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________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-24710
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SIRIUS SATELLITE RADIO INC.
(EXACT NAME OF REGISTRANT IN ITS CHARTER)
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DELAWARE 52-1700207
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OF ORGANIZATION)
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1221 AVENUE OF THE AMERICAS, 36TH FLOOR
NEW YORK, NEW YORK 10020
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 584-5100
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS: ON WHICH REGISTERED:
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None
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.001 PER SHARE
(TITLE OF CLASS)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
On March 23, 2000, the aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant, using the closing price
of the Registrant's Common Stock on such date, was $1,915,442,879.
The number of shares of the Registrant's common stock outstanding as of
March 23, 2000 was 38,841,070.
DOCUMENTS INCORPORATED BY REFERENCE
None
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SIRIUS SATELLITE RADIO INC.
1999 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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ITEM NO. DESCRIPTION PAGE
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PART I
Item 1. Business.................................................... 2
Item 2. Properties.................................................. 24
Item 3. Legal Proceedings........................................... 24
Item 4. Submission of Matters to a Vote of Security Holders......... 24
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 25
Item 6. Selected Consolidated Financial Data........................ 26
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 26
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 31
Item 8. Financial Statements and Supplementary Data................. 31
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure....................... 31
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 32
Item 11. Executive Compensation...................................... 33
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 39
Item 13. Certain Relationships and Related Transactions.............. 41
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.................................................. 42
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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
The following cautionary statements identify important factors that could
cause our actual results to differ materially from those projected in
forward-looking statements made in this Annual Report on Form 10-K and in other
reports and documents published by us from time to time. Any statements about
our expectations, beliefs, plans, objectives, assumptions or future events or
performance are not historical facts and may be forward-looking. Such statements
are often, but not always, made through the use of words or phrases such as
'will likely result,' 'are expected to,' 'will continue,' 'is anticipated,'
'estimated,' 'intends,' 'plans,' 'projection' and 'outlook.' Accordingly, these
statements involve estimates, assumptions and uncertainties that could cause our
actual results to differ materially from those expressed in the forward-looking
statements. Any forward-looking statements are qualified in their entirety by
reference to the factors discussed throughout this Annual Report on Form 10-K,
and particularly the risk factors set forth under the caption 'Business -- Risk
Factors' in Part I of this Annual Report on Form 10-K. Among the significant
factors that have a direct bearing on our results of operations are:
unavailability of receivers and antennas and our dependence upon third
parties to design, develop, manufacture and distribute receivers and
antennas;
our dependence on Space Systems/Loral, Inc. for construction and launch of
our satellites;
the potential risk of delay in implementing our business plan;
risk of launch failure;
unproven market for our service and unproven applications of technology;
and
our need for additional financing.
Because the risk factors referred to above could cause actual results or
outcomes to differ materially from those expressed in any forward-looking
statements made by us or on our behalf, you should not place undue reliance on
any such forward-looking statements. Further, any forward-looking statement
speaks only as of the date on which such statement is made, and we undertake no
obligation to update any forward-looking statement or statements to reflect
events or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events. New factors emerge from time to
time, and it is not possible for us to predict which will arise. In addition, we
cannot assess the impact of each such factor on our business or the extent to
which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.
ITEM 1. BUSINESS
We are building a subscription radio service that will broadcast up to 100
channels of audio entertainment directly from satellites to vehicles throughout
the continental United States. Sirius Radio will offer a wide selection of music
formats and program types; commercial free digital quality music; and nearly
seamless signal coverage across the continental United States. We believe this
service will be a substantial improvement over traditional radio. Sirius Radio
will be broadcast over a frequency band, the 'S-band,' that will augment
conventional (terrestrial broadcast) AM and FM radio bands. We hold one of only
two licenses issued by the Federal Communications Commission (the 'FCC') to
build, launch and operate a national satellite radio broadcast system. Under our
FCC license, we have the exclusive use of a 12.5 MHz portion of the S-band for
this purpose. Our service will offer 50 channels of commercial-free, digital
quality music programming and up to 50 channels of news, sports, talk and
entertainment programming. We currently expect to commence broadcasting at the
end of the fourth quarter of 2000, at an anticipated subscription price of $9.95
per month.
Our objective is to have radios capable of receiving our broadcasts included
as standard equipment in all cars and trucks sold in the continental United
States. We only intend to bill our subscribers electronically by credit card or,
in the case of leased vehicles, by including our monthly subscription fee in the
cost of leasing the vehicle. Approximately one-third of all new cars sold in the
United States in 1999 were leased.
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We currently have alliances with Ford Motor Company, DaimlerChrysler
Corporation and BMW of North America, Inc. which contemplate manufacturing,
marketing and selling vehicles that include receivers capable of receiving our
broadcasts. These alliances cover all brands and affiliates of these automakers,
including Ford, Chrysler, Mercedes, BMW, Jaguar, Mazda and Volvo. Our agreement
with DaimlerChrysler also includes Freightliner and Sterling heavy trucks. In
1999, Ford, DaimlerChyrsler and BMW vehicles accounted for approximately 7.5
million vehicles, or approximately 43% of all new cars and trucks sold in the
continental United States.
Sirius Satellite Radio Inc. was incorporated in the State of Delaware as
Satellite CD Radio, Inc. on May 17, 1990. On December 7, 1992, we changed our
name to CD Radio Inc., and we formed a wholly owned subsidiary, Satellite CD
Radio, Inc., that is the holder of our FCC license. On November 18, 1999, we
changed our name again to Sirius Satellite Radio Inc. Our executive offices are
located at 1221 Avenue of the Americas, New York, New York 10020, our telephone
number is (212) 584-5100 and our internet address is www.siriusradio.com.
Material on our website is not part of this report.
THE SIRIUS RADIO SERVICE
Sirius Radio will offer motorists: (1) a wide choice of finely focused music
and non-music formats; (2) commercial-free music programming; and (3) nearly
seamless signal coverage throughout the continental United States. The monthly
subscription fee for Sirius Radio will entitle subscribers to receive all Sirius
Radio channels.
Wide Choice of Programming. We will program each of our 50 commercial-free
music channels and offer each under our brand, 'Sirius Radio'. Sirius Radio will
offer subscribers a far broader range of programming formats than conventional
radio. Each of our 50 music channels will have a distinctive format, such as
opera, reggae, classic jazz and children's entertainment, intended to cater to
specific subscriber tastes. Because the economics of the existing advertiser
supported radio industry dictate that conventional radio stations generally
program for the greatest potential audience, nearly half of all commercial radio
stations in the United States offer one of only three formats: country, adult
contemporary and news/talk. The next five most prevalent formats account for
another 30% of all commercial radio stations. Although niche music categories,
including classical, jazz, rap, gospel, oldies, soundtracks, new age and
children's programming, accounted for approximately 33% of sales of recorded
music in 1998, these formats generally are unavailable on existing radio
stations in many markets. Even in New York City, the nation's largest radio
market, there are no radio stations devoted solely to such programming as opera,
blues, chamber music, soundtracks, reggae and others. Sirius Radio's wide choice
of formats is expected to appeal to the large number of currently underserved
radio listeners. Sirius Radio's ability to offer a number of channels devoted to
many of these genres will enable subscribers to listen to a wider range of music
within their preferred format than is available on conventional radio.
Commercial-Free Music Programming. Sirius Radio's 50 channels of music
programming will be entirely commercial-free. Our market research indicates that
a principal complaint of radio listeners concerning conventional radio is the
frequency of commercials, which in some cases can reach 18 minutes an hour, and
some industry analysts attribute a decline in listening to conventional radio to
this significant intrusion of commercials.
'Seamless' Signal Coverage. Sirius Radio will be broadcast throughout the
continental United States, enabling listeners to be almost always within its
broadcast range. We expect that our nearly seamless signal will appeal to
motorists who frequently outdrive the range of their preferred AM or FM radio
station, which typically fade after 30 to 40 miles. In addition, we expect that
our broadcasts will appeal to the 45 million underserved consumers who live in
areas that currently receive only a small number of FM stations.
We believe there will be significant consumer demand for Sirius Radio.
According to the Radio Advertising Bureau, each week radio reaches approximately
95% of all Americans over the age of 12, with the average listener spending more
than three hours per weekday and more than five hours per weekend listening to
the radio. Market research conducted for us by The Yankee Group, an independent
market research organization, shows that radio listeners today are substantially
dissatisfied
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with both AM and FM radio because of lack of variety in programming, frequent
commercial interruptions and loss of signal strength. Our service has been
designed to address these key disadvantages of conventional radio.
We are designing Sirius Radio primarily as a service for motorists. The
Federal Highway Administration estimates that there were approximately 200
million registered private motor vehicles in the United States at the end of
1999. According to Radio Advertising Bureau, more than 40% of all radio
listening is done in cars. In addition, according to Arbitron, in 1998
approximately 79% of total radio listening was to FM stations, which provide
primarily music programming, as compared with AM stations which devote a greater
proportion of their programming to talk and news. We believe the market for our
service will not be significantly affected by the widespread availability of
cassette players and CD players in vehicles. According to Arbitron, a radio
industry rating agency, in 1998 the average person (age 12 and over) listened to
the radio an average of 50 minutes a day while in the car, despite the fact that
87% of these cars have a compact disc or cassette player.
PROGRAMMING
We intend to program 50 channels of commercial-free music under our brand
'Sirius Radio,' and to offer up to 50 additional channels of other formats, such
as news, sports and talk programming. We believe that 50 music channels will
enable us to 'superserve' our subscribers with a greater range of choice of
content within their preferred format than is currently offered by conventional
radio, even in the most widely broadcast formats.
Our Music Channels. We intend to design and originate the programming on
each of our 50 commercial-free music channels. Each channel will be operated as
a separate radio station, with a distinct format. Some of the music channels
will offer continuous music while others will have program hosts, depending on
the type of music programming. Sirius Radio will initially offer the following
range of music channels:
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Symphonic NAC Jazz Country Hits
Chamber Music New Age Modern Country
Opera Soul Ballads Classic Country
Top of the Charts Contemporary R&B Folk Rock
50's Hits Classic Soul Hits Alternative Rock I
60's Hits R&B Oldies Alternative Rock II
70's Hits Rap/Hip Hop Classic Rock I
80's Hits Dance Classic Rock II
90's Hits Tropical Album Rock
Soft Rock Latin Jazz Hard Rock/Metal
Love Songs Boleros Blues
Singers & Songs Latin Contemporary Reggae
Beautiful Instrumentals Merengue World Beat
Broadway's Best Cumbia Gospel
Big Band/Swing Mexicana Contemporary Christian
Classic Jazz Tex Mex Children's Entertainment
Contemporary Jazz Rock en Espanol
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Music programming will be selected from our music library. We are creating
an extensive music library consisting of a deep range of recorded music in each
genre. To date, we have acquired approximately one million music titles and
expect our music library to consist of approximately two million titles when we
commence commercial broadcasts. Our music library will be updated with new
recordings as they are released and, in some cases, we intend to acquire
recordings that are no longer commercially available.
We have recruited program managers from the recording, broadcasting and
entertainment industries to manage the development of daily programming for each
Sirius Radio music channel and intend to recruit additional program managers. To
be accessible to these industries, we have built our National Broadcast Studio
in Rockefeller Center in New York City.
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We expect that well-known music experts and celebrity talent will have a
regular presence, and in some cases will perform, on our service. As local
businesess, conventional radio stations generally do not have the economies of
scale or large enough audiences to attract regular appearances by celebrity
hosts. We believe that, as a national service, Sirius Radio will have the
ability to support and attract regular appearances by celebrity hosts. We
believe these appearances will emphasize our brand and further differentiate us
from conventional radio. To date, we have alliances with the artists Grandmaster
Flash, MC Lyte, and Sting to appear on our service.
In connection with our music programming, we must negotiate and enter into
music programming royalty arrangements with performing rights societies such as
the American Society of Composers, Authors and Publishers, Broadcast Music, Inc.
and SESAC, Inc. These organizations collect royalties and distribute them to
songwriters and music publishers and negotiate fees with copyright users based
on a percentage of revenues. Radio broadcasters currently pay a combined total
of approximately 3-4% of their revenues to these performing rights societies. We
expect to negotiate or establish by arbitration royalty arrangements with these
organizations, but such royalty arrangements may be more costly than anticipated
or unavailable. Under the Digital Performance Right in Sound Recordings Act of
1995, we also must negotiate royalty arrangements with the owners of the sound
recordings. The Recording Industry Association of America negotiates licenses
and collect royalties on behalf of copyright owners for performance rights in
sound recordings. Cable audio services currently pay a royalty rate of 6.5% of
gross subscriber revenue for audio services broadcast over cable television
systems. This rate was set by the Librarian of Congress, which has statutory
authority to decide rates through arbitration, and this determination was
affirmed on May 21, 1999 by the United States Court of Appeals for the District
of Columbia. Although we believe we can distinguish Sirius Radio sufficiently
from cable audio services in order to negotiate a lower statutory rate, we may
not be able to do so, and we could be required to pay a higher rate. We expect
to commence the negotiations of these royalty arrangements prior to commencing
operations.
Our News, Sports and Entertainment Channels. In addition to our music
channels, we expect to offer up to 50 channels of news, sports and talk
programming, most of which will include commercial advertising. We believe that
this array of non-music programming will increase consumer interest in our
service because much of this content is unavailable on conventional radio. We
generally do not intend to produce programming for our non-music channels, and
will obtain this programming from various third party content providers. To
date, we have entered into agreements for a total of 24 channels with content
providers, such as CNBC, NPR and the BBC.
MARKETING AND DISTRIBUTION
Our marketing strategy for Sirius Radio has three interrelated components:
(1) creating consumer awareness of Sirius Radio, (2) generating purchases of
consumer electronic devices capable of receiving our broadcasts, and
(3) generating subscriptions to Sirius Radio.
We believe that the introduction of Sirius Radio will have high news value,
which we expect will result in significant national and local publicity before
and during the initial launch of our service. In addition, we plan to engage in
extensive marketing, advertising and promotional activities to create consumer
awareness of Sirius Radio. This includes an ongoing major advertising campaign
funded by us which will utilize a full mix of media, including network and cable
television, radio, print, internet and billboards. We also expect this campaign
to be supported by receiver manufacturer and retailer cooperative advertising.
We intend to focus our initial efforts on a number of demographic groups
that we believe represent target markets for Sirius Radio, including commuters,
niche music listeners, Hispanic listeners, sports enthusiasts, truck drivers,
recreational vehicle owners and consumers in areas with sparse radio coverage.
We also intend to aggressively target early adopters of new technologies, who we
believe are likely to have a high level of interest in Sirius Radio.
Commuters. Of the more than 100 million commuters, we have identified 34
million as highly addressable because of their extended commute times. To reach
these commuters, we plan to purchase
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radio advertising spots on stations with frequent traffic reports, outdoor
billboard advertising on long commute roads and advertising on websites
targeting commuters.
Niche Music Listeners. Niche music categories accounted for approximately
33% of sales of recorded music in 1998, according to the Recording Industry
Association of America. To reach niche music listeners, we intend to place print
advertising in specialty music magazines targeted to niche music listeners and
members of fan clubs, conduct direct mailings to specialized music mailing lists
of record clubs and sponsor and advertise at certain music events.
Hispanic Market. Currently there are approximately 32 million
Spanish-speaking Americans, many of whom have limited access to Spanish language
radio, and this population group is growing rapidly. To reach this market, we
intend to broadcast a number of music and non-music channels that will cater to
the Hispanic market. We plan to purchase local television spots on Spanish
speaking channels and place advertising in national Spanish language magazines
and local Spanish language newspapers.
Sports Enthusiasts. Many fans of various sports are unable to receive
broadcasts of interest to them because events are broadcast only within limited
regional areas. We intend to broadcast channels containing sports programming.
We plan to attract these enthusiasts through the purchase of advertising on
national and regional cable television sports channels, in sports magazines and
on sports related websites.
Truck Drivers. According to U.S. government estimates, there are
approximately three million professional truck drivers in the United States, of
whom approximately 1.1 million are long-distance haulers. To address this
market, we intend to place sampling displays at truck stops and to advertise in
publications and on websites that cater to truck drivers. We also have an
agreement with Freightliner Corporation, a subsidiary of DaimlerChrysler
Corporation and the largest manufacturer of heavy trucks sold in the United
States, to install Sirius receivers in vehicles manufactured by Freightliner and
to distribute receivers through heavy truck dealers affiliated with
Freightliner.
Recreational Vehicle Owners. There are approximately three million
recreational vehicles in the United States. We plan to advertise in magazines
targeted to recreational vehicle enthusiasts, conduct direct mailings targeted
to these individuals and place sampling displays at recreational vehicle
dealerships.
Consumers in Sparse Radio Zones. More than 45 million people aged 12 and
over live in areas with limited radio station coverage. We believe that of these
people, approximately 22 million people receive five or fewer FM stations, 1.6
million receive only one FM station and at least one million people receive no
FM stations. To reach these consumers, we plan to utilize distribution channels
similiar to satellite television and to utilize catalog/direct marketing, the
internet, infinity group marketing, local newspaper advertising and direct
mailings to music enthusiasts in these areas.
Receiver Sales and Distribution. In 1999, radio manufacturers sold over 29
million car radios, including 17 million original equipment automobile radios
and 11 million aftermarket automobile radios, as well as 1.2 million aftermarket
automobile CD changers. Original equipment radios are installed in new vehicles;
aftermarket radios are installed in vehicles after purchase. We expect that
Ford, Chrysler, Mercedes, BMW, Jaguar, Mazda and Volvo will install radios
capable of receiving our broadcasts in new vehicles manufactured by them. In the
aftermarket, we intend to market radios capable of receiving our broadcasts and
our service through national electronics retailers, car audio dealers and mass
retailers.
ALLIANCES WITH AUTOMAKERS
Our objective is to have radios capable of receiving our broadcasts included
as standard equipment in all cars and trucks sold in the continental United
States. We only intend to bill our subscribers electronically by credit card or,
in the case of leased vehicles, by including our monthly subscription fee in the
cost of leasing the vehicle. Approximately one-third of all new cars sold in the
United States in 1999 were leased.
On June 11, 1999, we entered into an agreement with Ford Motor Company which
anticipates Ford manufacturing, marketing and selling vehicles, including cars
and trucks, that include receivers capable
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of receiving our broadcasts. We expect that the first such vehicles will be
available in the first quarter of 2001. This exclusive agreement includes all
Ford brands, including Ford, Jaguar, Mazda and Volvo. As part of this agreement,
we agreed to share with Ford a portion of the revenues we will derive from new
Ford vehicles equipped to receive our broadcasts ('Ford Enabled Vehicles'). We
also agreed to reimburse Ford for certain hardware costs of Ford Enabled
Vehicles, and issued to Ford warrants to purchase 4,000,000 shares of our Common
Stock at an exercise price of $30 per share. These warrants are exercisable
based upon the number of Ford Enabled Vehicles that Ford manufactures, and are
fully exercisable after 4,000,000 Ford Enabled Vehicles are manufactured.
On January 28, 2000, we entered into an agreement with DaimlerChrysler
Corporation, Mercedes-Benz USA, Inc. and Freightliner Corporation (collectively,
'DaimlerChrysler') which anticipates DaimlerChrysler manufacturing, marketing
and selling vehicles that include receivers capable of receiving our broadcasts.
This agreement grants use exclusivity in all cars and light trucks manufactured
by DaimlerChrysler and provides us a preferred status in Freightliner and
Sterling heavy trucks. As part of this agreement, we agreed to share with
DaimlerChrysler a portion of the revenues we will derive from new
DaimlerChrysler vehicles equipped to receive our broadcasts ('DaimlerChrysler
Enabled Vehicles'). We also agreed to reimburse DaimlerChrysler for certain
hardware costs of DaimlerChrysler Enabled Vehicles and issued to DaimlerChrysler
Corporation warrants to purchase 4,000,000 shares of our Common Stock at an
exercise price of $60 per share. These warrants are exercisable based upon the
number of DaimlerChrysler Enabled Vehicles that DaimlerChrysler manufactures,
and are fully exercisable after 4,000,000 DaimlerChrysler Enabled Vehicles are
manufactured. Concurrently, DaimlerChrysler Corporation purchased 2,290,322
shares of our Common Stock for an aggregate purchase price of approximately $100
million.
On January 4, 2000, we entered into a letter agreement with BMW of North
America, Inc. which anticipates BMW marketing and selling vehicles that include
receivers capable of receiving our broadcasts. This letter agreement sets forth
the principal terms of a definitive agreement under which BMW will agree to
exclusively install Sirius Radio receivers in BMW vehicles, including cars and
trucks. As part of this definitive agreement, we will share with BMW a portion
of the revenues we will derive from BMW vehicles equipped to receive our
broadcasts ('BMW Enabled Vehicles'). In addition, we expect to reimburse BMW for
certain hardware costs of BMW Enabled Vehicles. We expect to complete a
definitive agreement with BMW in the second quarter of 2000.
In addition to our alliances with Ford, DaimlerChrysler and BMW, we are in
discussions with several other automobile manufacturers to include Sirius Radio
reception capability in new cars and trucks. Under our Joint Development
Agreement with XM Satellite Radio Inc., any new agreements with automakers will
be on a non-exclusive basis.
THE SIRIUS RADIO DELIVERY SYSTEM
The Sirius Radio delivery system is designed to provide nearly seamless
signal coverage throughout the continental United States. Listeners will almost
always be within the broadcast range of Sirius Radio, unlike current FM radio
broadcasts, which have an average range of only approximately 30 miles. Our
system is designed to provide clear reception in most areas despite variations
in terrain, buildings and other obstructions. The system is designed to enable
motorists to receive Sirius Radio in all outdoor locations where the vehicle has
an unobstructed line-of-sight with one of our satellites or is within range of
one of our terrestrial repeating transmitters.
The portion of the S-band located between 2320 MHz and 2345 MHz has been
allocated by the FCC exclusively for national satellite radio broadcasts. We
will use 12.5 MHz of bandwidth in the 2320.0-2332.5 MHz frequency allocation to
transmit our signals from our satellites to our subscribers. Uplink
transmissions (from the ground to our satellites) will use 12.5 MHz of bandwidth
in the 7060-7072.5 MHz band.
Each satellite will travel in a figure eight pattern extending above and
below the equator, and will spend approximately 16 hours per day north of the
equator. At any given time, two of our three satellites will operate north of
the equator while the third satellite will not broadcast as it traverses the
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portion of the orbit south of the equator. This orbital configuration will yield
very high signal elevation angles and thereby mitigate service interruptions
that can result from signal blockage.
The Sirius Radio delivery system will consist of three principal components:
(1) satellites and terrestrial repeaters; (2) receivers; and (3) our National
Broadcast Studio.
SATELLITES AND TERRESTRIAL REPEATERS
Satellite Design. Our satellites are of the Loral FS-1300 model series. This
family of satellites has a history of reliability with a total of 350 years of
in-orbit operation time. Each satellite is designed to have a useful life of
approximately 15 years. To ensure the durability of our satellites, we have
selected components and subsystems that have a demonstrated track record on
operational FS-1300 satellites, such as N-STAR, INTELSAT VII and TELSTAR.
Our satellites are designed to act as a 'bent pipe,' receiving, amplifying
and relaying the broadcast transmissions directly to the ground, and do not
contain on-board processors. All of our processing operations will be on the
ground where they are accessible for maintenance and continuing technological
upgrade without the need to launch replacement satellites.
Satellite Construction and Launch Services. We have contracted with Space
Systems/Loral to construct, launch and deliver three satellites, in-orbit and
checked-out, and to construct for us a fourth satellite for use as a ground
spare. We have also contracted with Space Systems/Loral to procure certain
long-lead time parts for a fifth satellite.
Our four satellites are currently being tested or are under construction.
Our first satellite is undergoing its final tests and we expect to ship this
satellite to the launch site in May 2000. Our second satellite has completed
thermal vacuum testing and is being readied for launch vibration testing; we
expect that this satellite will be ready to ship to the launch site in
July 2000. All of the subsystems for our third and fourth satellites have been
manufactured and are undergoing initial performance testing.
Each of our first three satellites is scheduled to be launched on a Proton
launch vehicle. Loral has scheduled the launch of our first satellite between
June 21 and July 20, 2000, the launch of our second satellite between August 30
and September 29, 2000, and the launch of our third satellite between
September 30 and October 29, 2000, and expects to deliver our fourth satellite
to a designated ground storage site by October 2000. Loral expects to deliver
all three of our satellites in-orbit and checked-out by November 2000.
Title to our first, second and third satellites will pass to us at the time
these satellites are delivered to us in-orbit and checked-out. Risk of loss for
our first, second and third satellites will pass to us at the time of launch.
Title and risk of loss for our fourth satellite will pass to us at the time this
satellite is shipped to the ground storage site designated by us. Each satellite
is warranted to be in accordance with the performance specifications contained
in the Loral Satellite Contract and free from defects in materials and
workmanship. Loral's warranties will expire at the time of launch or, in the
case of our fourth satellite, two years from the date of delivery to the ground
storage site.
Following the launch of each satellite, Loral will conduct an in-orbit
performance verification. If this testing shows that a satellite is not meeting
the performance specifications contained in the Loral Satellite Contract, we and
Loral have agreed to negotiate an equitable reduction in the final payment to be
made by us for the affected satellite.
Satellite launches have significant risks, including destruction or damage
of the satellite during launch or failure to achieve proper orbital placement.
There is no assurance that the launches of our satellites will be successful.
Although past experience is not necessarily indicative of future performance,
the Proton family of Russian-built launch vehicles has a 90% launch success rate
based on its last 50 launches (including two failed launches in 1999).
Satellites also may fail to achieve a proper orbit in some instances or be
damaged in space. Loral will not bear the risk of loss for either a satellite or
launch vehicle failure. However, Loral will provide a free relaunch if there is
a failure of the first or third Proton launch vehicle that is used to launch one
of our satellites. In that event, we would attempt to launch the spare satellite
that we are having constructed.
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Loral also will not be liable for indirect or consequential damages or lost
revenues or profits resulting from late delivery or other defaults. If Loral
fails to deliver the three satellites in-orbit and checked out by December 1,
2000 or fails to deliver the fourth satellite to its storage site by
December 1, 2000, it may be liable for specific late delivery penalties. We
cannot assure you that these remedies will adequately mitigate any damage to our
business caused by launch delays.
Terrestrial Repeaters. In some areas with high concentrations of tall
buildings, such as urban cores, and in tunnels, signals from our satellites will
be blocked and reception will be adversely affected. In 46 urban areas, we plan
to install terrestrial repeating transmitters to rebroadcast our satellite
signals, increasing the availability of service. We estimate that these 46 urban
areas will require a total of approximately 105 terrestrial repeater sites.
During 1998, we completed the construction and testing of our terrestrial
repeater network in San Francisco on an experimental basis. During 1999, we
entered into agreements with several third party contractors to deploy our
terrestrial repeater network. These include agreements with:
Black & Veatch Corporation, a construction services firm based in Kansas
City, Missouri, which is providing radio frequency design, site
acquisition, site design and site construction services. To date, Black &
Veatch has completed the radio frequency design work for each of the 46
urban areas where we intend to erect terrestrial repeaters and is in the
process of identifying, leasing and constructing our repeater sites.
Globecomm Systems, Inc., a systems integration and satellite operations
company based in Hauppauge, New York, which is designing, developing and
manufacturing custom digital audio broadcast equipment for our terrestrial
repeater network. The design of this digital audio broadcast equipment has
been completed by Globecomm and the equipment is currently being
manufactured.
Loral CyberStar, Inc., a leading satellite service provider, which will
transmit our broadcasts via one of its satellites from our National
Broadcast Studio to individual terrestrial repeater sites.
We expect to substantially complete the deployment of our terrestrial
repeater network during the fourth quarter of 2000.
Risk Management and Insurance. We have procured insurance covering launch
risks and in-orbit failure during the first two years of operation for each of
our satellites. This insurance covers losses arising from partial and total
failure of the satellites, will attach upon intentional ignition of the launch
vehicle and will remain in force for a period of two years from the date of
launch.
Our agreement with Loral includes a free relaunch if there is a failure of
the Proton launch vehicle used to launch our first or third satellite. Our
insurance provides coverage against other contingencies, including a failure
during launch caused by factors other than the launch vehicle, failure of launch
vehicles other than the first or third Proton launch vehicle and incurred costs
other than the free relaunch required to launch a replacement satellite.
Before expiration of this insurance, we intend to evaluate the need for
in-orbit insurance for the remainder of the estimated useful life of each
satellite. After we have launched our satellites and begin to generate revenues,
we will evaluate the need for business interruption insurance. Once properly
deployed and operational, the historical risk of premature total satellite
failure has been less than 1% for U.S. geosynchronous commercial communication
satellites.
If we are required to launch our spare satellite due to a launch failure,
our operational timetable would likely be delayed. The launch or in-orbit
failure of two satellites would require us to arrange for an additional
satellite to be built and would likely delay the commencement or continuation of
our operations by at least 16 months.
Satellites are designed to minimize the adverse effects of transmission
component failure through the incorporation of redundant components that
activate automatically or by ground command upon failure. If multiple component
failures occur, and the supply of redundant components is exhausted, the
satellite generally will continue to operate, but at reduced capacity.
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RECEIVERS
Consumers purchasing new vehicles will be able to receive Sirius Radio
through a new generation of radios installed by Ford, DaimlerChrysler, BMW or
other automotive manufacturers. In addition, consumers will be able to receive
Sirius Radio by installing specially designed radio receivers in their existing
vehicles. In 1999, radio manufacturers sold approximately 11 million aftermarket
automobile radios. In the automotive aftermarket, we expect that Sirius Radio
subscribers will have the choice of two different receiving devices for their
cars -- an FM modulated receiver or a three-band receiver. These devices, along
with Sirius Radio satellite antennas, are expected to be manufactured and
distributed by a number of consumer electronics manufacturers. To date, we have
entered into alliances with Alpine Electronics Inc., Audiovox Corporation,
Clarion Co., Ltd., Delphi Delco Electronics Systems, Kenwood Corporation,
Matsushita Communication Industrial Corporation of USA, Recoton Corporation,
Sanyo Electric Co. Ltd. and Visteon Automotive Systems, an enterprise of Ford,
to design and develop Sirius Radio receivers.
Many Sirius Radio receivers will have a visual display that will indicate
the channel and format selected, as well as the title, recording artist and
album title of the musical selection being played. Each of our receivers will
also incorporate a memory buffer chip. This memory buffer chip is designed to
store signals and to mitigate service interruptions which can result from signal
blockage and fading. Where the service from our satellites will be briefly
interrupted by nearby tall buildings, elevations in topography, tree clusters,
highway overpasses and similar obstructions, we expect that subscribers will
continue to receive a signal from their receiver's memory buffer.
All of the receivers under development will employ system architecture
designed by Lucent Technologies Inc., which was completed and successfully
delivered in March 1999. These receivers will also employ a digital signal
processor and conditional access technology developed by Lucent. Lucent is also
developing a set of integrated circuits for receivers capable of receiving our
broadcasts and we have agreed to pay the cost of this development.
Alpine, Audiovox, Clarion, Delphi Delco, Kenwood, Panasonic, Recoton, Sanyo,
Visteon and various contract electronics manufacturers are currently developing
receivers for us. We expect that receivers will be available at the end of 2000
in limited quantities, and will be manufactured and distributed by one or more
of these parties.
FM Modulated Receivers. The Sirius Radio FM modulated receiver will be
usable in all vehicles which have an FM radio, or approximately 95% of all U.S.
vehicles. Each FM modulated receiver will operate with a device that will be
approximately the size of a 35mm camera, and will be mounted in the vehicle's
trunk. Each FM modulated receiver will interface with a vehicle's existing radio
through the FM antenna input. The Sirius Radio data display, as well as the
controls for changing channels, will be contained in a small remote control
which will either be wired or wireless. We expect the retail price of this FM
modulated receiver, with a hard-wired satellite antenna and professional
installation, will be as low as $299 when produced in commercial quantities. We
anticipate that FM modulated receivers will be sold through electronics
superstores as well as independent autosound retailers and will be available to
be purchased by consumers before three-band receivers are available.
FM modulation technology is widely used in the autosound industry for the
integration of automobile compact disc changers, which typically interface with
the player unit through the FM antenna input and are also controlled through
remote controls. Approximately 700,000 FM modulated compact disc changers were
sold in the United States in 1998.
Three-Band Receivers. Three-band receivers will be nearly identical in
appearance to existing aftermarket car stereos and will allow the user to listen
to AM, FM or Sirius Radio with the push of a button. Like existing conventional
radios, a number of these three-band receivers may also incorporate cassette or
compact disc players. In the first generation, the receiver will include a
head-unit, which will accept the output of a Sirius Radio receiver device
mounted in the vehicle's trunk. We expect the retail price of these receivers,
when produced in commercial quantities, will be approximately $100 more than
similar receivers not capable of receiving our broadcasts.
Unified Standard for Satellite Radios. On February 16, 2000, we signed an
agreement with XM Satellite Radio Inc., the other holder of an FCC license to
provide a satellite-based digital audio radio
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service, to develop a unified standard for satellite radios to enable consumers
to purchase one radio capable of receiving both our and XM's services. We expect
the unified standard to detail the technology to be employed by manufacturers of
such dual-mode receivers. The technology relating to this unified standard will
be jointly developed, funded and owned by the two companies. In addition, we
will work together with XM to promote adoption of the new standard by creating a
service mark for satellite radio. This unified standard is also intended to meet
FCC rules that require interoperability of both licensed satellite radio
systems.
As part of the agreement, we and XM have licensed our intellectual property
to one another; the value of this license will be considered part of each
company's contribution toward the joint development. In addition, each company
has agreed to license its non-core technology, including non-essential features
of its system, to the other at commercially reasonable rates. As part of this
agreement, our previous patent litigation against XM has been resolved.
We anticipate that it will take several years to develop receivers capable
of receiving both services. At the commercial launch of our service, we
anticipate that consumers will be able to purchase receivers capable of
receiving our service only.
Both companies expect to work with their automobile and radio manufacturing
partners to integrate the new unified standard and have agreed that future
agreements with automakers and radio manufacturers will specify the unified
satellite radio standard. Furthermore, we and XM have agreed that future
agreements with retail and automotive distribution partners and content
providers will be on a non-exclusive basis. We and XM have also agreed to
negotiate in good faith an arrangement to provide service to each other's
subscribers in the event of a catastrophic failure of the XM system or our
system.
NATIONAL BROADCAST STUDIO
We will originate our broadcasts from our National Broadcast Studio in
Rockefeller Center in New York City. The National Broadcast Studio houses our
corporate headquarters, our music library, facilities for programming
origination, programming personnel and program hosts, and facilities to transmit
programming to our orbiting satellites and to perform the tracking, telemetry
and control of the satellites. Construction of our National Broadcast Studio was
completed in November 1999.
The studios and transmission facilities at our National Broadcast Studio are
100% digital, resulting in no cumulative distortion to degrade the sound of our
music and entertainment product. The National Broadcast Studio contains twenty
recording studios and two live performance studios, and has been designed to
support the live transmission of video and audio performances in any medium.
Broadcasting will be originated at the National Broadcast Studio and
transmitted to our satellites for broadcast to Sirius Radio subscribers. Our
broadcast transmissions will be uplinked to our satellites from our completed
earth station in Vernon Valley, New Jersey. The satellites will receive and
convert the signal for broadcast to the continental United States at a power
level sufficient to enable receipt directly by subscribers. Service-related
commands also will be relayed from the National Broadcast Studio to our
satellites for retransmission to subscribers' receivers. These service-related
commands include those required to (1) initiate and suspend subscriber service,
(2) change the encryption parameters in receivers to reduce piracy and
(3) activate receiver displays to show program related information.
Tracking, telemetry and control of our orbiting satellites also will be
performed from the National Broadcast Studio. These activities will include
routine stationkeeping, such as satellite orbital adjustments and monitoring of
the satellites. Loral Skynet, a leading provider of satellite communications
services in the United States and a subsidiary of Loral Space and Communications
Ltd., has designed, developed, integrated, installed and tested our tracking,
telemetry and command facilities. Loral Skynet will provide back-up tracking,
telemetry and command capabilities from its facilities in Hawley, Pennsylvania
and Three Peaks, California. As part of our tracking, telemetry and command
facilities, Loral Skynet has constructed two earth stations for us in Quito,
Ecuador, and Utive, Panama. These earth stations, which will be operated by
Loral Skynet, will permit us to communicate continuously with our satellites.
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SUBSCRIPTION AND BILLING
We only intend to bill our subscribers electronically by credit card or, in
the case of leased vehicles, by including our monthly subscription fee in the
cost of leasing the vehicle. Approximately one-third of all new cars sold in the
United States in 1999 were leased.
We have selected Stream International Inc., a call center operator, to
provide our customer care operations for our subscribers. Employees of Stream
International will have the ability to access our billing system for various
functions including account activation, billing inquiries, program service
changes, address changes and other general account updates. When appropriate,
representatives at a call center that will be operated for us by Stream
International will have the ability to escalate technical concerns to either a
Sirius Radio help desk or to the appropriate equipment manufacturer. We intend
to automate customer care functions where appropriate using interactive voice
response technology and our website. We plan to pay Stream International an
hourly rate for each representative assigned to support Sirius Radio.
We are deploying an integrated customer relationship management and billing
solution to meet the needs of our business, including all customer service,
subscriber management and billing operations. We have contracted with Infintium
Technologies Corp., a leading provider of information technology services, to
design and deploy this integrated customer relationship management and billing
solution. In creating this product, Infintium plans to integrate a customer
relationship management application created by The Vantive Corporation, which
was recently acquired by PeopleSoft, and a billing system application created by
Portal Software Inc. The customer relationship management solution being
developed by Infintium will be designed to manage the rapid growth of our
subscriber base. Our customer relationship management program will enable us to
interface electronically and exchange information with automobile manufacturers,
automobile dealers and consumer electronic retailers, and will facilitate and
encourage subscriber interaction through the internet and by other electronic
means. Infintium will manage our customer relationship management operations
from its Richmond, Virginia data center, and will be paid for billing services
on a per subscriber basis.
To reduce fraud, each Sirius Radio receiver will contain a security circuit
with an electronically encoded identification number. After verification of
subscriber billing information, we will transmit a digital signal to activate
the receiver's Sirius Radio capability. This feature will help us protect
against piracy of our broadcasts. Through this feature, we will directly (via
satellite) deactivate receivers of subscribers who are delinquent in paying the
monthly subscription fee.
DEMONSTRATIONS OF THE SIRIUS RADIO SYSTEM
In support of our application for our FCC license, we conducted a
demonstration of our proposed radio service from November 1993 through
November 1994. The demonstration involved the transmission of S-band signals to
a prototype S-band radio and satellite dish antenna installed in a car to
simulate some of the transmission characteristics of our planned system. Because
there are no commercial satellites in orbit capable of transmitting S-band
frequencies to the United States, we constructed a terrestrial simulation of our
planned system. For this purpose, we selected a test range covering several
kilometers near Washington, D.C. which included areas shadowed by buildings,
trees and overpasses. We placed S-band transmitters on the rooftops of a number
of tall buildings in such a way as to simulate the signal power and angle of
arrival of satellite transmissions to be used for our proposed service. We also
modified the standard factory installed sound system of an automobile to create
a radio receiving AM, FM and S-band signals, and to integrate a satellite dish
antenna into the car roof. The demonstrations included the reception of 30
channels of compact disc quality stereo music by the prototype radio while the
car was driven throughout the test range. We have also successfully tested our
terrestrial repeater system in San Francisco. Before testing with orbiting
satellites, antennas and receivers suitable for commercial production, we cannot
assure you that the Sirius Radio system will function as intended.
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COMPETITION
We expect to face competition from two principal sources:
conventional AM/FM radio broadcasting, including, when available,
terrestrial digital radio broadcasting; and
XM, the other holder of an FCC license to provide a satellite-based digital
audio radio service.
During 1999 XM entered into an exclusive agreement with General Motors
Corporation, which has a significant equity interest in XM's parent company,
under which GM will install devices capable of receiving XM's signal. In
addition, XM has obtained substantial financing from GM, Hughes Electronics
Corporation (a GM subsidiary) and several other investors.
The AM/FM radio broadcasting industry is well-established and very
competitive. Radio stations compete for listeners and advertising revenues
directly with other radio stations within their markets on the basis of a
variety of factors, including program content, on-air talent, transmitter power,
assigned frequency, audience characteristics, local program acceptance and the
number and characteristics of other radio stations in the market. Some of our
radio broadcasting competitors have greater financial resources than we do.
Unlike Sirius Radio, the radio industry has a well established market for
its services and generally offers 'free' broadcast reception paid for by
commercial advertising rather than by a subscription fee. In addition, some AM
and FM stations, such as non-commercial public radio stations, offer programming
without commercial interruption. Many radio stations also offer information
programming of a local nature, such as local news or traffic reports, which we
will not offer. Sirius Radio will compete with conventional radio stations on
the basis of its targeted programming formats, nearly seamless signal coverage,
freedom from advertising on its music channels and digital quality sound,
features which are largely unavailable on conventional radio.
Currently, radio stations broadcast by means of analog signals, as opposed
to digital transmission. We believe, however, that within several years
conventional broadcasters may be able to place digital audio broadcasts into the
bandwidth occupied by current AM and FM stations and simultaneously transmit
both analog and digital signals on the AM and FM bands. The limited bandwidth
assigned to AM stations will result in lower quality digital signals than can be
broadcast by FM stations. As a result, we expect that the use of this technology
will permit digital AM sound quality to approach monaural FM sound quality and
permit digital FM broadcasts to approach compact disc sound quality. To receive
these digital AM/FM broadcasts, listeners will need to purchase new digital
radios which currently are not commercially available. While the development of
digital broadcasting would eliminate one of the advantages of Sirius Radio over
FM radio, we do not believe it would affect broadcasters' ability to address the
other advantages of Sirius Radio. In addition, we view the growth of terrestrial
digital broadcasting as a positive force that would encourage listeners to
replace existing radios and thereby facilitate the introduction of receivers
capable of receiving our broadcasts.
Although some existing satellite operators currently provide music
programming to customers at fixed locations, these operators are incapable of
providing Sirius Radio-type service to vehicles as a result of some or all of
the following reasons:
these operators do not broadcast on radio frequencies suitable for
reception in a mobile environment;
Sirius Radio-type service requires fully dedicated satellites;
Sirius Radio-type service requires a custom satellite system design; and
Sirius Radio-type service requires regulatory approvals, which existing
satellite operators do not have.
The FCC could also grant new licenses that would enable additional
competitors to broadcast satellite radio. There are many portions of the
electromagnetic spectrum that are currently licensed for other uses and some
other portions for which licenses have been granted by the FCC without
restriction as to use, and we cannot assure you that these portions of the
spectrum could not be utilized for satellite radio broadcasting in the future.
Although any of these licensees would face cost and competition
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barriers, we cannot assure you that there will not be an increase in the number
of competitors in the satellite radio industry.
TECHNOLOGY AND PATENTS
We have been granted U.S. patents on various features of satellite radio
technology. Although we believe that obtaining patent protection may provide
benefits, we do not believe that our business is dependent on obtaining patent
protection or successfully defending any of the patents that may be obtained
against infringement by others.
Some of our know-how and technology is not the subject of U.S. patents. To
protect our rights, we require some of our employees, consultants, advisors and
collaborators to enter into confidentiality agreements. We cannot assure you,
however, that these agreements will provide meaningful protection for our trade
secrets, know-how or other proprietary information if there is any unauthorized
use or disclosure. In addition, our business may be adversely affected by
competitors who independently develop competing technologies.
Our proprietary technology was principally developed by Robert D. Briskman,
Sirius Radio's co-founder, and was assigned and belongs to us. We believe that
we are the sole owner of the technology covered by our issued patents. We cannot
assure you, however, that third parties will not bring suit against us for
patent infringement or for declaratory judgment to have our patents declared
invalid. If a dispute arises concerning our patents, trade secrets or know-how,
litigation might be necessary to enforce our patents, to protect our trade
secrets or know-how or litigation may occur to determine the scope of the
proprietary rights of others. This litigation could result in substantial cost
to, and diversion of effort by, us, and adverse findings in any proceeding could
subject us to significant liabilities to third parties, require us to seek
licenses from third parties or otherwise adversely affect our ability to
successfully develop and market Sirius Radio.
On January 12, 1999, we filed a lawsuit against XM in the United States
District Court for the Southern District of New York. The lawsuit alleged
infringement by XM of our U.S. Patent Nos. 5,319,673, 5,485,485 and 5,592,471.
On February 16, 2000, we and XM entered into a Joint Development Agreement to
design and develop receivers that are capable of receiving our and XM's
broadcasts and we agreed to withdraw this lawsuit. We and XM have agreed to
cross-license our respective intellectual property. Only if this Joint
Development Agreement is terminated before the value of the licenses has been
determined due to XM's failure to perform a material covenant or obligation
under the Joint Development Agreement could we refile this suit.
GOVERNMENT REGULATION
As an operator of a privately owned satellite system, we are regulated by
the FCC under the Communications Act of 1934 (the 'Communications Act'). The FCC
is the government agency with primary authority in the United States over
satellite radio communications. We currently must comply with regulation by the
FCC principally with respect to (1) the licensing of our satellite system; (2)
preventing interference with or to other users of radio frequencies; and (3)
compliance with rules that the FCC has established specifically for United
States satellites and rules that the FCC has established for providing a
satellite radio service.
On May 18, 1990, we proposed that the FCC establish a satellite radio
service and applied for an FCC license. On March 3, 1997, the FCC adopted rules
for the national satellite radio broadcast service (the 'FCC Licensing Rules').
Pursuant to the FCC Licensing Rules, an auction was held among the applicants on
April 1 and 2, 1997. We were a winning bidder for one of two FCC licenses with a
bid of approximately $83 million; XM was the other winning bidder for an FCC
license with a bid of $89 million. After payment of the full amount by us, on
October 10, 1997, the FCC's International Bureau issued us a license to place
two satellites in a geostationary orbit. Our FCC license was effective
immediately; however, for a period of 30 days following the grant of the FCC
license, those parties that had filed comments or petitions to deny in
connection with our license application were entitled to petition for
reconsideration the International Bureau or to request review of the decision by
the full FCC. An application for review by the FCC was filed by one of the
low-bidding applicants in the
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auction. This petition requests, among other things, that the FCC adopt
restrictions on foreign ownership, which were not applied in the license issued
to us by the FCC's International Bureau on October 10, 1997 (the 'IB Order'),
and, on the basis of our ownership, overrule the IB Order. Since December 1997,
there have been no further developments concerning this petition. Although we
believe the FCC will uphold the IB Order, we cannot predict the ultimate outcome
of any proceedings relating to this petition or any other proceeding that may be
filed. If this petition is denied, the complaining party may file an appeal with
the U.S. Court of Appeals which must find that the decision of the FCC was not
supported by substantial evidence, or was arbitrary, capricious or unlawful to
overturn the grant of our FCC license.
Under the FCC Licensing Rules, we are required to meet specific progress
milestones. We are required to begin satellite construction within one year of
the grant of our FCC license; to launch and begin operating our first satellite
within four years of such date; and to begin operating our entire system within
six years. The IB Order states that failure to meet these milestones will render
our FCC license null and void. We satisfied this first milestone and expect to
satisfy the second milestone by launching our first satellite, which is expected
to occur between June 21 and July 20, 2000. On March 27, 1997, a third party
requested reconsideration of the FCC Licensing Rules, seeking, among other
things, that the time period allotted for these milestones be shortened. To
date, the FCC has not responded to the petition for reconsideration. We cannot
predict the outcome of this petition.
The spectrum allocated by the FCC for satellite radio in the United States
is used in Canada and Mexico for terrestrial microwave links, mobile telemetry
and other purposes. In September 1998, the United States government and Canada
reached an agreement to coordinate the use of this spectrum. Under the FCC
Licensing Rules, the United States government must still coordinate the United
States' use of this spectrum with the Mexican government. The United States
government continues to meet and discuss this coordination process with Mexico.
We have been advised by the FCC that the current discussions with Mexico in this
coordination process involve a segmentation of the S-band frequency to permit
Mexico to launch and operate its own satellite digital radio system. Any plan to
segment the S-band to permit Mexico to launch and operate its own satellite
digital radio system may require the consent of certain FCC licensees in
spectrum adjoining that awarded to XM and ourselves. We cannot assure you that
we will be able to coordinate the use of this spectrum with Mexico or will be
able to do so in a timely manner.
In 1998, we decided to increase the number of satellites in our system from
two to three and change our orbits from geostationary to inclined, elliptical
geosynchronous, requiring modification of our FCC license. We filed an
application with the FCC for this modification on December 11, 1998. Although we
believe that the FCC will approve our application for this change, we cannot
assure you that this will occur. XM and WCS Radio Inc. have filed comments on
our application with the FCC. These comments requested the FCC to condition
approval of our modification on receiver interoperability and request us to
insure that our service will not cause harmful interference with wireless
services in Central and South America. We cannot predict the time it will take
the FCC to act on our application or any of those comments, or whether
additional submissions or waiver requests will be necessary, and we cannot be
sure that the modification we have requested will be granted. Failure of the FCC
to approve the requested modification to our license in a timely fashion would
have a material adverse effect on our business, financial condition and
prospects. In the interim, on December 20, 1999, we received special temporary
authority from the FCC to launch and test our satellites. This special temporary
authority will expire on April 18, 2000 and does not authorize us to begin
providing our service using our three satellites. On March 17, 2000 we submitted
a letter to the FCC requesting approval of the modification to our license or,
alternatively, an extension of our special temporary authority. We expect the
FCC to issue the requested modification to our license upon completion of the
coordination process with Mexico.
The term of our FCC license for each satellite is eight years, commencing
from the time each satellite is declared operational after having been inserted
into orbit. Upon the expiration of the term with respect to each satellite, we
will be required to apply for a renewal of the relevant FCC license. Although we
anticipate that, absent significant misconduct on our part, the FCC licenses
will be
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renewed in due course to permit operation of our satellites for their useful
lives, and that a license would be granted for any replacement satellites, we
cannot assure you of this renewal or grant.
To operate our satellites, we also will have to obtain a license from the
FCC to operate our uplink facility. Normally, this type of approval is sought
after issuance of an FCC satellite license. We applied for a license to operate
our uplink facility on June 25, 1999. The deadline for the public to file
comments on our application was October 16, 1999, and no comments were filed.
The FCC has indicated that it intends to consider our application to operate our
uplink facility in connection with the approval of our pending application to
modify our satellite license. Although we cannot assure you that this license
will be granted, we do not expect difficulties in obtaining this license in the
ordinary course.
In the future, any assignments or transfers of control of our FCC license
must be approved by the FCC. We cannot assure you that the FCC would approve any
of these transfers or assignments.
In some areas with high concentrations of tall buildings, such as urban
cores, or in tunnels, signals from our satellites will be blocked and reception
will be adversely affected. In these cases, we plan to install terrestrial
repeating transmitters to broadcast Sirius Radio. The FCC has not yet
established rules governing the application procedure for obtaining
authorizations to construct and operate terrestrial repeating transmitters. A
rulemaking on the subject was initiated by the FCC on March 3, 1997 and is still
pending. Several comments were received by the FCC that sought to cause the FCC
to consider placing restrictions on our ability to deploy our terrestrial
repeating transmitters. On December 17, 1999, XM filed supplemental comments in
this rulemaking and we filed supplemental comments in this rulemaking on January
18, 2000. On February 22, 2000, the National Association of Broadcasters, the
Wireless Communications Association and BellSouth Corporation filed comments on
these filing. These comments seek to protect adjoining wireless service and
ensure that we do not originate local programming through our terrestrial
repeater network. On March 8, 2000, we filed a reply to these comments
reaffirming that we do not intend to originate local programming through our
terrestrial repeater network and denying that our repeater network will
interfere with adjoining wireless services. Metricom, Inc., MCI WorldCom, Inc.
and the Aerospace & Flight Test Radio Coordinating Council also filed reply
comments on March 8, 2000 seeking to protect adjoining wireless services,
including flight test receivers. On March 22, 2000, we filed a supplemental
reply to these reply comments reaffirming that our terrestrial repeater network
will not interfere with wireless services in nearby spectrum. The repeaters we
have constructed in San Francisco are operating under temporary experimental
licenses. We cannot predict the outcome or the timing of these FCC proceedings.
The IB Order conditions our FCC license on us certifying that our system
includes a receiver design that will permit end users to access XM's system. On
February 16, 2000, we signed an agreement with XM to jointly develop a unified
standard for satellite radios to facilitate the ability of consumers to purchase
one radio capable of receiving both our and XM's services. We believe that this
agreement, and our efforts with XM to develop this unified standard for
satellite radios, will satisfy the interoperability condition contained in our
FCC license.
The FCC has proposed to update regulations for a new type of lighting device
that may generate radio energy in the part of the spectrum to be used by us. The
devices would be required to comply with FCC rules that prohibit these devices
from causing harmful interference to an authorized radio service such as Sirius
Radio. However, unless the FCC adopts adequate technical standards specifically
applicable to these devices, it may be difficult for us to enforce our rights if
the use of these devices were to become commonplace. We believe that the
currently proposed FCC rules must be strengthened to assure protection of our
spectrum and filed comments expressing this view on July 8, 1998 and reply
comments on August 24, 1998. The FCC's failure to adopt adequate standards could
have a material adverse effect on reception of our broadcasts. We believe that
the FCC will set adequate standards to prevent harmful interference, although we
cannot assure you that it will do so.
Our business operations as currently contemplated may require a variety of
permits, licenses and authorizations from governmental authorities other than
the FCC, but we have not identified any permit, license or authorization that we
believe could not be obtained in the ordinary course of business. The
Communications Act prohibits the issuance of a license to a foreign government
or a representative of a foreign government, and contains limitations on the
ownership of common carrier, broadcast and some other radio licenses by non-U.S.
citizens. We are regulated as a private carrier, not
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a common carrier, by the FCC. As such, the IB Order determined that we are not
bound by the foreign ownership provisions of the Communications Act. The FCC has
before it a petition to apply the foreign ownership rules to digital audio radio
services, but has not acted on that petition. As a private carrier, we are free
to set our own prices and serve customers according to our own business
judgment, without economic regulation.
The foregoing discussion reflects the application of current communications
law, FCC regulations and international agreements to our proposed service in the
United States. Changes in law, regulations or international agreements relating
to communications policy or to matters affecting specifically the service
proposed by us could adversely affect our ability to retain our FCC license and
obtain or retain other approvals required to provide Sirius Radio or the manner
in which our proposed service would be regulated. Further, actions of the FCC
may be reviewed by federal courts and we cannot assure you that if challenged,
these actions would be upheld.
THE SIRIUS TRADEMARK
We have an application pending in the United States Patent and Trademark
Office for the registration of the trademark 'Sirius' in connection with our
service. We intend to maintain our trademark and the anticipated registration.
We are not aware of any material claims of infringement or other challenges to
our right to use the 'Sirius' trademark in the United States in connection with
our service.
PERSONNEL
As of March 30, 2000, we had 99 employees. By commencement of operations, we
expect to have approximately 250 employees. The extent and timing of the
increase in staffing will depend on the availability of qualified personnel and
other developments in our business. None of our employees is represented by a
labor union, and we believe that our relationship with our employees is
excellent.
LEGAL PROCEEDINGS
We are not a party to any material litigation.
RISK FACTORS
In addition to the other information in this Annual Report on Form 10-K, the
following factors should be considered carefully in evaluating us and our
business. This Annual Report on Form 10-K contains certain forward-looking
statements within the meaning of the federal securities laws. Actual results and
the timing of certain events could differ materially from those projected in the
forward looking statements due to a number of factors, including those set forth
below and elsewhere herein. See 'Special Note Regarding Forward Looking
Statements.'
SATELLITE LAUNCHES HAVE SIGNIFICANT RISKS
We cannot assure you that the launches of our satellites will be successful.
Satellite launches have significant risks, including launch failure, damage or
destruction of the satellite during launch and failure to achieve a proper orbit
or operate as planned. Our agreement with Loral does not protect us against the
risks inherent in satellite launches or in-orbit operations. Our three
satellites are scheduled to be launched on Proton launch vehicles, which are
built by Russian entities. The Proton family of launch vehicles has a launch
success rate of 90% based on its last 50 launches. Past experience, however, is
not necessarily indicative of future performance.
On July 5, 1999 and October 27, 1999, the second stage of Proton rockets
launched from the Baikonur Cosmodrome in Kazakhstan malfunctioned during flight.
As a result of these failures, Proton rocket launches were suspended and the
Russian government appointed official investigatory commissions. On January 20,
2000, a commission announced that the October 27th failure was caused by a fire
which started in one of the launch vehicle's engines. Proton launches were
resumed on February 12, 2000, with the successful launch of a Garuda
communications satellite. We expect that
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there will be approximately three additional Proton launches prior to the launch
of our first satellite, which is scheduled to occur between June 21 and July 20,
2000.
As part of our risk management program, we contracted with Loral for the
construction of a fourth satellite that we will use as a ground spare and for
some of the long-lead time parts for a fifth satellite. We also have procured
insurance covering a replacement launch to the extent required to cover risks
Loral does not assume.
WE ARE DEPENDENT UPON LORAL TO BUILD AND LAUNCH OUR SATELLITES
Our business depends upon Loral successfully constructing and launching the
satellites to transmit Sirius Radio. We are relying upon Loral to construct and
to deliver these satellites in orbit on a timely basis. We cannot assure you
that Loral will deliver the satellites or provide these launch services on a
timely basis, if at all. If Loral fails to deliver functioning satellites in a
timely manner, our business could be materially adversely affected. Although our
agreement with Loral requires Loral to pay us penalties for late delivery, based
on the length of the delay, these remedies may not adequately mitigate the
damage any launch delays cause to our business. In addition, if Loral fails to
deliver the designated launch services due to causes beyond its control, Loral
will not be liable for the delay or the damages caused by the delay. While the
satellites are under construction, Loral is at risk should anything happen to
the satellites. In addition, Loral is responsible for making sure the satellites
meet specific performance specifications at the time of launch (in the case of
our first three satellites) or at the time of delivery to our ground storage
location (in the case of our fourth satellite). However, if any satellite is
destroyed during or after launch or if the fourth satellite is damaged or
destroyed while in storage, Loral will not be responsible to us for the cost of
replacing it.
We depend on Loral to obtain access to available slots on launch vehicles
and to contract with third-party launch service providers for the launch of our
satellites. A launch service provider may postpone one or more of our launches
for a variety of reasons, including:
technical problems;
a launch of a scientific satellite whose mission may be degraded by delay;
the need to conduct a replacement launch for another customer; or
a launch of another customer's satellite whose launch was postponed.
Generally, Loral is not liable to us for a satellite or launch failure.
However, if the first or the third Proton launch vehicle used to launch our
satellites fails, Loral will provide us with a free replacement launch. The
timing of these replacement launches cannot be predicted.
RECEIVERS FOR OUR SERVICE ARE NOT YET AVAILABLE AND WE ARE DEPENDENT UPON OTHERS
TO DESIGN, DEVELOP, MANUFACTURE AND DISTRIBUTE RECEIVERS
To receive our service, a subscriber will need to purchase a device capable
of receiving our broadcasts. Receivers capable of receiving our broadcasts are
being developed by several parties, including Lucent; however, receivers have
not yet been tested or completed. We expect that receivers will be available at
the end of 2000 in limited quantities. Initial receivers will be somewhat more
expensive than subsequent receivers we introduce because they will not utilize
the complete set of integrated circuits being developed by Lucent.
Lucent is designing and developing a set of integrated circuits for
receivers capable of receiving our broadcasts and we have agreed to pay the cost
of this development. The cost of this development has increased since we
contracted with Lucent. We cannot assure you that:
the cost of the chip set development, which we estimate will be
approximately $35 million, will not increase;
Lucent will deliver final integrated circuits in a timely manner and in
sufficient quantities to allow consumer electronics manufacturers to
produce commercial quantities of receivers capable of receiving our
broadcasts in accordance with our business plan; or
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Lucent will price the chip sets low enough to encourage and support the
widespread introduction of receivers capable of receiving our broadcasts.
No one currently manufactures devices capable of receiving our broadcasts or
suitable antennas. We may not be able to obtain a commitment on the part of any
manufacturer to produce, market and sell devices capable of receiving our
broadcasts and suitable antennas in a timely manner and at a price that would
permit the widespread introduction of Sirius Radio. In addition, any
manufacturers of devices capable of receiving our broadcasts may not produce
them in sufficient quantities to meet consumer demand. Our business would be
materially adversely affected if we cannot complete the timely development of
these products for commercial sale at an affordable price with sufficient
distribution.
WE ARE NOT SURE THERE WILL BE A MARKET FOR SIRIUS RADIO
Currently no one offers a commercial satellite radio service such as Sirius
Radio in the United States. As a result, our proposed market is new and untested
and we cannot reliably estimate the potential demand for this service or the
degree to which our proposed service will meet that demand. We cannot assure you
that there will be sufficient demand for Sirius Radio to enable us to achieve
significant revenues or cash flow or profitable operations. Sirius Radio will
achieve or fail to gain market acceptance depending upon many factors beyond our
control, including:
the willingness of consumers to pay subscription fees to obtain satellite
radio broadcasts;
the cost, availability and consumer acceptance of devices capable of
receiving Sirius Radio;
our marketing and pricing strategies and those of XM, our direct
competitor;
the development of alternative technologies or services; and
general economic conditions.
OUR BUSINESS IS STILL IN THE DEVELOPMENT STAGE
Historically, we have generated only losses. We are a development stage
company. The service we propose to offer, Sirius Radio, is still in development
and we have never recognized any operating revenues or conducted any operations.
Since our inception, we have concentrated on raising capital, obtaining required
licenses, developing technology, strategic planning, market research and
building our infrastructure. Our financial results from our inception on May 17,
1990 through December 31, 1999, are as follows:
no revenues;
net losses of approximately $134 million (including a net loss of $63
million during the year ended December 31, 1999); and
net losses applicable to common stock of approximately $261 million, which
includes a deemed dividend on our former 5% Delayed Convertible Preferred
Stock of $52 million.
We do not expect any revenues before 2001, and still have a variety of
hurdles to surmount before commencing operations. We have not started to
broadcast Sirius Radio and do not expect to generate any revenues from
operations until the first quarter of 2001 or to generate positive cash flow
from operations until 2002, at the earliest. Our ability to generate revenues,
generate positive cash flow and achieve profitability will depend upon a number
of factors, including:
the timely receipt of all necessary regulatory authorizations;
the successful and timely construction and deployment of our satellite
system and terrestrial repeater network;
the development and manufacture by one or more consumer electronics
manufacturers of devices capable of receiving Sirius Radio; and
the successful marketing and consumer acceptance of Sirius Radio.
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We cannot assure you that we will accomplish any of the above, that Sirius Radio
will ever commence operations, that we will attain any particular level of
revenues, that we will generate positive cash flow or that we will achieve
profitability.
WE NEED ADDITIONAL FINANCING TO OPERATE OUR SERVICE
We need more money to continue implementing our business plan. We believe we
can fund our planned operations, including the completion of our satellite and
terrestrial system, into the third quarter of 2001 from our working capital at
December 31, 1999. We estimate that we will need an additional $120 million to
fund our business through the first full year of operations and additional funds
until our revenues grow substantially. We will require more money than estimated
if there are delays, cost overruns, launch failures or other adverse
developments.
The funding required to develop a unified satellite radio standard could be
significant. We cannot predict at this time the amount of the license fees or
contribution that will be payable by XM or us under our joint development
agreement or the size of the credits to XM and us from the use of our or their
technology. This agreement may require us to invest significant additional
capital. Under this agreement, each party is obligated to fund one half of the
development costs of the technologies used to develop a unified standard for
satellite radios. Each party will be entitled to license fees or a credit
towards its one half of the costs based upon the validity, value, use,
importance and available alternatives of the technology it contributes. The
amounts of these fees or credits will be determined over time by agreement of
the parties or by arbitration.
Initially we may be required to arrange for the production of receivers. We
are currently discussing with several electronics manufacturers agreements to
produce receivers capable of receiving our broadcasts; however, no agreement has
yet been executed. As part of any such agreement, we may have to bear some costs
associated with receivers, the cost of which could be material.
WE FACE MANY FINANCING CHALLENGES AND CONSTRAINTS
We face many challenges and constraints in financing our development and
operations, including those listed below.
Our debt instruments limit our ability to incur indebtedness. The indentures
governing our 15% senior secured discount notes due 2007 and our 14 1/2% senior
secured notes due 2009 limit our ability to incur additional indebtedness. In
addition, we expect any future senior indebtedness will contain similar limits
on our ability to incur additional indebtedness.
A delay in introducing our service could hinder our ability to raise
additional financing. Any delay in implementing our business plan would hurt our
ability to obtain the additional financing we need by adversely affecting our
expected results of operations and increasing our cost of capital. Several
factors could delay us, including the following:
obtaining additional authorizations from the FCC;
coordinating the use of S-band radio frequency spectrum with Mexico;
delays in the testing or launch of our satellites;
delay in commercial availability of devices capable of receiving Sirius
Radio; and
failure of our vendors to perform as anticipated.
We have previously incurred some delays in implementing our business plan.
During any period of delay, we would continue to need significant amounts of
cash to fund capital expenditures, administrative and overhead costs,
contractual obligations and debt service. Accordingly, any delay could
materially increase the aggregate amount of funds we need to breakeven from
operations. Additional financing may not be available on favorable terms or at
all during periods of delay.
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WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY AGAINST CONVENTIONAL RADIO STATIONS,
THE OTHER HOLDER OF AN FCC LICENSE TO PROVIDE THIS SERVICE OR OTHER POTENTIAL
PROVIDERS OF THIS SERVICE
We will be competing with conventional radio stations, which, unlike Sirius
Radio:
do not charge subscription fees;
do not require users to purchase a separate receiver and antenna; and
often offer local information programming such as local news and traffic
reports.
In addition to direct competition from XM, we face the possibility of
additional satellite broadcast radio competition:
if the FCC grants additional licenses for satellite-delivered radio
services;
if holders of licenses for other portions of the electromagnetic spectrum
(currently licensed for other uses) obtain changes to their licenses; or
if holders of licenses without FCC restrictions for other portions of the
spectrum devise a method of broadcasting satellite radio.
Finally, one or more competitors may design a satellite radio broadcast
system that is superior to our system. The competitive factors listed above
could materially adversely affect our results of operations. In addition, any
delays in introducing our service also could place us at a competitive
disadvantage relative to any competitor that begins operations before us.
OUR SYSTEM RELIES ON UNPROVEN APPLICATIONS OF TECHNOLOGY
Our satellite system applies technology in new and unproven ways. Sirius
Radio is designed to be broadcast from three satellites orbiting the Earth. Two
of the three satellites will transmit the same signal at any given time to
receivers that will receive signals through antennas. This design applies
technology in new and unproven ways. Accordingly, we cannot assure you that the
Sirius Radio system will work as planned.
Some obstructions will adversely affect Sirius Radio reception. High
concentrations of tall buildings, other obstructions, such as those found in
large urban areas, and tunnels will block the signals from both transmitting
satellites. We plan to install terrestrial repeating transmitters to rebroadcast
Sirius Radio in 46 urban areas to mitigate this problem. However, some areas
with impediments to satellite line-of-sight may still experience 'dead zones.'
We cannot assure you that the Sirius Radio system will operate as planned with
the technology we have developed.
Our system has never been tested with orbiting satellites. We cannot assure
you that the Sirius Radio system will function as intended until we test it with
orbiting satellites and antennas and receivers suitable for commercial
production. We have never done this kind of test because there are no commercial
satellites in orbit capable of transmitting radio signals on S-band frequencies
to the United States.
SATELLITES HAVE A LIMITED LIFE AND MAY FAIL IN ORBIT
We expect that our satellites will last approximately 15 years, and that
after this period their performance in delivering Sirius Radio will deteriorate.
We cannot assure you, however, of the useful life of any particular satellite.
Our operating results would be adversely affected if the useful life of our
initial satellites is significantly shorter than 15 years.
The useful lives of our satellites will vary and will depend on a number of
factors, including:
quality of construction;
amount of fuel on board;
durability of component parts;
expected gradual environmental degradation of solar panels;
random failure of satellite components, which could result in damage to or
loss of a satellite; and
in rare cases, damage or destruction by electrostatic storms or collisions
with other objects in space.
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If one of our satellites fails on launch or in orbit and if we are required
to launch our spare satellite, our operational timetable will be delayed for up
to six months. If two or more of our satellites fail on launch or in orbit, our
operational timetable could be delayed by at least 16 months.
INSURANCE MAY NOT COVER ALL RISKS OF LAUNCHING AND OPERATING SATELLITES
There are many potential risks to insure. Our agreement with Loral does not
protect us against launch vehicle failure, failure of a satellite to deploy
correctly or failure of a satellite to operate as planned. We must purchase
insurance to protect adequately against these risks. The insurance premiums we
pay may increase substantially upon any adverse change in insurance market
conditions.
Many risks we face may not be covered by insurance. Our insurance may not
cover all of our losses, and may not fully reimburse us for the following:
expenditures for a satellite which fails to perform to specifications after
launch;
damages from business interruption, loss of business and any expenditures
arising from satellite failures or launch delays; and
losses for which there are deductibles, exclusions and conditions.
WE ARE SUBJECT TO CONTINUING AND DETAILED REGULATION BY THE FCC
We need a modification to our FCC license before we can begin operation. In
May 1998, we decided to increase the number of satellites in our system from two
to three and to change the orbit of those satellites. To implement these
changes, the FCC must approve changes to our FCC license. If the FCC were to
deny our application to modify our license, we would be required to redesign our
proposed system and modify our satellites, at a significant cost, and our
commercial operations would be delayed. On December 11, 1998, we filed an
application with the FCC for these changes. Although we believe that the FCC
will approve our application for this necessary change, we cannot assure you
that this will occur. XM and WCS Radio Inc. have filed comments on our
application with the FCC. These comments requested the FCC to condition approval
of our modification on receiver interoperability and request us to insure that
our service will not cause harmful interference with wireless services in
Central and South America. We cannot predict the time it will take the FCC to
act on our application or any of these comments, or whether additional
submissions or waiver requests will be necessary, and we cannot be sure that the
modification we have requested will be granted.
In the interim, on December 20, 1999, we received special temporary
authority from the FCC to launch and test our satellites. This special temporary
authority will expire on April 18, 2000 and does not authorize us to begin
providing our service using our three satellites. Although we have applied for
an extension of this authority, we cannot predict whether the FCC will reissue
this special temporary authority prior to April 18, 2000.
The United States needs to complete frequency coordination with Mexico. To
use our assigned spectrum, the United States government must complete a process
of frequency coordination with Mexico. This coordination process may require the
consent of certain FCC licensees in spectrum adjoining that assigned to
ourselves and XM. We cannot assure you that the United States government will be
able to coordinate use of this spectrum with Mexico or do so in a timely manner.
Our FCC license is being challenged. The FCC's International Bureau granted
us an FCC license after we submitted a winning bid in an FCC auction. One of the
low-bidders in that FCC auction applied to have the full FCC review the grant of
our FCC license. The application requests that the FCC adopt restrictions on
foreign ownership and overrule the granting of our FCC license on the basis of
our ownership. If the FCC denies this application, the complaining party may
appeal to the U.S. Court of Appeals. Because less than 25% of our voting stock
is owned by non-U.S. persons, we believe the FCC will uphold the grant of our
FCC license. We cannot predict the ultimate outcome of any proceedings relating
to this application or any other proceedings that interested parties may file.
Since December 29, 1997, there have been no developments in this matter.
We will need to renew our FCC license after eight years. The term of our FCC
license with respect to each satellite is eight years, beginning on the date it
is declared operational after it is inserted into orbit.
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When the term of our FCC license for each satellite expires, we must apply for a
renewal of the relevant license. If the FCC does not renew our FCC license, we
would be forced to cease broadcasting Sirius Radio. We cannot assure you that we
will obtain these renewals.
We need FCC approval to operate our terrestrial repeating transmitters.
Although we plan to install terrestrial repeating transmitters to rebroadcast
Sirius Radio in 46 urban areas, the FCC has not yet established rules governing
the application procedure for obtaining authorizations to construct and operate
terrestrial repeating transmitters on a commercial basis. The FCC initiated a
rulemaking on the subject in March 1997 and received several comments urging the
FCC to consider placing restrictions on the ability to deploy terrestrial
repeating transmitters. This rulemaking is still pending. Both we and XM filed
supplemental comments in this rulemaking. On February 22, 2000, the National
Association of Broadcasters, the Wireless Communications Association and
BellSouth Corporation filed comments seeking to protect adjoining wireless
service and to ensure that we do not originate local programming through our
terrestrial repeater network. On March 8, 2000, we filed a reply to these
comments reaffirming that we do not intend to originate local programming
through our terrestrial repeater network and denying that our repeater network
will interfere will adjoining wireless services. Metricom, Inc., MCI WorldCom,
Inc. and the Aerospace & Flight Test Radio Coordinating Council also filed reply
comments on March 8, 2000 seeking to protect adjoining wireless services,
including flight test receivers. On March 22, 2000, we filed a supplemental
reply to these reply comments reaffirming that our terrestrial repeater network
will not interfere with wireless services in nearby spectrum. The repeaters we
have constructed in San Francisco are operating under temporary experimental
licenses. We cannot predict the outcome or the timing of these FCC proceedings.
New devices may interfere with our broadcasts. The FCC has proposed
regulations to allow a new type of lighting device that may generate radio
energy in the part of the spectrum we intend to use. We believe the current
proposed regulations for these devices do not contain adequate safeguards to
prevent interference with services such as Sirius Radio. If the FCC fails to
adopt adequate technical standards specifically applicable to these devices and
if the use of these devices becomes commonplace, we could experience
difficulties enforcing our rights. If the FCC fails to adopt adequate standards,
the new devices could materially adversely affect reception of our broadcasts.
Although we believe that the FCC will set adequate standards to prevent harmful
interference, we cannot assure you that it will do so.
We may be adversely affected by changing regulations. To provide Sirius
Radio, we must retain our FCC license and obtain or retain other requisite
approvals. Our ability to do so could be affected by changes in laws, FCC
regulations, international agreements governing communications policy generally
or international agreements relating specifically to Sirius Radio. In addition,
the manner in which Sirius Radio would be offered or regulated could be affected
by these changes.
We may be adversely affected by foreign ownership restrictions. The
Communications Act restricts ownership in some broadcasters by foreigners. If
these foreign ownership restrictions were applied to us, we would need further
authorization from the FCC if our foreign ownership were to exceed 25%. The
order granting our FCC license determined that, as a private carrier, those
restrictions do not apply to us. However, the order granting our FCC license
stated that our foreign ownership status under the Communications Act could be
raised in a future proceeding. The pending appeal of the grant of our FCC
license may bring the question of foreign ownership restrictions before the full
FCC.
We could be required to comply with public service regulations. The FCC has
indicated that it may impose public service obligations on satellite radio
broadcasters in the future, which could add to our costs or reduce our revenues.
For example, the FCC could require broadcasters to set aside channels for
educational programming. We cannot predict whether the FCC will impose public
service obligations or the impact that any of these obligations would have on
our results of operations.
OUR TECHNOLOGY MAY BECOME OBSOLETE
We will depend on technologies being developed by third parties to implement
key aspects of our system. These technologies may become obsolete. We may be
unable to obtain more advanced technologies on a timely basis or on reasonable
terms, or our competitors may obtain more advanced technologies and we may not
have access to these technologies.
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WE MAY NOT BE ABLE TO MANAGE RAPID GROWTH
We expect to experience significant and rapid growth in the scope and
complexity of our business as we proceed with the development of our satellite
radio system. We do not currently employ sufficient staff to program our
broadcast service, or handle all of our sales and marketing efforts. Although we
have hired experienced executives in these areas, we must hire additional
employees before we begin commercial operations of our service. This growth may
strain our management and operational resources. Our results of operations could
be materially adversely affected if we fail to do any of the following:
develop and implement effective management systems;
hire and train sufficient personnel to perform all of the functions
necessary to effectively provide our service;
manage our subscriber base and business; or
manage our growth effectively.
CONSUMERS MAY STEAL OUR SERVICE
Consumers may steal the Sirius Radio signal. Although we plan to use
encryption technology to mitigate signal piracy, we do not believe that this
technology is infallible. Accordingly, we cannot assure you that we can
eliminate theft of the Sirius Radio signal. Widespread signal theft could reduce
the number of motorists willing to pay us subscription fees and materially
adversely affect our results of operations.
OUR PATENTS MAY NOT BE SUFFICIENT TO PREVENT OTHERS FROM COPYING ELEMENTS OF OUR
SYSTEM
Although our U.S. patents cover various features of satellite radio
technology, our patents may not cover all aspects of our system. Others may
duplicate aspects of our system which are not covered by our patents without
liability to us. In addition, competitors may challenge, invalidate or
circumvent our patents. We may be forced to enforce our patents or determine the
scope and validity of other parties' proprietary rights through litigation. In
this event, we may incur substantial costs and we cannot assure you of success
in this litigation. In addition, others may block us from operating our system
if our system infringes their patents, their pending patent applications which
mature into patents or their inventions developed earlier which mature into
patents. Should we desire to license our technology, we cannot assure you that
we can do so. Assuming we pay all necessary fees on time, the earliest
expiration date on any of our patents is April 10, 2012.
ITEM 2. PROPERTIES
On March 31, 1998, we signed a lease for the 36th and 37th floors and
certain portions of the roof and basement at 1221 Avenue of the Americas, New
York, New York, to house our headquarters and National Broadcast Studio. We will
use portions of the roof to install and maintain satellite transmission
equipment and will use a portion of the 8th floor setback to install an
emergency electric power generator. The term of the lease is 15 years and 10
months, with an option to renew for an additional five years at fair market
value. We also have a right of first refusal, from and after October 8, 2001, to
lease any full floor that becomes available on floors 27 through 37 of the
building at fair market value. The initial annual rental is approximately $4.3
million, with specified increases and escalations based on operating expenses.
On March 22, 2000, we signed a lease for the 32nd floor at 1221 Avenue of
the Americas to house our staff. The term of the lease for the 32nd floor
commences on August 1, 2000 and expires on December 31, 2002. Upon expiration of
the lease for the 32nd floor, the lease will automatically extend to cover the
34th floor of the same building and will expire on the date our lease for the
36th and 37th floor terminates. The initial annual rental for this additional
floor is approximately $2.7 million, with specified increases and escalations
based on operating expenses.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any material litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year covered
by this Annual Report on Form 10-K to a vote of security holders, through the
solicitation of proxies or otherwise.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our Common Stock began trading on the Nasdaq SmallCap Market on September
13, 1994. From October 24, 1997 to January 11, 2000, our Common Stock was traded
on the Nasdaq National Market under the symbol 'CDRD'. On January 12, 2000, our
Common Stock began trading on the Nasdaq National Market under the symbol
'SIRI'.
The following table sets forth the high and low closing bid price for our
Common Stock, as reported by Nasdaq, for the periods indicated below:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Year Ended December 31, 1999
First Quarter........................................... 38 5/8 20 1/2
Second Quarter.......................................... 32 19 1/2
Third Quarter........................................... 38 1/2 23 1/4
Fourth Quarter.......................................... 48 1/2 23 1/8
Year Ended December 31, 1998
First Quarter........................................... 23 1/2 12 1/8
Second Quarter.......................................... 41 1/2 24 1/8
Third Quarter........................................... 36 7/8 15 1/4
Fourth Quarter.......................................... 38 1/2 14 9/16
</TABLE>
On March 23, 2000, the closing bid price of our Common Stock on Nasdaq was
$54 3/4 per share. On March 23, 2000, there were approximately 278 record
holders of our Common Stock. We have never paid cash dividends on our capital
stock. We currently intend to retain earnings, if any, for use in our business
and do not anticipate paying any cash dividends in the foreseeable future. The
agreements governing our outstanding debt and the instruments governing our
outstanding preferred stock contain provisions that limit our ability to pay
dividends on our Common Stock. See Item 7, 'Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources.'
Recent Sales of Unregistered Securities. On January 31, 2000, we sold
2,000,000 shares of our 9.2% Series D Junior Cumulative Convertible Preferred
Stock to certain affiliates of The Blackstone Group, L.P. for an aggregate
purchase price of $200 million. In connection with this sale, we paid an
aggregate of $7 million in fees to an investment banking firm. Each share of our
9.2% Series D Junior Cumulative Convertible Preferred Stock is convertible into
shares of Common Stock at a price of $34 per share. The proceeds from this sale
of our 9.2% Series D Junior Cumulative Convertible Preferred Stock will be used
for general corporate purposes.
On February 1, 2000, we sold 2,290,322 shares of our Common Stock to
DaimlerChrysler Corporation for an aggregate purchase price of approximately
$100 million. We did not pay any amounts to investment banking firms in
connection with this sale. The proceeds from this sale of our Common Stock will
be used for general corporate purposes.
These sales were exempt from registration under the Securities Act of 1933,
as amended (the 'Securities Act'), by virtue of Section 4(2) thereof. We
determined that The Blackstone Group, L.P. and its affiliates and
DaimlerChrysler Corporation had such knowledge and experience in financial and
business matters that they were capable of evaluating the merits and risks of
purchasing shares of our 9.2% Series D Junior Cumulative Convertible Preferred
Stock and our Common Stock, respectively. We did not sell the shares of 9.2%
Series D Junior Cumulative Convertible Preferred Stock or Common Stock by any
form of general solicitation or general advertising, and we determined that each
of The Blackstone Group, L.P. and their affiliates and DaimlerChrysler
Corporation were acquiring these shares for their own accounts and with no
intention of distributing or reselling them. In addition, prior to these sales,
we provided each of The Blackstone Group, L.P. and their affiliates and
DaimlerChrysler Corporation with reports we filed with the Securities and
Exchange Commission, and other information, as contemplated by Rule 502 under
the Securities Act, and we afforded each of them an opportunity to
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ask questions concerning the information provided to them and to obtain any
other information concerning us.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Our selected consolidated financial data set forth below with respect to the
statements of operations for the years ended December 31, 1997, 1998 and 1999
and with respect to the balance sheets at December 31, 1998 and 1999 are derived
from our consolidated financial statements, audited by Arthur Andersen LLP,
independent public accountants, included in Item 8 of this report. Our selected
consolidated financial data with respect to the balance sheets at December 31,
1995, 1996 and 1997 and with respect to the statement of operations data for the
years ended December 31, 1995 and 1996, are derived from our audited
consolidated financial statements, which are not included herein. This selected
consolidated financial data should be read in conjunction with the Consolidated
Financial Statements and related notes thereto included in Item 8 of this report
and 'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
CUMULATIVE
FOR THE PERIOD
MAY 17, 1990
YEAR ENDED DECEMBER 31, (DATE OF INCEPTION)
------------------------------------------------- TO DECEMBER 31,
1995 1996 1997 1998 1999 1999
---- ---- ---- ---- ---- -------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues............ $ -- $ -- $ -- $ -- $ -- $ --
Net loss...................... $(2,107) $(2,831) $(4,737) $(48,396) $(62,822) $(134,491)
Net loss per share (basic and
diluted).................... $ (.23) $ (.29) $ (.41) $ (2.70) $ (2.57)
Weighted average common shares
outstanding (basic and
diluted).................... 9,224 9,642 11,626 17,932 24,470
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents................ $ 1,800 $ 4,584 $ 900 $150,190 $ 81,809
Restricted investments, at amortized
cost................................... $ -- $ -- $ -- $ -- $ 67,454
Marketable securities, at market......... $ -- $ -- $169,482 $115,433 $ 317,810
Working capital.......................... $ 1,741 $ 4,442 $170,894 $180,966 $ 304,010
Total assets............................. $ 2,334 $ 5,065 $323,808 $643,880 $1,206,612
Deficit accumulated during the
development stage...................... $(15,705) $(18,536) $(23,273) $(71,669) $ (134,491)
Stockholders' equity(1).................. $ 1,991 $ 4,898 $ 15,980 $ 77,953 $ 134,179
</TABLE>
- ---------
(1) No cash dividends were declared or paid in any of the periods presented.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Annual Report on Form 10-K contains certain forward-looking statements
within the meaning of the federal securities laws. Actual results and the timing
of certain events could differ materially from those projected in the
forward-looking statements due to a number of factors, including those set forth
under 'Business -- Risk Factors' and elsewhere herein. See 'Special Note
Regarding Forward Looking Statements.'
26
<PAGE>
(All dollar amounts referenced in this Item 7 are in thousands, unless
otherwise stated)
OVERVIEW
Sirius Satellite Radio Inc. was organized in May 1990 and is in its
development stage. Our principal activities to date have included developing our
technology, obtaining regulatory approval for our service, commencing the
construction of four satellites, constructing our production and broadcast
facility, acquiring content for our programming, developing our terrestrial
repeater network, arranging for the design and development of receivers,
strategic planning, market research, recruiting our management team and securing
financing for capital expenditures and working capital. We will require funds
for working capital, interest on borrowings, acquisition of programming,
financing costs and operating expenses until some time after the commencement of
commercial operations of Sirius Radio. We cannot assure you that we will ever
commence operations, that we will attain any particular level of revenues or
that we will achieve profitability.
Upon commencing operations, we expect our primary source of revenue to be
subscription fees. We currently anticipate that our subscription fee will be
$9.95 per month to receive Sirius Radio broadcasts, with a one time activation
fee per subscriber. In addition, we expect to derive revenues from directly
selling or bartering advertising on our non-music channels. We do not expect to
recognize revenues from operations until the first quarter of 2001, at the
earliest. We do not intend to manufacture the receivers necessary to receive
Sirius Radio and thus we will not receive any revenues from their sale.
We expect that the operating expenses associated with our service will
consist primarily of marketing, sales, programming, maintenance of our satellite
and broadcasting system and general and administrative costs. Costs to acquire
programming are expected to include payments to build and maintain an extensive
music library and royalty payments for broadcasting music (which are likely to
be calculated based on a percentage of revenues). Marketing, sales, general and
administrative costs are expected to consist primarily of advertising costs,
salaries of employees, rent and other administrative expenses.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998
We recorded net losses of $62,822 ($2.57 per share) and $48,396 ($2.70 per
share) for the years ended December 31, 1999 and 1998, respectively. Our total
operating expenses were $63,518 and $39,079 for the years ended December 31,
1999 and 1998, respectively.
Engineering, design and development costs were $33,134 and $2,150 for the
years ended December 31, 1999 and 1998, respectively. Engineering costs incurred
in the year ended December 31, 1999 represented primarily payments to Lucent in
connection with our chip set development effort and payments to consumer
electronic manufacturers in connection with our receiver development efforts.
The increase in these costs in the 1999 period resulted primarily from the
increased activity in the receiver development efforts as we prepare to launch
our service.
General and administrative expenses increased for the year ended
December 31, 1999 to $30,384 from $11,247 for the year ended December 31, 1998.
General and administrative expenses increased due to the occupancy of our
National Broadcast Studio and the growth of our management team and workforce.
The major components of general and administrative expenses for the year ended
December 31, 1999 were salaries and employment related costs (32%), rent and
occupancy costs (18%) and legal and regulatory fees (10%), while in the year
ended December 31, 1998 the major components were salaries and employment
related costs (29%), rent and occupancy costs (20%) and legal and regulatory
fees (17%). The remaining portion of general and administrative expenses (40% in
1999 and 34% in 1998) consisted of other costs such as insurance, marketing,
consulting, travel, depreciation and supplies, with only marketing (14%)
exceeding 10% of the total in the 1999 period and no amount exceeding 10% of the
total in the 1998 period.
27
<PAGE>
The increase in interest and investment income to $17,502 for the year ended
December 31, 1999 from $7,250 for the year ended December 31, 1998, was the
result of higher average balances of cash, marketable securities and restricted
investments during the year ended December 31, 1999. The higher average balances
of cash, marketable securities and restricted investments during 1999 were due
to the proceeds from financing activities during 1999, including the issuance of
our 14 1/2% Senior Secured Notes due 2009, 8 3/4% Convertible Subordinated Notes
due 2009, 9.2% Series B Junior Cumulative Convertible Preferred Stock and Common
Stock, exceeding the amount of our expenditures for satellite and launch vehicle
construction, other capital expenditures and operating expenses.
Interest expense, net of capitalized interest, was $16,806 for the year
ended December 31, 1999 and $14,272 for the year ended December 31, 1998. This
increase in net interest expense was due to interest expense increasing by an
amount ($42,618) greater than the corresponding increase in capitalized interest
($40,084). The increase in interest expense was due to interest accruing on our
14 1/2% Senior Secured Notes due 2009 issued in May 1999 and 8 3/4% Convertible
Subordinated Notes due 2009 issued in September and October 1999.
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997
We recorded net losses of $48,396 ($2.70 per share) and $4,737 ($.41 per
share) for the years ended December 31, 1998 and 1997, respectively. Our total
operating expenses were $39,079 and $6,865 for the years ended December 31, 1998
and 1997, respectively.
Engineering, design and development costs were $2,150 and $776 for the years
ended December 31, 1998 and 1997, respectively. Engineering costs increased in
the year ended December 31, 1998 due to increased consulting costs and growth of
our engineering workforce.
General and administrative expenses increased for the year ended December
31, 1998 to $11,247 from $6,089 for the year ended December 31, 1997. General
and administrative expenses increased due to the growth of our management team
and workforce necessary to develop and commence the broadcast of our service.
The major components of general and administrative expenses for the year ended
December 31, 1998 were salaries and employment related costs (29%), rent and
occupancy costs (20%) and legal and regulatory fees (17%), while in the year
ended December 31, 1997 the major components were salaries and employment
related costs (27%), rent and occupancy costs (6%) and legal and regulatory fees
(28%). The remaining portion of general and administrative expenses (34% in 1998
and 39% in 1997) consisted of other costs such as insurance, market research,
consulting, travel, depreciation and supplies, with no such amount exceeding 10%
of the total in the 1998 period and only consulting (15%) exceeding 10% of the
total in the 1997 period.
The increase in interest and investment income to $7,250 for the year ended
December 31, 1998 from $4,074 for the year ended December 31, 1997 was the
result of higher average cash and marketable securities balances during the year
ended December 31, 1998. The higher average balances were due to the proceeds
resulting from the sale of our Common Stock to Prime 66 Partners, L.P. and the
sale of our 9.2% Series A Junior Cumulative Convertible Preferred Stock to
Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P.
(collectively, the 'Apollo Investors') in 1998 and the unexpended proceeds from
our 1997 Common Stock sales exceeding the amount of our expenditures for
satellite and launch vehicle construction, other capital expenditures and
operating expenses.
Interest expense, net of capitalized interest, was $14,272 for the year
ended December 31, 1998 and $1,946 for the year ended December 31, 1997. The
increase in net interest expense was due to interest accruing on our 15% Senior
Secured Discount Notes due 2007 issued in November 1997, in conjunction with a
low level of interest capitalized during the 1998 period.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, we had cash, cash equivalents, marketable securities
and restricted investments totaling $467,073 and working capital of $304,010
compared with cash, cash equivalents and marketable securities of approximately
$265,623 and working capital of $180,966 at December 31, 1998. These increases
reflect the proceeds from the issuance of (1) our 14 1/2% Senior Secured Notes
due 2009 and related warrants during the second quarter of 1999, (2) our 8 3/4%
Convertible Subordinated Notes
28
<PAGE>
due 2009 during the third and fourth quarters of 1999, (3) a total of 3,450,000
shares of Common Stock during the third and fourth quarters of 1999 and (4) our
9.2% Series B Junior Cumulative Convertible Preferred Stock to the Apollo
Investors during the fourth quarter of 1999 exceeding capital expenditures and
operating expenses for 1999. As part of the issuance of our 14 1/2% Senior
Secured Notes due 2009 in the second quarter of 1999, we were required to place
approximately $79,300 of U.S. government securities in a restricted account to
pay the first six interest payments on these notes. We made the first interest
payment on these 14 1/2% Senior Secured Notes due 2009 from the proceeds of our
restricted investments during the fourth quarter of 1999. As of December 31,
1999, we had restricted investments, at amortized cost, of $67,454, which will
be used to make the next five interest payments on these 14 1/2% Senior Secured
Notes due 2009.
Funding Requirements. We believe we can fund our planned operations,
including the construction of our system, into the third quarter of 2001 from
our existing working capital. In addition, we anticipate cash requirements of
approximately $120,000 to fund our operations through the first full year of
commercial operations and additional funds until our revenues grow
substantially.
To build and launch the satellites necessary to transmit Sirius Radio we
entered into the Loral Satellite Contract. The Loral Satellite Contract provides
for Loral to construct, launch and deliver, in-orbit and checked-out, three
satellites, to construct for us a fourth satellite for use as a ground spare and
to provide satellite launch services. We are committed to make aggregate
payments of approximately $745,040 under the Loral Satellite Contract, which
includes $15,000 of long-lead time parts for a fifth satellite and $3,400 for
integration analysis of the viability of using the Sea Launch platform as an
alternative launch vehicle for our satellites. As of December 31, 1999, $434,804
of this obligation had been satisfied. Under the Loral Satellite Contract, with
the exception of a payment made to Loral in March 1993, payments are made in
installments that commenced in April 1997 and will end in December 2003.
Approximately half of all the payments under the Loral Satellite Contract are
contingent upon Loral meeting specified milestones in the construction of our
satellites.
We also will require funds for working capital, interest on borrowings,
acquisition of programming, financing costs and operating expenses until some
time after the commencement of our operations. We expect our interest expense
will increase significantly when compared to our 1999 interest expense as a
result of the issuance of our 14 1/2% Senior Secured Notes due 2009 in May 1999
and our 8 3/4% Convertible Subordinated Notes due 2009 in September and October
1999; however, our 15% Senior Secured Discount Notes due 2007 will not require
cash payments of interest until June 2003. A portion of the net proceeds of our
14 1/2% Senior Secured Notes due 2009 was used to purchase a portfolio of U.S.
government securities in an amount sufficient to pay in full interest on these
notes through May 15, 2002.
The amount and timing of our actual cash requirements will depend upon
numerous factors including costs associated with the construction and deployment
of our satellite system and terrestrial repeater network, costs associated with
the design and development of chip sets and receivers, the rate of growth of our
business after commencing service, costs of financing and the possibility of
unanticipated costs. We will require additional funds if there are delays, cost
overruns, unanticipated expenses, launch failures, launch services or satellite
system change orders or any shortfalls in estimated levels of operating cash
flow.
Sources of Funding. To date, we have funded our capital needs through the
issuance of debt and equity securities. As of March 20, 2000, we had received a
total of approximately $874,000 in equity capital, as a result of the following
transactions: (1) the sale of shares of our Common Stock prior to the issuance
of our FCC license (net proceeds of approximately $22,000); (2) the sale of
5,400,000 shares of 5% Delayed Convertible Preferred Stock (net proceeds of
approximately $121,000) in April 1997 (in November 1997, we exchanged 1,846,799
shares of our 10 1/2% Series C Convertible Preferred Stock for all the
outstanding shares of 5% Delayed Convertible Preferred Stock); (3) the sale of
4,955,488 shares of our Common Stock (net proceeds of approximately $71,000) in
1997; (4) the sale of 5,000,000 shares of our Common Stock to Prime 66 Partners,
L.P. (net proceeds of approximately $98,000) in November 1998; (5) the sale of
1,350,000 shares of our 9.2% Series A Junior Cumulative Convertible Preferred
Stock to the Apollo Investors (net proceeds of approximately $129,000) in
December 1998; (6) the sale of 650,000 shares of our 9.2% Series B Junior
Cumulative Convertible Preferred Stock to the Apollo
29
<PAGE>
Investors (net proceeds of approximately $63,000) in November 1999; (7) the sale
of 3,000,000 shares of our Common Stock in an underwritten public offering (net
proceeds of approximately $68,000) in September 1999, and an additional 450,000
shares of our Common Stock in connection with the exercise of the underwriters'
over-allotment option (net proceeds of approximately $10,000) in October 1999;
(8) the sale of 2,000,000 shares of our 9.2% Series D Junior Cumulative
Convertible Preferred Stock to certain affiliates of The Blackstone Group, L.P.
(net proceeds of approximately $192,000) in February 2000; and (9) the sale of
2,290,322 shares of our Common Stock to DaimlerChrysler Corporation (net
proceeds of approximately $100,000) in February 2000.
In September 1999, we issued $125,000 aggregate principal amount of 8 3/4%
Convertible Subordinated Notes due 2009 in an underwritten public offering (net
proceeds of approximately $119,000). In October 1999, we issued an additional
$18,750 aggregate principal amount of 8 3/4% Convertible Subordinated Notes due
2009 to the underwriters of this convertible notes offering in connection with
their over-allotment option (net proceeds of approximately $18,000). In May
1999, we received net proceeds of approximately $190,000 from the issuance of
200,000 units, each consisting of $1 aggregate principal amount of 14 1/2%
Senior Secured Notes due 2009 and three warrants, each to purchase 3.792 shares
of our Common Stock as of December 31, 1999. We invested approximately $79,300
of these net proceeds in a portfolio of U.S. government securities, which we
pledged as security for the payment in full of interest on the 14 1/2% Senior
Secured Notes due 2009 through May 15, 2002. In November 1997, we received net
proceeds of $116,000 from the issuance of 12,910 units, each consisting of $20
aggregate principal amount at maturity of 15% Senior Secured Discount Notes due
2007 and a warrant to purchase additional 15% Senior Secured Discount Notes due
2007 with an aggregate principal amount at maturity of $3. All of these warrants
were exercised in 1997. The aggregate value at maturity of our 15% Senior
Secured Discount Notes due 2007 is approximately $297,000. Our 15% Senior
Secured Discount Notes due 2007 mature on December 1, 2007 and the first cash
interest payment is due in June 2003. The indentures governing our 14 1/2%
Senior Secured Notes due 2009 and our 15% Senior Secured Discount Notes due 2007
contain limitations on our ability to incur additional indebtedness and are
secured by a pledge of the stock of Satellite CD Radio Inc., our subsidiary that
holds our FCC license.
In July 1998, we entered into a term loan agreement with a group of
financial institutions pursuant to which these lenders provided us $115,000 of
term loans. The proceeds of these loans were used to fund a portion of the
progress payments required to be made by us under the Loral Satellite Contract
for the purchase of launch services and to pay interest, fees and other expenses
related to these loans. On February 29, 2000, we repaid these loans and
cancelled the related credit agreement.
Loral has deferred a total of $50,000 of the payments under the Loral
Satellite Contract originally scheduled for payment in 1999. These deferred
amounts bear interest at 10% per annum and all interest on these deferred
amounts will accrue until December 2001, at which time interest will be payable
quarterly in cash. The principal amounts of the deferred payments under the
Loral Satellite Contract are required to be paid in six installments between
June 2002 and December 2003. As collateral security for these deferred payments,
we have granted Loral a security interest in our terrestrial repeater network.
If there is a satellite or launch failure, we will be required to pay Loral the
deferred amount for the affected satellite no later than 120 days after the date
of the failure. If we elect to put one of our first three satellites into ground
storage, rather than having it shipped to the launch site, the deferred amount
for that satellite will become due within 60 days of this election.
Shares of our 9.2% Series A Junior Cumulative Convertible Preferred Stock
and 9.2% Series B Junior Cumulative Convertible Preferred Stock are convertible
into shares of our Common Stock at a price of $30.00 per share. The 9.2%
Series A Junior Cumulative Convertible Preferred Stock and 9.2% Series B Junior
Cumulative Convertible Preferred Stock are callable by us beginning
November 15, 2001 at a price of 100% if the current market price, as defined in
the Certificate of Designation of the 9.2% Series A Junior Cumulative
Convertible Preferred Stock and 9.2% Series B Junior Cumulative Convertible
Preferred Stock, of our Common Stock exceeds $60.00 per share for a period of 20
consecutive trading days, will be callable in all events beginning November 15,
2003 at a price of 100% and must be redeemed by us on November 15, 2011.
Dividends on our 9.2% Series A Junior Cumulative Convertible Preferred Stock and
9.2% Series B Junior Cumulative Convertible Preferred
30
<PAGE>
Stock are payable in kind or in cash annually, at our option. Holders of our
9.2% Series A Junior Cumulative Convertible Preferred Stock and 9.2% Series B
Junior Cumulative Convertible Preferred Stock have the right to vote, on an
as-converted basis, on matters in which the holders of our Common Stock have the
right to vote.
Shares of our 9.2% Series D Junior Cumulative Convertible Preferred Stock
are convertible into shares of our Common Stock at a price of $34.00 per share.
The 9.2% Series D Junior Cumulative Convertible Preferred Stock is callable by
us beginning December 23, 2002 at a price of 100% if the market price, as
defined in the Certificate of Designation of the 9.2% Series D Junior Cumulative
Convertible Preferred Stock, of our Common Stock exceeds $68.00 per share for a
period of 20 consecutive trading days, will be callable in all events beginning
December 23, 2004 at a price of 100% and must be redeemed by us on November 15,
2011. Dividends on our 9.2% Series D Junior Cumulative Convertible Preferred
Stock are payable in kind or in cash annually, at our option. Holders of our
9.2% Series D Junior Cumulative Convertible Preferred Stock have the right to
vote, on an as-converted basis, on matters in which the holders of Common Stock
have the right to vote.
On March 3, 2000, we notified the holders of our 10 1/2% Series C
Convertible Preferred Stock and the holders of all outstanding warrants to
purchase shares of such 10 1/2% Series C Convertible Preferred Stock that on
April 12, 2000 we would redeem these securities. As of March 1, 2000, 1,200,627
shares of our 10 1/2% Series C Convertible Preferred Stock and warrants to
purchase up to 81,772 shares of 10 1/2% Series C Convertible Preferred Stock
were outstanding. On April 12, 2000, each outstanding share of 10 1/2% Series C
Convertible Preferred Stock will be redeemed for $100.00 (plus accrued and
unpaid dividends) and each outstanding warrant to purchase a share of 10 1/2%
Series C Convertible Preferred Stock will be redeemed for $35.34. The right of
holders of 10 1/2% Series C Convertible Preferred Stock to convert their shares
into shares of Common Stock (at a ratio of approximately 5.56 shares of Common
Stock for each share of 10 1/2% Series C Convertible Preferred Stock), or of
holders of warrants to purchase shares of 10 1/2% Series C Convertible Preferred
Stock, and to convert such 10 1/2% Series C Convertible Preferred Stock into
shares of Common Stock, will expire at 5:00 p.m., New York City time, on
April 11, 2000. Based on the closing sale price of the Common Stock on
March 21, 2000 of $51 1/16, a holder who converts his or her 10 1/2% Series C
Convertible Preferred Stock will receive Common Stock worth approximately
$283.68 (plus accrued and unpaid dividends). We anticipate that most holders
will convert their 10 1/2% Series C Convertible Preferred Stock into Common
Stock prior to April 12, 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements contained in Item 14 herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
31
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information regarding our directors and executive officers is
provided below.
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
---- --- --------------------------
<S> <C> <C>
David Margolese...................... 42 Chairman of the Board and Chief Executive Officer
Robert D. Briskman................... 67 Executive Vice President, Engineering, and
Director
Ira H. Bahr.......................... 37 Senior Vice President, Marketing, Alliances &
Communications
Joseph S. Capobianco................. 50 Senior Vice President, Content
Patrick L. Donnelly.................. 38 Senior Vice President, General Counsel & Secretary
Lawrence F. Gilberti(1)(2)........... 49 Director
Joseph V. Vittoria(1)(2)............. 64 Director
Ralph V. Whitworth(1)(2)............. 44 Director
</TABLE>
- ---------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
DAVID MARGOLESE has served as Chairman of the Board and Chief Executive
Officer since August 1993, and as a director since August 1991. Prior to his
involvement with Sirius Radio, Mr. Margolese proposed and co-founded Cantel
Inc., Canada's national cellular telephone carrier, which was acquired by Roger
Communications Inc. in 1989, and Canadian Telecom Inc., a radio paging company,
serving as that company's president until the company's sale in 1987.
ROBERT D. BRISKMAN is Sirius Radio's co-founder and has served as Executive
Vice President, Engineering, and as a director since October 1991. Before 1986,
during his twenty-two year career at Communications Satellite Corporation, a
satellite communications company, he was responsible for the engineering and
implementation of numerous major satellite systems, including ITALSAT, ARABSAT
and CHINASAT. Mr. Briskman was one of the early engineers hired at NASA in 1959,
and received the APOLLO Achievement Award for the design and implementation of
the Unified S-Band System. He is past chairman of the IEEE Standards Board, past
president of the Aerospace and Electronics Systems Society and served on the
industry advisory council to NASA. He is the Telecommunications Editor of McGraw
Hill's Encyclopedia of Science and Technology and is a recipient of the IEEE
Centennial Medal.
IRA H. BAHR has served as Senior Vice President, Marketing, Alliances &
Communications, since October 1998. From June 1998 to October 1998, Mr. Bahr was
Vice President, Marketing. Previously, Mr. Bahr held senior management positions
at BBDO New York, a worldwide advertising agency. From 1992 through 1998, Mr.
Bahr was Senior Vice President and Worldwide Account Director in charge of the
agency's relationship with Federal Express. In that role, he planned, managed
and executed FedEx advertising and promotional programs around the world and
worked closely with FedEx executive management in developing long term business
and branding strategies.
JOSEPH S. CAPOBIANCO has served as Senior Vice President, Content, since
April 1997. From 1981 to April 1997, he was an independent consultant providing
programming, production, marketing and strategic planning consulting services to
media and entertainment companies, including Home Box Office, a cable television
service and a subsidiary of Time Warner Entertainment Company, L.P., and ABC
Radio. From May 1990 to February 1995, he served as Vice President of
Programming at Music Choice, which operates a 40-channel music service available
to subscribers to DIRECTV, and is partially owned by Warner Music Group Inc.,
Sony Entertainment Inc. and EMI.
PATRICK L. DONNELLY has served as Senior Vice President, General Counsel &
Secretary since May 1998. From June 1997 to May 1998, he was Vice President and
Deputy General Counsel of ITT Corporation, a hotel, gaming and entertainment
company that was acquired by Starwood Hotels &
32
<PAGE>
Resorts Worldwide, Inc. in February 1998. From October 1995 to June 1997, he was
Assistant General Counsel of ITT Corporation. Prior to October 1995, Mr.
Donnelly was an associate at the law firm of Simpson Thacher & Bartlett.
LAWRENCE F. GILBERTI has been a director of Sirius Radio since September
1993 and served as our Secretary from November 1992 until May 1998. Since
December 1992, he has been the Secretary and sole director, and from December
1992 to September 1994 was the President, of Satellite CD Radio, Inc., our
subsidiary which holds our FCC license. Mr. Gilberti is of counsel to the law
firm of Reed Smith Shaw & McClay LLP and has provided legal services to Sirius
Radio since 1992. From August 1994 to May 1998, Mr. Gilberti was a partner in
the law firm of Fischbein Badillo Wagner & Harding. Mr. Gilberti is a member of
the Audit and Compensation Committees of our Board of Directors.
JOSEPH V. VITTORIA has been a director of Sirius Radio since April 1998.
Since 1997, Mr. Vittoria has served as Chairman and Chief Executive Officer of
Travel Services International, Inc., a travel services distributor, and as a
member of the Board of Overseers of Columbia Business School. From September
1987 to February 1997, Mr. Vittoria was the Chairman and Chief Executive Officer
of Avis Inc., one of the world's largest rental car companies, and served as its
President and Chief Operating Officer during the prior five years. During that
time, Mr. Vittoria was responsible for creating the Avis Employee Stock
Ownership Plan and for the sale of Avis to HFS Incorporated in 1996. Mr.
Vittoria is a member of the Audit and Compensation Committees of our Board of
Directors.
RALPH V. WHITWORTH has been a director of Sirius Radio since March 1994. Mr.
Whitworth has been a principal and managing member at Relational Investors LLC,
a private investment company, since March 1996, and a partner in Batchelder &
Partners, Inc., a financial advisory firm, since January 1997. Since April 1998,
he has also been Chairman of Apria Healthcare Group, Inc., a home-health
company. From August to November 1999, he was Chairman of Waste Management,
Inc., a provider of integrated waste management services. From August 1988 to
December 1996, he was President of Whitworth and Associates, a Washington,
D.C.-based consulting firm. Mr. Whitworth is also a director of Mattel, Inc.,
Waste Management, Inc. and Tektronix, Inc. Mr. Whitworth is a member of the
Audit and Compensation Committees of our Board of Directors.
ITEM 11. EXECUTIVE COMPENSATION
The table below shows the compensation for the last three years for our
Chairman of the Board and Chief Executive Officer and the four next highest paid
executive officers at the end of 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
---------------- ------------
NUMBER OF
SECURITIES
UNDERLYING ALL OTHER
SALARY BONUS OPTIONS COMPENSATION(1)
NAME AND PRINCIPAL POSITION YEAR $ $ # $
- --------------------------- ---- ------- ------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
David Margolese ............................ 1999 450,000 -- 2,500,000 10,000
Chairman of the Board and Chief 1998 400,000 -- -- 10,000
Executive Officer 1997 268,714 -- -- --
Robert D. Briskman ......................... 1999 280,000 40,000(2) 150,000 10,000
Executive Vice President, Engineering 1998 260,000 25,000(2) 57,500 10,000
1997 234,583 -- 30,000 --
Ira H. Bahr(3) ............................. 1999 234,167 -- 275,000 10,000
Senior Vice President, Marketing, 1998 103,183 -- 100,000 6,425
Alliances & Communications 1997 -- -- -- --
Joseph S. Capobianco ....................... 1999 241,667 -- 100,000 10,000
Senior Vice President, Content 1998 218,125 -- 25,000 9,200
1997 141,667 -- 75,000 --
Patrick L. Donnelly(4) ..................... 1999 277,500 -- 215,000 10,000
Senior Vice President, General Counsel 1998 162,500 -- 110,000 --
& Secretary 1997 -- -- -- --
</TABLE>
(footnotes on next page)
33
<PAGE>
(footnotes from previous page)
(1) Represents matching contributions by us under the Sirius Satellite Radio
Inc. 401(k) Savings Plan (the '401(k) Plan'). These amounts were paid in the
form of our Common Stock.
(2) Amount represents bonus award for obtaining patents.
(3) Mr. Bahr became an executive officer in October 1998.
(4) Mr. Donnelly became an executive officer in May 1998.
-------------------
The following table sets forth certain information for the fiscal year ended
December 31, 1999, with respect to options granted to individuals named in the
summary compensation table above.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATE
OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
------------------------------------------------------------------ ---------------------------
PERCENT OF
NUMBER OF SECURITIES TOTAL OPTIONS
UNDERLYING OPTIONS GRANTED TO
GRANTED EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME (#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
---- -------------------- ------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
David Margolese................ 1,800,000 55.0% 31.25 1/1/09 35,375,323 89,648,013
700,000 30.50 12/17/09 13,426,900 34,026,402
Robert D. Briskman............. 60,000 3.3% 23.75 3/26/09 896,175 2,271,083
90,000 30.50 12/17/09 1,726,316 4,374,823
Ira H. Bahr.................... 100,000 6.0% 23.75 3/26/09 1,493,625 3,785,138
50,000 29.125 6/22/09 915,828 2,320,887
125,000 30.50 12/17/09 2,397,661 6,076,143
Joseph S. Capobianco........... 40,000 2.2% 23.75 3/26/09 597,450 1,514,055
60,000 30.50 12/17/09 1,150,877 2,916,549
Patrick L. Donnelly............ 90,000 4.7% 23.75 3/26/09 1,344,262 3,406,625
125,000 30.50 12/17/09 2,397,661 6,076,143
</TABLE>
The following table sets forth certain information with respect to the
number of shares covered by both exercisable and unexercisable stock options
held by the individuals named in the summary compensation table above as of
December 31, 1999. Also reported are the values for 'in-the-money' stock options
that represent the positive spread between the respective exercise prices of
outstanding stock options and the fair market value of our Common Stock as of
December 31, 1999 ($44.50 share).
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) (#) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David Margolese.......... 0 0 1,540,000 1,660,000 37,355,000 22,520,000
Robert D. Briskman....... 0 0 220,000 180,000 8,745,000 3,405,000
Ira H. Bahr.............. 0 0 25,000 350,000 449,375 5,941,875
Joseph S. Capobianco..... 0 0 42,500 157,500 1,320,000 3,403,125
Patrick L. Donnelly...... 0 0 35,000 290,000 385,000 4,442,500
</TABLE>
EMPLOYMENT AGREEMENTS
We are a party to employment agreements with Messrs. Margolese, Briskman,
Bahr, Capobianco and Donnelly (the 'Employment Agreements').
34
<PAGE>
MR. MARGOLESE
Effective January 1, 1999, we entered into an agreement to employ David
Margolese as our Chairman and Chief Executive Officer for a term of five years.
The employment agreement provides for an annual based salary of $450,000 in 1999
and increases of $50,000 for each year thereafter. If Mr. Margolese is
terminated without 'Cause' or resigns for 'Good Reason' (each as defined in the
Employment Agreement), we are obligated to pay Mr. Margolese the sum of
$5,000,000. If following the occurrence of a 'Change of Control' (as defined in
the Employment Agreement), Mr. Margolese is terminated for any reason (including
resignation by Mr. Margolese for Good Reason), we are obligated to pay to Mr.
Margolese the sum of $8,000,000 plus an amount equal to any excise taxes Mr.
Margolese is required to pay solely as a result of the acceleration of the
vesting of options and such additional amounts as are necessary to place Mr.
Margolese in the same financial position he would have been in if such excise
taxes were not imposed. Under the terms of the Employment Agreement, Mr.
Margolese may not disclose any of our proprietary information or during his
employment with us and for two years thereafter, engage in any business
involving the transmission of radio entertainment programming in North America.
MR. BRISKMAN
Effective December 31, 1999, we entered into an agreement to employ Robert
D. Briskman as Executive Vice President, Engineering, until his retirement in
February 2001. Pursuant to this agreement, we pay Mr. Briskman an annualized
base salary of $310,000. If Mr. Briskman's employment is terminated for any
reason, other than 'Cause' (as defined in the Employment Agreement), we are
obligated to pay to Mr. Briskman a sum equal to 50% of his then annual salary.
Under this agreement, Mr. Briskman may not disclose any of our proprietary
information during his employment with us or, for two years following the
termination of his employment or, in the event he has been terminated without
'Cause' or has resigned for 'Good Reason' (each as defined in the Employment
Agreement), for one year following such termination without Cause or resignation
for Good Reason, enter into the employment of, render services to, or otherwise
assist, any person or entity engaged in any operations in North America
involving the transmission of radio entertainment programming in competition
with us or that competes, or is likely to compete, with any other aspect of our
business as conducted on the date his employment terminates. Under the terms of
this agreement, we have also agreed to provide Mr. Briskman and his wife medical
insurance, on the same terms as they are receiving such insurance on the date of
Mr. Briskman's retirement, for the rest of their lives.
Upon Mr. Briskman's retirement from Sirius Radio in February 2001, we will
enter into a three year consulting agreement with Mr. Briskman. Under this
consulting agreement, Mr. Briskman will be paid a consulting fee of $10,000 per
month.
MESSRS. BAHR, CAPOBIANCO AND DONNELLY
On March 28, 2000, we entered into employment agreements with Ira H. Bahr to
serve as Senior Vice President, Marketing, Alliances & Communications, Joseph S.
Capobianco to serve as Senior Vice President, Content, and Patrick L. Donnelly
to serve as Senior Vice President, General Counsel and Secretary. The agreement
with Mr. Capobianco replaces an existing employment agreement expiring on
April 16, 2000; and the agreement with Mr. Donnelly replaces an existing
employment agreement expiring on May 18, 2001. Each of these employment
agreements has a term of three years.
Pursuant to these employment agreements, we pay Mr. Bahr an annualized base
salary of $290,000, Mr. Capobianco an annualized base salary of $275,000 and Mr.
Donnelly an annualized base salary of $290,000. These base salaries are subject
to increase from time to time by the Board of Directors.
Pursuant to these agreements, if the executive's employment is terminated,
except by us for 'Cause' (as defined in the Employment Agreements) or by the
executive voluntarily, we are obligated to pay him an amount equal to the sum of
his annual salary and the annual bonus last paid to him. Under these agreements,
none of Mr. Bahr, Mr. Capobianco and Mr. Donnelly may disclose any of our
proprietary information or, for two years following the termination of his
employment (or, in the event he has been terminated without Cause or has
resigned for 'Good Reason' (as defined in the
35
<PAGE>
Employment Agreements), for one year following such termination without Cause or
resignation for 'Good Reason') enter into the employment of, render services to,
or otherwise assist, certain of our competitors.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the 'Committee') is
comprised solely of directors who are not current or former employees of the
Company. The Committee is responsible for overseeing and administering our
executive compensation programs. The Committee reviews, monitors and approves
executive compensation, establishes compensation guidelines for corporate
officers and administers our stock option plans.
COMPENSATION PHILOSOPHY
Our compensation philosophy is premised upon the belief that our employees
are Sirius Radio's most valuable asset. Our executive officers are charged with
directing our strategic planning, managing the growth of our organization,
overseeing the completion of our infrastructure and have overall responsibility
for our results. We have planned and implemented a compensation structure
intended to attract and retain highly talented individuals, energize and reward
the creativity of our executive officers in achieving our stated milestones, and
provide incentives to executive officers to execute our objectives and enhance
stockholder value by achieving short and long term business objectives.
COMPENSATION PROGRAM
Our compensation program has to date consisted of base salary and long term
incentive compensation comprised exclusively of the stock options under our
stock option plans.
BASE SALARIES
The base salaries paid to each of our executive officers during 1999 (with
the exception of Ira H. Bahr) were paid pursuant to written employment
agreements described above. The Committee reviews and considers base salary
adjustments for each of our executive officers annually based on recommendations
from management and considerations relating to the respective officers'
individual performances, the responsibilities of their positions and their
competitive positions vis-a-vis executives of other high performing companies.
During 1999, at the recommendation of our Chief Executive Officer, Mr.
Briskman's annual salary was increased from $280,000 to $310,000, Mr.
Capobianco's annual salary was increased from $230,000 to $250,000, Mr.
Donnelly's annual salary was increased from $260,000 to $290,000 and Mr. Bahr's
salary was increased from $225,000 to $280,000. Mr. Bahr's salary increase was
awarded, in part, to reflect Mr. Bahr's significant contributions during 1999 in
planning and executing alliances with our receiver and automobile partners.
Salary increases during fiscal year 1999 were based upon these criteria.
However, except as to the compensation reflected in the Employment Agreement
entered into by us and David Margolese as of January 1, 1999, we have not sought
to position executive compensation within any particular range as compared to
any stated peer group.
LONG-TERM INCENTIVES
We provide long-term incentives through stock options granted to our
executive officers under our stock option plans. The Committee believes that the
potential for stock ownership by executives and other employees is the most
effective method by which the interests of management may be aligned with those
of other Sirius Radio stockholders. The options granted typically vest over four
years, have a term of ten years and have an exercise price equal to the fair
market value of our Common Stock on the grant date.
In March 1999, the Committee awarded Mr. Briskman 60,000 stock options, Mr.
Bahr 100,000 stock options, Mr. Capobianco 40,000 stock options and Mr. Donnelly
90,000 stock options. These options have a ten year term and an exercise price
of $23.75. In June 1999, the Committee awarded Mr. Bahr an
36
<PAGE>
additional 50,000 stock options. These options have a ten year term and an
exercise price of $29.125. In December 1999, the Committee awarded Mr. Briskman
an additional 90,000 stock options, Mr. Bahr an additional 125,000 stock
options, Mr. Capobianco an additional 60,000 stock options and Mr. Donnelly an
additional 125,000 stock options. These options have a ten year term and an
exercise price of $30.50 per share. The number of options granted by the
Committee to each executive officer during 1999 was based upon such criteria as
anticipated achievement, responsibilities, performance, experience and future
potential, as well as an awareness of the financial incentives required to
retain the quality of executive management essential to the attainment of our
strategic and financial objectives.
The Committee has authorized executive management to grant stock options to
employees below the executive officer level on an annual basis according to
performance guidelines intended to be competitive with comparable companies and
to reward individual achievement appropriately. The executive officers do not
receive annual stock options grants under this program.
ANNUAL BONUS/SHORT-TERM INCENTIVES
As of December 31, 1999, we have not implemented any plan or program of
annual cash bonuses or other similar short-term incentive awards for our
executive officers, other than the awarding of certain cash bonuses to our
employees upon the receipt of patent grants.
COMPENSATION OF OUR CHAIRMAN AND CHIEF EXECUTIVE OFFICER
In 1998, the Committee negotiated, and we entered into, a new employment
agreement with David Margolese, our Chairman and Chief Executive Officer,
effective January 1, 1999. (Mr. Margolese's prior employment agreement expired
on December 31, 1998.) The specific terms of this agreement are set forth and
described in detail above. During 1998, the Committee engaged independent
compensation consultants to assist it in the process of determining appropriate
compensation for Mr. Margolese. These consultants identified for the Committee
peer companies within the telecommunications and technologies industries whose
compensation arrangements with their respective CEO's served as comparative
compensation standards against which the Committee measured the compensation
package (comprised of annual base salary and stock options) agreed to with Mr.
Margolese. Mr. Margolese's base salary structure under this employment agreement
includes annual increases of $50,000 per year, commencing with a base salary of
$450,000 in 1999 and increasing $50,000 per year over the five year term of the
agreement. This stepped program of annual base salary increases fell within the
median parameter of the peer group data provided by the consultants.
In December 1999, the Committee awarded Mr. Margolese an additional 700,000
stock options. The Committee awarded Mr. Margolese these options after
evaluating his performance in achieving our goals and objectives to date, the
level of his management responsibilities and Mr. Margolese's clear importance to
our future success. The Committee conditioned the grant of these options upon us
executing an agreement with either DaimlerChrysler or BMW for the installation
in their vehicles of receivers capable of receiving our service. This condition
was satisfied on January 4, 2000, when we executed an agreement with BMW.
POLICY WITH RESPECT TO INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
'Code'), places a $1 million per person limitation on the tax deduction we may
take for compensation paid to our Chief Executive Officer and our four other
highest paid executive officers, except that compensation constituting
performance-based compensation, as defined by the Code, is not subject to the $1
million limit. The Committee generally intends to grant awards under our stock
option plans consistent with the terms of Section 162(m) so that such awards
will not be subject to the $1 million limit. In other respects, the Committee
expects to take actions in the future that may be necessary to preserve the
deductibility of executive compensation to the extent reasonably practicable and
consistent with other objectives of our compensation program. However, the
Committee reserves the discretion to pay compensation that does not qualify for
exemption under Section 162(m) where the Committee believes such action to be in
our best interest. The Committee believes that the compensation terms of Mr.
Margolese's employment
37
<PAGE>
agreement which would take effect upon his termination without 'Cause' or his
resignation for 'Good Reason' will qualify as a tax-deductible expense under
Section 162(m). The terms of such agreement which would take effect on a 'Change
of Control' will result in compensation exceeding the deductibility limit.
SUMMARY
The Committee believes that our compensation programs are well structured to
encourage attainment of objectives and foster a stockholder perspective in
management through the potential for employee stock ownership. The Committee
believes, further, that the stock option awards made in 1999 were competitive,
appropriate and in our stockholders long-term interests.
Compensation Committee
Ralph V. Whitworth, Chairman
Lawrence F. Gilberti
Joseph V. Vittoria
38
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below shows, as of February 29, 2000, each person we know to be a
beneficial owner of more than 5% of our Common Stock. In general, 'beneficial
ownership' includes those shares a person has the power to vote or transfer, and
options to acquire our Common Stock that are exercisable currently or become
exercisable within 60 days. Except as otherwise noted, the persons named in the
table below have sole voting and investment power with respect to all shares
shown as beneficially owned by them.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAMES AND ADDRESS OF BENEFICIALLY
BENEFICIAL OWNER OWNED PERCENT OF CLASS
------------------- ----- ----------------
<S> <C> <C>
Apollo Investment Fund IV, L.P.(1) 7,055,587 18.0
Apollo Overseas Partners IV, L.P.
Two Manhattanville Road
Purchase, New York 10577
David Margolese(2) ......................................... 5,955,505 17.4
1221 Avenue of the Americas
New York, New York 10020
Prime 66 Partners, L.P.(3) ................................. 5,160,075 16.0
201 Main Street, Suite 3200
Forth Worth, Texas 76102
Blackstone Management Associates III L.L.C.(4) ............. 5,882,353 15.4
345 Park Avenue
New York, New York 10154
Everest Capital Master Fund, L.P.(5)(6) .................... 4,326,567 11.8
Everest Capital Limited
c/o Morgan Stanley & Co. Incorporated
One Pierpont Plaza
10th Floor
Brooklyn, New York 11201
Darlene Friedland(7) ....................................... 2,334,500 7.2
1210 Wolseley Road
Point Piper 2027
Sydney, Australia
DaimlerChrysler Corporation(8) ............................. 2,290,322 7.1
1000 Chrysler Drive
Auburn Hills, Michigan 48326
Loral Space & Communications Ltd.(9) ....................... 1,905,488 5.9
600 Third Avenue
New York, New York 10016
</TABLE>
- ---------
(1) Represents 1,461,270 shares of 9.2% Series A Junior Cumulative Convertible
Preferred Stock and 655,406 shares of 9.2% Series B Junior Cumulative
Convertible Preferred Stock which entitle the holder to vote as if the
shares had been converted to Common Stock. Each share of 9.2% Series A
Junior Cumulative Convertible Preferred Stock and 9.2% Series B Junior
Cumulative Convertible Preferred Stock is entitled to three and one-third
votes per share.
(2) Includes 2,020,000 shares issuable pursuant to stock options that are
exercisable within 60 days and 1,005 vested shares acquired under the 401(k)
Plan as of February 29, 2000. Pursuant to a voting trust agreement ('Voting
Trust Agreement') entered into by Darlene Friedland, as grantor, David
Margolese, as trustee, and Sirius Radio, until November 20, 2002, Mr.
Margolese has the power to vote in his discretion all shares of Common Stock
owned or hereafter acquired by Darlene Friedland and certain of her
affiliates (2,334,500 shares as of February 29, 2000). See 'Voting Trust
Agreement'.
(3) This information is based upon the Schedule 13D dated September 29, 1999
filed by Prime 66 Partners, L.P. with the Securities and Exchange
Commission.
(4) Represents 2,000,000 shares of 9.2% Series D Junior Cumulative Convertible
Preferred Stock which entitle the holder to vote as if the shares had been
converted to Common Stock. Each share of 9.2%
(footnotes continued on next page)
39
<PAGE>
(footnotes continued from previous page)
Series D Junior Cumulative Convertible Preferred Stock is entitled to 2.9412
votes per share. This information is based upon the Schedule 13D dated
January 31, 2000 filed by Blackstone Management Associates III L.L.C. with
the Securities and Exchange Commission.
(5) Represents 57,711 shares of Common Stock, shares of Common Stock issuable
upon conversion of 442,546 shares of 10 1/2% Series C Convertible Preferred
Stock and $2 million in aggregate principal amount of our 8 3/4% Convertible
Subordinated Notes due 2009. This information is based upon the Form 4 filed
November 30, 1999 by Everest Capital Limited with the Securities and
Exchange Commission. On March 3, 2000, we called for redemption all shares
of our 10 1/2% Series C Convertible Preferred Stock and on March 10, 2000
Everest Capital converted its shares of 10 1/2% Series C Convertible
Preferred Stock into 2,666,717 shares of our Common Stock.
(6) Includes shares of Common Stock issuable pursuant to warrants to purchase
1,740,000 shares of Common Stock at a purchase price of $50 per share. These
warrants are exercisable from June 15, 1998 through and including June 15,
2005.
(7) Pursuant to the Voting Trust Agreement, until November 20, 2002, David
Margolese has the power to vote in his discretion all shares of Common Stock
owned or hereafter acquired by Darlene Friedland and certain of her
affiliates (2,334,500 shares as of February 29, 2000).
(8) This information is based upon the Schedule 13D dated February 2, 2000 filed
by DaimlerChrysler Corporation with the Securities and Exchange Commission.
(9) This information is based upon the Schedule 13D dated August 14, 1997 filed
by Loral Space & Communications Ltd. with the Securities and Exchange
Commission.
-------------------
The following table shows the number of shares of our Common Stock held by
each director, our Chief Executive Officer and the four other most highly
compensated executive officers on February 29, 2000. The table also shows stock
held by all of our directors and executive officers as a group on February 29,
2000.
<TABLE>
<CAPTION>
NAME OF NUMBER OF SHARES ACQUIRABLE WITHIN
BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENT OF CLASS 60 DAYS
---------------- --------------------- ---------------- -------
<S> <C> <C> <C>
David Margolese(2)......................... 5,955,505 17.4% 2,020,000
Robert D. Briskman......................... 220,855 * 220,000
Lawrence F. Gilberti....................... 55,000 * 55,000
Joseph V. Vittoria......................... 45,000 * 45,000
Ralph V. Whitworth......................... 55,000 * 55,000
Ira H. Bahr................................ 47,240 * 45,000
Joseph S. Capobianco....................... 75,754 * 75,000
Patrick L. Donnelly........................ 50,136 * 50,000
All directors and executive officers as a
group (8 persons)(3)..................... 6,504,520 18.7% 2,565,000
</TABLE>
- ---------
* Less than 1% of our outstanding shares of Common Stock.
(1) These amounts include shares which the individuals named hold and share they
have a right to acquire within the next 60 days as shown in the last column
through the exercise of stock options. Also included in the table are the
number of shares acquired under the 401(k) Plan as of February 29, 2000 for
the accounts of: Mr. Margolese -- 1,005 shares; Mr. Briskman -- 885 shares;
Mr. Bahr -- 240 shares; Mr. Capobianco -- 754 shares; and
Mr. Donnelly -- 136 shares.
(2) Pursuant to the Voting Trust Agreement, until November 20, 2002, David
Margolese, as trustee, has the power to vote in his discretion all shares of
Common Stock owned or hereafter acquired by Darlene Friedland and certain of
her affiliates (2,334,500 shares as of February 29, 2000).
(3) Does not include 2,140,000 shares issuable pursuant to stock options that
are not exercisable within 60 days.
40
<PAGE>
VOTING TRUST AGREEMENT
We are a party to a voting trust agreement dated August 26, 1997 by and
among Darlene Friedland, as grantor, David Margolese, as voting trustee, and us.
The following summary description of the Voting Trust Agreement does not purport
to be complete and is qualified in its entirety by reference to the complete
text thereof.
The Voting Trust Agreement provides for the establishment of a trust (the
'Trust') into which (i) there has been deposited all of the shares of Common
Stock owned by Mrs. Friedland on August 26, 1997 and (ii) there shall be
deposited any shares of Common Stock acquired by Mrs. Friedland, her spouse
Robert Friedland, any member of either of their immediate families or any entity
directly or indirectly controlled by Mrs. Friedland, her spouse or any member of
their immediate families (the 'Friedland Affiliates') between the date shares
are initially deposited and the termination of the Trust. The Voting Trust will
terminate on November 20, 2002.
The Voting Trust Agreement does not restrict the ability of Mrs. Friedland
or any of the Friedland Affiliates to sell, assign, transfer or pledge any of
the shares deposited into the Trust, nor does it prohibit Mrs. Friedland or the
Friedland Affiliates from purchasing additional shares of our Common Stock,
provided those shares become subject to the Trust.
Under the Voting Trust Agreement, the trustee has the power to vote shares
held in the Trust in relation to any matter upon which the holders of such stock
would have a right to vote, including without limitation the election of
directors. For so long as David Margolese remains trustee of the Trust, he may
exercise such voting rights in his discretion. Any successor trustee or trustees
of the Trust must vote as follows:
on the election of directors, the trustee(s) must vote the entire number of
shares held by the Trust, with the number of shares voted for each director
(or nominee for director) determined by multiplying the total number of
votes held by the Trust by a fraction, the numerator of which is the number
of votes cast for such person by other stockholders of the Company and the
denominator of which is the sum of the total number of votes represented by
all shares casting any votes in the election of directors;
if the matter under Delaware law or our Certificate of Incorporation or our
Bylaws requires at least an absolute majority of all outstanding shares of
Common Stock in order to be approved, the trustee(s) must vote all of the
shares in the Trust in the same manner as the majority of all votes that
are cast for or against the matter by all other stockholders of the
Company; and
on all other matters, including, without limitation, any amendment of the
Voting Trust Agreement for which a stockholder vote is required, the
trustee(s) must vote all of the shares in the Trust for or against the
matter in the same manner as all votes that are cast for or against the
matter by all other stockholders of the Company.
The Voting Trust Agreement may not be amended without our prior written
consent, acting by unanimous vote of the Board of Directors, and approval of our
stockholders, acting by the affirmative vote of two-thirds of the total voting
power of the Company, except in certain limited circumstances where amendments
to the Voting Trust Agreement are required to comply with applicable law.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Gilberti, a director, is of counsel to the law firm of Reed Smith Shaw &
McClay LLP and has provided legal services to us since 1992.
Pursuant to an agreement dated October 21, 1992 (the 'Batchelder
Agreement'), we retained the services of Batchelder & Partners, Inc.
('Batchelder') to provide certain financial consulting services. The Batchelder
Agreement was terminated on November 30, 1997; however, the parties agreed that
the termination would not affect our obligations with respect to financing
transactions entered prior to November 30, 1999. In January 1997, Mr. Whitworth
became a partner in Batchelder. In the fiscal year ended December 31, 1999, Mr.
Whitworth, as a partner in Batchelder, received approximately $885,000 from the
total fees received by Batchelder from us. On December 29, 1997, Mr. Whitworth
received, pursuant to options given Batchelder, an option to purchase 17,800
shares of our Common Stock at an exercise price of $6.25. On February 2, 2000,
Mr. Whitworth exercised this option and sold the Common Stock received upon
exercise of the option.
41
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statement, Financial Statement Schedules and Exhibits
(1) Financial Statements
See index to financial statements appearing on page F-1.
(2) Financial Statement Schedules
None. All schedules have been included in the Consolidated Financial
Statements or Notes thereto.
(3) Exhibits
See Exhibit Index appearing on pages E-1 through E-4 for a list of
exhibits filed or incorporated by reference as part of this Annual
Report on Form 10-K.
(b) Reports on Form 8-K
On October 1, 1999, we filed a Current Report on Form 8-K to file
certain exhibits relating to our offering of 3,000,000 shares of Common
Stock and our offering of $125,000,000 aggregate principal amount of 8 3/4%
Convertible Subordinated Notes due 2009, which securities were registered
under the Securities Act of 1933 on Form S-3 (Registration No. 333-86003).
On December 28, 1999, we filed a Current Report on Form 8-K announcing
that we had entered into a Stock Purchase Agreement with Blackstone Capital
Partners III Merchant Banking Fund L.P. ('Blackstone') pursuant to which we
agreed to sell 2,000,000 shares of our 9.2% Series D Junior Cumulative
Convertible Preferred Stock to Blackstone for an aggregate purchase price of
$200 million.
As of the date of the filing of this Annual Report on Form 10-K, no proxy
materials have been furnished to security holders. Copies of all proxy materials
will be furnished to the Securities and Exchange Commission in compliance with
its rules.
42
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on this 30th day of
March, 2000.
SIRIUS SATELLITE RADIO INC.
By: /S/ EDWARD WEBER, JR.
..................................
EDWARD WEBER, JR.
VICE PRESIDENT AND CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DAVID MARGOLESE Chairman of the Board and Chief March 30, 2000
......................................... Executive Officer (Principal
(DAVID MARGOLESE) Executive Officer and Principal
Financial Officer)
/s/ EDWARD WEBER, JR. Vice President and Controller March 30, 2000
......................................... (Principal Accounting Officer)
(EDWARD WEBER, JR.)
/s/ ROBERT D. BRISKMAN Director and Executive Vice March 30, 2000
......................................... President, Engineering
(ROBERT D. BRISKMAN)
/s/ LAWRENCE F. GILBERTI Director March 30, 2000
.........................................
(LAWRENCE F. GILBERTI)
/s/ JOSEPH V. VITTORIA Director March 30, 2000
.........................................
(JOSEPH V. VITTORIA)
/s/ RALPH V. WHITWORTH Director March 30, 2000
.........................................
(RALPH V. WHITWORTH)
</TABLE>
43
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Statements of Operations for each of the three
years in the period ended December 31, 1999 and for the
period May 17, 1990 (date of inception) to December 31,
1999...................................................... F-3
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-4
Consolidated Statements of Stockholders' Equity for each of
the three years in the period ended December 31, 1999 and
for the period May 17, 1990 (date of inception) to
December 31, 1999......................................... F-5
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 1999 and for the
period May 17, 1990 (date of inception) to December 31,
1999...................................................... F-8
Notes to Consolidated Financial Statements.................. F-9
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Sirius Satellite Radio Inc.:
We have audited the accompanying consolidated balance sheets of Sirius
Satellite Radio Inc. (a Delaware corporation in the development stage) and
subsidiary as of December 31, 1998 and 1999, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1999 and for the period from May
17, 1990 (date of inception) to December 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sirius Satellite Radio Inc.
and subsidiary, as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 and for the period from May 17, 1990 (date of inception) to
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
ARTHUR ANDERSEN LLP
New York, New York
March 21, 2000
F-2
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CUMULATIVE FOR
THE PERIOD
MAY 17, 1990
FOR THE YEARS ENDED DECEMBER 31, (DATE OF INCEPTION)
--------------------------------- TO DECEMBER 31,
1997 1998 1999 1999
--------- --------- --------- -------------------
<S> <C> <C> <C> <C>
Revenue....................................... $ -- $ -- $ -- $ --
Operating expenses:
Engineering design & development.......... (776) (2,150) (33,134) (39,550)
General and administrative................ (6,089) (11,247) (30,384) (60,928)
Special charges........................... -- (25,682) -- (27,682)
-------- -------- -------- ---------
Total operating expenses.............. (6,865) (39,079) (63,518) (128,160)
-------- -------- -------- ---------
Other income (expense):
Interest and investment income............ 4,074 7,250 17,502 29,154
Interest expense.......................... (1,946) (14,272) (16,806) (33,190)
-------- -------- -------- ---------
2,128 (7,022) 696 (4,036)
-------- -------- -------- ---------
Loss before income taxes...................... (4,737) (46,101) (62,822) (132,196)
Income taxes:
Federal................................... -- (1,982) -- (1,982)
State..................................... -- (313) -- (313)
-------- -------- -------- ---------
Net loss...................................... (4,737) (48,396) (62,822) (134,491)
-------- -------- -------- ---------
Preferred stock dividends..................... (2,338) (19,380) (30,321) (52,039)
Preferred stock deemed dividends.............. (51,975) (11,676) (3,535) (67,186)
Accretion of dividends in connection with the
issuance of warrants on preferred stock..... -- (6,501) (303) (6,804)
-------- -------- -------- ---------
Net loss applicable to common stockholders.... $(59,050) $(85,953) $(96,981) $(260,520)
-------- -------- -------- ---------
-------- -------- -------- ---------
Net loss per share applicable to common
stockholders (basic and diluted)............ $(5.08) $(4.79) $(3.96)
------ ------ ------
------ ------ ------
Weighted average common shares outstanding
(basic and diluted)......................... 11,626 17,932 24,470
------ ------ ------
------ ------ ------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $150,190 $ 81,809
Marketable securities, at market......................... 115,433 317,810
Restricted investments, at amortized cost................ -- 67,454
Prepaid expense and other................................ 166 741
-------- ----------
Total current assets.................................. 265,789 467,814
-------- ----------
Property and equipment:
Satellite construction in process........................ 188,849 375,294
Launch construction in process........................... 87,492 199,385
Broadcast studio equipment............................... 5,081 15,731
Leasehold improvements................................... 87 15,285
Technical equipment and other............................ 2,146 18,653
-------- ----------
283,655 624,348
Less accumulated depreciation............................... (21) (880)
-------- ----------
283,634 623,468
Other assets:
FCC license.............................................. 83,368 83,368
Debt issue cost, net..................................... 9,313 23,053
Deposits and other....................................... 1,776 8,909
-------- ----------
Total other assets.................................... 94,457 115,330
-------- ----------
Total assets.......................................... $643,880 $1,206,612
-------- ----------
-------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.................... $ 5,481 $ 30,454
Satellite construction payable........................... 8,479 19,275
Short-term notes payable................................. 70,863 114,075
-------- ----------
Total current liabilities............................. 84,823 163,804
Long-term notes payable and accrued interest................ 153,033 488,835
Deferred satellite payments and accrued interest............ 31,324 55,140
Deferred income taxes....................................... 2,237 2,237
-------- ----------
Total liabilities..................................... 271,417 710,016
-------- ----------
Commitments and contingencies:
10 1/2% Series C Convertible Preferred Stock, no par
value: 2,025,000 shares authorized, 1,467,416 and
1,248,776 shares issued and outstanding at December 31,
1998 and 1999, respectively (liquidation preferences of
$146,742 and $124,878), at net carrying value including
accrued dividends....................................... 156,755 149,285
9.2% Series A Junior Cumulative Convertible Preferred
Stock, $.001 par value: 4,300,000 shares authorized,
1,350,000 and 1,461,270 shares issued and outstanding at
December 31, 1998 and 1999, respectively (liquidation
preferences of $135,000 and $146,127), at net carrying
value including accrued dividends....................... 137,755 148,894
9.2% Series B Junior Cumulative Convertible Preferred
Stock, $.001 par value: 2,100,000 shares authorized,
655,406 shares issued and outstanding at December 31,
1999 (liquidation preference of $65,541), at net
carrying value including accrued dividends.............. -- 64,238
Stockholders' equity:
Preferred stock, $.001 par value: 50,000,000 shares
authorized 8,000,000 shares designated as 5% Delayed
Convertible Preferred Stock, none issued or
outstanding............................................. -- --
Common stock, $.001 par value: 200,000,000 shares
authorized, and 23,208,949 and 28,721,041 shares issued
and outstanding at December 31, 1998 and 1999,
respectively............................................ 23 29
Additional paid-in capital............................... 149,599 268,641
Deficit accumulated during the development stage......... (71,669) (134,491)
-------- ----------
Total stockholders' equity............................ 77,953 134,179
-------- ----------
Total liabilities and stockholders' equity............ $643,880 $1,206,612
-------- ----------
-------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DEFICIT
COMMON STOCK ACCUMULATED
---------------------------------------------------------------- ADDITIONAL DURING
CLASS CLASS CLASS CLASS PAID- THE
A A B B IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE
------ ------ ------ ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial sale of no par value
common stock, $5.00 per
share, May 17, 1990.......... 11,080 $ 55 -- $-- -- $ -- $ -- $--
Initial issuance of common
stock in satisfaction of
amount due to related party,
$5.00 per share.............. 28,920 145 -- -- -- -- -- --
Conversion of no par value
common stock to Class A and
Class B no par value common
stock........................ (40,000) (200) 2,000,000 169 360,000 31 -- --
Sale of Class B common stock,
$0.4165 per share............ -- -- -- -- 442,000 184 -- --
Issuance of Class B common
stock in satisfaction of
amount due to related party,
$0.4165 per share............ -- -- -- -- 24,000 10 -- --
Net loss...................... -- -- -- -- -- -- -- (839)
--------- ------- ---------- ----- ---------- ------- ------- -------
Balance, December 31, 1990.... -- -- 2,000,000 169 826,000 225 -- (839)
Sale of Class B common stock,
$0.50 per share.............. -- -- -- -- 610,000 305 -- --
Issuance of Class B common
stock in satisfaction of
amount due to related party,
$0.50 per share.............. -- -- -- -- 300,000 150 -- --
Net loss...................... -- -- -- -- -- -- -- (575)
--------- ------- ---------- ----- ---------- ------- ------- -------
Balance, December 31, 1991.... -- -- 2,000,000 169 1,736,000 680 -- (1,414)
Sale of Class B common stock,
$0.50 per share.............. -- -- -- -- 200,000 100 -- --
Issuance of Class B common
stock in satisfaction of
amount due to related party,
$0.50 per share.............. -- -- -- -- 209,580 105 -- --
Conversion of note payable to
related party to Class B
common stock, $0.4165 per
share........................ -- -- -- -- 303,440 126 -- --
Conversion of Class A and
Class B common stock to no
par value common stock....... 4,449,020 1,180 (2,000,000) (169) (2,449,020) (1,011) -- --
Sale of no par value common
stock, $1.25 per share....... 1,600,000 2,000 -- -- -- -- -- --
Conversion of no par value
common stock to $.001 par
value common stock........... -- (3,174) -- -- -- -- 3,174 --
Sale of $.001 par value common
stock, $5.00 per share....... 315,000 -- -- -- -- -- 1,575 --
Net loss...................... -- -- -- -- -- -- -- (1,551)
--------- ------- ---------- ----- ---------- ------- ------- -------
Balance, December 31, 1992.... 6,364,020 6 -- -- -- -- 4,749 (2,965)
Sale of $.001 par value common
stock, $5.00 per share, net
of commissions............... 1,029,000 1 -- -- -- -- 4,882 --
Compensation expense in
connection with issuance of
stock options................ -- -- -- -- -- -- 80 --
Common stock issued in
connection with conversion of
note payable at $5.00 per
share........................ 60,000 -- -- -- -- -- 300 --
Common stock issued in
satisfaction of commissions
payable, $5.00 per share..... 4,000 -- -- -- -- -- 20 --
Net loss...................... -- -- -- -- -- -- -- (6,568)
--------- ------- ---------- ----- ---------- ------- ------- -------
Balance, December 31, 1993.... 7,457,020 7 -- -- -- -- 10,031 (9,533)
<CAPTION>
DEFERRED
COMPENSATION
ON
STOCK
OPTIONS
GRANTED TOTAL
------- -----
<S> <C> <C>
Initial sale of no par value
common stock, $5.00 per
share, May 17, 1990.......... $ -- $ 55
Initial issuance of common
stock in satisfaction of
amount due to related party,
$5.00 per share.............. -- 145
Conversion of no par value
common stock to Class A and
Class B no par value common
stock........................ -- --
Sale of Class B common stock,
$0.4165 per share............ -- 184
Issuance of Class B common
stock in satisfaction of
amount due to related party,
$0.4165 per share............ -- 10
Net loss...................... -- (839)
-------- -------
Balance, December 31, 1990.... -- (445)
Sale of Class B common stock,
$0.50 per share.............. -- 305
Issuance of Class B common
stock in satisfaction of
amount due to related party,
$0.50 per share.............. -- 150
Net loss...................... -- (575)
-------- -------
Balance, December 31, 1991.... -- (565)
Sale of Class B common stock,
$0.50 per share.............. -- 100
Issuance of Class B common
stock in satisfaction of
amount due to related party,
$0.50 per share.............. -- 105
Conversion of note payable to
related party to Class B
common stock, $0.4165 per
share........................ -- 126
Conversion of Class A and
Class B common stock to no
par value common stock....... -- --
Sale of no par value common
stock, $1.25 per share....... -- 2,000
Conversion of no par value
common stock to $.001 par
value common stock........... -- --
Sale of $.001 par value common
stock, $5.00 per share....... -- 1,575
Net loss...................... -- (1,551)
-------- -------
Balance, December 31, 1992.... -- 1,790
Sale of $.001 par value common
stock, $5.00 per share, net
of commissions............... -- 4,883
Compensation expense in
connection with issuance of
stock options................ -- 80
Common stock issued in
connection with conversion of
note payable at $5.00 per
share........................ -- 300
Common stock issued in
satisfaction of commissions
payable, $5.00 per share..... -- 20
Net loss...................... -- (6,568)
-------- -------
Balance, December 31, 1993.... -- 505
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DEFICIT
COMMON STOCK ACCUMULATED
---------------------------------------------------------------- ADDITIONAL DURING
CLASS CLASS CLASS CLASS PAID- THE
A A B B IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE
------ ------ ------ ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales of $.001 par value
common stock, $5.00 per
share, net of commissions.... 250,000 -- -- -- -- -- 1,159 --
Initial public offering of
Units, consisting of two
shares of $.001 par value
common stock and one warrant,
$10.00 per Unit, net of
expenses..................... 1,491,940 2 -- -- -- -- 4,834 --
Deferred compensation on stock
options granted.............. -- -- -- -- -- -- 1,730 --
Forfeiture of stock options by
Company officer.............. -- -- -- -- -- -- (207) --
Compensation expense in
connection with issuance of
stock options................ -- -- -- -- -- -- 113 --
Amortization of deferred
compensation................. -- -- -- -- -- -- -- --
Net loss...................... -- -- -- -- -- -- -- (4,065)
---------- --- ---------- ----- ---------- ------- -------- --------
Balance, December 31, 1994.... 9,198,960 9 -- -- -- -- 17,660 (13,598)
Common stock issued for
services rendered, between
$3.028 and $3.916 per
share........................ 107,000 -- -- -- -- -- 347 --
Amortization of deferred
compensation................. -- -- -- -- -- -- -- --
Net loss...................... -- -- -- -- -- -- -- (2,107)
---------- --- ---------- ----- ---------- ------- -------- --------
Balance, December 31, 1995.... 9,305,960 9 -- -- -- -- 18,007 (15,705)
Exercise of stock warrants at
$6.00 per share.............. 791,931 1 -- -- -- -- 4,588 --
Exercise of stock options by
Company officers, between
$1.00 and $5.00 per share.... 135,000 -- -- -- -- -- 155 --
Common stock issued for
services rendered, between
$5.76 and $12.26 per share... 67,500 -- -- -- -- -- 554 --
Common stock options granted
for services rendered, to
purchase 60,000 shares at
$4.50 per share.............. -- -- -- -- -- -- 120 --
Amortization of deferred
compensation................. -- -- -- -- -- -- -- --
Net loss...................... -- -- -- -- -- -- -- (2,831)
---------- --- ---------- ----- ---------- ------- -------- --------
Balance, December 31, 1996.... 10,300,391 10 -- -- -- -- 23,424 (18,536)
Exercise of stock options
between $1.00 and $2.00 per
share........................ 43,000 -- -- -- -- -- 56 --
Value of beneficial conversion
feature on 5% Delayed
Convertible Preferred
Stock........................ 51,975 --
Accretion of deemed
dividend..................... -- -- -- -- -- -- (51,975) --
Sale of $.001 par value common
stock, $13.12 per share, net
of expenses.................. 1,905,488 2 -- -- -- -- 24,393 --
Exchange of 5% Delayed
Convertible Preferred Stock
into 10 1/2% Series C
Convertible Preferred
Stock........................ -- -- -- -- -- -- (63,450) --
Conversion of 5% Delayed
Convertible Preferred Stock
into $.001 par value common
stock........................ 749,812 1 -- -- -- -- 10,280 --
Public offering of $.001 par
value common stock at $18.00
per share, net of expenses... 3,050,000 3 -- -- -- -- 46,424 --
Dividends on preferred
stock........................ -- -- -- -- -- -- (2,338) --
Issuance of fully vested in
the money stock options...... -- -- -- -- -- -- 448
Net loss...................... -- -- -- -- -- -- -- (4,737)
---------- --- ---------- ----- ---------- ------- -------- --------
Balance, December 31, 1997.... 16,048,691 16 -- -- -- -- 39,237 (23,273)
<CAPTION>
DEFERRED
COMPENSATION
ON
STOCK
OPTIONS
GRANTED TOTAL
------- -----
<S> <C> <C>
Sales of $.001 par value
common stock, $5.00 per
share, net of commissions.... -- 1,159
Initial public offering of
Units, consisting of two
shares of $.001 par value
common stock and one warrant,
$10.00 per Unit, net of
expenses..................... -- 4,836
Deferred compensation on stock
options granted.............. (1,730) --
Forfeiture of stock options by
Company officer.............. 207 --
Compensation expense in
connection with issuance of
stock options................ -- 113
Amortization of deferred
compensation................. 883 883
Net loss...................... -- (4,065)
------- --------
Balance, December 31, 1994.... (640) 3,431
Common stock issued for
services rendered, between
$3.028 and $3.916 per
share........................ -- 347
Amortization of deferred
compensation................. 320 320
Net loss...................... -- (2,107)
------- --------
Balance, December 31, 1995.... (320) 1,991
Exercise of stock warrants at
$6.00 per share.............. -- 4,589
Exercise of stock options by
Company officers, between
$1.00 and $5.00 per share.... -- 155
Common stock issued for
services rendered, between
$5.76 and $12.26 per share... -- 554
Common stock options granted
for services rendered, to
purchase 60,000 shares at
$4.50 per share.............. -- 120
Amortization of deferred
compensation................. 320 320
Net loss...................... -- (2,831)
------- --------
Balance, December 31, 1996.... -- 4,898
Exercise of stock options
between $1.00 and $2.00 per
share........................ -- 56
Value of beneficial conversion
feature on 5% Delayed
Convertible Preferred
Stock........................ -- 51,975
Accretion of deemed
dividend..................... -- (51,975)
Sale of $.001 par value common
stock, $13.12 per share, net
of expenses.................. -- 24,395
Exchange of 5% Delayed
Convertible Preferred Stock
into 10 1/2% Series C
Convertible Preferred
Stock........................ -- (63,450)
Conversion of 5% Delayed
Convertible Preferred Stock
into $.001 par value common
stock........................ -- 10,281
Public offering of $.001 par
value common stock at $18.00
per share, net of expenses... -- 46,427
Dividends on preferred
stock........................ -- (2,338)
Issuance of fully vested in
the money stock options...... 448
Net loss...................... -- (4,737)
------- --------
Balance, December 31, 1997.... -- 15,980
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DEFICIT
COMMON STOCK ACCUMULATED
---------------------------------------------------------------- ADDITIONAL DURING
CLASS CLASS CLASS CLASS PAID- THE
A A B B IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE
------ ------ ------ ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sale of $.001 par value common
stock, $20.00 per share, net
of expenses.................. 5,000,000 5 -- -- -- -- 97,995 --
Exercise of stock options
between $2.00 and $4.50 per
share........................ 44,850 -- -- -- -- -- 140 --
Conversion of 10 1/2%
Series C Convertible
Preferred Stock into $.001
par value common stock....... 2,107,666 2 -- -- -- -- 37,654 --
Issuance of $.001 par value
common stock in connection
with employee benefit plan... 7,742 -- -- -- -- -- 214 --
Compensation expense in
connection with quick vesting
of stock options............. -- -- -- -- -- -- 950 --
Value of beneficial conversion
feature on 9.2% Series A
Junior Cumulative Convertible
Preferred Stock.............. -- -- -- -- -- -- 10,884 --
Value of option on 9.2% Series
B Junior Cumulative
Convertible Preferred
Stock........................ -- -- -- -- -- -- (6,600) --
Amortization of option on 9.2%
Series B Junior Cumulative
Convertible Preferred
Stock........................ -- -- -- -- -- -- 181 --
Accretion of deemed
dividend..................... -- -- -- -- -- -- (11,676) --
Dividends on preferred
stock........................ -- -- -- -- -- -- (19,380) --
Net loss...................... -- -- -- -- -- -- -- (48,396)
---------- --- ---------- ------ ---------- ------- -------- ---------
Balance, December 31, 1998.... 23,208,949 23 -- -- -- -- 149,599 (71,669)
Sale of $.001 par value common
stock, $24.75 per share, net
of expenses.................. 3,450,000 4 -- -- -- -- 78,133 --
Issuance of warrants in
connection with the 14 1/2%
Senior Secured Notes due
2009......................... -- -- -- -- -- -- 31,382 --
Exercise of stock options
between $2.00 and $24.38 per
share........................ 205,002 -- -- -- -- -- 1,642 --
Conversion of 10 1/2%
Series C Convertible
Preferred Stock, including
accrued dividends, into $.001
par value common stock....... 1,409,871 1 -- -- -- -- 25,813 --
Conversion of 8 3/4%
Convertible Subordinated
Notes due 2009, including
interest and related costs... 423,221 1 -- -- -- -- 11,488 --
Issuance of $.001 par value
common stock in connection
with employee benefit plan... 23,998 -- -- -- -- -- 654 --
Compensation in connection
with the issuance of common
stock options................ -- -- -- -- -- -- 752 --
Value of premium on issuance
of 9.2% Series B Junior
Cumulative Convertible
Preferred Stock.............. -- -- -- -- -- -- (3,385) --
Amortization of option on 9.2%
Series B Junior Cumulative
Convertible Preferred
Stock........................ -- -- -- -- -- -- 6,419 --
Accretion of deemed
dividend..................... -- -- -- -- -- -- (3,535) --
Dividends on preferred
stock........................ -- -- -- -- -- -- (30,321) --
Net loss...................... -- -- -- -- -- -- -- (62,822)
---------- --- ---------- ------ ---------- ------- -------- ---------
Balance, December 31, 1999.... 28,721,041 $29 -- $-- -- $ -- $268,641 $(134,491)
---------- --- ---------- ------ ---------- ------- -------- ---------
---------- --- ---------- ------ ---------- ------- -------- ---------
<CAPTION>
DEFERRED
COMPENSATION
ON
STOCK
OPTIONS
GRANTED TOTAL
------- -----
<S> <C> <C>
Sale of $.001 par value common
stock, $20.00 per share, net
of expenses.................. -- 98,000
Exercise of stock options
between $2.00 and $4.50 per
share........................ -- 140
Conversion of 10 1/2%
Series C Convertible
Preferred Stock into $.001
par value common stock....... -- 37,656
Issuance of $.001 par value
common stock in connection
with employee benefit plan... -- 214
Compensation expense in
connection with quick vesting
of stock options............. -- 950
Value of beneficial conversion
feature on 9.2% Series A
Junior Cumulative Convertible
Preferred Stock.............. -- 10,884
Value of option on 9.2% Series
B Junior Cumulative
Convertible Preferred
Stock........................ -- (6,600)
Amortization of option on 9.2%
Series B Junior Cumulative
Convertible Preferred
Stock........................ -- 181
Accretion of deemed
dividend..................... -- (11,676)
Dividends on preferred
stock........................ -- (19,380)
Net loss...................... -- (48,396)
-------- --------
Balance, December 31, 1998.... -- 77,953
Sale of $.001 par value common
stock, $24.75 per share, net
of expenses.................. -- 78,137
Issuance of warrants in
connection with the 14 1/2%
Senior Secured Notes due
2009......................... -- 31,382
Exercise of stock options
between $2.00 and $24.38 per
share........................ -- 1,642
Conversion of 10 1/2%
Series C Convertible
Preferred Stock, including
accrued dividends, into $.001
par value common stock....... -- 25,814
Conversion of 8 3/4%
Convertible Subordinated
Notes due 2009, including
interest and related costs... -- 11,489
Issuance of $.001 par value
common stock in connection
with employee benefit plan... -- 654
Compensation in connection
with the issuance of common
stock options................ -- 752
Value of premium on issuance
of 9.2% Series B Junior
Cumulative Convertible
Preferred Stock.............. -- (3,385)
Amortization of option on 9.2%
Series B Junior Cumulative
Convertible Preferred
Stock........................ -- 6,419
Accretion of deemed
dividend..................... -- (3,535)
Dividends on preferred
stock........................ -- (30,321)
Net loss...................... -- (62,822)
-------- --------
Balance, December 31, 1999.... $ -- $134,179
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-7
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE FOR THE
PERIOD MAY 17, 1990
FOR THE YEARS ENDED DECEMBER 31, (DATE OF INCEPTION)
--------------------------------- TO DECEMBER 31,
1997 1998 1999 1999
--------- --------- --------- -------------------
<S> <C> <C> <C> <C>
Cash flows from development stage activities:
Net loss.................................. $ (4,737) $ (48,396) $ (62,822) $ (134,491)
Adjustments to reconcile net loss to net
cash provided by (used in) development
stage activities:
Depreciation expense................... 30 49 861 1,164
Unrealized (gain) loss on marketable
securities........................... (624) 138 (3,396) (3,882)
(Gain) loss on disposal of assets...... -- 105 10 115
Special charges........................ -- 23,557 -- 25,557
Accretion of note payable charged as
interest expense..................... 1,868 25,998 56,199 84,065
Sales (purchases) of marketable
securities and restricted
investments, net..................... (168,858) 53,911 (266,422) (381,369)
Compensation expense in connection with
issuance of common stock and stock
options.............................. 448 150 1,206 4,542
Expense incurred in connection with
induced conversion of debt........... -- -- 1,776 1,776
Increase (decrease) in cash and cash
equivalents resulting from changes in
assets and liabilities:
Prepaid expense and other.............. (919) 762 (575) (741)
Due to related party................... -- -- -- 351
Other assets........................... 73 (2,368) (3,457) (6,056)
Accounts payable and accrued
expenses............................. 249 5,062 4,019 9,571
Deferred income taxes.................. -- 2,237 -- 2,237
--------- --------- --------- ----------
Net cash provided by (used in)
development stage activities...... (172,470) 61,205 (272,601) (397,161)
--------- --------- --------- ----------
Cash flows from investing activities:
Purchase of FCC license................... (83,346) (22) -- (83,368)
Payments for satellite construction....... (49,300) (99,646) (167,933) (316,879)
Payments for launch services.............. (6,292) (103,563) (95,793) (205,648)
Other capital expenditures................ (7) (7,301) (45,333) (53,033)
Acquisition of Sky-Highway Radio Corp..... -- -- -- (2,000)
--------- --------- --------- ----------
Net cash used in investing
activities........................ (138,945) (210,532) (309,059) (660,928)
--------- --------- --------- ----------
Cash flows from financing activities:
Proceeds from issuance of notes payable... -- 70,863 180,399 251,262
Proceeds from issuance of common stock,
net...................................... 70,822 98,064 78,337 261,780
Proceeds from issuance of preferred stock,
net...................................... 120,518 129,550 62,900 312,968
Proceeds from exercise of stock options
and warrants............................. 56 140 1,643 6,583
Proceeds from issuance of promissory note
and units, net........................... 116,335 -- 190,000 306,535
Proceeds from issuance of promissory notes
to related parties....................... -- -- -- 2,965
Repayment of promissory notes............. -- -- -- (2,635)
Loan from officer......................... -- -- -- 440
--------- --------- --------- ----------
Net cash provided by financing
activities........................ 307,731 298,617 513,279 1,139,898
--------- --------- --------- ----------
Net increase (decrease) in cash and cash
equivalents................................. (3,684) 149,290 (68,381) 81,809
Cash and cash equivalents at the beginning of
period...................................... 4,584 900 150,190 --
--------- --------- --------- ----------
Cash and cash equivalents at the end of
period...................................... $ 900 $ 150,190 $ 81,809 $ 81,809
--------- --------- --------- ----------
--------- --------- --------- ----------
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest,
net of capitalized interest.............. $ -- $ 2,383 $ 1,204 $ 3,670
Cash paid during the period for taxes..... $ -- $ 58 $ -- $ 58
Supplemental disclosure of non-cash investing
and financing activities:
Deferred satellite payments, including
accrued interest......................... $ -- $ 31,324 $ 23,816 $ 55,140
Common stock issued in satisfaction of
notes payable and amounts due to related
parties, including accrued interest...... $ -- $ -- $ 10,151 $ 11,558
Exchange of 5% Delayed Convertible
Preferred Stock for 10 1/2% Series C
Convertible Preferred Stock.............. $ 173,687 $ -- $ -- $ 173,687
Exchange of 10 1/2% Series C Convertible
Preferred Stock and accrued dividends for
common stock............................. $ -- $ 37,656 $ 25,814 $ 63,470
Accrual of dividends on preferred stock... $ 2,338 $ 19,380 $ 30,321 $ 52,040
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, UNLESS OTHERWISE STATED)
1. BUSINESS
Sirius Satellite Radio Inc. ('Sirius Radio'), a Delaware corporation, is
developing a service for broadcasting digital quality music programming via
satellites to subscribers' vehicles. We intend to focus exclusively on providing
a consumer service, and anticipate that the equipment required to receive our
broadcasts will be manufactured by consumer electronics manufacturers. In April
1997, we were the winning bidder in an FCC auction for one of two national
satellite broadcast licenses with a winning bid of $83.3 million. We paid the
bid amount during 1997 and were awarded an FCC license on October 10, 1997.
2. ACCOUNTING POLICIES
Basis of presentation: The consolidated financial statements include the
accounts of Sirius Radio and our wholly owned subsidiary. Intercompany
transactions are eliminated in consolidation. Our principal activities to date
have included developing our technology, obtaining regulatory approval for our
service, commencing the construction of four satellites, constructing our
production and broadcast facility, acquiring content for our programming,
developing our terrestrial repeater network, arranging for the design and
development of receivers, strategic planning, market research, recruiting our
management team and securing financing for capital expenditures and working
capital. Accordingly, our financial statements are presented as those of a
development stage enterprise, as prescribed by Statement of Financial Accounting
Standards ('SFAS') No. 7, 'Accounting and Reporting by Development Stage
Enterprises.'
Risks and uncertainties: As a development stage enterprise, we have a
limited operating history and our prospects are subject to the risks, expenses
and uncertainties frequently encountered by companies in new and rapidly
evolving markets for satellite products and services. Among the key risks that
may have a direct bearing on our future results of operations are the potential
risk of delay in implementing our business plan; our dependence on Space
Systems/Loral, Inc. ('Loral'), Lucent Technologies, Inc. ('Lucent') and consumer
electronics manufacturers; the unavailability of receivers and antennas; the
risk of launch failure; the unproven market for our proposed service; the
unproven applications of existing technology; and our need for additional
financing.
Use of estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of expenses during
the reported period. The estimates involve judgments with respect to, among
other things, various future factors which are difficult to predict and are
beyond our control. Actual amounts could differ from these estimates.
Cash equivalents: We consider all highly liquid investments purchased with
an original maturity of three months or less to be cash equivalents.
Concentration of credit risk: We have invested our excess cash in
obligations of agencies of the U.S. government and in commercial paper issued by
major U.S. corporations with high credit ratings. We have not experienced any
losses on our investments.
Property and equipment: All costs incurred related to activities necessary
to prepare the Sirius Radio delivery system for use are capitalized, including
interest on funds borrowed to finance construction. To date, such costs consist
of satellite construction in process, launch construction in process, broadcast
studio equipment, terrestrial repeater network in process, capitalized interest
(totaling $72,810 at December 31, 1999) and the cost to acquire the FCC license
at auction. Charges to operations for depreciation and amortization of these
items will begin upon commencement of commercial broadcasting, which is
projected to be at the end of 2000. We anticipate that we will
F-9
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, UNLESS OTHERWISE STATED)
depreciate the satellite and launch costs over a period not to exceed 15 years
and amortize the FCC license costs over 40 years. Depreciation of technical and
other equipment, primarily satellite communications equipment, is computed on
the straight-line method based on estimated useful lives ranging from 3 to 10
years.
Long-lived assets: We evaluate the recoverability of long-lived assets,
utilizing qualitative and quantitative factors. At such time as an impairment in
value is identified, the impairment will be quantatively measured in accordance
with SFAS No. 121, 'Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of,' and charged to operations. No such
impairment losses have been recognized to date.
Fair value information: The carrying amount of current assets and current
liabilities approximates fair value because of the short maturity of these
investments. The fair value of fixed-rate long-term debt and redeemable
preferred stock is estimated using quoted market prices where applicable or by
discounting remaining cash flows at the current market rate.
Income taxes: Deferred income taxes are recognized for the tax consequences
in future years of differences between the tax bases of assets and liabilities
and their financial reporting amounts at each year-end, based on enacted tax
laws and statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
Income tax expense is the sum of tax payable for the period and the change
during the period in deferred tax assets and liabilities.
Redeemable convertible preferred stock: We record redeemable convertible
preferred stock on the date of issuance by allocating a portion of the proceeds
that represents a beneficial conversion feature to additional paid-in capital.
The beneficial conversion feature (discount) is amortized using the effective
interest method and is recognized as a deemed dividend over the shortest period
of conversion. The carrying value of the stock accretes to its liquidation value
over the mandatory redemption period. The periodic accretion increases the net
loss applicable to common stockholders.
Net loss per share: Basic loss per share is based on the weighted average
number of outstanding shares of our Common Stock. Diluted loss per share adjusts
the weighted average for the potential dilution that could occur if common stock
equivalents (convertible preferred stock, convertible debt, warrants and stock
options) were exercised or converted into Common Stock. As of December 31, 1997,
1998 and 1999, approximately 11,345,000, 16,646,000 and 21,127,000 common stock
equivalents were outstanding, respectively, and were excluded from the
calculation of diluted loss per share as they were antidilutive.
Comprehensive income: In 1997, the Financial Accounting Standards Board
issued SFAS No. 130, 'Reporting Comprehensive Income.' SFAS No. 130 requires
additional reporting with respect to certain changes in assets and liabilities
that previously were included in stockholders' equity. Currently, we have no
comprehensive income items to report.
Reclassifications: Certain amounts in the prior years' consolidated
financial statements have been reclassified to conform to the current
presentation.
3. MARKETABLE SECURITIES
Marketable securities consist of fixed income securities and are stated at
market value. Marketable securities are defined as trading securities under the
provision of SFAS No. 115, 'Accounting for Certain Investments in Debt and
Equity Securities' ('SFAS No. 115'), and unrealized holding gains and losses are
reflected in earnings. Unrealized holding gains were $485 and $3,882 at
December 31, 1998 and 1999, respectively.
F-10
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, UNLESS OTHERWISE STATED)
4. RESTRICTED INVESTMENTS
Restricted investments consist of fixed income securities and are stated at
amortized cost plus accrued interest income. Restricted investments are defined
as held-to-maturity securities under the provision of SFAS No. 115 and
unrealized holding gains and losses are not reflected in earnings. Unrealized
holding losses were $716 at December 31, 1999. The securities included in
restricted investments are restricted to provide for the first six scheduled
interest payments on our 14 1/2% Senior Secured Notes due 2009. On November 15,
1999, proceeds from matured investments were used to make the first scheduled
interest payment on these notes.
5. NOTES PAYABLE
SHORT-TERM
In 1998, we entered into a credit agreement with Bank of America ('BofA')
and a group of financial institutions (together with BofA, the 'Lenders')
pursuant to which the Lenders provided us a term loan facility in an aggregate
principal amount of up to $115,000. We used the proceeds of the facility to fund
progress payments for the purchase of launch services and to pay interest, fees
and other related expenses. The contract under which the launch vehicles are
being constructed was pledged to the Lenders as collateral. In addition, Loral
Space & Communications Ltd. ('Loral Space') guaranteed the amounts outstanding
under the credit agreement. The terms of the credit agreement required us to
maintain minimum levels of consolidated net worth and placed limitations on
asset disposals. The weighted-average borrowing rate for 1999 was 8.65%. On
February 29, 2000, we repaid these loans and cancelled the related credit
agreement.
LONG-TERM
In November 1997, we received net proceeds of $116,000 from the issuance of
12,910 units consisting of $20 principal amount at maturity of our 15% Senior
Secured Discount Notes due 2007 and a warrant to purchase additional 15% Senior
Secured Discount Notes due 2007 with an aggregate principal amount at maturity
of $3. All of the warrants were exercised in 1997. The aggregate maturity value
of our 15% Senior Secured Discount Notes due 2007 is $297,000. Our 15% Senior
Secured Discount Notes due 2007 mature on December 1, 2007 and the first cash
interest payment is deferred until June 2003. Cash interest of approximately
$19,000 will be due on each June 1 and December 1 of the remaining years of our
15% Senior Secured Discount Notes due 2007. The indenture governing our 15%
Senior Secured Discount Notes due 2007 contains some limitations on our ability
to incur additional indebtedness. As of December 31, 1998 and 1999, we had
accrued interest relating to our 15% Senior Secured Discount Notes due 2007 of
$27,867 and $59,488, respectively. At December 31, 1999, our 15% Senior Secured
Discount Notes due 2007 had a fair value of approximately $141,000. Our 15%
Senior Secured Discount Notes due 2007 are redeemable, at our option, in whole
or in part, at any time on or after December 1, 2002, at specified redemption
prices plus accrued interest, if any, to the date of redemption. Our 15% Senior
Secured Discount Notes due 2007 are senior obligations and are secured by a
pledge of the stock of Satellite CD Radio, Inc., our subsidiary that holds our
FCC license. We incurred approximately $9,000 of costs in connection with the
issuance of our 15% Senior Secured Discount Notes due 2007. Debt issuance costs
have been deferred and are amortized over the 10-year life of these notes.
Accumulated amortization of debt issuance costs was $952 and $1,834 at December
31, 1998 and 1999, respectively.
In May 1999, we received net proceeds of approximately $190,000 from the
issuance of 200,000 units, each consisting of $1 aggregate principal amount of
our 14 1/2% Senior Secured Notes due 2009 and three warrants, each to purchase
3.65 shares of our Common Stock. The warrants are exercisable
F-11
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, UNLESS OTHERWISE STATED)
through May 15, 2009 at an exercise price of $28.60 per share. Interest payments
on our 14 1/2% Senior Secured Notes due 2009 began on November 15, 1999 and
future interest payments are payable semi-annually in cash. We invested
approximately $79,300 of the net proceeds of our 14 1/2% Senior Secured Notes
due 2009 in a portfolio of U.S. government securities, which we pledged as
security for the payment in full of interest on our 14 1/2% Senior Secured Notes
due 2009 through May 15, 2002. As of December 31, 1999, we had accrued interest
relating to our 14 1/2% Senior Secured Notes due 2009 of $3,706. At December 31,
1999, our 14 1/2% Senior Secured Notes due 2009 had a fair value of
approximately $220,000. Our 14 1/2% Senior Secured Notes due 2009 are
redeemable, at our option, in whole or in part, at any time on or after May 15,
2004 at a specified redemption price plus accrued interest, if any, to the date
of redemption. In addition, we may redeem up to 35% of the principal amount of
our 14 1/2% Senior Secured Notes due 2009 with the net proceeds of one or more
equity offerings before May 15, 2002. Our 14 1/2% Senior Secured Notes due 2009
are senior secured obligations and are secured by the issued and outstanding
common stock of Satellite CD Radio, Inc. The indenture governing our 14 1/2%
Senior Secured Notes due 2009 contains some limitations on our ability to incur
additional indebtedness. We incurred approximately $10,000 of costs in
connection with the issuance of our 14 1/2% Senior Secured Notes due 2009. Debt
issuance costs have been deferred and amortized over the 10-year life of these
notes. Accumulated amortization of debt issuance costs was $611 as of December
31, 1999.
In September 1999, we issued $125,000 aggregate principal amount of our
8 3/4% Convertible Subordinated Notes due 2009 in an underwritten public
offering resulting in net proceeds of $119,000. In October 1999, we issued an
additional $18,750 aggregate principal amount of our 8 3/4% Convertible
Subordinated Notes due 2009 to satisfy the underwriters' over-allotment option,
resulting in net proceeds of $18,000. Our 8 3/4% Convertible Subordinated Notes
due 2009 are convertible, at the option of the holder, unless previously
redeemed, into shares of our Common Stock at any time at a conversion rate of
35.134 shares of Common Stock for each $1 principal amount of our 8 3/4%
Convertible Subordinated Notes due 2009, subject to certain adjustments. We may
redeem our 8 3/4% Convertible Subordinated Notes due 2009, in whole or in part,
at our option on or after September 29, 2002, contingent upon certain
circumstances. In December 1999, we acquired $10,000 of our 8 3/4% Convertible
Subordinated Notes due 2009 in exchange for shares of our Common Stock. At
December 31, 1999, our 8 3/4% Convertible Subordinated Notes due 2009 had a fair
value of approximately $226,038. Interest on our 8 3/4% Convertible Subordinated
Notes due 2009 is payable semi-annually in cash beginning March 29, 2000. As of
December 31, 1999, we had accrued interest related to our 8 3/4% Convertible
Subordinated Notes due 2009 of $3,021. We incurred approximately $6,600 of costs
in connection with the issuance of our 8 3/4% Convertible Subordinated Notes due
2009. Debt issuance costs have been deferred and amortized over the 10-year life
of these notes. Accumulated amortization of debt issuance costs was $168 as of
December 31, 1999.
As required by the terms of the warrants issued in conjunction with the
14 1/2% Senior Secured Notes due 2009, we adjusted the number of shares for
which each warrant may be exercised and the exercise price per share on
September 29, 1999, in connection with our issuance of 3,000,000 shares of our
Common Stock and $125,000 principal amount of our 8 3/4% Convertible
Subordinated Notes due 2009. As of December 31, 1999, each warrant may be
exercised for 3.792 shares of our Common Stock at an exercise price per share of
$27.53.
6. DEFERRED SATELLITE PAYMENTS
Under an amended and restated contract with Loral (the 'Loral Satellite
Contract'), Loral has agreed to defer certain amounts previously due under the
Loral Satellite Contract. The amounts deferred, which approximate fair value,
bear interest at 10% per year and are due in quarterly
F-12
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, UNLESS OTHERWISE STATED)
installments beginning in June 2002. We have the right to prepay any deferred
payments together with accrued interest, without penalty.
7. CAPITAL STOCK
COMMON STOCK, PAR VALUE $.001 PER SHARE
On September 29, 1994, we completed our initial public offering by issuing
1,491,940 shares of our Common Stock for net proceeds of $4,800. On August 5,
1997, we sold 1.9 million shares of our Common Stock to Loral Space for net
proceeds of approximately $24,400. In November 1997, we issued 2.8 million
shares of our Common Stock for net proceeds of $42,200 in a public offering. In
December 1997, we issued an additional 250,000 shares of our Common Stock, in
connection with the partial exercise of the option granted to the underwriters
of our November 1997 public offering solely to cover over-allotments, for net
proceeds of $4,200. In November 1998, we issued 5 million shares of our Common
Stock to Prime 66 Partners, L.P. for net proceeds of $98 million. In September
1999, we issued 3 million shares of our Common Stock in an underwritten public
offering for net proceeds of approximately $68,000. In October 1999, we issued
an additional 450,000 shares of our Common Stock, in connection with the
exercise of the option granted to the underwriters of our September 1999 public
offering solely to cover over-allotments, for net proceeds of approximately
$10,000.
As of December 31, 1999, approximately 34 million shares of our Common Stock
were reserved in connection with outstanding shares of convertible preferred
stock, convertible debt, warrants and incentive stock plans.
PREFERRED STOCK
In April 1997, we completed a private placement of our 5% Delayed
Convertible Preferred Stock. We sold a total of 5.4 million shares of our 5%
Delayed Convertible Preferred Stock for an aggregate sales price of $135,000.
The 5% Delayed Convertible Preferred Stock was immediately convertible at a
discount to the fair market value of our Common Stock and, accordingly, in 1997,
we recorded approximately $52,000 as a deemed dividend in determining net loss
attributable to common stockholders.
In November 1997, we exchanged 1,846,799 shares of our 10 1/2% Series C
Convertible Preferred Stock for all outstanding shares of our 5% Delayed
Convertible Preferred Stock. Each share of our 10 1/2% Series C Convertible
Preferred Stock is convertible into a number of shares of our Common Stock
calculated by dividing the $100.00 per share liquidation preference (the 'Series
C Liquidation Preference') by a conversion price of $18.00. This conversion
price is subject to adjustment for certain corporate events. Any holder who
converts our 10 1/2% Series C Convertible Preferred Stock into Common Stock
prior to November 15, 2002 will forfeit the right to any accrued and unpaid
dividends. Dividends on our 10 1/2% Series C Convertible Preferred Stock are
cumulative from the date of issuance and payable, if declared by the Board of
Directors, on a quarterly basis commencing on November 15, 2002. Dividends may
be paid in cash or in Common Stock at our option. Commencing November 15, 1999,
we may redeem our 10 1/2% Series C Convertible Preferred Stock at the Series C
Liquidation Preference plus any accrued and unpaid dividends, provided the price
of our Common Stock is at least $31.50 per share during a specified period. On
March 3, 2000, we notified the holders of our 10 1/2% Series C Convertible
Preferred Stock and the holders of all outstanding warrants to purchase shares
of our 10 1/2% Series C Convertible Preferred Stock that on April 12, 2000 we
would redeem these securities. As of December 31, 1998 and 1999, we accrued
dividends payable relating to the 10 1/2% Series C Convertible Preferred Stock
totaling $18,179 and $30,796, respectively. At December 31, 1999, the 10 1/2%
Series C Convertible Preferred Stock had a fair value of $308,725.
F-13
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, UNLESS OTHERWISE STATED)
On December 23, 1998, we sold to Apollo Investment Fund IV, L.P., a Delaware
limited partnership, and Apollo Overseas Partners IV, L.P., a Cayman Islands
limited partnership (collectively, the 'Apollo Investors'), 1,350,000 shares of
our 9.2% Series A Junior Cumulative Convertible Preferred Stock, par value $.001
per share, for an aggregate purchase price of approximately $135,000. Each share
of our 9.2% Series A Junior Cumulative Convertible Preferred Stock is
convertible into a number of shares of our Common Stock calculated by dividing
the $100.00 per share liquidation preference (the 'Series A Liquidation
Preference') by a conversion price of $30.00. This conversion price is subject
to adjustment for certain corporate events. Dividends on our 9.2% Series A
Junior Cumulative Convertible Preferred Stock commenced on November 15, 1999 and
are payable annually in cash or in additional shares of our 9.2% Series A Junior
Cumulative Convertible Preferred Stock, at our option. From and after November
15, 2001 and prior to November 15, 2003, we may redeem shares of our 9.2% Series
A Junior Cumulative Convertible Preferred Stock at the Series A Liquidation
Preference, plus any accrued and unpaid dividends, provided the price of our
Common Stock is at least $60.00 per share during a specified period. From and
after November 15, 2003, we may redeem shares of our 9.2% Series A Junior
Cumulative Convertible Preferred Stock at the same redemption price without
reference to the market price of our Common Stock. We are required to redeem all
outstanding shares of our 9.2% Series A Junior Cumulative Convertible Preferred
Stock at a price equal to the Series A Liquidation Preference plus any accrued
and unpaid dividends on November 15, 2011. On the date of issuance, the 9.2%
Series A Junior Cumulative Convertible Preferred Stock was immediately
convertible at a discount to the then fair market value of our Common Stock and,
accordingly, we recorded approximately $11 million as a deemed dividend in net
loss applicable to common stockholders. At December 31, 1999, the fair value of
our 9.2% Series A Junior Cumulative Convertible Preferred Stock approximated
book value and accrued dividends payable relating to this stock totaled $12,821.
The Apollo Investors granted to us, in conjunction with the issuance of our
9.2% Series A Junior Cumulative Convertible Preferred Stock, an option to sell
to the Apollo Investors 650,000 shares of our 9.2% Series B Junior Cumulative
Convertible Preferred Stock, par value $.001 per share, for an aggregate
purchase price of $65,000. We recorded the value of our 9.2% Series B Junior
Cumulative Convertible Preferred Stock at fair value and recorded approximately
$3,101 of deemed dividends related primarily to the amortization of the value of
the option during 1999. We exercised the option to sell our 9.2% Series B Junior
Cumulative Convertible Preferred Stock to the Apollo Investors on December 23,
1999. The terms of our 9.2% Series B Junior Cumulative Convertible Preferred
Stock are similar to those of our 9.2% Series A Junior Cumulative Convertible
Preferred Stock. At December 31, 1999, the fair value of our 9.2% Series B
Junior Cumulative Convertible Preferred Stock approximated book value and
accrued dividends payable relating to this stock totaled $1,301.
WARRANTS
In connection with our initial public offering in 1994, we issued warrants
to purchase 745,970 shares of our Common Stock. Additionally, we issued to the
underwriters, as consideration, warrants to purchase 123,560 shares of our
Common Stock. In September 1996, we received proceeds of $4,589 relating to the
exercise of 864,848 warrants and the remaining 4,682 warrants expired
unexercised. Of the warrants exercised, 764,848 shares of our Common Stock were
issued in exchange for cash at a purchase price of $6.00 per share and 27,083
shares of our Common Stock were issued in a cashless exercise of 100,000
warrants held by the underwriters.
In connection with the November 1997 issuance of our 10 1/2% Series C
Convertible Preferred Stock, we granted our investment advisor and certain
related persons, in lieu of a warrant to purchase shares of 5% Delayed
Convertible Preferred Stock, warrants to purchase an aggregate of 177,178 shares
of our 10 1/2% Series C Convertible Preferred Stock at an initial exercise price
of $68.47 per share. The
F-14
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, UNLESS OTHERWISE STATED)
exercise price of the warrants declines by approximately $0.12 per month to
$60.24 per share on and after April 1, 2002. This warrant was exercisable at a
discount to the fair market value of our Common Stock on the date of issuance
and, accordingly, we will record, over the life of the warrant, $1.6 million as
a deemed dividend in connection with the issuance of these warrants to purchase
shares of our 10 1/2% Series C Convertible Preferred Stock. During 1999, we
accreted dividends of $303 related to this warrant. In addition, in 1997 we
granted to an investor warrants to purchase 1.8 million shares of our Common
Stock at $50.00 per share during the period from June 15, 1998 until June 15,
2005, subject to certain conditions. After June 15, 2000, we may redeem all of
these warrants, provided that the price of our Common Stock is at least $75.00
per share during a specified period.
As part of our agreement with Ford Motor Company ('Ford') on June 11, 1999,
we issued to Ford warrants to purchase 4 million shares of our Common Stock at
an exercise price of $30.00 per share. These warrants are exercisable based upon
the number of new Ford vehicles equipped to receive our broadcasts manufactured
by Ford, and are fully exercisable after 4 million new Ford vehicles equipped to
receive our broadcasts are manufactured.
8. EMPLOYEE BENEFIT PLANS
STOCK OPTION PLANS
In February 1994, we adopted our 1994 Stock Option Plan (the '1994 Plan')
and our 1994 Directors' Nonqualified Stock Option Plan (the 'Directors' Plan').
In June 1999, we adopted our 1999 Long-Term Stock Incentive Plan (the '1999
Plan'). Generally, stock options are granted at an exercise price equal to or
greater than market value at the date of grant; vest over a four-year period;
and are exercisable for a period of ten years from the date of grant. As of
December 31, 1999, the aggregate number of shares of Common Stock available for
issuance pursuant to the 1994 Plan, the Directors' Plan and the 1999 Plan was
9,928,000.
The following table summarizes the option activity under all option plans
for the years ended December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
1997 1998 1999
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
OPTION EXERCISE OPTION EXERCISE OPTION EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at Beginning of
Year........................... 1,492,500 $ 5.74 1,909,500 $ 8.16 2,453,525 $12.87
Granted.......................... 515,000 $14.52 659,500 $28.13 4,569,250 $29.88
Exercised........................ (43,000) $ 1.30 (44,850) $ 3.11 (128,025) $ 9.08
Cancelled........................ (55,000) $ 5.98 (70,625) $18.55 (620,000) $13.45
--------- --------- ---------
Outstanding at End of Year....... 1,909,500 $ 8.16 2,453,525 $12.87 6,274,750 $25.27
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-15
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, UNLESS OTHERWISE STATED)
Exercise prices for stock options outstanding as of December 31, 1999 ranged
from $1.00 to $38.875. The following table provides certain information with
respect to stock options outstanding and exercisable at December 31, 1999:
<TABLE>
<CAPTION>
RANGE OF EXERCISE WEIGHTED AVERAGE WEIGHTED AVERAGE REMAINING
PRICES PER SHARE SHARES UNDER OPTION EXERCISE PRICE PER SHARE CONTRACTUAL LIFE IN YEARS
- ---------------- ------------------- ------------------------ -------------------------
<S> <C> <C> <C>
OUTSTANDING:
Under $5.00.................. 327,500 $ 3.0324 4.90
$5.00-$14.99................. 651,500 $ 9.7707 3.44
$15.00-$24.99................ 757,100 $22.0903 8.98
$25.00-$34.99................ 4,266,900 $30.6094 9.30
Over $35..................... 71,750 $36.7859 9.10
EXERCISABLE:
Under $5.00.................. 327,500 $ 3.0324
$5.00-$14.99................. 577,000 $ 9.2537
$15.00-$24.99................ 135,749 $15.9461
$25.00-$34.99................ 1,060,000 $30.6783
Over $35..................... 8,250 $36.6383
</TABLE>
As of December 31, 1999, 3,492,000 shares of our Common Stock were available
for grant pursuant to the 1994 Plan, the Directors' Plan or the 1999 Plan.
We have adopted the disclosure-only provisions of SFAS No. 123, 'Accounting
for Stock-Based Compensation', as they pertain to financial statement
recognition of compensation expense attributable to stock option grants. If we
had elected to recognize compensation cost for the stock option grants in
accordance with SFAS No. 123, our net loss and net loss per share (basic and
diluted) on a pro-forma basis would have been:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Net loss -- as reported................................. $(4,737) $(48,396) $(62,822)
Net loss -- pro-forma................................... $(6,254) $(51,028) $(99,721)
Net loss per share -- as reported....................... $ (0.41) $ (2.70) $ (2.57)
Net loss per share -- pro-forma......................... $ (0.54) $ (2.85) $ (4.08)
</TABLE>
The pro-forma expense related to stock options is recognized over the
vesting period, generally four years. The fair value of each option grant was
estimated using the Black-Scholes option pricing model with the following
weighted average assumptions for each year:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate..................................... 6.11% 4.72% 6.70%
Expected life of options -- years........................... 3.11 4.36 4.38
Expected stock price volatility............................. 75% 75% 70%
Expected dividend yield..................................... N/A N/A N/A
</TABLE>
401(K) SAVINGS PLAN
We sponsor the Sirius Satellite Radio 401(k) Savings Plan (the '401(k)
Plan') for eligible employees. The 401(k) Plan allows eligible employees to
voluntarily contribute from 1% to 12% of their gross salary subject to certain
defined limits. We may match up to 100% of the voluntary employee contribution
in the form of our Common Stock. Our matching contribution vests at a rate of
33 1/3% each year and is fully vested after three years of employment.
Contribution expense resulting from our matching contribution to the 401(k) Plan
was $104 and $454 for 1998 and 1999, respectively.
F-16
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, UNLESS OTHERWISE STATED)
9. INCOME TAXES
The types of temporary differences between the tax bases of assets and
liabilities and their financial reporting amounts that give rise to the deferred
tax assets and deferred tax liability are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
---- ----
<S> <C> <C>
Start-up costs capitalized for tax purposes................. $ 13,066 $ 28,688
Accrual to cash adjustments................................. 6,427 --
Net operating loss carryforwards............................ 6,205 14,829
Other....................................................... (1,581) (1,009)
-------- --------
24,117 42,508
Valuation allowance......................................... (26,354) (44,745)
-------- --------
Net deferred tax liability.................................. $ (2,237) $ (2,237)
-------- --------
-------- --------
</TABLE>
Realization of deferred tax assets at the balance sheet date is dependent
upon future earnings, which are uncertain. Accordingly, a full valuation
allowance was recorded against the assets.
At December 31, 1999, we had net operating loss carryforwards of
approximately $36,435 for federal and state income tax purposes, subject to
Internal Revenue Service and state audits, available to offset future taxable
income. The net operating loss carryforwards expire at various dates beginning
in 2008. A significant portion of costs incurred to date has been capitalized
for tax purposes as a result of our status as a start-up enterprise. Total
start-up costs as of December 31, 1999 were $70,266. Once we begin our active
trade or business, these capitalized costs will be amortized over 60 months. The
total deferred tax asset related to capitalized start-up costs of $28,915
includes $4,190 which, when realized, would not affect financial statement
income but will be recorded directly to stockholders' equity.
10. SPECIAL CHARGES
During 1998, we decided to enhance our satellite delivery system to include
a third in-orbit satellite and to terminate certain launch and orbit related
contracts. We recorded special charges totaling $25,682 related primarily to the
termination of such contracts.
11. RELATED PARTIES
Since inception, we have relied upon related parties for certain consulting,
legal and management services. We have paid for these services with cash and
with the issuance of shares of our Common Stock. Total cash expenses incurred in
transactions with related parties during the years ended December 31, 1997, 1998
and 1999 and the period from May 17, 1990 (date of inception) to December 31,
1999 were $279, $127, $94 and $2,540, respectively. We have also issued shares
of our Common Stock in lieu of cash in settlement of other related party
liabilities. There were no related party expenses settled with the issuance of
shares of our Common Stock during the years ended December 31, 1997, 1998 and
1999. Related party expenses settled with the issuance of shares of our Common
Stock for the period from May 17, 1990 (date of inception) to December 31, 1999
were $1,311.
During the years ended December 31, 1997, 1998 and 1999 we made payments of
$6,048, $2,000 and $9,379 to a financial advisory firm, of which a related party
is a partner.
12. LEASES AND RENTALS
As of December 31, 1999, minimum rental commitments under operating leases
were $4,298, $4,275, $4,267, $4,267 and $4,379 for the years 2000, 2001, 2002,
2003 and 2004, respectively. For the remaining years, such commitments totaled
$44,811, aggregating total minimum lease payments of $66,297.
F-17
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, UNLESS OTHERWISE STATED)
Total rent expense for the years ended December 31, 1997, 1998 and 1999 and
the period May 17, 1990 (date of inception) to December 31, 1999 was $278,
$1,985, $4,976 and $8,444, respectively.
13. COMMITMENTS AND CONTINGENCIES
SATELLITE CONSTRUCTION AND LAUNCH SERVICES
To build and launch the satellites necessary for the operations of Sirius
Radio, we entered into the Loral Satellite Contract. The Loral Satellite
Contract provides for Loral to construct, launch and deliver three satellites
in-orbit and checked-out, to construct a fourth satellite for use as a ground
spare and to become our launch services provider. We are committed to make
aggregate payments of approximately $745,040 under the Loral Satellite Contract,
which includes $15,000 of long-lead time parts for a fifth satellite and $3,400
for integration analysis of the viability of using a Sea Launch platform as an
alternative launch vehicle for our satellites. As of December 31, 1999,
approximately $434,804 of this commitment has been satisfied. Under the Loral
Satellite Contract, with the exception of a payment made to Loral in March 1993,
payments are made in installments that commenced in April 1997 and will end in
December 2003. Approximately half of these payments are contingent upon Loral
meeting specified milestones in the construction of our satellites. Future
payments are due as follows: $260,236 in 2000, $25,000 in 2002 and $25,000 in
2003.
In the event of a satellite or launch failure, we will be required to pay
Loral the full deferred amount for the affected satellite no later than 120 days
after the date of the failure. If we should elect to put one of the first three
satellites into ground storage, rather than having it shipped to the launch
site, the full deferred amount for the affected satellite will become due within
60 days of such election.
INTEGRATED CIRCUITS
During 1998, we signed an agreement with Lucent pursuant to which Lucent has
agreed to use commercially reasonable efforts to deliver commercial quantities
of integrated circuits ('chip sets'), which will be used in consumer electronic
devices capable of receiving our broadcasts. We agreed to pay Lucent the costs
of the chip set development work totaling $9,000. On February 1, 1999, we
amended and restated this agreement because the design and development of the
chip sets required more engineering resources than originally estimated. We
estimate that the costs of this development work could total approximately
$35,000.
14. SUBSEQUENT EVENTS
On January 31, 2000, we sold 2 million shares of our 9.2% Series D Junior
Cumulative Convertible Preferred Stock to certain affiliates of The Blackstone
Group, L.P. for net proceeds of approximately $192,000. Each share of our 9.2%
Series D Junior Cumulative Convertible Preferred Stock is convertible into
shares of our Common Stock at a price of $34.00 per share.
On February 1, 2000, we sold 2,290,322 shares of our Common Stock to
DaimlerChrysler Corporation ('DaimlerChrysler') for an aggregate purchase price
of approximately $100,000. As part of our agreement with DaimlerChrysler, we
issued DaimlerChrysler warrants to purchase 4 million shares of our Common Stock
at an exercise price of $60.00 per share. These warrants are exercisable based
upon the number of new DaimlerChrysler vehicles equipped to receive our
broadcasts manufactured by DaimlerChrysler, and are fully exercisable after 4
million new DaimlerChrysler vehicles equipped to receive our broadcasts are
manufactured.
On March 3, 2000, we notified the holders of our 10 1/2% Series C
Convertible Preferred Stock and the holders of the outstanding warrants to
purchase shares of our 10 1/2% Series C Convertible Preferred Stock that on
April 12, 2000 we will redeem these securities. On April 12, 2000, each
outstanding share of our 10 1/2% Series C Convertible Preferred Stock will be
redeemed for $100.00, plus accrued and unpaid dividends, and each outstanding
warrant to purchase one share of our 10 1/2% Series C Convertible Preferred
Stock will be redeemed for $35.34.
F-18
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
3.1.1 -- Certificate of Amendment, dated June 16, 1997, to the
Company's Certificate of Incorporation and the Company's
Amended and Restated Certificate of Incorporation, dated
January 31, 1994 (incorporated by reference to Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999).
3.1.2 -- Certificate of Ownership and Merger merging Sirius
Satellite Radio Inc. into CD Radio Inc. dated November 18,
1999 (incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-8 (File No.
333-31362)).
3.2 -- Amended and Restated By-Laws (incorporated by reference
to Exhibit 3.2 to the Company's Registration Statement on
Form S-1 (File No. 33-74782) (the 'S-1 Registration
Statement')).
3.3 -- Certificate of Designations of 5% Delayed Convertible
Preferred Stock (incorporated by reference to Exhibit
10.24 to the Company's Annual Report on Form 10-K/A for
the year ended December 31, 1996 (the '1996 Form 10-K')).
3.4 -- Form of Certificate of Designations of Series B Preferred
Stock (incorporated by reference to Exhibit A to Exhibit 1
to the Company's Registration Statement on Form 8-A filed
on October 30, 1997 (the 'Form 8-A')).
3.5.1 -- Form of Certificate of Designations, Preferences and
Relative, Participating, Optional and Other Special Rights
of 10 1/2% Series C Convertible Preferred Stock (the
'Series C Certificate of Designations') (incorporated by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-4 (File No. 333-34761)).
3.5.2 -- Certificate of Correction to Series C Certificate of
Designations (incorporated by reference to Exhibit 3.5.2
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 (the '1997 Form 10-K')).
3.5.3 -- Certificate of Increase of 10 1/2% Series C Convertible
Preferred Stock (incorporated by reference to Exhibit
3.5.3 to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1998).
3.6 -- Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of the
Company's 9.2% Series A Junior Cumulative Convertible
Preferred Stock (incorporated by reference to Exhibit 3.6
to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999).
3.7 -- Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of the
Company's 9.2% Series B Junior Cumulative Convertible
Preferred Stock (incorporated by reference to Exhibit 3.7
to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999).
3.8 -- Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of the
Company's 9.2% Series D Junior Cumulative Convertible
Preferred Stock (incorporated by reference to Exhibit 99.2
to the Company's Current Report on Form 8-K filed on
December 29, 1999).
4.1 -- Form of Certificate for shares of Common Stock
(incorporated by reference to Exhibit 4.3 to the S-1
Registration Statement).
4.2 -- Form of Certificate for shares of 10 1/2% Series C
Convertible Preferred Stock (incorporated by reference to
Exhibit 4.4 to the Company's Registration Statement on
Form S-4 (File No. 333-34761)).
4.3 -- Form of Certificate for shares of 9.2% Series A Junior
Cumulative Convertible Preferred Stock (incorporated by
reference to Exhibit 4.10.1 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1998 (the
'1998 Form 10-K')).
4.4 -- Form of Certificate for shares of 9.2% Series B Junior
Cumulative Convertible Preferred Stock (incorporated by
reference to Exhibit 4.10.2 to the 1998 Form 10-K).
4.5 -- Form of Certificate for shares of 9.2% Series D Junior
Cumulative Convertible Preferred Stock (filed herewith).
4.6.1 -- Rights Agreement, dated as of October 22, 1997 (the
'Rights Agreement'), between the Company and Continental
Stock Transfer & Trust Company, as rights agent
(incorporated by reference to Exhibit 1 to the Form 8-A).
4.6.2 -- Form of Right Certificate (incorporated by reference to
Exhibit B to Exhibit 1 to the Form 8-A).
4.6.3 -- Amendment to the Rights Agreement dated as of October 13,
1998 (incorporated by reference to Exhibit 99.2 to the
Company's Current Report on Form 8-K dated October 13,
1998).
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
4.6.4 -- Amendment to the Rights Agreement dated as of November
13, 1998 (incorporated by reference to Exhibit 99.7 to the
Company's Current Report on Form 8-K dated November 17,
1998).
4.6.5 -- Amended and Restated Amendment to the Rights Agreement
dated as of December 22, 1998 (incorporated by reference
to Exhibit 6 to the Amendment No. 1 to the Form 8-A filed
on January 6, 1999).
4.6.6 -- Amendment to the Rights Agreement dated as of June 11,
1999 (incorporated by reference to Exhibit 4.1.8 to the
Company's Registration Statement on Form S-4 (File No.
333-82303) filed on July 2, 1999 (the '1999 Units
Registration Statement')).
4.6.7 -- Amendment to the Rights Agreement dated as of September
29, 1999 (incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K filed on October 13,
1999).
4.6.8 -- Amendment to the Rights Agreement dated as of December
23, 1999 (incorporated by reference to Exhibit 99.4 to the
Company's Current Report on Form 8-K filed on December 29,
1999).
4.6.9 -- Amendment to the Rights Agreement dated as of January 28,
2000 (filed herewith).
4.7 -- Indenture, dated as of November 26, 1997, between the
Company and IBJ Schroder Bank & Trust Company, as trustee,
relating to the Company's 15% Senior Secured Discount
Notes due 2007 (incorporated by reference to Exhibit 4.1
to the Company's Registration Statement on Form S-3 (File
No. 333-34769) (the '1997 Units Registration Statement')).
4.8 -- Form of 15% Senior Secured Discount Note due 2007
(incorporated by reference to Exhibit 4.2 to the 1997
Units Registration Statement).
4.9 -- Warrant Agreement, dated as of November 26, 1997, between
the Company and IBJ Schroder Bank & Trust Company, as
warrant agent (incorporated by reference to Exhibit 4.3 to
the 1997 Units Registration Statement).
4.10 -- Form of Warrant (incorporated by reference to Exhibit 4.4
to the 1997 Units Registration Statement).
4.11 -- Form of Preferred Stock Warrant Agreement, dated as of
April 9, 1997, between the Company and each warrantholder
thereof (incorporated by reference to Exhibit 4.12 to the
1997 Form 10-K).
4.12 -- Form of Common Stock Purchase Warrant granted by the
Company to Everest Capital Master Fund, L.P. and to The
Ravich Revocable Trust of 1989 (incorporated by reference
to Exhibit 4.11 to the 1997 Form 10-K).
4.13 -- Indenture, dated as of May 15, 1999, between the Company
and United States Trust Company of New York, as trustee,
relating to the Company's 14 1/2% Senior Secured Notes due
2009 (incorporated by reference to Exhibit 4.4.2 to the
1999 Units Registration Statement).
4.14 -- Form of 14 1/2% Senior Secured Notes due 2009
(incorporated by reference to Exhibit 4.4.2 to the 1999
Units Registration Statement).
4.15 -- Indenture, dated as of September 29, 1999, between the
Company and United States Trust Company of Texas, N.A.,
relating to the Company's 8 3/4% Convertible Subordinated
Notes due 2009 (incorporated by reference to Exhibit 4.2
to the Company's Current Report on Form 8-K filed on
October 13, 1999).
4.16 -- First Supplemental Indenture, dated as of September 29,
1999, between the Company and United States Trust Company
of Texas, N.A., relating to the Company's 8 3/4%
Convertible Subordinated Notes due 2009 (incorporated by
reference to Exhibit 4.1 to the Company's Current Report
on Form 8-K filed on October 1, 1999).
4.17 -- Form of 8 3/4% Convertible Subordinated Notes due 2009
(incorporated by reference to Article VII of Exhibit 4.01
to the Company's Current Report on Form 8-K filed on
October 11, 1999).
4.18 -- Warrant Agreement, dated as of May 15, 1999, between the
Company and United States Trust Company of New York, as
warrant agent (incorporated by reference to Exhibit 4.4.4
to the 1999 Units Registration Statement).
4.19 -- Amended and Restated Pledge Agreement, dated as of May
15, 1999, among the Company, as pledgor, IBJ Whitehall
Bank & Trust Company, as trustee, United States Trust
Company of New York, as trustee, and IBJ Whitehall Bank &
Trust Company, as collateral agent (incorporated by
reference to Exhibit 4.4.5 to the 1999 Units Registration
Statement).
4.20 -- Collateral Pledge and Security Agreement, dated as of May
15, 1999, between the Company, as pledgor, and United
States Trust Company of New York, as trustee (incorporated
by reference to Exhibit 4.4.6 to the 1999 Units
Registration Statement).
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
4.21 -- Intercreditor Agreement, dated May 15, 1999, by and
between IBJ Whitehall Bank & Trust Company, as trustee,
and United States Trust Company of New York, as trustee
(incorporated by reference to Exhibit 4.4.7 to the 1999
Units Registration Statement).
4.22 -- Common Stock Purchase Warrant granted by the Company to
Ford Motor Company, dated June 11, 1999 (incorporated by
reference to Exhibit 4.4.2 to the 1999 Units Registration
Statement).
4.23 -- Common Stock Purchase Warrant granted by the Company to
DaimlerChrysler Corporation, dated January 28, 2000 (filed
herewith).
9.1 -- Voting Trust Agreement, dated as of August 26, 1997, by
and among Darlene Friedland, as Grantor, David Margolese,
as Trustee, and the Company (incorporated by reference to
Exhibit (c) to the Company's Issuer Tender Offer Statement
on Form 13E-4 filed on October 16, 1997).
10.1 -- Lease Agreement, dated as of March 31, 1998, between
Rock-McGraw, Inc. and the Company (incorporated by
reference to Exhibit 10.1.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998).
'D'10.2 -- Amended and Restated Contract, dated as of June 30, 1998,
between the Company and Space Systems/Loral, Inc.
(incorporated by reference to Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q/A for the quarter
ended June 30, 1998).
*10.3 -- Employment Agreement, dated as of January 1, 1999,
between the Company and David Margolese (incorporated by
reference to Exhibit 10.6 to the 1998 Form 10-K).
*10.4 -- Employment Agreement, dated as of December 31, 1999,
between the Company and Robert D. Briskman (filed
herewith).
*10.5 -- Employment Agreement, dated as of March 28, 2000, between
the Company and Joseph S. Capobianco (filed herewith).
*10.6 -- Employment Agreement, dated as of March 28, 2000, between
the Company and Patrick L. Donnelly (filed herewith).
*10.7 -- Employment Agreement, dated as of March 28, 2000, between
the Company and Ira H. Bahr (filed herewith).
10.8 -- Registration Agreement, dated January 2, 1994, between
the Company and M.A. Rothblatt and B.A. Rothblatt
(incorporated by reference to Exhibit 10.20 to the S-1
Registration Statement).
*10.9 -- 1994 Stock Option Plan (incorporated by reference to
Exhibit 10.21 to the S-1 Registration Statement).
*10.10 -- Amended and Restated 1994 Directors' Nonqualified Stock
Option Plan (incorporated by reference to Exhibit 10.22 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1995).
*10.11 -- CD Radio Inc. 401(k) Savings Plan (incorporated by
reference to Exhibit 4.4 to the Company's Registration
Statement on Form S-8 (File No. 333-65473)).
*10.12 -- Sirius Satellite Radio 1999 Long-Term Stock Incentive
Plan (incorporated by reference to Exhibit 4.4 of the
Company's Registration Statement on Form S-8 (File No.
333-31362)).
10.13.1 -- Option Agreement, dated as of October 21, 1992, between
the Company and Batchelder & Partners, Inc. (incorporated
by reference to Exhibit 10.24 to the S-1 Registration
Statement).
10.13.2 -- Form of Option Agreement, dated as of December 29, 1997,
between the Company and each Optionee (incorporated by
reference to Exhibit 10.16.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998).
10.14.1 -- Preferred Stock Investment Agreement, dated October 23,
1996, between the Company and certain investors
(incorporated by reference to Exhibit 10.24 to the 1996
Form 10-K).
10.14.2 -- First Amendment to Preferred Stock Investment Agreement,
dated March 7, 1997, between the Company and certain
investors (incorporated by reference to Exhibit 10.24.1 to
the 1996 Form 10-K).
10.14.3 -- Second Amendment to Preferred Stock Investment Agreement,
dated March 14, 1997, between the Company and certain
investors (incorporated by reference to Exhibit 10.24.2 to
the 1996 Form 10-K).
10.15 -- Letter, dated May 29, 1998, terminating Launch Services
Agreement dated July 22, 1997 between the Company and
Arianespace S.A.; Arianespace Customer Loan Agreements
dated July 22, 1997 for Launches #1 and #2 between the
Company and Arianespace Finance S.A.; and the Multiparty
Agreements dated July 22, 1997 for Launches #1 and #2
among the Company, Arianespace S.A. and Arianespace
Finance S.A. (incorporated by reference to Exhibit 10.21
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998).
</TABLE>
E-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
10.16 -- Summary Term Sheet/Commitment, dated June 15, 1997, among
the Company and Everest Capital International, Ltd.,
Everest Capital Fund, L.P. and The Ravich Revocable Trust
of 1989 (incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K filed on July 8,
1997).
10.17.1 -- Engagement Letter Agreement, dated June 14, 1997, between
the Company and Libra Investments, Inc. (incorporated by
reference to Exhibit 10.26.1 to the 1997 Form 10-K).
10.17.2 -- Engagement Letter Agreement, dated August 6, 1997,
between the Company and Libra Investments, Inc.
(incorporated by reference to Exhibit 10.26.2 to the 1997
Form 10-K).
10.18 -- Radio License Agreement, dated January 21, 1998, between
the Company and Bloomberg Communications Inc.
(incorporated by reference to Exhibit 10.28 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998).
'D'10.19 -- Amended and Restated Agreement, dated as of February 1,
1999, between Lucent Technologies Inc. and the Company
(incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K filed on February 4,
1999).
10.20 -- Stock Purchase Agreement, dated as of August 5, 1997,
between the Company, David Margolese and Loral Space &
Communications Ltd. (incorporated by reference to Exhibit
99.1 to the Company's Current Report on Form 8-K filed on
August 19, 1997).
10.21 -- Stock Purchase Agreement, dated as of October 8, 1998,
between the Company and Prime 66 Partners, L.P.
(incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K dated October 8,
1998).
10.22.1 -- Stock Purchase Agreement, dated as of November 13, 1998
(the 'Apollo Stock Purchase Agreement'), by and among the
Company, Apollo Investment Fund IV, L.P. and Apollo
Overseas Partners IV, L.P. (incorporated by reference to
Exhibit 99.1 to the Company's Current Report on Form 8-K
dated November 17, 1998).
10.22.2 -- Amendment No. 1, dated as of December 23, 1998, to the
Apollo Stock Purchase Agreement (incorporated by reference
to Exhibit 10.28.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999).
10.22.3 -- Second Amendment, dated as of December 23, 1999, to the
Apollo Stock Purchase Agreement (incorporated by reference
to Exhibit 99.3 to the Company's Current Report on
Form 8-K filed on December 29, 1999).
10.23 -- Stock Purchase Agreement, dated as of December 23, 1999
(the 'Blackstone Stock Purchase Agreement'), by and
between the Company and Blackstone Capital Partners III
Merchant Banking Fund L.P. (incorporated by reference to
Exhibit 99.1 to the Company's Current Report on Form 8-K
filed on December 29, 1999).
10.24 -- Stock Purchase Agreement, dated as of January 28, 2000,
among the Company, Mercedes-Benz USA, Inc., Freightliner
Corporation and DaimlerChrysler Corporation (filed
herewith).
10.25 -- Voting Agreement, dated as of November 13, 1998, by and
among Apollo Investment Fund IV, L.P., Apollo Overseas
Partners IV, L.P. and David Margolese (incorporated by
reference to Exhibit 99.5 to the Company's Current Report
on Form 8-K dated November 17, 1998).
10.26 -- Tag-Along Agreement, dated as of November 13, 1998, by
and among Apollo Investment Fund IV, L.P., Apollo Overseas
Partners IV, L.P., the Company and David Margolese
(incorporated by reference to Exhibit 99.6 to the
Company's Current Report on Form 8-K dated November 17,
1998).
'D'10.27 -- Agreement, dated as of June 11, 1999, between the Company
and Ford Motor Company (incorporated by reference to
Exhibit 10.33 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999).
21.1 -- List of Subsidiaries.
23.1 -- Consent of Arthur Andersen LLP.
27.1 -- Financial Data Schedule (filed herewith).
</TABLE>
- ---------
* This document has been identified as a management contract or compensatory
plan or arrangement.
'D' Portions of these exhibits have been omitted pursuant to Applications for
Confidential treatment filed by the Company with the Securities and Exchange
Commission.
E-4
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as................................... 'D'
<PAGE>
EXHIBIT 4.5
Form of Certificate for Shares of 9.2% Series D Junior Cumulative Convertible
Preferred Stock
===============================================================
NUMBER SHARES
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SIRIUS SATELLITE RADIO INC.
See reverse for Certain Definitions
10,700,000 SHARES 9.2% SERIES D JUNIOR CUMULATIVE CONVERTIBLE PREFERRED
STOCK PAR VALUE $.001 EACH
THE CORPORATION WILL FURNISH TO ANY SHAREHOLDER WHO SO REQUESTS THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER
SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES OF THEREOF AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS
This is to Certify that_________________________________________ is the owner of
___________________________________________________________fully paid and
non-assessable shares of 9.2% Series D Junior Cumulative Convertible preferred
Stock of Sirius Satellite Radio Inc. transferable on the books of the
Corporation by the holder hereof in person or by duly authorized Attorney upon
surrender of this Certificate, properly endorsed.
Witness, the seal of the Corporation and the signatures of its duly authorized
officers.
Dated
- ---------------------- -----------------------
Senior Vice President Assistant Secretary
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM --as tenants in common
TEN ENT --as tenants by the entireties
JT TEN --as joint tenants with right of survivorship and not as tenants in
common UNIF GIFT ACT- . . . . . Custodian . . . . . . . . (Cust) (Minor) under
Uniform Gifts to Minors Act . . . . . . . . . . . . . . . . . . . . . . (State)
For value received __________ hereby sell, assign and transfer unto Please
insert social security or other identifying number of assignee__________________
________________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Shares represented by the within Certificate and does hereby irrevocably
constitute and appoint _____________________________________________________
Attorney to transfer the said Shares on the books of the within named
Corporation with full power of substitution in the premises.
Dated ___________________
In Presence of ________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF SUCH ACT AND SUCH LAWS.
<PAGE>
EXHIBIT 4.6.9
AMENDMENT TO RIGHTS AGREEMENT
AMENDMENT, dated as of January 28, 2000 (this "Amendment"), by and between
SIRIUS SATELLITE RADIO INC., a Delaware corporation (the "Company"), and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as rights agent (the "Rights
Agent").
RECITALS
WHEREAS, the Company and the Rights Agent are parties to a Rights
Agreement, dated as of October 22, 1997 (as heretofore amended, the "Rights
Agreement");
WHEREAS, the Company proposes to (a) issue and sell 2,290,322 shares of
its common stock, par value $.001 per share ("Common Stock"), to DaimlerChrysler
Corporation (the "Purchaser") pursuant to a Stock Purchase Agreement, dated as
of January 28, 2000 (the "Stock Purchase Agreement"), by and between the Company
and the Purchaser and (b) issue to the Purchaser a warrant (the "Warrant")
entitling the Purchaser to purchase from the Company, on terms and subject to
the conditions specified therein, up to an aggregate of 4,000,000 shares of
Common Stock (as such number may be adjusted pursuant to the Warrant);
WHEREAS, under the terms of the Rights Agreement, unless the Rights
Agreement is amended, the Purchaser would become an "Acquiring Person," as
defined in Section 1(a) of the Rights Agreement, upon the purchase of the Common
Stock pursuant to the Stock Purchase Agreement and/or upon acquisition of the
Warrant; and
WHEREAS, the Board of Directors of the Company deems it desirable and in
the best interests of the Company and its stockholders to amend the Rights
Agreement to exclude the Purchaser and any of the Purchaser's Affiliates and
Associates (each as defined in the Rights Agreement) who would otherwise be
deemed Beneficial Owners (as defined in the Rights Agreement) as a result of
such transaction from such definition of "Acquiring Person."
Accordingly, the parties agree as follows:
1. Amendment of Section 1(a) of the Rights Agreement. The definition of
"Acquiring Person" set forth in Section 1(a) of the Rights Agreement is amended
by adding the following clause at the end of such Section 1(a):
"; provided, further, that DaimlerChrysler Corporation (hereinafter
referred to as "DCC"), and any of the Affiliates or Associates of DCC that
would otherwise be deemed to be Beneficial Owners of the Company's
securities (such Affiliates and Associates, together with DCC, are
hereinafter referred to as the "DaimlerChrysler Investors"), shall not be,
or be deemed to be, Acquiring Persons solely by reason of (1) the issuance
by the Company, and the acquisition or beneficial ownership by the
DaimlerChrysler Investors,
<PAGE>
2
of a common stock purchase warrant issued on January 28, 2000 or the
Common Shares issued pursuant thereto and/or (2) the purchase or
beneficial ownership by the DaimlerChrysler Investors of up to (but not
more than) 2,290,322 Common Shares pursuant to the Stock Purchase
Agreement dated as of January 28, 2000 by and between the Company and
DCC."
2. Miscellaneous. This Amendment shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be governed
by and construed in accordance with the laws of such state applicable to
contracts to be made and performed entirely within such state. This Amendment
may be executed in any number of counterparts, each of such counterparts shall
for all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument. If any provision, covenant
or restriction of this Amendment is held by a court of competent jurisdiction or
other authority to be invalid, illegal or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Amendment shall remain in
full force and effect and shall in no way be effected, impaired or invalidated.
(Signature page follows)
<PAGE>
3
EXECUTED as of the date set forth above.
SIRIUS SATELLITE RADIO INC.
By: /s/ Patrick L. Donnelly
----------------------------------------------
Name: Patrick L. Donnelly
Title: Senior Vice President, General Counsel
and Secretary
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
By: /s/ William F. Seegraber
----------------------------------------------
Name: William F. Seegraber
Title: Vice President
<PAGE>
EXHIBIT 4.23
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THIS WARRANT NOR
SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT AND SUCH LAWS.
SIRIUS SATELLITE RADIO INC.
COMMON STOCK PURCHASE WARRANT
This certifies that, for good and valuable consideration, Sirius Satellite
Radio Inc., a Delaware corporation (the "Company"), grants to DaimlerChrysler
Corporation, a Delaware corporation ("DCC"), or registered assigns (together
with DCC, the "Warrantholder"), the right to subscribe for and purchase from the
Company an aggregate of 4,000,000 validly issued, fully paid and nonassessable
shares (the "Warrant Shares") of the Company's common stock, par value $0.001
per share (the "Common Stock"), at the purchase price per share of $60 (the
"Exercise Price"), at any time and from time to time, during the period from and
including 9:00 AM, New York City time, on the date the Company commences its
commercial broadcasts from orbiting satellites until 5:00 PM, New York City
time, on the date of the termination or expiration of the Agreement, dated as of
January 28, 2000, among the Company, DCC, Freightliner Corporation
("Freightliner") and Mercedes-Benz USA, Inc. ("Mercedes" and, together with DCC,
Freightliner and their respective subsidiaries and affiliates,
"DaimlerChrysler") (the "Expiration Date"), all subject to the terms, conditions
and adjustments herein set forth.
Certain capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in Section 10.
Certificate No. DCX-1
Number of Shares: 4,000,000
Name of Warrantholder: DaimlerChrysler Corporation, a Delaware corporation
<PAGE>
2
1. Duration and Exercise of Warrant; Limitations on Exercise; Payment of
Taxes.
1.1 Excercisability of Warrant. Subject to the terms and conditions set
forth herein, the right to exercise this Warrant shall vest, and this Warrant
shall become exercisable, as follows:
(a) with respect to 1,000,000 shares of Common Stock, on the date
that there are 500,000 Total Enabled Vehicles;
(b) with respect to an additional 500,000 shares of Common Stock, on
the date there are 1,000,000 Total Enabled Vehicles;
(c) with respect to an additional 500,000 shares of Common Stock, on
the date there are 2,000,000 Total Enabled Vehicles;
(d) with respect to an additional 1,000,000 shares of Common Stock,
on the date there are 3,000,000 Total Enabled Vehicles; and
(e) with respect to an additional 1,000,000 shares of Common Stock,
on the date there are 4,000,000 Total Enabled Vehicles.
The Warrantholder shall have no right to exercise this Warrant with respect to
shares of Common Stock which are not vested and exercisable as described in this
Section 1.1.
1.2 Duration and Exercise of Warrant. Subject to the terms and conditions
set forth herein, including Section 1.1, the Warrant may be exercised, in whole
or in part, by the Warrantholder by:
(a) the surrender of this Warrant to the Company, with a duly
executed Exercise Form specifying the number of Warrant Shares to be
purchased, during normal business hours on any Business Day prior to the
Expiration Date; and
(b) the delivery of payment to the Company, for the account of the
Company, by cash, by certified or bank cashier's check or by wire transfer
of immediately available funds in accordance with wire instructions that
shall be provided by the Company upon request, of the Exercise Price for
the number of Warrant Shares specified in the Exercise Form in lawful
money of the United States of America.
The Company agrees that such Warrant Shares shall be deemed to be issued to the
Warrantholder as the record holder of such Warrant Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for the Warrant Shares as aforesaid.
1.3 Limitations on Exercise. Notwithstanding anything to the contrary
herein, this Warrant may be exercised only upon (i) the delivery to the Company
of any certificates, legal opinions, and other documents reasonably requested by
the Company to satisfy the Company that
<PAGE>
3
the proposed exercise of this Warrant may be effected without registration under
the Securities Act, (ii) receipt by the Company of FCC approval of the proposed
exercise, if such approval is required (as determined by a written opinion of
the Company's special FCC counsel, delivered to the Warrantholder) to maintain
any license granted to the Company by the FCC, or to maintain the Company's
eligibility for any FCC license for which it has applied, or reasonably expects
to apply, for, (iii) in the event that the acquisition of the Warrant Shares is
subject to the provisions of the HSR Act, any person or entity required to file
a notification and report in compliance with the HSR Act shall have filed such
form and the applicable waiting period with respect to such form (including any
extension thereof by reason of a request for additional information) shall have
expired or been terminated, and (iv) receipt by the Company of approval of any
other applicable Governmental Authority of the proposed exercise. The
Warrantholder shall not be entitled to exercise this Warrant, or any part
thereof, unless and until such approvals, certificates, legal opinions or other
documents are reasonably acceptable to the Company. The cost of such approvals,
certificates, legal opinions and other documents, if required, shall be borne by
the Warrantholder.
1.4 Warrant Shares Certificate. A stock certificate or certificates for
the Warrant Shares specified in the Exercise Form shall be delivered to the
Warrantholder within five Business Days after receipt of the Exercise Form and
receipt of payment of the purchase price. If this Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of the stock
certificate or certificates, deliver to the Warrantholder a new Warrant
evidencing the rights to purchase the remaining Warrant Shares, which new
Warrant shall in all other respects be identical with this Warrant.
1.5 Payment of Taxes. The issuance of certificates for Warrant Shares
shall be made without charge to the Warrantholder for any documentary, stamp or
similar stock transfer or other issuance tax in respect thereto; provided that
the Warrantholder shall be required to pay any and all taxes which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the then Warrantholder as reflected
upon the books of the Company.
1.6 Divisibility of Warrant; Transfer of Warrant. (a) This Warrant may
only be transferred by the Warrantholder with the prior written consent of the
Company; provided that the Warrantholder shall have the right to transfer this
Warrant to any wholly-owned subsidiary of the original Warrantholder. Except as
set forth above, any transfer of this Warrant without the prior written consent
of the Company shall be void and of no force and effect. Except as set forth
above, the Warrantholder expressly agrees shall not sell, transfer, assign or
otherwise dispose of any of the Warrant Shares until the first anniversary of
the acquisition of such Warrant Shares pursuant to this Warrant without the
prior written consent of the Company.
(b) Subject to the provisions of this Section, this Warrant may be divided
into warrants of one thousand shares or multiples thereof, upon surrender at the
office of the Company located at 1221 Avenue of the Americas, 36th Floor, New
York, New York 10020, without charge to any Warrantholder. Subject to the
provisions of this Section, upon such division, the Warrants may
<PAGE>
4
be transferred of record as the then Warrantholder may specify without charge to
such Warrantholder (other than any applicable transfer taxes).
(c) Subject to the provisions of this Section 16, upon surrender of this
Warrant to the Company with a duly executed Assignment Form and funds sufficient
to pay any transfer tax, the Company shall, without charge, execute and deliver
a new Warrant or Warrants of like tenor in the name of the assignee named in
such Assignment Form, and this Warrant shall promptly be canceled. Prior to any
proposed transfer (whether as the result of a division or otherwise) of this
Warrant, Warrantholder shall give written notice to the Company of
Warrantholder's intention to effect such transfer. Each such notice shall
describe the manner and circumstances of the proposed transfer in sufficient
detail, and, if requested by the Company, shall be accompanied by a written
opinion of legal counsel, which opinion shall be addressed to the Company and be
reasonably satisfactory in form and substance to the Company, to the effect that
the proposed transfer of this Warrant may be effected without registration under
the Securities Act. In addition to the restrictions contained in this Section,
the Warrantholder shall not be entitled to transfer this Warrant, or any part
thereof, if such legal opinion is not reasonably acceptable to the Company. The
term "Warrant" as used in this Agreement shall be deemed to include any Warrants
issued in substitution or exchange for this Warrant.
2. Restrictions on Transfer; Restrictive Legends.
Except as otherwise permitted by this Section 2, each Warrant shall (and
each Warrant issued upon direct or indirect transfer or in substitution for any
Warrant pursuant to Section 1.6 or Section 4 shall) be stamped or otherwise
imprinted with a legend in substantially the following form:
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THIS WARRANT NOR SUCH
SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT AND SUCH LAWS.
Except as otherwise permitted by this Section 2, each stock certificate for
Warrant Shares issued upon the exercise of any Warrant and each stock
certificate issued upon the direct or indirect transfer of any such Warrant
Shares shall be stamped or otherwise imprinted with a legend in substantially
the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE
<PAGE>
5
REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT AND SUCH LAWS.
Notwithstanding the foregoing, the Warrantholder may require the Company
to issue a Warrant or a stock certificate for Warrant Shares, in each case
without a legend, if either (i) such Warrant or such Warrant Shares, as the case
may be, have been registered for resale under the Securities Act or (ii) the
Warrantholder has delivered to the Company an opinion of legal counsel, which
opinion shall be addressed to the Company and be reasonably satisfactory in form
and substance to the Company, to the effect that such registration is not
required with respect to such Warrant or such Warrant Shares, as the case may
be.
By acceptance of this Warrant, the Warrantholder expressly agrees that it
will at all times comply with the restrictions contained in Rule 144(e) under
the Securities Act (as in effect on the date hereof) when selling, transferring
or otherwise disposing Warrant Shares, even if such restrictions would not then
be applicable to the Warrantholder.
3. Reservation and Registration of Shares, Etc. The Company covenants and
agrees as follows:
(a) all Warrant Shares which are issued upon the exercise of this
Warrant will, upon issuance, be validly issued, fully paid, and
nonassessable, not subject to any preemptive rights, and free from all
taxes, liens, security interests, charges, and other encumbrances with
respect to the issue thereof, other than taxes with respect to any
transfer occurring contemporaneously with such issue;
(b) during the period within which this Warrant may be exercised,
the Company will at all times have authorized and reserved, and keep
available free from preemptive rights and any liens and encumbrances, a
sufficient number of shares of Common Stock to provide for the exercise of
the rights represented by this Warrant; and
(c) the Company will, from time to time, take all such action as may
be required to assure that the par value per share of the Warrant Shares
is at all times equal to or less than the then effective Exercise Price.
4. Loss or Destruction of Warrant. Subject to the terms and conditions
hereof, upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant and, in the case of
loss, theft or destruction, of such bond or indemnification as the Company may
reasonably require, and, in the case of such mutilation, upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor.
5. Ownership of Warrant. The Company may deem and treat the Person in
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall
<PAGE>
6
not be affected by any notice to the contrary, until presentation of this
Warrant for registration of transfer.
6. Certain Adjustments.
6.1 The number of Warrant Shares purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment as follows:
(a) Stock Dividends. If at any time after the date of the issuance
of this Warrant (i) the Company shall fix a record date for the issuance
of any stock dividend payable in shares of Common Stock; or (ii) the
number of shares of Common Stock shall have been increased by a
subdivision or split-up of shares of Common Stock, then, on the record
date fixed for the determination of holders of Common Stock entitled to
receive such dividend or immediately after the effective date of such
subdivision or split-up, as the case may be, the number of shares to be
delivered upon exercise of this Warrant shall be increased so that the
Warrantholder shall be entitled to receive the number of shares of Common
Stock that such Warrantholder would have owned immediately following such
action had this Warrant been exercised immediately prior thereto, and the
Exercise Price shall be adjusted as provided below in paragraph (g).
(b) Combination of Stock. If the number of shares of Common Stock
outstanding at any time after the date of the issuance of this Warrant
shall have been decreased by a combination of the outstanding shares of
Common Stock, then, immediately after the effective date of such
combination, the number of shares of Common Stock to be delivered upon
exercise of this Warrant shall be decreased so that the Warrantholder
thereafter shall be entitled to receive the number of shares of Common
Stock that such Warrantholder would have owned immediately following such
action had this Warrant been exercised immediately prior thereto, and the
Exercise Price shall be adjusted as provided below in paragraph (g).
(c) Reorganization, etc. If any capital reorganization of the
Company, any reclassification of the Common Stock, any consolidation of
the Company with or merger of the Company with or into any other Person,
or any sale or lease or other transfer of all or substantially all of the
assets of the Company to any other Person, shall be effected in such a way
that the holders of Common Stock shall be entitled to receive stock, other
securities or assets (whether such stock, other securities or assets are
issued or distributed by the Company or another Person) with respect to or
in exchange for Common Stock, then, upon exercise of this Warrant, the
Warrantholder shall have the right to receive the kind and amount of
stock, other securities or assets receivable upon such reorganization,
reclassification, consolidation, merger or sale, lease or other transfer
by a holder of the number of shares of Common Stock that such
Warrantholder would have been entitled to receive upon exercise of this
Warrant had this Warrant been exercised immediately before such
reorganization, reclassification, consolidation, merger or sale, lease or
other transfer, subject to adjustments that shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Section 6.
The Company shall not effect any such
<PAGE>
7
consolidation, merger or sale, lease or other transfer, unless prior to,
or simultaneously with, the consummation thereof, the successor Person (if
other than the Company) resulting from such consolidation or merger, or
such Person purchasing, leasing or otherwise acquiring such assets, shall
assume, by written instrument, the obligation to deliver to the
Warrantholder the shares of stock, securities or assets to which, in
accordance with the foregoing provisions, the Warrantholder may be
entitled and all other obligations of the Company under this Warrant. The
provisions of this paragraph (c) shall apply to successive
reorganizations, reclassifications, consolidations, mergers, sales,
leasing transactions and other transfers.
(d) Distributions to all Holders of Common Stock. If the Company
shall, at any time after the date of issuance of this Warrant, fix a
record date to distribute to all holders of its Common Stock any shares of
capital stock of the Company (other than Common Stock) or evidences of its
indebtedness or assets (not including regular quarterly cash dividends and
distributions paid from retained earnings of the Company) or rights or
warrants to subscribe for or purchase any of its securities, then the
Warrantholder shall be entitled to receive, upon exercise of this Warrant,
that portion of such distribution to which it would have been entitled had
the Warrantholder exercised its Warrant immediately prior to the date of
such distribution. At the time it fixes the record date for such
distribution, the Company shall allocate sufficient reserves to ensure the
timely and full performance of the provisions of this Subsection. The
Company shall promptly (but in any case no later than five Business Days
prior to the record date of such distribution) give notice to the
Warrantholder that such distribution will take place.
(e) Fractional Shares. No fractional shares of Common Stock or scrip
shall be issued to any Warrantholder in connection with the exercise of
this Warrant. Instead of any fractional shares of Common Stock that would
otherwise be issuable to such Warrantholder, the Company shall pay to such
Warrantholder a cash adjustment in respect of such fractional interest in
an amount equal to that fractional interest of the then current Fair
Market Value per share of Common Stock.
(f) Carryover. Notwithstanding any other provision of this Section
6, no adjustment shall be made to the number of shares of Common Stock to
be delivered to the Warrantholder (or to the Exercise Price) if such
adjustment represents less than 1% of the number of shares to be so
delivered, but any lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment which
together with any adjustments so carried forward shall amount to 1% or
more of the number of shares to be so delivered.
(g) Exercise Price Adjustment. Whenever the number of Warrant Shares
purchasable upon the exercise of this Warrant is adjusted, as herein
provided, the Exercise Price payable upon the exercise of this Warrant
shall be adjusted by multiplying such Exercise Price immediately prior to
such adjustment by a fraction, of which the numerator shall be the number
of Warrant Shares purchasable upon the exercise of the Warrant
<PAGE>
8
immediately prior to such adjustment, and of which the denominator shall
be the number of Warrant Shares purchasable immediately thereafter.
6.2 Rights Offering. In the event the Company shall effect an offering of
Common Stock pro rata among its stockholders, the Warrantholder shall be
entitled to elect to participate in each and every such offering as if this
Warrant had been exercised immediately prior to each such offering. The Company
shall promptly (but in any case no later than five Business Days prior to such
rights offering) give notice to the Warrantholder that such rights offering will
take place. The Company shall not be required to make any adjustment with
respect to the issuance of shares of Common Stock pursuant to a rights offering
in which the holder hereof elects to participate under the provisions of this
Section 6.2.
6.3 Notice of Adjustments. Whenever the number of Warrant Shares or the
Exercise Price of such Warrant Shares is adjusted, as herein provided, the
Company shall promptly give to the Warrantholder notice of such adjustment or
adjustments and a certificate of a firm of independent public accountants of
recognized national standing (which shall be appointed at the Company's expense
and may be the independent public accountants regularly employed by the Company)
setting forth the number of Warrant Shares and the Exercise Price of such
Warrant Shares after such adjustment, a brief statement of the facts requiring
such adjustment, and the computation by which such adjustment was made.
6.4 Notice of Extraordinary Corporate Events. In case the Company after
the date hereof shall propose to (i) distribute any dividend (whether stock or
cash or otherwise) to the holders of shares of Common Stock or to make any other
distribution to the holders of shares of Common Stock, (ii) offer to the holders
of shares of Common Stock rights to subscribe for or purchase any additional
shares of any class of stock or any other rights or options, or (iii) effect any
reclassification of the Common Stock (other than a reclassification involving
merely the subdivision or combination of outstanding shares of Common Stock),
any capital reorganization, any consolidation or merger (other than a merger in
which no distribution of securities or other property is to be made to holders
of shares of Common Stock), any sale or lease or transfer or other disposition
of all or substantially all of its property, assets and business, or the
liquidation, dissolution or winding up of the Company, then, in each such case,
the Company shall give to the Warrantholder notice of such proposed action,
which notice shall specify the date on which (a) the books of the Company shall
close, or (b) a record shall be taken for determining the holders of Common
Stock entitled to receive such stock dividends or other distribution or such
rights or options, or (c) such reclassification, reorganization, consolidation,
merger, sale, transfer, other disposition, liquidation, dissolution or winding
up shall take place or commence, as the case may be, and the date, if any, as of
which it is expected that holders of record of Common Stock shall be entitled to
receive securities or other property deliverable upon such action. Such notice
shall be given in the case of any action covered by clause (i) or (ii) above at
least ten days prior to the record date for determining holders of Common Stock
for purposes of receiving such payment or offer, or in the case of any action
covered by clause (iii) above at least 30 days prior to the date upon which such
action takes place and 20 days prior to any record date to determine holders of
Common Stock entitled to receive such securities or other property.
<PAGE>
9
6.5 Effect of Failure to Notify. Failure to file any certificate or notice
or to give any notice, or any defect in any certificate or notice, pursuant to
Sections 6.3 and 6.4 shall not affect the legality or validity of the adjustment
to the Exercise Price, the number of shares purchasable upon exercise of this
Warrant, or any transaction giving rise thereto.
7. Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the
Securities Act or any other similar rule or regulation of the SEC that may at
any time permit the Holders to sell securities of the Company to the public
without registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the
Exchange Act; and
(c) furnish to each Holder so long as such Holder owns Warrants,
promptly upon request, (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested
to permit the Holders to sell such securities without registration.
8. Amendments. Any provision of this Warrant may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent or
approval of the Company and the Holders who hold a majority in interest of the
Warrants; provided that it is not necessary that the exact form of the amendment
be approved by the holders of a majority in interest of the Warrants if such
holders have approved the substance of such amendment. Any amendment or waiver
effected in accordance with this Section 8 shall be binding upon each Holder and
the Company.
9. Expiration of the Warrant. The obligations of the Company pursuant to
this Warrant shall terminate on the Expiration Date.
10. Definitions. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
"Aftermarket Freightliner Receiver" shall mean each Sirius Receiver
equipped to receive the Sirius Service, and not any Competing Service,
which is sold by a Freightliner dealer, Travel Center of America location
or other heavy truck dealer or service center owned, controlled by or
affiliated with Freightliner from time to time.
"Assignment Form" shall mean an instrument of transfer of a warrant
in the form annexed hereto as Exhibit B.
<PAGE>
10
"Board" shall mean the Board of Directors of the Company or any duly
authorized committee thereof.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banks are required or authorized by law to close in The City
of New York, State of New York.
"Bylaws" shall mean the Amended and Restated Bylaws of the Company,
as the same may be amended and in effect from time to time.
"Certificate of Incorporation" shall mean the Amended and Restated
Certificate of Incorporation of the Company, as the same may be amended
and in effect from time to time.
"Common Stock" shall have the meaning specified on the cover of this
Warrant.
"Company" shall have the meaning specified on the cover of this
Warrant.
"Competing Service" shall mean any satellite digital audio radio
service offered in the continental United States within the frequency
range from 2310 to 2360 megahertz.
"Contractual Obligation" shall mean as to any Person, any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other
instrument to which such Person is a party or by which it or any of its
property is bound.
"DaimlerChrysler" shall have the meaning specified on the cover of
this Warrant.
"DaimlerChrysler Enabled Vehicle" shall mean any vehicle which
contains a Sirius Receiver capable of receiving the Sirius Service, and
not any Competing Service, that was installed in (a) a factory owned or
operated by DaimlerChrysler, any present or future subsidiary of
DaimlerChrysler, or (b) the factory from which DaimlerChrysler or any
present or future subsidiary of DaimlerChrysler acquired such vehicle for
distribution in the United States, or (c) any other service facility
designated in writing by DaimlerChrysler (which may include dealerships as
long as such installation principally results from a program authorized by
DaimlerChrysler).
"DCC" shall have the meaning specified on the cover of this Warrant.
"Eligible Vehicle" means a DaimlerChrysler Enabled Vehicle or any
vehicle containing an Aftermarket Freightliner Receiver.
"Exchange Act" shall mean the Securities Exchange Act of 1934 or any
similar Federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include a reference to a
comparable section, if any, of any such similar Federal statute.
<PAGE>
11
"Exercise Form" shall mean a request to exercise this Warrant in the
form annexed hereto as Exhibit A.
"Exercise Price" shall have the meaning specified on the cover of
this Warrant.
"Expiration Date" shall have the meaning specified on the cover of
this Warrant.
"Fair Market Value" shall mean, With respect to a share of Common
Stock as of a particular date (the "Determination Date"):
(i) if the Common Stock is registered under the Exchange Act, (a)
the average of the daily closing sales prices of the Common Stock for the
20 consecutive trading days immediately preceding such date, or (b) if the
securities have been registered under the Exchange Act for less than 20
consecutive trading days before such date, then the average of the daily
closing sales prices for all of trading days before such date for which
closing sales prices are available, in the case of each of (a) and (b), as
certified by any Vice President or the Chief Financial Officer of the
Company; or
(ii) if the Common Stock is not registered under the Exchange Act,
then the Fair Market Value shall be as reasonably determined in good faith
by the Board or a duly appointed committee of the Board (which
determination shall be reasonably described in the written notice given to
the Warrantholder).
For the purposes of clause (i) of this definition, the closing sales price
for each such trading day shall be: (1) in the case of a security listed
or admitted to trading on any United States national securities exchange
or quotation system, the closing sales price, regular way, on such day, or
if no sale takes place on such day, the average of the closing bid and
asked prices on such day; (2) in the case of a security not then listed or
admitted to trading on any national securities exchange or quotation
system, the last reported sale price on such day, or if no sale takes
place on such day, the average of the closing bid and asked prices on such
day, as reported by a reputable quotation source designated by the
Company; (3) in the case of a security not then listed or admitted to
trading on any national securities exchange or quotation system and as to
which no such reported sale price or bid and asked prices are available,
the average of the reported high bid and low asked prices on such day, as
reported by a reputable quotation service, or a newspaper of general
circulation in the Borough of Manhattan, City and State of New York,
customarily published on each Business Day, designated by the Company, or
if there shall be no bid and asked prices on such day, the average of the
high bid and low asked prices, as so reported, on the most recent day (not
more than 30 days prior to the date in question) for which prices have
been so reported; and (4) if there are no bid and asked prices reported
during the 30 days prior to the date in question, the Fair Market Value
shall be determined as if the securities were not registered under the
Exchange Act
"FCC" shall mean the Federal Communications Commission.
<PAGE>
12
"Freightliner" shall have the meaning specified on the cover of this
Warrant.
"Governmental Authority" shall mean the government of any nation,
state, city, locality or other political subdivision of any thereof, and
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government or any
international regulatory body having or asserting jurisdiction over a
Person, its business or its properties.
"Head Unit" shall mean a device, which is integrated in the
dashboard of a vehicle, which provides the user interface for the
reception of radio signals and, in some cases, the playback of recorded
media, such as cassette tapes, compact discs, minidiscs and DVDs.
"Holder(s)" shall mean holder(s) of Warrants.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations of the Federal
Trade Commission thereunder.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other),
restriction or other security interest of any kind or nature whatsoever.
"Mercedes" shall have the meaning specified on the cover of this
Warrant.
"Mitsubishi" shall mean Mitsubishi Motor Sales of America, Inc. or
any affiliate thereof or successor thereto.
"Mitsubishi Agreement" shall mean an agreement between the Company
and Mitsubishi pursuant to which the Company becomes the lead provider (as
defined or described in such agreement) of satellite digital audio radio
service with respect to new Mitsubishi vehicles sold or leased in the
United States.
"Mitsubishi Enabled Vehicle" shall mean a Mitsubishi vehicle which
is equipped to receive the Sirius Service, and not any Competing Service,
pursuant to the Mitsubishi Agreement.
"Nasdaq" shall mean the National Association of Securities Dealers
Automated Quotations System.
"Person" shall mean any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, Governmental Authority or
other entity of any kind.
"Requirement of Law" shall mean, as to any Person, the Certificate
of Incorporation and Bylaws, or other organizational or governing
documents, of such Person, and any law, treaty, rule, regulation,
qualification, license or franchise or
<PAGE>
13
determination of an arbitrator or a court or other Governmental Authority,
in each case applicable or binding upon such Person or any of its property
or to which such Person or any of its property is subject or pertaining to
any or all of the transactions contemplated hereby.
"Rule 144" shall have the meaning specified in Section 7.
"SEC" shall mean the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act or the
Exchange Act, whichever is the relevant statute for the particular
purpose.
"Securities Act" shall have the meaning specified on the cover of
this Warrant, or any similar Federal statute, and the rules and
regulations of the SEC thereunder, all as the same shall be in effect at
the time. Reference to a particular section of the Securities Act, shall
include a reference to the comparable section, if any, of any such similar
Federal statute.
"Sirius Receiver" shall mean (a) a Head Unit which is capable of
receiving and outputting the Sirius signal, either as a result of
circuitry included in the Head Unit itself or as a result of another
device and (b) an antenna suitable for receiving the Sirius signal.
"Sirius Service" shall mean the digital audio radio service that the
Company will offer to Sirius Subscribers which will permit such Sirius
Subscribers to receive a multichannel audio service broadcast from
satellites and, in certain instances, terrestrial repeaters.
"Sirius Subscriber" shall mean any person or entity that has agreed
to pay the Company for the right to receive the Sirius Service.
"Subsidiary" shall mean, in respect of any Person, any other Person
of which, at the time as of which any determination is made, such Person
or one or more of its subsidiaries has, directly or indirectly, voting
control.
"Total Enabled Vehicles" shall mean, at any time, a number equal to
(i) the number of Eligible Vehicles at such time, plus (ii) if the Company
enters into the Mitsubishi Agreement, the number of Mitsubishi Enabled
Vehicles which have been produced at such time.
"Warrantholder" shall have the meaning specified on the cover of
this Warrant.
"Warrant Shares" shall have the meaning specified on the cover of
this Warrant.
11. No Impairment. The Company shall not by any action, including, without
limitation, amending the Certificate of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid
<PAGE>
14
or seek to avoid the observance or performance of any of the terms of this
Warrant, but shall at all times in good faith assist in the carrying out of all
such terms and in the taking of all such reasonable actions as may be necessary
or appropriate to protect the rights of the Warrantholder against impairment.
Without limiting the generality of the foregoing, the Company shall (a) take all
such actions as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassesable shares of Common Stock
upon the exercise of this Warrant, and (b) provide reasonable assistance to the
Warrantholder in obtaining all authorizations, exemptions or consents from any
Governmental Authority which may be necessary in connection with the exercise of
this Warrant.
12. Miscellaneous.
12.1 Entire Agreement. This Warrant constitutes the entire agreement
between the Company and the Warrantholder with respect to the Warrants.
12.2 Binding Effects; Benefits. This Warrant shall inure to the
benefit of and shall be binding upon the Company and the Warrantholders and
their respective heirs, legal representatives, successors and assigns. Nothing
in this Warrant, expressed or implied, is intended to or shall confer on any
Person other than the Company and the Warrantholders, or their respective heirs,
legal representatives, successors or assigns, any rights, remedies, obligations
or liabilities under or by reason of this Warrant.
12.3 Section and Other Headings. The section and other headings
contained in this Warrant are for reference purposes only and shall not be
deemed to be a part of this Warrant or to affect the meaning or interpretation
of this Warrant.
12.4 Pronouns. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
12.5 Further Assurances. Each of the Company and the Warrantholder
shall do and perform all such further acts and things and execute and deliver
all such other certificates, instruments and documents as the Company or the
Warrantholder may, at any time and from time to time, reasonably request in
connection with the performance of any of the provisions of this Warrant.
12.6 Notices. All notices and other communications required or
permitted to be given under this Warrant shall be in writing and shall be deemed
to have been duly given if (i) delivered personally or (ii) sent by facsimile or
recognized overnight courier or by United States first class certified mail,
postage prepaid, to the parties hereto at the following addresses or to such
other address as any party hereto shall hereafter specify by notice to the other
party hereto:
<PAGE>
15
if to the Company, addressed to:
Sirius Satellite Radio Inc.
1221 Avenue of the Americas
36th Floor
New York, New York 10020
Attention: Chief Financial Officer
Telecopy: (212) 584-5353
if to the Warrantholder, addressed to:
DaimlerChrysler Corporation
1000 Chrysler Drive
CIMS 485-14-78
Auburn Hills, Michigan 48326-2766
Attention: Assistant Secretary
Telecopy: (248) 512-1771
Except as otherwise provided herein, all such notices and communications shall
be deemed to have been received (a) on the date of delivery thereof, if
delivered personally or sent by facsimile, (b) on the second Business Day
following delivery into the custody of an overnight courier service, if sent by
overnight courier, provided that such delivery is made before such courier's
deadline for next-day delivery, or (c) on the third Business Day after the
mailing thereof.
12.7 Separability. Any term or provision of this Warrant which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant or
affecting the validity or enforceability of any of the terms or provisions of
this Warrant in any other jurisdiction.
12.8 Governing Law. This Warrant shall be deemed to be a contract
made under the laws of New York and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to such
agreements made and to be performed entirely within such State.
12.9 No Rights or Liabilities as Stockholder. Nothing contained in
this Warrant shall be deemed to confer upon the Warrantholder any rights as a
stockholder of the Company or as imposing any liabilities on the Warrantholder
to purchase any securities whether such liabilities are asserted by the Company
or by creditors or stockholders of the Company or otherwise.
12.10 Representations of the Company. The Company hereby represents
and warrants, as of the date hereof, to the Warrantholder as follows:
<PAGE>
16
(a) Corporate Existence and Power. The Company (i) is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware; (ii) has all requisite corporate power
and authority to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is engaged; and
(iii) has the corporate power and authority to execute, deliver and
perform its obligations under this Warrant. The Company is duly qualified
to do business as a foreign corporation in, and is in good standing under
the laws of, each jurisdiction in which the conduct of its business or the
nature of the property owned requires such qualification.
(b) Corporate Authorization; No Contravention. The execution,
delivery and performance by the Company of this Warrant and the
transactions contemplated hereby, including, without limitation, the sale,
issuance and delivery of the Warrant Shares, (i) have been duly authorized
by all necessary corporate action of the Company; (ii) do not contravene
the terms of the Certificate of Incorporation or Bylaws; and (iii) do not
violate, conflict with or result in any breach or contravention of, or the
creation of any Lien under, any Contractual Obligation of the Company or
any Requirement of Law applicable to the Company. No event has occurred
and no condition exists which, upon notice or the passage of time (or
both), would constitute a default under any indenture, mortgage, deed of
trust, credit agreement, note or other evidence of indebtedness or other
material agreement of the Company or the Certificate of Incorporation or
Bylaws.
(c) Issuance of Warrant Shares. The Warrant Shares have been
duly authorized and reserved for issuance. When issued, such shares will
be validly issued, fully paid and non-assessable, and free and clear of
all Liens and preemptive rights, and the holders thereof shall be entitled
to all rights and preferences accorded to a holder of Common Stock.
(d) Binding Effect. This Warrant has been duly executed and
delivered by the Company and constitutes the legal, valid and binding
obligation of the Company enforceable against the Company in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance or transfer, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity.
13. Preemptive Right. (a) If at any time after the date hereof and prior
to the Expiration Date, the Company proposes to issue shares of Common Stock
(excluding any warrants, options or securities or units comprising securities
convertible into or exchangeable for Common Stock or rights to acquire the same
issued as part of or simultaneously with any preferred stock or debt securities
of the Company) in an underwritten public offering, then the Company shall (i)
prior to the completion of such underwritten public offering, notify the
Warrantholder of such underwritten public offering and (ii) offer to issue to
the Warrantholder as part of such underwritten public offering, for cash, a
number of shares of Common Stock such that, after giving effect to the shares of
Common Stock issued in such underwritten public offering, the number of shares
of Common Stock owned by Warrantholder plus the shares of Common Stock
<PAGE>
17
receivable by the Warrantholder upon exercise of any Warrants equals the same
percentage of the total number of shares of Common Stock issued and outstanding
immediately prior to the consummation of such offering as after giving effect to
such offering. The purchase price for such shares of Common Stock shall be equal
to the price of the shares of Common Stock sold in such underwritten public
offering (prior to deducting any underwriting discounts and commissions). The
Warrantholder must exercise its purchase rights hereunder in whole within five
Business Days after receipt of such notice from the Company and close such
purchase, by payment of immediately available funds, simultaneously with the
closing of such underwritten public offering. If after the date that the Company
notifies the Warrantholder of the proposed underwritten public offering of
Common Stock the actual number of shares of Common Stock offered is increased or
decreased as a result of demand for such Common Stock offering, then the Company
shall not be required to make an additional offer to the Warrantholder to give
effect to the increased or decreased size of such offering.
<PAGE>
18
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
SIRIUS SATELLITE RADIO INC.
By: /s/. Patrick L. Donnelly
------------------------------------
Patrick L. Donnelly
Senior Vice President and
General Counsel
Dated: January 28, 2000
Attest:
By: /s/ Douglas A. Kaplan
------------------------
Douglas Kaplan
Assistant Secretary
<PAGE>
1
Exhibit A
EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase __________ shares of Common Stock and
herewith tenders payment for such Common Stock to the order of Sirius Satellite
Radio Inc. in the amount of $__________, which amount includes payment of the
par value for _________ of the Common Stock, in accordance with the terms of
this Warrant. The undersigned requests that a certificate for such shares of
Common Stock be registered in the name of __________________ and that such
certificates be delivered to __________________ whose address is
________________________________________________________.
Dated:______________
Signature_______________________________
_______________________________
(Print Name)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
Signed in the Presence of:
_______________________________
<PAGE>
1
Exhibit B
FORM OF ASSIGNMENT
(To be executed only upon transfer of this Warrant)
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto ______________________ the
right represented by such Warrant to purchase ________________ shares of Common
Stock of Sirius Satellite Radio Inc. to which such Warrant relates and all other
rights of the Warrantholder under the within Warrant, and appoints
______________________ Attorney to make such transfer on the books of Sirius
Satellite Radio Inc. maintained for such purpose, with full power of
substitution in the premises. This sale, assignment and transfer has been
previously approved in writing by Sirius Satellite Radio Inc.
Dated: ___________________
Signature_______________________________
_______________________________
(Print Name)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
Signed in the presence of:
_______________________________
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is dated as of December 31, 1999 (this
"Agreement"), between SIRIUS SATELLITE RADIO INC., a Delaware corporation (the
"Company"), and Robert D. Briskman (the "Executive").
In consideration of the mutual covenants and conditions set forth herein,
the Company and the Executive agree as follows:
1. Employment. Subject to the terms and conditions of this Agreement, the
Company hereby employs the Executive, and the Executive hereby accepts
employment with the Company.
2. Duties and Reporting Relationship. (a) The Executive shall be employed
in the capacity of Executive Vice President, Engineering, of the Company. During
the Term (as defined below), the Executive shall, on a full-time basis, use his
skills and render services to the best of his ability in supervising the
engineering and technology development affairs of the Company and shall, in
addition, perform such other activities and duties consistent with his position
as the Chairman and Chief Executive of the Company shall, from time to time,
reasonably specify and direct. It is acknowledged that the Executive has made,
and may continue to make, passive investments which will require a portion of
his time and attention but Executive agrees that such investments will not
interfere with his full-time commitment to the Company. The Executive shall not
be required by this Agreement to perform duties for any entity other than the
Company and its subsidiaries.
(b) The Executive shall perform his duties and conduct his business
primarily at the principal offices of the Company in New York, New York, and
nothing in this Agreement shall cause the Executive to perform his duties
outside New York City, except for required travel on the Company's business
consistent with the Executive's position, duties and responsibilities.
(c) The Executive shall report to the Chairman and Chief Executive of the
Company.
(d) Upon termination of this Agreement, the Company shall enter into a
consulting agreement with the Executive for a term of three years (the
"Consulting Agreement"). The Consulting Agreement shall be in form and substance
acceptable to the Executive and the Company and shall provide, among other
things, that (i) the Company will pay the Executive a consulting fee of $15,000
per month; (ii) the Executive shall be available to consult with the Company at
such times and places as the Company shall reasonably request for not less than
100 days per year; and (iii) the Executive shall be provided an office and
secretarial assistance at the headquarters of the Company.
3. Term. The term of this Agreement shall commence and be effective on and
from December 31, 1999 and end on February 28, 2001, unless terminated earlier
pursuant to the provisions of Section 6 (the "Term").
4. Annual Base Salary. (a) During the Term, the Executive shall be paid an
annual base salary of US$310,000, subject to any increases that the Chief
Executive of the Company
<PAGE>
2
shall approve. All amounts paid to the Executive under this Agreement shall be
in U.S. dollars. The Executive's base salary shall be paid at least monthly and,
at the option of the Company, may be paid more frequently. In the event the
Executive's employment is terminated during the Term, the Executive's base
salary shall be prorated for such partial year.
(b) All compensation paid to the Executive hereunder shall be subject to
any payroll and withholding deductions required by any applicable law,
including, without limitation, federal and state income tax withholding, federal
unemployment tax and social security (FICA).
5. Additional Compensation, Expenses and Benefits. (a) During the Term,
the Company shall promptly reimburse the Executive for all reasonable and
necessary business expenses incurred or advanced by him in carrying out his
duties under this Agreement. The Executive shall present to the Company from
time to time an itemized account of such expenses in such form as may be
required by the Company from time to time.
(b) During the Term, the Executive shall be entitled to participate fully
in any bonus grants, benefit plans, programs, policies and fringe benefits which
may be made available to the officers of the Company generally, including,
without limitation, medical, dental and life insurance; provided that the
Executive shall participate in any bonus, stock option or stock purchase or
compensation plan currently in effect or subsequently established by the Company
to the extent, and only to the extent, authorized by the plan document or by the
Board of Directors or the compensation committee thereof. With respect to any
annual bonus program which may be in effect from time to time, the Company
agrees that the Executive shall be entitled to annual bonuses, if any, on the
same basis as other senior officers of the Company; provided that the foregoing
shall not be interpreted or construed as entitling the Executive to any annual
bonus.
(c) The Company agrees that upon expiration or termination of this
Agreement, it shall provide the Executive and his spouse medical coverage for
the rest of their lives. Such medical coverage will be on the same terms and
conditions (including, without limitation, co-payments and deductibles) as the
Executive is receiving medical coverage on the date of the termination or
expiration of this Agreement.
6. Termination. (a) Termination for Cause. At any time during the Term,
the Company has the right and may elect to terminate this Agreement for Cause.
For purposes of this Agreement, "Cause" shall be limited to (i) any action by
the Executive involving willful malfeasance having a substantial adverse effect
on the business or prospects of the Company, (ii) the Executive being convicted
of a felony, and (iii) a repeated and willful failure of the Executive to
perform the material duties of his office, which failure is not cured by the
Executive within thirty days after notice by the Company to the Executive that
it intends to terminate the Executive for such failure. Termination of the
Executive for Cause pursuant to this Section 6(a) shall be communicated by a
Notice of Termination. For purposes of this Agreement, a "Notice of Termination"
shall mean delivery to the Executive of a copy of a resolution or resolutions
duly adopted by the affirmative vote of not less than a majority of the
directors present and voting at a meeting of the Company's Board of Directors
called and held for that purpose after reasonable notice to the Executive and
reasonable opportunity for the Executive, together with the Executive's counsel,
to be heard before the Board prior to such vote, finding that in the good faith
opinion of the Board the Executive was guilty of conduct set forth in the second
sentence of this Section 6(a) and specifying the particulars thereof in detail
(the date of such termination by the Board is referred hereinafter as the
"Termination Date").
<PAGE>
3
For purposes of this Agreement, no such purported termination of the Executive's
employment shall be effective without such Notice of Termination.
(b) Death or Disability. (i) This Agreement and the Executive's employment
hereunder shall terminate upon the death of the Executive. The date of the
Executive's death is referred to in this Agreement as the "Termination Date."
(ii) If the Executive is unable to perform the duties and functions of his
position because of a disability, which is reasonably expected to be permanent,
for an uninterrupted period of one hundred eighty days from the date on which
the Executive was first unable to perform his duties, and the Company, in its
reasonable judgment, determines that the exigencies created by the Executive's
disability are such that termination is warranted, the Company shall have the
right and may elect to terminate the services of the Executive by a Notice of
Disability Termination. For purposes of this Agreement, a "Notice of Disability
Termination" shall mean a written notice which sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under this Section 6(b)(ii). For purposes of this
Agreement, no such purported termination by the Company shall be effective
without such Notice of Disability Termination. The day after such written notice
has been received by the Executive is referred to in this Agreement as the
"Termination Date."
(c) Voluntary Resignation. Should the Executive wish to resign from his
position with the Company for other than Good Reason (as defined below) during
the Term, the Executive shall give fourteen days prior written notice to the
Company, setting forth the reasons and specifying the date as of which his
resignation is to become effective. The date specified in such written notice is
referred to in this Agreement as the "Termination Date." Failure to provide such
notice shall entitle the Company to fix the Termination Date as of the last
business day on which the Executive reported for work at his principal place of
employment with the Company.
(d) Without Cause. The Company shall have the absolute right to terminate
the Executive's employment without Cause at any time. If the Company elects to
terminate the Executive without Cause, the Company shall give seven days written
notice to the Executive. The date that is seven days after such notice is
received by the Executive is referred to in this Agreement as the "Termination
Date."
(e) For Good Reason. Should the Executive wish to resign from his position
with the Company for Good Reason during the Term, the Executive shall give seven
days prior written notice to the Company, setting forth the reasons and
specifying the date as of which his resignation is to become effective. The date
specified in such written notice is referred to in this Agreement as the
"Termination Date." Failure to provide such notice shall entitle the Company to
fix the Termination Date as of the last business day on which the Executive
reported for work at his principal place of employment with the Company.
For purposes of this Agreement, "Good Reason" shall mean the occurrence of
any of the following (without the Executive's express prior written consent):
(i) the assignment to the Executive by the Company of duties
materially inconsistent with the Executive's positions, duties,
responsibilities, titles or offices at the commencement of the Term, any
reduction in his duties or responsibilities or any
<PAGE>
4
removal of the Executive from or any failure to re-elect the Executive to
any of such positions (except in connection with the termination of the
Executive's employment for Cause, disability or as a result of the
Executive's death or by the Executive other than for Good Reason), which
is not cured within thirty days following notice to the Company; or
(ii) any reduction in the Executive's annual base salary from the
previous year or any failure of the Company to comply with the terms of
Section 5(b) as it relates to annual bonuses, which is not cured within
thirty days following notice to the Company; or
(iii) a relocation of the Company's executive offices to a location
outside of the New York City; or
(iv) any breach by the Company of any material provision of this
Agreement which breach is not cured within thirty days following notice to
the Executive of such breach.
(f) Compensation and Benefits Upon Termination. If the employment of the
Executive is terminated for any reason, except by the Company for Cause, then
the Executive shall be entitled to receive, and the Company shall pay to the
Executive, without setoff, counterclaim or other withholding except as set forth
in Section 4(b), an amount (in addition to any salary, benefits or other sums
due the Executive through the Termination Date) equal to 50% of the sum of (1)
the Executive's annualized base salary then in effect, and (2) the highest
annual bonus, if any, previously paid to the Executive in the preceding two
years. Any amount becoming payable under this Section 6(f) shall be paid in
immediately available funds within five business days following the Termination
Date.
7. Change of Control Matters. (a) If the Executive is, in the opinion of a
nationally recognized accounting firm selected by the Executive, expected to pay
(determined on the basis of a more likely than not standard) an excise tax on
"excess parachute payments" (as defined in Section 280G(b) of the Internal
Revenue Code of 1986, as amended (the "Code")) under Section 4999 of the Code as
a result of an acceleration of the vesting of options, or for any other reason,
the Company shall have an absolute and unconditional obligation to pay the
Executive in accordance with the terms of this Section the expected amount of
such taxes. In addition, the Company shall have an absolute and unconditional
obligation to pay the Executive such additional amounts as are necessary to
place the Executive in the exact same financial position that he would have been
in if he had not incurred any expected tax liability under Section 4999 of the
Code; provided that the Company shall in no event pay the Executive any amounts
with respect to any penalties or interest due under any provision of the Code.
The determination of the exact amount, if any, of any expected "excess parachute
payments" and any expected tax liability under Section 4999 of the Code shall be
made by a nationally-recognized independent accounting firm selected by the
Executive. The fees and expenses of such accounting firm shall be paid by the
Company in advance. The determination of such accounting firm shall be final and
binding on the parties. The Company irrevocably agrees to pay to the Executive
any amounts to be paid under this Section 7 within two days after receipt by the
Company of written notice from the accounting firm which sets forth such
accounting firm's determination. In no event will the Executive be required to
refund to the Company any amounts payable pursuant to this Section 7. In
addition, in the event that such payments are not sufficient to pay all excise
taxes on "excess parachute payments"
<PAGE>
5
under Section 4999 of the Code as a result of an acceleration of the vesting of
options or for any other reason and to place the Executive in the exact same
financial position that he would have been in if he had not incurred any
expected tax liability under Section 4999 of the Code, then the Company shall
have an absolute and unconditional obligation to pay the Executive such
additional amounts as may be necessary to pay such excise taxes and place the
Executive in the exact same financial position that he would have been had he
not incurred any tax liability as a result of a change in control under the
Code.
(b) The provisions of this Section 7 shall survive any termination of this
Agreement.
8. Nondisclosure of Confidential Information. The Executive acknowledges
that in the course of his employment he will occupy a position of trust and
confidence. The Executive shall not, except as may be required to perform his
duties or as required by applicable law, disclose to others or use, whether
directly or indirectly, any Confidential Information. "Confidential Information"
shall mean information about the Company and its proposed business and
operations that is not disclosed by the Company for financial reporting purposes
and that was learned by the Executive in the course of his employment by the
Company, including, without limitation, any proprietary knowledge, patents,
trade secrets, data, formulae, information and client and customer lists and all
papers, resumes and records (including computer records) of the documents
containing such Confidential Information. The Executive acknowledges that such
Confidential Information is specialized, unique in nature and of great value to
the Company, and that such information gives the Company a competitive
advantage. The Executive agrees to deliver or return to the Company, at the
Company's request at any time or upon termination or expiration of his
employment or as soon as possible thereafter, all documents, computer tapes and
disks, records, lists, data, drawings, prints, notes and written information
(and all copies thereof) furnished by the Company or prepared by the Executive
in the course of his employment by the Company.
9. Covenant Not to Compete. For two (2) years following the end of the
Term or, in the event the Executive has been terminated without Cause or has
resigned for Good Reason, for one year following such termination without Cause
or resignation for Good Reason (the "Restricted Period"), the Executive will
not, directly or indirectly, enter into the employment of, render services to or
acquire any interest whatsoever in (whether for his own account as an individual
proprietor, or as a partner, associate, stockholder, officer, director,
consultant, trustee or otherwise), or otherwise assist, any person or entity
engaged in any operations in North America involving the transmission of radio
entertainment programming in competition with the Company or that competes, or
is likely to compete, with any other aspect of the business of the Company as
conducted at the end of the Term; provided, that nothing in this Agreement shall
prevent the purchase or ownership by the Executive by way of investment of up to
five percent of the shares or equity interest of any public corporation or other
entity. Without limiting the generality of the foregoing, the Executive agrees
that during the Restricted Period, the Executive will not call on or otherwise
solicit business or assist others to solicit business from any of the customers
or potential customers of the Company as to any product or service that competes
with any product or service provided or marketed by or actually under
development by the Company at the end of the Term. The Executive agrees that
during the Restricted Period he will not solicit or assist others to solicit the
employment of or hire any employee of the Company without the prior written
consent of the Company.
10. Remedies. The Executive agrees that damages for breach of any of his
covenants under Sections 8 and 9 above will be difficult to determine and
inadequate to remedy the harm
<PAGE>
6
which may be caused thereby, and therefore consents that these covenants may be
enforced by temporary or permanent injunction without the necessity of bond.
Such injunctive relief shall be in addition to and not in place of any other
remedies available at law or equity. The Executive believes, as of the date of
this Agreement, that the provisions of this Agreement are reasonable and that
the Executive is capable of gainful employment without breaching this Agreement.
However, should any court or tribunal decline to enforce any provision of
Section 8 or 9 of this Agreement, this Agreement shall, to the extent applicable
in the circumstances before such court or tribunal, be deemed to be modified to
restrict the Executive's competition with the Company to the maximum extent of
time, scope and geography which the court or tribunal shall find enforceable,
and such provisions shall be so enforced. The losing party shall reimburse the
prevailing party for any costs and attorneys fees incurred in connection with
any action to enforce the covenants under Section 8 of this Agreement. The
Company and the Executive shall have available to them all remedies at law and
in equity for the enforcement of this Agreement, which remedies (including but
not limited to termination of this Agreement as provided herein) shall be
cumulative.
11. Indemnification. The Company shall indemnify the Executive to the full
extent provided in the Company's Amended and Restated Articles of Incorporation
and Amended and Restated Bylaws and the law of the State of Delaware in
connection with his activities as an officer of the Company. The obligations of
the Company contained in this Section shall survive any termination or
expiration of this Agreement.
12. Entire Agreement. The provisions contained herein constitute the
entire agreement between the parties with respect to the subject matter hereof
and supersede any and all prior agreements, understandings and communications
between the parties, oral or written, with respect to such subject matter.
13. Modification. Any waiver, alteration, amendment or modification of any
provisions of this Agreement shall not be valid unless in writing and signed by
both the Executive and the Company.
14. Severability. If any provision of this Agreement shall be declared to
be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof, which shall
remain in full force and effect.
15. Assignment. The Executive may not assign any of his rights or delegate
any of his duties hereunder without the written consent of the Company. The
Company may not assign any of its rights or delegate any of its obligations
hereunder.
16. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the successors in interest of the Executive and the Company.
17. Notice. All notices and other communications required or permitted
hereunder shall be made in writing and shall be deemed effective when initially
transmitted by courier or facsimile transmission and five (5) days after mailing
by registered or certified mail:
if to the Company:
Sirius Satellite Radio Inc.
1221 Avenue of the Americas
<PAGE>
7
36th Floor
New York, New York 10020
Attention: General Counsel
Telecopier: (212) 584-5353
if to the Executive:
Robert D. Briskman
61 Valerian Court
North Bethesda, Maryland 20852
or to such other person or address as either of the parties shall furnish in
writing to the other party from time to time.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within the State of New York.
19. Attorneys' Fees. In the event of arbitration or litigation arising out
of or in connection with this Agreement, the Executive shall be entitled to
recover from the Company all of his attorneys' fees and other expenses incurred
in connection with such arbitration or litigation so long as the Executive has
prevailed with respect to at least one issue in such arbitration or litigation.
20. Non-Mitigation. After the termination of his employment hereunder, the
Executive shall not be required to mitigate damages or the amount of any benefit
or payment provided under this Agreement by seeking other employment or
otherwise; nor shall the amount of any benefit or payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer.
21. Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SIRIUS SATELLITE RADIO INC.
By: /s/ Patrick L. Donnelly
------------------------------------
Patrick L. Donnelly
Senior Vice President,
General Counsel and Secretary
/s/ Robert D. Briskman
----------------------------------------
Robert D. Briskman
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of March 28, 2000 (this
"Agreement"), between SIRIUS SATELLITE RADIO INC., a Delaware
corporation (the "Company"), and Joseph S. Capobianco (the
"Executive").
In consideration of the mutual covenants and conditions set forth
herein, the Company and the Executive agree as follows:
1. Employment. Subject to the terms and conditions of this Agreement,
the Company hereby employs the Executive, and the Executive hereby accepts
employment with the Company.
2. Duties and Reporting Relationship. (a) The Executive shall be
employed in the capacity of Senior Vice President, Content, of the Company.
During the Term (as defined below), the Executive shall, on a full-time basis,
use his skills and render services to the best of his ability in supervising the
programming affairs of the Company and shall, in addition, perform such other
activities and duties consistent with his position as the Chief Executive
Officer of the Company shall, from time to time, reasonably specify and direct.
It is acknowledged that the Executive has made, and may continue to make,
passive investments which will require a portion of his time and attention but
Executive agrees that such investments will not interfere with his full-time
commitment to the Company. The Executive shall not be required by this Agreement
to perform duties for any entity other than the Company and its subsidiaries.
(b) The Executive shall generally perform his duties and conduct his
business at the principal offices of the Company in New York, New York.
(c) The Executive shall report to the Chief Executive Officer of the
Company.
3. Term. The term of this Agreement shall commence on March 28, 2000,
and end on February 28, 2003, unless terminated earlier pursuant to the
provisions of Section 6 (the "Term").
4. Annual Base Salary. (a) During the Term, the Executive shall be paid
an annual base salary of $275,000, subject to any increases that the Chief
Executive Officer of the Company shall approve. All amounts paid to the
Executive under this Agreement shall be in U.S. dollars. The Executive's base
salary shall be paid at least monthly and, at the option of the Company, may be
paid more frequently. In the event the Executive's employment is terminated
during the Term, the Executive's base salary shall be prorated through the date
of termination.
(b) All compensation paid to the Executive hereunder shall be subject
to any payroll and withholding deductions required by any applicable law,
including, without limitation, federal, New York state and New York City income
tax withholding, federal unemployment tax and social security (FICA).
5. Additional Compensation, Expenses and Benefits. (a) During the Term,
the Company shall promptly reimburse the Executive for all reasonable and
necessary business
<PAGE>
2
expenses incurred and advanced by him in carrying out his duties under this
Agreement. The Executive shall present to the Company from time to time an
itemized account of such expenses in such form as may be required by the Company
from time to time.
(b) During the Term, the Executive shall be entitled to participate
fully in any bonus grants, benefit plans, programs, policies and fringe benefits
which may be made available to the officers of the Company generally, including,
without limitation, medical, dental and life insurance; provided that the
Executive shall participate in any stock option or stock purchase or
compensation plan currently in effect or subsequently established by the Company
to the extent, and only to the extent, authorized by the plan document or by the
Board of Directors of the Company (the "Board") or the compensation committee
thereof. With respect to any annual bonus program which may be established by
the Company, the Board or any committee thereof, the Company agrees that the
Executive shall be entitled to annual bonuses, if any, on the same basis as
other senior officers of the Company.
6. Termination. The date upon which this Agreement is deemed to be
terminated in accordance with any of the provisions of this Section 6 is
referred to herein as the "Termination Date."
(a) Termination for Cause. The Company has the right and may elect to
terminate this Agreement for Cause at any time. For purposes of this Agreement,
"Cause" means the occurrence or existence of any of the following: (i) a
material breach by the Executive of the terms of his employment or of his duty
not to engage in any transaction that represents, directly or indirectly,
self-dealing with the Company or any of its affiliates (which, for purposes
here, shall mean any individual, corporation, partnership, association, limited
liability company, trust, estate, or other entity or organization directly or
indirectly controlling, controlled by, or under direct or indirect common
control with the Company) which has not been approved by a majority of the
disinterested directors of the Board, if in any such case such material breach
remains uncured after thirty days have elapsed following the date on which the
Company gives the Executive written notice of such breach; (ii) the repeated
material breach by the Executive of any duty referred to in clause (i) above
with respect to which at least one prior notice was given under clause (i);
(iii) any act of dishonesty, misappropriation, embezzlement, intentional fraud,
or similar conduct by the Executive involving the Company or its affiliates;
(iv) the conviction or the plea of nolo contendre or the equivalent in respect
of a felony; (v) any damage of a material nature to any property of the Company
or any of its affiliates caused by the Executive's willful or grossly negligent
conduct; (vi) the repeated nonprescription use of any controlled substance or
the repeated use of alcohol or any other non-controlled substance that the Board
reasonably determines renders the Executive unfit to serve as an officer or
employee of the Company or its affiliates; (vii) the Executive's failure to
comply with the Board's reasonable written instructions, after thirty days
written notice; or (viii) conduct by the Executive that in a good faith written
determination of the Board demonstrates unfitness to serve as an officer or
employee of the Company or its affiliates, including, without limitation, a
finding by the Board or any regulatory authority that the Executive committed
acts of unlawful harassment or violated any other state, federal or local law or
ordinance prohibiting discrimination in employment applicable to the business of
the Company or any of its operating subsidiaries. Termination of the Executive
for Cause pursuant to this Section 6(a) shall be communicated by a Notice of
Termination. For purposes of this Agreement a "Notice of Termination" shall mean
delivery to the Executive of a copy of a resolution or resolutions duly adopted
by the affirmative vote of not less than a majority of the directors present and
voting at a meeting of the Board called and held for that purpose after
reasonable notice to the Executive and reasonable opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board prior to
such vote, finding
<PAGE>
3
that in the good faith opinion of the Board, the Executive was guilty of conduct
set forth in the first sentence of this Section 6(a) and specifying the
particulars thereof in detail. For purposes of Section 6(a), this Agreement
shall terminate on the date specified by the Board in the Notice of Termination.
(b) Death or Disability. (i) This Agreement and the Executive's
employment hereunder shall terminate upon the death of the Executive. For
purposes of Section 6(b)(i), this Agreement shall terminate on the date of the
Executive's death.
(ii) If the Executive is unable to perform the essential duties and
functions of his position because of a disability, even with a reasonable
accommodation, for one hundred eighty days within any three hundred sixty-five
day period, and the Company, in its reasonable judgment, determines that the
exigencies created by the Executive's disability are such that termination is
warranted, the Company shall have the right and may elect to terminate the
services of the Executive by a Notice of Disability Termination. For purposes of
this Agreement, a "Notice of Disability Termination" shall mean a written notice
which sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under this Section
6(b)(ii). For purposes of this Agreement, no such purported termination by the
Company shall be effective without such Notice of Disability Termination. This
Agreement shall terminate on the day after such Notice of Disability Termination
is received by the Executive.
(c) Voluntary Resignation. Should the Executive wish to resign from his
position with the Company, for other than Good Reason (as defined below), during
the Term, the Executive shall give fourteen days prior written notice to the
Company. Failure to provide such notice shall entitle the Company to terminate
this Agreement effective on the last business day on which the Executive
reported for work at his principal place of employment with the Company. The
Agreement will terminate on the effective date of the resignation as defined
above, however, the Company may, at its sole discretion, request that the
Executive perform no job responsibilities and cease his or her active employment
immediately upon receipt of the Notice.
(d) Without Cause. The Company shall have the absolute right to
terminate the Executive's employment without Cause at any time. If the Company
elects to terminate the Executive without Cause, the Company shall give seven
days written notice to the Executive. This Agreement shall terminate seven days
following receipt of such notice by the Executive, however, the Company, at its
sole discretion may request that the Executive cease active employment and
perform no more job duties immediately upon provision of such notice to the
Executive.
(e) For Good Reason. Should the Executive wish to resign from his
position with the Company for Good Reason during the Term, the Executive shall
give seven days prior written notice to the Company. Failure to provide such
notice shall entitle the Company to fix the Termination Date as of the last
business day on which the Executive reported for work at his principal place of
employment with the Company. The Agreement shall terminate on the date specified
in such notice, however, at its sole discretion, the Company may request the
Executive cease active employment and perform no more job duties for the Company
immediately upon receipt of such notice.
For purposes of this Agreement, "Good Reason" shall mean the
continuance of any of the following events (without the Executive's express
prior written consent) for a period of seven
<PAGE>
4
days (or thirty days in the case of items (i) and (v) below) after delivery to
the Company by the Executive of a notice of the occurrence of such event:
(i) the assignment to the Executive by the Company of duties
not reasonably consistent with the Executive's positions, duties,
responsibilities, titles or offices at the commencement of the Term or
any unreasonable reduction in his duties or responsibilities or any
removal of the Executive from or any failure to re-elect the Executive
to any of such positions (except in connection with the termination of
the Executive's employment for Cause, disability or as a result of the
Executive's death or by the Executive other than for Good Reason);
provided that Employee acknowledges and agrees that or
(ii) any reduction in the Executive's annual base salary from
the previous year;
or
(iii) any failure of the Company to comply with the terms of
Section 5(b) as it relates to the Executive's annual bonuses; or
(iv) a relocation of the Company's executive offices to a
location outside of New York City; or
(v) any material breach by the Company of any provision of
this Agreement.
(f) Compensation and Benefits Upon Termination. If the employment of
the Executive is terminated for any reason, except (i) by the Company for Cause
or (ii) by the Executive voluntarily, then the Executive shall be entitled to
receive, and the Company shall pay to the Executive without setoff, counterclaim
or other withholding, except as set forth in Section 4(b), an amount (in
addition to any salary, benefits or other sums due the Executive through the
Termination Date) equal to the sum of (1) the Executive's annualized base salary
then in effect, and (2) the annual cash bonus, if any, paid to the Executive
with respect to the immediately preceding calendar year (or, in the case of the
year ending December 31, 2000, the performance bonus paid to the Executive in
February 2000). Any amount becoming payable under this Section 6(f) shall be
paid in immediately available funds within ten business days following the
Termination Date. The resignation of the Executive for Good Reason shall not be
considered a voluntary resignation and the Executive shall be entitled to be
paid the amount set forth above in the event the Executive terminates for Good
Reason.
7. Gross-Up Provisions. (a) If the Executive is, in the opinion of a
nationally recognized accounting firm selected by the Executive in his sole
discretion, expected to pay an excise tax on "excess parachute payments" (as
defined in Section 280G(b) of the Internal Revenue Code of 1986, as amended (the
"Code")) under Section 4999 of the Code as a result of an acceleration of the
vesting of options or for any other reason, the Company shall have an absolute
and unconditional obligation to pay the Executive in accordance with the terms
of this Section 7 the expected amount of such taxes. In addition, the Company
shall have an absolute and unconditional obligation to pay the Executive such
additional amounts as are necessary to place the Executive in the exact same
financial position that he would have been in if he had not incurred any
expected tax liability under Section 4999 of the Code; provided that the Company
shall in no event pay the Executive any amounts with respect to any penalties or
interest due under any provision of the Code. The determination of the exact
amount, if any, of any expected "excess parachute payments" and any expected tax
liability under Section 4999 of the Code shall be made by the
nationally-recognized independent accounting firm selected by the
<PAGE>
5
Executive. The fees and expenses of such accounting firm shall be paid by the
Company in advance. The determination of such accounting firm shall be final and
binding on the parties. The Company irrevocably agrees to pay to the Executive,
in immediately available funds to an account designated in writing by the
Executive, any amounts to be paid under this Section 7 within two days after
receipt by the Company of written notice from the accounting firm which sets
forth such accounting firm's determination. In addition, in the event that such
payments are not sufficient to pay all excise taxes on "excess parachute
payments" under Section 4999 of the Code as a result of an acceleration of the
vesting of options or for any other reason and to place the Executive in the
exact same financial position that he would have been in if he had not incurred
any expected tax liability under Section 4999 of the Code as a result of a
change in control, then the Company shall have an absolute and unconditional
obligation to pay the Executive such additional amounts as may be necessary to
pay such excise taxes and place the Executive in the exact same financial
position that he would have been had he not incurred any tax liability as a
result of a change in control under the Code. Notwithstanding the foregoing, in
the event that a written ruling (whether public or private) of the Internal
Revenue Service ("IRS") is obtained by or on behalf of the Company or the
Executive, which ruling expressly provides that the Executive is not required to
pay, or is entitled to a refund with respect to, all or any portion of such
excise taxes or additional amounts, the Executive shall promptly reimburse the
Company in an amount equal to all amounts paid to the Executive pursuant to this
Section 7 less any excise taxes or additional amounts which remain payable by,
or are not refunded to, the Executive after giving effect to such IRS ruling.
Each of the Company and the Executive agrees to promptly notify the other party
if it receives any such IRS ruling.
(b) The provisions of this Section 7 shall survive any termination of
this Agreement.
8. Nondisclosure of Confidential Information. (a) The Executive
acknowledges that in the course of his employment he will occupy a position of
trust and confidence. The Executive shall not, except as may be required to
perform his duties or as required by applicable law, disclose to others or use,
whether directly or indirectly, any Confidential Information.
(b) "Confidential Information" shall mean information about the
Company's business and operations that is not disclosed by the Company for
financial reporting purposes and that was learned by the Executive in the course
of his employment by the Company, including, without limitation, any proprietary
knowledge, patents, trade secrets, data, formulae, information and client and
customer lists and all papers and records (including computer records) of the
documents containing such Confidential Information. The Executive acknowledges
that such Confidential Information is specialized, unique in nature and of great
value to the Company, and that such information gives the Company a competitive
advantage. The Executive agrees to deliver or return to the Company, at the
Company's request at any time or upon termination or expiration of his
employment or as soon as possible thereafter, all documents, computer tapes and
disks, records, lists, data, drawings, prints, notes and written information
(and all copies thereof) furnished by the Company or prepared by the Executive
in the course of his employment by the Company.
(c) The provisions of this Section 8 shall survive any termination of
this Agreement.
9. Covenant Not to Compete. For two years following the end of the Term
or, in the event the Executive has been terminated without Cause or has resigned
for Good Reason, for one year following such termination without Cause or
resignation for Good Reason (the "Restricted Period"), the Executive will not,
directly or indirectly, enter into the employment of, render services to, or
acquire any interest whatsoever in (whether for his own account as an
<PAGE>
6
individual proprietor, or as a partner, associate, stockholder, officer,
director, consultant, trustee or otherwise), or otherwise assist, XM Satellite
Radio Inc., Clear Channel Communications Inc. or any subsidiary or affiliate of
either thereof; provided, that nothing in this Agreement shall prevent the
purchase or ownership by the Executive by way of investment of up to five
percent of the shares or equity interest of any corporation or other entity.
Without limiting the generality of the foregoing, the Executive agrees that
during the Restricted Period, the Executive will not call on or otherwise
solicit business or assist others to solicit business from any of the customers
or potential customers of the Company as to any product or service that competes
with any product or service provided or marketed by or actually under
development by the Company at the end of the Term. The Executive agrees that
during the Restricted Period he will not solicit or assist others to solicit the
employment of or hire any employee of the Company without the prior written
consent of the Company.
10. Remedies. The Executive and Company agree that damages for breach
of any of the covenants under Sections 8 and 9 above will be difficult to
determine and inadequate to remedy the harm which may be caused thereby, and
therefore consent that these covenants may be enforced by temporary or permanent
injunction without the necessity of bond. The Executive believes, as of the date
of this Agreement, that the provisions of this Agreement are reasonable and that
the Executive is capable of gainful employment without breaching this Agreement.
However, should any court or arbitrator decline to enforce any provision of
Section 8 or 9 of this Agreement, this Agreement shall, to the extent applicable
in the circumstances before such court or arbitrator, be deemed to be modified
to restrict the Executive's competition with the Company to the maximum extent
of time, scope and geography which the court or arbitrator shall find
enforceable, and such provisions shall be so enforced.
11. Indemnification. The Company shall indemnify the Executive to the
full extent provided in the Company's Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws and the law of the State of
Delaware in connection with his activities as an officer of the Company.
12. Entire Agreement. The provisions contained herein constitute the
entire agreement between the parties with respect to the subject matter hereof
and supersede any and all prior agreements, understandings and communications
between the parties, oral or written, with respect to such subject matter.
13. Modification. Any waiver, alteration, amendment or modification of
any provisions of this Agreement shall not be valid unless in writing and signed
by both the Executive and the Company.
14. Severability. If any provision of this Agreement shall be declared
to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof, which shall
remain in full force and effect.
15. Assignment. The Executive may not assign any of his rights or
delegate any of his duties hereunder without the prior written consent of the
Company. The Company may not assign any of its rights or delegate any of its
obligations hereunder.
16. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the successors in interest of the Executive and the Company.
<PAGE>
7
17. Notice. All notices and other communications required or permitted
hereunder shall be made in writing and shall be deemed effective when initially
transmitted by courier or facsimile transmission and five days after mailing by
registered or certified mail:
if to the Company:
Sirius Satellite Radio Inc.
1221 Avenue of the Americas
36th Floor
New York, New York 10020
Attention: General Counsel
Telecopier: (212) 584-5353
if to the Executive:
Joseph S. Capobianco
14 Evergreen Court
Suffern, NY 10901
Telecopier: (914) 368-2012
or to such other person or address as either of the parties shall furnish in
writing to the other party from time to time.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within the State of New York.
19. Non-Mitigation. The Executive shall not be required to mitigate
damages or seek other employment in order to receive compensation or benefits
under Section 6 or Section 7 of this Agreement; nor shall the amount of any
benefit or payment provided for under Section 6 or Section 7 of this Agreement
be reduced by any compensation earned by the Executive as the result of
employment by another employer.
20. Arbitration. (a) The Executive and the Company agree that if a
dispute arises concerning or relating to the Executive's employment with the
Company, or the termination of the Executive's employment, such dispute shall be
submitted to binding arbitration under the rules of the American Arbitration
Association in effect at the time such dispute arises. The arbitration shall
take place in New York, New York, and both the Executive and the Company agree
to submit to the jurisdiction of the arbitrator selected in accordance with the
American Arbitration Association rules and procedures. Except as provided for
below, the Executive and the Company agree that this arbitration procedure will
be the exclusive means of redress for any disputes relating to or arising from
the Executive's employment with the Company or his termination, including
disputes over rights provided by federal, state, or local statutes, regulations,
ordinances, and common law, including all laws that prohibit discrimination
based on any protected classification. THE PARTIES EXPRESSLY WAIVE THE RIGHT TO
A JURY TRIAL, AND AGREE THAT THE ARBITRATOR'S AWARD SHALL BE FINAL AND BINDING
ON BOTH PARTIES, AND SHALL NOT BE APPEALABLE. The arbitrator shall have
discretion to award monetary and other damages, and any other relief that the
arbitrator deems appropriate and is allowed by law. The arbitrator shall have
the discretion to award the prevailing party reasonable costs and attorneys'
fees incurred in bringing or defending an action, and shall award such costs and
fees to the Executive in the event the Executive prevails on the merits of any
action brought hereunder.
<PAGE>
8
(b) Exceptions. The Company and the Executive agree that the sole
dispute that is excepted from Section 20(a) is an action seeking injunctive
relief from a court of competent jurisdiction regarding enforcement and
application of Sections 8 and 9 of this Agreement, which action may be brought
in addition to, or in place of, an arbitration proceeding in accordance with
Section 20(a).
21. Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
22. Executive's Representations. Executive hereby represents and
warrants to Company that he (a) is not now under any contractual or other
obligation that is inconsistent with or in conflict with this Agreement or that
would prevent, limit, or impair the Executive's performance of his or her
obligations under this Agreement; (b) has been provided the opportunity to be,
or has been, represented by legal counsel in preparing, negotiating, executing
and delivering this Agreement; and (c) fully understands the terms and
provisions of this Agreement.
<PAGE>
9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SIRIUS SATELLITE RADIO INC.
By: /s/ Patrick L. Donnelly
---------------------------------
Patrick L. Donnelly
Senior Vice President,
General Counsel and Secretary
/s/ Joseph S. Capobianco
--------------------------------
Joseph S. Capobianco
<PAGE>
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of March 28, 2000 (this
"Agreement"), between SIRIUS SATELLITE RADIO INC., a Delaware
corporation (the "Company"), and Patrick L. Donnelly (the "Executive").
In consideration of the mutual covenants and conditions set forth
herein, the Company and the Executive agree as follows:
1. Employment. Subject to the terms and conditions of this Agreement,
the Company hereby employs the Executive, and the Executive hereby accepts
employment with the Company.
2. Duties and Reporting Relationship. (a) The Executive shall be
employed in the capacity of Senior Vice President, General Counsel and Secretary
of the Company. During the Term (as defined below), the Executive shall, on a
full-time basis, use his skills and render services to the best of his ability
in supervising the legal affairs of the Company and shall, in addition, perform
such other activities and duties consistent with his position as the Chief
Executive Officer of the Company shall, from time to time, reasonably specify
and direct. It is acknowledged that the Executive has made, and may continue to
make, passive investments which will require a portion of his time and attention
but Executive agrees that such investments will not interfere with his full-time
commitment to the Company. The Executive shall not be required by this Agreement
to perform duties for any entity other than the Company and its subsidiaries.
(b) The Executive shall generally perform his duties and conduct his
business at the principal offices of the Company in New York, New York.
(c) The Executive shall report to the Chief Executive Officer of the
Company.
3. Term. The term of this Agreement shall commence on March 28, 2000,
and end on February 28, 2003, unless terminated earlier pursuant to the
provisions of Section 6 (the "Term").
4. Annual Base Salary. (a) During the Term, the Executive shall be paid
an annual base salary of $290,000, subject to any increases that the Chief
Executive Officer of the Company shall approve. All amounts paid to the
Executive under this Agreement shall be in U.S. dollars. The Executive's base
salary shall be paid at least monthly and, at the option of the Company, may be
paid more frequently. In the event the Executive's employment is terminated
during the Term, the Executive's base salary shall be prorated through the date
of termination.
(b) All compensation paid to the Executive hereunder shall be subject
to any payroll and withholding deductions required by any applicable law,
including, without limitation, federal, New York state and New York City income
tax withholding, federal unemployment tax and social security (FICA).
5. Additional Compensation, Expenses and Benefits. (a) During the Term,
the Company shall promptly reimburse the Executive for all reasonable and
necessary business
<PAGE>
2
expenses incurred and advanced by him in carrying out his duties under this
Agreement. The Executive shall present to the Company from time to time an
itemized account of such expenses in such form as may be required by the Company
from time to time.
(b) During the Term, the Executive shall be entitled to participate
fully in any bonus grants, benefit plans, programs, policies and fringe benefits
which may be made available to the officers of the Company generally, including,
without limitation, medical, dental and life insurance; provided that the
Executive shall participate in any stock option or stock purchase or
compensation plan currently in effect or subsequently established by the Company
to the extent, and only to the extent, authorized by the plan document or by the
Board of Directors of the Company (the "Board") or the compensation committee
thereof. With respect to any annual bonus program which may be established by
the Company, the Board or any committee thereof, the Company agrees that the
Executive shall be entitled to annual bonuses, if any, on the same basis as
other senior officers of the Company.
6. Termination. The date upon which this Agreement is deemed to be
terminated in accordance with any of the provisions of this Section 6 is
referred to herein as the "Termination Date."
(a) Termination for Cause. The Company has the right and may elect to
terminate this Agreement for Cause at any time. For purposes of this Agreement,
"Cause" means the occurrence or existence of any of the following: (i) a
material breach by the Executive of the terms of his employment or of his duty
not to engage in any transaction that represents, directly or indirectly,
self-dealing with the Company or any of its affiliates (which, for purposes
here, shall mean any individual, corporation, partnership, association, limited
liability company, trust, estate, or other entity or organization directly or
indirectly controlling, controlled by, or under direct or indirect common
control with the Company) which has not been approved by a majority of the
disinterested directors of the Board, if in any such case such material breach
remains uncured after thirty days have elapsed following the date on which the
Company gives the Executive written notice of such breach; (ii) the repeated
material breach by the Executive of any duty referred to in clause (i) above
with respect to which at least one prior notice was given under clause (i);
(iii) any act of dishonesty, misappropriation, embezzlement, intentional fraud,
or similar conduct by the Executive involving the Company or its affiliates;
(iv) the conviction or the plea of nolo contendre or the equivalent in respect
of a felony; (v) any damage of a material nature to any property of the Company
or any of its affiliates caused by the Executive's willful or grossly negligent
conduct; (vi) the repeated nonprescription use of any controlled substance or
the repeated use of alcohol or any other non-controlled substance that the Board
reasonably determines renders the Executive unfit to serve as an officer or
employee of the Company or its affiliates; (vii) the Executive's failure to
comply with the Board's reasonable written instructions, after thirty days
written notice; or (viii) conduct by the Executive that in a good faith written
determination of the Board demonstrates unfitness to serve as an officer or
employee of the Company or its affiliates, including, without limitation, a
finding by the Board or any regulatory authority that the Executive committed
acts of unlawful harassment or violated any other state, federal or local law or
ordinance prohibiting discrimination in employment applicable to the business of
the Company or any of its operating subsidiaries. Termination of the Executive
for Cause pursuant to this Section 6(a) shall be communicated by a Notice of
Termination. For purposes of this Agreement a "Notice of Termination" shall mean
delivery to the Executive of a copy of a resolution or resolutions duly adopted
by the affirmative vote of not less than a majority of the directors present and
voting at a meeting of the Board called and held for that purpose after
reasonable notice to the Executive and reasonable opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board prior to
such vote, finding
<PAGE>
3
that in the good faith opinion of the Board, the Executive was guilty of conduct
set forth in the first sentence of this Section 6(a) and specifying the
particulars thereof in detail. For purposes of Section 6(a), this Agreement
shall terminate on the date specified by the Board in the Notice of Termination.
(b) Death or Disability. (i) This Agreement and the Executive's
employment hereunder shall terminate upon the death of the Executive. For
purposes of Section 6(b)(i), this Agreement shall terminate on the date of the
Executive's death.
(ii) If the Executive is unable to perform the essential duties and
functions of his position because of a disability, even with a reasonable
accommodation, for one hundred eighty days within any three hundred sixty-five
day period, and the Company, in its reasonable judgment, determines that the
exigencies created by the Executive's disability are such that termination is
warranted, the Company shall have the right and may elect to terminate the
services of the Executive by a Notice of Disability Termination. For purposes of
this Agreement, a "Notice of Disability Termination" shall mean a written notice
which sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under this Section
6(b)(ii). For purposes of this Agreement, no such purported termination by the
Company shall be effective without such Notice of Disability Termination. This
Agreement shall terminate on the day after such Notice of Disability Termination
is received by the Executive.
(c) Voluntary Resignation. Should the Executive wish to resign from his
position with the Company, for other than Good Reason (as defined below), during
the Term, the Executive shall give fourteen days prior written notice to the
Company. Failure to provide such notice shall entitle the Company to terminate
this Agreement effective on the last business day on which the Executive
reported for work at his principal place of employment with the Company. The
Agreement will terminate on the effective date of the resignation as defined
above, however, the Company may, at its sole discretion, request that the
Executive perform no job responsibilities and cease his or her active employment
immediately upon receipt of the Notice.
(d) Without Cause. The Company shall have the absolute right to
terminate the Executive's employment without Cause at any time. If the Company
elects to terminate the Executive without Cause, the Company shall give seven
days written notice to the Executive. This Agreement shall terminate seven days
following receipt of such notice by the Executive, however, the Company, at its
sole discretion may request that the Executive cease active employment and
perform no more job duties immediately upon provision of such notice to the
Executive.
(e) For Good Reason. Should the Executive wish to resign from his
position with the Company for Good Reason during the Term, the Executive shall
give seven days prior written notice to the Company. Failure to provide such
notice shall entitle the Company to fix the Termination Date as of the last
business day on which the Executive reported for work at his principal place of
employment with the Company. The Agreement shall terminate on the date specified
in such notice, however, at its sole discretion, the Company may request the
Executive cease active employment and perform no more job duties for the Company
immediately upon receipt of such notice.
For purposes of this Agreement, "Good Reason" shall mean the
continuance of any of the following events (without the Executive's express
prior written consent) for a period of seven
<PAGE>
4
days (or thirty days in the case of items (i) and (v) below) after delivery to
the Company by the Executive of a notice of the occurrence of such event:
(i) the assignment to the Executive by the Company of duties
not reasonably consistent with the Executive's positions, duties,
responsibilities, titles or offices at the commencement of the Term or
any unreasonable reduction in his duties or responsibilities or any
removal of the Executive from or any failure to re-elect the Executive
to any of such positions (except in connection with the termination of
the Executive's employment for Cause, disability or as a result of the
Executive's death or by the Executive other than for Good Reason);
provided that Employee acknowledges and agrees that or
(ii) any reduction in the Executive's annual base salary from
the previous year;
or
(iii) any failure of the Company to comply with the terms of
Section 5(b) as it relates to the Executive's annual bonuses; or
(iv) a relocation of the Company's executive offices to a
location outside of New York City; or
(v) any material breach by the Company of any provision of
this Agreement.
(f) Compensation and Benefits Upon Termination. If the employment of
the Executive is terminated for any reason, except (i) by the Company for Cause
or (ii) by the Executive voluntarily, then the Executive shall be entitled to
receive, and the Company shall pay to the Executive without setoff, counterclaim
or other withholding, except as set forth in Section 4(b), an amount (in
addition to any salary, benefits or other sums due the Executive through the
Termination Date) equal to the sum of (1) the Executive's annualized base salary
then in effect, and (2) the annual cash bonus, if any, paid to the Executive
with respect to the immediately preceding calendar year (or, in the case of the
year ending December 31, 2000, the performance bonus paid to the Executive in
February 2000). Any amount becoming payable under this Section 6(f) shall be
paid in immediately available funds within ten business days following the
Termination Date. The resignation of the Executive for Good Reason shall not be
considered a voluntary resignation and the Executive shall be entitled to be
paid the amount set forth above in the event the Executive terminates for Good
Reason.
7. Gross-Up Provisions. (a) If the Executive is, in the opinion of a
nationally recognized accounting firm selected by the Executive in his sole
discretion, expected to pay an excise tax on "excess parachute payments" (as
defined in Section 280G(b) of the Internal Revenue Code of 1986, as amended (the
"Code")) under Section 4999 of the Code as a result of an acceleration of the
vesting of options or for any other reason, the Company shall have an absolute
and unconditional obligation to pay the Executive in accordance with the terms
of this Section 7 the expected amount of such taxes. In addition, the Company
shall have an absolute and unconditional obligation to pay the Executive such
additional amounts as are necessary to place the Executive in the exact same
financial position that he would have been in if he had not incurred any
expected tax liability under Section 4999 of the Code; provided that the Company
shall in no event pay the Executive any amounts with respect to any penalties or
interest due under any provision of the Code. The determination of the exact
amount, if any, of any expected "excess parachute payments" and any expected tax
liability under Section 4999 of the Code shall be made by the
nationally-recognized independent accounting firm selected by the
<PAGE>
5
Executive. The fees and expenses of such accounting firm shall be paid by the
Company in advance. The determination of such accounting firm shall be final and
binding on the parties. The Company irrevocably agrees to pay to the Executive,
in immediately available funds to an account designated in writing by the
Executive, any amounts to be paid under this Section 7 within two days after
receipt by the Company of written notice from the accounting firm which sets
forth such accounting firm's determination. In addition, in the event that such
payments are not sufficient to pay all excise taxes on "excess parachute
payments" under Section 4999 of the Code as a result of an acceleration of the
vesting of options or for any other reason and to place the Executive in the
exact same financial position that he would have been in if he had not incurred
any expected tax liability under Section 4999 of the Code as a result of a
change in control, then the Company shall have an absolute and unconditional
obligation to pay the Executive such additional amounts as may be necessary to
pay such excise taxes and place the Executive in the exact same financial
position that he would have been had he not incurred any tax liability as a
result of a change in control under the Code. Notwithstanding the foregoing, in
the event that a written ruling (whether public or private) of the Internal
Revenue Service ("IRS") is obtained by or on behalf of the Company or the
Executive, which ruling expressly provides that the Executive is not required to
pay, or is entitled to a refund with respect to, all or any portion of such
excise taxes or additional amounts, the Executive shall promptly reimburse the
Company in an amount equal to all amounts paid to the Executive pursuant to this
Section 7 less any excise taxes or additional amounts which remain payable by,
or are not refunded to, the Executive after giving effect to such IRS ruling.
Each of the Company and the Executive agrees to promptly notify the other party
if it receives any such IRS ruling.
(b) The provisions of this Section 7 shall survive any termination of
this Agreement.
8. Nondisclosure of Confidential Information. (a) The Executive
acknowledges that in the course of his employment he will occupy a position of
trust and confidence. The Executive shall not, except as may be required to
perform his duties or as required by applicable law, disclose to others or use,
whether directly or indirectly, any Confidential Information.
(b) "Confidential Information" shall mean information about the
Company's business and operations that is not disclosed by the Company for
financial reporting purposes and that was learned by the Executive in the course
of his employment by the Company, including, without limitation, any proprietary
knowledge, patents, trade secrets, data, formulae, information and client and
customer lists and all papers and records (including computer records) of the
documents containing such Confidential Information. The Executive acknowledges
that such Confidential Information is specialized, unique in nature and of great
value to the Company, and that such information gives the Company a competitive
advantage. The Executive agrees to deliver or return to the Company, at the
Company's request at any time or upon termination or expiration of his
employment or as soon as possible thereafter, all documents, computer tapes and
disks, records, lists, data, drawings, prints, notes and written information
(and all copies thereof) furnished by the Company or prepared by the Executive
in the course of his employment by the Company.
(c) The provisions of this Section 8 shall survive any termination of
this Agreement for a period of three years.
9. Covenant Not to Compete. For two years following the end of the Term
or, in the event the Executive has been terminated without Cause or has resigned
for Good Reason, for one year following such termination without Cause or
resignation for Good Reason (the "Restricted Period"), the Executive will not,
directly or indirectly, enter into the employment of, render services to, or
acquire any interest whatsoever in (whether for his own account as an
<PAGE>
6
individual proprietor, or as a partner, associate, stockholder, officer,
director, consultant, trustee or otherwise), or otherwise assist, any person or
entity engaged in any operations in North America involving the transmission of
radio entertainment programming in competition with the Company or that
competes, or is likely to compete, with any other aspect of the business of the
Company as conducted at the end of the Term; provided, that nothing in this
Agreement shall prevent the purchase or ownership by the Executive by way of
investment of up to five percent of the shares or equity interest of any
corporation or other entity. Without limiting the generality of the foregoing,
the Executive agrees that during the Restricted Period, the Executive will not
call on or otherwise solicit business or assist others to solicit business from
any of the customers or potential customers of the Company as to any product or
service that competes with any product or service provided or marketed by or
actually under development by the Company at the end of the Term. The Executive
agrees that during the Restricted Period he will not solicit or assist others to
solicit the employment of or hire any employee of the Company without the prior
written consent of the Company.
10. Remedies. The Executive and Company agree that damages for breach
of any of the covenants under Sections 8 and 9 above will be difficult to
determine and inadequate to remedy the harm which may be caused thereby, and
therefore consent that these covenants may be enforced by temporary or permanent
injunction without the necessity of bond. The Executive believes, as of the date
of this Agreement, that the provisions of this Agreement are reasonable and that
the Executive is capable of gainful employment without breaching this Agreement.
However, should any court or arbitrator decline to enforce any provision of
Section 8 or 9 of this Agreement, this Agreement shall, to the extent applicable
in the circumstances before such court or arbitrator, be deemed to be modified
to restrict the Executive's competition with the Company to the maximum extent
of time, scope and geography which the court or arbitrator shall find
enforceable, and such provisions shall be so enforced.
11. Indemnification. The Company shall indemnify the Executive to the
full extent provided in the Company's Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws and the law of the State of
Delaware in connection with his activities as an officer of the Company.
12. Entire Agreement. The provisions contained herein constitute the
entire agreement between the parties with respect to the subject matter hereof
and supersede any and all prior agreements, understandings and communications
between the parties, oral or written, with respect to such subject matter.
13. Modification. Any waiver, alteration, amendment or modification of
any provisions of this Agreement shall not be valid unless in writing and signed
by both the Executive and the Company.
14. Severability. If any provision of this Agreement shall be declared
to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof, which shall
remain in full force and effect.
15. Assignment. The Executive may not assign any of his rights or
delegate any of his duties hereunder without the prior written consent of the
Company. The Company may not assign any of its rights or delegate any of its
obligations hereunder.
16. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the successors in interest of the Executive and the Company.
<PAGE>
7
17. Notice. All notices and other communications required or permitted
hereunder shall be made in writing and shall be deemed effective when initially
transmitted by courier or facsimile transmission and five days after mailing by
registered or certified mail:
if to the Company:
Sirius Satellite Radio Inc.
1221 Avenue of the Americas
36th Floor
New York, New York 10020
Attention: General Counsel
Telecopier: (212) 584-5353
if to the Executive:
Patrick L. Donnelly
55 Dartmouth Street
Garden City, New York 11530
Telecopier: (516) 326-9730
or to such other person or address as either of the parties shall furnish in
writing to the other party from time to time.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within the State of New York.
19. Non-Mitigation. The Executive shall not be required to mitigate
damages or seek other employment in order to receive compensation or benefits
under Section 6 or Section 7 of this Agreement; nor shall the amount of any
benefit or payment provided for under Section 6 or Section 7 of this Agreement
be reduced by any compensation earned by the Executive as the result of
employment by another employer.
20. Arbitration. (a) The Executive and the Company agree that if a
dispute arises concerning or relating to the Executive's employment with the
Company, or the termination of the Executive's employment, such dispute shall be
submitted to binding arbitration under the rules of the American Arbitration
Association in effect at the time such dispute arises. The arbitration shall
take place in New York, New York, and both the Executive and the Company agree
to submit to the jurisdiction of the arbitrator selected in accordance with the
American Arbitration Association rules and procedures. Except as provided for
below, the Executive and the Company agree that this arbitration procedure will
be the exclusive means of redress for any disputes relating to or arising from
the Executive's employment with the Company or his termination, including
disputes over rights provided by federal, state, or local statutes, regulations,
ordinances, and common law, including all laws that prohibit discrimination
based on any protected classification. THE PARTIES EXPRESSLY WAIVE THE RIGHT TO
A JURY TRIAL, AND AGREE THAT THE ARBITRATOR'S AWARD SHALL BE FINAL AND BINDING
ON BOTH PARTIES, AND SHALL NOT BE APPEALABLE. The arbitrator shall have
discretion to award monetary and other damages, and any other relief that the
arbitrator deems appropriate and is allowed by law. The arbitrator shall have
the discretion to award the prevailing party reasonable costs and attorneys'
fees incurred
<PAGE>
8
in bringing or defending an action, and shall award such costs and fees to the
Executive in the event the Executive prevails on the merits of any action
brought hereunder.
(b) Exceptions. The Company and the Executive agree that the sole
dispute that is excepted from Section 20(a) is an action seeking injunctive
relief from a court of competent jurisdiction regarding enforcement and
application of Sections 8 and 9 of this Agreement, which action may be brought
in addition to, or in place of, an arbitration proceeding in accordance with
Section 20(a).
21. Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
22. Executive's Representations. Executive hereby represents and
warrants to Company that he (a) is not now under any contractual or other
obligation that is inconsistent with or in conflict with this Agreement or that
would prevent, limit, or impair the Executive's performance of his or her
obligations under this Agreement; (b) has been provided the opportunity to be,
or has been, represented by legal counsel in preparing, negotiating, executing
and delivering this Agreement; and (c) fully understands the terms and
provisions of this Agreement.
<PAGE>
9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SIRIUS SATELLITE RADIO INC.
By: /s/ David Margolese
------------------------------
David Margolese
Chief Executive Officer
/s/ Patrick L. Donnelly
------------------------------
Patrick L. Donnelly
<PAGE>
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of March 28, 2000 (this
"Agreement"), between SIRIUS SATELLITE RADIO INC., a Delaware
corporation (the "Company"), and Ira H. Bahr (the "Executive").
In consideration of the mutual covenants and conditions set forth
herein, the Company and the Executive agree as follows:
1. Employment. Subject to the terms and conditions of this Agreement,
the Company hereby employs the Executive, and the Executive hereby accepts
employment with the Company.
2. Duties and Reporting Relationship. (a) The Executive shall be
employed in the capacity of Senior Vice President, Marketing, Alliances &
Communications of the Company. During the Term (as defined below), the Executive
shall, on a full-time basis, use his skills and render services to the best of
his ability in supervising the marketing and communications affairs of the
Company and shall, in addition, perform such other activities and duties
consistent with his position as the Chief Executive Officer of the Company
shall, from time to time, reasonably specify and direct. It is acknowledged that
the Executive has made, and may continue to make, passive investments which will
require a portion of his time and attention but Executive agrees that such
investments will not interfere with his full-time commitment to the Company. The
Executive shall not be required by this Agreement to perform duties for any
entity other than the Company and its subsidiaries.
(b) The Executive shall generally perform his duties and conduct his
business at the principal offices of the Company in New York, New York.
(c) The Executive shall report to the Chief Executive Officer of the
Company.
3. Term. The term of this Agreement shall commence on March 28, 2000,
and end on February 28, 2003, unless terminated earlier pursuant to the
provisions of Section 6 (the "Term").
4. Annual Base Salary. (a) During the Term, the Executive shall be paid
an annual base salary of $290,000, subject to any increases that the Chief
Executive Officer of the Company shall approve. All amounts paid to the
Executive under this Agreement shall be in U.S. dollars. The Executive's base
salary shall be paid at least monthly and, at the option of the Company, may be
paid more frequently. In the event the Executive's employment is terminated
during the Term, the Executive's base salary shall be prorated through the date
of termination.
(b) All compensation paid to the Executive hereunder shall be subject
to any payroll and withholding deductions required by any applicable law,
including, without limitation, federal, New York state and New York City income
tax withholding, federal unemployment tax and social security (FICA).
<PAGE>
2
5. Additional Compensation, Expenses and Benefits. (a) During the Term,
the Company shall promptly reimburse the Executive for all reasonable and
necessary business expenses incurred and advanced by him in carrying out his
duties under this Agreement. The Executive shall present to the Company from
time to time an itemized account of such expenses in such form as may be
required by the Company from time to time.
(b) During the Term, the Executive shall be entitled to participate
fully in any bonus grants, benefit plans, programs, policies and fringe benefits
which may be made available to the officers of the Company generally, including,
without limitation, medical, dental and life insurance; provided that the
Executive shall participate in any stock option or stock purchase or
compensation plan currently in effect or subsequently established by the Company
to the extent, and only to the extent, authorized by the plan document or by the
Board of Directors of the Company (the "Board") or the compensation committee
thereof. With respect to any annual bonus program which may be established by
the Company, the Board or any committee thereof, the Company agrees that the
Executive shall be entitled to annual bonuses, if any, on the same basis as
other senior officers of the Company.
6. Termination. The date upon which this Agreement is deemed to be
terminated in accordance with any of the provisions of this Section 6 is
referred to herein as the "Termination Date."
(a) Termination for Cause. The Company has the right and may elect to
terminate this Agreement for Cause at any time. For purposes of this Agreement,
"Cause" means the occurrence or existence of any of the following: (i) a
material breach by the Executive of the terms of his employment or of his duty
not to engage in any transaction that represents, directly or indirectly,
self-dealing with the Company or any of its affiliates (which, for purposes
here, shall mean any individual, corporation, partnership, association, limited
liability company, trust, estate, or other entity or organization directly or
indirectly controlling, controlled by, or under direct or indirect common
control with the Company) which has not been approved by a majority of the
disinterested directors of the Board, if in any such case such material breach
remains uncured after thirty days have elapsed following the date on which the
Company gives the Executive written notice of such breach; (ii) the repeated
material breach by the Executive of any duty referred to in clause (i) above
with respect to which at least one prior notice was given under clause (i);
(iii) any act of dishonesty, misappropriation, embezzlement, intentional fraud,
or similar conduct by the Executive involving the Company or its affiliates;
(iv) the conviction or the plea of nolo contendre or the equivalent in respect
of a felony; (v) any damage of a material nature to any property of the Company
or any of its affiliates caused by the Executive's willful or grossly negligent
conduct; (vi) the repeated nonprescription use of any controlled substance or
the repeated use of alcohol or any other non-controlled substance that the Board
reasonably determines renders the Executive unfit to serve as an officer or
employee of the Company or its affiliates; (vii) the Executive's failure to
comply with the Board's reasonable written instructions, after thirty days
written notice; or (viii) conduct by the Executive that in a good faith written
determination of the Board demonstrates unfitness to serve as an officer or
employee of the Company or its affiliates, including, without limitation, a
finding by the Board or any regulatory authority that the Executive committed
acts of unlawful harassment or violated any other state, federal or local law or
ordinance prohibiting discrimination in employment applicable to the business of
the Company or any of its operating subsidiaries. Termination of the Executive
for Cause pursuant to this Section 6(a) shall be communicated by a Notice of
Termination. For purposes of this Agreement a "Notice of Termination" shall mean
delivery to the Executive of a copy of a resolution or resolutions duly adopted
by the affirmative vote of not less than a majority of the directors present and
voting at a meeting of the Board called and held for that
<PAGE>
3
purpose after reasonable notice to the Executive and reasonable opportunity for
the Executive, together with the Executive's counsel, to be heard before the
Board prior to such vote, finding that in the good faith opinion of the Board,
the Executive was guilty of conduct set forth in the first sentence of this
Section 6(a) and specifying the particulars thereof in detail. For purposes of
Section 6(a), this Agreement shall terminate on the date specified by the Board
in the Notice of Termination.
(b) Death or Disability. (i) This Agreement and the Executive's
employment hereunder shall terminate upon the death of the Executive. For
purposes of Section 6(b)(i), this Agreement shall terminate on the date of the
Executive's death.
(ii) If the Executive is unable to perform the essential duties and
functions of his position because of a disability, even with a reasonable
accommodation, for one hundred eighty days within any three hundred sixty-five
day period, and the Company, in its reasonable judgment, determines that the
exigencies created by the Executive's disability are such that termination is
warranted, the Company shall have the right and may elect to terminate the
services of the Executive by a Notice of Disability Termination. For purposes of
this Agreement, a "Notice of Disability Termination" shall mean a written notice
which sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under this Section
6(b)(ii). For purposes of this Agreement, no such purported termination by the
Company shall be effective without such Notice of Disability Termination. This
Agreement shall terminate on the day after such Notice of Disability Termination
is received by the Executive.
(c) Voluntary Resignation. Should the Executive wish to resign from his
position with the Company, for other than Good Reason (as defined below), during
the Term, the Executive shall give fourteen days prior written notice to the
Company. Failure to provide such notice shall entitle the Company to terminate
this Agreement effective on the last business day on which the Executive
reported for work at his principal place of employment with the Company. The
Agreement will terminate on the effective date of the resignation as defined
above, however, the Company may, at its sole discretion, request that the
Executive perform no job responsibilities and cease his or her active employment
immediately upon receipt of the Notice.
(d) Without Cause. The Company shall have the absolute right to
terminate the Executive's employment without Cause at any time. If the Company
elects to terminate the Executive without Cause, the Company shall give seven
days written notice to the Executive. This Agreement shall terminate seven days
following receipt of such notice by the Executive, however, the Company, at its
sole discretion may request that the Executive cease active employment and
perform no more job duties immediately upon provision of such notice to the
Executive.
(e) For Good Reason. Should the Executive wish to resign from his
position with the Company for Good Reason during the Term, the Executive shall
give seven days prior written notice to the Company. Failure to provide such
notice shall entitle the Company to fix the Termination Date as of the last
business day on which the Executive reported for work at his principal place of
employment with the Company. The Agreement shall terminate on the date specified
in such notice, however, at its sole discretion, the Company may request the
Executive cease active employment and perform no more job duties for the Company
immediately upon receipt of such notice.
<PAGE>
4
For purposes of this Agreement, "Good Reason" shall mean the
continuance of any of the following events (without the Executive's express
prior written consent) for a period of seven days (or thirty days in the case of
items (i) and (v) below) after delivery to the Company by the Executive of a
notice of the occurrence of such event:
(i) the assignment to the Executive by the Company of duties
not reasonably consistent with the Executive's positions, duties,
responsibilities, titles or offices at the commencement of the Term or
any unreasonable reduction in his duties or responsibilities or any
removal of the Executive from or any failure to re-elect the Executive
to any of such positions (except in connection with the termination of
the Executive's employment for Cause, disability or as a result of the
Executive's death or by the Executive other than for Good Reason);
provided that Employee acknowledges and agrees that or
(ii) any reduction in the Executive's annual base salary from
the previous year;
or
(iii) any failure of the Company to comply with the terms of
Section 5(b) as it relates to the Executive's annual bonuses; or
(iv) a relocation of the Company's executive offices to a
location outside of New York City; or
(v) any material breach by the Company of any provision of
this Agreement.
(f) Compensation and Benefits Upon Termination. If the employment of
the Executive is terminated for any reason, except (i) by the Company for Cause
or (ii) by the Executive voluntarily, then the Executive shall be entitled to
receive, and the Company shall pay to the Executive without setoff, counterclaim
or other withholding, except as set forth in Section 4(b), an amount (in
addition to any salary, benefits or other sums due the Executive through the
Termination Date) equal to the sum of (1) the Executive's annualized base salary
then in effect, and (2) the annual cash bonus, if any, paid to the Executive
with respect to the immediately preceding calendar year (or, in the case of the
year ending December 31, 2000, the performance bonus paid to the Executive in
February 2000). Any amount becoming payable under this Section 6(f) shall be
paid in immediately available funds within ten business days following the
Termination Date. The resignation of the Executive for Good Reason shall not be
considered a voluntary resignation and the Executive shall be entitled to be
paid the amount set forth above in the event the Executive terminates for Good
Reason.
7. Gross-Up Provisions. (a) If the Executive is, in the opinion of a
nationally recognized accounting firm selected by the Executive in his sole
discretion, expected to pay an excise tax on "excess parachute payments" (as
defined in Section 280G(b) of the Internal Revenue Code of 1986, as amended (the
"Code")) under Section 4999 of the Code as a result of an acceleration of the
vesting of options or for any other reason, the Company shall have an absolute
and unconditional obligation to pay the Executive in accordance with the terms
of this Section 7 the expected amount of such taxes. In addition, the Company
shall have an absolute and unconditional obligation to pay the Executive such
additional amounts as are necessary to place the Executive in the exact same
financial position that he would have been in if he had not incurred any
expected tax liability under Section 4999 of the Code; provided that the Company
shall in no event pay the Executive any amounts with respect to any penalties or
interest due under any provision of the Code. The determination of the exact
amount, if any, of any expected
<PAGE>
5
"excess parachute payments" and any expected tax liability under Section 4999 of
the Code shall be made by the nationally-recognized independent accounting firm
selected by the Executive. The fees and expenses of such accounting firm shall
be paid by the Company in advance. The determination of such accounting firm
shall be final and binding on the parties. The Company irrevocably agrees to pay
to the Executive, in immediately available funds to an account designated in
writing by the Executive, any amounts to be paid under this Section 7 within two
days after receipt by the Company of written notice from the accounting firm
which sets forth such accounting firm's determination. In addition, in the event
that such payments are not sufficient to pay all excise taxes on "excess
parachute payments" under Section 4999 of the Code as a result of an
acceleration of the vesting of options or for any other reason and to place the
Executive in the exact same financial position that he would have been in if he
had not incurred any expected tax liability under Section 4999 of the Code as a
result of a change in control, then the Company shall have an absolute and
unconditional obligation to pay the Executive such additional amounts as may be
necessary to pay such excise taxes and place the Executive in the exact same
financial position that he would have been had he not incurred any tax liability
as a result of a change in control under the Code. Notwithstanding the
foregoing, in the event that a written ruling (whether public or private) of the
Internal Revenue Service ("IRS") is obtained by or on behalf of the Company or
the Executive, which ruling expressly provides that the Executive is not
required to pay, or is entitled to a refund with respect to, all or any portion
of such excise taxes or additional amounts, the Executive shall promptly
reimburse the Company in an amount equal to all amounts paid to the Executive
pursuant to this Section 7 less any excise taxes or additional amounts which
remain payable by, or are not refunded to, the Executive after giving effect to
such IRS ruling. Each of the Company and the Executive agrees to promptly notify
the other party if it receives any such IRS ruling.
(b) The provisions of this Section 7 shall survive any termination of
this Agreement.
8. Nondisclosure of Confidential Information. (a) The Executive
acknowledges that in the course of his employment he will occupy a position of
trust and confidence. The Executive shall not, except as may be required to
perform his duties or as required by applicable law, disclose to others or use,
whether directly or indirectly, any Confidential Information.
(b) "Confidential Information" shall mean information about the
Company's business and operations that is not disclosed by the Company for
financial reporting purposes and that was learned by the Executive in the course
of his employment by the Company, including, without limitation, any proprietary
knowledge, patents, trade secrets, data, formulae, information and client and
customer lists and all papers and records (including computer records) of the
documents containing such Confidential Information. The Executive acknowledges
that such Confidential Information is specialized, unique in nature and of great
value to the Company, and that such information gives the Company a competitive
advantage. The Executive agrees to deliver or return to the Company, at the
Company's request at any time or upon termination or expiration of his
employment or as soon as possible thereafter, all documents, computer tapes and
disks, records, lists, data, drawings, prints, notes and written information
(and all copies thereof) furnished by the Company or prepared by the Executive
in the course of his employment by the Company.
(c) The provisions of this Section 8 shall survive any termination of
this Agreement.
9. Covenant Not to Compete. For two years following the end of the Term
or, in the event the Executive has been terminated without Cause or has resigned
for Good Reason, for one year following such termination without Cause or
resignation for Good Reason (the
<PAGE>
6
"Restricted Period"), the Executive will not, directly or indirectly, enter into
the employment of, render services to, or acquire any interest whatsoever in
(whether for his own account as an individual proprietor, or as a partner,
associate, stockholder, officer, director, consultant, trustee or otherwise), or
otherwise assist, any person or entity engaged in any operations in North
America involving the transmission of radio entertainment programming in
competition with the Company or that competes, or is likely to compete, with any
other aspect of the business of the Company as conducted at the end of the Term;
provided, that nothing in this Agreement shall prevent the purchase or ownership
by the Executive by way of investment of up to five percent of the shares or
equity interest of any corporation or other entity. Without limiting the
generality of the foregoing, the Executive agrees that during the Restricted
Period, the Executive will not call on or otherwise solicit business or assist
others to solicit business from any of the customers or potential customers of
the Company as to any product or service that competes with any product or
service provided or marketed by or actually under development by the Company at
the end of the Term. The Executive agrees that during the Restricted Period he
will not solicit or assist others to solicit the employment of or hire any
employee of the Company without the prior written consent of the Company.
10. Remedies. The Executive and Company agree that damages for breach
of any of the covenants under Sections 8 and 9 above will be difficult to
determine and inadequate to remedy the harm which may be caused thereby, and
therefore consent that these covenants may be enforced by temporary or permanent
injunction without the necessity of bond. The Executive believes, as of the date
of this Agreement, that the provisions of this Agreement are reasonable and that
the Executive is capable of gainful employment without breaching this Agreement.
However, should any court or arbitrator decline to enforce any provision of
Section 8 or 9 of this Agreement, this Agreement shall, to the extent applicable
in the circumstances before such court or arbitrator, be deemed to be modified
to restrict the Executive's competition with the Company to the maximum extent
of time, scope and geography which the court or arbitrator shall find
enforceable, and such provisions shall be so enforced.
11. Indemnification. The Company shall indemnify the Executive to the
full extent provided in the Company's Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws and the law of the State of
Delaware in connection with his activities as an officer of the Company.
12. Entire Agreement. The provisions contained herein constitute the
entire agreement between the parties with respect to the subject matter hereof
and supersede any and all prior agreements, understandings and communications
between the parties, oral or written, with respect to such subject matter.
13. Modification. Any waiver, alteration, amendment or modification of
any provisions of this Agreement shall not be valid unless in writing and signed
by both the Executive and the Company.
14. Severability. If any provision of this Agreement shall be declared
to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof, which shall
remain in full force and effect.
15. Assignment. The Executive may not assign any of his rights or
delegate any of his duties hereunder without the prior written consent of the
Company. The Company may not assign any of its rights or delegate any of its
obligations hereunder.
<PAGE>
7
16. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the successors in interest of the Executive and the Company.
17. Notice. All notices and other communications required or permitted
hereunder shall be made in writing and shall be deemed effective when initially
transmitted by courier or facsimile transmission and five days after mailing by
registered or certified mail:
if to the Company:
Sirius Satellite Radio Inc.
1221 Avenue of the Americas
36th Floor
New York, New York 10020
Attention: General Counsel
Telecopier: (212) 584-5353
if to the Executive:
Ira H. Bahr
145 West 67th Street
Apt. 37H
New York, NY 10023
(212) 501-8454
or to such other person or address as either of the parties shall furnish in
writing to the other party from time to time.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within the State of New York.
19. Non-Mitigation. The Executive shall not be required to mitigate
damages or seek other employment in order to receive compensation or benefits
under Section 6 or Section 7 of this Agreement; nor shall the amount of any
benefit or payment provided for under Section 6 or Section 7 of this Agreement
be reduced by any compensation earned by the Executive as the result of
employment by another employer.
20. Arbitration. (a) The Executive and the Company agree that if a
dispute arises concerning or relating to the Executive's employment with the
Company, or the termination of the Executive's employment, such dispute shall be
submitted to binding arbitration under the rules of the American Arbitration
Association in effect at the time such dispute arises. The arbitration shall
take place in New York, New York, and both the Executive and the Company agree
to submit to the jurisdiction of the arbitrator selected in accordance with the
American Arbitration Association rules and procedures. Except as provided for
below, the Executive and the Company agree that this arbitration procedure will
be the exclusive means of redress for any disputes relating to or arising from
the Executive's employment with the Company or his termination, including
disputes over rights provided by federal, state, or local statutes, regulations,
ordinances, and common law, including all laws that prohibit discrimination
based on any protected classification. THE PARTIES EXPRESSLY WAIVE THE RIGHT TO
A JURY TRIAL, AND AGREE THAT THE ARBITRATOR'S AWARD SHALL BE FINAL AND BINDING
ON BOTH PARTIES, AND SHALL NOT BE APPEALABLE. The arbitrator shall have
discretion to award monetary and other damages, and
<PAGE>
8
any other relief that the arbitrator deems appropriate and is allowed by law.
The arbitrator shall have the discretion to award the prevailing party
reasonable costs and attorneys' fees incurred in bringing or defending an
action, and shall award such costs and fees to the Executive in the event the
Executive prevails on the merits of any action brought hereunder.
(b) Exceptions. The Company and the Executive agree that the sole
dispute that is excepted from Section 20(a) is an action seeking injunctive
relief from a court of competent jurisdiction regarding enforcement and
application of Sections 8 and 9 of this Agreement, which action may be brought
in addition to, or in place of, an arbitration proceeding in accordance with
Section 20(a).
21. Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
22. Executive's Representations. Executive hereby represents and
warrants to Company that he (a) is not now under any contractual or other
obligation that is inconsistent with or in conflict with this Agreement or that
would prevent, limit, or impair the Executive's performance of his or her
obligations under this Agreement; (b) has been provided the opportunity to be,
or has been, represented by legal counsel in preparing, negotiating, executing
and delivering this Agreement; and (c) fully understands the terms and
provisions of this Agreement.
<PAGE>
9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SIRIUS SATELLITE RADIO INC.
By: /s/ Patrick L. Donnelly
-------------------------------
Patrick L. Donnelly
Senior Vice President,
General Counsel and Secretary
/s/ Ira H. Bahr
-------------------------------
Ira H. Bahr
<PAGE>
EXHIBIT 10.24
================================================================================
STOCK PURCHASE AGREEMENT
between
SIRIUS SATELLITE RADIO INC.
and
DAIMLERCHRYSLER CORPORATION
Dated as of January 28, 2000
================================================================================
<PAGE>
Page
----
TABLE OF CONTENTS
ARTICLE 1DEFINITIONS......................................................... 1
1.1 Definitions....................................................... 1
ARTICLE 2PURCHASE AND SALE OF SECURITIES..................................... 5
2.1 Purchase and Sale of Securities................................... 5
2.2 Closing........................................................... 5
ARTICLE 3REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................... 6
3.1 Corporate Existence and Power..................................... 6
3.2 Subsidiaries...................................................... 6
3.3 Corporate Authorization; No Contravention......................... 6
3.4 Governmental Authorization; Third Party Consents.................. 7
3.5 Binding Effect.................................................... 7
3.6 Capitalization of the Company..................................... 7
3.7 SEC Filings; Financial Statements................................. 8
3.8 Absence of Certain Developments................................... 8
3.9 Compliance with Laws.............................................. 9
3.10 Licenses......................................................... 9
3.11 Litigation....................................................... 9
3.12 Intellectual Property............................................ 9
3.13 Private Offering................................................ 10
3.14 Rights Agreement................................................ 10
3.15 Board Approval; Delaware GCL 203................................ 10
3.16 Brokers or Finders.............................................. 10
3.17 OEM Matters...................................................... 11
ARTICLE 4REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.................... 11
4.1 Existence and Power.............................................. 11
4.2 Corporate Authorization; No Contravention........................ 11
4.3 Governmental Authorization; Third Party Consents................. 11
4.4 Binding Effect................................................... 11
4.5 Purchase for Own Account......................................... 12
4.6 Brokers or Finders............................................... 12
ARTICLE 5COVENANTS OF THE COMPANY........................................... 12
5.1 Conduct of Business.............................................. 12
5.2 Indemnification of Brokerage..................................... 13
5.3 Rule 144......................................................... 13
5.4 Rights Agreement................................................. 13
5.5 Matching Right................................................... 13
ARTICLE 6COVENANTS OF THE PURCHASER......................................... 14
6.1 Indemnification of Brokerage..................................... 14
6.2 Lock-Up Agreement................................................ 14
6.3 Transfer Restrictions............................................ 15
<PAGE>
Page
----
ARTICLE 7CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER TO CLOSE... 15
7.1 Representations and Covenants.................................... 15
7.2 Consents and Approvals........................................... 15
7.3 No Claims........................................................ 15
ARTICLE 8CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO CLOSE..... 16
8.1 Representations and Covenants.................................... 16
8.2 Consents and Approvals........................................... 16
8.3 No Claims........................................................ 16
ARTICLE 9REGISTRAION RIGHTS................................................. 17
9.1Requested Registration............................................. 17
9.2 Company Registration............................................. 17
9.3 Transferability.................................................. 18
9.4 Expenses of Registration......................................... 18
9.5 Registration Procedures........................................... 18
9.6 Indemnification.................................................. 20
ARTICLE 10TERMINATION OF AGREEMENT.......................................... 22
10.1 Termination..................................................... 22
10.2 Survival After Termination...................................... 23
ARTICLE 11MISCELLANEOUS..................................................... 23
11.1 Expenses........................................................ 23
11.2 Notices......................................................... 23
11.3 Successors and Assigns.......................................... 24
11.4 Amendment and Waiver............................................ 24
11.5 Counterparts.................................................... 24
11.6 Headings........................................................ 24
11.7 GOVERNING LAW................................................... 24
11.8 Severability.................................................... 24
11.9 Entire Agreement................................................ 25
11.10 Further Assurances............................................. 25
11.11 Public Announcements........................................... 25
SCHEDULE 3.2 Subsidiaries of the Company
SCHEDULE 3.3 Defaults
SCHEDULE 3.4 Required Consents
SCHEDULE 3.11 Litigation
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of January 28, 2000 (this
"Agreement"), by and between SIRIUS SATELLITE RADIO INC., a Delaware corporation
(the "Company"), and DAIMLERCHRYSLER CORPORATION, a Delaware corporation (the
"Purchaser").
WHEREAS, the Company proposes to issue and sell to the Purchaser,
and the Purchaser proposes to buy, for an aggregate purchase price of One
Hundred Million Thirty Nine Dollars ($100,000,039), a total of 2,290,322 shares
of Common Stock, par value $.001 per share, of the Company;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms shall have the meanings set
forth below:
"Affiliate" means a Person that directly, or indirectly through one
or more intermediaries, Controls or is Controlled by, or is under common Control
with the Person specified.
"Agreement" means this Stock Purchase Agreement, as the same may be
amended, supplemented or modified in accordance with the terms hereof.
"Beneficial Owner" shall mean, with respect to any securities, a
Person who beneficially owns such securities within the meaning of Rule 13d-3
under the Exchange Act, and "beneficially owned" and "beneficial ownership"
shall have correlative meanings.
"Board of Directors" means the board of directors of the Company or
any duly authorized committee thereof.
"Broker" has the meaning assigned to such term in Section 3.16.
"Business Day" means any day other than Saturday, Sunday or other
day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.
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2
"Bylaws" means the bylaws of the Company, as the same may have been
amended and in effect as of the Closing Date.
"Certificate of Incorporation" means the Amended and Restated
Certificate of Incorporation of the Company, as the same may have been amended
and in effect as of the Closing Date.
"Claims" means actions, causes of action, suits, claims, complaints,
demands, litigations or legal, administrative or arbitral proceedings.
"Closing" has the meaning assigned to such term in Section 2.2.
"Closing Date" has the meaning assigned to such term in Section 2.2.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" means the common stock, par value $.001 per share, of
the Company, or any other capital stock of the Company into which such stock is
reclassified or reconstituted.
"Company Options" has the meaning assigned to such term in Section
3.6.
"Contemplated Transaction" means the purchase of shares of Common
Stock contemplated by this Agreement, including without limitation the purchase
and sale of the Purchased Shares.
"Contractual Obligation" means, as to any Person, any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other instrument to
which such Person is a party or by which it or any of its property is bound.
"Control" (including the terms "controlling," "controlled by" and
"under common control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Convertible Subordinated Notes" means the Company's 8-3/4%
Convertible Subordinated Notes due 2009.
"Delaware GCL" means the Delaware General Corporation Law.
"Demand Notice" has the meaning assigned to such term in Section
9.1(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
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3
"Existing Plans" has the meaning assigned to such term in Section
3.6.
"FCC" has the meaning assigned to such term in Section 3.8.
"Ford" has the meaning assigned to such term in Section 3.17.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"Governmental Authority" means the government of any nation, state,
city, locality or other political subdivision of any thereof, and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government or any international regulatory body
having or asserting jurisdiction over a Person, its business or its properties.
"Intellectual Property" has the meaning assigned to such term in
Section 3.12.
"Licenses" has the meaning assigned to such term in Section 3.10.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other), restriction or other
security interest of any kind or nature whatsoever.
"Lock-up Period" has the meaning assigned to such term in Section
6.2.
"Lock-up Request" has the meaning assigned to such term in Section
6.2.
"Loral" means Loral Space & Communications, Ltd., a Bermuda
corporation.
"Material Adverse Effect" has the meaning assigned to such term in
Section 3.8.
"NASD" means the National Association of Securities Dealers, Inc.
"OEM" means an original equipment manufacturer of vehicles, such as
Ford, BMW AG, Honda Motor Corp. and Toyota.
"Offering" has the meaning assigned to such term in Section 6.2.
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, Governmental Authority or other entity of
any kind.
"Prospectus" shall mean the prospectus included in any Registration
Statement (including without limitation a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A
<PAGE>
4
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Purchased Shares covered by such Registration Statement and all other
amendments and supplements to such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
"Purchased Shares" has the meaning assigned to such term in Section
2.1.
"Purchaser" has the meaning assigned to such term in the preamble.
"Registration Statement" shall mean any registration statement of
the Company under the Securities Act that covers any of the Purchased Shares
pursuant to the provisions of this Agreement, including the related Prospectus,
all amendments and supplements to such registration statement (including
post-effective amendments), all exhibits and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
"Required Consents" has the meaning assigned to such term in Section
3.4.
"Requirement of Law" means, as to any Person, the Certificate of
Incorporation and Bylaws or other organizational or governing documents of such
Person, and any law, treaty, rule, regulation, qualification, license or
franchise or determination (including, without limitation, those related to
taxes) of an arbitrator or a court or other Governmental Authority or of the
NASD or the Nasdaq National Market or any national securities exchange on which
the Common Stock is listed or admitted to trading, in each case applicable or
binding upon such Person or any of its property or to which such Person or any
of its property is subject or pertaining to the transactions contemplated
hereby.
"Rights Agreement" has the meaning assigned to such term in Section
3.14(a).
"Rule 144" shall mean Rule 144 promulgated by the Commission under
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission.
"SEC Reports" means all proxy statements, registration statements,
reports and other documents filed or required to be filed by the Company or any
of its Subsidiaries with the Commission pursuant to the Securities Act or the
Exchange Act since December 31, 1998.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder.
"Series A Preferred Stock" means the Company's 9.2% Series A Junior
Cumulative Convertible Preferred Stock, par value $.001 per share.
"Series B Preferred Stock" means the Company's 9.2% Series B Junior
Cumulative Convertible Preferred Stock, par value $.001 per share.
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5
"Series C Preferred Stock" means the Company's 102% Series C
Convertible Preferred Stock, par value $.001 per share.
"Series C Warrants" has the meaning assigned to such term in Section
3.6.
"Series D Preferred Stock" means the Company's 9.2% Series D Junior
Cumulative Convertible Preferred Stock, par value $.001 per share.
"Subsidiary" means, in respect of any Person, any other Person
which, at the time as of which any determination is made, such Person or one or
more of its Subsidiaries has, directly or indirectly, voting control.
"Termination Date" has the meaning assigned to such term in Section
10.1(a).
"Transfer" means any sale, assignment, hypothecation, transfer or
other disposition. "Transferor" and "Transferee" shall have correlative
meanings.
ARTICLE 2
PURCHASE AND SALE OF SECURITIES
2.1 Purchase and Sale of Securities. Subject to the terms set forth
herein and in reliance upon the representations set forth below, the Company
agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the
Company, on the Closing Date, an aggregate of 2,290,322 shares of Common Stock
for the aggregate purchase price of $100,000,039 (all of the shares of Common
Stock being purchased pursuant hereto being referred to herein as the "Purchased
Shares").
2.2 Closing. The purchase and issuance of the Purchased Shares shall
take place at a closing (the "Closing") to be held at the offices of the
Company, 1221 Avenue of the Americas, New York, New York 10020, at 10:00 A.M.,
local time, on the fifth Business Day after the conditions to closing set forth
in Articles 7 and 8 (other than those to be satisfied at the Closing, which
shall be satisfied or waived at the Closing) have been satisfied or waived by
the party entitled to waive such conditions or such other day as may be mutually
agreed to by the parties hereto (the "Closing Date"). At the Closing, the
Company shall deliver to the Purchaser certificates representing the Purchased
Shares, duly registered in the name of the Purchaser, and the Purchaser shall
deliver to the Company the aggregate purchase price therefor by wire transfer of
immediately available funds to an account designated in writing by the Company
to the Purchaser at least two Business Days before the Closing.
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6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as
follows:
3.1 Corporate Existence and Power. The Company (a) is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware; (b) has all requisite corporate power and authority to own
and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is engaged; and (c) has the corporate power and
authority to execute, deliver and perform its obligations under this Agreement.
The Company is duly qualified to do business as a foreign corporation in, and is
in good standing under the laws of, each jurisdiction in which the conduct of
its business or the nature of the property owned requires such qualification.
3.2 Subsidiaries. Except as set forth on Schedule 3.2, the Company
has no Subsidiaries and no interest or investments in any corporation,
partnership, limited liability company, trust or other entity or organization.
Each Subsidiary listed on Schedule 3.2 has been duly organized, is validly
existing and in good standing under the laws of the jurisdiction of its
organization, has the corporate power and authority to own its properties and to
conduct its business and is duly registered, qualified and authorized to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or the nature of its properties requires such
registration, qualification or authorization. Except as disclosed on Schedule
3.2, all of the issued and outstanding capital stock (or equivalent interests)
of each Subsidiary set forth on Schedule 3.2 has been duly authorized and
validly issued, is fully paid and non-assessable and is owned by the Company
free and clear of any Liens and there are no rights, options or warrants
outstanding or other agreements to acquire shares of capital stock (or
equivalent interests) of such Subsidiary.
3.3 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Company of this Agreement and the Contemplated
Transaction, including, without limitation, the sale, issuance and delivery of
the Purchased Shares, (a) have been duly authorized by all necessary corporate
action of the Company; (b) do not contravene the terms of the Certificate of
Incorporation or Bylaws of the Company or the organizational documents of its
Subsidiaries; and (c) do not violate or result in any breach or contravention
of, or the creation of any Lien under, any material Contractual Obligation of
the Company or its Subsidiaries or any Requirement of Law applicable to the
Company or its Subsidiaries. Except as set forth on Schedule 3.3, no event has
occurred and no condition exists which, upon notice or the passage of time (or
both), would constitute a default or change of control under any indenture,
mortgage, deed of trust, credit agreement, note or other evidence of
indebtedness or other material agreement of the Company or its Subsidiaries or
the Certificate of Incorporation or Bylaws or the organizational documents of
the Company's Subsidiaries.
3.4 Governmental Authorization; Third Party Consents. Except for the
approvals and consents as listed on Schedule 3.4 hereto (collectively, the
"Required Consents"), no
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7
approval, consent, exemption, authorization or other action by, or notice to, or
filing with, any Governmental Authority or any other Person in respect of any
Requirement of Law, Contractual Obligation or otherwise, and no lapse of a
waiting period under a Requirement of Law, is necessary or required in
connection with the execution, delivery or performance by the Company, or
enforcement against the Company, of this Agreement or the Contemplated
Transaction.
3.5 Binding Effect. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as the enforceability thereof may be limited by considerations of public
policy and subject to the effects of bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
3.6 Capitalization of the Company. The authorized capital stock of
the Company consists of (i) 200,000,000 shares of Common Stock, of which, as of
January 21, 2000 (a) 29,428,869 shares were issued and outstanding and (b)
33,635,862 shares were reserved for issuance upon (x) the exercise of
outstanding stock options or warrants to purchase Common Stock and (y) the
conversion of outstanding shares of Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, shares of Series C Preferred Stock issuable
pursuant to warrants to purchase Series C Preferred Stock and the Convertible
Subordinated Notes, and (ii) 50,000,000 shares of Preferred Stock, of which, as
of January 21, 2000 (a) 1,461,270 shares of Series A Preferred Stock were issued
and outstanding, (b) 655,407 shares of Series B Preferred Stock were issued and
outstanding and (c) 1,152,427 shares of Series C Preferred Stock were issued and
outstanding. Each share of Series A Preferred Stock and Series B Preferred Stock
may be converted at any time, at the option of the holder, unless previously
redeemed, into a number of shares of Common Stock calculated by dividing the
$100 liquidation preference of the Series A Preferred Stock and Series B
Preferred Stock (without accrued and unpaid dividends) by $30 (as adjusted from
time to time in accordance with the relevant certificate of designations as
currently in effect). Each share of Series C Preferred Stock may be converted at
any time, at the option of the holder, unless previously redeemed, into a number
of shares of Common Stock calculated by dividing the $100 liquidation preference
of the Series C Preferred Stock (without accrued and unpaid dividends) by $18
(as adjusted from time to time in accordance with the relevant certificate of
designations as currently in effect). The Company has previously provided the
Purchaser with a true and correct list of all outstanding options or warrants to
purchase shares of any class or series of capital stock of the Company other
than Series C Preferred Stock and other than capital stock which may be
purchased under the Existing Plans (collectively, the "Company Options"), a true
and correct list of all outstanding options or warrants to purchase Series C
Preferred Stock (collectively, the "Series C Warrants") and a true and correct
list of each of the Company's stock option, incentive or other plans pursuant to
which options or warrants to purchase capital stock of the Company may be
issued, including any such plan adopted as of the date hereof but which remain
subject to stockholder approval (collectively, the "Existing Plans"). Except as
set forth above and except for the Stock Purchase Agreement, dated as of
December 23, 1999, between the Company and Blackstone Capital Partners III
Merchant Banking Fund L.P. relating to the proposed issue and sale by the
Company of the Series
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8
D Preferred Stock, there exists no options or warrants to purchase any series or
class of preferred stock of the Company. Except (a) as set forth in this Section
3.6, (b) shares of Common Stock issued (i) pursuant to the exercise of
outstanding Company Options or (ii) on the conversion of outstanding shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Convertible Subordinated Notes or shares of Series C
Preferred Stock issuable upon the exercise of outstanding Series C Warrants and
(c) options granted under Existing Plans, on the Closing Date there will be no
shares of Common Stock or any other equity security of the Company issuable upon
conversion or exchange of any security of the Company nor will there be any
rights, options or warrants outstanding or other agreements to acquire shares of
capital stock of the Company nor will the Company be contractually obligated to
purchase, redeem or otherwise acquire any of its outstanding shares of capital
stock. The Company has not created any "phantom stock," stock appreciation
rights or other similar rights the value of which is related to or based upon
the price or value of the Common Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock. None of
the Company's outstanding debt or debt instruments provide voting rights with
respect to the Company to the holders thereof. Other than Loral and Ford, no
stockholder of the Company is entitled to any preemptive or similar rights to
subscribe for shares of capital stock of the Company. All of the issued and
outstanding shares of Common Stock, Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock are, and the Purchased Shares (when issued
hereunder) after payment of the purchase price therefor to the Company, will be,
duly authorized, validly issued, fully paid and nonassessable.
3.7 SEC Filings; Financial Statements. (a) The Company has timely
filed all SEC Reports. The SEC Reports complied in all material respects with
the applicable requirements of the Securities Act or the Exchange Act, as
applicable, and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements in the SEC Reports, in light of the circumstances under
which they were made, not misleading.
(b) Each of the Company's financial statements (including, in each
case, any related notes) contained in the SEC Reports complied as to form in all
material respects with applicable published rules and regulations of the
Commission with respect thereto, was prepared in accordance with GAAP applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes to such financial statements) and fairly presented the financial
position of the Company and its Subsidiaries as at the respective dates and for
the periods indicated, except that the unaudited financial statements were
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount or effect.
3.8 Absence of Certain Developments. Since November 1, 1999, except
as described in the SEC Reports filed with the Commission prior to the date
hereof, there has been no material adverse change, or any development involving
a prospective material adverse change, in or affecting the business, management
or condition, financial or otherwise, of the Company and its Subsidiaries, taken
as a whole (a "Material Adverse Effect"). For purposes of this Agreement,
"Material Adverse Effect" shall include, without limitation, any material
adverse change in or affecting the technical feasibility of the Company's
proposed satellite broadcast system (including,
<PAGE>
9
without limitation, its terrestrial repeater transmitter network or customer
end-user components such as integrated circuits, adapters for existing radios
and antennas), existing or proposed Federal Communications Commission ("FCC")
approvals and proposed agreements with one or more consumer electronics
manufacturers, in each case as may be required in connection with the Company's
planned operations as described in the SEC Reports filed as of the date hereof,
but shall not include any change or prospective change which principally affects
the date on which the Company will commence commercial operations but does not
do any of the following: (a) affect the underlying technical feasibility of the
Company's operations, (b) materially increase the total cost of achieving
commercial operability or (c) affect the timing of any FCC approval.
3.9 Compliance with Laws. None of the Company or its Subsidiaries is
in material violation of any Requirement of Law to which it is subject.
3.10 Licenses. The Company has no reason to believe that either (a)
it will not finally obtain any license, permit, franchise or other
authorizations (collectively, "Licenses") necessary for it to conduct its
business as described in the SEC Reports or (b) any such Licenses will not be
obtained on a timely basis. As of the date hereof, the Company and its
Subsidiaries possess all Licenses necessary to conduct their business as
currently being conducted, except for the failure to possess such Licenses as
would not reasonably be expected to result in a Material Adverse Effect.
3.11 Litigation. Except as set forth on Schedule 3.11, there is no
legal action, suit, arbitration or other legal, administrative or other
governmental investigation, inquiry or proceeding pending or, to the best
knowledge of the Company, threatened against or affecting the Company or its
Subsidiaries which, if determined adversely to the Company, could reasonably be
expected to have a Material Adverse Effect.
3.12 Intellectual Property. The Company and its Subsidiaries own,
free and clear of all Liens, and have good and marketable title to, or hold
adequate licenses or otherwise possess all such rights as are necessary to use
all patents (and applications therefor), patent disclosures, trademarks, service
marks, trade names, copyrights (and applications therefor), inventions,
discoveries, processes, know-how, scientific, technical, engineering and
marketing data, formulae and techniques (collectively, "Intellectual Property")
used or proposed to be used in or necessary for the conduct of their business as
now conducted or as proposed to be conducted in the SEC Reports. The Company has
not received notice or otherwise has reason to know of any conflict or alleged
conflict with the rights of others pertaining to the Company's Intellectual
Property. To the best of the Company's knowledge, the business of the Company as
presently conducted and as proposed to be conducted in the SEC Reports does not
infringe upon or violate any Intellectual Property rights of others.
3.13 Private Offering. No form of general solicitation or general
advertising was used by the Company or its representatives in connection with
the offer or sale of the Purchased Shares. No registration of the Purchased
Shares pursuant to the provisions of the Securities Act or any state securities
or "blue sky" laws will be required by the offer, sale, or issuance of the
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10
Purchased Shares pursuant to this Agreement, assuming the accuracy of the
Purchaser's representation contained in Section 4.5.
3.14 Rights Agreement.
(a) The execution and delivery of this Agreement by the Company and
the consummation of the Contemplated Transaction does not and will not (i)
result in the ability of any person to exercise any Rights under the Rights
Agreement, dated as of October 22, 1997, between the Company and Continental
Stock Transfer & Trust Company, as rights agent (as amended, the "Rights
Agreement"), (ii) enable or require the Rights (as defined in the Rights
Agreement) to separate from the shares of Common Stock to which they are
attached or to be triggered or become exercisable, (iii) cause any "Distribution
Date" or "Shares Acquisition Date" (as such terms are defined in the Rights
Agreement) to occur or (iv) prior to the Closing Date, cause the Purchaser to
"beneficially own" (as such term is defined in the Rights Agreement) any shares
of Common Stock.
(b) No "Distribution Date" or "Shares Acquisition Date" (as such
terms are defined in the Rights Agreement) has occurred or will occur as a
result of the Contemplated Transaction.
3.15 Board Approval; Delaware GCL 203
(a) The Board of Directors, at a meeting duly called and held, has
determined the Contemplated Transaction to be advisable and in the best
interests of the Company and its stockholders and has approved the Contemplated
Transaction.
(b) The Company has taken all action necessary to cause the
restriction contained in Section 203 of the Delaware GCL to be inapplicable to
the Contemplated Transaction and to approve the transactions which resulted in
the Purchaser becoming an "interested stockholder" within the meaning of Section
203 of the Delaware GCL.
3.16 Brokers or Finders. The Company represents and warrants to the
Purchaser that no broker, finder, agent or similar intermediary (a "Broker") has
acted on behalf of the Company or its Subsidiaries in connection with this
Agreement or the Contemplated Transaction, and that there are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
therewith based on any agreement, arrangement or understanding with the Company
or any of its Subsidiaries or any action taken by the Company or any of its
Subsidiaries.
3.17 OEM Matters. To the knowledge of the Company, no OEM owns any
shares of Common Stock, any rights, options, warrants or other agreements which
entitle the holder thereof to purchase any shares of Common Stock or any
securities which are convertible into, or exchangeable for, shares of Common
Stock, other than (a) 800,000 shares of Common Stock and (b) a warrant to
purchase 4,000,000 shares of Common Stock issued by the Company to Ford Motor
Company ("Ford") on June 11, 1999.
<PAGE>
11
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as
follows:
4.1 Existence and Power. The Purchaser (a) is duly incorporated,
validly existing and in good standing under the laws of the State of Delaware;
(b) has all corporate power and authority to own and operate its property, to
lease the property it operates as lessee and to conduct the business in which it
is engaged; and (c) has the corporate power and authority to execute, deliver
and perform its obligations under this Agreement.
4.2 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Purchaser of this Agreement and the Contemplated
Transaction (a) have been duly authorized by all necessary corporate action, (b)
do not contravene the terms of the Purchaser's organizational documents, or any
amendment thereof, and (c) do not violate, conflict with or result in any breach
or contravention of, or the creation of any Lien under, any Contractual
Obligation of the Purchaser or any Requirement of Law applicable to the
Purchaser, except for such violation, conflict, breach or Lien which will not
result in a material adverse effect on the Purchaser's ability to consummate the
Contemplated Transaction.
4.3 Governmental Authorization; Third Party Consents. Except for the
Required Consents, no approval, consent, exemption, authorization, or other
action by, or notice to, or filing with, any Governmental Authority or any other
Person in respect of any Requirement of Law, and no lapse of a waiting period
under a Requirement of Law, is necessary or required in connection with the
execution, delivery or performance by the Purchaser, or enforcement against the
Purchaser, of this Agreement or the consummation of the Contemplated
Transaction.
4.4 Binding Effect. This Agreement has been duly executed and
delivered by the Purchaser and constitutes the legal, valid and binding
obligation of the Purchaser, enforceable against it in accordance with its
terms, except as the enforceability thereof may be limited by considerations of
public policy and subject to the effects of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
4.5 Purchase for Own Account. The Purchased Shares are being
acquired by the Purchaser for its own account and with no intention of
distributing or reselling such Purchased Shares or any part thereof in any
transaction that would be in violation of the securities laws of the United
States of America or any state, without prejudice, however, to the rights of the
Purchaser at all times to sell or otherwise dispose of all or any part of such
Purchased Shares under an effective registration statement under the Securities
Act or under an exemption from said registration available under the Securities
Act. The Purchaser understands and agrees that if the
<PAGE>
12
Purchaser should in the future decide to dispose of any Purchased Shares, it may
do so only in compliance with the Securities Act and applicable state securities
laws, as then in effect. The Purchaser agrees to the imprinting, so long as
required by law, of a legend on all certificates representing such Purchased
Shares to the following effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED FOR SALE, SOLD
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
4.6 Brokers or Finders. The Purchaser represents and warrants to the
Company that no Broker has acted on behalf of the Purchaser or its Affiliates in
connection with this Agreement or the Contemplated Transaction, and that there
are no brokerage commissions, finder's fees or similar fees or commissions
payable in connection therewith based on any agreement, arrangement or
understanding with the Purchaser or any of its Affiliates or any action taken by
the Purchaser or any of its Affiliates.
ARTICLE 5
COVENANTS OF THE COMPANY
5.1 Conduct of Business. From the date hereof through the Closing
Date, the Company and its Subsidiaries shall conduct their businesses in a
manner such that the representations and warranties contained in Article 3 shall
continue to be true and correct in all material respects on and as of the
Closing Date (except for representations and warranties made as of a specific
date) as if made on and as of the Closing Date. The Company shall give the
Purchaser prompt notice of any event, condition or circumstance occurring from
the date hereof through the Closing Date that would constitute a violation or
breach of (i) any representation or warranty, whether made as of the date hereof
or as of the Closing Date, or (ii) any covenant of the Company contained in this
Agreement; provided, however, that no such notification shall relieve or cure
any such breach or violation of any such representation, warranty or covenant or
otherwise affect the accuracy of any such representation or warranty for the
purposes of Section 7.1.
5.2 Indemnification of Brokerage. The Company agrees to indemnify
and hold harmless the Purchaser from any Claim for commission or other
compensation by any Broker claiming to have been employed by or on behalf of the
Company or any of its Subsidiaries and to bear the cost of legal expenses
incurred in defending against any such claim.
<PAGE>
13
5.3 Rule 144. The Company shall file all reports required to be
filed by it under the Securities Act and the Exchange Act and shall take such
further action as the Purchaser may reasonably request, all to the extent
required to enable the Purchaser to sell the Purchased Shares pursuant to and in
accordance with Rule 144. Such action shall include, but not be limited to,
making available adequate current public information meeting the requirements of
paragraph (c) of Rule 144.
5.4 Rights Agreement. On or before the Closing Date, the Company
shall amend its Rights Agreement to provide that the Purchaser shall not be or
become an "Acquiring Person" (as that term is defined in the Rights Agreement)
by virtue of the acquisition and ownership by itself of the (i) Purchased
Shares; and (ii) a warrant to purchase up to 4,000,000 shares of Common Stock.
5.5 Matching Right. If any OEM or any of their respective Affiliates
enters into an agreement with the Company to purchase shares of Common Stock or
other securities that are convertible into, or exchangeable or exercisable for,
Common Stock, and as a result of such purchase such OEM and its Affiliates could
then beneficially own a greater number of shares of Common Stock than the number
of shares of Common Stock beneficially owned collectively by the Purchaser and
its Affiliates, then the Company shall offer in writing to sell to the Purchaser
such shares of Common Stock or, in the event such OEM is not purchasing Common
Stock, such other securities that are convertible into, or exchangeable or
exercisable for, Common Stock that are being sold to such other OEM or its
Affiliates in an amount such that, after consummation of such proposed sale, the
Purchaser and its Affiliates, collectively, could beneficially own the same
number of shares of Common Stock as such OEM and its Affiliates, collectively.
Such offer shall remain open for three Business Days and the price to the
Purchaser of any such securities shall be the same price per share as that
contained in the agreement between the Company and the applicable OEM or its
Affiliate.
ARTICLE 6
COVENANTS OF THE PURCHASER
6.1 Indemnification of Brokerage. The Purchaser agrees to indemnify
and hold harmless the Company from any Claim for commission or other
compensation by any Broker claiming to have been employed by or on behalf of the
Purchaser or any of its Affiliates, and to bear the cost of legal expenses
incurred in defending against any such claim.
6.2 Lock-Up Agreement. At any time prior to the earlier of (a)
January 28, 2003 and (b) the date that the Purchaser ceases to beneficially own
5% or more of the Common Stock, the Company and its underwriters, by written
notice from the Company and its lead underwriter to the Purchaser (a "Lock-up
Request"), given as provided herein on or after the time of the initial filing
with the Commission of any registration statement with respect to any offering
of Common Stock or securities convertible into Common Stock (the "Offering"),
may request that the
<PAGE>
14
Purchaser agree not to offer, sell or transfer any of the Purchased Shares or
engage in any hedging or similar transactions with respect to the Purchased
Shares during the 180-day period (the "Lock-up Period") beginning on a date
specified in the Lock-up Request, which date may be as early as five (5)
Business Days prior to the closing date of the Offering (but no later than the
closing date of the Offering), and the Purchaser agrees to consent to and be
bound by the restrictions specified in any such Lock-up Request. The foregoing
notwithstanding, no Lock-up Request shall be effective and binding upon the
Purchaser unless a similar lock-up is imposed upon all Persons beneficially
owning 5% or more of the Common Stock with respect to which the Company then has
the power to request or impose such lock-up. Any such lock-up imposed upon any
other Person shall be for the shorter of (i) the Lock-up Period and (ii) the
maximum period the Company has the right or power to impose upon such other
Person. The Lock-up Period may be terminated as to the Purchaser on written
notice from either the Company or the lead underwriter of the Offering, and
automatically shall be terminated immediately as to the Purchaser in the event
it is terminated as to any other Person (including the Company and its
Affiliates) or any other Person is otherwise released from any lock-up
obligations with respect to the Offering. The Company shall specify the expected
effective date of any Offering by notice to the Purchaser given not later than
two (2) Business Days prior to the beginning of the Lock-up Period. The
Purchaser shall cause each Person, together with its Affiliates, to whom it
Transfers, in one or a series of related transactions, 100,000 or more shares of
Common Stock to execute and deliver to the Company a letter agreement pursuant
to which such transferee agrees (and to cause each other Person to whom it
Transfers any shares of Common Stock if, after giving effect to such Transfer,
such Person, together with its Affiliates, would beneficially own 100,000 or
more shares of Common Stock to execute and deliver to the Company a similar
letter agreement) to comply with the requirements of this Section 6.2 (including
this sentence) to the same extent and subject to the same terms and conditions
as the Purchaser.
6.3 Transfer Restrictions. Until the first anniversary of the
Closing Date, the Purchaser shall not sell, transfer, assign or otherwise
dispose of any of the Purchased Shares without the prior written consent of the
Company.
ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER TO CLOSE
The obligations of the Purchaser to enter into and complete the
Closing are subject to the fulfillment on or prior to the Closing Date of the
following conditions, any one or more of which may be waived by the Purchaser:
7.1 Representations and Covenants. The representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects (other than those which are qualified as to
materiality, Material Adverse Effect or other similar term, which shall be true
and correct in all respects) on and as of the Closing Date with the same force
and effect as though made on and as of the Closing Date; the Company shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to
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15
be performed or complied with by the Company on or prior to the Closing Date;
and the Company shall have delivered to the Purchaser a certificate, dated the
Closing Date and signed by an executive officer of the Company, to the foregoing
effect.
7.2 Consents and Approvals. All Required Consents shall have been
obtained and be in full force and effect, and the Purchaser shall have been
furnished with evidence reasonably satisfactory to it that such Required
Consents have been granted and obtained.
7.3 No Claims. (a) No Claims shall be pending before any
Governmental Authority (including investigations instituted by the United States
Department of Justice or the Federal Trade Commission in connection with
antitrust regulations) to restrain or prohibit this Agreement or the
consummation of the Contemplated Transaction.
(b) No law, order, decree, rule or injunction shall have been
enacted, entered, promulgated or enforced by any Governmental Authority that
prohibits or makes illegal the consummation of any of the Contemplated
Transaction.
ARTICLE 8
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO CLOSE
The obligation of the Company to enter into and complete the Closing
is subject to the fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which may be waived by the Company:
8.1 Representations and Covenants. The representations and
warranties of the Purchaser contained in this Agreement shall be true and
correct in all material respects (other than those which are qualified as to
materiality, Material Adverse Effect or other similar term, which shall be true
and correct in all respects) on and as of the Closing Date with the same force
and effect as though made on and as of the Closing Date; the Purchaser shall
have performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by it on
or prior to the Closing Date; and the Purchaser shall have delivered to the
Company a certificate, dated the Closing Date and signed by an officer of the
Purchaser, to the foregoing effect.
8.2 Consents and Approvals. All Required Consents shall have been
obtained and be in full force and effect.
8.4 No Claims. (a) No Claims shall be pending before any
Governmental Authority (including investigations instituted by the United States
Department of Justice or the Federal Trade Commission in connection with
antitrust regulations) to restrain or prohibit this Agreement or the
consummation of the Contemplated Transaction.
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16
(b) No law, order, decree, rule or injunction shall have been
enacted, entered, promulgated or enforced by any Governmental Authority that
prohibits or makes illegal the consummation of the Contemplated Transaction.
ARTICLE 9
REGISTRATION RIGHTS
9.1 Requested Registration. (a) If, at any time after January 28,
2002, the Company shall receive from the Purchaser a written request (which
shall specify whether the distribution will be made by means of an underwriting)
that the Company effect a registration (a "Demand Notice") with respect to all
or a part of the Purchased Shares, which Demand Notice shall request
registration of not less than 1,000,000 shares of Common Stock or all remaining
shares of Common Stock then held by the Purchaser, the Company will, as soon as
practicable, use its reasonable best efforts to effect such registration under
the Securities Act (which shall be a "shelf" Registration Statement pursuant to
Rule 415 under the Securities Act (or a successor provision), if so requested by
the Purchaser in the Demand Notice and if the Company is eligible therefor at
such time) as may be so requested and as would permit or facilitate the sale and
distribution of the Purchased Shares as are specified in such request. After the
Company has effected two (2) such registrations pursuant to this Section 9.1(a),
the related Registration Statements have been declared effective and the
distribution contemplated thereunder completed, the Company shall have no
further obligation under this Section 9.1(a).
(b) Notwithstanding any other provision of this Section 9.1, if the
Company shall furnish to the Purchaser a certificate signed by the President or
the Chief Executive Officer of the Company stating that the requested
registration and offering would require the disclosure of material non-public
information and, in the good faith judgment of the Board of Directors of the
Company, such disclosure in a Registration Statement to be filed pursuant to
Section 9.1(a) would be seriously detrimental to the Company and its
stockholders and it is therefore desirable and in the best interests of the
Company to defer the filing of such Registration Statement, then the Company
shall have the right to defer such filing for a period of time after receipt of
such request; provided, however, that the Company may not make such a request
more than twice in any 12-month period and the aggregate period of time during
which the Company may defer such filing shall not exceed 90 days.
(c) In connection with any underwritten offering pursuant to this
Section 9.1, the Purchaser shall have the right to select the underwriter or
underwriters, which shall be a nationally recognized investment banking firm or
firms reasonably acceptable to the Company.
9.2 Company Registration. (a) If the Company shall determine to
register any shares of Common Stock for the account of a security holder or
holders or otherwise (other than a registration relating solely to employee
benefit plans, or a registration relating solely to a merger, exchange offer or
a transaction of the type specified in Rule 145(a) under the Securities Act),
the Company will promptly deliver to the Purchaser a written notice of such
proposed
<PAGE>
17
transaction at least 20 Business Days prior to the filing of a Registration
Statement and include in such registration, and in any underwriting involved
therein, all Purchased Shares specified in a written request made by the
Purchaser within ten Business Days after receipt of the written notice from the
Company described above. The Purchaser shall be entitled to have its shares
included in an unlimited number of registrations pursuant to this Section 9.2.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Purchaser as a part of the written notice given pursuant to Section
9.2(a). In such event, the right of the Purchaser to registration pursuant to
Section 9.2(a) shall be conditioned upon the Purchaser's participation in such
underwriting and the inclusion of the Purchased Shares in the underwriting to
the extent provided herein. If the Purchaser shall have elected to exercise its
rights under Section 9.2(a), it shall enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected for underwriting by the Company. Notwithstanding any other provision of
this Section 9.2, if the representative determines and so advises the Company in
writing that marketing factors require a limitation on the number of shares to
be underwritten, the Company shall so advise the Purchaser. In such an event,
the number of Purchased Shares that may be included in the registration and
underwriting by the Purchaser shall be reduced, on a pro rata basis (based on
the number of shares of Common Stock held by the Purchaser and each other Person
(other than the Company) registering shares under such registration), by such
minimum number of shares as is necessary to comply with such limitation. If the
Purchaser disapproves of the terms of any such underwriting, it may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Purchased Shares excluded or withdrawn from such underwriting shall be withdrawn
from such registration.
9.3 Transferability. The registration rights granted pursuant to
this Article 9 shall be assignable, in whole but not in part, to any Transferee
of the Purchased Shares; provided, however, that the rights granted under
Section 9.1 shall be assignable only to a Transferee who, after giving effect to
such Transfer, beneficially owns at least 1,000,000 shares of Common Stock and
such Transferee shall also be deemed to be the Purchaser for purposes of this
Article 9.
9.4 Expenses of Registration. In connection with any registration
pursuant to Section 9.1 or Section 9.2, the Company shall pay all registration,
filing and NASD fees, all fees and expenses of complying with securities or
"blue sky" laws; provided, however, that the Purchaser shall pay its pro rata
share of any commissions, fees and disbursements of underwriters customarily
paid by sellers of securities (based on offering proceeds to be received by it).
In any registration pursuant to Section 9.1 or Section 9.2, the Company shall be
responsible for the fees and disbursements of counsel for the Company, the
Company's independent public accountants and any expert retained by the Company
in connection with any such registration and premiums and other costs of
policies of insurance against liabilities arising out of the public offering of
the Purchased Shares.
9.5 Registration Procedures. In the case of each registration
effected by the Company pursuant to this Article 9, the Company shall:
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18
(a) furnish to the Purchaser prior to the filing of the requisite
Registration Statement copies of drafts of such Registration Statement as is
proposed to be filed (and give such holders and their counsel a reasonable
opportunity to comment on such documents), and thereafter such number of copies
of such Registration Statement, each amendment and supplement thereto (in each
case including all exhibits thereto), the Prospectus included in such
Registration Statement (including each preliminary prospectus) and such other
documents in such quantities as the Purchaser may reasonably request from time
to time in order to facilitate its distribution;
(b) notify the Purchaser promptly of any request by the Commission
for the amending or supplementing of such Registration Statement or Prospectus
or for additional information and promptly deliver to the Purchaser and its
counsel copies of any comments received by the Commission;
(c) notify the Purchaser, promptly after the Company shall receive
notice thereof, of the time when the Registration Statement becomes effective or
when any amendment or supplement or any prospectus forming a part of the
Registration Statement has been filed;
(d) advise the Purchaser promptly after the Company shall receive
notice or obtain knowledge of the issuance of any stop order by the Commission
suspending the effectiveness of any such Registration Statement or amendment
thereto or of the initiation or threatening of any proceeding for that purpose,
and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal promptly if such stop order should be issued;
(e) use all reasonable efforts to register or qualify the Purchased
Shares under such other securities or blue sky laws of such jurisdictions as the
Purchaser (or the managing underwriter, in the case of underwritten offerings)
reasonably request; provided that the Company shall not be required to qualify
to do business or become subject to service of process or taxation in any
jurisdiction in which it is not already so qualified or subject;
(f) use all reasonable efforts to cause the Purchased Shares
included in the Registration Statement to be listed on any securities exchange
or authorized for quotation on any national quotation system on which any of the
Common Stock is then listed;
(g) notify the Purchaser, at any time when a prospectus relating to
the proposed sale is required to be delivered under the Securities Act, of the
happening of any event as a result of which the Prospectus included in such
Registration Statement or amendment contains an untrue statement of a material
fact or omits to state any material fact required to be stated therein in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, and the Company will prepare a supplement or
amendment to such Prospectus so that, as thereafter delivered to the purchasers
of the Purchased Shares, such Prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be stated therein
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading;
<PAGE>
19
(h) enter into customary agreements (including without limitation,
an underwriting agreement in customary form) and take such other actions
(including, without limitation, making senior management of the Company
available to participate in road show presentations on a customary basis) as are
reasonably required in order to expedite or facilitate the disposition of the
Purchased Shares included in the Registration Statement;
(i) in the case of a Registration Statement filed pursuant to
Section 9.1 involving a shelf Registration Statement, prepare and file with the
Commission such amendments and supplements to such shelf Registration Statement
and the Prospectus used in connection therewith as may be necessary to keep such
shelf Registration Statement effective until the earlier of (i) the sale of all
Purchased Securities covered thereby or (ii) two years (exclusive of any period
during which the distribution is postponed pursuant to Section 9.1), and to
comply with the provisions of the Securities Act with respect to the sale or
other disposition of all Purchased Shares covered by such Registration
Statement;
(j) make available, upon reasonable prior notice and during normal
business hours in New York City, for inspection by the Purchaser, any
underwriter participating in any disposition pursuant to the Registration
Statement and any attorney, accountant or other agent retained by the Purchaser
or any such underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and cause the Company's
officers, directors and employees, upon reasonable prior notice and during
normal business hours in New York City, to supply all relevant information
reasonably requested by the Purchaser or any such underwriter, attorney,
accountant or agent in connection with the Registration Statement;
(k) request the Company's independent public accountants to provide
to the underwriters, if any, and the Purchaser, if permissible, a comfort letter
in customary form and covering such matters of the type customarily covered by
comfort letters to underwriters in connection with public offerings; and
(l) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
underwriter in an underwritten offering.
The Purchaser agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 9.5(g), the Purchaser
will forthwith discontinue disposition of Purchased Shares pursuant to a
Registration Statement until the Purchaser's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 9.5(g), and, if so
directed by the Company, the Purchaser will deliver to the Company (at the
Company's expense), all copies in its possession, other than permanent file
copies then in the Purchaser's possession, of the Prospectus covering such
Purchased Shares current at the time of receipt of such notice.
9.6 Indemnification. (a) The Company will indemnify the Purchaser,
each of its officers and directors, and each Person controlling the Purchaser
within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder, with respect to each registration which has been
effected pursuant to this Article 9, and each underwriter, if any, and each
Person who controls any underwriter within the meaning of Section 15 of the
Securities Act and the rules
<PAGE>
20
and regulations thereunder, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any Prospectus or
other document (including any related registration statement, notification or
the like) incident to any such registration or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration and will reimburse the Purchaser, each of
its officers and directors, and each Person controlling the Purchaser, each such
underwriter and each Person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission based upon information furnished in writing to the Company
by the Purchaser with respect to the Purchaser and stated to be specifically for
use therein. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of any the Purchaser and shall survive
the transfer of the Purchased Shares by the Purchaser.
(b) The Purchaser will, if Purchased Shares held by it are included
in the securities as to which such registration is being effected, indemnify the
Company, each of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each Person who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact with respect to the Purchaser contained in any such registration statement,
prospectus or other document made by the Purchaser, or any omission (or alleged
omission) to state therein a material fact with respect to the Purchaser
required to be stated therein or necessary to make the statements by the
Purchaser therein not misleading, and will reimburse the Company and such other
directors, officers, partners, persons, underwriters or control Persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus or other document in reliance upon and in conformity with
information furnished in writing to the Company by the Purchaser with respect to
the Purchaser and stated to be specifically for use therein; provided, however,
that the obligations of the Purchaser hereunder shall be limited to an amount
equal to the proceeds to the Purchaser of securities sold as contemplated
herein.
(c) If the indemnification provided for in this Section 9.6 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage or expense referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions which resulted in
<PAGE>
21
such loss, liability, claim, damage or expense, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
ARTICLE 10
TERMINATION OF AGREEMENT
10.1 Termination. This Agreement may be terminated prior to the
Closing as follows:
(a) by the Purchaser or the Company if the Closing shall not
have occurred before the Termination Date (as defined below); provided, however,
that the right to terminate this Agreement under this Section 10.1(a) shall not
be available to any party whose failure to perform any covenant or obligation
under this Agreement or willful breach of a representation or warranty has been
the cause of or resulted in the failure of the Closing to occur on or before
such date. The "Termination Date" shall be May 28, 2000; or
(b) at the election of the Purchaser, if prior to the Closing
Date there shall have been a breach of any of the Company's representations,
warranties, covenants or agreements, which breach would result in the failure to
satisfy any of the conditions set forth in Section 7.1, and such breach shall be
incapable of being cured or, if capable of being cured, shall not have been
cured within 30 days after written notice thereof shall have been received by
the Company; or
(c) at the election of the Company, if prior to the Closing
Date there shall have been a breach of the Purchaser's representations,
warranties, covenants or agreements, which breach would result in the failure to
satisfy any of the conditions set forth in Section 8.1, and such breach shall be
incapable of being cured or, if capable of being cured, shall not have been
cured within 30 days after written notice thereof shall have been received by
the Purchaser; or
(d) at the election of the Company or the Purchaser, if any
legal proceeding is commenced and pending by any Governmental Authority seeking
to prevent the consummation of the Closing or the Contemplated Transaction and
the Company or the Purchaser, as the case may be, reasonably and in good faith
deems it impracticable or inadvisable to proceed in view of such legal
proceeding; or
(e) at any time on or prior to the Closing Date, by mutual
written consent of the Company and the Purchaser.
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22
If this Agreement so terminates, it shall become null and void and
have no further force or effect, except as provided in Section 10.2.
10.2 Survival After Termination. If this Agreement terminates
pursuant to Section 10.1 and the Contemplated Transaction is not consummated,
this Agreement shall become null and void and have no further force or effect,
except that any such termination shall be without prejudice to the rights of any
party on account of the nonsatisfaction of the conditions set forth in Articles
7 and 8 resulting from the intentional or willful breach or violation of the
representations, warranties, covenants or agreements of another party under this
Agreement. Notwithstanding anything in this Agreement to the contrary, the
provisions of Sections 5.2, 5.3, 5.5 and 6.1, Article 9, this Section 10.2 and
Sections 11.1, 11.7 and 11.9 shall survive the Closing.
ARTICLE 11
MISCELLANEOUS
11.1 Expenses. Each of the Company and the Purchaser shall pay its
own expenses incurred in connection with the negotiation, execution, delivery
and performance of this Agreement.
11.2 Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered personally,
telecopied, sent by reputable overnight courier or sent by certified, registered
or express mail, postage prepaid. Any such notice shall be deemed given if
delivered personally or telecopied, on the date of such delivery, if sent by
reputable overnight courier, on the first Business Day following the date of
such sending, or if sent by certified, registered or express mail, on the third
Business Day following the date of such mailing, as follows:
(a) if to the Company:
Sirius Satellite Radio Inc.
1221 Avenue of the Americas, 36th Floor
New York, New York 10020
Attention: Patrick L. Donnelly
Telecopy: (212) 584-5353
(b) if to the Purchaser:
DaimlerChrysler Corporation
1000 Chrysler Drive
CIMS 485-14-78
Auburn Hills, Michigan 48326-2766
Attention: Assistant Secretary
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23
Telecopy: (248) 512-1771
Any party may by notice given in accordance with this Section 10.3 designate
another address or person for receipt of notices hereunder.
11.3 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. No Person other than the parties hereto and their successors and
permitted assigns is intended to be a beneficiary of this Agreement. No party
hereto may assign its rights under this Agreement without the prior written
consent of the other party hereto; provided that the Purchaser shall have the
right to assign this Agreement to any wholly-owned subsidiary of the Purchaser.
11.4 Amendment and Waiver.
(a) No failure or delay on the part of the Company or the Purchaser
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
the Purchaser at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to any provision
of this Agreement and any waiver of any provision of this Agreement shall be
effective only if it is made or given in writing and signed by the Company and
the Purchaser.
11.5 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, all of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
11.6 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
11.7 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND THE DUTIES OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
11.8 Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
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11.9 Entire Agreement. This Agreement, together with the schedules
hereto, is intended by the parties as a final expression of their agreement and
intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein or therein. This Agreement, together
with the schedules hereto, supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
11.10 Further Assurances. Each of the parties shall execute such
documents and take, or cause to be taken, all appropriate action, and shall do
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the Contemplated
Transaction and obtaining any consents, exemptions, authorizations, or other
actions by, or giving any notices to, or making any filings with, any
Governmental Authority or any other Person.
11.11 Public Announcements. Except to the extent required by law or
the regulations of any national securities exchange or the Nasdaq National
Market, no party hereto will issue or make any reports, statements or releases
to the public with respect to this Agreement or the Contemplated Transaction
without consulting the other.
(Signature page to follow)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective officers hereunto duly authorized
as of the date first above written.
SIRIUS SATELLITE RADIO INC.
By: /s/ Patrick L. Donnelly
------------------------------------
Patrick L. Donnelly
Senior Vice President and
General Counsel
DAIMLERCHRYSLER CORPORATION
By: /s/ James P. Holden
------------------------------------
James P. Holden
President
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
Satellite CD Radio, Inc.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-3 (File Nos. 333-52893, 333-85847 and
333-86003), Form S-4 (File No. 333-69275) and Form S-8 (File Nos. 333-65473,
333-15085, 33-95118, 33-92588 and 333-31362).
ARTHUR ANDERSEN LLP
New York, New York
March 29, 2000
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<FISCAL-YEAR-END> DEC-31-1999
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