Exhibit 10.38
 

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EMPLOYMENT AGREEMENT
 
Between
 
XM SATELLITE RADIO HOLDINGS INC. and
XM SATELLITE RADIO INC.
 
and
 
JOSEPH J. EUTENEUER
 
Dated as of June 21, 2002
 

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THIS AGREEMENT is entered into as of June 21, 2002 (the “Effective Date”), by
and between XM Satellite Radio Holdings Inc., a Delaware corporation, and its
subsidiary XM Satellite Radio Inc., a Delaware corporation, both having a place
of business at 1500 Eckington Place, N.E., Washington, D.C. 20002 (hereinafter
collectively referred to as “XM”) and Joseph J. Euteneuer (“EMPLOYEE”) a
resident of the State of Pennsylvania.
 
WHEREAS, XM is engaged in the development, implementation and operation of a
digital audio satellite service to portable receivers; and
 
WHEREAS, XM is interested in employing EMPLOYEE as its Executive Vice President
and Chief Financial Officer and EMPLOYEE is interested in being employed in that
position subject to the terms and conditions set forth herein;
 
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements of the parties contained herein, the parties hereby
agree as follows:
 
ARTICLE 1
DEFINITIONS
 
For purposes of this Agreement, the terms defined in this Article 1 shall have
the respective meanings set forth below:
 
1.1.    “Affiliate” shall mean any corporation, partnership or other entity (i)
owning more than ten percent (10%) of the then outstanding voting shares of XM;
or (ii) controlling, controlled by, or under common control with XM. For
purposes of this definition, “control” (including the terms “controlling” and
“controlled”) means the power to direct or cause the direction of the management
and policies of an entity, whether through the ownership of securities, by
contract, or otherwise.
 
1.2.    “Confidential information” shall mean all information relating to the
business of XM known to XM or learned by EMPLOYEE during the term of employment
and not generally known, including any and all general and specific knowledge,
experience, information and data, technical or non-technical, and whether or not
patentable, including, without limitation processes, skills, information,
know-how, trade secrets, data, designs, formulae, algorithms, specifications,
samples, methods, techniques, compilations, computer programs, devices,
concepts, inventions, developments, discoveries, improvements, and commercial or
financial information, in any form, including without limitation, oral, written,
graphic, demonstrative, machine recognizable, specimen or sample form.
 
1.3.    “Conflicting Product or Service” shall mean any product or service of
any person or organization other than XM, in existence or under development,
which competes directly with a product or service of XM.

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1.4.    “Conflicting Organization” shall mean any person or organization engaged
in, or about to become engaged in, research on or development, production,
marketing, or selling of a “Conflicting Product or Service.”
 
1.5.    “Inventions” shall mean inventions, designs, discoveries, developments,
creations, and improvements created, discovered, developed, conceived or reduced
to practice.
 
1.6.    “Works of Authorship” shall mean all computer software programs or other
writings, including, without limitation, verbal works, designs, models,
drawings, or audio, visual or audiovisual recordings.
 
ARTICLE 2
TERM OF AGREEMENT; EMPLOYMENT
 
2.1.    Term.    Subject to the provisions of Article 4 hereof, this Agreement
shall be in effect for a term of three (3) years commencing as of the Effective
Date. For the term of this Agreement, each twelve (12) month period beginning on
the Effective Date or any anniversary thereof shall be considered a “Contract
Year.”
 
2.2.    Employment.    XM agrees to employ EMPLOYEE as Executive Vice President
and Chief Financial Officer and EMPLOYEE agrees to accept such employment by XM,
on the terms and conditions set forth herein. EMPLOYEE represents and warrants
that neither the execution and delivery nor performance by him of this Agreement
will violate any agreement, order, judgment or decree to which he is a party or
by which he is bound.
 
2.3.    Duties.
 
(a)    As Executive Vice President and Chief Financial Officer of XM, EMPLOYEE
shall have responsibility for all the financial and accounting affairs of XM,
subject to the direction of the Chief Executive Officer and the Board of
Directors (the “Board”), and such other responsibilities and duties, consistent
with his position and expertise, as may from time to time be reasonably
prescribed by the Chief Executive Officer or the Board. EMPLOYEE shall report to
the Chief Executive Officer.
 
(b)    EMPLOYEE’s employment with XM shall be full-time and exclusive. During
the term of employment, EMPLOYEE shall devote the whole of EMPLOYEE’s business
time, attention, skill, and ability to the faithful and diligent fulfillment of
EMPLOYEE’s duties hereunder. EMPLOYEE acknowledges and agrees that EMPLOYEE may
be required, without additional compensation, to perform services for any
Affiliates, and to accept such office or position with any Affiliate as the
Board may require, including, but not limited to, service as an officer or
director of XM or any Affiliate, provided however, that such services, and such
office or position, shall be consistent with EMPLOYEE’s position as Executive
Vice President and Chief Financial Officer of XM. EMPLOYEE shall comply with all
applicable policies of XM and Affiliates.

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(c)    During the term of employment, it shall not be a violation of this
Agreement for EMPLOYEE to (i) serve on no more than one outside corporate board
(except the board of a Conflicting Organization); (ii) serve as an officer or
director of a cooperative housing, or civic or charitable organization or
committee; (iii) deliver lectures, fulfill speaking engagements, or teach at
educational institutions; or (iv) manage personal passive investments, so long
as such activities (individually or collectively) do not conflict or materially
interfere with the performance of EMPLOYEE’s duties hereunder.
 
2.4.    Indemnification.    During and after the term of this Agreement, XM
shall provide EMPLOYEE with directors and officers insurance, and shall
indemnify EMPLOYEE and his legal representatives to the fullest extent permitted
by the laws of the State of Delaware and the By-Laws of XM as in effect on the
date hereof, against all damages, costs, expenses and other liabilities incurred
or sustained by EMPLOYEE or his legal representatives in connection with any
suit, action or proceeding to which EMPLOYEE or his legal representatives may be
made a party by reason of EMPLOYEE being or having been a director or officer of
XM or any Affiliate or having served in any other capacity or taken any other
action purportedly on behalf of or at the request of XM or any Affiliate. During
and after the term of this Agreement and without the need for further approval
by the Board of Directors of XM or any Affiliate, XM will promptly advance or
pay any and all amounts for costs or expenses (including but not limited to
legal fees and expenses incurred by counsel of EMPLOYEE’s choice retained by
EMPLOYEE) for which EMPLOYEE may claim XM is obligated to indemnify him.
EMPLOYEE undertakes to repay such amounts if it is ultimately determined that he
is not entitled to be indemnified by XM as provided in this Section 2.4.
 
ARTICLE 3
COMPENSATION
 
3.1.    Base Salary.    For services rendered by EMPLOYEE pursuant to this
Agreement, XM agrees to pay EMPLOYEE a base salary (“Base Salary”) for the first
Contract Year at the rate of Three Hundred Twenty Five Thousand Dollars
($325,000) per year. Such Base Salary shall be subject to review and increase at
least annually by the Board, and shall be increased to at least Three Hundred
Fifty Seven Thousand Five Hundred Dollars ($357,500) for the second Contract
Year and at least Three Hundred Ninety Three Thousand Two Hundred Fifty Dollars
($393,250) for the third Contract Year. In determining any increase above the
minimums set forth in the preceding sentence, the Board shall consider any
increases in the cost of living and may provide for performance or merit
increases as it deems appropriate in its sole discretion. Base Salary shall be
payable in accordance with XM’s then-prevailing executive payroll practices. The
term “Base Salary” as used herein shall include any adjustments thereto made
from time to time as permitted by this Section 3.1.

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3.2.    Bonuses.
 
As an incentive for EMPLOYEE to enter into this Agreement, XM agrees to pay
EMPLOYEE, upon the execution of this Agreement, a signing bonus of One Hundred
Thousand Dollars ($100,000). In the event that, within one year of the Effective
Date, EMPLOYEE’s employment hereunder terminates because of his voluntary
resignation (as defined in Section 4.4(b) hereof), EMPLOYEE shall reimburse XM
for the bonus received pursuant to this Section 3.2(a), less any personal living
and transportation costs actually incurred by EMPLOYEE between the Effective
Date and the date of termination of his employment by XM.
 
(b)    As a further incentive for EMPLOYEE to enter into this Agreement,
EMPLOYEE shall receive, upon the execution of this Agreement, Fifty Thousand
(50,000) restricted shares of Class A common stock of XM Satellite Radio
Holdings Inc. (the “Restricted Shares”). The Restricted Shares shall be provided
on the same terms and conditions applicable to other executive employees,
provided that Twenty Five Thousand (25,000) of the Restricted Shares shall vest
on January 1, 2003, and Twenty Five Thousand (25,000) of the Restricted Shares
shall vest on January 1, 2004.
 
(c)    With respect to each calendar year during the term of this Agreement,
beginning in calendar year 2002, EMPLOYEE will be eligible to receive such
bonuses (the “Bonus”) as may be authorized and declared by the XM Board of
Directors based upon EMPLOYEE meeting or substantially exceeding performance
criteria to be set by the Board, after consultation with EMPLOYEE, at the start
of each calendar year. For 2002, such criteria shall be set by July 15, 2002.
Although the actual amount of any Bonus will be determined by the Board, the
“target” amount of the annual Bonus will be forty percent (40%) of EMPLOYEE’s
Base Salary for the calendar year, reflecting the Board’s determination that
EMPLOYEE has met or substantially exceeded the established performance criteria.
EMPLOYEE shall be eligible for a bonus for calendar year 2002 which shall not be
pro-rated, but which shall be based on EMPLOYEE’s base salary as if he had been
employed by XM for the entire year. The Bonus shall be paid within sixty (60)
days of the end of each calendar year.
 
3.3.    Participation in Benefit Plans.
 
(a)    Subject to applicable eligibility requirements, and to the terms of this
Agreement, EMPLOYEE shall be eligible during the term of this Agreement to
participate in any stock option, employee stock ownership, pension, thrift,
profit sharing, group life or disability insurance, medical or dental coverage,
education, or other retirement or employee benefit plan or program that XM has
adopted or may adopt for the benefit of its employees, on the same basis as
other executive employees. EMPLOYEE shall be entitled to paid vacation of four
weeks annually, paid sick leave, and holidays on the same basis as may from time
to time apply to other XM executive employees generally.
 
(b)    Without limiting the generality of the foregoing, EMPLOYEE shall receive
annual stock option grants, in addition to the stock option grant provided under
Section 

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3.7 hereof, of no fewer shares than the largest grant awarded to any other
executive vice president of XM.
 
3.4.    Expenses.
 
(a)    XM shall reimburse EMPLOYEE, on a tax neutral basis based upon EMPLOYEE’s
actual tax rate, for all reasonable, ordinary and necessary expenses actually
incurred by EMPLOYEE in connection with the relocation of his residence to the
Washington, D.C. area, including any and all origination costs and points,
closing costs, brokerage commissions, etc. In addition, XM shall reimburse all
reasonable and necessary temporary living and transportation costs actually
incurred by EMPLOYEE through December 31, 2002.
 
(b)    XM shall reimburse EMPLOYEE for all reasonable, ordinary and necessary
business expenses actually incurred by EMPLOYEE in connection with the
performance of his duties hereunder, including ordinary and necessary expenses
incurred by EMPLOYEE in connection with travel on XM business.
 
(c)    All expenses shall be approved in advance by XM in accordance with and
subject to the terms and conditions of XM’s then-prevailing expense policy. As a
condition precedent to obtaining reimbursement of expenses, EMPLOYEE shall
provide to XM any and all statements, bills, or receipts evidencing the expenses
for which EMPLOYEE seeks reimbursement, and such related information or
materials as XM may from time to time reasonably require. EMPLOYEE shall account
to XM for any expenses that are eligible for reimbursement under this Section
3.4 in accordance with XM policy.
 
3.5.    Employment and Supplies.    XM shall provide EMPLOYEE with
administrative support relating to the performance of EMPLOYEE’s duties of the
same type and at least the same extent as is provided to other executive
employees.
 
3.6.    Withholding.    Anything in this Agreement to the contrary
notwithstanding, all payments required to be made by XM hereunder to EMPLOYEE or
EMPLOYEE’s estate or beneficiaries in connection with EMPLOYEE’s employment
hereunder shall be subject to the withholding of such amounts relating to taxes
as XM may reasonably determine it should withhold pursuant to any applicable law
or regulation.
 
3.7.    Stock Option Grants.    EMPLOYEE shall receive options to purchase Class
A common stock of XM Satellite Radio Holdings Inc. (“XM Stock”) on the following
terms.
 
(a)    On the Effective Date, XM will grant EMPLOYEE an option to purchase Two
Hundred Thousand (200,000) shares of XM Stock.
(b)    The options granted pursuant to Section 3.7(a) hereof will be
non-qualified. The exercise price for such options shall be the closing price of
XM Stock on the date of the grant.

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(c)    Subject to the provisions of Article 4 hereof, the options granted
pursuant to Section 3.7(a) hereof will vest and become exercisable on the
following schedule: one half of the shares covered by the option shall become
exercisable on the date of the grant, one sixth of the shares covered by the
option shall become exercisable on the first anniversary of the grant, one sixth
of the shares covered by the option shall become exercisable on the second
anniversary of the grant, and one sixth of the shares covered by the option
shall become exercisable on the third anniversary of the grant. In the event
that EMPLOYEE holds non-vested options at the time his employment by XM
terminates, such non-vested options shall vest or shall be forfeited, as the
case may be, in accordance with the provisions of Article 4 hereof.
 
(d)    Vested options may be exercised within ten (10) years of the date on
which they were granted. In the event that EMPLOYEE holds unexercised vested
options at the time his employment by XM terminates, such vested options may be
exercised within the time periods set forth in Article 4 hereof.
 
(e)    XM agrees that the XM Stock to be issued to EMPLOYEE upon his exercise of
the options granted pursuant to Section 3.7(a) hereof will be registered for
sale to the public on XM’s Form S-8 Registration Statement.
 
ARTICLE 4
TERMINATION
 
4.1.    General.    EMPLOYEE’s employment hereunder shall terminate in
accordance with the provisions of this Article 4 upon EMPLOYEE’s death or
Disability, upon EMPLOYEE’s termination by XM with or without Cause, upon
EMPLOYEE’s resignation with or without Good Reason, or upon the expiration of
the term of this Agreement.
 
4.2.    Death.    If the EMPLOYEE’s employment terminates because of his death,
the date of termination shall be the date of death.
 
(a)    If the EMPLOYEE’s employment terminates because of his death, XM shall
continue to pay EMPLOYEE’s then current Base Salary, annual Bonus (based on the
percentage of Base Salary awarded to EMPLOYEE as a Bonus in the prior year), and
shall continue to make all applicable benefits available, to EMPLOYEE’s legal
representatives, estate, beneficiaries or heirs, in accordance with XM’s
then-prevailing executive payroll practices, for one (1) year following
EMPLOYEE’s death. In addition, XM shall also continue any health, medical,
dental, or similar benefits which members of EMPLOYEE’s family were receiving
for a period of one year, or pay such family members an amount equal to their
cost for obtaining equivalent coverage.
 
(b)    If the EMPLOYEE’s employment terminates because of his death, those of
EMPLOYEE’s non-vested options that were scheduled to vest within twelve (12)
months of the date of his death shall immediately vest and become exercisable.
All other non-vested options shall be forfeited. EMPLOYEE’s legal
representatives, estate,

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beneficiaries or heirs shall be entitled to exercise any of EMPLOYEE’s vested
options within eighteen (18) months after EMPLOYEE’s death.
 
4.3.    Disability.    For purposes of this Agreement, EMPLOYEE shall be deemed
to be under a Disability if EMPLOYEE shall be unable, by virtue of illness or
physical or mental incapacity or disability (from any cause or causes
whatsoever), to perform EMPLOYEE’s essential job functions hereunder, whether
with or without reasonable accommodation, in substantially the manner and to the
extent required hereunder prior to the commencement of such disability, for a
period exceeding ninety (90) consecutive days.
 
(a)    Upon EMPLOYEE’s Disability, the payment of benefits under XM’s short-term
and long-term disability insurance programs, if any, shall offset XM’s
obligations under Section 3.1 hereof to the extent such benefits are received by
EMPLOYEE.
 
(b)    Subject to any applicable legal requirements, in the event EMPLOYEE shall
remain under a Disability for a period exceeding one hundred twenty (120) days
in any twelve (12) month period, XM shall have the right to terminate EMPLOYEE’s
employment hereunder. XM shall effect such termination by giving EMPLOYEE a
notice specifying the effective date of such termination, which date shall not
be earlier than the last day of the calendar month following the giving of
notice.
 
(c)    If XM terminates the EMPLOYEE’s employment because of Disability, XM
shall continue to pay EMPLOYEE’s then current Base Salary, annual Bonus (based
on the percentage of Base Salary awarded to EMPLOYEE as a Bonus in the prior
year), and shall continue to make all applicable benefits available, to
EMPLOYEE, in accordance with XM’s then-prevailing executive payroll practices,
for one (1) year following termination. In addition, XM shall also continue any
health, medical, dental, or similar benefits which EMPLOYEE (and/or members of
EMPLOYEE’s family) were receiving for a period of one year, or pay EMPLOYEE an
amount equal to the cost of obtaining equivalent coverage.
 
(d)    If XM terminates EMPLOYEE’s employment because of Disability, those of
EMPLOYEE’s non-vested options that were scheduled to vest within twelve (12)
months of the date of termination shall immediately vest and become exercisable.
All other non-vested options shall be forfeited. EMPLOYEE shall be entitled to
exercise any of his vested options within eighteen (18) months after
termination.
 
4.4.    Termination for Cause or Voluntary Resignation.
 
(a)    For purposes of this Agreement, Cause shall mean: (i) EMPLOYEE’s willful
or gross misconduct, willful or gross negligence in the performance of his
duties for XM, or intentional or habitual neglect of his duties for XM, provided
that XM shall have given EMPLOYEE notice specifying the conduct it believes to
fall within this sentence and EMPLOYEE shall have failed to remedy such conduct
within ten (10) days thereafter; or (ii) EMPLOYEE’s theft or misappropriation of
funds of XM or conviction

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of a felony. XM shall effect a termination for Cause by giving EMPLOYEE a notice
specifying the effective date of such termination.
 
(b)    For purposes of this Agreement, voluntary resignation means the
EMPLOYEE’s resignation of his employment hereunder without Good Reason (as
defined in Section 4.5(b) hereof. EMPLOYEE shall effect a termination by
voluntary resignation by giving XM a notice specifying the effective date of
such termination, which date shall not be earlier than thirty (30) days after
the giving of notice.
 
(c)    In the event EMPLOYEE’s employment is terminated by XM for Cause or by
EMPLOYEE by voluntary resignation:
 
(i)    XM shall pay to EMPLOYEE, in accordance with XM’s then-prevailing
executive payroll practices, all Base Compensation, benefits and other payments
to which EMPLOYEE was entitled hereunder through the effective date of
termination.
 
(ii)    In the case of voluntary resignation only, EMPLOYEE shall be entitled to
exercise any of his vested options within three (3) months after termination.
Subject to the previous sentence of this Section 4.4(c)(ii), EMPLOYEE’s
non-vested and vested but unexercised options shall be forfeited.
 
(iii)    Except as set forth in this Section 4.4, XM shall have no further
obligation to EMPLOYEE (or EMPLOYEE’s legal representatives, estate,
beneficiaries or heirs) for any compensation, benefits or other payments
hereunder, provided that nothing herein shall be deemed to affect EMPLOYEE’s
entitlement, if any, to any vested pension or similar benefits to which he may
be or may become entitled.
 
4.5.    Termination Without Cause or Resignation for Good Reason.
 
(a)    For the purposes of this Agreement, termination without Cause is any
termination by XM of EMPLOYEE’s employment hereunder without Cause, as defined
in Section 4.4(a) hereof. XM shall effect a termination without Cause by giving
EMPLOYEE a notice specifying the effective date of such termination, which date
shall not be earlier than thirty (30) days after the giving of notice.
 
(b)    For the purposes of this Agreement, Good Reason shall mean: (i) a
substantial diminution of EMPLOYEE’s responsibilities or status, or a change in
his reporting relationships such that EMPLOYEE no longer reports to the Chief
Executive Officer or Chairman of XM; (ii) XM’s relocation of EMPLOYEE outside
the Washington, D.C. area; (iii) a material breach of this Agreement by XM,
provided that EMPLOYEE shall have given XM notice of the conduct he believes to
constitute the material breach and XM shall have failed to remedy such breach
within ten (10) days thereafter; or (iv) a Change of Control of XM as defined in
Section 4.5(c) hereof. EMPLOYEE shall effect a termination by resignation for
Good Reason by giving XM a notice specifying the effective date of such
termination.

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(c)    For the purposes of this Agreement, a Change of Control will occur where
(i) any person or group becomes beneficial owner of securities of XM
representing more than 40% of the then voting power of XM; (ii) Board members
(together with new members appointed by at least two thirds (2/3) of those
members) at the beginning of a two-year period no longer constitute two thirds
(2/3) of the Board during such two-year period; (iii) a merger/consolidation of
XM occurs wherein the XM voting securities immediately prior thereto do not
constitute at least sixty percent (60%) of the combined voting securities after
the merger/consolidation; (iv) the stockholders approve a plan of complete
liquidation or winding-up or an agreement for the sale or disposition of all or
substantially all of XM’s assets; or (v) XM becomes a consolidated subsidiary of
an existing or new shareholder, irrespective of ownership interest.
 
(d)    In the event EMPLOYEE’s employment is terminated by XM without Cause or
by EMPLOYEE by resignation for Good Reason:
 
(i)    XM shall continue to pay EMPLOYEE’s then current Base Salary, annual
Bonus (based on the percentage of Base Salary awarded to EMPLOYEE as a Bonus in
the prior year), and shall continue to make all applicable benefits available to
EMPLOYEE, in accordance with XM’s then-prevailing executive payroll practices,
for one (1) year from such termination. With respect to the health, medical,
dental, or similar benefits which EMPLOYEE (and/or members of EMPLOYEE’s family)
were receiving, XM may pay EMPLOYEE an amount equal to his cost for obtaining
equivalent coverage, as an alternative to continuing such benefits.
 
(ii)    All options that have been granted to EMPLOYEE shall immediately vest
and become exercisable, and EMPLOYEE shall be entitled to exercise any of his
vested options within eighteen (18) months after termination.
 
(e)    If, as a result of a Change of Control, it is determined that EMPLOYEE
would be subject to the excise tax imposed by Article 4999 of the Internal
Revenue Code, XM shall reimburse EMPLOYEE for the amount of such tax, and shall
pay EMPLOYEE such additional amount as may be necessary to place EMPLOYEE in the
same financial position that he would have been in if he had not incurred such
excise tax liability. All determinations under this Section 4.5(f), including
whether EMPLOYEE is liable for the excise tax, and the amount to be paid to
EMPLOYEE by XM, shall be made by a nationally-recognized accounting firm to be
selected by EMPLOYEE and paid by XM.
 
4.6.    Expiration of Contract Term.
 
(a)    The parties agree that, beginning no later than six (6) months prior to
the expiration of this Agreement, they will negotiate in good faith concerning
the continuation of EMPLOYEE’s employment by XM.
 
(b)    In the event that EMPLOYEE’s employment by XM is not extended beyond the
term of this Agreement, and EMPLOYEE’s employment by XM therefore terminates
upon the expiration of this Agreement:

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(i)    XM shall continue to pay EMPLOYEE’s then current Base Salary, and shall
continue to make all applicable benefits available to EMPLOYEE, in accordance
with XM’s then-prevailing executive payroll practices, for one (1) year from the
date of termination; provided, however, that XM shall not be obligated to make
any payments under this Section 4.6(b)(i) if, no later than three (3) months
prior to the expiration of this Agreement, XM made a bona fide offer to EMPLOYEE
to enter into a new employment agreement on terms at least as favorable to
EMPLOYEE as this Agreement.
 
(ii)    Any options scheduled to vest on the third anniversary of the Effective
Date of this Agreement pursuant to Section 3.7(c) shall immediately vest and
become exercisable, all other non-vested options shall be forfeited, and
EMPLOYEE shall be entitled to exercise any of his vested options within eighteen
(18) months after termination.
 
ARTICLE 5
RESTRICTIVE COVENANTS
 
5.1.    Confidentiality.    Except as authorized or directed by XM, EMPLOYEE
shall not, at any time during or subsequent to the term of this Agreement,
directly or indirectly publish or disclose any Confidential Information of XM or
of any of its Affiliates, or Confidential Information of others that has come
into the possession of XM or of any of its Affiliates, or into the EMPLOYEE’s
possession in the course of his employment with XM or of his services and duties
hereunder, to any other person or entity, and EMPLOYEE shall not use any such
Confidential Information for EMPLOYEE’s own personal use or advantage or make it
available to others for use. All Confidential Information, whether oral or
written, regarding the business or affairs of XM or any of its Affiliates,
including, without limitation, information as to their products, services,
systems, designs, inventions, software, finances (including prices, costs and
revenues), marketing plans, programs, methods of operation, prospective and
existing contracts, customers and other business arrangements or business plans,
procedures, and strategies, shall all be deemed Confidential Information, except
to the extent the same shall have been lawfully and without breach of the
EMPLOYEE’S confidentiality obligation made available to the general public
without restriction, or that EMPLOYEE can prove, by documentary evidence, was
previously known to EMPLOYEE prior to the term of EMPLOYEE’s employment. The
Company shall be under no obligation to identify specifically any information as
to which the protection of this Section 5.1 extends by any notice or other
action. Upon expiration or termination of this Agreement for any reason,
EMPLOYEE shall promptly return to XM all Confidential Information, including all
copies thereof in EMPLOYEE’s possession, whether prepared by him or others.
 
5.2.    Unfair Competition.    During his employment pursuant to this Agreement
and for a period of one (1) year after the termination of his employment,
EMPLOYEE shall not, within the United States, whether or not for compensation,
as a stockholder owning beneficially or of record more than five percent (5%) of
the outstanding shares of any class of stock of an issuer, or as an officer,
director, employee, consultant, partner, joint venturer, proprietor, or
otherwise, engage in or become interested in any Conflicting

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Organization in connection with research, development, consulting,
manufacturing, purchasing, accounting, engineering, marketing, merchandising or
selling of any Conflicting Product or Service, in competition with XM or any of
its Affiliates (or any of their successors) as conducted from time to time
during such period. During the period in which EMPLOYEE is receiving any
payments under this Agreement and for a period of one (1) year thereafter,
EMPLOYEE shall not, without the prior written consent of XM, solicit or hire or
induce the termination of employment of any employees or other personnel
providing services to XM, or any of its Affiliates, for any business activity,
other than a business activity owned or controlled by XM or any of its
Affiliates.
 
5.3.    Injunctive Relief.
 
(a)    EMPLOYEE acknowledges and warrants that he will be fully able to earn an
adequate livelihood for himself and his dependents if Section 5.2 should be
specifically enforced against him, and that Section 5.2 merely prevents unfair
competition against XM for a limited period of time. EMPLOYEE agrees and
acknowledges that, by virtue of EMPLOYEE’s employment with XM, EMPLOYEE shall
have access to and maintain an intimate knowledge of XM’s activities and
affairs, including trade secrets, Confidential Information, and other
confidential matters. As a result of such access and knowledge, and because of
the special, unique, and extraordinary services that EMPLOYEE is capable of
performing for XM or one of its competitors, EMPLOYEE acknowledges that the
services to be rendered by EMPLOYEE pursuant to this Agreement are of a
character giving them a peculiar value, the loss of which cannot adequately or
reasonably be compensated by money damages. Consequently, EMPLOYEE agrees that
any breach or threatened breach by EMPLOYEE of EMPLOYEE’s obligations under this
Article 5 would cause irreparable injury to XM, and that XM shall be entitled to
(i) preliminary and permanent injunctions enjoining EMPLOYEE from violating such
provisions, and (ii) actual money damages suffered by XM as a result of such
breach, in the amount of any fees, compensation, benefits, profits, or other
remuneration earned by EMPLOYEE as a result of such breach, together with
interest, and cost and attorney’s fees expended to collect such damages or
secure such injunctions. Nothing in this Agreement, however, shall be construed
to prohibit XM from pursuing any other remedy, XM and EMPLOYEE having agreed
that all such remedies shall be cumulative.
 
(b)    The restrictions set forth in this Article 5 and the following Article 6
shall be construed as independent covenants, and shall survive the termination
or expiration of this Agreement, and the existence of any claim or cause of
action against XM, whether predicated upon this Agreement or otherwise, shall
not constitute a defense to the enforcement by XM of the restrictions contained
in this Article 5 or the following Article 6. EMPLOYEE hereby consents and
waives any objection to the jurisdiction over his person or the venue of any
courts within the State of Virginia with respect to any proceedings in law or in
equity arising out of this Article 5 or the following Article 6. If any court of
competent jurisdiction shall hold that any of the restrictions contained in
Section 5.2 are unreasonable as to time, geographical area, or otherwise, said
restrictions shall be deemed to be reduced to the extent necessary in the
opinion of such court to make their application reasonable.

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ARTICLE 6
INVENTIONS, WORKS OF AUTHORSHIP,
PATENTS AND COPYRIGHTS
 
6.1.    Ownership of Inventions and Works of Authorship.    EMPLOYEE agrees that
all Inventions made, conceived, discovered, developed or reduced to practice by
EMPLOYEE and all software and other works of authorship created by EMPLOYEE,
either alone or with others, at any time, within or without normal working
hours, during the term of this Agreement, arising out of such employment or
based upon Confidential Information, or pertinent to any field of business or
research in which, during such employment, XM is engaged or (if such is known or
ascertainable by EMPLOYEE) is considering engaging, whether or not patented or
patentable, shall be and remain the sole property of XM with respect to all
rights of EMPLOYEE arising from any discovery, conception, development,
reduction to practice, or creation by EMPLOYEE. XM shall have the full right to
assign, license, or transfer all rights thereto.
 
6.2.    Disclosure of Inventions and Works of Authorship.    EMPLOYEE shall
promptly make full disclosure to XM or to an authorized representative thereof
of all information relating to the making, conception, discovery, development,
creation or reduction to practice of Inventions, or of software and other works
of authorship owned by XM pursuant to Section 6.1 above.
 
6.3.    Patent and Copyright Applications.    At the request of XM and at XM’s
expense, EMPLOYEE shall execute such documents and perform such acts as XM deems
necessary to obtain patents or the like on such Inventions or copyright
registrations for such software and other works of authorship in any
jurisdiction or jurisdictions. Such obligation shall continue beyond the term of
this Agreement. In the event that XM is unable because of EMPLOYEE’s mental or
physical capacity or for any other reason to secure EMPLOYEE’s signature to
apply for or to pursue any applications for patent or copyright covering
Inventions, software and other works of authorship owned by XM pursuant to
Section 6.1, then EMPLOYEE hereby irrevocably designates and appoints XM as
EMPLOYEE’s agent and attorney in fact, upon prior notice, to act for and in his
behalf and stead to execute and file any such applications and to do all other
lawfully permitted acts to further the prosecution and issuance of patents and
copyright registrations thereon with the same legal force and effect as if
executed by EMPLOYEE. EMPLOYEE further agrees not to file any patent
applications relating to or describing or otherwise disclosing any Confidential
Information or any such Inventions, or to claim any copyright or file any
applications to register any copyright in such software or other works of
authorship, except with the prior written consent of XM.
 
6.4.    Assignment of Inventions and Works of Authorship.    EMPLOYEE agrees to
assign to XM or it Affiliates all of EMPLOYEE’s right, title and interest in and
to any and all such Inventions and the patent applications and patents relating
thereto and to the copyright in any and all such software and other works of
authorship and any copyright applications and registrations relating thereto
conceived, reduced to practice, discovered, created or otherwise developed by
EMPLOYEE and owned by XM pursuant to Section 6.1 above.

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ARTICLE 7
MISCELLANEOUS
 
7.1.    Assignment.    The rights and obligations of XM under this Agreement
shall be binding upon its successors and assigns and, subject to EMPLOYEE’s
rights under Section 4.5 hereof, may be assigned by XM to the successors in
interest of XM. The rights and obligations of EMPLOYEE under this Agreement
shall be binding upon EMPLOYEE’s heirs, legatees, personal representatives,
executors or administrators. This Agreement may not be assigned by EMPLOYEE, but
any amount owed EMPLOYEE upon EMPLOYEE’s death shall inure to the benefit of
EMPLOYEE’s heirs legatees, personal representatives, executors, or
administrators.
 
7.2.    Notice.    For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when hand delivered, sent by overnight courier,
or mailed by first-class, registered, or certified mail, return receipt
requested, postage prepaid, or transmitted by telegram, telecopy, or telex
addressed as follows:
If to EMPLOYEE: (Copy to XM Executive Office)
 
Joseph J. Euteneuer
 
If to XM:
 
XM Satellite Radio Holdings Inc.
1500 Eckington Place, N.E.,
Washington, D.C. 20002
Telephone:    703-758-6116
Telecopy:      703-758-6106
 
Attn: General Counsel
 
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
 
7.3.    Entire Agreement.    From and after the Effective Date, this Agreement
constitutes the entire agreement between the parties hereto, and expressly
supersedes all prior oral or written agreements, commitments or understandings
with respect to the matters provided for herein.
 
7.4.    Headings.    Article and Section headings contained in this Agreement
are inserted for convenience of reference only, shall not be deemed to be a part
of this Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.

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7.5.    Severability.    In the event any provision of this Agreement, or any
portion thereof, is determined by any arbitrator or court of competent
jurisdiction to be unenforceable as written, such provision or portion thereof
shall be interpreted so as to be enforceable. In the event any provision of this
Agreement, or any portion thereof is determined by any arbitrator or court of
competent jurisdiction to be void, the remaining portions of this Agreement
shall nevertheless be binding upon XM and EMPLOYEE with the same effect as
though the void provision or portion thereof had been severed and deleted.
 
7.6.    Arbitration.    Without prejudice to XM’s right to seek an injunction
pursuant to Section 5.3(a) hereof from a court of competent jurisdiction, any
dispute between the parties hereto arising out of this Agreement, or otherwise
arising out of or relating to EMPLOYEE’s employment by XM, or the termination
thereof, shall be submitted to non-binding mediation before a mediator to be
agreed upon by the parties or, failing agreement, to be appointed by the
American Arbitration Association (“AAA”). In the event that mediation is
unsuccessful, such dispute shall be resolved by binding arbitration, before a
single arbitrator, under the rules of the AAA. The arbitrator shall have the
authority to apportion the costs of arbitration, and to render an award
including reasonable attorney’s fees, as and to the extent he deems appropriate
under the circumstances.
 
7.7.    Governing Law.    This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the substantive laws of the State of
Virginia (excluding the choice of law rules thereof).
 
7.8.    Amendment; Modification; Waiver.    No amendment, modification or waiver
of the terms of this Agreement shall be valid unless made in writing and duly
executed by EMPLOYEE and XM. No delay or failure at any time on the part of
EMPLOYEE or XM in exercising any right, power or privilege under this Agreement,
or in enforcing any provision of this Agreement, shall impair any such right,
power, or privilege, or be construed as a waiver of any default or as any
acquiescence therein, or shall affect the right of EMPLOYEE or XM thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
 
7.9.    Additional Obligations.    Both during and after the term of employment,
EMPLOYEE shall, upon reasonable notice, furnish XM with such information as may
be in EMPLOYEE’s possession or control, and cooperate with XM, as may reasonably
be requested by XM (and, after the term of employment, with due consideration
for EMPLOYEE’s obligations with respect to any new employment or business
activity) in connection with any litigation or other adversarial proceedings in
which XM or any Affiliate is or may become a party. XM shall reimburse EMPLOYEE
for all reasonable expenses incurred by EMPLOYEE in fulfilling EMPLOYEE’s
obligations under this Section 7.9.

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IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as
of the Effective Date.
 
XM Satellite Radio Holdings, Inc.
XM Satellite Radio Inc.
By:
       

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Hugh Panero
Chief Executive Officer
   
Date:
           

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Joseph J. Euteneuer
   
Date:
           

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