EXHIBIT 10.35a
                                 --------------

                           AMENDMENT NO. 1 AND WAIVER
                                       TO
                           REVOLVING CREDIT AGREEMENT


         AMENDMENT  AND WAIVER dated as of January 15, 1999 to the  $100,000,000
Revolving  Credit  Agreement dated as of March 31, 1998 (the  "Revolving  Credit
Agreement")  among AMSC ACQUISITION  COMPANY,  INC. (the  "Borrower"),  AMERICAN
MOBILE SATELLITE  CORPORATION (the "Parent Guarantor"),  the BANKS party thereto
(the "Banks"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent
(the   "Documentation   Agent"),   and  TORONTO  DOMINION   (TEXAS),   INC.,  as
Administrative Agent (the "Administrative Agent").

                              W I T N E S S E T H :

         WHEREAS,  the  Parent  Guarantor  desires  to issue  up to  $21,500,000
aggregate principal amount of junior subordinated  secured exchangeable notes to
Baron Asset Fund;

         WHEREAS,  the Parent Guarantor will use the proceeds thereof to acquire
three  notes  issued by AMRC  Holdings  in the  principal  amounts of  $806,050,
$3,612,478,  and  $17,000,025 and  convertible  into 0.9212,  4.1285 and 19.4286
shares, respectively, of common stock of AMRC Holdings;

         WHEREAS,  as a consequence  of the  foregoing  investment by the Parent
Guarantor in AMRC Holdings,  the Parent  Guarantor will no longer be required to
transfer  shares of AMRC Holdings to  WorldSpace,  Inc. as  contemplated  by the
Waiver and  Release of Certain  Collateral  dated as of July 30,  1998 under the
Term Credit Agreement;

         WHEREAS,  the  undersigned  Banks and the  Guarantors  are  willing  to
consent to the foregoing and to certain other amendments to the Revolving Credit
Agreement  and to  waive  Section  5.12 of the  Revolving  Credit  Agreement  in
connection  with the  acquisition by a Subsidiary of the Borrower of the capital
stock of Access Point of Virginia, Inc.;

         NOW, THEREFORE, the undersigned parties hereto agree as follows:

         SECTION 1.  Definitions; References.

          (a)  Unless  otherwise  specifically  defined  herein,  each term used
herein  which is defined  in the  Revolving  Credit  Agreement  has the  meaning



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assigned to such term in the  Revolving  Credit  Agreement.  Each  reference  to
"hereof",  "hereunder",  "herein" and "hereby" and each other similar  reference
and  each  reference  to  "this  Agreement"  and each  other  similar  reference
contained in the Revolving Credit Agreement shall,  after this Amendment becomes
effective, refer to the Revolving Credit Agreement as amended hereby.

          (b)  The  following  definitions  are  added  to  Section  1.01 in the
appropriate alphabetical order:

         "Baron  Exchangeable Notes" means one or more of the Parent Guarantor's
junior   subordinated   secured   exchangeable  notes  due  September  30,  2006
substantially  in the form approved by the Required  Banks in writing and issued
to Baron Asset Fund.

          (c) The  definition  of  "Reduction  Event" is  amended  by adding the
expression  "(other than the sale,  transfer or other  disposition of securities
issued by AMRC Holdings and permitted by Section  5.16(a-1))"  immediately after
the words "Asset Sale".

         SECTION 2. Waiver.  The  undersigned  Banks hereby waive the failure by
the Borrower to comply with Section 5.12 of the  Revolving  Credit  Agreement in
connection  with the  acquisition by a Subsidiary of the Borrower of 100% of the
capital stock of Access Point of Virginia, Inc. for a purchase price of $45,000.
On the Amendment  Effective  Date,  this waiver will be effective as of December
18, 1998.

         SECTION 3.  Limitation on  Liens.  Section 5.15 of the Revolving Credit
Agreement is amended by adding the  following subsection (a-1) immediately after
subsection (a) thereof:

         (a-1) Liens on securities  issued by AMRC Holdings that are not subject
to the Security  Interests (as defined in the Security and Pledge  Agreement (as
defined in the Term Credit Agreement));

         SECTION 4. Limitation on Sales of Assets. Section 5.16 of the Revolving
Credit Agreement is amended by adding the following subsection (a-1) immediately
after subsection (a) thereof:

         (a-1) the sale,  transfer or other  disposition of securities issued by
AMRC Holdings that are not subject to the Security  Interests (as defined in the
Security and Pledge Agreement (as defined in the Term Credit Agreement));




<PAGE>



         SECTION 5.  Limitation  on Indebtedness.  Section 5.23 of the Revolving
Credit Agreement is amended by adding the following subsection (a-1)
immediately after subsection (a) thereof:

         (a-1)  Indebtedness  under the Baron Exchangeable Notes in an aggregate
principal  amount not to exceed  $21,500,000  (less the principal amount thereof
which is exchanged or repaid);

         SECTION 6.  Restrictions on  Payments in  Respect of Baron Exchangeable
Notes.  The following is added as Section 5.24 of the Revolving Credit
Agreement:

                  SECTION  5.24.  Restrictions  on  Payments in Respect of Baron
         Exchangeable  Notes. The Parent Guarantor will not, and will not permit
         any of its  Subsidiaries  to, directly or indirectly,  redeem,  retire,
         purchase,  acquire, defease or otherwise make any payment in respect of
         the Baron  Exchangeable  Notes;  provided that the foregoing  shall not
         prohibit the exchange of Baron  Exchangeable Notes for Shares of Common
         Stock  of AMRC  Holdings  in  accordance  with the  terms of the  Baron
         Exchangeable Notes. The Parent Guarantor will not consent to or solicit
         any  amendment,   supplement,  waiver  or  other  modification  of  any
         agreement or instrument  evidencing or governing the Baron Exchangeable
         Notes without the prior written consent of the Required Lenders.

         SECTION 7. Events of Default.  Section 6.01(s) is amended by adding the
words "or, in the case of the Baron Capital Letter of Credit, as the result of a
draw  thereunder  pursuant  to  Section  1(e)  of the  Baron  Capital  Guaranty"
immediately after the words "the relevant  Shareholder  Guarantor's  obligations
thereunder".

         SECTION 8.  Baron Exchangeable Notes.  The undersigned Banks hereby
approve the form and substance of the Baron Exchangeable Notes set forth in
Exhibit A hereto.

         SECTION 9.  Representations  of Borrower and Parent Guarantor.  Each of
the  Borrower and the Parent  Guarantor  represents  and  warrants  that (i) the
representations  and warranties  set forth in Article 4 of the Credit  Agreement
shall be true on and as of the  Amendment  Effective  Date  and (ii) no  Default
shall have occurred and be continuing on such date.

         SECTION 10.  Governing Law.  This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.



<PAGE>



         SECTION 11. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

         SECTION 12. Effectiveness.  This Amendment shall become effective as of
the  date  hereof  on  the  date  (the  "Amendment  Effective  Date")  when  the
Documentation  Agent shall have received a  counterpart  hereof from each of the
Borrower, the Parent Guarantor,  Hughes, SingTel, Baron Capital and the Required
Banks signed by such party or a facsimile or other written confirmation (in form
satisfactory  to  the  Documentation   Agent)  that  such  party  has  signed  a
counterpart hereof.

         SECTION 13.  Shareholder Guarantor Consent.  The Shareholder Guarantors
consent to the foregoing.





<PAGE>



         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.


                                             AMSC ACQUISITION COMPANY, INC.


                                             By  /s/Randy Segal
                                                 -----------------------------
                                                 Title:Vice President


                                             AMERICAN MOBILE SATELLITE
                                             CORPORATION


                                             By  /s/Randy Segal
                                                 -----------------------------
                                                 Title:Vice President


                                             TORONTO DOMINION (TEXAS), INC.,
                                             as Administrative Agent and Bank


                                             By  /s/Jane Mott
                                                 -----------------------------
                                                 Title:Vice President


                                             MORGAN GUARANTY TRUST
                                             COMPANY OF NEW YORK


                                             By  /s/Christopher C. Hunhardt
                                                 -----------------------------
                                                 Title:Vice President


                                             BANK OF AMERICA NATIONAL
                                             TRUST AND SAVINGS ASSOCIATION


                                             By  /s/Dianne P. Allen
                                                 -----------------------------
                                                 Title:  Vice President








<PAGE>


                                             BANCA COMMERCIALE ITALIANA
                                             LOS ANGELES FOREIGN BRANCH


                                             By  /s/E. Bombieri
                                                 -----------------------------
                                                 Title:V.P. & Manager



                                             By  /s/J. Wityak
                                                 -----------------------------
                                                 Title:V.P.


                                             BANCA DI ROMA - SAN FRANCISCO


                                             By  /s/Richard G. Dietz (97271)
                                                 -----------------------------
                                                 Title:Vice President


                                             By  /s/Augusto Bianchi (97911)
                                                 -----------------------------
                                                 Title:First Vice President


                                             THE CHASE MANHATTAN BANK


                                             By  /s/Richard C. Smith
                                                 -----------------------------
                                                 Title:Vice President


                                             CITIBANK, N.A.


                                             By  /s/Walter Larsen
                                                 -----------------------------
                                                 Title:Attorney-in-Fact








<PAGE>


                                             DEUTSCHE BANK AG, NEW YORK
                                             BRANCH AND/OR CAYMAN
                                             ISLANDS BRANCH


                                             By  /s/Stephen A. Wiedemann
                                                 -----------------------------
                                                 Title:Director


                                             By  /s/Joel Makowsky
                                                 -----------------------------
                                                 Title:Vice President


                                             THE FIRST NATIONAL BANK OF
                                             CHICAGO


                                             By  /s/Mark A. Isley
                                                 -----------------------------
                                                 Title:First Vice President


                                             ISTITUTO BANCARIO SAN PAOLO DI
                                             TORINO ISTITUTO MOBILIARE
                                             ITALIANO S.P.A.


                                             By  /s/Carlo Persico
                                                 -----------------------------
                                                 Title:Deputy Manager


                                             By  /s/Ettore Viazzo
                                                 -----------------------------
                                                 Title:Vice President


                                             NATIONSBANK, N.A.


                                             By  /s/Dianne P. Allen
                                                 -----------------------------
                                                 Title:Vice President








<PAGE>


                                             HUGHES ELECTRONICS CORPORATION


                                             By  /s/Mark A. McEachen
                                                 -----------------------------
                                                 Title:Corporate Vice President
                                                       and Treasurer

                                             SINGAPORE TELECOMMUNICATIONS
                                             LTD.


                                             By  /s/Ho Siaw Hong
                                                 -----------------------------
                                                 Title:Assistant Vice President
                                                       (Satellite Services)

                                             BARON CAPITAL PARTNERS, L.P., a
                                             Delaware limited partnership
                                             By: BARON CAPITAL MANAGEMENT,
                                             INC., a general partner


                                             By  /s/Morty Schaja
                                                 -----------------------------
                                                 Title:Chief Operating Officer


<PAGE>


                                                                       EXHIBIT A

                  JUNIOR SUBORDINATED SECURED EXCHANGEABLE NOTE


THIS NOTE HAS NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE  "SECURITIES  ACT") OR ANY APPLICABLE  STATE SECURITIES LAWS. IT MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE  REGISTRATION  STATEMENT
UNDER THE SECURITIES ACT AND COMPLIANCE  WITH SUCH STATE  SECURITIES  LAWS OR AN
OPINION OF COUNSEL  SATISFACTORY  TO THE COMPANY THAT SUCH  REGISTRATION  AND/OR
COMPLIANCE IS NOT REQUIRED.

$21,500,000                                                     January 15, 1999

         FOR VALUE RECEIVED,  American Mobile Satellite Corporation,  a Delaware
corporation (the "Company"), promises to pay to the order of Baron Asset Fund on
behalf of The Baron Asset Fund Series, or its registered assigns (the "Holder"),
the principal sum of  $21,500,000  or such lesser amount as shall then equal the
outstanding  principal  amount  hereof,  together with interest from the date of
issuance of this Note on the unpaid principal  balance hereof at a rate equal to
six percent (6%) per annum,  computed on the basis of the actual  number of days
elapsed and a year of 365 days. All unpaid principal,  together with any accrued
but  unpaid  interest  and other  amounts  payable  hereunder,  shall be due and
payable on September 30, 2006 (the "Maturity Date"). Interest on this Note shall
accrue on a  quarterly  basis on January 1, April 1, July 1 and October 1, (each
an  "Interest  Accrual  Date") with the first such  Interest  Accrual Date being
April 1, 1999; provided, however, that right to accrued interest on this Note is
subject to Section 7(b) herein.

         This  Note is  issued  pursuant  to the Note  Purchase  Agreement  (the
"Purchase  Agreement")  dated as of January  15, 1999 by and between the Company
and the Holder.

         The  following  is a  statement  of the  rights of the  Holder  and the
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:

         1.       Definitions.   As used in this Note, the following capitalized
terms have the following meanings:

                   (a)  "Business  Day"  means  any day other  than a  Saturday,
Sunday or other day on which the national or state banks located in the State of
New York are authorized to be closed.

                   (b)  "Exchange  Price" has the  meaning  set forth in Section
7(a) hereof.

                   (c)  "Obligations"  means the  principal,  interest and other
amounts payable under this Note.


<PAGE>



                   (d) "Senior  Debt" shall mean the  principal of (and premium,
if any), unpaid interest on and fees,  expenses,  costs of enforcement and other
amounts due in connection with (a) all  outstanding  indebtedness of the Company
for money  borrowed  (other than this Note) for the payment of which the Company
is  responsible or liable,  or the payment of which the Company has  guaranteed,
whether such  indebtedness  is  outstanding  as of the date hereof or thereafter
created,  incurred,  assumed  or  guaranteed  by  the  Company,  unless  in  the
instrument  creating  or  evidencing  the same or  pursuant to which the same is
outstanding it is specifically  provided that such  indebtedness is not superior
in right of payment to this Note,  (b) capital lease  obligations  determined in
accordance with generally accepted accounting principles,  (c) any obligation of
the Company to reimburse  banks  pursuant to letters of credit  extended by such
banks,  advances made by such banks and other credit  arrangements  entered into
with such banks in connection with tax-exempt obligations issued for the benefit
of the Company, and (d) renewals extensions, modifications and refundings of any
such indebtedness or obligations,  provided however,  that Senior Debt shall not
mean the  principal  of (and  premium,  if any),  unpaid  interest  on and fees,
expenses, costs of enforcement and other amounts due in connection with any such
indebtedness that is expressly subordinated to this Note.

                   (e)  "XM"  means  XM  Satellite  Radio   Holdings,   Inc.,  a
corporation organized under the laws of the State of Delaware.

                   (f) "XM Common  Stock" means the common stock of XM, having a
par value of $0.10 per share.

                   (g) "XM Convertible  Note" means the Convertible  Note, dated
as of January 15, 1999, for a principal  amount of up to $806,050,  issued by XM
to the Company.

                   (h) "XM Note  Shares"  means the  shares  of XM Common  Stock
issuable upon exercise of the conversion rights under the XM Convertible Note.

                   (i) "XM Owned Shares"  means the 23.6502  shares of XM Common
Stock owned by the Company.

         2.  Exchange  Event.  The  occurrence  of any of  the  following  shall
constitute an "Exchange Event" under this Note:

                  (a) Failure to Pay. The Company shall fail to pay (i) when due
any  principal  payment  on this  Note or (ii) any  interest  or  other  payment
required under the terms of this Note within five Business Days of its due date;

                  (b) Breaches of  Covenants.  The Company shall fail to observe
or to perform any other covenant,  obligation,  condition or agreement contained
in this Note, and such failure shall continue for 30 days.

                  (c)  Voluntary  Bankruptcy  or  Insolvency  Proceedings.   The
Company  shall  (i) apply  for or  consent  to the  appointment  of a  receiver,
trustee,  liquidator or custodian of itself or of all or a  substantial  part of
its  property,  (ii) be unable,  or admit in writing its  inability,  to pay its
debts generally as they mature,  (iii) make a general assignment for the benefit



<PAGE>



of its or any of its  creditors,  (iv) be dissolved or  liquidated in full or in
part, (v) become insolvent (as such term may be defined or interpreted under any
applicable statute),  (vi) commence a voluntary case or other proceeding seeking
liquidation,  reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the  appointment of or taking  possession of
its  property  by any  official  in an  involuntary  case  or  other  proceeding
commenced  against it or (vii) take any action for the purpose of effecting  any
of the foregoing;

                  (d)   Involuntary   Bankruptcy  or   Insolvency   Proceedings.
Proceedings for the appointment of a receiver,  trustee, liquidator or custodian
of the Company or of all or a substantial  part of the property  thereof,  or an
involuntary case or other  proceedings  seeking  liquidation,  reorganization or
other  relief  with  respect  to the  Company  or the  debts  thereof  under any
bankruptcy,  insolvency or other similar law now or hereafter in effect shall be
commenced and an order for relief entered,  or such case or proceeding shall not
be dismissed or discharged within 45 days of commencement; or

                  (e) Event of Default on Senior  Debt. A default in the payment
of principal premium, if any, or interest with respect to Senior Debt.

         3.  Rights  of Holder  Upon  Exchange  Event.  Upon the  occurrence  or
existence of any Exchange Event,  the Note shall  automatically be exchanged for
the XM Owned  Shares and XM Note Shares,  and all rights,  title and interest in
the Collateral shall be transferred to Holder.


         4.  Subordination.  The  indebtedness  evidenced by this Note is hereby
expressly  subordinated,  to the extent and in the manner hereinafter set forth,
in right of payment to the prior payment in full of all of the Company's  Senior
Debt.

                  (a)  Event of  Default  on Senior  Debt.  No  payments  by the
Company on account of  principal  or  interest on this Note shall be made unless
full payment of amounts then due for principal, premium, if any, and interest on
Senior Debt has been made or duly  provided  for in money or money's  worth.  No
payment by the Company on account of principal or interest on this Note shall be
made if, at the time of such payment or immediately after giving effect thereto,
(i) there shall exist a default in the payment of principal, premium, if any, or
interest  with respect to any Senior Debt,  or (ii) there shall have occurred an
event of default (other than a default in the payment of principal,  premium, if
any, or interest) with respect to any Senior Debt, as defined  therein or in the
instrument under which the same is outstanding,  permitting the holders thereof,
or any trustee under any such  instrument,  to accelerate the maturity  thereof,
and such event of default  shall not have been cured or waived or shall not have
ceased to exist.  Nothing in this  Section  4(a) shall be deemed to restrict the
Holder's exchange rights set forth in Section 2(e).

                  (b)   Insolvency   Proceedings.   If  there  shall  occur  any
receivership,  insolvency,  assignment for the benefit of creditors, bankruptcy,
reorganization,  or  arrangements  with  creditors  (whether or not  pursuant to
bankruptcy or other insolvency  laws),  sale of all or substantially  all of the
assets,  dissolution,  liquidation,  or any other  marshaling  of the assets and
liabilities of the Company, no amount shall be paid by the Company in respect of



<PAGE>



the principal of,  interest on or other amounts due with respect to this Note at
the time  outstanding,  unless and until the  principal  of  (premium,  if any),
interest  on,  and any fees and  expenses  relating  to,  the  Senior  Debt then
outstanding shall be paid in full.

                  (c) Subrogation.  Subject to the payment in full of all Senior
Debt, the Holder of this Note shall be subrogated to the rights of the holder(s)
of such Senior Debt (to the extent of the payments or distributions  made to the
holder(s) of such Senior Debt)  pursuant to the  provisions of this Section 4 to
receive payments and  distributions  of assets of the Company  applicable to the
Senior Debt until the principal of and interest on this Note is paid in full and
no such  payments  or  distributions  to the  Holder of  assets  of the  Company
otherwise  distributable  to the holders of Senior  Debt  shall,  as between the
Company, its creditors other than the holders of Senior Debt, and the Holder, be
deemed to be a payment  by the  Company  to the  Holder of or on  account of the
Note.  It is  understood  that the  provisions  of this Section 4(c) are and are
intended  solely for the purpose of defining the relative  rights of the Holder,
on the one hand, and the holders of Senior Debt, on the other hand.

                  (d) No Impairment.  Nothing  contained in this Section 4 shall
impair,  as between the Company and the Holder,  the  obligation of the Company,
subject to the terms and conditions  hereof,  to pay to the Holder the principal
hereof and interest hereon as and when the same become due and payable, or shall
prevent the Holder of this Note,  upon default  hereunder,  from  exercising all
rights, powers and remedies otherwise provided herein or by applicable law.

                  (e)  Reliance of Holders of Senior  Debt.  The Holder,  by its
acceptance  hereof,  shall be deemed to acknowledge and agree that the foregoing
subordination  provisions  are, and are intended to be, an  inducement  to and a
consideration  of each  holder of Senior  Debt,  whether  such  Senior  Debt was
created or acquired before or after the creation of the  indebtedness  evidenced
by this Note,  and each such holder of Senior Debt shall be deemed  conclusively
to have relied on such subordination  provisions in acquiring and holding, or in
continuing to hold, such Senior Debt.

         5.       Collateral.

                  (a) To secure the  Company's  payment and  performance  of the
Obligations and to secure the Company's  prompt,  full and faithful  performance
and  observance of all of the  provisions  under this Note and the Note Purchase
Agreement,  the Company (i) hereby grants the Holder a security  interest in all
of the Company's right, title and interest in and to the XM Owned Shares and the
XM Convertible Note including any right to XM Note Shares exchangeable  therefor
(collectively,   the  "Collateral"),  and  (ii)  delivers  herewith,  the  stock
certificates  representing  the XM Owned  Shares with stock  powers  executed in
blank and the XM Convertible Note.

                  (b) The Company covenants and agrees with Holder that: (a) the
security  interest  granted under this Note is in addition to any other security
interest  from time to time held by the Holder;  (b) the Holder may realize upon
all or part of any Collateral in any order it desires and any realization by any
means upon any Collateral  will not bar realization  upon any other  Collateral;
and (c) the security interest created is a continuing security interest and will


<PAGE>



cover and secure  all  Obligations  both  present  and future of the  Company to
Holder pursuant to this Note. The Company  further  covenants and agrees to take
all  actions  requested  by the  Holder to  establish  or perfect  the  security
interest granted under this Note.

         6.  Prepayment.  This Note may be  prepaid as a whole or in part at any
time prior to the Maturity  Date upon at least ten Business  Days prior  written
notice to the Holder.  Any such prepayment shall be applied first to the payment
of expenses  due under this Note,  second to  interest  accrued on this Note and
third,  if the amount of prepayment  exceeds the amount of all such expenses and
accrued interest, to the payment of principal of this Note.

         7.       Exchange.

                  (a) Exchange for XM Common Stock.  The Holder,  at its option,
may, on two Business Days prior written notice (each an "Exchange  Notice"),  on
one or more  occasions  any time  after the  earlier  of an  Exchange  Event and
January 15, 2000,  and on or prior to repayment in full of  principal,  interest
and any  other  amounts  due and  owing  hereunder  (each an  "Exchange  Date"),
exchange  all of the  principal  then  outstanding  on this  Note,  or a portion
thereof in an amount not less than  $250,000 (and if greater than  $250,000,  in
increments of $1,000 above such amount),  for (i) XM Owned Shares,  (ii) XM Note
Shares issued to the Company on or prior to such Exchange  Date, or (iii) rights
to XM Note Shares  issuable  to the  Company,  at an  exchange  rate of $875,000
principal  amount  for each one (1) share of XM Owned  Shares or XM Note  Shares
issued  or  issuable  to the  Company  (the  "Exchange  Price").  Any  principal
exchanged  under this  Section  7(a) shall be  exchanged  first for,  and to the
extent of, XM Owned Shares,  second for XM Note Shares issued to the Company, if
any,  and then for the XM Note.  Upon full  exchange  of this Note,  the Company
shall be forever  released from all its obligations  and liabilities  under this
Note. If, on the Maturity  Date, the Company has not received a timely  Exchange
Notice for the then  outstanding  principal  amount under this Note, the Company
may, at its option, (x) require the Holder to exchange such remaining  principal
for XM Owned  Shares  and/or XM Note  Shares  pursuant to the terms set forth in
this Section 7 in full satisfaction of all Obligations  hereunder,  or (y) repay
all remaining  principal and accrued  interest due as of the Maturity Date. Upon
such exchange or repayment pursuant to the immediately  preceding sentence,  the
Company shall be forever released from all its obligations and liabilities under
this Note.

                   (b) Mechanics and Effect of Exchange. This Section 7(b) shall
apply to any  partial  exchange of this Note other than in  connection  with the
exercise  by the  Company of its option  under  Section  7(a)(x)  above.  On any
exchange  covered by this Section 7(b), the Company shall transfer to the Holder
(i) the XM Owned  Shares,  XM Note  Shares  or XM  Convertible  Note for which a
portion of this Note is exchanged and (ii) a replacement  promissory note having
identical  terms to this Note,  except that the principal  amount  thereof shall
equal the difference  between (x) the principal  amount of this Note immediately
prior to such exchange minus (y) the portion of such principal  amount exchanged
for XM Owned Shares,  XM Note Shares or XM  Convertible  Note.  Upon exchange of
this Note pursuant to this Section 7(b),  the Holder shall  surrender this Note,
duly  endorsed,  at the  principal  office of the Company.  At its expense,  the
Company shall, as soon as practicable thereafter, deliver to such Holder at such



<PAGE>


principal office a certificate or certificates for the number of XM Owned Shares
or XM Note Shares held by the Company to which the Holder shall be entitled upon
such  exchange,  together  with any other  securities  and property to which the
Holder is entitled upon such exchange under the terms of this Note. The Holder's
right to all accrued  interest  relating to the portion of the principal  amount
exchanged  pursuant  to this  Section  7(b)  shall  be  extinguished  upon  such
exchange.

                  (c) Interest on XM Convertible Note. Interest, if any, paid in
cash by XM under the XM  Convertible  Note  shall be  allocated  and paid to the
Company to the extent such interest accrued before any Exchange Date relating to
the XM Convertible  Note, and to the Holder to the extent such interest  accrued
after any such Exchange Date.

         8.  Successors  and Assigns.  Subject to the  restrictions  on transfer
described  in  Sections  10 and 11 hereof,  the rights  and  obligations  of the
Company  and the  Holder of this Note  shall be  binding  upon and  benefit  the
successors, assigns, heirs, administrators and transferees of the parties.

         9.  Waiver and  Amendment.  The waiver or failure of the Company or the
Holder  to  exercise  in any  respect  any  right  provided  in  this  Note on a
particular  occasion  shall not be  deemed a waiver  of such  right on any other
occasion or a waiver of any other right.  To be  effective,  a waiver must be in
writing  and be signed by the party that is entitled to the benefit of the right
that is being waived. No amendment or modification of this Note shall be made or
deemed  effective  unless in writing and  executed  and  delivered  by the party
against whom enforcement of such amendment or modification is sought.

         10.  Transfer of this Note or Securities  Issuable on Exchange  Hereof.
This Note may not be  transferred  in  violation of the  restrictive  legend set
forth at the head hereof.  Each new Note issued upon transfer of this Note shall
bear a legend as to the applicable  restrictions on  transferability in order to
ensure  compliance with the Securities Act, unless in the opinion of counsel for
the Company such legend is not required in order to ensure  compliance  with the
Securities Act. The Company may issue stop transfer instructions to its transfer
agent in connection with such restrictions.  Subject to the foregoing, transfers
of this Note shall be registered  upon  registration  books  maintained for such
purpose by or on behalf of the Company.  Prior to  presentation of this Note for
registration of transfer,  the Company shall treat the registered  holder hereof
as the owner and holder of this Note for the purpose of  receiving  all payments
of principal and interest hereon and for all other purposes whatsoever,  whether
or not this Note shall be  overdue,  and the  Company  shall not be  affected by
notice to the contrary.

         11. Assignment by the Company. Neither this Note nor any of the rights,
interests  or  obligations  hereunder  may be  assigned,  by operation of law or
otherwise,  in whole or in part,  by the  Company,  without  the  prior  written
consent of the Holder.

         12.  Treatment of Note. To the extent  permitted by generally  accepted
accounting  principles,  the Company will treat,  account and report the Note as
debt and not equity for  accounting  purposes  and with  respect to any  returns
filed with federal, state or local tax authorities.


<PAGE>



         13. Notices.  Any notice,  request or other  communication  required or
permitted  hereunder  shall be in writing  and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid,  or by recognized  overnight  courier,  personal  delivery or facsimile
transmission at the respective  addresses or facsimile  number of the parties as
set forth below:

                  If to the Company:

                  American Mobile Satellite Corporation
                  10802 Parkridge Blvd.
                  Reston, Virginia 20191-5416
                  Attention:  Randy Segal, Esq.
                  Fax No.:   (703) 758-6134

                  If to Holder:

                  The Baron Asset Fund Series
                  c/o Baron Asset Fund
                  767 Fifth Avenue, 49th Floor
                  New York, New York 10153
                  Attention:  Linda Martinson, Esq.
                  Fax No.:   (212) 583-2014

         Any party hereto may by notice so given change its address or facsimile
number for future notice hereunder.  Notice shall conclusively be deemed to have
been given when received.

         14.  Expenses;  Waivers.  If action is instituted to collect this Note,
the  Company  promises  to  pay  all  costs  and  expenses,  including,  without
limitation,  reasonable  attorneys' fees and costs,  incurred in connection with
such action. The Company hereby waives notice of default,  presentment or demand
for payment,  protest or notice of  nonpayment or dishonor and all other notices
or demands relative to this instrument.

         15.  Governing  Law.  This Note and all  actions  arising  out of or in
connection  with this Note shall be governed by and construed in accordance with
the laws of the State of New York, without regard to conflict of laws provisions
of the State of New York or of any  other  state.  In the  event of any  dispute
among or between  any of the  parties to this Note  arising  out of the terms of
this Note,  the parties  hereby  consent to the  exclusive  jurisdiction  of the
federal and state courts located in the State of New York for resolution of such
dispute,  and  agree  not to  contest  such  exclusive  jurisdiction  or seek to
transfer any action relating to such dispute to any other jurisdiction.



<PAGE>


         IN WITNESS WHEREOF, the Company has caused this Note to be issued as of
the date first written above.

                                               AMERICAN MOBILE
                                               SATELLITE CORPORATION


                                               By:__________________________

                                               Name:________________________

                                               Title:_______________________