<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
XM Satellite Radio Holdings Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
XM SATELLITE RADIO HOLDINGS INC.
1250 23rd Street, N.W., Suite 57
Washington, DC 20037
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 31, 2000
----------------
To our stockholders:
On behalf of the Board of Directors of XM Satellite Radio Holdings Inc., it
is my pleasure to invite you to the Company's 2000 annual meeting of
stockholders. The annual meeting will be held on May 31, 2000, at 9:00 a.m.,
local time, at the Embassy Suites Hotel, 1250 22nd Street, N.W., Washington,
DC 20037. The annual meeting has been called for the following purposes:
1. to consider and vote upon a proposal to elect nine directors of XM
Satellite Radio Holdings Inc.;
2. to consider and vote upon an amendment to the XM Satellite Radio Holdings
Inc. 1998 Shares Award Plan to increase the number of shares of Class A
common stock that may be issued under the plan;
3. to ratify the Board of Directors' appointment of KPMG LLP as the
independent public accountants of XM Satellite Radio Holdings Inc. for
the 2000 fiscal year; and
4. to transact such other business as may properly come before the annual
meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on April 12, 2000 will
be entitled to notice of, and to vote at, the annual meeting or any
adjournment or postponement thereof.
By Order of the Board of Directors,
/s/ Gary M. Parsons
Gary M. Parsons
Chairman of the Board of Directors
Dated: April 25, 2000
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
<PAGE>
XM SATELLITE RADIO HOLDINGS INC.
1250 23rd Street, N.W., Suite 57
Washington, DC 20037
Annual Meeting of Stockholders
May 31, 2000
----------------
PROXY STATEMENT
----------------
GENERAL INFORMATION
Proxy Solicitation
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of XM Satellite Radio Holdings Inc. for use
at the Company's 2000 annual meeting of stockholders to be held on May 31,
2000, at 9:00 a.m., local time, at the Embassy Suites Hotel, 1250 22nd Street,
N.W., Washington, DC 20037. The purpose of the annual meeting and the matters
to be acted upon are set forth in the accompanying notice of annual meeting.
XM Satellite Radio Holdings Inc. will pay the cost of all proxy
solicitation. In addition to the solicitation of proxies by use of the mails,
officers and other employees of the Company and its subsidiaries may solicit
proxies by personal interview, telephone, facsimile and telegram. None of
these individuals will receive compensation for such services, which will be
performed in addition to their regular duties. The Company may also make
arrangements with brokerage firms, banks, custodians, nominees and other
fiduciaries to forward proxy solicitation material for shares held of record
by them to the beneficial owners of such shares. The Company will reimburse
such persons for their reasonable out-of-pocket expenses in forwarding such
material.
This proxy statement and the enclosed proxy are first being mailed to the
Company's stockholders on or about April 26, 2000.
Voting and Revocability of Proxies
A proxy for use at the annual meeting and a return envelope are enclosed.
Shares of XM Satellite Radio Holdings Inc.'s common stock represented by a
properly executed proxy, if such proxy is received in time and not revoked,
will be voted at the annual meeting according to the instructions indicated in
the proxy. If no instructions are indicated, the shares will be voted "FOR"
approval of each proposal considered at the annual meeting. Discretionary
authority is provided in the proxy as to any matters not specifically referred
to in the proxy. Management is not aware of any other matters which are likely
to be brought before the annual meeting. If any other matter is properly
presented at the annual meeting for action, the persons named in the
accompanying proxy will vote on such matter in their own discretion.
A stockholder who has given a proxy may revoke it at any time before its
exercise at the annual meeting by (1) giving written notice of revocation to
the Secretary of the Company, (2) properly submitting to the Company a duly
executed proxy bearing a later date or (3) voting in person at the annual
meeting. Unless revoked, the shares represented by each such proxy will be
voted at the meeting and any adjournment or postponement of the meeting.
Presence at the meeting of a stockholder who has signed a proxy but does not
provide a notice of revocation or request to vote in person does not revoke
that proxy. All written notices of revocation or other communications with
respect to revocation of proxies should be addressed as follows: XM Satellite
Radio Holdings Inc., 1250 23rd Street, N.W., Suite 57, Washington, DC, 20037,
Attention: Secretary.
<PAGE>
Voting Procedure
All holders of record of the Company's common stock at the close of business
on April 12, 2000 will be eligible to vote at the annual meeting. Each holder
of the Company's Class A common stock is entitled to one vote at the annual
meeting for each share held by such stockholder, and each holder of the
Company's Class B common stock is entitled to three votes at the annual
meeting for each share held by such stockholder. As of April 12, 2000, there
were 32,176,825 shares of Class A common stock and 16,557,262 shares of Class
B common stock outstanding.
The holders of a majority of the voting rights of the shares of common stock
issued and outstanding and entitled to vote at the annual meeting, present in
person or by proxy, will constitute a quorum at the annual meeting. A quorum
must exist for the Company's stockholders to vote on the proposals set forth
in this proxy statement. Abstentions and any broker non-votes, which are
described below, will be counted for purposes of determining the presence of a
quorum at the annual meeting.
The affirmative vote of a plurality of the voting rights of the shares of
Class A common stock and Class B common stock present or represented by Proxy
at the Annual Meeting, voting together as a single class, is required to elect
directors. The affirmative vote of a majority of the voting rights of the
shares of Class A common stock and Class B common stock present or represented
by Proxy at the Annual Meeting, voting together as a single class, is required
to approve the 1998 Shares Award Plan, as amended, and to ratify the
appointment of the Company's independent public accountants for fiscal year
2000.
Votes cast in person or by proxy at the annual meeting will be tabulated by
the inspector of election appointed for the annual meeting, who will determine
whether or not a quorum is present. Votes may be cast for, against or as
abstentions. Broker-dealers who hold their customers' shares in street name
may, under the applicable rules of the exchange and other self-regulatory
organizations of which the broker-dealers are members, sign and submit proxies
for such shares and may vote such shares on routine matters, which under such
rules, typically include the election of directors. Abstentions will be
counted for purposes of determining the shares present or represented at the
annual meeting and entitled to vote. Accordingly, abstentions will have the
same effect as a vote against the proposal to approve an amendment to the XM
Satellite Radio Holdings Inc. 1998 Shares Award Plan and the proposal to
ratify the Board of Directors' appointment of KPMG LLP as the Company's
independent public accountants for the 2000 fiscal year, but will not affect
the proposal for election of directors.
Broker-dealers may not vote such shares on other matters without specific
instructions from the customers who beneficially own such shares. Proxies
signed and submitted by broker-dealers which have not been voted on matters
described in the previous sentence are referred to as broker non-votes. Broker
non-votes on a particular matter are not deemed to be shares present and
entitled to vote on such matters and, assuming the presence of a quorum, will
not affect any of the proposals.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE
PROPOSALS SET FORTH IN THIS PROXY STATEMENT.
2
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Company's Board of Directors recommends the election as directors of the
nine nominees listed below. The nine nominees, if elected, will hold office
until the next annual meeting of stockholders and until their successors are
elected and qualified or until their earlier death, resignation or removal.
Each of the nominees is an incumbent director.
It is intended that shares represented by Proxies in the accompanying form
will be voted "FOR" the election of the nominees named below unless a contrary
direction is indicated. If at the time of the 2000 Annual Meeting any of the
nominees named below should be unable to serve, which event is not expected to
occur, the discretionary authority provided in the Proxy will be exercised to
vote for such substitute nominee or nominees, if any, as shall be designated
by the Board of Directors.
The following table sets forth the name and age of each nominee for
director, indicating all positions and offices with the Company currently held
by the director.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Gary M. Parsons.................. 49 Chairman of the Board of Directors
Hugh Panero...................... 44 President, Chief Executive Officer and
Member, Board of Directors
Nathanial A. Davis(1)............ 46 Member, Board of Directors
Thomas J. Donohue(2)............. 61 Member, Board of Directors
Randall T. Mays(1)(2)............ 34 Member, Board of Directors
Randy S. Segal(1)................ 44 Member, Board of Directors
Jack Shaw(2)..................... 61 Member, Board of Directors
Rajendra Singh(2)................ 45 Member, Board of Directors
Ronald L. Zarrella............... 50 Member, Board of Directors
</TABLE>
- --------
(1) Member of the audit committee.
(2)Member of the compensation committee.
Set forth below are descriptions of the backgrounds and principal
occupations of each of the Company's directors, and the period during which he
or she has served as a director.
Gary M. Parsons has served as Chairman of the Board of Directors of the
Company since May 1997. Mr. Parsons is Chairman of the Board of Directors of
American Mobile, a position he has held since March 1998. Mr. Parsons joined
American Mobile in July 1996 and has also served as its Chief Executive
Officer and President. Previously, Mr. Parsons was with MCI Communications
Corporation where he served in a variety of roles from 1990 to 1996, including
most recently as Executive Vice President of MCI Communications, and as Chief
Executive Officer of MCI's subsidiary MCImetro, Inc. From 1984 to 1990, Mr.
Parsons was one of the principals of Telecom*USA, which was acquired by MCI.
Prior to the recruitment of Hugh Panero, Mr. Parsons served as the Company's
Chief Executive Officer.
Hugh Panero has served as a member of the Board of Directors and as
President and Chief Executive Officer of the Company since June 1998. Mr.
Panero has over 16 years experience building and managing entertainment
distribution services. Most recently, from 1993 to 1998, Mr. Panero served as
President and Chief Executive Officer of Request TV, a national pay-per-view
network owned by Liberty Media and Twentieth Century Fox. Prior to his
employment with Request TV, Mr. Panero spent ten years with Time Warner Cable
where he was part of the team which built the cable systems serving parts of
Queens and Brooklyn, New York. Mr. Panero held various positions with Time
Warner Cable, including Vice President, Marketing.
Nathanial A. Davis has served as a member of the Board of Directors of the
Company since October 1999. Mr. Davis is President and Chief Operating Officer
of Nextlink Communications Inc. From December 1998 to December 1999, he was
Executive Vice President of Nextel Communications where he had responsibility
for the
3
<PAGE>
technical and engineering operations of Nextel's nationwide switching and
wireless communications network, billing and information technology systems.
From August 1986 through November 1998, Mr. Davis served in a variety of
senior engineering and finance roles at MCI, most recently as Senior Vice
President and Chief Financial Officer of MCI Telecommunications. Mr. Davis
serves on the board of directors of Capital Management Corporation.
Thomas J. Donohue has served as a member of the Board of Directors of the
Company since October 1999. Mr. Donohue is President and Chief Executive
Officer of the U.S. Chamber of Commerce, the world's largest business
federation, and has been active in national policy and non-profit operations
for 30 years. From July 1984 through September 1997, Mr. Donohue served as
President and Chief Executive Officer of the American Trucking Association. He
serves on the board of directors of Union Pacific Corporation, Sunrise
Assisted Living Corporation, Marymount University and the Hudson Institute.
Randall T. Mays has served as a member of the Board of Directors of the
Company since July 1999. Mr. Mays is the Executive Vice President and Chief
Financial Officer of Clear Channel Communications. Mr. Mays has been
associated with Clear Channel since 1993 when he was elected Vice President
and Treasurer. Mr. Mays also serves on the board of directors of American
Tower Corporation.
Randy S. Segal has served as a board member of the Company since July 1999.
Ms. Segal has served as American Mobile's Senior Vice President, General
Counsel and Secretary since October 1992. From October 1983 to October 1992,
Ms. Segal was associated with the law firm of Debevoise & Plimpton in New
York, New York. Prior to joining Debevoise, Ms. Segal clerked for the
Honorable Jerre S. Williams of the United States Court of Appeals for the
Fifth Circuit, and for the Honorable Edmund L. Palmieri for the United States
District Court for the Southern District of New York.
Jack Shaw has served as a member of the Board of Directors of the Company
since May 1997. Mr. Shaw is Corporate Senior Executive Vice President-
Enterprise Sector of Hughes Electronics Corporation and served as Chief
Executive Officer and Chairman of Hughes Network Systems, Inc. from 1987 and
1988, respectively, through January 2000. Mr. Shaw is a member of the Hughes
Electronics Corporation Executive Committee. Mr. Shaw has been a director of
American Mobile since July 1996 and has previously served as Chairman of
American Mobile's Board. Previously, Mr. Shaw held senior management positions
with companies including ITT Space Communications, Inc., Digital
Communications Corporation and M/A-Com Telecommunications, Inc., which was
acquired by Hughes Electronics Corporation in 1987.
Rajendra Singh has served as a board member of the Company since July 1999.
Dr. Singh is a member of the Board of Directors and a co-founder of LCC
International. Dr. Singh was President of LCC International from its formation
in 1983 until September 1994, was Chief Executive Officer from January 1994
until January 1995 and was Interim President from September 1998 to May 1999.
Dr. Singh is Chairman of the Members Committee of Telcom Ventures L.L.C. and a
director of Teligent, Inc., a wireless local access provider. He is also a
director of Aether System, Inc., a provider of wireless services and systems.
Ronald L. Zarrella has served as a member of the Board of Directors of the
Company since July 1999. Mr. Zarrella is an Executive Vice President of
General Motors and President of GM North America, a position he has held since
October 1998. Mr. Zarrella has been associated with General Motors since 1994
when he was elected Vice President and Group Executive in charge of the North
American Vehicle Sales Service and Marketing Group.
Provisions of Shareholders' Agreement Governing the Board of Directors
The Company has entered into a shareholders' agreement with American Mobile,
Baron Asset Fund and the former holders of its Series A subordinated
convertible notes, which is further described below under "Security Ownership
- -- Shareholders' Agreement." Pursuant to this agreement, the Company's Board
of Directors presently consists of nine members, four of whom are selected by
American Mobile, including the
4
<PAGE>
Chairman and the President and Chief Executive Officer, and one of whom is
selected by each of General Motors, Clear Channel and the TCM Group. The
remaining two are independent directors, one of whom must be approved by
American Mobile and the other by a majority of the interests held by General
Motors, Clear Channel and the TCM Group. Messrs. Parsons, Panero, Shaw and Ms.
Segal are the directors and the director nominees selected by American Mobile;
Mr. Zarrella is the director and director nominee selected by General Motors;
Mr. Mays is the director and director nominee selected by Clear Channel; and
Dr. Singh is the director and director nominee selected by the TCM Group. Mr.
Davis is the independent director and director nominee approved by American
Mobile, and Mr. Donohue is the independent director and director nominee
approved by the other interests. The TCM Group is owned by Columbia Capital,
Telcom Ventures and Madison Dearborn Partners.
The shareholders' agreement provides for an eventual application to the FCC
to transfer control of the Company to a diffuse group of stockholders.
Following receipt of approval of the FCC, the Company's Board of Directors
will consist of nine members: three will be selected by American Mobile, one
will be selected by each of General Motors, Clear Channel and the TCM Group,
one will be the Company's President and Chief Executive Officer, and the
remaining two will be independent directors of recognized industry experience
and stature whose nominations must be approved by American Mobile and a
majority of the interests held by General Motors, Clear Channel and the TCM
Group. General Motors, Clear Channel and the TCM Group also have observation
rights at meetings of the Board of Directors. As provided in the shareholders'
agreement, these board and observation rights are subject to these entities
maintaining their original investment or certain minimum share percentages in
the Company. The shareholders' agreement will terminate upon unanimous consent
of the parties, the bankruptcy of the Company or at such time as only one
shareholder remains a party to the agreement.
Approval of Proposal
The affirmative vote of a plurality of the voting rights of the shares of
Class A common stock and Class B common stock present or represented by Proxy
at the Annual Meeting, voting together as a single class, is required to elect
directors. Each share of Class B common stock is entitled to three votes.
The Board of Directors recommends a vote FOR Proposal 1.
5
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth information concerning executive officers of
the Company. Officers are elected by and serve at the discretion of the
Company's Board of Directors.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Senior Vice President, Chief of
Lee Abrams....................... 47 Programming
Senior Vice President, Sales and
Stephen Cook..................... 44 Marketing
Senior Vice President, New Business
Steven P. Gavenas................ 44 Development
Stelios Patsiokas................ 46 Senior Vice President, Technology
Senior Vice President, Chief Financial
Heinz Stubblefield............... 42 Officer
Senior Vice President, General Counsel
Joseph M. Titlebaum.............. 37 and Secretary
Senior Vice President, Engineering and
John R. Wormington............... 55 Operations
</TABLE>
Set forth below are descriptions of the backgrounds of each of the Company's
executive officers, other than Messrs. Parsons and Panero, whose positions and
backgrounds are described under "Election of Directors" above.
Lee Abrams has served as Senior Vice President, Chief of Programming of the
Company since June 1998. Mr. Abrams is a prominent radio programmer/consultant
with more than 30 years of experience in radio, and since 1970 has been a
consultant to a variety of radio stations, networks and record companies. He
is credited with many innovations in radio programming, including transforming
FM radio, pioneering the album rock format in the 1970s, adult contemporary
radio and urban, classic and smooth jazz radio in the 1980s and active rock
radio in the 1990s. He most recently has served as a consultant for ABC Radio
Networks, Capstar, Thorn-EMI and Sony, among others.
Stephen Cook has served as Senior Vice President, Sales and Marketing of the
Company since February 1999. Previously, Mr. Cook was Chief Operating Officer
for Conxus Communications, where he successfully launched its portable voice
messaging product, Pocketalk, in the top 12 United States markets. From 1990
to 1997, Mr. Cook held key management positions with GTE's cellular
operations, including VP of Marketing and President of the Southeast region.
Prior to that time, Mr. Cook also spent five years in brand management with
Procter & Gamble and has more than 15 years of experience with launching and
marketing new consumer products.
Steven P. Gavenas has served as Senior Vice President, New Business
Development of the Company since December 1999. Previously, from June 1996 to
November 1999, Mr. Gavenas held several positions in WorldSpace International,
including VP of Marketing, EVP Corporate Strategy and EVP Commercial
Operations. Before joining WorldSpace, from September 1989 to May 1996 Mr.
Gavenas was a management consultant with McKinsey and Company, Inc., an
international strategy consulting firm.
Stelios Patsiokas has served as Senior Vice President, Technology of the
Company since October 1998. Previously, Dr. Patsiokas was with Motorola, Inc.,
where he served in a variety of consumer electronics design and development
roles since 1979. Since 1996, Dr. Patsiokas was Director of Product
Development, for Motorola's Messaging Systems Product Group, where he was
involved with developing the PageWriterTM 2000 two-way messaging device. Dr.
Patsiokas holds 24 United States patents.
Heinz Stubblefield has served as Senior Vice President, Chief Financial
Officer of the Company since June 1998. Previously, from March 1996 to May
1998, Mr. Stubblefield was Chief Financial Officer for WorldSpace
International. Before joining WorldSpace, from February 1993 to February 1996,
Mr. Stubblefield was Corporate Controller for Next Software Corporation and,
prior to that time, spent several years as divisional CFO for Raychem
Corporation's German offices.
6
<PAGE>
Joseph M. Titlebaum has served as Senior Vice President, General Counsel and
Secretary of the Company since September 1998. From 1990 to 1998, Mr.
Titlebaum was an attorney with the law firm of Cleary, Gottlieb, Steen &
Hamilton. With a specialty in telecommunications ventures, Mr. Titlebaum has
expertise in structuring, negotiating and implementing corporate finance and
mergers and acquisitions transactions.
John R. Wormington has served as Senior Vice President, Engineering and
Operations of the Company since September 1998. Mr. Wormington has leadership
experience in commercial and governmental development, design and operational
deployment of a variety of high technology projects. Mr. Wormington came to
the Company from Hughes, where since September 1995 he was a senior executive
and led the project management team responsible for that company's HS 702
satellite program. During his distinguished military career (retiring as an
Air Force Brigadier General in 1995), Mr. Wormington was responsible for a
wide range of large government projects requiring technical management and
operational leadership skills necessary to meet strict implementation
deadlines, including responsibility for conducting all launch and range
operations at Cape Canaveral.
7
<PAGE>
SECURITY OWNERSHIP
The information presented under "Principal Stockholders" and "Security
Ownership of Directors and Executive Officers" below regarding beneficial
ownership of the common stock has been presented in accordance with the rules
of the SEC and is not necessarily indicative of beneficial ownership for any
other purpose. Under these rules, beneficial ownership of common stock
includes any shares as to which a person, directly or indirectly, has or
shares voting power or investment power and also any shares as to which a
person has the right to acquire such voting or investment power within 60 days
through the exercise of any stock option or other right.
As of March 31, 2000, there were 32,176,557 shares of Class A common stock
outstanding. Also as of March 31, 2000, there were 16,557,262 shares of Class
B common stock outstanding, of which were owned by American Mobile. The Class
B common stock is convertible into Class A common stock on a one-for-one basis
and is entitled to three votes for each share.
Principal Stockholders
The following table presents, as of March 31, 2000, information based upon
the Company's records and filings with the SEC regarding each person, other
than a director, director nominee or executive officer of the Company, known
to the Company to be the beneficial owner of more than 5% of the Class A
common stock:
<TABLE>
<CAPTION>
Number of Percentage of
Class A Shares Total
Name and Address of Beneficial Owner Beneficially Owned Class A Shares
------------------------------------ ------------------ --------------
<S> <C> <C>
American Mobile Satellite Corporation.... 16,757,262(1) 34.4%
10802 Parkridge Boulevard
Reston, VA 20191-5416
General Motors Corporation............... 11,106,504(2) 25.9%
100 Renaissance Center
3031 West Grand Boulevard
PO Box 100
Detroit, MI 48265-1000
DIRECTV Enterprises, Inc................. 5,553,252(3) 14.8%
2230 E. Imperial Highway
El Segundo, CA 90245
Clear Channel Investments, Inc. ......... 8,329,877 25.9%
200 Concord Plaza, Suite 600
San Antonio, TX 78216
Columbia XM Radio Partners, L.L.C. ...... 2,776,626 8.6%
201 N. Union Street, Suite 300
Alexandria, VA 22314
Telcom-XM Investors, L.L.C. ............. 2,776,626(4) 8.6%
211 North Union Street, Suite 300
Alexandria, VA 22314
Madison Dearborn Capital Partners III,
L.P.
Madison Dearborn Special Equity III, L.P.
Special Advisors Fund I, LLC. ........... 2,776,626 8.6%
3 First National Plaza, Suite 3800
Chicago, IL 60602
</TABLE>
- --------
* Less than one percent.
(1) Includes 16,557,262 shares issuable upon conversion of Class B common
stock.
(2) Includes 10,786,504 shares issuable upon conversion of the Company's
Series A convertible preferred stock, 5,393,252 of which are owned by
DIRECTV.
(3) Includes 5,393,252 shares issuable upon conversion of the Company's Series
A convertible preferred stock.
(4) Rajendra Singh, a member of the Board of Directors, indirectly owns a
controlling interest in Telcom-XM Investors, L.L.C. Dr. Singh disclaims
beneficial ownership of the shares of Class A common stock beneficially
owned by Telcom-XM Investors, L.L.C.
8
<PAGE>
Security Ownership of Directors and Executive Officers
The following table presents, as of March 31, 2000, information regarding
the beneficial ownership of the Class A common stock by each director of the
Company (each such director also being a director nominee), each executive
officer of the Company named in the summary compensation table under the
"Executive Compensation" section of this proxy statement and all directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
Percentage
Number of of Total
Class A Shares Class A
Name Beneficially Owned Shares
---- ------------------ ----------
<S> <C> <C>
Directors and Named Executive Officers
Gary M. Parsons................................. 24,716(1) *
Hugh Panero..................................... 89,190(2) *
Randall T. Mays................................. 26,757 *
Randy S. Segal.................................. 26,757 *
Jack Shaw....................................... 26,757 *
Rajendra Singh.................................. 26,757(3) *
Ronald L. Zarrella.............................. -- *
Nathanial Davis................................. 26,757 *
Thomas R. Donohue............................... 26,757 *
Lee Abrams...................................... 17,911(4) *
Stephen Cook.................................... 21,921(4) *
Stelios Patsiokas............................... 19,921(4) *
Heinz Stubblefield.............................. 19,921(4) *
All directors and executive officers as a group
(16 persons)................................... 391,578(5) 1.2%
</TABLE>
- --------
* Less than 1%.
(1) Does not include 267,570 shares issuable upon exercise of options which
are not exercisable within 60 days. A trust for the benefit of Mr.
Parsons' minor children has acquired a minority membership interest in
each of Columbia XM Radio Partners, L.L.C. and Telcom-XM Investors, L.L.C.
and a minority participatory interest in each of Madison Dearborn Capital
Partners III, L.P. and Madison Dearborn Special Equity III, L.P. Mr.
Parsons disclaims beneficial ownership of these interests.
(2) Does not include 278,384 shares issuable upon exercise of options which
are not exercisable within 60 days. Mr. Panero has acquired a minority
membership interest in Telcom-XM Investors, L.L.C.
(3) Rajendra Singh, a member of the Company's Board of Directors, indirectly
owns a controlling interest in Telcom-XM Investors, L.L.C. Dr. Singh
disclaims beneficial ownership of the shares of Class A common stock
beneficially owned by Telcom-XM Investors, L.L.C.
(4) Does not include 85,665 shares issuable upon exercise of options which are
not exercisable within 60 days.
(5) Does not include 1,113,506 shares issuable upon exercise of options which
are not exercisable within 60 days.
9
<PAGE>
Shareholders' Agreement
The Company has entered into a shareholders' agreement with certain of its
primary investors, including American Mobile, Baron Asset Fund and the former
holders of its Series A subordinated convertible notes, containing, among
others, the provisions described below.
American Mobile owns all of the Company's Class B common stock, which is
convertible into Class A common stock on a one for one basis at any time at
American Mobile's discretion. In addition, under the shareholders' agreement,
the holders of a majority of the outstanding Class A common stock, which must
include at least 20% of the public holders of the Class A common stock, may
require conversion by American Mobile. This conversion will not be effected,
however, if the FCC does not approve the transfer of control of the Company
from American Mobile to a diffuse group of stockholders.
Except for affiliated transactions, American Mobile will not be permitted to
transfer any of the Company's securities until the earlier of the date on
which the Company begins commercial operations or one year after October 8,
1999, which was the date of the closing of the Company's initial public
offering. Shares of the Company's Class B common stock, all of which are
currently owned by American Mobile, are transferable only upon conversion into
shares of Class A common stock.
American Mobile has agreed not to compete with the Company in the satellite
radio business in the United States for so long as American Mobile holds 5% of
the Company's common stock and for a period of three years following any
transfer which results in American Mobile owning less than 5% of the Company's
common stock.
The parties to the shareholders' agreement are entitled to designate
directors to the Company's Board of Directors and to observe meetings of the
Board. These provisions are described above under the caption "Election of
Directors -- Provisions of Shareholders' Agreement Governing the Board of
Directors." In addition, the parties have agreed to take all necessary actions
to give effect to the agreement including to prevent any conflict between the
agreement and the Company's governing instruments.
The shareholders' agreement will terminate upon unanimous consent of the
parties, the bankruptcy of the Company or at such time as only one shareholder
remains a party to the agreement.
American Mobile cannot relinquish its position as the Company's controlling
shareholder without obtaining the prior approval of the FCC. Accordingly,
prior to obtaining FCC approval of any transfer of control from American
Mobile, the Company is only able to issue a limited amount of voting
securities and it is only able to issue a limited amount of securities
convertible into voting securities unless the stockholders holding nonvoting
convertible securities agree not to convert them into voting securities or the
Company takes other steps to permit voting securities on a basis consistent
with FCC rules. GM and DIRECTV have agreed not to convert their Series A
convertible preferred stock if it would cause American Mobile to hold less
than the minimum percentage of the Company's voting rights approved by the FCC
until the Company obtains approval by the FCC of a change in control. In
return, the Company has agreed not to issue new voting securities, except for
certain types of securities, if doing so would make GM and DIRECTV unable to
convert any of their Series A convertible preferred stock. On March 30, 2000,
the FCC approved the Company's application to allow American Mobile to reduce
its ownership of the voting rights of the Company from a majority to as little
as 40%, provided that American Mobile retain de facto control of the Company,
including the right to elect a majority of the directors of the Company's
Board of Directors.
10
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has the authority to manage the Company's business
and affairs. The Company's Restated Bylaws (the "Bylaws") and applicable law
permit the Board to establish committees from among its members and delegate
authority to these committees for various purposes. In addition, the Bylaws
provide that the Board must annually appoint officers of the Company to manage
the affairs of the Company on a day to day basis as set forth in the Bylaws or
as otherwise directed by the Board. During the fiscal period ended
December 31, 1999, there were a total of 11 meetings held by the Board of
Directors.
In 1999, all director nominees other than Mr. Mays and Mr. Zarrella attended
75% or more of all Board Meetings held during the period for which he or she
had been a director and all meetings of the committees on which he or she
served during the periods that he or she served.
Terms of Directors
All members of the Board of Directors hold office until the next annual
meeting of stockholders and the election and qualification of their
successors.
The Board of Directors has established compensation and audit committees.
Each committee reports to the Board of Directors. The compensation committee,
currently consisting of Messrs. Singh, Shaw, Donohue and Mays, is responsible
for determining and paying compensation, salaries, annual bonuses, stock
option grants and benefits to officers, directors and employees. The audit
committee, currently consisting of Messrs. Mays and Davis and Ms. Segal,
reviews, acts on and reports to the Board of Directors with respect to various
auditing and accounting matters. These matters include the selection of the
Company's auditors and review of the Company's accounting books, records and
policies. During the fiscal year ended December 31, 1999, there was a total of
one meeting of the Audit Committee and three meetings of the Compensation
Committee.
Director Compensation
The Company's independent directors (which consist of Messrs. Davis and
Donohue) receive retainer fees of $2,500 per quarter. In addition, these
directors receive $2,000 for every meeting attended in person and $500 for
every meeting attended telephonically. Independent directors also receive
$3,000 per year for each board committee on which they serve. In July 1999,
the Company also granted each non-employee director an option to purchase
26,757 shares of the Company's Class A common stock at $9.52 per share. These
options are immediately exercisable and have ten-year terms. Mr. Zarrella has
elected to forego receipt of these options.
Chairman of the Board. On July 16, 1999, the Company issued to Mr. Parsons
14,716 shares of Class A common stock in compensation for his service to the
Company. The Company will have a right to repurchase these shares for $9.52
per share if Mr. Parsons' service with the Company ends prior to July 16,
2000. In addition, the Company granted Mr. Parsons a ten-year option to
purchase 267,570 shares of Class A common stock at an exercise price of $9.52
per share. Of these shares, 160,542 will vest one year after the grant, and
53,514 shares will vest in each of the two years thereafter. The vesting of
53,514 of the 160,542 shares that vest in the first year and the shares that
vest at the end of the second and third years will be subject to the
fulfillment of performance criteria.
11
<PAGE>
TRANSACTIONS WITH RELATED PARTIES
Contracts with Hughes
The Company's Satellite Purchase Contract for In-Orbit Delivery, dated March
20, 1998, and amended and restated on July 21, 1999, with Hughes Space and
Communications calls for Hughes to deliver
. in-orbit, two high-power satellites;
. an optional ground spare satellite; and
. satellite launch services.
The Company expects to incur total payment obligations under this contract
of approximately $541.3 million, which includes amounts the Company expects to
pay pursuant to the exercise of the option to build the ground spare satellite
and certain financing costs and in-orbit incentive payments. Payments are to
be made to Hughes upon certain calendar dates and completion of discrete
milestones and other events. As of December 31, 1999, the Company has paid
$183.9 million under this contract.
The Company has granted Hughes a first priority security interest in any
rights the Company may have in Hughes' work product under the satellite
contract to secure the Company's payment obligations to Hughes under the
contract. This security interest will be released once the Company has made
substantial pre-arranged payments to Hughes under the satellite contract or,
if earlier, upon the launch of the satellites.
The Company may, subject to certain conditions, terminate the satellite
contract at its convenience, in which case Hughes will be entitled to certain
payments. The Company may also terminate the satellite contract for certain
events of default by Hughes or in case it becomes reasonably certain that the
total amount of excusable delay in Hughes' performance under the satellite
contract caused by events beyond Hughes' control, excluding delays caused by
the Company, will exceed 485 calendar days.
The first satellite is to be delivered to the Company in orbit by December
31, 2000, and the second by April 11, 2001. The scheduled launch period for
the first satellite is the period from November 1, 2000 through February 1,
2001. The scheduled launch period for the second satellite is the period from
February 15, 2001 through May 15, 2001. If there is a delay of more than six
months in the launch of either the first or second satellite, the Company
would be able to select an alternative launch system from within or outside of
Hughes' inventory of launch vehicles, subject to certain payment conditions
set forth in the satellite contract.
For each satellite, title will transfer to the Company after Hughes
successfully completes certain tests and analyses on each satellite upon
arrival at its specified orbital location. If Hughes fails to deliver either
satellite on or before the fiftieth day following its delivery date, then
Hughes must pay the Company liquidated damages which accrue on a daily basis.
The total aggregate amount of liquidated damages for failure to meet the
delivery dates of both satellites is limited to $16 million. These liquidated
damages are in addition to other limited liquidated damages for delay in the
launch of the satellites. The Company would have no other damages or remedies
for late delivery of a satellite. If, on the other hand, Hughes launches both
satellites on or before December 31, 2000, the Company will pay Hughes $6
million in addition to the contract price.
The Company has entered into a contract with Hughes Electronics Corporation
for the design, development and manufacture of the terrestrial repeaters,
which will supplement the Company's high-powered satellite signals. Production
of the repeaters is expected to begin in July 2000 and be completed in
February 2001. Payments under this contract are expected to be approximately
$128.0 million. As of December 31, 1999, the Company has paid $3.5 million
under this contract.
The contract provides that the Company may reduce the number of repeaters
ordered under the contract to a specified minimum order or terminate the
terrestrial repeater contract altogether, in which case the Company is
required to pay certain amounts to Hughes Electronics depending on the date of
the reduction or termination and other factors. The Company has agreed to make
certain incentive payments to Hughes Electronics for timely delivery of the
terrestrial repeaters. In the event of late delivery of the terrestrial
repeaters, the Company is entitled to specified liquidated damages. In certain
events of default by Hughes Electronics, the Company may terminate the
contract and would be entitled to have the work completed by a third party
plus certain costs resulting from the termination.
12
<PAGE>
Hughes Space and Communications is owned by Hughes Electronics Corporation.
On January 13, 2000, Hughes Electronics announced its intention to sell Hughes
Space and Communications to Boeing. The Company's management believes this
sale, if consummated, would not have any material effect on the Company.
American Mobile, whose single largest stockholder on a fully diluted basis is
Hughes Communications, owns approximately 26% of the outstanding shares of the
Company's Class A common stock, assuming conversion of its Class B common
stock, or 33% assuming no conversion of preferred stock. General Motors, which
owns Hughes Electronics and with whom the Company has a distribution agreement
as described below, owns a 9% equity interest in the Company and an additional
9% equity interest in the Company is held by DIRECTV, a direct subsidiary of
Hughes Electronics and an indirect subsidiary of General Motors.
Distribution Agreement with General Motors and OnStar
The Company has signed a long-term distribution agreement with the OnStar
division of General Motors providing for the installation of XM radios in
General Motors vehicles. During the term of the agreement, which expires 12
years from the commencement date of the Company's commercial operations,
General Motors has agreed to distribute the Company's service to the exclusion
of other satellite digital radio services that broadcast in the S-Band.
General Motors will factory-install XM radios, purchased exclusively from the
Company's authorized manufacturers, in certain new General Motors vehicles and
not install any radios which receive broadcasts by Sirius Radio, the Company's
primary competitor, as the only satellite radio service. The Company will have
a non-exclusive right to arrange for the installation of XM radios included in
OnStar systems in non-General Motors vehicles that are sold for use in the
United States.
The Company has agreed, for a nine-month period beginning on July 1, 2001,
that General Motors shall be the exclusive vehicle manufacturer in whose new
vehicles the Company will activate the XM Radio service. If, however, the
Company cannot install XM radios prior to January 1, 2002, then this
exclusivity arrangement will apply for a six-month period beginning on the
later of July 1, 2002 or the date the Company commences full commercial
operations. In addition, the Company has significant annual, fixed payment
obligations to General Motors for four years following commencement of
commercial operation. These payments approximate $35 million in the aggregate
during this period. Additional annual fixed payment obligations beyond the
initial four years of the contract term range from less than $35 million to
approximately $130 million through 2009, aggregating approximately $400
million. In order to encourage the broad installation of XM radios, the
Company has agreed to subsidize a portion of the cost of XM radios, and to
make incentive payments to General Motors when the owners of General Motors
vehicles with installed XM radios become subscribers for the XM Radio service
within 12 months of purchasing a General Motors vehicle equipped with an XM
radio. The Company must also share with General Motors a percentage of the
subscription revenue attributable to General Motors vehicles with installed XM
radios. The Company will also make available to General Motors a limited
amount of bandwidth for audio and/or data transmission by General Motors to
owners of General Motors vehicles equipped with XM radios.
This agreement is subject to renegotiation if four years after the
commencement of commercial operations and at two-year intervals thereafter
General Motors does not achieve and maintain specified installation levels,
starting with 1.24 million units after four years and thereafter increasing by
the lesser of 600,000 units per year and amounts proportionate to the
Company's share of the satellite digital radio market. There can be no
assurance as to the outcome of any such renegotiations. General Motors'
exclusivity obligations will discontinue if, four years after the Company
commences commercial operations and at two-year intervals thereafter, its
mobile aftermarket share falls below 40% if there are two satellite radio
providers in the United States, or below 33% if there are three satellite
radio providers in the United States.
In February 2000, the Company signed an agreement with Sirius Radio to
develop a unified standard for satellite radios, which will facilitate the
ability of consumers to purchase one radio capable of receiving both
companies' services. In accordance with the terms of the agreement, the
Company expects to work with General Motors to integrate the new standard
under the terms of the distribution agreement with General Motors. The
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<PAGE>
agreement with General Motors provides that if General Motors elects to
install radios which are capable of receiving broadcasts from other satellite
radio providers, in the absence of any regulatory requirements to do so, the
Company may seek to renegotiate the distribution agreement. If the FCC
requires the installation of interoperable radios, the Company will
renegotiate the distribution agreement on mutually acceptable terms.
Engineering Contract with LCC International
The Company has signed a contract with LCC International for the engineering
of and site preparation of the Company's terrestrial repeater network. The
repeater network will supplement the Company's high-powered satellite signals.
Payments by under this contract are expected to approximate $115.0 million.
This contract does not include the repeater hardware, which will be supplied
by a separate vendor. As of December 31, 1999, the Company has paid $6.6
million under this contract.
The contract designates LCC International as the prime contractor for the
implementation of the Company's terrestrial repeater sites. Under this
contract, LCC International will perform various services, including program
management radio frequency engineering, site acquisition, architectural and
engineering design, zoning, regulatory services, network management testing
and construction and interim system maintenance. The initial site planning is
now complete for 70 cities and metropolitan areas and implementation work is
continuing.
The design of the Company's terrestrial repeater system will be guided by a
radio frequency analysis technique newly developed by LCC International. This
technique uses analysis of the satellite footprint to discover areas likely to
have impaired reception of XM Radio through technology similar to that used in
certain cellular telephone systems.
Dr. Rajendra Singh, a member of the Company's Board of Directors and a
member of the board of directors of LCC International, controls the largest
shareholder of both LCC International and one of the Company's principal
shareholders, Telcom-XM Investors L.L.C. See "Security Ownership -- Principal
Stockholders."
Technology License Agreement with American Mobile
American Mobile has granted the Company a royalty-free license with respect
to certain technology to be used in connection with the implementation of the
XM Radio system, including, among other things, certain ground segment
communications technology and antenna technology. The Company also has the
right to sublicense this technology to any third party, including chipset
manufacturers, terrestrial repeater manufacturers and receiver manufacturers
in connection with the XM Radio system.
Under cross-license provisions in the license, if the Company obtains from
any third party the right to use any technology which could be used to
develop, implement and commercialize a satellite radio system for transmission
in the United States, it will make all reasonable efforts to obtain for
American Mobile the right to use such technology. The Company has granted to
American Mobile a royalty-free, non-exclusive and irrevocable license to any
and all technology and improvements the Company develops relating to the XM
Radio system. This cross-license is for use and sublicensing worldwide outside
the United States and its territories, or inside the United States and its
territories only in connection with American Mobile's mobile satellite
business in the United States and other than in connection with any satellite
radio system.
The technology license renews automatically on an annual basis unless
terminated for a breach which has not been or cannot be remedied.
Technical Services Agreement with American Mobile
The Company has a technical services agreement with American Mobile under
which American Mobile provides the Company with certain technical,
engineering, marketing and strategic planning services. The Company pays
American Mobile at specified hourly rates, which the Company believes
approximate rates
14
<PAGE>
available from unrelated parties. On or after the Company's commencement of
commercial operations, American Mobile or the Company may terminate the
technical services agreement at any time.
Other Transactions with American Mobile
In 1997, American Mobile contributed $143,000 for the Company to establish
its original application for its FCC license. Also in 1997, the Company
received $1.5 million as a capital contribution from American Mobile. During
1998, American Mobile incurred general and administrative costs and
professional fees for the Company and established an intercompany balance of
$458,000. During June 1999, American Mobile provided the Company with a line
of credit under which it drew $250,000. This was repaid, and the line of
credit terminated, in July 1999.
Registration Rights Agreement
The Company has a registration rights agreement with American Mobile, Baron
Asset Fund and the former holders of its Series A subordinated convertible
notes. Commencing July 7, 2000, each of these parties is entitled to demand
registration with respect to its Class A common stock, including shares
issuable upon conversion of other securities. American Mobile is entitled to
make two demands. These rights are subject to the Company's right to defer the
timing of a demand registration and an underwriters' right to cut back shares
in an underwritten offering. In certain instances if a demand registration is
cut back by more than 75% of the number of shares originally requested to be
registered, then the party requesting registration shall be entitled to one
additional demand registration request.
In addition to these demand rights, following the Company's commencement of
commercial operations, parties to the registration rights agreement may
request registration of at least $25.0 million of Class A common stock.
Parties to the registration rights agreement also have rights to include
their Class A common stock in registered offerings initiated by the Company,
other than an offering for high yield debt.
Shareholders' Agreement
The Company has entered into a shareholders' agreement with American Mobile,
Baron Asset Fund and the former holders of its Series A subordinated
convertible notes, including GM and DIRECTV. GM and DIRECTV have also agreed
not to convert their nonvoting securities into Class A common stock if doing
so would cause American Mobile to own less than 40% of the Company's voting
rights. These agreements are described above under the captions "Security
Ownership--Shareholders' Agreement" and "Election of Directors--Provisions of
Shareholders' Agreement Governing the Board of Directors."
Investor Operational Agreements
The Company has agreements with Clear Channel, DIRECTV and the TCM Group,
which is owned by Columbia Capital, Telcom Ventures and Madison Dearborn
Partners, under which the Company will make available to them up to 406.6
kilobits per second, 204.8 kilobits per second, and 64.0 kilobits per second
each, respectively, of the Company's bandwidth, for them to supply programming
to the Company with content reasonably acceptable to it, on terms (including
revenue sharing) no less favorable than those offered to similar commercial
programmers who provide similar programming. Until these options are exercised
and this bandwidth is actually used by them, the Company can use the
bandwidth. Any use of the Company's bandwidth by these companies must be in
compliance with applicable laws, must not interfere with the Company's
business or obligations to other content providers, and must meet the
Company's quality standards.
The agreements call for the Company to have a technology advisory committee
on which Clear Channel, DIRECTV and the TCM Group have representatives. The
committee will direct the selection of appropriate
15
<PAGE>
billing, customer service and conditional access systems for the Company, as
well as its overall system integration effort. The Company has granted to
Clear Channel, DIRECTV, and TCM Group under these agreements a royalty-free,
non-transferable, non-exclusive license to use, sell, manufacture and have
manufactured any and all technology the Company develops relating to the XM
Radio system worldwide for any purpose other than one related to digital audio
radio service.
The Company has entered into a technical services agreement with DIRECTV
with respect to customer service, billing and conditional access capabilities
and will use DIRECTV's customer service, billing and conditional access
capabilities if made available to the Company on competitive terms and
conditions. DIRECTV is to make good faith efforts to represent the Company in
obtaining distribution of XM Radio service through DIRECTV's existing retail
distribution network. The Company will provide Clear Channel and DIRECTV with
access to the Company's advertising at the lowest available commercial rates.
Clear Channel must make good faith efforts to give the Company access to its
advertising at the lowest available commercial rates.
The agreements provide for further good faith negotiations with respect to
other arrangements, including advertising barter arrangements, marketing of XM
Radio service by Clear Channel and DIRECTV, and technology cooperation.
These agreements remain in effect so long as Clear Channel, DIRECTV, and
Columbia Capital, Telcom Ventures and Madison Dearborn Partners hold at least
5% of the Company's fully diluted ownership or the full amount of their
original investments in the Company.
July 1999 Transactions
In July 1999, the Company issued $250.0 million of Series A subordinated
convertible notes to six strategic and financial investors--General Motors,
$50.0 million; Clear Channel Communications, $75.0 million; DIRECTV, $50.0
million; and Columbia Capital, Telcom Ventures, L.L.C. and Madison Dearborn
Partners, $75.0 million in the aggregate. Using part of the proceeds from the
issuance of the Series A subordinated convertible notes, the Company paid
WorldSpace, Inc. $75.0 million in July 1999 to redeem an outstanding loan. The
Company incurred fees and expenses totaling $11.0 million in connection with
these transactions. Several of the transactions and agreements described above
were entered into in connection with these transactions.
As part of the July 1999 transactions, WorldSpace transferred all of its
rights, title and interests in XM Satellite Radio Inc., the operating company
now owned by XM Satellite Radio Holdings Inc., to a trust. These interests
included:
. 1,337,850 shares of XM Satellite Radio Holdings Inc. common stock;
. a $54.5 million note issued to WorldSpace in April 1998 convertible into
3,335,367 shares of XM Satellite Radio Holdings Inc. common stock,
together with interest accrued and capitalized thereon;
. an aggregate of $81.9 million of additional indebtedness incurred to
WorldSpace in May 1997, together with interest accrued and capitalized
thereon, other than $75.0 million aggregate principal amount thereof,
which was retained by WorldSpace and repaid and retired by XM Satellite
Radio Holdings Inc.; and
. options issued to WorldSpace in May 1997 to purchase up to 12,287,933
shares of XM Satellite Radio Holdings Inc. common stock.
The stock, notes, and indebtedness were then acquired from the trust by
American Mobile, and the notes and indebtedness were converted into or
exchanged for additional shares of XM Satellite Radio Holdings Inc. common
stock. As a result of these transactions, WorldSpace ceased to have any direct
equity or debt interest in XM Satellite Radio Holdings Inc.
16
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth the compensation paid to the Company's Chief
Executive Officer and to each of the Company's other four most highly
compensated executive officers for 1999, referred to collectively as the named
executive officers:
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------------- ------------------
Name and Principal Class A Shares
Position(s) Year Salary Bonus Other Underlying Options
- ------------------ ---- ------ ----- ----- ------------------
<S> <C> <C> <C> <C> <C>
Hugh Panero 1998 $163,333 $ 65,333 $293,060(1) 267,570
President and Chief
Executive Officer...... 1999 286,533 125,000 1,354 100,000
Lee Abrams 1998 125,417 27,413 30,989(2) 53,514
Senior Vice President,
Chief of Programming... 1999 220,000 56,100 47,900 50,000
Stelios Patsiokas 1998 43,077 16,710 59,966(3) 53,514
Senior Vice President,
Technology............. 1999 211,700 84,680 213 50,000
Heinz Stubblefield 1998 116,667 60,000 -- 53,514
Senior Vice President,
Chief Financial
Officer................ 1999 208,000 62,400 1,589 50,000
Stephen Cook 1998 -- -- -- --
Senior Vice President,
Sales and Marketing.... 1999 205,960 70,082 51,927(4) 103,514
</TABLE>
- --------
(1) Includes a signing bonus of $200,000.
(2) Includes a signing bonus of $28,000.
(3) Includes a signing bonus of $59,966.
(4) Includes a signing bonus of $50,000.
Employment Agreements
Hugh Panero is employed as the Company's President, Chief Executive Officer
and member of the Board of Directors for a term of three years under an
employment agreement effective June 1, 1998. His employment agreement provides
for an annual base salary of $280,000, subject to increase from time to time
by the Company's Board of Directors. Mr. Panero is also eligible for a pro-
rata annual bonus to be determined by the Board of Directors according to Mr.
Panero's personal job performance and mutually agreed upon corporate goals and
objectives. The bonus target guideline is 40% of Mr. Panero's annual base
salary. Under Mr. Panero's employment agreement and pursuant to the XM
Satellite Radio Holdings Inc. 1998 Shares Award Plan, the Company granted to
Mr. Panero a 10-year option to purchase 267,570 shares of Class A common stock
at an exercise price of $9.52 per share. This option vests at the rate of
. 107,028 shares in three equal annual installments beginning on the first
anniversary of the grant; and
. 160,542 shares in three equal annual installments beginning on the first
anniversary of the grant based on achievement of performance objectives.
All options vest in the event of death or involuntary termination within one
year of a change of control of the Company; otherwise, all non-vested options
would be forfeited upon termination of employment. Following termination of
employment, vested stock options would cease to be exercisable
. immediately, if Mr. Panero is terminated for cause;
. three months after termination, in the event of a voluntary termination;
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<PAGE>
. six months, following an involuntary termination; or
. one year following death, disability, retirement, or in the event of
voluntary or involuntary termination within one year following a change
of control.
His employment agreement restricts Mr. Panero from engaging in any business
in the United States which resembles or competes with the Company for a period
of one year following termination of his employment.
The Company also has agreements with the following named executive officers:
<TABLE>
<CAPTION>
Name Title Effective Date
---- ----- --------------
<C> <S> <C>
Lee Abrams....................... Senior Vice President, June 8, 1998
Chief
of Programming
Stephen Cook..................... Senior Vice President, February 22, 1999
Sales
and Marketing
Stelios Patsiokas................ Senior Vice President, October 19, 1998
Technology
Heinz Stubblefield............... Senior Vice President, June 1, 1998
Chief
Financial Officer
</TABLE>
Mr. Stubblefield's agreement is for a term of three years, which will
automatically renew for a period of an additional two years unless either
party gives 60 days notice to the other; Mr. Patsiokas' agreement is for a
term of three years; and Mr. Abrams' and Mr. Cook's agreement have no
specified term. Each agreement provides that the executive is eligible for an
annual bonus to be determined by the Board of Directors based upon agreed upon
performance measures. These amounts are up to 40% of annual base salary for
Mr. Patsiokas, up to 35% of annual base salary for Mr. Cook and up to 30% of
annual base salary for Messrs. Stubblefield and Abrams. The agreement for Mr.
Patsiokas and Mr. Cook provide for severance payment of one year's salary
payable in a lump sum upon termination of employment by the Company other than
for cause. The agreement for Mr. Stubblefield provides for severance payment
of one year's salary and bonus, plus the pro-rated portion of earned bonus and
options scheduled to vest for the current year, payable in a lump sum upon
termination of employment by the Company other than for cause. Under these
agreements and the terms of the 1998 Shares Award Plan, the Company has
granted to each of Messrs. Abrams, Cook, Patsiokas and Stubblefield a 10-year
option to purchase 53,514 shares of Class A common stock at an exercise price
of $9.52 per share. Each of these options vests in three equal annual
installments beginning on the first anniversary of the grant.
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<PAGE>
Stock Option Grants in 1999
In 1998, the Company's Board of Directors adopted a 1998 Shares Award Plan
for employees, consultants and non-employee directors. The following table
sets forth information concerning the stock options granted by the Company to
named executive officers under the 1998 Shares Award Plan in 1999.
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------
Number of
Common Percent of Potential Realizable
Shares Total Exercise Value at Assumed
Underlying Options Price Annual Rates of Stock
Options Granted to Per Price Appreciation for
Name Granted Employees Share Expiration Date Stock Term
- ---- ---------- ---------- -------- ----------------- -----------------------
5% 10%
-----------------------
<S> <C> <C> <C> <C> <C> <C>
Hugh Panero............. 100,000 6.8% $12.00 October 8, 2009 $ 754,674 $ 1,912,491
Lee Abrams.............. 50,000 3.4 12.00 October 8, 2009 377,337 956,245
Stephen Cook............ 53,514 3.6 9.52 February 22, 2009 320,392 811,937
50,000 3.4 12.00 October 8, 2009 377,337 956,245
Stelios Patsiokas....... 50,000 3.4 12.00 October 8, 2009 377,337 956,245
Heinz Stubblefield...... 50,000 3.4 12.00 October 8, 2009 377,337 956,245
</TABLE>
Stock Option Exercises in 1999
The following table sets forth the number of shares acquired and the value
realized upon exercise of stock options during 1999 and the number of shares
of Class A common stock subject to exercisable and unexercisable stock options
held as of December 31, 1999 by each of the named executive officers. Value at
fiscal year end is measured as the difference between the exercise price and
the fair market value at close of market on December 31, 1999, which was
$38.13.
Aggregate Option Exercises in 1999 and Values at December 31, 1999
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Number of Unexercised Options at In-the Money Options
Shares December 31, 1999 December 31, 1999
Acquired Value ------------------------------------ ------------------------------
Name on Exercise Realized Exercisable(#) Unexercisable(#) Exercisable($) Unexercisable($)
- ---- ----------- -------- --------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Hugh Panero............. -- -- 89,190 278,380 2,551,280 7,715,060
Lee Abrams.............. -- -- 17,838 85,676 510,256 2,326,762
Stephen Cook............ -- -- -- 103,514 -- 2,837,018
Stelios Patsiokas....... -- -- 17,838 85,676 510,256 2,326,762
Heinz Stubblefield...... -- -- 17,838 85,676 510,256 2,326,762
</TABLE>
19
<PAGE>
Report of the Compensation Committee of the
Board of Directors of XM Satellite Radio Holdings Inc.
on Executive Compensation
This report, as well as the performance graph on page 23, are not soliciting
materials, are not deemed filed with the SEC and are not incorporated by
reference in any filing of the Company under the Securities Act of 1933 or the
Securities Exchange Act of 1934, whether made before or after the date of this
proxy statement and irrespective of any general incorporation language in any
such filing.
The Compensation Committee is charged with making decisions with respect to
the compensation of the Company's executive officers and administering the
Company's 1998 Shares Award Plan and Employee Stock Purchase Plan. No member
of the Compensation Committee is an employee of the Company. During 1999, the
Compensation Committee consisted of Messrs. Donohue, Mays, Shaw and Singh.
The Compensation Committee of the Board of Directors has prepared the
following report on the Company's policies with respect to the compensation of
executive officers for the fiscal year ended December 31, 1999.
Compensation Policies Toward Executive Officers
The compensation policies of the Company are designed to:
(1)attract, motivate and retain experienced and qualified executives,
(2)increase the overall performance of the Company,
(3)increase stockholder value, and
(4)increase the performance of individual executives.
The Compensation Committee seeks to provide competitive salaries based upon
individual performance together with annual cash bonuses awarded based on the
Company's overall performance relative to corporate objectives, taking into
account individual contributions, teamwork and performance levels. In
addition, it is the policy of the Company to grant stock options to executives
upon their commencement of employment with the Company and annually thereafter
in order to strengthen the alliance of interest between such executives and
the Company's stockholders and to give executives the opportunity to reach the
top compensation levels of the competitive market depending on the Company's
performance, as reflected in the market price of the common stock.
The following describes in more specific terms the elements of compensation
that implement the Compensation Committee's compensation policies, with
specific reference to compensation reported for 1999.
Base Salaries. Base salaries of executives are initially determined by
evaluating the responsibilities of the position, the experience and knowledge
of the individual, and the competitive marketplace for executive talent,
including a comparison to base salaries for comparable positions at peer
public companies in the Company's geographic region. Base salaries for
executive officers are reviewed annually by the Compensation Committee based
upon, among other things, individual performance and responsibilities.
Annual salary adjustments are recommended by the Chief Executive Officer by
evaluating the performance of each executive officer after considering new
responsibilities and the previous year's performance. The Compensation
Committee performs the same review of the performance of the Chief Executive
Officer. Individual performance ratings take into account such factors as
achievement of specific goals that are driven by the Company's strategic plan
and attainment of specific individual objectives. The factors affecting base
salary levels are not assigned specific weights but are subject to adjustments
by the Compensation Committee.
Bonuses. The Company's annual bonuses to its executive officers are based on
both corporate and individual performance, as measured by reference to factors
which reflect objective performance criteria over which management generally
has the ability to exert some degree of control. These corporate performance
factors
20
<PAGE>
consist of revenue and earnings targets established in the Company's annual
budget. Bonuses for 1999, which were paid in 2000, are based upon the
achievement of such financial and operating factors.
Stock Options. A third component of executive officers' compensation
consists of awards under the 1998 Shares Award Plan pursuant to which the
Company grants executive officers and other key employees options to purchase
shares of Class A common stock.
The Compensation Committee grants stock options to the Company's executives
in order to align their interests with the interests of the stockholders.
Stock options are considered by the Compensation Committee to be an effective
long-term incentive because the executives' gains are linked to increases in
the value of the Class A common stock, which in turn provides stockholder
gains. The Compensation Committee generally grants options to new executive
officers and other key employees upon their commencement of employment with
the Company and periodically thereafter. The options generally are granted at
an exercise price equal to the closing market price of the Class A common
stock at the date of the grant. Options granted to executive officers
typically vest over a three-year period following the date of grant. The
maximum option term is ten years. The full benefit of the options is realized
upon appreciation of the stock price in future periods, thus providing an
incentive to create value for the Company's stockholders through appreciation
of stock price. Management of the Company believes that stock options have
been helpful in attracting and retaining skilled executive personnel.
Stock option grants made to executive officers in 1999 reflect significant
individual contributions relating to the Company's initial public offering as
well as the Company's operations and implementation of the Company's
development and growth programs. Newly hired executive officers also received
stock option grants at the time of their employment with the Company. During
1999, the Company granted stock options to purchase an aggregate of 2,188,988
shares of Class A common stock to approximately 62 employees, including
options to purchase an aggregate of 355,514 shares of Class A common stock to
the Company's five most highly compensated executive officers. The per share
option exercise prices of such options ranged from $9.52 to $18.75.
Chief Executive Officer Compensation
The executive compensation policy described above is applied in setting Mr.
Panero's compensation. Mr. Panero generally participates in the same executive
compensation plans and arrangements available to the other senior executives.
Accordingly, his compensation also consists of annual base salary, annual
bonus, and long-term equity-linked compensation. The Compensation Committee's
general approach in establishing Mr. Panero's compensation is to be
competitive with peer companies, but to have a large percentage of his target
compensation based upon the long-term performance of the Company, as reflected
in part in the market price of the Class A common stock.
Mr. Panero's employment agreement with the Company, dated June 1, 1998,
provides for an annual base salary of $280,000, subject to increase by the
Board of Directors, and makes him eligible for an annual bonus with a target
guideline of 40% of his base salary. Mr. Panero's compensation for the year
ended December 31, 1999 included $286,533 in base salary and $126,354 in the
form of a cash bonus and other compensation. The increase in Mr. Panero's
salary from the previous year and his bonus payments for 1999 were based on,
among other factors, the Company's performance and the 1998 compensation of
chief executive officers of comparable companies, although his compensation
was not linked to any particular group of these companies.
Compensation Deductibility Policy
Under Section 162(m) of the Internal Revenue Code, and applicable Treasury
regulations, no tax deduction is allowed for annual compensation in excess of
$1 million paid to any of the Company's five most highly compensated executive
officers. However, performance-based compensation that has been approved by
stockholders is excluded from the $1 million limit if, among other
requirements, the compensation is payable only upon attainment of pre-
established, objective performance goals and the board committee that
establishes such goals consists only of "outside directors" as defined for
purposes of Section 162(m). The Compensation
21
<PAGE>
Committee intends to maximize the extent of tax deductibility of executive
compensation under the provisions of Section 162(m) so long as doing so is
compatible with its determinations as to the most appropriate methods and
approaches for the design and delivery of compensation to the Company's
executive officers.
Respectfully submitted,
Compensation Committee
Thomas J. Donohue
Randall T. Mays
Jack Shaw
Rajendra Singh
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Messrs. Donohue, Mays,
Shaw and Singh.
There are no interlock relationships as defined in the applicable SEC rules.
For a description of certain transactions between such individuals and the
Company, see "Transactions with Related Parties" in this proxy statement.
22
<PAGE>
Stockholder Return Performance Graph
The following graph shows the cumulative total stockholder return on the
Company's Class A common stock compared to the Standard & Poor's 500 Stock
Index and the Nasdaq Telecommunications Index, composed of publicly traded
companies which are principally in the telecommunications business, for the
periods between October 5, 1999, the date the Class A common stock began
trading on The Nasdaq National Market, and December 31, 1999. The graph
assumes $100 was invested on October 5, 1999 in (1) the Company's Class A
common stock, (2) the Standard & Poor's 500 Stock Index and (3) the Nasdaq
Telecommunications Index. Total stockholder return is measured by dividing
total dividends, assuming dividend reinvestment, plus share price change for a
period by the share price at the beginning of the measurement period.
COMPARISION OF 3 MONTH CUMULATIVE TOTAL RETURN*
Among XM Satellite Radio Holdings Inc., the S & P 500 Index
and the Nasdaq Telecommunications Index
[CHART APPEARS HERE]
Cumulative Total Return
----------------------------------------
- -
10/5/1999 10/99 11/99 12/99
XM SATELLITE RADIO HOLDINGS INC. 100.00 161.46 222.40 317.71
S & P 500 100.00 108.12 110.32 116.81
NASDAQ TELECOMMUNICATIONS 100.00 117.47 124.59 144.13
* $100 invested on 10/5/99 in stock or index, including reinvestment of
dividends. Fiscal year ending December 31.
23
<PAGE>
XM SATELLITE RADIO HOLDINGS INC. 1998 SHARES AWARD PLAN PROPOSAL
(Proposal 2)
The XM Satellite Radio Holdings Inc. 1998 Shares Award Plan currently
authorizes the issuance of a total of 2,675,700 shares of Class A common stock
pursuant to the plan. The Board of Directors has approved an amendment to the
plan at a meeting held on March 9, 2000 to increase the number of shares of
Class A common stock that may be issued pursuant to the plan to 5,000,000
shares. At this meeting the Board of Directors directed that the plan, as
amended, be submitted to the stockholders for approval in order for awards
under the plan to qualify under the exception to Section 162(m) of the
Internal Revenue Code, as "qualified performance-based compensation" if the
requirements of the exception are otherwise satisfied and so that options
granted under the plan using the additional shares may qualify as incentive
stock options within the meaning of the Internal Revenue Code.
The purpose of the 1998 Shares Award Plan is to advance the interests of the
Company by providing eligible individuals an opportunity to acquire or
increase a proprietary interest in the Company, which thereby will create a
stronger incentive to expend maximum effort for the growth and success of the
Company and will encourage such eligible individuals to remain in the employ
of the Company. The Board of Directors believes that it is important to
increase the number of shares available under the plan in order to maintain
and improve the Company's ability to attract and retain key personnel, and to
serve as an incentive to such personnel to make extra efforts to contribute to
the success of the Company's operations.
The only change proposed by the amendment is an increase in the number of
shares of Class A common stock that may be issued under the 1998 Shares Award
Plan. The amendment does not alter the considerations of the Compensation
Committee with respect to grants under the plan. Because the award of options
is completely within the discretion of the Compensation Committee, it is not
possible to determine at this time the awards that may be made to officers or
other employees.
There were 575,540 shares of Class A common stock authorized for issuance
under the 1998 Shares Award Plan and not subject to outstanding awards as of
December 31, 1999. The Board of Directors believes that this number of shares
is insufficient to meet the Company's needs for long-term incentive
compensation in the form of stock options. The Board of Directors has
determined that the number of shares that may be issued under the plan should
be within a certain range of percentages of the total number of outstanding
shares of Class A common stock, including shares issuable upon conversion of
other securities of the Company into Class A common stock. Since 1998, when
the plan was adopted, the Company has completed its initial public offering
and several additional rounds of financing and, in connection with these
financings, has issued a large amount of additional equity. As a result, the
number of shares of Class A common stock issuable under the plan no longer
falls within the range targeted by the Board of Directors. Also, during this
time, the number of employees of the Company has increased substantially,
thereby increasing the need for additional shares under the plan to enable the
Company to continue to grow and attract new employees.
The following is a summary description of the XM Satellite Radio Holdings
Inc. 1998 Shares Award Plan, which was originally approved by the stockholders
of the Company on June 16, 1998 and later amended, which amendments were
approved by the stockholders of the Company on July 8, 1999. This summary is
qualified in its entirety by the detailed provisions of the 1998 Shares Award
Plan, a copy of which is attached as Exhibit A to this proxy statement.
Description of the XM Satellite Radio Holdings Inc. 1998 Shares Award Plan
In 1998, the Company's Board of Directors adopted a 1998 Shares Award Plan
for employees, consultants and non-employee directors. The Company can grant
options, stock appreciation rights, restricted stock or phantom shares under
the plan. The aggregate number of shares of Class A common stock with respect
to which awards may be granted under the plan is 2,675,700 shares, which will
be increased to 5,000,000 shares if the amended plan is approved. The Company
may not grant awards of more than 267,570 shares of its Class A
24
<PAGE>
common stock to any participant in any calendar year. Options granted under
the shares award plan may be either incentive or non-incentive stock options
within the meaning of the Internal Revenue Code. Shares granted to satisfy
awards under the plan may be authorized and unissued shares, issued shares
held in the Company's treasury or shares acquired on the open market.
The 1998 Shares Award Plan is administered by the Compensation Committee.
The Compensation Committee selects the optionees and determines the number of
shares of Class A common stock covered by each option and the terms of the
option agreement to be executed by the Company and the optionee, including the
exercise price of the option. Options granted to date under the 1998 Shares
Award Plan generally become exercisable in equal amounts on the first three
anniversaries of the effective date of grant.
Each option will be exercisable in whole or in installments, as determined
at the time of grant. The term of any option granted may not be more than 10
years from the date of grant. Stock appreciation rights of the Company may be
granted in tandem with another award, in addition to another award or
unrelated to any other award. No stock appreciation right may be exercisable
until six months after the day of grant. A stock appreciation right entitles
the participant to receive the excess of the fair market value of the Class A
common stock on the date of the exercise of the stock appreciation right over
its grant price.
In the event there is any change in the Class A common stock of the Company
by reason of any stock dividend, stock split, adoption of stock rights plans,
split-ups, split-offs, spin-offs, liquidations, combination or exchanges of
shares, recapitalizations, mergers, consolidations or reorganizations of or by
the Company or any distribution to Class A common stockholders other than
ordinary cash dividends, the Company will make an appropriate adjustment in
the price and number of shares subject to outstanding awards under the 1998
Shares Award Plan. The number of shares available for issuance under the plan
as well as any individual limits on shares available for grant pursuant to
awards issued under the plan will also be adjusted accordingly.
If the Company engages in a merger or a consolidation and awards are not
substituted for, assumed or continued in connection with the merger or
consolidation, or the Company engages in a dissolution, a liquidation, or a
sale of all or substantially all of its assets, then the holder of an
outstanding award will have the right immediately prior to the effective date
of the transaction to exercise such award without regard to any installment
provision regarding exercisabilty. If not assumed, substituted for, or
continued, all such awards which are not so exercised will be forfeited as of
the effective time of the transaction.
In the event of a change of control (as defined in the 1998 Shares Award
Plan) of the Company, each participant will be entitled to receive an
equivalent award. An equivalent award is defined as a continuation of the
awards, an agreement by the person acquiring the Company to honor or assume
the award, or the substitution of a new award with an inherent value at least
equivalent to the original award, and on terms at least as beneficial to the
participant as is the original award. If it is not possible to grant such an
equivalent award, the Company may grant a cash equivalent, calculated as
described in the plan. If the participant's employment with the Company is
terminated by reason of involuntary termination within one year following the
change of control, the equivalent award may be exercised in full beginning on
the date of such termination.
The Board of Directors at any time may amend, suspend or terminate the 1998
Shares Award Plan, except that no amendment, suspension or termination may
alter or impair any award previously made under the plan without the consent
of the holder of the award and certain amendments will be subject to
stockholder approval as required by the Internal Revenue Code. Unless
previously terminated, the 1998 Shares Award Plan will terminate automatically
on June 16, 2008, the tenth anniversary of the date of adoption of the plan by
the Board of Directors.
Section 162(m) of the Internal Revenue Code. Section 162(m) of the Internal
Revenue Code limits publicly-held companies to an annual deduction for federal
income tax purposes of $1,000,000 for compensation paid to their chief
executive officer and the four highest compensated executive officers (other
than the chief executive officer) determined at the end of each year (the
"covered employees"). However, performance-based compensation is excluded from
this limitation.
25
<PAGE>
To qualify as performance-based:
. the compensation must be paid solely on account of the attainment of one
or more preestablished, objective performance goals;
. the performance goal under which compensation is paid must be
established by a compensation committee comprised solely of two or more
directors who qualify as outside directors for purposes of the
exception;
. the material terms under which the compensation is to be paid must be
disclosed to and subsequently approved by stockholders of the
corporation before payment is made in a separate vote; and
. the compensation committee must certify in writing before payment of the
compensation that the performance goals and any other material terms
were in fact satisfied.
In the case of compensation attributable to stock options, the performance
goal requirement is deemed satisfied, and the certification requirement is
inapplicable, if the grant is made by the compensation committee; the plan
under which the option is granted states the maximum number of shares with
respect to which options may be granted during a specified period to an
employee; and under the terms of the option, the amount of compensation is
based solely on an increase in the value of the stock after the date of grant.
The 1998 Shares Award Plan is designed to permit the compensation committee to
grant options that qualify as performance-based for purposes of satisfying the
conditions of Section 162(m).
Under the Internal Revenue Code, a director is an "outside director" if he
or she is not a current employee of the corporation; is not a former employee
who receives compensation for prior services (other than under a qualified
retirement plan); has not been an officer of the corporation; and does not
receive, directly or indirectly (including amounts paid to an entity that
employs the director or in which the director has at least a five percent
ownership interest), remuneration from the corporation in any capacity other
than as a director.
Federal Income Tax Consequences
The grant of an option is not a taxable event for the optionee or the
Company.
Incentive Stock Options. An optionee will not recognize taxable income upon
exercise of an ISO except that the alternative minimum tax may apply, and any
gain realized upon a disposition of shares of common stock received pursuant
to the exercise of an ISO will be taxed as long-term capital gain if the
optionee holds the shares of common stock for at least two years after the
date of grant and for one year after the date of exercise referred to as the
"holding period requirement". The Company will not be entitled to any business
expense deduction with respect to the exercise of an ISO, except as discussed
below.
For the exercise of an ISO to qualify for the foregoing tax treatment, the
optionee generally must be an employee of the Company from the date the option
is granted through a date within 30 days before the date of exercise of the
option. In the case of an optionee who is disabled, the 30 day period is
extended to one year. In the case of an employee who dies, the three-month
period and the holding period requirement for shares of common stock received
pursuant to the exercise of the option are waived. Options granted to non-
employee directors cannot qualify as ISOs.
If all of the requirements for incentive option treatment are met except for
the holding period requirement, the optionee will recognize ordinary income
upon the disposition of shares of common stock received pursuant to the
exercise of an ISO in an amount equal to the excess of the fair market value
of the shares of common stock at the time the option was exercised over the
exercise price. The balance of the realized gain, if any, will be long-term or
short-term capital gain, depending upon whether or not the shares of common
stock were sold more than one year after the option was exercised. The Company
will be allowed a business expense deduction to the extent the optionee
recognizes ordinary income, subject to Section 162(m) of the Internal Revenue
Code.
26
<PAGE>
Non-Qualified Options. Upon exercising a NSO, an optionee will recognize
ordinary income in an amount equal to the difference between the exercise
price and the fair market value of the shares of common stock on the date of
exercise except that, if the optionee is subject to certain restrictions
imposed by securities laws, the measurement date will be deferred, unless the
optionee makes a special tax election within 30 days after exercise to have
income determined without regard to the restrictions. Upon a subsequent sale
or exchange of shares of common stock acquired pursuant to the exercise of a
NSO, the optionee will have taxable gain or loss, measured by the difference
between the amount realized on the disposition and the tax basis of the shares
of common stock, which generally, the amount paid for the shares of common
stock plus the amount treated as ordinary income at the time the option was
exercised.
An optionee who has transferred an NSO to a spouse, child, grandchild,
parent or sibling by gift will realize taxable income at the time the NSO is
exercised by the family member. The optionee will be subject to withholding of
income and employment taxes at that time. The family member's tax basis in the
shares will be the fair market value of the shares on the date the option is
exercised. The transfer of vested non-qualified stock options will be treated
as a completed gift for gift and estate tax purposes. Once the gift is
completed, neither the transferred options nor the shares acquired on exercise
of the transferred options may be included in the optionee's estate for estate
tax purposes.
Stock Appreciation Rights. There are no immediate tax consequences of
receiving an award of stock appreciation rights under the 1998 Shares Award
Plan. Upon exercising a stock appreciation right, a grantee will recognize
ordinary income in an amount equal to the difference between the exercise
price and the fair market value of the common stock on the date of exercise.
If the Company complies with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue Code, the Company will
be entitled to a business expense deduction in the same amount and generally
at the same time as the grantee recognizes ordinary income.
Restricted Stock. A grantee who is awarded restricted stock will not
recognize any taxable income for federal income tax purposes in the year of
the award, provided that the shares of common stock are subject to
restrictions (that is, the restricted stock is nontransferable and subject to
a substantial risk of forfeiture). However, the grantee may elect under
Section 83(b) of the Internal Revenue Code to recognize compensation income in
the year of the award in an amount equal to the fair market value of the
common stock on the date of the award, determined without regard to the
restrictions. If the grantee does not make such a Section 83(b) election, the
fair market value of the common stock on the date the restrictions lapse will
be treated as compensation income to the grantee and will be taxable in the
year the restrictions lapse. The Company generally will be entitled to a
deduction for compensation paid in the same amount treated as compensation
income to the grantee in the year the grantee is taxed on the income.
Phantom Shares. A grantee who receives an award of Phantom Shares will be
required to recognize ordinary income in an amount equal to the fair market
value of the shares issued to the grantee pursuant to the award, reduced by
the amount, if any, paid for such shares. The Company will generally be
allowed a business expense deduction for the amount of any taxable income
recognized by the grantee at the time such income is recognized.
Approval of Proposal
The affirmative vote of a majority of the voting rights of the shares of
Class A common stock and Class B common stock present or represented by Proxy
at the Annual Meeting, voting together as a single class, is required to
approve the 1998 Shares Award Plan, as amended. Each share of Class B common
stock is entitled to three votes.
The Board of Directors Recommends that the Stockholders of XM Satellite
Radio Holdings Inc. Vote "FOR" Proposal 2 to approve the amended XM Satellite
Radio Holdings Inc. 1998 Shares Award Plan.
27
<PAGE>
RATIFICATION OF THE APPOINTMENT
OF THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS
FOR THE 2000 FISCAL YEAR
(Proposal 3)
The Board of Directors has appointed the firm of KPMG LLP as the independent
accountants for XM Satellite Radio Holdings Inc. for the fiscal year ending
December 31, 2000.
Stockholder ratification of Proposal 3 is not required by the Bylaws or
otherwise. However, the Board of Directors is submitting Proposal 3 to the
stockholders for ratification as a matter of good corporate practice. If the
stockholders fail to ratify Proposal 3, the Board of Directors will reconsider
whether or not to retain KPMG LLP. Even if Proposal 3 is ratified, the Board
of Directors in its discretion may direct the appointment of a different
independent accountant at any time during the year if the Board of Directors
determines that such a change would be in the best interests of XM Satellite
Radio Holdings Inc. and its stockholders.
Representatives of KPMG LLP will be present at the Annual Meeting and will
have the opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
The affirmative vote of a majority of the voting rights of the shares of
Class A common stock and Class B common stock present or represented by Proxy
at the Annual Meeting, voting together as a single class, is required to
approve the Proposal 3. Each share of Class B common stock is entitled to
three votes.
The Board of Directors Recommends a Vote "FOR" Proposal 3.
28
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than 10% of a
registered class of the Company's equity securities to file with the SEC
initial reports of ownership and reports of changes in ownership of common
stock and other equity securities of the Company. Such reporting persons are
required by rules of the SEC to furnish the Company with copies of all Section
16(a) reports they file. To the Company's knowledge, based solely upon a
review of Section 16(a) reports furnished to the Company for fiscal 1999 or
written representations that no other reports were required, the Company
believes that the foregoing reporting persons complied with all filing
requirements for fiscal 1999, except that Messrs. Parsons, Panero, Davis,
Donohue, Mays, Shaw, Singh, Zarrella, Abrams, Cook, Patsiokas, Stubblefield,
Titlebaum and Wormington, Ms. Segal, American Mobile Satellite Corporation,
General Motors Corporation, DIRECTV Enterprises, Inc., Clear Channel
Investments, Inc., Columbia XM Radio Partners, L.L.C., Telcom-XM Investors,
L.L.C., Madison Dearborn Capital Partners III, L.P., Madison Dearborn Special
Equity III, L.P., and Special Advisors Fund I, LLC timely reported
transactions on Form 3 in connection with the Company's initial public
offering but inadvertently reported the date and the number of securities
acquired incorrectly, and Mr. Parsons timely reported a transaction on Form 4
but inadvertently reported the number of securities acquired incorrectly. Each
of these errors was corrected by amendment.
STOCKHOLDER PROPOSALS FOR THE ANNUAL MEETING IN 2001
Any proposal or proposals by a stockholder intended to be included in the
Company's proxy statement and form of proxy relating to the 2001 annual
meeting of stockholders must be received by the Company no later than December
28, 2000, pursuant to the proxy solicitation rules of the SEC. Nothing in this
paragraph shall be deemed to require the Company to include in its proxy
statement and proxy relating to the 2001 annual meeting of stockholders any
stockholder proposal which may be omitted from the Company's proxy materials
pursuant to applicable regulations of the SEC in effect at the time such
proposal is received. For any proposal that is not submitted for inclusion in
next year's proxy statement but is instead presented directly at the 2001
annual meeting of stockholders, notice of such proposal must be received in
writing by the Secretary of the Company between 60 and 90 days prior to the
annual meeting, except that if less than 70 days' notice of the date of the
annual meeting is given to stockholders or publicly disclosed, notice of such
proposal must be received by the Secretary not later than the 10th day
following the date that notice of the annual meeting is mailed or publicly
disclosed. Failure to provide notice in this manner and within this time
period means that such proposal will be considered untimely. Management will
be entitled to vote proxies in its discretion with respect to any proposal
that is presented at the 2001 annual meeting of stockholders but not included
in the proxy statement.
OTHER MATTERS
The Board of Directors does not intend to present to the annual meeting any
other matters not referred to above and does not presently know of any matters
that may be presented to the meeting by others. If other matters are properly
brought before the meeting, the persons named in the enclosed proxy will vote
on such matters in their own discretion.
By Order of the Board of Directors
/s/ Gary M. Parsons
Gary M. Parsons
Chairman of the Board of Directors
Dated: April 25, 2000
29
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EXHIBIT A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
XM SATELLITE RADIO HOLDINGS INC.
1998 SHARES AWARD PLAN
(AS AMENDED)
Effective as of June 16, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-1
<PAGE>
XM Satellite Radio Holdings Inc.
1998 Shares Award Plan
(as amended)
INTRODUCTION
XM Satellite Radio Holdings Inc., a Delaware corporation (hereinafter
referred to as the "Corporation"), hereby establishes an incentive
compensation plan to be known as the "XM 1998 Shares Award Plan" (hereinafter
referred to as the "Plan"), as set forth in this document. The Plan permits
the grant of Incentive Stock Options, Non-Qualified Stock Options, Phantom
Stock Awards, Stock Appreciation Rights, Restricted Stock Awards and Other
Stock-Based Awards. Subject to the terms of the Plan, the Plan shall become
effective on June 16, 1998.
The purpose of the Plan is to promote the success and enhance the value of
the Corporation by linking the personal interests of Participants to those of
the Corporation's shareholders by providing Participants with an incentive for
outstanding performance. The Plan is further intended to assist the
Corporation in its ability to motivate, and retain the services of,
Participants upon whose judgment, interest and special effort the successful
conduct of its operations is largely dependent.
DEFINITIONS
For purposes of this Plan, the following terms shall be defined as follows
unless the context clearly indicates otherwise:
(a) "Affiliate" shall mean (i) any parent, including American Mobile
Satellite Corporation and any other entity which owns directly or
indirectly at least 50% of the total combined voting power of all classes
of stock of the Corporation and (ii) any entity in which the Corporation
directly or indirectly owns at least 50% of the total combined voting power
of all classes of stock.
(b) "Award" shall mean any award to a participant of an Option, Stock
Appreciation Right, Phantom Share, Restricted Stock or any other stock-
based award under the Plan.
(c) "Award Agreement" shall mean the written agreement, executed by an
appropriate officer of the Corporation, pursuant to which an Award is
granted.
(d) "Board of Directors" shall mean the Board of Directors of the
Corporation.
(e) "Change of Control" shall have the meaning set forth in Section 11(d)
hereof.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder.
(g) "Committee" shall mean the Board of Directors of the Corporation or
any committee of two or more Non-Employee Directors (as defined under Rule
16b promulgated under the Exchange Act) designated by the Board of
Directors to serve as the Committee.
(h) "Consultant" shall mean an individual or entity who is in a
consulting relationship with the Corporation or any parent or subsidiary of
the Corporation.
(i) "Corporation" shall mean XM Satellite Radio Holdings Inc., a Delaware
corporation.
(j) "Employee" shall mean a common-law employee of the Corporation or of
any Affiliate.
(k) "Equivalent Award" shall mean, in connection with a Change of
Control, a continuation of the Award by the Corporation to a Participant,
an agreement by the person(s) acquiring the Corporation that to honor or
assume the Award following the Change of Control, or the substitution of a
new Award with an inherent value equivalent to that of the original Award
and on terms at least as beneficial to the Participant as those contained
in the Participant's original Award Agreement.
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(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
(m) "Fair Market Value" of the Corporation's Common Shares on a Trading
Day shall mean the last reported sale price for Common Shares or, in case
no such reported sale takes place on such Trading Day, the average of the
closing bid and asked prices for the Common Shares for such Trading Day, in
either case on the principal national securities exchange on which the
Common Shares are listed or admitted to trading, or if the Common Shares
are not listed or admitted to trading on any national securities exchange
but are traded in the over-the-counter market, the closing sale price of
the Common Shares or, if no sale is publicly reported, the average of the
closing bid and asked quotations for the Common Shares, as reported by the
National Association of Securities Dealers Automated Quotation System
("NASDAQ") or any comparable system or, if the Common Shares are not listed
on NASDAQ or a comparable system, the average of the bid and asked prices
of the Common Shares or, if no sale is publicly reported, the average of
the closing bid and asked prices, as furnished by two members of the
National Association of Securities Dealers, Inc., who make a market in the
Common Shares selected from time to time by the Corporation for that
purpose. In addition, for purposes of this definition, a "Trading Day"
shall mean, if the Common Shares are listed on any national securities
exchange, a business day during which such exchange was open for trading
and at least one trade of Common Shares was effected on such exchange on
such business day, or, if the Common Shares are not listed on any national
securities exchange but are traded in the over-the-counter market, a
business day during which the over-the-counter market was open for trading
and at least one "broker-dealer" quoted both a bid and asked price for the
Common Shares (if a broker-dealer quoted only a bid or only an asked price
for such day, such day will not be a Trading Day). In the event the
Corporation's Common Shares are not publicly traded, the Fair Market Value
of such Common Shares shall be determined by the Committee in good faith
and in its sole discretion.
(n) "Good Cause" shall mean, with respect to any Participant, the meaning
of such term as set forth in the employment agreement between the
Corporation (or any Affiliate) and the Participant or, in the event there
is no such employment agreement (or if any such employment agreement does
not contain such a definition), such term shall mean (i) willful or gross
misconduct or willful or gross negligence in the performance of his or her
duties for the Corporation or any Affiliate, (ii) neglect of his or her
duties for the Corporation or any Affiliate after written notice and
opportunity to cure, (iii) dishonesty, fraud, theft, embezzlement or
misappropriation of funds, properties or assets of the Corporation or of
any Affiliate, (iv) conviction of a felony, (v) a direct or indirect
material breach of the terms of any agreement with the Corporation or any
Affiliate or (vi) acting in a manner or making any statements which the
Committee reasonably determines to have a material adverse effect on the
reputation, operations, prospects or business relations of the Company or
its Affiliates.
(o) "Incentive Stock Option" shall mean a right to purchase Shares from
the Corporation that is granted under Section 5 of the Plan and that is
intended to meet the requirements of Section 422 of the Code or any
successor provision thereto.
(p) "Non-Employee Director" shall mean a member of the Board of Directors
who is not a full-time employee of the Corporation.
(q) "Non-Qualified Stock Option" shall mean a shares option which does
not satisfy the requirements for, or which is not intended to be eligible
for, tax-favored treatment under Section 422 of the Code.
(r) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
(s) "Optionee" shall mean a Participant who is granted an Option under
the terms of the Plan.
(t) "Other Stock-Based Award" shall mean any right granted under Section
9 of the Plan.
(u) "Participant" shall mean any Employee, Consultant or Non-Employee
Director participating under the Plan.
(v) "Phantom Share" shall mean a hypothetical Share which is cancelled by
the delivery of an actual Share or, in the discretion of the Corporation,
by the payment of cash (or a combination of cash and Shares) in an amount
equal to the Fair Market Value of a Share on the date of surrender.
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(w) "Plan" shall mean this XM 1998 Shares Award Plan as the same shall be
amended, revised or terminated from time to time.
(x) "Restoration Option" shall mean an Option granted under Section 5(f).
(y) "Restricted Stock" shall mean any Share granted under Section 7 of
the Plan.
(z) "Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
(aa) "Share" shall mean a share of the Class A common stock, par value
$.01 per share, of the Corporation, or such other securities of the
Corporation as may be designated by the Committee from time to time.
(bb) "Stock Appreciation Right" shall mean any right granted under
Section 6 of the Plan.
SECTION 1
ADMINISTRATION
The Plan shall be administered by the Committee. Subject to the provisions
of the Plan, the Committee may establish from time to time such regulations,
provisions, proceedings and conditions of awards which, in its sole opinion,
may be advisable in the administration of the Plan. A majority of the
Committee shall constitute a quorum, and, subject to the provisions of Section
4 of the Plan, the acts of a majority of the members present at any meeting at
which a quorum is present, or acts approved in writing by a majority of the
Committee, shall be the acts of the Committee as a whole.
SECTION 2
SHARES AVAILABLE
Subject to the adjustments provided in Section 7 of the Plan, the aggregate
number of Shares with respect to which Awards may be granted under the Plan
shall be 2,675,700 shares. The Shares underlying Awards shall be counted
against the limitation set forth in the immediately preceding sentence and may
be reused to the extent that the related Award to any individual is settled in
cash, expires, is terminated unexercised, or is forfeited without the delivery
of Shares. Shares granted to satisfy Awards under the Plan may be authorized
and unissued shares, issued Shares held in the Corporation's treasury or
Shares acquired on the open market. The maximum number of Shares with respect
to which Awards may be granted under the Plan to any individual in any
calendar year shall be equal to 267,570 Shares.
SECTION 3
ELIGIBILITY
All (i) Employees who are regularly employed, (ii) Consultants and (iii)
Non-Employee Directors shall be eligible to participate in the Plan.
SECTION 4
AUTHORITY OF COMMITTEE
The Plan shall be administered by, or under the direction of, the Committee,
which shall administer the Plan so as to comply at all times with applicable
law, and shall otherwise have the sole and exclusive authority to interpret
the Plan and to make all determinations specified in or permitted by the Plan
or deemed necessary or desirable for its administration or for the conduct of
the Committee's business. Subject to the provisions of Section 12 hereof, all
interpretations and determinations of the Committee may be made on an
individual or
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group basis and shall be final, conclusive and binding on all persons. Subject
to the express provisions of the Plan, the Committee shall have authority, in
its discretion, to determine, without limitation, the persons to whom Awards
shall be granted, the times when Awards shall be granted, the number of Shares
subject to any Awards, the terms of Awards, any other restrictions, including
any vesting requirements, and the other provisions thereof (which need not be
identical with respect to each Award). In addition, the authority of the
Committee shall include, without limitation, the following with respect to an
Award of an Option:
(a) Financing. The arrangement of temporary financing for a Participant
by registered broker-dealers, under the rules and regulations of the
Federal Reserve Board, for the purpose of assisting a Participant in the
exercise of an Option, such authority to include the payment by the
Corporation of the commissions of the broker-dealer;
(b) Procedures for Exercise of Option. The establishment of procedures
for a Participant (i) to exercise an Option by payment of cash or (ii) with
the consent of the Committee, (A) to have withheld from the total number of
Shares to be acquired upon the exercise of an Option that number of shares
having a Fair Market Value, which, together with such cash as will be paid
in respect of fractional shares, shall equal the Option exercise price of
the total number of Shares to be acquired, (B) to exercise all or a portion
of an Option by delivering that number of Shares already owned by him or
her having a Fair Market Value which shall equal the Option exercise price
for the portion exercised and, in cases where an Option is not exercised in
its entirety, and subject to the requirements of the Code, to permit the
Participant to deliver the Shares thus acquired by him or her in payment of
Shares to be received pursuant to the exercise of additional portions of
such Option, the effect of which shall be that a Participant can in
sequence utilize such newly acquired shares of Common Shares in payment of
the exercise price of the entire Option, together with such cash as shall
be paid in respect of fractional shares or (C) to engage in any form of
"cashless" exercise.
(c) Withholding. The establishment of a procedure whereby a number of
Shares may be withheld from the total number of Shares to be issued upon
exercise of an Award or for the tender of Shares owned by any Participant
to meet any obligation of withholding for taxes incurred by the Participant
upon such exercise.
SECTION 5
SHARE OPTIONS
(a) Grant. Subject to the provisions of the Plan, the Committee shall have
sole and complete discretion and authority to determine the Employees,
Consultants and Non-Employee Directors to whom Options shall be granted, the
number of Shares to be covered by each Option, the option price therefor and
the conditions and limitations applicable to the exercise of the Option. The
Committee shall have the discretion and authority to grant Incentive Stock
Options (but only to Employees who meet the requirements of Section 422(a)(2)
of the Code), Non-Qualified Stock Options, and any combination thereof
(provided that Incentive Stock Options shall be granted only to Employees who
meet the requirements of Section 422(a)(2) of the Code). In the case of
Incentive Stock Options, the terms and conditions of such grants shall be
subject to and comply with such rules as may be prescribed by Section 422 of
the Code, as from time to time amended, and any regulations implementing such
statute.
(b) Exercise Price. Subject to the requirement set forth in Section 5(a)
with respect to Incentive Stock Options, the Committee in its sole discretion
shall establish the exercise price at the time each option is granted. The
exercise price shall be subject to adjustment in accordance with the
provisions of Section 11 of the Plan.
(c) Term. Subject to the provisions of the Plan, the term of any Option
granted hereunder shall be not more than 10 years from the date of grant.
(d) Exercisability. Except as provided in Section 5(e) hereof, each Option
shall be exercisable in whole or in installments, and at such time(s), and
subject to the fulfillment of any conditions on, and to any limitations on,
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exercisability as may be determined by the Committee at the time of the grant
of such Options. The right to purchase Shares shall be cumulative so that when
the right to purchase any Shares has accrued such Shares or any part thereof
may be purchased at any time thereafter until the expiration or termination of
the Option. Notwithstanding the above, no Option shall be exercisable by a
Participant until he or she has fully repaid any and all loans made to him or
her by the Corporation (or by any parent or subsidiary of the Corporation);
provided, however, that a repayment (whether in the form of cash or Shares)
made contemporaneously with an exercise of an Option granted hereunder
(including a repayment in the form of withholding on Shares to be received
upon the exercise of such Option) shall be considered to have occurred prior
to such Option exercise.
(e) Payment of Exercise Price. The price per share of Shares with respect to
each Option shall be payable at the time the Option is exercised. Such price
shall be payable in cash or pursuant to any of the methods set forth in
Sections 4(a) or (b) hereof, as determined by the Participant and approved by
the Committee. Common Shares delivered to the Corporation in payment of the
exercise price shall be valued at the Fair Market Value of the Common Shares
on the date preceding the date of the exercise of the Option.
(f) Restoration Options. In the event that any Participant delivers Shares
in payment of the exercise price of any Option granted hereunder, or in the
event that the withholding tax liability arising upon exercise of any such
Option by a Participant is satisfied through the withholding by the
Corporation of Shares otherwise deliverable upon exercise of the Option, the
Committee shall have the authority to grant or provide for the automatic grant
of a Restoration Option to such Participant. The grant of a Restoration Option
shall be subject to the satisfaction of such conditions or criteria as the
Committee in its sole discretion shall establish from time to time. A
Restoration Option shall entitle the holder thereof to purchase a number of
Shares equal to the number of such Shares so delivered or withheld upon
exercise of the original Option. A Restoration Option shall have a per share
exercise price of not less than 100% of the per Share Fair Market Value as of
the date of grant of such Restoration Option and such other terms and
conditions as the Committee in its sole discretion shall determine.
SECTION 6
STOCK APPRECIATION RIGHTS
(a) Grant. Subject to the provisions of the Plan, the Committee shall have
sole and complete discretion and authority to determine the eligible persons
to whom Stock Appreciation Rights shall be granted, the number of Shares to be
covered by each Stock Appreciation Right Award, the grant price thereof and
the conditions and limitations applicable to the exercise thereof. Stock
Appreciation Rights may be granted in tandem with another Award, in addition
to another Award or freestanding and unrelated to another Award. Stock
Appreciation Rights granted in tandem with or in addition to an Award may be
granted either at the same time as the Award or at a later time. Stock
Appreciation Rights shall not be exercisable earlier than six months after
grant and shall have a grant price as determined by the Committee on the date
of grant.
(b) Exercise and Payment. A Stock Appreciation Right shall entitle the
Participant to receive an amount equal to the excess of the Fair Market Value
of a Share on the date of exercise of the Stock Appreciation Right over the
grant price thereof, provided that the Committee may for administrative
convenience determine that, with respect to any Stock Appreciation Right that
is not related to an Incentive Stock Option and that can only be exercised for
cash during limited periods of time in order to satisfy the conditions of Rule
16b-3, the exercise of such Stock Appreciation Right for cash during such
limited period shall be deemed to occur for all purposes hereunder on the day
during such limited period on which the Fair Market Value of the Shares is the
highest. Any such determination by the Committee may be changed by the
Committee from time to time and may govern the exercise of Stock Appreciation
Rights granted prior to such determination as well as Stock Appreciation
Rights thereafter granted. The Committee shall determine whether a Stock
Appreciation Right shall be settled in cash, Shares or a combination of cash
and Shares.
(c) Other Terms and Conditions. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine, at or after the
grant of a Stock Appreciation Right, the term, methods of exercise,
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methods and form of settlement, and any other terms and conditions of any
Stock Appreciation Right. Any such determination by the Committee may be
changed by the Committee from time to time and may govern the exercise of
Stock Appreciation Rights granted or exercised prior to such determination as
well as Stock Appreciation Rights granted or exercised thereafter. The
Committee may impose such conditions or restrictions on the exercise of any
Stock Appreciation Right as it shall deem appropriate.
SECTION 7
RESTRICTED STOCK
(a) Grant. Subject to the provisions of the Plan, the Committee shall have
sole and complete discretion and authority to determine the eligible persons
to whom Shares of Restricted Stock shall be granted, the number of Shares of
Restricted Stock to be granted to each Participant, the duration of the period
during which, if any, and the conditions under which, the Restricted Stock may
be forfeited to the Corporation, and the other terms and conditions of such
Awards.
(b) Transfer Restrictions. Shares of Restricted Stock may not be sold,
assigned, transferred, pledged or otherwise encumbered, except, in the case of
Restricted Stock, as provided in the Plan or the applicable Award Agreements.
Certificates issued in respect of Shares of Restricted Stock shall be
registered in the name of the Participant and deposited by such Participant,
together with a stock power endorsed in blank, with the Corporation. Upon the
lapse of the restrictions applicable to such Shares of Restricted Stock, the
Corporation shall deliver such certificates to the Participant or the
Participant's legal representative.
(c) Dividends and Distributions. Dividends and other distributions paid on
or in respect of any Shares of Restricted Stock may be paid directly to the
Participant, or may be reinvested in additional Shares of Restricted Stock, as
determined by the Committee in its sole discretion.
SECTION 8
PHANTOM SHARES
(a) Grant. Subject to the provisions of the Plan, the Committee shall have
sole and complete discretion and authority to determine the eligible persons
to whom Phantom Shares shall be granted, the number of Phantom Shares to be
granted to each Participant, the duration of the period during which, and the
conditions under which, the Phantom Shares may be forfeited to the Corporation
and the other terms and conditions of such Awards.
(b) Surrender. Each Award Agreement with respect to a Phantom Stock Unit
shall specify the date on which the Phantom Stock Unit shall be surrendered,
and thereby cancelled by delivery of a Share with respect thereto, subject to
such terms and conditions as the Committee may specify, in its sole
discretion, in the applicable Award Agreement or thereafter. The date on which
the Phantom Shares shall be surrendered may be accelerated upon the occurrence
of certain events, as determined by the Committee in its sole discretion and
as set forth in the applicable Award Agreement.
(c) Dividends and Distributions. Payments may be made to Participants who
have been awarded Phantom Shares in an amount equal to dividends and other
distributions paid on or in respect of an equivalent number of Shares. Such
payments may be paid directly to the Participant or may be reinvested in
additional Phantom Shares, as determined by the Committee in its sole
discretion.
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SECTION 9
OTHER STOCK-BASED AWARDS
The Committee shall have the discretion and authority to grant to eligible
persons an "Other Stock-Based Award," which shall consist of any right that is
(i) not an Award described in Sections 5 through 8 above and (ii) an Award of
Shares or an Award denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, Shares (including, without
limitation, securities or rights convertible into Shares), as deemed by the
Committee to be consistent with the purposes of the Plan. Subject to the terms
of the Plan and any applicable Award Agreement, the Committee shall determine
the terms and conditions of any such Other Stock-Based Award.
SECTION 10
TERMINATION OF SERVICES
The following provisions shall apply in the event that the Participant
ceases to provide services to the Corporation or any Affiliate, either as an
Employee, a Consultant or a Non-Employee Director, unless the Committee shall
have provided otherwise, either at the time of the grant of the Award or
thereafter.
(a) Non-Qualified Stock Options and Stock Appreciation Rights.
(i) Upon Termination of Services as Employee or Consultant. The
Participant's right to exercise any Non-Qualified Stock Option or Stock
Appreciation Right shall terminate, and such Option or Stock Appreciation
Right shall expire, as set forth in the Award Agreement. The exercise
periods and rights to acceleration, if any, in the event of termination of
employment, including for Good Cause, or upon death, total and permanent
disability or retirement, or as a result of a change of control or
otherwise shall be as set forth in the Award Agreement as determined by the
Committee in its sole discretion.
(ii) For purposes of determining whether a Participant's employment or
consulting relationship has terminated, a Participant who is both an
Employee (or Consultant) and a director of the Corporation or any Affiliate
shall be considered to have terminated his or her employment or consulting
relationship only upon his or her termination of service both as an
Employee (or Consultant) and as a director.
(b) Incentive Stock Options.
(i) Except as otherwise determined by the Committee at the time of grant, if
the Participant's employment with the Corporation terminates for any reason,
the Participant shall have the right to exercise any Incentive Stock Option
and any related Stock Appreciation Right during the 90 days after such
termination of employment to the extent it was exercisable at the date of such
termination, but in no event later than the date the Option would have expired
had it not been for the termination of such employment. If the Participant
does not exercise such Option or related Stock Appreciation Right to the full
extent permitted by the preceding sentence, the remaining exercisable portion
of such Option automatically will be deemed a Non-Qualified Stock Option
(except to the extent otherwise provided by Section 421 or Section 422 of the
Code), and such Option and any related Stock Appreciation Right will be
exercisable during the period set forth in Section 10(a) of the Plan, provided
that in the event that employment terminates because of death or the
Participant dies in such 90-day period, the option will continue to be an
Incentive Stock Option to the extent provided by Section 421 or Section 422 of
the Code, or any successor provisions, and any regulations promulgated
thereunder. Notwithstanding the forgoing, if a Participant's employment is
terminated by the Corporation or by any Affiliate for Good Cause or as
otherwise set forth in the Award Agreement, then the Participant shall
immediately forfeit his or her rights to exercise any and all of outstanding
Options or Stock Appreciation Rights theretofore granted to him or her.
(ii) For purposes of determining whether a Participant's employment or
consulting relationship has terminated, a Participant who is both an Employee
(or Consultant) and a director of the Corporation or any
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Affiliate shall be considered to have terminated his or her employment or
consulting relationship only upon his or her termination of service both as an
Employee (or Consultant) and as a director.
(c) Restricted Stock. Except as otherwise determined by the Committee at the
time of grant, upon termination of employment for any reason during the
restriction period, all shares of Restricted Stock still subject to
restriction shall be forfeited by the Participant and reacquired by the
Corporation at the price (if any) paid by the Participant for such Restricted
Stock, provided that in the event of a Participant's retirement, permanent and
total disability or death, or in cases of special circumstances, the Committee
may, in its sole discretion, when it finds that a waiver would be in the best
interests of the Corporation, waive in whole or in part any or all remaining
restrictions with respect to such Participant's shares of Restricted Stock.
(d) Phantom Shares and Other Stock-Based Awards. Upon termination of a
Participant's employment or consulting relationship with the Corporation for
any reason, the Participant who has been granted Phantom Shares or Other
Stock-Based Awards under the Plan shall surrender such Awards, and such Awards
shall either be cancelled or shall be paid as determined by the Committee at
the time of grant and as set forth in the relevant Award Agreement.
SECTION 11
ADJUSTMENT OF SHARES; MERGER OR
CONSOLIDATION, ETC. OF THE CORPORATION
(a) Recapitalization, Etc. In the event there is any change in the common
shares of the Corporation by reason of any stock dividend, stock split,
adoption of stock rights plans, split-ups, split-offs, spin-offs,
liquidations, combination or exchanges of shares, recapitalizations, mergers,
consolidations or reorganizations of or by the corporation or any distribution
to common stockholders other than ordinary cash dividends, there shall be
substituted for or added to each Share theretofore appropriated or thereafter
subject, or which may become subject, to any Award, the number and kind of
shares or other securities into which each outstanding Share shall be so
changed or for which each such Share shall be exchanged, or to which each such
Share be entitled, as the case may be, and the per share price thereof also
shall be appropriately adjusted.
(b) Merger or Consolidation of Corporation. Upon (i) the merger or
consolidation of the Corporation with or into another corporation (pursuant to
which the shareholders of the Corporation immediately prior to such merger or
consolidation will not, as of the date of such merger or consolidation, own a
beneficial interest in shares of voting securities of the corporation
surviving such merger or consolidation having at least a majority of the
combined voting power of such corporation's then outstanding securities), if
the agreement of merger or consolidation does not provide for (1) the
continuance of the Awards granted hereunder or (2) the substitution of new
awards for Awards granted hereunder, or for the assumption of such Awards by
the surviving corporation or (ii) the dissolution, liquidation, or sale of all
or substantially all the assets of the Corporation, the holder of any such
Award theretofore granted and still outstanding (and not otherwise expired)
who satisfies such other requirements, if any, that may be required by the
Committee and set forth in the related Award Agreement, shall have the right
immediately prior to the effective date of such merger, consolidation,
dissolution, liquidation or sale of assets of the Corporation to exercise such
Awards in whole or in part without regard to any installment provision
regarding exercisability that may have been made part of the terms and
conditions of such Awards. The Corporation, to the extent practicable, shall
give advance notice to affected Participants of such merger, consolidation,
dissolution, liquidation or sale of assets of the Corporation. All such Awards
which are not so exercised shall be forfeited as of the effective time of such
merger, consolidation, dissolution, liquidation or sale of assets of the
Corporation.
(c) Change of Control of the Corporation. Notwithstanding the foregoing, if
a Change of Control occurs during the period commencing on the date of grant
of an Award and terminating on the date of expiration of the Award, the
Participant shall be entitled to receive an Equivalent Award. If, despite the
best efforts of the Corporation, the Participant cannot receive an Equivalent
Award in connection with such Change in Control, (i)
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the Participant shall be entitled to receive immediately prior to such Change
in Control, in exchange for his or her Award, cash in an amount equal to the
excess of the highest price paid for a Share in connection with the Change of
Control over the exercise price per Share under the Award, multiplied by the
total number of Shares subject to the Award, including all Shares with respect
to which the Award has not yet become exercisable under the provisions of the
Plan but excluding any Shares with respect to which the Award has previously
been exercised or (ii) if the Participant is an insider who would be subject
to suit under Section 16(b) of the Exchange Act if the Participant were to
receive the cash payment described above, the Award may be exercised by the
Participant in full beginning on the date two weeks before such Change of
Control. If the Participant receives an Equivalent Award in connection with a
Change of Control, and the Optionee's employment with the Corporation or an
Affiliate is terminated within one year following the Change of Control by
reason of involuntary termination, the Equivalent Award may be exercised in
full beginning on the date of such termination if and for such period as the
Committee, in its sole discretion, shall determine.
(d) Definition of Change of Control of the Corporation. A "Change of
Control" shall be deemed to have occurred if (i) any person or group of
persons (as defined in Section 13(d) and 14(d) of the Exchange Act) together
with its affiliates, excluding employee benefit plans of the Corporation, is
or becomes, directly or indirectly, the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of securities of the Corporation representing
40% or more of the combined voting power of the Corporation's then outstanding
securities; or (ii) individuals who at the beginning of any two-year period
constitute the Board, plus new directors of the Corporation whose election or
nomination for election by the Corporation's shareholders is approved by a
vote of at least two-thirds of the directors of the Corporation still in
office who were directors of the Corporation at the beginning of such two-year
period, cease for any reason during such two-year period to constitute at
least two-thirds of the members of the Board; or (iii) the shareholders of the
Corporation approve a merger or consolidation of the Corporation with any
other corporation or entity regardless of which entity is the survivor, other
than a merger or consolidation which would result in the voting securities of
the Corporation outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or being converted into voting securities of
the surviving entity) at least 60% of the combined voting power of the voting
securities of the Corporation or such surviving entity outstanding immediately
after such merger or consolidation; or (iv) the shareholders of the
Corporation approve a plan of complete liquidation or winding-up of the
Corporation or an agreement for the sale or disposition by the Corporation of
all or substantially all of the Corporation's assets. Notwithstanding anything
herein to the contrary, in no event shall (A) an initial public offering of
the Corporation, (B) any change in the percentage ownership of the Corporation
by American Mobile Satellite Corporation or its affiliates, or (C) a private
placement of less than $150,000,000 be deemed to constitute a Change of
Control hereunder.
SECTION 12
MISCELLANEOUS PROVISIONS
(a) Administrative Procedures. The Committee may establish any procedures
determined by it to be appropriate in discharging its responsibilities under
the Plan. All actions and decisions of the Committee shall be final.
(b) Investment Representation. With respect to Shares received pursuant to
the exercise of an Option, the Committee may require, as a condition of
receiving such securities, that the Participant furnish to the Corporation
such written representations and information as the Committee deems
appropriate to permit the Corporation, in light of the existence or
nonexistence of an effective registration statement under the Securities Act,
to deliver such securities in compliance with the provisions of the Securities
Act.
(c) Withholding Taxes. The Corporation shall have the right to deduct from
all cash payments hereunder any federal, state, local or foreign taxes
required by law to be withheld with respect to such payments. In the case of
the issuance or distribution of Common Shares upon the exercise of an Award,
the Corporation, as a
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<PAGE>
condition of such issuance or distribution, may require the payment (through
withholding from the Participant's salary, reduction of the number of Shares
or other securities to be issued, or otherwise) of any such taxes. Each
Participant may satisfy the withholding obligations by paying to the
Corporation a cash amount equal to the amount required to be withheld or by
tendering to the Corporation a number of Shares having a value equivalent to
such cash amount, or by use of any available procedure as described under
Section 4(c) hereof.
(d) Compliance with Applicable Law and Regulations. The adoption of the Plan
and the grant and exercise of the Awards thereunder shall be subject to
receipt of all required regulatory approvals, including without limitation any
required approvals of the Federal Communications Commission. Should any
provision of the Plan that is intended to comply with the provisions of Rule
16b-3 under the Exchange Act at the date of the adoption of the Plan by the
Board not be necessary for such compliance, or become no longer necessary for
such compliance, such provision of the Plan shall have no force or effect
under the Plan as of the date that such provision is not required for the
purpose of satisfying the provisions of Rule 16b-3 under the Exchange Act.
(e) Costs and Expenses. The costs and expenses of administering the Plan
shall be borne by the Corporation and shall not be charged against any Award
or to any employee receiving an Award.
(f) Funding of Plan. The Plan shall be unfunded. Neither the Participants
nor any other persons shall have any interest in any fund or in any specific
asset or assets of the Corporation or any other entity by reason of any Award.
The interests of each Participant and former Participant hereunder are
unsecured and shall be subject to the general creditors of the Corporation.
(g) Other Incentive Plans. The adoption of the Plan does not preclude the
adoption by appropriate means of any other incentive plan for employees.
(h) Plurals. Where appearing in the Plan, singular terms shall include the
plural, and vice versa, unless the context clearly indicates a different
meaning.
(i) Headings. The headings and sub-headings in the Plan are inserted for the
convenience of reference only and are to be ignored in any construction of the
provisions hereof.
(j) Severability. In case any provision of the Plan shall be held illegal or
void, such illegality or invalidity shall not affect the remaining provisions
of the Plan, but shall be fully severable, and the Plan shall be construed and
enforced as if said illegal or invalid provisions had never been inserted
herein.
(k) Liability and Indemnification. Neither the Corporation nor any Affiliate
shall be responsible in any way for any action or omission of the Committee,
or any other fiduciaries in the performance of their duties and obligations as
set forth in the Plan. Furthermore, neither the Corporation nor any Affiliate
shall be responsible for any act or omission of any of their agents, or with
respect to reliance upon advice of their counsel provided that the Corporation
and/or the appropriate Affiliate relied in good faith upon the action of such
agent or the advice of such counsel.
(ii) Except for their own gross negligence or willful misconduct regarding
the performance of the duties specifically assigned to them under, or their
willful breach of the terms of, the Plan, the Corporation, each Affiliate and
the Committee shall be held harmless by the Participants, former Participants,
beneficiaries and their representatives against liability or losses occurring
by reason of any act or omission. Neither the Corporation, any Affiliate, the
Committee, nor any agents, employees, officers, directors or shareholders of
any of them, nor any other person shall have any liability or responsibility
with respect to the Plan, except as expressly provided herein.
(l) Cooperation of Parties. All parties to the Plan and any person claiming
any interest hereunder agree to perform any and all acts and execute any and
all documents and papers which the Committee deems necessary or desirable for
carrying out the Plan or any of its provisions.
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<PAGE>
(m) Governing Law. All questions pertaining to the validity, construction
and administration of the Plan shall be determined in accordance with the laws
of the State of Delaware.
(n) Nonguarantee of Employment or Consulting Relationship. Nothing contained
in the Plan shall be construed as a contract of employment (or as a consulting
contract) between the Corporation (or any Affiliate) and any Employee or
Participant, as a right of any Employee or Participant to be continued in the
employment of (or in a consulting relationship with) the Corporation (or any
Affiliate), or as a limitation on the right of the Corporation or any
Affiliate to discharge any of its Employees or Consultants, at any time, with
or without cause.
(o) Notices. Each notice relating to the Plan shall be in writing and
delivered in person or by certified mail to the proper address. All notices to
the Corporation or the Committee shall be addressed to it at c/o General
Counsel, 1250 23rd Street, N.W., Suite 57, Washington, D.C. 20037. All notices
to Participants, former Participants, beneficiaries or other persons acting
for or on behalf of such persons shall be addressed to such person at the last
address for such person maintained in the Committee's records.
(p) Written Agreements. Each Award shall be evidenced by a signed Award
Agreement between the Corporation and the Participant containing the terms and
conditions of the Award.
SECTION 13
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Corporation shall have the right to amend,
suspend or terminate the Plan at any time except that no amendment, suspension
or termination of the Plan shall alter or impair any Award previously granted
under the Plan without the consent of the holder thereof. Any provision of the
Plan or any Award Agreement notwithstanding, the Committee may cause any Award
granted hereunder to be cancelled in consideration of a cash payment or
alternative Award made to the holder of such cancelled Award equal to the Fair
Market Value of such cancelled Award.
SECTION 14
TERM OF PLAN
The Plan shall automatically terminate on the day immediately preceding the
tenth anniversary of the date the Plan was adopted by the Board of Directors,
unless sooner terminated by the Board of Directors. No Award may be granted
under the Plan subsequent to the termination of the Plan.
SECTION 15
EFFECTIVE DATE
The Plan shall become effective as of June 16, 1998, the date as of which it
was approved by the Board of Directors.
* * * * *
The Plan was duly adopted and approved by the Board on June 16, 1998, and
was duly adopted and approved by the stockholders of the Corporation on June
16, 1998. The Board duly adopted certain amendments to the Plan on February 3,
1999 and June 6, 1999. The Board duly adopted certain amendments to the Plan
on July 8, 1999, including an amendment to increase the number of authorized
Shares under the Plan; the stockholders of the Company approved the amendment
for such increase in the number of authorized Shares on July 8, 1999.
-------------------------------------
Joseph M. Titlebaum
XM Satellite Radio Holdings Inc.
Senior Vice President,
General Counsel and Secretary
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<PAGE>
PROXY
XM SATELLITE RADIO HOLDINGS INC.
1250 23rd Street, N.W., Suite 57
Washington, DC 20037
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Joseph Titlebaum and Heinz Stubblefield, each
with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated on the reverse side, all shares of common
stock of XM Satellite Radio Holdings Inc. held of record by the undersigned on
April 12, 2000 at the Annual Meeting of Stockholders to be held on May 31, 2000
and any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS
GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE VOTED FOR SUCH
PROPOSAL.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE>
[X] Please mark
votes as in
this example
1. Election of Directors, Nominees:
(01) Gary M. Parsons, (02) Hugh Panero, (03) Nathanial A. Davis,
(04) Thomas J. Donohue, (05) Randall T. Mays, (06) Randy S. Segal,
(07) Jack Shaw, (08) Rajendra Singh, (09) Ronald L. Zarrella
FOR WITHHELD
ALL FROM ALL
NOMINEES [_] [_] NOMINEES
[_] ______________________________________________________________
For all nominees except those nominees whose number is noted above
2. Approve the amended XM Satellite Radio FOR AGAINST ABSTAIN
Holdings Inc. 1998 Shares Award Plan. [_] [_] [_]
3. Ratify the appointment of KPMG LLP as FOR AGAINST ABSTAIN
independent auditors. [_] [_] [_]
4. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
Please sign exactly as name appears hereon. Joint owners should each sign.
Executors, administrators, trustees, guardians or other fiduciaries should give
full title as such. If signing for a corporation, please sign in full corporate
name by a duly authorized officer.
Signature: __________________________________________ Date: ___________________
Signature: __________________________________________ Date: ___________________
