<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 2000
Commission file number 0-24710
SIRIUS SATELLITE RADIO INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 52-1700207
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1221 AVENUE OF THE AMERICAS, 36TH FLOOR
NEW YORK, NEW YORK 10020
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(Address of principal executive offices)
(Zip code)
212-584-5100
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK, $.001 PAR VALUE 41,880,932 SHARES
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(Class) (Outstanding as of May 10, 2000)
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX
Part I - Financial Information
<TABLE>
<CAPTION>
Page
<S> <C>
Consolidated Statements of Operations (unaudited) for the three 1
month periods ended March 31, 2000 and 1999 and for the
period May 17, 1990 (date of inception) to March 31, 2000
Consolidated Balance Sheets as of March 31, 2000 (unaudited) 2
and December 31, 1999
Consolidated Statements of Cash Flows (unaudited) for the three 3
month periods ended March 31, 2000 and 1999 and for the
period May 17, 1990 (date of inception) to March 31, 2000
Notes to Consolidated Financial Statements (unaudited) 4
Management's Discussion and Analysis of Financial Condition and 6
Results of Operations
Part II - Other Information 11
Signatures 12
</TABLE>
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative for
the period
For the Three Months Ended March 31, May 17, 1990
------------------------------------------ (date of inception)
2000 1999 to March 31, 2000
----------- ------------ -------------------
<S> <C> <C> <C>
Revenue $ -- $ -- $ --
Operating expenses:
Engineering design and development (16,898) (6,911) (56,448)
General and administrative (9,878) (4,964) (70,806)
Special charges -- -- (27,682)
-------- ------- --------
Total operating expenses (26,776) (11,875) (154,936)
-------- ------- --------
Other income (expense):
Interest and investment income 7,831 2,864 36,985
Interest expense (5,866) (1,433) (39,056)
-------- ------- --------
1,965 1,431 (2,071)
-------- ------- --------
Loss before income taxes (24,811) (10,444) (157,007)
Income taxes:
Federal -- -- (1,982)
State -- -- (313)
-------- ------- --------
Net loss (24,811) (10,444) (159,302)
-------- ------- --------
Preferred stock dividends (10,838) (7,330) (62,877)
Preferred stock deemed dividends (7,218) (2,256) (74,404)
Accretion of dividends in connection with the
issuance of warrants on preferred stock (894) (74) (7,698)
-------- -------- ---------
Net loss applicable to common stockholders $(43,761) $(20,104) $(304,281)
======== ======== =========
Net loss per share applicable to common
stockholders (basic and diluted) $ (1.35) $ (0.87)
======== ========
Weighted average common shares
outstanding (basic and diluted) 32,412 23,220
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
1
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------------- -----------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 65,316 $ 81,809
Marketable securities, at market 419,108 317,810
Restricted investments, at amortized cost 68,338 67,454
Prepaid expense and other 757 741
---------- ----------
Total current assets 553,519 467,814
---------- ----------
Property and equipment, at cost:
Satellite construction in process 429,637 375,294
Launch construction in process 245,599 199,385
Broadcast studio equipment 16,834 15,731
Leasehold improvements 16,239 15,285
Technical equipment and other 22,374 18,653
---------- ----------
730,683 624,348
Less accumulated depreciation (1,224) (880)
---------- ----------
729,459 623,468
---------- ----------
Other assets:
FCC license 83,368 83,368
Debt issue costs, net 21,982 23,053
Deposits and other 9,010 8,909
---------- ----------
Total other assets 114,360 115,330
---------- ----------
Total assets $1,397,338 $1,206,612
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 37,008 $ 30,454
Satellite and launch construction payable 33,974 19,275
Short-term notes payable -- 114,075
---------- ----------
Total current liabilities 70,982 163,804
Long-term notes payable and accrued interest 497,710 488,835
Deferred satellite payments and accrued interest 56,515 55,140
Deferred income taxes 2,237 2,237
---------- ----------
Total liabilities 627,444 710,016
---------- ----------
Commitments and contingencies:
10 1/2% Series C Convertible Preferred Stock, no par value: 2,025,000 shares
authorized, 102,902 and 1,248,776 shares issued and outstanding at March
31, 2000 and December 31, 1999, respectively (liquidation preferences of
$10,290 and $124,878), at net carrying value including accrued dividends 12,704 149,285
9.2% Series A Junior Cumulative Convertible Preferred Stock, $.001 par
value: 4,300,000 shares authorized, 1,461,270 shares issued and
outstanding at March 31, 2000 and December 31, 1999 (liquidation
preference of $146,127), at net carrying value including accrued dividends 152,180 148,894
9.2% Series B Junior Cumulative Convertible Preferred Stock, $.001 par
value: 2,100,000 shares authorized, 655,406 shares issued and outstanding
at March 31, 2000 and December 31, 1999 (liquidation preference of $65,541),
at net carrying value including accrued dividends 65,767 64,238
9.2% Series D Junior Cumulative Convertible Preferred Stock, $.001 par
value: 10,700,000 shares authorized 2,000,000 shares issued and
outstanding at March 31, 2000 (liquidation preference of $200,000), at
net carrying value including accrued dividends 195,626 --
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,
39,079,936 and 28,721,041 shares issued and outstanding at March 31, 2000
and December 31, 1999, respectively 39 29
Additional paid-in capital 502,880 268,641
Deficit accumulated during the development stage (159,302) (134,491)
---------- ----------
Total stockholders' equity 343,617 134,179
---------- ----------
Total liabilities and stockholders' equity $1,397,338 $1,206,612
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
2
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative for
the period
For the Three Months Ended March 31, May 17, 1990
-------------------------------------- (date of inception)
2000 1999 to March 31, 2000
---------------- ------------------ ------------------
<S> <C> <C> <C>
Cash flows from development stage activities:
Net loss $ (24,811) $ (10,444) $ (159,302)
Adjustments to reconcile net loss to net cash provided by
(used in) development stage activities:
Depreciation expense 471 17 1,635
Unrealized loss on marketable securities (448) (146) (4,330)
Loss on disposal of assets 249 -- 364
Special charges -- -- 25,557
Accretion of note payable charged as interest expense 19,517 8,950 103,582
Sales (purchases) of marketable securities and restricted
investments, net (100,850) 14,846 (482,219)
Compensation expense in connection with
issuance of Common Stock and stock options 1,730 152 6,272
Expense incurred in connection with induced conversion
of debt -- -- 1,776
Increase (decrease) in cash and cash equivalents resulting from
changes in assets and liabilities:
Prepaid expense and other 13 (566) (728)
Due to related party -- -- 351
Other assets 160 1,130 (5,896)
Accounts payable and accrued expenses (3,942) 645 5,629
Deferred taxes -- -- 2,237
--------- -------- --------
Net cash provided by (used in) development stage activities (107,911) 14,584 (505,072)
--------- -------- --------
Cash flows from investing activities:
Purchase of FCC license -- -- (83,368)
Payments for satellite construction (38,269) (29,236) (355,148)
Payments for launch services (46,214) (19,705) (251,862)
Other capital expenditures (6,403) (17,419) (59,436)
Acquisition of Sky-Highway Radio Corp. -- -- (2,000)
--------- --------- --------
Net cash used in investing activities (90,886) (66,360) (751,814)
--------- --------- --------
Cash flows from financing activities:
Proceeds from issuance of notes payable 1,882 8,951 253,144
Proceeds from issuance of Common Stock, net 100,010 -- 361,790
Proceeds from issuance of preferred stock, net 192,450 -- 505,418
Proceeds from exercise of stock options and warrants 3,919 129 10,502
Proceeds from issuance of promissory notes
and units, net -- -- 306,535
Proceeds from issuance of promissory notes to
related parties -- -- 2,965
Repayment of promissory notes -- -- (2,635)
Repayment of notes payable (115,957) -- (115,957)
Loan from officer -- -- 440
--------- --------- --------
Net cash provided by financing activities 182,304 9,080 1,322,202
--------- --------- --------
Net increase (decrease) in cash and cash equivalents (16,493) (42,696) 65,316
Cash and cash equivalents at the beginning of period 81,809 204,753 --
--------- --------- --------
Cash and cash equivalents at the end of period $ 65,316 $ 162,057 $ 65,316
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, UNLESS OTHERWISE STATED)
(UNAUDITED)
GENERAL
The accompanying consolidated financial statements and the notes
thereto do not include all of the information and disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles. In the opinion of management, all adjustments (consisting
only of normal, recurring adjustments) considered necessary to fairly state our
consolidated financial position and consolidated results of operations have been
included. These financial statements should be read in connection with our
consolidated financial statements and the notes thereto for the fiscal year
ended December 31, 1999 included in our Annual Report on Form 10-K as filed with
the Securities and Exchange Commission.
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 (i.e. convertible stock, convertible debt, warrants and stock
options) were exercised or converted into Common Stock. As of March 31, 2000 and
1999, approximately 28,892,000 and 14,234,000 common stock equivalents were
outstanding, respectively, and were excluded from the calculation of diluted
loss per share as they were antidilutive.
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 $4,330 and $3,882 at March
31, 2000 and December 31, 1999, respectively.
RESTRICTED INVESTMENTS
Restricted investments consist of fixed income securities and are
stated at amortized cost plus accrued interest. 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 $765 and $716 at March 31, 2000 and December 31, 1999,
respectively. The securities included in restricted investments are restricted
to provide for the payment of interest due on our 14 1/2% Senior Secured Notes
due 2009 through May 15, 2002.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and include interest on
funds borrowed to finance construction. Capitalized interest was $90,328 and
$72,810 at March 31, 2000 and December 31, 1999, respectively.
4
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, UNLESS OTHERWISE STATED)
(UNAUDITED)
SHORT-TERM NOTES PAYABLE
We entered into a credit agreement with Bank of America and other
lenders in July 1998 under which Bank of America and other lenders agreed to
provide us a term loan facility of up to $115,000. The proceeds of this facility
were used to fund progress payments for the purchase of launch services and to
pay interest, fees and other related expenses. On February 29, 2000, we repaid
these loans and cancelled the related credit agreement.
DEFERRED SATELLITE PAYMENTS
Under an amended and restated contract (the "Loral Satellite Contract")
with Space Systems/Loral, Inc. ("Loral"), Loral has agreed to defer certain
amounts due under the Loral Satellite Contract. The amounts deferred bear
interest at 10% per year and are due in quarterly installments beginning in June
2002. We have the right to prepay any deferred payments together with accrued
interest, without penalty.
ENGINEERING DESIGN AND DEVELOPMENT COSTS
We have entered into an agreement with Lucent Technologies, Inc.
("Lucent") pursuant to which Lucent has agreed to use commercially reasonable
efforts to deliver integrated circuits ("chip sets"), which will be used in
consumer electronic devices capable of receiving our broadcasts. In addition, we
have entered into agreements with various equipment manufacturers, including
Alpine Electronics Inc., Audiovox Corporation, Clarion Co., Ltd., Delphi Delco
Electronics Systems, Kenwood Corporation, Matsushita Communication Industrial
Corporation of USA, Recoton Corporation, Sanyo Electronic Co. Ltd., and Visteon
Automotive Systems, an enterprise of Ford Motor Company, to design and develop
equipment that will be used to receive our broadcasts. Pursuant to these
agreements, we have agreed to pay certain development costs. We record expenses
under these contracts as the work is performed. Total expenses related to these
agreements were $13,903 and $38,534 for the three months ended March 31, 2000
and the period May 17, 1990 (date of inception) to March 31, 2000, respectively.
RECLASSIFICATIONS
Certain amounts in the prior period's financial statements have been
reclassified to conform to the current period presentation.
5
<PAGE>
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, UNLESS OTHERWISE STATED)
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 Quarterly Report on Form 10-Q and in
other reports and documents published by us from time to time. Any statements
about our expectations, beliefs, plans, objectives, assumptions, future events
or performance are not historical facts and may be "forward-looking" within the
meaning of the Private Securities Litigation Reform Act of 1995. 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 other factors discussed throughout our Annual Report on Form 10-K
for the year ended December 31, 1999 (the "1999 Form 10-K"), and particularly
the risk factors set forth under the caption "Business--Risk Factors" in Part I
of the 1999 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 Loral 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 statements
speak 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.
6
<PAGE>
OVERVIEW
Sirius Satellite Radio Inc. ("Sirius Radio") 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 system, 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 we
commence operations. 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 revenues to
be subscription fees. We currently anticipate that our subscription fee will be
$9.95 per month, 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 our service 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). As of May 10, 2000, we had 107
employees. By commencement of operations, we expect to have approximately 250
employees.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH THREE MONTHS ENDED
MARCH 31, 1999
We recorded net losses of $24,811 and $10,444 for the three months
ended March 31, 2000 and 1999, respectively. Our total operating expenses were
$26,776 and $11,875 for the three months ended March 31, 2000 and 1999,
respectively.
Engineering design and development costs were $16,898 and $6,911 for
the three months ended March 31, 2000 and 1999, respectively. Engineering costs
incurred in the 2000 quarter and the 1999 quarter 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 2000 quarter resulted primarily from
the increased activity in the receiver development effort as we prepare to
launch our service.
General and administrative expenses increased for the three months
ended March 31, 2000 to $9,878 from $4,964 for the three months ended March 31,
1999. 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 in the 2000 quarter
were salaries and employment related costs (46%) and rent and occupancy costs
(15%), while in the 1999 quarter the major components were salaries and
employment related costs (28%) and rent and occupancy costs (30%). The remaining
portion of general and administrative expenses (39% in the 2000 quarter and 42%
in the 1999 quarter) consisted of other costs such as legal and regulatory,
insurance, marketing, consulting, travel, depreciation and supplies, with only
marketing expenses (13%) exceeding 10% of the total in the 2000 quarter and only
legal and regulatory expenses (15%) exceeding 10% of the total in the 1999
quarter.
7
<PAGE>
The increase in interest and investment income to $7,831 for the three
months ended March 31, 2000 from $2,864 for the three months ended March 31,
1999 was the result of higher average balances of cash, marketable securities
and restricted investments during the 2000 quarter. The higher average balances
of cash, marketable securities and restricted investments during the 2000
quarter were due to the proceeds from financing activities in 1999 and the first
quarter of 2000, 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, 9.2% Series D Junior Cumulative
Convertible Preferred Stock and 2,290,322 shares of Common Stock.
Interest expense, net of capitalized interest, was $5,866 for the three
months ended March 31, 2000 and $1,433 for the three months ended March 31,
1999. This increase in net interest expense was due to interest expense
increasing by an amount ($11,824) greater than the corresponding increase in
capitalized interest ($7,391). The increase in interest expense for the 2000
quarter was due to interest accruing on our 14 1/2% Senior Secured Notes due
2009 issued in May 1999 and our 8 3/4% Convertible Subordinated Notes due 2009
issued in September and October 1999.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, we had cash, cash equivalents, marketable securities
and restricted investments totaling $552,762 and working capital of $482,537
compared with cash, cash equivalents and marketable securities totaling $467,073
and working capital of $304,010 at December 31, 1999. These increases reflect
the proceeds from the issuance of (1) our 9.2% Series D Cumulative Convertible
Preferred Stock to certain affiliates of The Blackstone Group, L.P. on January
31, 2000 for net proceeds of approximately $192,000 and (2) our Common Stock to
DaimlerChrysler Corporation for net proceeds of approximately $100,000.
FUNDING REQUIREMENTS
We believe we can fund our planned operations, including the
construction of our broadcast 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 expect to require 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 three satellites in-orbit
and checked-out, 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 March 31, 2000, $504,164 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 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 we commence 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. A portion
of the net proceeds of the issuance 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 interest on these notes through May 15, 2002.
8
<PAGE>
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, satellite system or launch
services 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 31, 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 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") (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 Apollo 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 our
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 our 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 our 14 1/2% Senior Secured Notes due 2009 and three
warrants, each to purchase 3.947 shares of our Common Stock as of March 31,
2000. We invested approximately $79,300 of these net proceeds in a portfolio
of U.S. government securities, which we pledged as security for 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 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 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.
9
<PAGE>
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 related to 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 related to 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 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 current
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 our 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 April 12, 2000, all of
the shares of our 10 1/2% Series C Convertible Preferred Stock and all of the
outstanding warrants to purchase shares of such 10 1/2% Series C Convertible
Preferred Stock were converted into shares of our Common Stock.
10
<PAGE>
PART II
OTHER INFORMATION
(Dollar amounts in thousands)
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) On January 31, 2000, we sold 2,000,000 shares of our 9.2%
Series D Junior Cumulative Convertible Preferred Stock to Blackstone
Capital Partners III Merchant Banking Fund L.P. and certain related
parties for an aggregate purchase price of $200,000. In connection
with the sale of our 9.2% Series D Junior Cumulative Convertible
Preferred Stock, we paid an aggregate of $8,000 in fees to an
investment banking firm.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
See Exhibit Index attached hereto.
(b) Reports on Form 8-K:
On January 28, 2000, we filed a Current Report on Form 8-K
to report that we had entered into an agreement with DaimlerChrysler
Corporation pursuant to which DaimlerChrysler Corporation would
purchase 2,290,322 shares of our Common Stock for an aggregate
purchase price of approximately $100,000.
11
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SIRIUS SATELLITE RADIO INC.
By: /s/ Edward Weber, Jr.
--------------------------
Edward Weber, Jr.
Vice President and Controller
(Principal Accounting Officer)
May 15, 2000
12
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EXHIBIT INDEX
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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).
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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 (incorporated by reference to Exhibit 4.5
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1999 (1999 Form 10-K).
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).
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")).
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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
(incorporated by reference to Exhibit 4.6.9 to the 1999 Form 10-K).
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 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 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).
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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).
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 (incorporated by
reference to Exhibit 4.23 to the 1999 Form 10-K).
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).
10.1.1 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).
10.1.2 Supplemental Indenture, dated as of March 22, 2000, between Rock-McGraw, Inc.
and the Company (filed herewith).
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'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 (incorporated by reference to Exhibit
10.4 to the 1999 Form 10-K).
*10.5 Employment Agreement, dated as of March 28, 2000, between the Company
and Joseph S. Capobianco (incorporated by reference to Exhibit 10.5 to
the 1999 Form 10-K).
*10.6 Employment Agreement, dated as of March 28, 2000, between the Company
and Patrick L. Donnelly (incorporated by reference to Exhibit 10.6 to
the 1999 Form 10-K).
*10.7 Employment Agreement, dated as of March 28, 2000, between the Company
and Ira H. Bahr (incorporated by reference to Exhibit 10.7 to the 1999
Form 10-K).
*10.8 Employment Agreement, dated as of April 17, 2000, between the Company and
Dr. Mircho Davidov (filed herewith).
10.9 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).
*10.10 1994 Stock Option Plan (incorporated by reference to Exhibit 10.21 to
the S-1 Registration Statement).
*10.11 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).
*10.12 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)).
*10.13 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)).
10.14 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).
10.15.1 Preferred Stock Investment Agreement, dated October 23, 1996, between
the Company and certain investors (incorporated by reference to
Exhibit 10.24 to the
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1996 Form 10-K).
10.15.2 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).
10.15.3 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).
10.16 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).
10.17 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).
10.18.1 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).
10.18.2 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).
10.19 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'10.20 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).
10.21 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).
10.22 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).
10.23.1 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
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99.1 to the Company's Current Report on Form 8-K dated November 17,
1998).
10.23.2 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).
10.23.3 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).
10.24 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).
10.25 Stock Purchase Agreement, dated as of January 28, 2000, among the
Company, Mercedes-Benz USA, Inc., Freightliner Corporation and
DaimlerChrysler Corporation (incorporated by reference to Exhibit
10.24 to the 1999 Form 10-K).
10.27 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).
'D'10.28 Joint Development Agreement, dated as of February 16, 2000, between
the Company and XM Satellite Radio, Inc. (filed herewith).
27.1 Financial Data Schedule (filed herewith).
</TABLE>
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* 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.
7
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as................................... 'D'
<PAGE>
EXHIBIT 10.1.2
SUPPLEMENTAL INDENTURE, dated March 22, 2000, between ROCK-MCGRAW,
INC., a New York corporation, having an office at 1221 Avenue of the Americas,
New York, N.Y. 10020 (the "Landlord"), and SIRIUS SATELLITE RADIO INC. (formerly
known as CD RADIO INC.), a Delaware corporation having an office at 1221 Avenue
of the Americas, New York, N.Y. 10020 (the "Tenant").
WHEREAS, by Lease dated March 31, 1998, as the same heretofore may have
been amended (the "Original Lease"), certain premises, as therein described, in
the building known as 1221 Avenue of the Americas (the "Building"), in the
Borough of Manhattan, New York, N.Y., are now leased and demised by the Landlord
to the Tenant;
WHEREAS, the parties hereto mutually desire to amend the Original Lease
as herein set forth, and are executing and delivering this Supplemental
Indenture for such purpose (the Original Lease as amended by this Supplemental
Indenture, the "Lease");
WHEREAS, all capitalized terms not defined herein shall have the
meanings ascribed to them in the Original Lease.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH, that the
parties hereto, in consideration of the terms and conditions herein contained,
hereby amend the Original Lease in the following respects, and only in the
following respects:
(1) DEMISE OF 32ND FLOOR ADDITIONAL SPACE, TERM AND RENT. The Landlord
does hereby lease and demise to the Tenant, and the Tenant does hereby hire and
take from the Landlord, subject and subordinate to the Qualified Encumbrances
(as defined in the Original Lease), and upon and subject to the terms and
conditions of the Lease for the term hereinafter stated, the space substantially
as shown crosshatched on the diagram attached hereto as Exhibit A and designated
as 'A' on the 32nd floor of the Building, together with all fixtures, equipment,
improvements, installations and appurtenances which at the commencement of or
during the term of the Lease with respect to said space are thereto attached
(except items not deemed to be included therein and removable by the Tenant as
provided in Article Four of the Original Lease); which space, fixtures,
equipment, improvements, installations and appurtenances are sometimes called
the "32nd Floor Additional Space".
<PAGE>
2
The term of the Lease for which the 32nd Floor Additional Space is
hereby leased and demised shall commence on August 1, 2000 (the "32nd Floor
Additional Space Term Commencement Date") and shall end on December 31, 2002
(the "32nd Floor Additional Space Expiration Date") or on such earlier date upon
which said term may expire or be terminated pursuant to any of the conditions of
limitation or other provisions of the Lease or pursuant to law, provided,
however, that if the 34th Floor Additional Space Term Commencement Date (as
hereinafter defined) is postponed pursuant to the provisions of the second
paragraph of Article (2) hereof, then the 32nd Floor Additional Space Expiration
Date shall be similarly postponed one day for each day the 34th Floor Additional
Space Term Commencement Date is so postponed. The Landlord shall deliver the
32nd floor additional space vacant and broom clean.
For the period of the term of the Lease for which the 32nd Floor
Additional Space is hereby leased and demised, the fixed rent reserved under the
Original Lease shall be increased by the following amount: $2,731,700.00 per
annum ($227,641.67 per month). The Tenant does hereby covenant and agree to pay
said fixed rent as so increased and the additional rent payable under the Lease,
at the times and in the manner specified in the Lease for the payment of fixed
rent and additional rent; provided, however, that, notwithstanding the
foregoing, the fixed rent payable under the Lease shall be abated at the rate of
$2,731,700.00 per annum during the period commencing on the 32nd Floor
Additional Space Term Commencement Date and ending on the 31st day thereafter.
The term the "Premises" as used in the Lease shall be deemed to include
the 32nd Floor Additional Space, which shall be deemed part of the Office Space,
except that (i) the provisions of Section 30.1 and Article Thirty-three of the
Lease shall not apply to the 32nd Floor Additional Space, (ii) the Landlord will
not separately require the Tenant to comply with the obligations imposed by the
second sentence of Section 11.1. of the Lease, provided, however, that should
such requirements (or any requirements of the Tenant under Article Thirty) arise
by virtue of any Requirement or by virtue of any alterations performed by the
Tenant in the 32nd Floor Additional Space, then the Tenant shall be obligated to
comply therewith, and, (iii) in applying the provisions of Article Two of the
Lease to the 32nd Floor Additional Space, (a) the "Premises" shall be deemed to
mean the 32nd Floor Additional Space only, (b) the "term commencement date"
shall be deemed to mean the 32nd Floor Additional Space Term Commencement Date,
(c) Section 2.2. shall be deemed to read as follows below:
"2.2. Unless otherwise specifically provided in this Lease, if the
Premises shall not be available for possession by the Tenant on the
specific date hereinabove designated for the commencement of the term
hereof for any reason, including,
<PAGE>
3
without limitation, noncompletion by the Landlord of such work as it
shall be required by the terms of this Lease to do in connection with
the layout or finish of the Premises, then this Lease shall not be
affected thereby but, in such case, the term commencement date shall be
postponed until the date when the Premises shall be available for
possession by the Tenant, provided, that there shall be no such
postponement of the term commencement date for any delay in the
availability of the Premises for possession by the Tenant which shall
be due to (a) any act or omission of the Tenant, any affiliate thereof
or their respective agents, officers, partners, directors, contractors,
employees, licensees or invitees, including, without limitation, delays
due to changes in or additions to any work to be done by the Landlord
or delays in submission of information, approving working drawings or
estimates or giving authorizations or approvals ("Tenant Delay"), or
(b) the noncompletion by the Landlord of any work, whether in
connection with the layout or finish of the Premises or otherwise,
which the Landlord is not required to do by the terms of this Lease
until after the term commencement date; it being understood that the
Tenant shall have no claim against the Landlord, and the Landlord shall
have no liability to the Tenant, by reason of any such postponement of
said specific date. No part of the Premises shall be deemed unavailable
for possession by the Tenant, nor shall any work which the Landlord is
obligated to perform in such part of the Premises be deemed incomplete
for the purpose of any adjustment of fixed rent payable under this
Lease, solely due to the noncompletion of details of construction,
decoration or mechanical adjustments which are minor in character and
the noncompletion of which does not materially interfere with the
Tenant's use of such part of the Premises. Subject to the foregoing,
the parties to this Lease expressly provide that, if the Premises are
not available for possession by the Tenant on the specific date
hereinabove designated for the commencement of the term hereof, the
Tenant, except with the consent of the Landlord, shall not be entitled
to possession of the Premises until the same is delivered to the Tenant
by the Landlord and there shall be no abatement of rent by reason
thereof, and the Tenant shall not have any claim against the Landlord
nor any right to rescind this Lease, and the Landlord shall have no
liability to the Tenant, by reason thereof. The foregoing Section 2.2.
shall constitute "an express provision to the contrary" as such phrase
is used in Section 223-a of the Real Property Law of the State of New
York and shall constitute a waiver of the Tenant's rights pursuant to
such Section 223-a and any other law of like import now or hereafter in
force.",
and (d) in applying the provisions of Sections 2.4.1., 2.4.2. and 2.4.3. to the
32nd Floor Additional Space, the dates "October 1, 1998", "November 1, 1998",
January 1, 1999 and "April 1, 1999" shall be deemed to be "August 1, 2000,
"September 1, 2000", November 1, 2000" and "February 1, 2001" respectively,
except that the Tenant's right of cancellation shall only apply to the 32nd
Floor Additional Space, and the Landlord shall only be required to return any
Deposit L/C(s) which then exceed the Required Amount.
In applying the provisions of Section 1.6. of the Lease to the 32nd
Floor Additional Space, the figure "20%" which appears in the first sentence
thereof shall be deleted and the figure "23%" shall be inserted in lieu thereof.
Accordingly, the Landlord and the Tenant
<PAGE>
4
hereby agree that (i) the rentable area of the 32nd Floor Additional Space is
46,300 rentable square feet, and (ii) in applying the provisions of subparagraph
(e) of Section 24.3. of the Lease to the 32nd Floor Additional Space, the figure
"2,497,153" contained in such subparagraph shall be deleted and the figure
"2,627,402" shall be inserted in lieu thereof.
The Landlord and the Tenant hereby agree that (i) the Tenant is taking
the 32nd Floor Additional Space in its "as-is" condition, (ii) there is no work
to be performed by the Landlord therein, and (iii) accordingly there are no
"Term Commencement Conditions" as such term is used in Article Two of the Lease.
In applying the provisions of Article Thirty-one of the Lease to the
32nd Floor Additional Space, the Landlord agrees that on or after the Tenant
occupies such 32nd Floor Additional Space for the normal conduct of its business
(i) if the Tenant is not then in monetary default under the Lease beyond any
applicable notice and cure periods, (ii) upon receipt by it of evidence
satisfactory to it of the completion of the Tenant's work in a manner reasonably
satisfactory to the Landlord, and (iii) upon the furnishing by the Tenant to the
Landlord of evidence of the payment for such alterations by the Tenant, the
Landlord shall reimburse to the Tenant the sum of $231,500.00.
(2) DEMISE OF 34TH FLOOR ADDITIONAL SPACE, TERM AND RENT. The Landlord
does hereby lease and demise to the Tenant, and the Tenant does hereby hire and
take from the Landlord, subject and subordinate to the Qualified Encumbrances
(as defined in the Original Lease), and upon and subject to the terms and
conditions of the Lease for the term hereinafter stated, the space substantially
as shown crosshatched on the diagram attached hereto as Exhibit A and designated
as 'A' on the 34th floor of the Building, together with all fixtures, equipment,
improvements, installations and appurtenances which at the commencement of or
during the term of the Lease with respect to said space are thereto attached
(except items not deemed to be included therein and removable by the Tenant as
provided in Article Four of the Original Lease); which space, fixtures,
equipment, improvements, installations and appurtenances are sometimes called
the "34th Floor Additional Space".
The term of the Lease for which the 34th Floor Additional Space is
hereby leased and demised shall commence on August 1, 2002 (subject to Article
Two of the Lease, the "34th Floor Additional Space Term Commencement Date"),
provided, however, that, notwithstanding the foregoing, the 34th Floor
Additional Space Term Commencement Date may be postponed by not more than three
(3) months upon notice by the Landlord to the Tenant given not later than July
1, 2001. The Landlord shall be responsible for complying
<PAGE>
5
with all Term Commencement Conditions, as such term is used in Article Two of
the Lease, in the 34th Floor Additional Space.
For the period of the term of the Lease for which the 34th Floor
Additional Space is hereby leased and demised, the fixed rent reserved under the
Original Lease shall be increased by the following amounts: $3,055,800.00 per
annum ($254,650.00 per month) during the period commencing on the 34th Floor
Additional Space Term Commencement Date and ending on July 31, 2004,
$3,333,600.00 per annum ($277,800.00 per month) during the period commencing on
August 1, 2004 and ending on July 31, 2009, and $3,611,400.00 per annum
($300,950.00 per month) thereafter. The Tenant does hereby covenant and agree to
pay said fixed rent as so increased and the additional rent and percentage rent
(if any) payable under the Lease, at the times and in the manner specified in
the Lease for the payment of fixed rent, additional rent and percentage rent (if
any); provided, however, that, notwithstanding the foregoing, the fixed rent
payable under the Lease shall be abated at the rate of $3,055,800.00 per annum
in equal monthly installments, prorated for partial months, during the period
commencing on the 34th Floor Additional Space Term Commencement Date and ending
on the 153rd day thereafter.
The term the "Premises" as used in the Lease shall be deemed to include
the 34th Floor Additional Space, which shall be deemed part of the Office Space,
except that, in applying the provisions of Article Two of the Lease to the 34th
Floor Additional Space, (a) the "Premises" shall be deemed to mean the 34th
Floor Additional Space only, (b) the "term commencement date" shall be deemed to
mean the 34th Floor Additional Space Term Commencement Date, (c) Section 2.2.
shall be deemed to read consistent with the provisions of the fourth paragraph
of Paragraph (1) hereof, and (d) in applying the provisions of Sections 2.4.1.,
2.4.2. and 2.4.3. to the 34th Floor Additional Space, the dates "October 1,
1998", "November 1, 1998", January 1, 1999 and "April 1, 1999" shall be deemed
to be "August 1, 2002", "September 1, 2002", "November 1, 2002" and "February 1,
2003" respectively, except that the Tenant's right of cancellation shall only
apply to the 34th Floor Additional Space, and the Landlord shall only be
required to return any Deposit L/C(s) which then exceed the Required Amount.
The asbestos removal that the Landlord would be obligated to perform in
the 34th Floor Additional Space pursuant to the provisions of paragraph 3. of
Exhibit B of the Lease has already been performed. If, by virtue of the working
drawings submitted by the Tenant in connection with its Initial Alteration of
the 34th Floor Additional Space, additional asbestos removal will be required,
then the Landlord shall promptly perform such additional asbestos removal and in
such event when applying the provisions of Article Two of the Lease to
<PAGE>
6
the 34th Floor Additional Space, any delays in meeting the dates anticipated by
the immediately preceding paragraph hereof caused by such additional asbestos
removal shall be deemed Tenant Delay (as defined in the Lease).
In applying the provisions of Section 1.6. of the Lease to the 34th
Floor Additional Space, the figure "20%" which appears in the first sentence
thereof shall be deleted and the figure "23%" shall be inserted in lieu thereof.
Accordingly, the Landlord and the Tenant hereby agree that (i) the rentable area
of the 34th Floor Additional Space is 46,300 rentable square feet, and (ii) in
applying the provisions of subparagraph (e) of Section 24.3. of the Lease to the
34th Floor Additional Space, the figure "2,497,153" contained in such
subparagraph shall be deleted and the figure "2,627,402" shall be inserted in
lieu thereof.
(3) In applying the provisions of Article Thirty-one of the Lease to
the 34th Floor Additional Space, within thirty (30) days after substantial
completion of the Alteration, the Tenant shall deliver to the Landlord (i)
copies of paid receipts certified by an officer of the Tenant, (ii) general
releases and waivers of lien from all consultants, contractors, subcontractors
and materialmen involved in the performance of the Alteration and the materials
furnished in connection therewith and (iii) a certificate from the Tenant's
architect certifying that the Alteration has been substantially completed in
accordance with the Lease, the reasonable rules, regulations and guidelines of
the Landlord and the Working Drawings, and (iv) record drawings and
specifications of the Premises reflecting the Alteration. Notwithstanding the
foregoing, but in all events subject to the Tenant's obligation to keep the
Premises and the Building free of liens, the Tenant shall not be required to
deliver to the Landlord any general release or waiver of lien, as required by
the preceding sentence, if the Tenant shall be disputing in good faith the
payment which would otherwise entitle the Tenant to such release or waiver,
provided that the Tenant shall (a) keep the Landlord advised in a timely fashion
of the status of any such dispute and the basis therefor, (b) maintain on
deposit with the Landlord such security as the Landlord may reasonably request
in connection with such disputed payment, and (c) deliver to the Landlord the
general release or waiver of lien when any such dispute is settled.
The Landlord agrees that (i) if the Tenant is not then in monetary
default under the Lease beyond any applicable notice and cure periods, (ii) upon
receipt by it of evidence satisfactory to it (as provided above) of the
completion of such work in a manner reasonably satisfactory to the Landlord, and
(iii) upon the furnishing by the Tenant to the Landlord of the evidence of the
payment therefor by the Tenant, the Landlord shall reimburse to the Tenant the
lesser of (a) the payment of the actual cost of such work, or (b)$1,620,500.00.
Notwithstanding the foregoing, the Tenant may request draws for such
reimbursement, no
<PAGE>
7
more often than once a month, in lieu of a lump sum reimbursement upon
completion of the Alterations. Such partial reimbursement requests shall only be
with respect to work for which the Tenant has not theretofore been paid by the
Landlord. Each request, which shall be directed to the Landlord, Attention:
Director of Billing & Cash Applications, shall be accompanied by (x) a
certificate executed by the Tenant's architect stating that, in such architect's
opinion, the work for which payment is requested has been substantially
completed in a good and workmanlike manner and substantially in accordance with
the Working Drawings and all Requirements and identifying the work for which
reimbursement is requested, and (y) evidence reasonably satisfactory to the
Landlord that all consultants, contractors, subcontractors and materialmen have
waived and released any lien theretofore filed by it against the Premises or the
Building and, further, have waived and released their right to file any such
lien with respect to the portion of the work for which reimbursement is
requested. Within thirty (30) days after receipt of such partial reimbursement
request, and provided that the Tenant is not then in monetary default beyond any
applicable notice and cure periods under the Lease, the Landlord shall reimburse
to the Tenant the amount set forth in the approved requisition except to the
extent that the Landlord asserts that the Tenant's approval of any invoice as
due and owing is not true or is in excess of the limitation on the aggregate
reimbursement referred to above.
The Landlord shall endeavor to provide reasonable access to the 33rd
Floor of the Building if and to the extent such access is required in connection
with the Alteration. In the event the Landlord is unable to provide access for
the Tenant to perform any such Alteration outside of the Premises, the Landlord
shall reasonably exercise its rights to perform such Alteration on behalf of,
and at the sole cost and expense of, the Tenant.
(4) In applying the provisions of (I) Section 24.1. of the Lease to
both the 32nd Floor Additional Space and the 34th Floor Additional Space (a) the
date "June 30, 1999" shall be deleted from the second sentence of such paragraph
and the date "June 30, 2001" shall be inserted in lieu thereof, and (b) the date
"December 31, 1999" shall be deleted from the second sentence of such paragraph
and the date "December 31, 2000" shall be inserted in lieu thereof, (II) Section
24.3(h) of the Lease to both the 32nd Floor Additional Space and the 34th Floor
Additional Space, the dates "July 1, 1998" and "June 30, 1999" shall be deleted
and the dates "July 1, 2000" and "June 30, 2001" respectively shall be inserted
in lieu thereof, and (III) Section 24.3(i) of the Lease to both the 32nd Floor
Additional Space and the 34th Floor Additional Space, the dates "January 1,
1999" and "December 31, 1999" shall be deleted and the dates "January 1, 2000"
and "December 31, 2000" respectively shall be inserted in lieu thereof.
<PAGE>
8
(5) The supply and return air specifications set forth in Exhibit F-1
of the Lease for the 36th and 37th Floors of the Building shall apply also to
the 32nd and the 34th Floors.
(6) The Landlord will, subject to furnish to the Tenant, at no charge
to the Tenant, the exclusive use of one (1) freight elevator for the Tenant's
initial move-in to the 34th Floor Additional Space on two (2) consecutive
weekends (during the period from 8:00 a.m. to 11:59 p.m. on both Saturday and
Sunday).
(7) As of the date hereof, space 'A' on the 35th Floor (shown hatched
on the diagram attached hereto as Exhibit B, hereafter the "Substitute Space")
is leased and demised to Morgan Stanley & Co. Incorporated. If (i) the
Substitute Space becomes available for leasing on or before January 1, 2002, and
(ii) the Landlord has so notified the Tenant by December 1, 2001, then in such
event, by execution and delivery of a Supplemental Indenture confirming such
change, the Tenant may substitute the Substitute Space in lieu of the 34th Floor
Additional Space and all of the references to the 34th Floor Additional Space in
this Supplemental Indenture shall be deemed to refer to the Substitute Space.
The Landlord hereby agrees to give the Tenant notice if the Substitute Space
becomes available for leasing under this Paragraph (7).
(8) In consideration of the additional space demised by this
Supplemental Indenture, the Tenant shall, concurrent with its execution and
delivery hereof, increase the Deposit L/C's posted with the Landlord by
$1,000,000.00 (either by amendment, replacement or the furnishing of additional
instruments) and thereafter the term "Required Amount" as it is used in Article
Twenty-six of the Lease shall be deemed increased by $1,000,000.00, provided,
however, if the Tenant terminates the Lease with respect to either the 32nd
Floor Additional Space and/or the 34th Floor Additional Space due to the
Landlord's failure to timely delivery possession of either such space, then in
such event, the Required Amount shall be reduced by $1,000,000.00 within thirty
days following the termination of the Lease with respect to either the 32nd
Floor Additional Space and/or the 34th Floor Additional Space. Notwithstanding
the foregoing (i) in no event shall the Required Amount be reduced pursuant to
the foregoing sentence by more than $1,000,000.00 in the aggregate, and (ii) if
the Tenant terminates the Lease with respect to the 32nd Floor Additional Space,
then on and after the 34th Floor Additional Space Term Commencement Date, the
term Required Amount shall once again be deemed increased by $1,000,000.00 and
the Tenant shall then, once again, increase the Deposit L/C's posted with the
Landlord by $1,000,000.00.
(9) On and after the execution and delivery of this Supplemental
Indenture, in applying the provisions of Article Thirty-eight of the Lease to
the 35th Floor of the Building, the
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9
provisions of clause (b) of the third sentence of Section 38.2. shall be
inapplicable, and with respect to the 35th Floor only, the Tenant's rights shall
only be subordinate to rights and options to lease the 35th Floor which may be
existing as of the date of this Supplemental Indenture.
(10) Each party represents to the other that the only brokers with
which it has dealt in connection with this Lease are Rockefeller Group
Development Corporation and The Staubach Company (collectively, the "Brokers").
Each party shall indemnify and save harmless their respective Indemnitees from
and against all liability, claims, suits, demands, judgments, costs, interest
and expenses (including reasonable counsel fees and disbursements incurred in
the defense thereof) arising out of any claim for commission or other
compensation made by a broker claiming through the indemnifying party (except,
that Tenant shall not be liable for any claim made by the Brokers). The Landlord
shall be obligated to pay any commissions owing to the Brokers pursuant to a
separate agreement between Landlord and either or both of the Brokers.
(11) The submission of this Supplemental Indenture shall be subject to
modification or withdrawal and does not constitute a reservation of or option on
the premises or an agreement to lease the premises. No brokerage fees,
commissions or payments shall be earned, due or payable, if at all, nor shall
this Supplemental Indenture become effective or the Landlord be obligated
thereunder, unless and until the full execution and unconditional delivery
thereof by the parties thereto.
(12) THE ORIGINAL LEASE, as hereby amended, shall remain in full force
and effect according to its terms and conditions.
<PAGE>
10
IN WITNESS WHEREOF, the parties hereto have duly executed this
Supplemental Indenture as of the day and year first above written.
ROCK-MCGRAW, INC.
ATTEST: BY /S/ JONATHAN D. GREEN
---------------------------
PRESIDENT & CEO
/S/ GWEN A. ROWDEN
- ----------------------------
SECRETARY
SIRIUS SATELLITE RADIO INC.
ATTEST: BY /S/ MICHAEL HAYNES
----------------------------
VICE PRESIDENT
/S/ DOUGLAS A. KAPLAN
- ----------------------------
ASSISTANT SECRETARY
<PAGE>
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of April 17, 2000 (this
"Agreement"), between SIRIUS SATELLITE RADIO INC., a Delaware corporation (the
"Company"), and Dr. Mircho Davidov (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, Engineering, of the Company.
In such capacity, the Executive shall be primarily responsible for the Company's
microelectronics and receiver development activities. The Company and the
Executive expect that upon the retirement of Mr. Robert D. Briskman as Executive
Vice President, Engineer, of the Company the Executive shall succeed Mr.
Briskman as the chief engineer of the Company. During the Term (as defined
below), the Executive shall, on a full-time basis and consistent with the needs
of the Company to achieve the goals of the Executive and the Company, use his
skills and render services to the best of his ability in supervising the
engineering efforts of the Company described above 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 May 1, 2000, and
end on May 1, 2003, unless terminated earlier pursuant to the provisions of
Section 6 (the "Term").
4. Compensation. (a) Base Salary. During the Term, the Executive shall
be paid an annual base salary of $325,000, 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) Stock Options. On the first day of the Term, the Company shall
grant to the Executive an option to purchase 250,000 shares of the Company's
common stock, par value
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2
$.001 per share (the "Common Stock"), at an exercise price equal to the closing
price of the Common Stock on the last business day preceding first day of the
Term. Such options shall also be subject to the terms and conditions set forth
in the Option Agreement attached to this Agreement as Exhibit A.
(c) Restricted Stock. On the first day of the Term, the Company shall
grant to the Executive 40,000 restricted shares of the Common Stock. Such
restricted shares of Common Stock shall be subject to the terms and conditions
set forth in the Restricted Stock Agreement attached to this Agreement as
Exhibit B. In connection with such grant of restricted stock, the Executive
represents and warrants to the Company that he has forfeited all of his rights
to unvested stock options granted by his previous employer, which unvested stock
options had a gross value in excess of $1,000,000 as of the date hereof.
(d) Starting Bonus. On May 15, 2000, the Company shall pay the
Executive the sum of $150,000. In connection with such payment, the Executive
represents and warrants to the Company that he has forfeited all of his rights
to all future awards under the long-term incentive plans of his previous
employer and all other cash bonuses applicable to the calendar year 2000 from
his previous employer.
(e) Fee For Services. On May 15, 2000, the Company shall pay the
Executive $150,000. This payment reflects compensation for services performed as
an independent contractor after the termination of the Executive's employment
with his previous employer. No deductions will be made from this payment
pursuant to Section 4(g). At the appropriate time, the Company will issue a Form
1099 to the Executive regarding this payment. The Company cannot warrant to the
Executive that his status as an independent contractor will be affirmed by any
third party. The Executive is solely responsible for any federal, state, or
local taxes owed by the Executive regarding this payment, and any fees or costs
which may be incurred by him in defending his independent contractor status.
(f) Retirement Benefits. (i) If the Gross Value (as defined below) of
all vested options to purchase the Common Stock granted to the Executive during
his employment with the Company (assuming no such options have been exercised)
does not equal or exceed $10,000,000 on at least one day during the 365 days
preceding the Executive's 57th birthday, then, if the Executive is an employee
of the Company on his 57th birthday, the Company shall pay the Executive a
monthly pension equal to 70% of his current base salary as of the date of his
retirement from the Company for the rest of his life upon his retirement from
the Company.
(ii) If the Gross Value (as defined below) of all vested
options to purchase the Common Stock granted to the Executive during
his employment with the Company (assuming no such options have been
exercised) does not equal or exceed $15,000,000 on at least one day
during the 365 days preceding the Executive's 65th birthday, then, if
the Executive is an employee of the Company on his 65th birthday, the
Company shall be unconditionally committed to pay the Executive a
monthly pension equal to 100% of his current base salary as of the date
of his retirement from the Company for the rest of his life upon his
retirement from the Company. If the Executive shall earn 100% pension
under this Section 4(f)(ii), then the 70% pension under Section
4(f)(ii) shall no longer apply.
(iii) "Gross Value" shall, with respect to any option to
purchase the Common Stock, mean the closing price on the applicable
date of the Common Stock on the Nasdaq National Market, the New York
Stock Exchange or, if the Common Stock is not
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3
then listed on the Nasdaq National Market or the New York Stock
Exchange, the principal securities exchange on which the Common Stock
is then traded, less the applicable exercise price per share of Common
Stock for such option to purchase the Common Stock, without giving
effect to any federal, state or local taxes which may be withheld or
payable upon the exercise of such option to purchase the Common Stock.
(iv) The Executive shall be solely responsible for any payroll
and withholding taxes imposed 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), on
any compensation payable under this Section 4(f).
(g) 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. 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 senior 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 the annual bonus program of the Company, 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;
<PAGE>
4
(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 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
<PAGE>
5
claimed to provide a basis for termination of the Executive's
employment under this Section 6(b)(ii). In considering whether the
Executive is able to perform the essential functions of his position
with a reasonable accommodation, the Company shall consider reasonably
available competent medical advice. 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 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 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, or
(ii) any reduction in the Executive's annual base salary from
the previous year; or
<PAGE>
6
(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(g), an amount (in
addition to any salary, benefits or other sums due the Executive through the
Termination Date) equal to the Executive's annualized base salary then in
effect. 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. Inventions and Ideas. (a) The Executive agrees to promptly disclose
in writing to the Company all inventions, discoveries, developments,
improvements, and innovations (herein called "Inventions") whether or not
patentable, conceived or made by the Executive, either solely or in concert with
others during the period of his employment with the Company, including, but not
limited to any period prior to the date of this Agreement, whether or not made
or conceived during work hours that: (a) relate in any manner to the existing or
contemplated business or research activities of the Company; or (b) are
suggested by or result from the Executive's employment with the Company; or (c)
result from the use of the Company's time, materials, or facilities and that all
such inventions shall be the exclusive property of the Company.
(b) The Executive hereby assigns to the Company his entire right,
title, and interest to all such inventions that are the property of the Company
under the provisions of this Agreement and all unpatented inventions that the
Executive now owns, except those specifically described in a statement which has
been separately executed by a duly authorized officer of the Company and the
Executive and which is attached hereto as Exhibit C. The Executive will, at the
Company's request and expense, execute specific assignments to any such
invention and execute, acknowledge, and deliver such other documents and take
such further action as may be considered necessary by the Company at any time
during or subsequent to the period of his employment with the Company to obtain
and define letters patent in any and all countries and to vest title in such
inventions in the Company or its assigns.
(c) Any invention disclosed by the Executive to a third person or
described in a patent application filed by the Executive or on the Executive's
behalf within one year following the period of the Executive's employment with
the Company, shall be presumed to have been conceived or made by the Executive
during the period of his employment with the Company unless proved to have been
conceived and made by the Executive following the termination of employment with
the Company.
(d) The provisions of this Section 7 shall survive any termination of
this Agreement.
<PAGE>
7
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, sketches, notebooks,
blueprints, 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 one year following the end of the Term,
including in the event the Executive has been terminated without Cause or has
resigned 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, XM Satellite Radio Inc.
("XM"), any subsidiary or affiliate of XM or any person or entity in North
America to compete with the Company in the creation and innovation of
technologies related to the transmission of satellite radio entertainment
programming; 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. 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 of the Company as to technologies developed by the Executive for the
Company during the Term, including those relating to the transmission of
satellite radio entertainment programming. 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. 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 10 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
<PAGE>
8
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 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 10 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 10 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 10 shall survive any
termination of this Agreement.
11. 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.
12. 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.
13. 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.
<PAGE>
9
14. 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.
15. 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.
16. 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.
17. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the successors in interest of the Executive and the Company.
18. 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:
Dr. Mircho Davidov
Address on file at the offices
of the Company
or to such other person or address as either of the parties shall furnish in
writing to the other party from time to time.
19. 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.
20. 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 of this Agreement; nor shall the amount of any benefit or
payment provided for under Section 6 of this Agreement be reduced by any
compensation earned by the Executive as the result of employment by another
employer.
21. 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
<PAGE>
10
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.
(b) The Company and the Executive agree that the sole dispute that is
excepted from Section 21(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 21(a).
22. 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.
23. Executive's Representations. The 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 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>
11
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/ Dr. Mircho Davidov
-------------------------
Dr. Mircho Davidov
<PAGE>
12
EXHIBIT A
THIS OPTION HAS NOT BEEN REGISTERED UNDER STATE OR FEDERAL SECURITIES
LAWS. THIS OPTION MAY NOT BE TRANSFERRED EXCEPT BY WILL OR UNDER THE LAWS OF
DESCENT AND DISTRIBUTION.
SIRIUS SATELLITE RADIO 1999 LONG-TERM STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), dated as of May 15,
2000 ("Date of Grant"), between SIRIUS SATELLITE RADIO INC., a Delaware
corporation (the "Company"), and Dr. Mircho Davidov (the "Optionee").
1. Grant of Option. Subject to the terms and conditions of this
Agreement and the Sirius Satellite Radio 1999 Long-Term Stock Incentive Plan (as
amended, supplemented or otherwise modified from time to time, the "Plan"), the
Company hereby grants to the Optionee the right and option (this "Option") to
purchase up to two hundred and fifty thousand (250,000) shares (the "Shares") of
common stock, par value $0.001 per share, of the Company at a price per share of
$31.875 (the "Exercise Price"). This Option is not intended to qualify as an
Incentive Stock Option for purposes of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"). In the case of any stock split, stock dividend
or like change in the Shares occurring after the date hereof, the number of
Shares and the Exercise Price shall be adjusted as set forth in Section 4(b) of
the Plan. This Option shall vest and be exercisable as follows:
(a) The right and option to purchase up to sixty two thousand and
five hundred (62,500) Shares shall vest and become exercisable on
May 15, 2001 if the Optionee continues to be employed by the
Company, either as an employee or a consultant, until and on such
date;
(b) The right and option to purchase up to sixty two thousand and
five hundred (62,500) Shares shall vest and become exercisable on
May 15, 2002 if the Optionee continues to be employed by the
Company, either as an employee or a consultant, until and on such
date;
(c) The right and option to purchase up to sixty two thousand and
five hundred (62,500) Shares shall vest and become exercisable on
May 15, 2003 if the Optionee continues to be employed by the
Company, either as an employee or a consultant, until and on such
date; and
(d) The right and option to purchase up to sixty two thousand and
five hundred (62,500) Shares shall vest and become exercisable on
May 15, 2004 if the Optionee continues to be employed by the
Company, either as an employee or a consultant, until and on such
date.
<PAGE>
2
The vesting of this Option is also subject to acceleration in accordance with
the provisions of Section 13 of the Plan; provided that in no event shall the
ownership by (i) Apollo Investment Fund IV, L.P. and Apollo Overseas Partners
IV, L.P. of shares of the Company's 9.2% Series A Junior Cumulative Convertible
Preferred Stock and shares of the Company's 9.2% Series B Junior Cumulative
Convertible Preferred Stock or (ii) affiliates of The Blackstone Group L.P. of
shares of the Company's 9.2% Series D Junior Cumulative Convertible Preferred
Stock be deemed to constitute a Change of Control (as defined in the Plan) for
the purposes of the Plan.
2. Termination of Option. This Option shall terminate, to the extent
not previously exercised, ten (10) years from the Date of Grant or earlier upon
the expiration of (a) ninety (90) days from the date of termination of the
Optionee's employment or contractual relationship with the Company for any
reason whatsoever other than death or Disability (as defined below) or (b) the
expiration of one (1) year from (i) the date of death of the Optionee or (ii)
cessation of the Optionee's employment or contractual relationship by reason of
Disability (as defined below). Subject to the terms of the Plan, if the
Optionee's employment or contractual relationship is terminated by death, this
Option shall be exercisable only by the person or persons to whom the Optionee's
rights under such Option shall pass by the Optionee's will or by the laws of
descent and distribution of the state or county of the Optionee's domicile at
the time of death. "Disability" shall mean any physical, mental or other health
condition which substantially impairs the Optionee's ability to perform his or
her assigned duties for one hundred twenty (120) days or more in any two hundred
forty (240) day period or that can be expected to result in death. The Company
shall determine whether the Optionee has incurred a Disability on the basis of
medical evidence reasonably acceptable to the Company. Upon making a
determination of Disability, the Company shall determine the date of the
Optionee's termination of employment or contractual relationship .
For purposes of this Agreement, transfer of employment between or among
the Company and/or any Related Company shall not be deemed to constitute a
termination of employment with the Company or the Related Company. "Related
Company", when referring to a subsidiary corporation, shall mean any corporation
(other than the Company) in an unbroken chain of corporations beginning with the
Company if, on the date of this Agreement, each of the corporations other than
the last corporation in the unbroken chain owns stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock of one
of the other corporations in such chain. When referring to a parent corporation,
the term "Related Company" shall mean any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company if, on the date of
this Agreement, each of the corporations, other than the Company, owns stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock of one of the other corporations in such chain.
3. Non-transferable. This Option may not be transferred, assigned,
pledged or hypothecated in any manner (whether by operation of law or otherwise)
other than by will or by the applicable laws of descent and distribution, and
shall not be subject to execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this
Option or of any right or privilege conferred hereby, contrary to the provisions
hereof, or upon the sale or levy or any attachment or similar process upon
<PAGE>
3
the rights and privileges conferred hereby, this Option shall terminate and
become null and void.
4. Exercise. Subject to Sections 1 and 2 of this Agreement and the
Plan, this Option may be exercised, in whole or in part, by means of a written
notice of exercise signed and delivered by the Optionee (or, in the case of
exercise after death of the Optionee by the executor, administrator, heir or
legatee of the Optionee, as the case may be) to the Company at the address set
forth herein for notices to the Company. Such notice (a) shall state the number
of Shares to be purchased and the date of exercise, and (b) shall be accompanied
by payment of the Exercise Price in cash, by certified or cashier's check or by
delivery of such other consideration as the administrator of the Plan may
approve.
5. Withholding. Prior to delivery of the Shares purchased upon exercise
of this Option, the Company shall determine the amount of any United States
federal, state and local income tax, if any, which is required to be withheld
under applicable law and shall, as a condition of exercise of this Option and
delivery of certificates representing the Shares purchased upon exercise of this
Option, collect from the Optionee the amount of any such tax to the extent not
previously withheld.
6. Rights of the Optionee. Neither this Option, the execution of this
Agreement nor the exercise of any portion of this Option shall confer upon the
Optionee any right to, or guarantee of, continued employment by the Company, or
in any way limit the right of the Company to terminate employment of the
Optionee at any time, subject to the terms of any employment agreement between
the Company and the Optionee.
7. Professional Advice. The acceptance and exercise of this Option may
have consequences under federal and state tax and securities laws which may vary
depending upon the individual circumstances of the Optionee. Accordingly, the
Optionee acknowledges that the Optionee has been advised to consult his or her
personal legal and tax advisor in connection with this Agreement and this
Option.
8. Agreement Subject to Plan. The Option and this Agreement are subject
to the terms and conditions set forth in the Plan and in any amendments to the
Plan existing now or in the future, which terms and conditions are incorporated
herein by reference. A copy of the Plan previously has been delivered to the
Optionee. Should any conflict exist between the provisions of the Plan and those
of this Agreement, the provisions of the Plan shall govern and control. This
Agreement and the Plan constitute the entire understanding between the Company
and the Optionee with respect to this Option.
9. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to its
conflict of laws principles, and shall bind and inure to the benefit of the
heirs, executors, personal representatives, successors and assigns of the
parties hereto.
10. Notices. Any notice required or permitted to be made or given
hereunder shall be mailed via certified or registered mail or delivered
personally to the addresses set forth below, or as changed from time to time by
written notice to the other:
Company: Sirius Satellite Radio Inc.
<PAGE>
4
1221 Avenue of the Americas, 36th Floor
New York, New York 10020
Attention: General Counsel
Optionee: Dr. Mircho Davidov
Address on file at the
offices of company
Notices and other communications shall be deemed received and effective
upon the earlier of (i) hand delivery to the recipient, or (ii) five (5) days
after being mailed by certified or registered mail, postage prepaid, return
receipt requested.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
SIRIUS SATELLITE RADIO INC. Optionee:
By: /s/ Patrick L. Donnelly /s/ Dr. Mircho Davidov
--------------------------- --------------------------
Patrick L. Donnelly Dr. Mircho Davidov
Senior Vice President and
General Counsel
<PAGE>
EXHIBIT B
SIRIUS SATELLITE RADIO 1999 LONG-TERM STOCK INCENTIVE PLAN
RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT (this "Agreement"), dated as of May 1,
2000 ("Date of Grant"), between SIRIUS SATELLITE RADIO INC., a Delaware
corporation (the "Company"), and Dr. Mircho Davidov (the "Executive").
WHEREAS, the Company maintains the Sirius Satellite Radio 1999
Long-Term Incentive Plan (the "Plan"), which is incorporated into and forms a
part of this Agreement, and the Executive has been selected by the committee
administering the Plan (the "Committee") to receive an award of Restricted Stock
under Section 8(a) of the Plan (and thus become a "Participant" as defined in
the Plan).
NOW, THEREFORE, IT IS AGREED, by and between the Company and the
Executive, as follows:
1. Definitions. Terms used in this Agreement that are not defined in
this Agreement are defined in the Plan.
2. Shares Subject to Agreement. The Executive is hereby awarded 40,000
shares of Restricted Stock.
3. Rights as Stockholder. The Executive shall be entitled to receive
any dividends paid with respect to his shares of Restricted Stock; provided,
however, that no dividends shall be payable to or for the benefit of the
Executive with respect to record dates occurring either (i) before the Date of
Grant or (ii) on or after the date, if any, on which the Executive has forfeited
the Restricted Stock. The Executive shall be entitled to vote his shares of
Restricted Stock that have not been forfeited to the same extent as would have
been applicable to the Executive if he was then vested in the shares; provided,
however, that the Executive shall not be entitled to vote the shares with
respect to record dates for such voting rights arising either (i) before the
Date of Grant or (ii) on or after the date, if any, on which the Executive has
forfeited the shares.
4. Transfer and Forfeiture of Shares. On the Executive's Termination
Date, the Executive shall forfeit all of his shares of Restricted Stock that are
not then vested. For purposes of this Agreement, the Executive's "Termination
Date" means his Termination Date as defined in Section 6 of the Employment
Agreement dated April 17, 2000 between the Company and the Executive (as
amended, supplemented or otherwise modified, the "Employment Agreement").
Subject to earlier vesting pursuant to Section 5, the Executive shall become
vested in his shares of Restricted Stock, and thus become owner of the shares
free of all restrictions otherwise imposed by this Agreement, in accordance with
the following schedule:
<PAGE>
2
<TABLE>
<CAPTION>
DATE NO. SHARES THAT VEST
---- --------------------
<S> <C>
First Anniversary of Date of Grant 35,000
Second Anniversary of Date of Grant 3,500
Third Anniversary of Date of Grant 1,500
</TABLE>
A share of the Executive's Restricted Stock may not be sold, assigned,
transferred pledged or otherwise encumbered until the Executive becomes vested
in such share.
5. Death or Disability. Notwithstanding Section 4, the Executive shall
become vested in his shares of Restricted Stock as of his Termination Date
before the date his Restricted Stock would otherwise vest under Section 4, if
such Termination Date occurs by reason of the Participant's death or Disability.
For purposes of this Agreement, "Disability" means any physical, mental or other
health condition which substantially impairs the Executive's ability to perform
his assigned duties for one hundred twenty (120) days or more in any two hundred
forty (240) day period or that can be expected to result in death. The Company
shall determine whether the Executive has incurred a Disability on the basis of
medical evidence reasonably acceptable to the Company. Upon making a
determination of Disability, the Company shall determine the date of the
Executive's termination of employment.
6. Other Termination. Notwithstanding Section 4, the Executive shall
become vested in his shares of Restricted Stock as of his Termination Date
before the date his Restricted Stock would otherwise vest under Section 4, if
such Termination Date occurs by any reason that would cause an amount to become
payable to the Executive under Section 6(f) of the Employment Agreement.
7. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to its
conflict of laws principles, and shall bind and inure to the benefit of the
heirs, executors, personal representatives, successors and assigns of the
parties hereto.
8. Plan Governs. Notwithstanding anything in this Agreement to the
contrary, the terms of this Agreement shall be subject to the terms of the Plan,
a copy of which may be obtained by the Executive from the office of the
Secretary of the Company.
9. Amendment. This Agreement may be amended by written agreement of the
Executive and the Company, without the consent of any other person.
10 Section 83(b) Election. The Executive understands and acknowledges
that (i) he should consult with his tax advisor regarding the advisability of
filing with the Internal Revenue Service an election under ss.83(b) of the
Internal Revenue Code, (ii) that an election under ss.83(b) must be filed within
30 days after the Date of Grant, and (iii) that the Company is under no
obligation to assist the Executive with determining the appropriateness of
filing the election or making the filing itself.
<PAGE>
3
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the Date of Grant.
SIRIUS SATELLITE RADIO INC.
By: /s/ Patrick L. Donnelly /s/ Dr. Mircho Davidov
-------------------------- -------------------------
Patrick L. Donnelly Dr. Mircho Davidov
Senior Vice President and
General Counsel
<PAGE>
EXHIBIT C
List of Prior Inventions
and Original Works of Authorship
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
TITLE DATE IDENTIFYING NUMBER OR BRIEF DESCRIPTION
- -----------------------------------------------------------------------------------------------
</TABLE>
The parties shall complete this
Exhibit C on or prior to May 1, 2000
____ No inventions or improvements
____ Additional Sheets Attached
Signature of Employee: _____________________________
Print Name of Employee: ____________________________
Date: April 17, 2000
<PAGE>
Exhibit 10.28
***** Confidential treatment has been requested for portions of this agreement.
The copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as *****. A complete version of this agreement
has been filed separately with the Securities and Exchange Commission.
JOINT DEVELOPMENT AGREEMENT
This JOINT DEVELOPMENT AGREEMENT is entered into between XM Satellite
Radio Inc., a Delaware corporation with its principal location at 1250 23rd
Street, N.W., Washington, DC ("XM"), and Sirius Satellite Radio Inc., a Delaware
--
corporation with its principal location at 1221 Avenue of the Americas, New
York, New York ("Sirius") as of February 16th, 2000 ("Effective Date").
------ --------------
RECITALS
WHEREAS, XM is engaged in designing, developing, marketing and licensing
the technology relating to its satellite digital audio radio system ("XM Radio
--------
System") in accordance with the rights under the license issued to XM by the
- ------
Federal Communications Commission (the "FCC");
---
WHEREAS, Sirius is engaged in designing, developing, marketing and
licensing the technology relating to its satellite digital audio radio system
("Sirius Radio System") in accordance with the rights under the license issued
- ---------------------
to Sirius by the FCC;
WHEREAS, the FCC has mandated that XM and Sirius deploy a final receiver
design that is interoperable;
WHEREAS, due to the different technical heritage, satellite design and
performance requirements of the XM Radio System and the Sirius Radio System,
such systems currently employ different technologies that impede the design and
development of an interoperable receiver;
WHEREAS, XM and Sirius and their respective radio equipment suppliers
already have expended significant funds in developing Single Mode Radios (as
defined below);
WHEREAS, it will take an extensive and expensive joint program to merge the
technologies employed by the XM Radio System and the Sirius Radio System in
order to design and develop a cost efficient interoperable receiver;
WHEREAS, XM and Sirius are, and will continue to be, competitors in, among
other things, the marketing and sale of the satellite broadcasting of radio
programming to listeners, the acquisition of rights to broadcast such
programming and sale of radio advertising availabilities and other forms of
advertising or promotional opportunities in connection with that programming
(collectively, "Business Opportunities");
----------------------
WHEREAS, nothing in this Agreement is intended to, or will in any way,
restrain or reduce the competitive rivalry between the parties in the pursuit of
Business Opportunities;
WHEREAS, the parties desire to comply with FCC licensing requirements and
to enhance efficiency and consumer welfare by jointly developing and deploying
certain interoperable technology for the purpose of producing radios capable of
receiving broadcasts from both the XM Radio System and the Sirius Radio System;
<PAGE>
***** Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
WHEREAS, in jointly developing such interoperable technology in the most
cost effective manner, the parties believe it necessary and desirable to
integrate some of their economic activities to develop and bring to market
Interoperable Radios (as defined below); and
WHEREAS, the parties wish to set forth the terms and conditions under which
they will jointly develop and deploy such interoperable technology;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants contained herein, the parties hereto agree as follows:
ARTICLE I
Definitions
-----------
1.01. Defined Terms. Capitalized terms used herein and not otherwise
-------------
defined herein shall have the meaning assigned to such terms below:
"Aftermarket" shall mean the market for radios that are (a) sold to
-----------
a customer for use in a vehicle, aircraft or vessel, after such vehicle,
aircraft or vessel has been manufactured and sold to a customer; or (b)
sold separately as stand alone devices.
"Agreement" shall mean this Joint Development Agreement, including
---------
all Exhibits attached hereto, as amended, supplemented or otherwise
modified from time to time.
"Auditor" shall have the meaning specified in Section 14.10.
-------
"Business Opportunities" shall have the meaning specified in the
----------------------
recitals to this Agreement.
"Confidential Information" shall have the meaning specified in
------------------------
Section 9.01.
"Consultant" shall have the meaning specified in Section 3.02(b).
----------
"Consulting Agreement" shall have the meaning specified in Section
--------------------
3.02(b).
"Content Provider" shall have the meaning specified in Section
----------------
6.06.
"Distribution Partners" shall have the meaning specified in Section
---------------------
6.01.
"Effective Date" shall have the meaning specified in the
--------------
introductory paragraph of this Agreement.
"[*****] Deals" shall mean the agreements,
-----------------------------
arrangements and understandings in effect as of the Effective Date among
[*****]
<PAGE>
***** Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
3
[*****], as such agreements, arrangements and understandings may be
amended, supplemented or otherwise modified from time to time.
"[*****] Partner" shall mean [*****].
---------------
"[****] Deals" shall mean the agreements, arrangements and
------------
understandings in effect as of the Effective Date among [*****],
or any of their respective subsidiaries or affiliates, as such agreements,
arrangements and understandings may be amended, supplemented or otherwise
modified from time to time.
"[*****] Partner" shall mean [*****] and [*****].
"Expedited Rules" shall have the meaning specified in Section 13.02.
---------------
"FCC" shall have the meaning specified in the recitals to this
---
Agreement, together with any successor agency or agencies.
"FCC License" shall mean the license granted by the FCC to Sirius or
-----------
XM, as the context may require, to launch and operate satellites to provide
a radio communications service in which audio programming is digitally
transmitted by one or more space stations directly to fixed, mobile and/or
portable stations which may involve complementary repeating terrestrial
transmitters and telemetry, tracking and control facilities.
"Interoperable Chipset" shall mean integrated circuits which are
---------------------
capable of receiving, decoding, decompressing and outputting to a user
interface the digital audio radio broadcast, transmitted from both
satellites and terrestrial repeaters, of both the XM Radio System and the
Sirius Radio System.
<PAGE>
4
*****Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
"Interoperable Radio" shall mean a radio that, at a minimum, (a)
-------------------
receives and processes the audio portion of both the Sirius Radio System
signal and the XM Radio System signal, either as a result of an
Interoperable Chipset contained in the unit itself or as a result of an
Interoperable Chipset contained in an outboard location which interfaces
directly with the unit, and (b) which is capable of providing the user
interface for both Sirius Radio System broadcasts and XM Radio System
broadcasts, including displaying the artist and title information
transmitted as part of such broadcasts, in each case, without the consumer
purchasing additional hardware or software.
"Interoperability Technology" shall mean the technology, including
---------------------------
the technology which is jointly funded and developed by Sirius and XM
pursuant to this Agreement or owned and/or licensed by either party, which
is required to design, develop and/or manufacture an Interoperable Radio,
as well as any enhancements and modifications jointly funded and developed
for such technology pursuant to this Agreement (including the industry
standards jointly developed by the parties pursuant to Section 3.03), but
shall not include Non-core Technology.
"JV" shall have the meaning specified in Article XI.
--
[*****] shall have the meaning specified in Section 6.02(a).
-----
[*****] shall have the meaning specified in Section 6.04(a).
-----
"Non-core Technology" shall have the meaning specified in Section
-------------------
5.02.
"Non-owning Party" shall have the meaning specified in Section 8.05.
----------------
"OEM Automobile Partners" shall mean an original equipment
-----------------------
manufacturer of vehicles (including trucks and/or other specialty
vehicles), such as General Motors Corporation, Ford Motor Company,
DaimlerChrysler AG, Honda Motor Company, Toyota, BMW AG and their
respective divisions, affiliates and subsidiaries.
"Owning Party" shall have the meaning specified in Section 8.05.
------------
"Project Leader" shall have the meaning specified in Section
--------------
3.02(d).
"Project Plan" shall have the meaning specified in Section 3.02(b).
------------
"Radio Manufacturing Partners" shall have the meaning specified in
----------------------------
Section 5.04.
"Recipient" shall have the meaning specified in Section 9.01.
---------
"RFP" shall have the meaning specified in Section 3.02(e).
---
"SDARS Mark" shall have the meaning specified in Section 4.04(a).
----------
<PAGE>
***** Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
5
"Single Mode Radio" shall mean a radio that (a) receives and
-----------------
processes the Sirius Radio System signal or the XM Radio System signal, but
not both, and (b) which is capable of providing the user interface for
either Sirius Radio System broadcasts or XM Radio System broadcasts, but
not both.
"Sirius" shall have the meaning specified in the first paragraph of
------
this Agreement.
"Sirius Radio System" shall have the meaning specified in the
-------------------
recitals to this Agreement.
"Specifications" shall have the meaning specified in Section
--------------
3.02(c).
[*****]
"Third Party Technology" shall mean any patents, know-how or other
----------------------
intellectual property rights owned or controlled by any person or entity
other than Sirius, XM and their respective affiliates that may be included
within the XM Radio System or the Sirius Radio System or in
Interoperability Technology from time to time.
"XM" shall have the meaning specified in the first paragraph of this
--
Agreement.
"XM Radio System" shall have the meaning specified in the recitals
---------------
to this Agreement.
1.02. Other Definitional Matters. Definitions in this Agreement apply
--------------------------
equally to the singular and plural forms of the defined terms. The words
"include" and "including" shall be deemed to be followed by the phrase "without
limitation" or "but not limited to" when such phrase does not otherwise appear.
The terms "herein," "hereof" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular section, paragraph
or subdivision. All article, section, paragraph, clause, exhibit or schedule
references not attributed to a particular document shall be references to such
parts of this Agreement.
<PAGE>
6
ARTICLE II
Term of this Agreement
----------------------
Unless terminated in accordance with Section 12.01, this Agreement shall
commence on the Effective Date and continue until the termination of each of the
parties' respective FCC Licenses, and shall be automatically renewed upon the
renewal or extension of the FCC Licenses.
ARTICLE III
Joint Technology Development.
-----------------------------
3.01. Interoperability Technology Development. XM and Sirius hereby agree
----------------------------------------
to develop Interoperability Technology for the purpose of producing (or having
produced by others) Interoperable Radios.
3.02. Project Plan. Unless otherwise agreed by the parties in writing:
------------
(a) As soon as practicable, the parties shall exchange, on a
mutually agreed date, appropriate technical documentation relating to the
XM Radio System and the Sirius Radio System, as the case may be.
(b) The parties shall use commercially reasonable efforts to
execute, within 90 days following the Effective Date, a consulting
agreement (the "Consulting Agreement") with a third party consultant
--------------------
reasonably acceptable to both parties (the "Consultant") to manage the
----------
project development activities relating to the Interoperability Technology.
The Consultant shall have responsibility for creating a budget and project
plan for developing the Interoperability Technology (the "Project Plan").
------------
(c) The Consultant shall work with representatives of the parties
to develop the Project Plan, including the development and preparation of a
written document containing agreed upon engineering and other
specifications for the Interoperable Chipset (the "Specifications"). The
--------------
Specifications shall be in form and substance acceptable to both Sirius and
XM.
(d) The parties shall negotiate in good faith to determine the
Project Plan and Specifications. Each party agrees to use commercially
reasonable efforts to meet any deliverables and/or timetables set forth in
the Project Plan. Each party shall provide commercially reasonable support
to facilitate the exchange of information during the development of the
Project Plan and Specifications, as well as during the development of the
Interoperability Technology. In addition, each party shall designate a
project leader (each, a "Project Leader"), who shall be designated in the
--------------
Project Plan, and who shall coordinate such party's development activities.
(e) As part of the Project Plan, upon completion of the
Specifications, the Consultant shall issue to chipset design and
fabrication firms reasonably acceptable
<PAGE>
***** Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
7
to XM and Sirius, a request for (the "RFP") to design, develop and
---
manufacture Interoperable Chipsets. However, the Consultant shall [*****]
Similarly, the Consultant shall [*****]. As soon as practicable after
responses to the RFP have been received by the Consultant and reviewed by
XM and Sirius, the Consultant, with the consent of Sirius and XM (which
shall not be unreasonably withheld, delayed or conditioned), shall use
commercially reasonable efforts to negotiate one or more agreements to
design and develop Interoperable Chipsets.
(f) The parties shall use commercially reasonable efforts to
develop an antenna or series of antennas which function with both the
Sirius Radio System and the XM Radio System for deployment with
Interoperable Radios.
(g) Nothing contained in this Agreement shall be interpreted or
construed to limit in any way Sirius' or XM's ability to continue its
existing integrated circuit development efforts for Single Mode Radios.
(h) XM and Sirius shall each use commercially reasonable efforts to
design and develop Interoperable Radios that are backward compatible with
then existing Single Mode Radios.
(i) XM and Sirius agree that [*****], as the case may be.
3.03. SDARS Industry Standards Publication. In order to direct that the
------------------------------------
development work performed pursuant to this Agreement results in the quality of
reception on Interoperable Radios of either party's programming being comparable
to the quality of reception of such party's programming on a Single Mode Radio,
XM and Sirius shall jointly develop and publish industry standards for
Interoperable Radios. Such standards shall contain parameters relating to
Interoperable Radios, including, but not limited to user-interface and
communication protocols.
3.04. Enhancement and Support of the Interoperability Technologies. Each
------------------------------------------------------------
party agrees to use commercially reasonable efforts to maintain and enhance the
Interoperability Technology to ensure its proper functioning and commercial
usefulness.
3.05. Implementation of Non-core Technologies. Nothing in this Agreement
---------------------------------------
shall prevent the development, manufacturing, marketing, sale and distribution
of Interoperable Radios with respect to which the Non-core Technologies, if any,
used by or relating to customers of one of the parties differ from the Non-core
Technologies, if any, used by or relating to customers of the other party.
<PAGE>
8
ARTICLE IV
Intellectual Property Rights and Ownership
------------------------------------------
4.01. XM Radio System. The parties agree that XM owns, or has license
---------------
rights to, the XM Radio System and shall at all times continue to retain full
and exclusive right, title and ownership and/or license, as the case may be, in
and to the XM Radio System, and in any and all intellectual property rights
therein, including, but not limited to, all rights in related patents,
trademarks, copyrights, derivative works and proprietary and trade secret rights
and know-how.
4.02. Sirius Radio System. The parties agree that Sirius owns, or has
-------------------
license rights to, the Sirius Radio System and shall at times continue to retain
full and exclusive right, title and ownership and/or license, as the case may
be, in and to the Sirius Radio System, and in any and all intellectual property
rights therein, including, but not limited to, all rights in related patents,
trademarks, copyrights, derivative works and proprietary and trade secret rights
and know-how.
4.03. Interoperability Technology. (a) Subject to each party's rights
---------------------------
set forth in Sections 4.01 and 4.02, the parties agree that XM and Sirius shall
jointly own the Interoperability Technology jointly developed by the parties and
jointly funded hereunder, and any and all intellectual property rights therein,
including, but not limited to, all rights in related patents, trademarks,
copyrights, derivative works and proprietary and trade secret rights and know-
how. Each party shall give the other party all reasonable assistance and shall,
at the other party's request and expense, execute and deliver all documents and
assignments which may be necessary to establish the joint ownership rights in
the Interoperability Technology.
(b) If any patentable inventions are created as a result of the parties'
joint development activities hereunder, the parties agree to cooperate in the
filing and prosecution of patent applications for such inventions with the costs
to be shared equally by the parties. Any resulting patent shall be jointly
owned by Sirius and XM.
(c) Each party agrees to require each of its employees to assign to such
party all of such employee's right, title and interest in and to
Interoperability Technology and all related intellectual property rights,
including patents, patent applications, copyright, derivative works, trademarks,
trade secrets, know-how and other proprietary rights.
4.04. Logo or Service Mark for Interoperability Technology. (a) Sirius
----------------------------------------------------
and XM shall jointly select and file for federal trademark protection a new
name, logo and/or service mark (collectively, the "SDARS Mark") relating to
----------
digital satellite radios for the purposes of promoting and identifying
Interoperable Radios and Single Mode Radios, and the parties shall share equally
in any profits relating to the SDARS Mark. The parties will work cooperatively
to design the SDARS Mark(s) so as to minimize consumer confusion regarding
whether a given radio is a Single Mode Radio or Interoperable Radio.
(b) From and after the joint selection thereof, Sirius and XM shall
prominently use and/or display the SDARS Mark in all communications that mention
XM or Sirius.
<PAGE>
***** Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
9
(c) Each of the parties agrees not to change its name to, or adopt the use
of a trade name or trademark that is likely to cause confusion with (i) the
corporate name, trade names and trademarks employed by the other party hereto,
or (ii) following the joint selection thereof, the SDARS Mark.
(d) Each party shall license the SDARS Mark to its Radio Manufacturing
Partners, Distribution Partners and OEM Automobile Partners for use on Single
Mode Radios and Interoperable Radios. Each party shall require, as part of any
agreement, arrangement or understanding entered into with any Radio
Manufacturing Partner, Distribution Partner or OEM Automobile Partner after the
Effective Date, the use of the SDARS Mark on the face or another static
component of the user interface of all Single Mode Radios and Interoperable
Radios; provided that such requirement shall not apply to any radio if no logo,
--------
trade name or trademark relating to XM, Sirius or satellite digital audio radio
service is displayed on the face or any other static component of the user
interface thereof. In addition, each party shall use commercially reasonable
efforts to require its [*****] Partners and [*****] Partners to use the SDARS
Mark on the face or another static component of the user interface of all Single
Mode Radios and Interoperable Radios; provided that such requirement shall not
--------
apply to any radio if no logo, trade name or trademark relating to XM, Sirius or
satellite digital audio radio service is displayed on the face or any other
static component of the user interface thereof.
(e) Each party acknowledges that the quality of use of the SDARS Mark will
have an important effect on goodwill associated with the SDARS Mark and on the
resulting value of the SDARS Mark and each party agrees that the nature and
quality of all uses of the SDARS Mark shall be of high quality, and be
adequately suited to exploitation of the SDARS Mark to the best advantage and
enhancement of the SDARS Mark and consistent with quality control standards
mutually established by the parties.
ARTICLE V
Licensing Matters
-----------------
5.01. Independent Developments. (a) In the event that either party
------------------------
independently develops technology, including any technology existing on the
Effective Date, that is included in Interoperability Technology, such party
shall retain full right, title and interest in and to such technology, including
any and all intellectual property rights therein; however, each party hereby
grants to the other party, to the fullest extent possible, subject to any Third
Party Technology restrictions as described in Section 5.03, a perpetual, non-
exclusive, royalty-free, worldwide license to use, copy, distribute, sublicense
and allow its Distribution Partners and Radio Manufacturing Partners to
sublicense such technology for the purpose of manufacturing Interoperable Radios
and marketing and distributing Interoperable Radios in North America.
(b) In addition, each party shall retain full right, title and interest in
and to its technology included in the digital satellite radio system of such
party as of the Effective Date, including any and all intellectual property
rights therein; however, each party hereby grants to the other party, to the
fullest extent possible, subject to any Third Party
<PAGE>
10
Technology restrictions as described in Section 5.03, a perpetual, non-
exclusive, royalty-free, worldwide license to use, copy, distribute, sublicense
and allow such other party's Distribution Partners and Radio Manufacturing
Partners to sublicense such technology (including any other technology relevant
to a satellite digital audio radio system that such party, or any officer,
employee or affiliate of such party, may own or have a license to use) for the
purpose of manufacturing, marketing and distributing such other party's
satellite digital audio radio system in North America, including any Single Mode
Radios used in connection therewith; provided that the technology covered by
--------
such license shall exclude all Non-core Technology.
5.02. Independent Development of Non-core Technology. In the event that
----------------------------------------------
either party independently develops or licenses technology that is not included
in the definition of Interoperability Technology ("Non-core Technology"), such
-------------------
Non-core Technology shall remain the property of the developing or licensing
party; and all right, title and interest in and to such Non-core Technology,
including any intellectual property rights therein, shall reside with the
developing or licensing party. In such event, the developing or licensing party
shall make available (or, in the case of licensed technology, use commercially
reasonable efforts (which shall not include the payment of additional license
fees) to make available) to the other party, upon written request, a license for
such Non-core Technology on commercially reasonable terms. In the event that
the non-developing party does not accept such commercially reasonable terms, no
license shall be granted. In no event shall either party be entitled to any
equitable relief with regard to Non-core Technology.
5.03. Third Party Technology. Each party shall be responsible, at its
----------------------
cost, for licensing any Third Party Technology to the extent that such Third
Party Technology is used in the digital satellite radio system of such party.
All licenses granted hereunder shall be subject to existing agreements entered
into by the parties for such Third Party Technology. A listing of the Third
Party Technology included within each party's satellite digital audio radio
system as of the Effective Date shall be provided to the other party within 30
days of the Effective Date. Each party shall, within 30 days of the Effective
Date, provide to the other party copies of any agreements executed by such party
relating to Third Party Technology, to the extent such party is legally entitled
to disclose such agreement. Each party shall use commercially reasonable
efforts to obtain all consents necessary to disclose such agreements to the
other party in accordance with the terms of this Agreement.
5.04. Licensing of the Interoperability Technology to Third Parties.
-------------------------------------------------------------
Subject to any restrictions in the Third Party Technology agreements, as joint
owners of the Interoperability Technology, the parties shall each have authority
to license (and permit the sublicense of) the Interoperability Technology to
third parties, including, but not limited to, manufacturers of integrated
circuits and receivers ("Radio Manufacturing Partners"), for the purpose of
----------------------------
manufacturing, marketing, distributing and/or selling Interoperable Radios. The
parties shall share equally in any licensing, technical assistance or other
revenue recognized from such third party licensing of, or technical or other
assistance relating to, Interoperability Technology.
<PAGE>
***** Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
11
ARTICLE VI
Marketing Matters
-----------------
6.01. Distribution Partners. Commencing on the Effective Date, neither
---------------------
party shall enter into any agreement, arrangement or understanding with any
[*****] distribution partner (collectively, "Distribution Partners") for the
---------------------
distribution of either the XM Radio System or Sirius Radio System that [*****].
In addition, commencing on the Effective Date neither party shall enter into any
agreement, arrangement or understanding which [*****].
6.02. [*****] Deals. (a) Notwithstanding anything to the contrary in
-----------------
this Agreement, XM and Sirius each agree that, other than their respective
[*****] Deals, all agreements, arrangements and understandings made by either
party after the Effective Date that [*****] shall specify the [*****]; provided
--------
that, in the period before [*****]; and provided further, that neither party
-------- -------
shall enter into any agreement, arrangement or understanding to [*****].
(b) Neither party shall after the Effective Date enter into any agreement,
arrangement or understanding with [*****] in circumvention of the terms of this
Agreement and neither party shall [*****], other than in accordance with the
terms of this Agreement.
6.03. [*****] Deals. (a) Notwithstanding anything to the contrary in
-------------
Section 6.02, both XM and Sirius shall be free to [*****]. The parties
acknowledge that any [*****] Deals. After the Effective Date, each of the
parties shall work cooperatively with one another and with its [*****], enter
into any agreement relating to Interoperable Radios with any [*****] Deal unless
such agreement (i) is either (A) [*****]
<PAGE>
***** Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
12
[*****] and (ii) shall become effective as soon as practicable after [*****];
provided, that until such an agreement is established with a given [*****] of a
- --------
party, the other party shall not [*****].
(b) Notwithstanding Sections 6.02(a) and 6.03(a), in the period [*****].
6.04. [*****] Partners. (a) Notwithstanding anything to the contrary in
----------------
this Agreement, XM and Sirius each agree that all agreements, arrangements and
understandings made by either party after the Effective Date that contemplate
[*****]; provided that, for the avoidance of doubt, it is understood that each
--------
of the parties may [*****].
(b) Notwithstanding Section 6.04(a), in the period [*****].
(c) Neither party shall [*****] Deal in circumvention of the terms of this
Agreement nor shall it [*****] in violation of the terms of Section 6.04(a).
6.05. [*****] Partners. (a) Notwithstanding anything to the contrary in
----------------
Section 6.04, the parties agree that each may [*****]. The parties acknowledge
that [*****]. Nothing in this Agreement shall, or shall be construed to, require
either party to [*****].
(b) XM and Sirius shall each [*****].
6.06. New Content Arrangements. (a) Commencing on the Effective Date,
------------------------
neither party shall enter into any agreement, arrangement or understanding with
any provider of content or programming, including celebrity talent (a "Content
Provider") that (i) [*****]
<PAGE>
***** Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
13
[*****] or (ii) rewards any such Content Provider for [*****]. This Section
6.06(a) shall not apply to contracts between either party and its employees,
other than celebrity talent. To implement this provision, each party agrees,
[*****].
(b) Commencing on the Effective Date, neither party shall enter into any
agreement, arrangement or understanding [*****].
ARTICLE VII
Consideration
-------------
7.01. Resources. Each party agrees to devote its resources to the joint
---------
development of the Interoperability Technology in accordance with the Project
Plan, or as mutually agreed by the parties in writing.
7.02. Existing Technology. Each party shall negotiate in good faith the
-------------------
financial value of the intellectual property licenses granted hereunder for the
technology of such party that is included in (a) the Interoperability
Technology; and/or (b) the satellite digital audio radio system of the other
party. The applicability, validity, value, use, importance and available
alternatives of each party's intellectual property rights with respect to (i)
the Interoperability Technology; and (ii) the other party's satellite digital
audio radio system shall be considered in determining the financial value of
such intellectual property licenses. In the event that the parties fail to
reach agreement regarding the financial value of such intellectual property
licenses within ninety days of the Effective Date, the parties shall resolve the
dispute through binding arbitration in accordance with Section 13.02. The
financial value agreed by the parties or determined by arbitration to be
attributed to each party's existing technology licenses granted hereunder shall
be set forth on a schedule which shall be approved in writing by both parties.
Each party shall receive a credit against its contribution to fees, costs and
expenses that this Agreement may require equal to the value attributed to its
technology pursuant to this Section.
7.03. Fees, Costs and Expenses. Subject to Section 7.02, each party shall
------------------------
share equally in the fee, costs and expenses associated with the following
activities:
(a) contracting with the Consultant pursuant to the Consulting
Agreement, as further described in Section 3.02(b);
(b) publication of the industry standards set forth in Section 3.03;
(c) joint trademark activities set forth in Section 4.04;
<PAGE>
14
(d) development, enhancement and support of the Interoperability
Technology as described in Section 3.04.
(e) royalties, if applicable, due after the Effective Date for Third
Party Technology that the parties mutually agree shall be included in
Interoperability Technology;
(f) the parties' activities pursuant to this Agreement to jointly
market the Interoperability Technology;
(g) the parties' activities relating to the filing and prosecution
of patent applications for the jointly owned Interoperability Technology;
and
(h) any other joint activities undertaken in furtherance of this
Agreement as mutually agreed by the parties in writing.
7.04. Stipulation of Dismissal of Patent Litigation. Subject to the terms
----------------------------------------------
of this Agreement, XM and Sirius shall cause to be to filed, within five
business days of the Effective Date, a stipulation substantially in the form set
forth in Exhibit A for dismissal, without prejudice, of the patent litigation
---------
currently pending between XM and Sirius.
ARTICLE VIII
Infringement Action Defense and General Indemnity
-------------------------------------------------
8.01. XM Defense. (a) Subject to Section 8.03 and 8.04, XM shall defend
----------
at its expense any action brought against Sirius, or any of its officers or
directors, to the extent such action is based upon the claim that the XM Radio
System, including the technology contributed pursuant to Section 5.01,
constitutes direct infringement of any duly issued United States patent,
copyright, trademark or trade secret and will pay any reasonable expenses and
settlements or judgments to the extent based thereon, provided that (i) XM has
sole control of any such action or settlement negotiations, (ii) Sirius notifies
XM promptly in writing of such claim, suit or proceeding, and (iii) Sirius uses
commercially reasonable efforts, at XM's expense, to assist in the settlement
and/or defense of any such claim, suit or proceeding. Sirius may, at its option
and expense, elect to participate in such settlement and/or defense with its own
counsel. Neither party shall be liable for any costs or expenses incurred by
the other party without its prior written authorization.
(b) In the event that the XM Radio System is likely to result in, or is
subject to, a claim hereunder, XM shall, at its option, modify the XM Radio
System so that it becomes non-infringing, or procure the right to continue using
the XM Radio System without modification. Notwithstanding the foregoing, XM
shall not be liable for any claim arising from or based upon the combination of
the XM Radio System with another system, including the Sirius Radio System,
unless Sirius establishes that the modifications or combination of the systems
did not contribute to the infringement, except to the extent XM knew, or
reasonably should have known, that such modifications or combination could give
rise to such claim and failed to so inform Sirius.
<PAGE>
15
8.02. Sirius Defense. (a) Subject to Section 8.03 and 8.04, Sirius shall
--------------
defend at its expense any action brought against XM, or any of its officers or
directors, to the extent such action is based upon the claim that the Sirius
Radio System, including the technology contributed pursuant to Section 5.01,
constitutes direct infringement of any duly issued United States patent,
copyright, trademark or trade secret and will pay any reasonable expenses and
settlements or judgments to the extent based thereon, provided that (i) Sirius
has sole control of any such action or settlement negotiations, (ii) XM notifies
Sirius promptly in writing of such claims, suit or proceeding, and (iii) XM uses
commercially reasonable efforts, at Sirius' expense, to assist in the settlement
and/or defense of any such claim, suit or proceeding. XM may, at its option and
expense, elect to participate in such settlement, and/or defense with its own
counsel. Neither party shall be liable for any costs or expenses incurred by
the other party without its prior written authorization.
(b) In the event that the Sirius Radio System is likely to result in, or
is subject to, a claim hereunder, Sirius shall, at its option, modify the Sirius
Radio System so that it becomes non-infringing, or procure the right to continue
using the Sirius Radio System without modification. Notwithstanding the
foregoing, Sirius shall not be liable for any claim arising from or based upon
the combination of the Sirius Radio System with another system, including the XM
Radio System, unless XM establishes that the modifications or combination of the
systems did not contribute to the infringement, except to the extent Sirius
knew, or reasonably should have known, that such modification or combination
could give rise to such claim and failed to so inform XM.
8.03. No Indemnification for Interoperability Technology. Except to the
--------------------------------------------------
extent indemnification is available pursuant to Section 8.01 or 8.02, neither
party shall be liable to the other for any intellectual property infringement
claim, action, proceeding or suit brought against such party relating to the
Interoperability Technology.
8.04. Non-Core Technology. In the event that either party licenses Non-
-------------------
core Technology to the other party, any indemnification rights and obligations
shall be as set forth in the licensing agreement between the parties relating to
such Non-core Technology.
8.05. General Indemnity for Third Party Actions Based on Use of the Other
-------------------------------------------------------------------
Party's System. Subject to Section 8.01 through 8.04, each party (in such
- --------------
context, the "Owning Party") owns a satellite digital radio system and such
------------
Owning Party shall defend, indemnify and hold harmless the other party (in such
context, the "Non-owning Party") from all damages, liabilities and expenses,
----------------
including reasonable attorney's fees, arising out of, connected with, or
resulting in any way from a claim or action by a third party against the Non-
owning Party due to the performance or use of the satellite digital radio system
of the Owning Party.
ARTICLE IX
Confidential Information.
-------------------------
9.01. General. Each party acknowledges that in the course of performance
-------
of this Agreement, either of them may disclose to the other (such other party,
together with its directors, officers, employees, agents and other
representatives, a "Recipient") information
---------
<PAGE>
16
about the disclosing party's technology, products, business or activities which
such party considers proprietary and confidential, including, without
limitation, information regarding the XM Radio System, the Sirius Radio System,
Interoperability Technology, other trade secrets and information concerning the
existence and terms of this Agreement and the joint development arrangements
contemplated hereunder, as well as the characterization and use of any of the
intellectual property rights of the parties described in this Agreement, and any
financial valuations, determinations, or settlements relating to either party's
intellectual property rights in any patent or other disputes between the
parties, in any form, including, without limitation, oral, written, graphic,
demonstrative, machine recognizable or sample form (all of such proprietary and
confidential information, and all summaries, analyses and other material and
data generated by Recipient from any such information, is hereinafter referred
to as "Confidential Information"). Confidential Information shall be retained
------------------------
in confidence and shall not be disclosed or caused or permitted to be disclosed
directly or indirectly to any third party without the prior written approval of
the disclosing party, and shall not be used by Recipient for any reason other
than in accordance with the terms of this Agreement. Notwithstanding the
foregoing, in no event shall either party exchange information on the subjects
as to which the parties compete, and nothing in this Section 9.01 shall be
construed to require the sharing of any information other than information
necessary to effectuate the purposes of this Agreement. The obligation of
Recipient to retain Confidential Information in confidence shall not apply to
Confidential Information which is (a) now in or hereafter enters the public
domain beyond the control of Recipient and without its violation of this
Agreement; (b) rightfully known to Recipient prior to the time of disclosure by
the disclosing party hereunder, or independently developed by Recipient
personnel without access to Confidential Information; (c) disclosed in good
faith to Recipient by a third party legally entitled to disclose the same; or
(d) which Recipient discloses under operation of law, rule or legal process;
provided, that (i) the burden shall be on Recipient to prove the applicability
- --------
of one or more of the foregoing exceptions by documentary evidence should the
disclosing party question the applicability of such exceptions; (ii) as to
exception (b), Recipient makes known to the disclosing party within five (5)
days of receipt of information from the disclosing party that such information
was already known to Recipient and (iii) as to exception (d), Recipient provides
the disclosing party with prompt written notice of any request or legal
proceeding through which Recipient may be required to disclose such Confidential
Information.
9.02. Transmission of Confidential Information. Recipient agrees to
----------------------------------------
transmit Confidential Information only to those of its directors, officers,
employees, agents or other representatives who need access to the Confidential
Information for the purposes of this Agreement, and who are informed by
Recipient of the confidential nature of such Confidential Information, and who
agree to be bound by the terms of this Agreement or an agreement containing
substantially similar terms in regards to Confidential Information. Recipient
further agrees to be responsible for any breach of this Agreement by any
director, officer, employee or other representative of Recipient.
9.03. Return or Destruction of Confidential Information. Recipient agrees
-------------------------------------------------
that all Confidential Information disclosed to Recipient hereunder shall be and
remain the property of the disclosing party, unless otherwise agreed hereunder.
Any tangible form of such Confidential Information including, but not limited
to, documents, papers, computer diskettes and electronically transmitted
information shall be destroyed by Recipient or returned, together with all
copies thereof, to the disclosing party upon request. If such tangible
<PAGE>
17
form of Confidential Information is destroyed, a certification of such
destruction executed by a duly authorized officer of Recipient shall be
delivered to the disclosing party.
9.04. Survival of Confidentiality Obligations. Recipient's obligations
---------------------------------------
under this Article IX shall survive the termination of this Agreement,
regardless of the manner of such termination, and shall be binding upon its
successors and assigns.
9.05. Publicity. (a) Each party agrees that it shall not make any public
---------
statement concerning the existence of this Agreement, the contemplated joint
development efforts, the intellectual property rights of either party relating
to the development of Interoperable Radios or statements regarding the
settlement of any patent or other disputes between the parties, without the
prior written consent of the other party.
(b) The parties shall promptly issue a press release announcing this
Agreement, in the form attached hereto as Exhibit B.
---------
(c) The parties hereby agree to cooperate with one another with regard to
any disclosures required by the Securities and Exchange Commission ("SEC") and
---
the FCC relating to this Agreement, and each shall afford the other party as
much advance notice as practicable for such party's review and comment prior to
the filing of such SEC or FCC disclosure document.
ARTICLE X
Warranty; Disclaimers; Limitation of Liability
----------------------------------------------
10.01. Warranties. Each party hereby represents and warrants to the other
----------
that (subject to agreements for Third Party Technology as set forth in Section
5.03):
(a) it has the right and power to enter into this Agreement;
(b) to the best of its knowledge, the information which it may
disclose to the other party, and the process of disclosure and the use of
such information in accordance with the provisions of this Agreement, will
not violate any trade secret right, trademark, issued United States patent,
copyright or other proprietary right of any third party; and
(c) it holds good title or right, free and clear of all liens and
encumbrances, to technology or other information which it is providing
under this Agreement.
In addition to the foregoing, each party warrants that its development efforts
relating to the Interoperability Technology shall be performed in accordance
with those standards of care, skill and diligence, and those practices and
procedures, which are commonly accepted in connection with the performance of
the same or similar services, and that any development work performed by such
party pursuant to this Agreement shall substantially conform to the
Specifications.
<PAGE>
18
10.02. DISCLAIMER. EXCEPT AS SPECIFICALLY SET FORTH HEREIN, NEITHER PARTY
----------
MAKES ANY OTHER WARRANTY TO THE OTHER PARTY UNDER THIS AGREEMENT, EITHER
EXPRESS, IMPLIED, OR ARISING BY COURSE OF CONDUCT OR PERFORMANCE, CUSTOM OR
USAGE IN THE TRADE, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
10.03 LIMITATION OF LIABILITY. EACH PARTY SHALL BE LIABLE TO THE OTHER IN
----- -----------------------
THE EVENT OF A MATERIAL BREACH OF THIS AGREEMENT IN AN AMOUNT EQUAL TO DIRECT
DAMAGES ACTUALLY SUFFERED BY THE OTHER PARTY. EXCEPT FOR WILLFUL MISCONDUCT
AND/OR LACK OF GOOD FAITH, NEITHER PARTY HEREUNDER SHALL BE LIABLE FOR ANY LOST
PROFITS, LOST SAVINGS, OR INCIDENTAL DAMAGES, OR OTHER ECONOMIC CONSEQUENTIAL
DAMAGES RESULTING FROM THIS AGREEMENT. WHERE A PARTY IS LIABLE FOR
CONSEQUENTIAL DAMAGES UNDER THIS PROVISION, SUCH PARTY'S LIABILITY THEREFOR
SHALL NOT EXCEED $100 MILLION.
ARTICLE XI
Establishment of Joint Venture
------------------------------
The parties contemplate that they may form a joint venture or limited
liability corporation ("JV") to pursue the development of the Interoperability
--
Technology. If a JV is established, the parties agree that any agreements
between the parties relating to establishing the JV and/or addressing any of the
terms or conditions included in this Agreement shall supersede the terms of this
Agreement. The parties anticipate that the JV may contract with the Consultant
to undertake the parties' activities pursuant to this Agreement to jointly
develop the Interoperability Technology, including preparing the RFP for third
parties and licensing the Interoperability Technology to third parties,
including, but not limited to, chipset manufacturers, OEM Automobile Partners,
Distribution Partners and Radio Manufacturing Partners. The parties further
anticipate that all development and other costs of such JV will be split equally
between XM and Sirius. In the event that the parties elect not to form such JV,
this Agreement shall continue in full force and effect.
ARTICLE XII
Termination
-----------
12.01. Termination Events. Either party may terminate this Agreement upon
------------------
the occurrence of any of the following events:
(a) the other party becomes the subject of a bankruptcy petition
filed in a court in any jurisdiction, whether voluntary or involuntary,
and, in the case of an involuntary proceeding, is not dismissed within 90
days; or
(b) a receiver or a trustee is appointed for all or a substantial
portion of the other party's assets; or
<PAGE>
19
(c) the other party makes an assignment for the benefit of its
creditors; or
(d) Sirius Radio and XM agree in writing that the design and
development of an Interoperable Receiver is technically impracticable; or
(e) the other party fails to begin digital audio broadcasting for
sale to consumers using the XM Radio System or the Sirius Radio System, as
applicable, on or before June 30, 2002 and is not reasonably likely to
commence such broadcasts on or before December 31, 2002; or
(f) the other party or any of its subsidiaries defaults in the
payment of principal of or premium, if any, on any indebtedness aggregating
$25 million or more, when the same becomes due and payable, and such
default or defaults shall have continued after any applicable grace period
and shall not have been cured or waived; or
(g) the other party fails to perform any material covenant or
obligation contained in this Agreement, and such failure continues
unremedied for a period of ninety days following receipt of written notice
describing in reasonable detail such failure.
12.02. Effects of Termination. Upon termination of this Agreement pursuant
----------------------
to Section 12.01, the licenses granted to each party pursuant to Section 5.01
shall survive such termination and each party shall continue to maintain joint
ownership rights in the Interoperability Technology; provided that if this
Agreement is terminated by a party pursuant to Section 12.01(g) prior to the
time that the value of the intellectual property licensed under Section 5.01
shall have been determined, either through negotiated agreement or decision of
an arbitrator, then the licenses granted to the other party under Section 5.01
shall terminate.
12.03. Mutual Covenant Prior to Termination. Other than a party which has
------------------------------------
terminated this Agreement pursuant to Section 12.01(g), neither party shall take
any legal action, including, but not limited to, arbitration, that seeks to
enjoin the other party's use of any intellectual property rights which relate to
or are useful in a digital satellite radio system or any enhancements,
modifications, and derivative works thereof.
ARTICLE XIII
Dispute Resolution and Arbitration
----------------------------------
13.01. Dispute Resolution. The parties shall attempt to settle any
------------------
dispute between them amicably and agree to exercise their commercially
reasonable efforts to resolve such controversy or dispute prior to seeking an
arbitrated resolution. To invoke the dispute resolution process, the invoking
party shall give to the other party written notice of its decision to do so,
including a description of the issues subject to the controversy or dispute and
a proposed resolution thereof. Designated representatives of both parties with
the closest responsibility for this Agreement shall attempt to resolve the
controversy or dispute within five business days after receipt of such notice.
If those designated representatives
<PAGE>
20
cannot resolve the controversy or dispute, the parties shall describe their
controversy or dispute and their respective proposals for resolution to their
respective Chief Executive Officers or other designated persons with comparable
authority who shall meet in good faith to resolve the controversy or dispute.
Except as provided in Section 7.02, if any controversy or dispute is not
resolved within ten business days after such meeting, the parties shall seek a
resolution through arbitration as set forth in Section 13.02.
13.02. Arbitration. Any controversy or claim arising out of or relating
-----------
to this Agreement shall be settled by arbitration in Washington, DC, by one or
more arbitrators, as mutually agreed by the parties, and such arbitrator(s) will
be persons with sufficient expertise to evaluate the subject of the dispute. In
the event that the dispute relates to intellectual property, such arbitrators
shall have sufficient technical, engineering and legal knowledge to evaluate the
applicability, validity and value of the intellectual property that is the
subject of the dispute. The arbitration shall be conducted in accordance with
the Expedited Arbitration Rules of JAMS/Endispute ("Expedited Rules"). In the
---------------
event that the parties do not agree on the arbitrators, or other procedures or
standards concerning the arbitration, such choice of arbitrator(s) or other
procedures shall be determined under the Expedited Rules. The award of the
arbitrator shall be binding upon the parties. The arbitrator(s) shall be
entitled to award reasonable attorneys' fees and expenses to the prevailing
party.
ARTICLE XIV
Miscellaneous
-------------
14.01. Non-Solicitation. During the term of this Agreement, and for a
----------------
period of twelve months following termination of this Agreement, neither party
shall, without the prior written consent of the other party, directly or
indirectly solicit for employment, employ or otherwise engage the services of
employees or individual consultants of the other party.
14.02. Catastrophic Loss Backup. XM and Sirius shall negotiate in good
------------------------
faith with respect to an agreement to provide service to the other's subscribers
in the event of a catastrophic failure of the XM Radio System or the Sirius
Radio System.
14.03. Governing Law. This Agreement shall be governed by, and
-------------
interpreted in accordance with, the laws of the State of New York, without
giving effect to any provisions which would require the application of the laws
of another jurisdiction.
14.04. Assignment. Any assignment of this Agreement by either party
----------
(except to an entity controlling, controlled by or in common control with such
party) without the written consent of the other party shall be void. Subject to
the foregoing, this Agreement will be binding upon and will inure to the benefit
of the respective successors and assigns of the parties.
14.05. Entire Agreement. This Agreement and all exhibits hereto shall
----------------
constitute the entire agreement between the parties with regard to the subject
matter of this Agreement and supersede all previous communications, whether oral
or written, between the parties with respect to such subject matter. No
modification of any provision of this Agreement
<PAGE>
21
shall be binding unless in writing and signed by duly authorized representatives
of XM and Sirius.
14.06. Severability. Each party agrees that, in the event any court shall
------------
determine that any provision of this Agreement is invalid, such determination
shall not affect the validity of any other provisions of this Agreement, which
shall remain in full force and effect and shall be construed so as to be valid
under applicable law only to the extent that such construction maintains the
economic balance of the parties under this Agreement.
14.07. Waiver. Each party agrees that no failure or delay by any party in
------
exercising any right, power or privilege under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof.
14.08. Notices. Any notice required or permitted to be sent under this
-------
Agreement shall be sent by certified mail, overnight mail with receipt requested
or telefax with written confirmation to the following addresses:
For XM:
XM Satellite Radio Inc.
1250 23rd Street, N.W.
Washington, DC 20037
Attention: General Counsel
Telecopier: 202-969-7050
For Sirius:
Sirius Satellite Radio Inc.
1221 Avenue of the Americas
36th Floor
New York, New York 10020
Attention: General Counsel
Telecopier: 212-584-5353
14.09. Independent Parties. The parties hereto are independent parties, and
-------------------
neither shall be liable for the performance or failure to perform of the other
party.
14.10. Records and Audits. Either party may, up to twice within any
------------------
twelve month period at such party's expense and upon five (5) days written
notice to the other party, hire an independent audit firm or other independent
representative reasonably acceptable to the other party ("Auditor"), to inspect
-------
or audit any or all of the other party's records solely relating to this
Agreement, for the purposes of verifying the other party's compliance with its
obligations hereunder. Such Auditor shall not disclose any information relating
to the business of the other party other than that information required to
determine the other party's compliance, and in such event, only to those
employees, agents or representatives of the other party having a need-to-know
for the purpose of the verification.
<PAGE>
22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the Effective Date.
Accepted by XM Satellite Radio Inc. Accepted by Sirius Satellite Radio Inc.
By: /s/ Stephen R. Cook By: /s/ Patrick L. Donnelly
--------------------------- ---------------------------
Name: Stephen R. Cook Name: Patrick L. Donnelly
Title: SVP Sales and Marketing Title: Senior Vice President
and General Counsel
<PAGE>
23
EXHIBIT A
STIPULATION OF DISMISSAL
James David Jacobs (JJ 7731)
Robert B. Davidson (RD 7158)
Jonathan S. Caplan (JC 1039)
BAKER & MCKENZIE
805 Third Avenue
New York, New York 10022
Tel.: (212) 751-5700
Attorneys for Plaintiff
Sirius Radio Inc.
Robert C. Morgan (RM 0245)
Mark H. Bloomberg (MB 5614)
FISH & NEAVE
1251 Avenue of the Americas, 50th Fl.
New York, New York 10020
Tel.: (212) 596-9000
Attorneys for Defendant
XM Satellite Radio, Inc.
UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SIRIUS RADIO INC., )
)
Plaintiff, ) Civ. No. 99-0230 (LMM)
)
v. )
)
XM SATELLITE RADIO, INC., )
)
Defendant. )
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
STIPULATION OF DISMISSAL
------------------------
<PAGE>
24
Pursuant to Rule 41, Fed. R. Civ. P., Plaintiff Sirius Radio Inc. and
Defendant XM Satellite Radio, Inc., by their undersigned attorneys, stipulate
that this action be dismissed, without prejudice, each party bearing its own
costs and attorney fees.
Respectfully submitted, Respectfully submitted,
By_________________________ By_________________________
James David Jacobs (JJ 7731) Robert C. Morgan (RM 0245)
Robert B. Davidson (RD 7158) Mark H. Bloomberg (MB 5614)
Jonathan S. Caplan (JC 1039) FISH & NEAVE
BAKER & MCKENZIE 1251 Avenue of the Americas
805 Third Avenue New York, New York 10020
New York, New York 10022 Tel.: (212) 596-9000
Tel.: (212) 751-5700
Attorneys for Plaintiff, Attorneys for Defendant,
Sirius Radio Inc. XM Satellite Radio Inc.
Dated:_________________________ Dated:_________________________
<PAGE>
25
EXHIBIT B
PRESS RELEASE
PRESS RELEASE
For Immediate Release
Sirius Radio and XM Radio Form Alliance to Develop
Unified Standard for Satellite Radios
New York, NY and Washington, DC -- February 16, 2000 -- Sirius
Satellite Radio (Nasdaq: SIRI) and XM Satellite Radio (Nasdaq: XMSR) today
announced an agreement to develop a unified standard for satellite radios.
The standard is expected to accelerate growth of the satellite radio
category by enabling consumers to purchase one radio capable of receiving
both companies' broadcasts. XM Radio and Sirius will jointly fund development
of the technology and work together to proliferate the new standard by
creating a service mark for satellite radio. As part of the agreement, each
company will contribute its intellectual property to the initiative and have
agreed to resolve any pending patent litigation.
"This standard is good news both for consumers and for the category," said
David Margolese, Sirius Chairman and CEO, and High Panero, XM President and
CEO, in a joint statement. "This will allow for reduced subscriber
acquisition costs, more satellite radios in the marketplace, and a
simplified choice for consumers."
The unified standard will represent a second generation of satellite radios.
At the time of the commercial launches of XM Radio and Sirius, consumers
will be able to purchase radios capable of receiving one of the two
companies' broadcasts. These radios are already being developed by leading
electronics and automotive manufacturers. XM and Sirius will work with their
existing automobile and radio manufacturing partners to integrate the new
standard under the terms of their existing agreements. All future agreements
with automakers and radio partners will specify the new satellite radio
standard.
XM Radio and Sirius are each building a digital satellite radio service for
consumers, offering up to 100 channels of audio entertainment for a monthly
subscription fee of $9.95. For more information about the companies, visit
XM Satellite Radio at www.xmradio.com and Sirius Satellite Radio at
---------------
www.siriusradio.com.
-------------------
continues...
Sirius Radio and XM Radio Form Alliance
Page Two
Any statements that express, or involve discussions as to, expectations,
beliefs, plans, objectives, assumptions, future events or performance with
respect to Sirius Satellite Radio Inc. or XM Satellite Radio Inc. are not
historical facts and may be forward-looking and, accordingly, such statements
involve estimates, assumptions and uncertainties which could cause actual
results to differ materially from those expressed in the forward-looking
statements. Accordingly, any such statements are qualified in their entirety by
reference to the factors discussed, as the case may be, in XM Satellite Radio
Inc.'s registration statement on Form S-1 (File No. 333-93529) filed with the
Securities and Exchange Commission or Sirius Satellite Radio Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1998, filed under the
company's former name, CD Radio Inc. Among the key factors that have a direct
bearing on the companies' results of operations are the potential risk of delay
in implementing the companies' business plans; increased costs of construction
and launch of necessary satellites; dependence on satellite construction and
launch contractors; dependence on third-party technology partners; risk of
launch failure; unproven market and unproven applications of existing
technology; unavailability of satellite radio receivers; and the companies' need
for additional financing.
###############
For more information, please call:
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