EX-10.1






Execution Copy




WAIVER AND LETTER AGREEMENT




     WAIVER AND LETTER AGREEMENT, dated as of July 14, 2008 (this “Agreement”), by and
among XM Satellite Radio Inc., a Delaware corporation (“XM Inc.” or the “Company”),
XM Satellite Radio Holdings Inc. (“XM Holdings”), the undersigned beneficial owners (or
investment managers or advisors with authority for the beneficial owners) of the Notes (as defined
below) identified on Schedule A to this Agreement on the date of this Agreement (each a
“Beneficial Noteholder” and collectively, the “Beneficial Noteholders”).



     WHEREAS, the Beneficial Noteholders of the 9.75% Senior Notes due 2014 of XM Inc., guaranteed
by XM Holdings (the “Notes”) issued pursuant to the Indenture, dated as of May 1, 2006,
among XM Inc., XM Holdings, XM Equipment Leasing LLC as subsidiary guarantor, XM Radio Inc. as
subsidiary guarantor, and The Bank of New York as trustee (the “Trustee”) relating to the
Notes (the “Indenture”), hold a majority in aggregate principal amount of the Notes as of
the time of execution hereof and desire to agree to waivers of the change of control provisions of
the Indenture.



     WHEREAS, the proposed merger of XM Holdings with Vernon Merger Corporation (“Merger
Sub”), a wholly-owned subsidiary of Sirius Satellite Radio Inc. (“Sirius”), pursuant to
the terms of an Agreement and Plan of Merger, dated as of February 19, 2007, as it may be amended,
modified or extended (the “Merger Agreement”), among XM Holdings, Merger Sub and Sirius, or
other business combination in which XM Holdings and Sirius become affiliated (the “Merger”)
may trigger certain obligations of the Company pursuant to the Indenture.



     NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this
Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, each of the parties signatory to this Agreement hereby agrees as follows:



     1. Waiver. Each of the Beneficial Noteholders hereby irrevocably agrees and consents that,
to the extent that the consummation of the Merger constitutes a “Change of Control” as defined
under Section 1.01 of the Indenture, the requirements pursuant to Section 4.14 (Offer to Repurchase
Upon Change of Control) of the Indenture that the Company repurchase Notes or make an offer to the
holders of the Notes to repurchase the Notes and to give notice of such Change of Control or Offer
to Repurchase Upon a Change of Control are, subject to the other provisions of this Agreement,
hereby waived in respect of such “Change of Control” (the “Waiver”). The Waiver will be
set forth in a supplemental indenture substantially in the form attached hereto as Exhibit
A, and pursuant to the terms of the Indenture all holders of the Notes will be bound thereby.
The Trustee is hereby instructed by each of the Beneficial Noteholders, and will be instructed by
the registered holders under Section 4, to execute the supplemental indenture referred to in the
preceding sentence. Each Beneficial Noteholder acknowledges and agrees that the Waiver shall be
binding upon their respective successors, assigns, trustees in bankruptcy and other legal
representatives.



 









 





     2. Termination of Effectiveness.



          (a) The Waiver shall become effective upon signing and shall cease to be effective as of
August 31, 2008 unless the following events have occurred on or prior to such date:





     (i) the consummation of the Merger;




     (ii) the Company having caused funds to be raised in the amount of at least
$400,000,000 through the issuance of (A) a new series of senior notes (the “New Senior
Notes”) or (B) other securities, both of which will be equal to or junior in right of
payment to the Exchange Notes (as defined in Section 3 below), to fund the cash portion of
the consideration payable in the Exchange Offer (as defined below);




     (iii) the Company or XM Holdings having raised at least $500,000,000 through a
contribution to the Company’s equity capital, the issuance and sale of convertible or
exchangeable notes that will be junior in right of payment to the Exchange Notes or the
issuance and sale of equity securities (it being understood that, the financing conditions
in subsection (ii) above and this subsection (iii) are independent of each other resulting
in an aggregate condition of $900,000,000 of financing);




     (iv) the Company or XM Holdings having funded or contributed the necessary funds into a
segregated account to fund the mandatory offer to repurchase all Senior Floating Rate Notes
due 2013 of XM Inc. (the “Floating Rate Notes”) triggered by the Merger;




     (v) the Company or XM Holdings having funded or contributed the necessary funds into a
segregated account to fund the mandatory offer to repurchase transponders of the XM-4
satellite, triggered by the Merger under the sale and leaseback transaction pursuant to (A)
the Participation Agreement, dated as of February 13, 2007, by and among XM Holdings, Wells
Fargo Bank Northwest in its capacity as Owner Trustee and other parties, (B) the lease
agreement, dated as of February 13, 2007, by and between Wells Fargo Bank Northwest, as
Owner Trustee, and the Company and (C) the other related documents (the “Sale-Leaseback
Transaction”);




     (vi) the Company or XM Holdings having repaid all borrowings under Section 13 and
related “credit facility” portions of the Third Amended and Restated Distribution and Credit
Agreement, dated as of February 6, 2008, by and among General Motors Corporation, XM
Holdings and XM Inc.;




     (vii) with respect to XM Holdings’ 1.75% Convertible Senior Notes due 2009 (the
“Convertible Senior Notes”), XM Holdings having obtained the consent of holders of
at least 98% of the aggregate principal amount of such Convertible Senior Notes to waive a
change of control offer, if any, triggered by the Merger with the interest rate on such
Convertible Senior Notes to be increased to 10% subject to the Merger being completed; and



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     (viii) the absence of any occurrence of an event that, with notice or lapse of time or
both, would constitute a default, in the due performance or observance of any term, covenant
or condition contained in the indenture governing the Exchange Notes (as defined below).



     3. The Company’s Obligations to Make the Exchange Offer. The Company agrees to commence
the exchange offer for the Notes held by the Beneficial Noteholders and other “qualified
institutional buyers” (as defined in the Securities Act) (“QIBs”) (and at the Company’s
option, the other registered holders of the Notes) for $600,000,000 (assuming the offer is for all
outstanding Notes) of aggregate consideration which shall be paid (a) two thirds in cash and (b)
the remaining one third in new senior unsecured notes (the “Exchange Notes”) on the terms
and conditions set forth in the description of notes attached hereto as Exhibit B hereto
(the “Exchange Offer”); provided, that for each dollar in excess of $400,000,000
raised by the Company in the offering contemplated by Section 2(a)(ii) hereof (other than
securities that rank junior in right of payment to Exchange Notes), the Company will increase the
cash portion and concurrently reduce the Exchange Notes portion of the consideration in the
Exchange Offer. The Exchange Notes will have the same coupon as the New Senior Notes. The
exchange ratio for each $1000 principal amount of Notes exchanged in the Exchange Offer will be
$1,000 divided by the price on the Exchange Notes (expressed as a decimal) that equates to a yield
to maturity (to the investor) of the greater of (a) 13.92% or (b) the yield to maturity of the New
Senior Notes (calculated solely based on the coupon of the New Senior Notes and the price at which
they are sold to investors). If less than $150 million of New Senior Notes are issued, then the
coupon of the Exchange Notes will be 13% and the yield to maturity used to calculate the exchange
ratio will be the greater of (a) 15% or (b) the yield to maturity of the New Senior Notes
(calculated solely based on the coupon of the New Senior Notes and the price at which they are sold
to investors). The Company agrees that it will commence the Exchange Offer as promptly as
practicable following the Merger, but in no event later than five business days following the
consummation of the Merger and to do all things reasonably necessary and appropriate in furtherance
thereof, including filing any related documents with the Securities and Exchange Commission (the
“Commission”), if applicable, and to use its best efforts to consummate the Exchange Offer
within 30 business days of its commencement.



     4. Instruction to Registered Holders. Section 9.02 of the Indenture provides that the
Holders (defined as the registered holders) of a majority in aggregate principal amount of
the Notes then outstanding may waive compliance with certain provisions of the Indenture, subject
to the limitations set forth therein. Each of the Beneficial Noteholders hereby covenants and
agrees to instruct its registered holder or holders of the Notes to execute a waiver, as of the
date hereof, substantially in the form attached hereto as Exhibit C, implementing the
Waiver and instructing the Trustee to execute the supplemental indenture referred to in Section 1
and agrees to take any additional action as may be reasonably requested by the Company in order to
give effect to the Waiver and to make the supplemental indenture effective.



     5. Effectiveness of this Agreement. This Agreement shall become effective immediately upon
the execution hereof by the parties listed on the signature pages hereto.



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     6. Termination of Agreement. Notwithstanding anything to the contrary set forth in this
Agreement, this Agreement and the Waiver shall terminate upon termination of the Merger Agreement
without the Merger having been consummated upon or prior to such termination.



     7. Representations and Warranties.



          (a) Each of XM Holdings and the Company represents and warrants to each of the Beneficial
Noteholders that:





     (i) each of XM Holdings and XM Inc. is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and has all requisite
corporate, partnership or other power and authority to enter into this Agreement and to
carry out the transactions contemplated by, and perform its respective obligations under,
this Agreement;




     (ii) the execution and delivery of this Agreement and the performance of its
obligations hereunder have been duly authorized by all necessary corporate, partnership or
other action on its part;




     (iii) the execution, delivery and performance by it of this Agreement do not and shall
not (A) violate any provision of law, rule or regulation applicable to either of XM Holdings
or XM Inc. or their respective certificate of incorporation or bylaws or other
organizational documents or (B) conflict with, result in the breach of or constitute (with
due notice or lapse of time or both) a default under any material contractual obligations to
which either of XM Holdings or XM Inc. is a party or under their respective certificate of
incorporation, bylaws or other governing instruments;




     (iv) the execution, delivery and performance by it of this Agreement do not and shall
not require any registration or filing with, the consent or approval of, notice to, or any
other action with respect to, any Federal, state or other governmental authority or
regulatory body, except for (A) the registration under the Securities Act of 1933, as
amended (the “Securities Act”), of the securities to be issued in the Exchange Offer
in the event that the Company determines to register the Exchange Offer under the Securities
Act and (B) such consents, approvals, authorizations, registrations or qualifications as may
be required under the state securities or Blue Sky laws in connection with the Exchange
Offer and such other filings as may be necessary or required by the Commission; and




     (v) assuming the due execution and delivery of this Agreement by each of the other
parties hereto, this Agreement is the legally valid and binding obligation of it,
enforceable against it in accordance with its terms.



          (b) Each of the Beneficial Noteholders severally and not jointly represents and warrants to
the Company and XM Holdings that:





     (i) it is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate, partnership or other



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power and authority to enter into this Agreement and to carry out the transactions
contemplated by, and perform its respective obligations under, this Agreement;




     (ii) the execution and delivery of this Agreement and the performance of its
obligations hereunder have been duly authorized by all necessary corporate, partnership or
other action on its part;




     (iii) assuming the due execution and delivery of this Agreement by each of the other
parties hereto, this Agreement is the legally valid and binding obligation of it,
enforceable against it in accordance with its terms;




     (iv) as of the date of this Agreement, such Beneficial Noteholder is the beneficial
owner of, or the investment adviser or manager for the beneficial owners of, the principal
amount at maturity of the Notes, set forth opposite such Beneficial Noteholder’s name on
Schedule A hereto, with the power and authority to vote and dispose of such Notes;




     (v) as of the date of this Agreement, such Beneficial Noteholder is not aware, after
due inquiry, of any event that, due to any fiduciary or similar duty to any other Person,
would prevent it from taking any action required of it under this Agreement;




     (vi) it is a “qualified institutional buyer” (as such term is defined in Rule 144A
promulgated under the Securities Act);




     (vii) the knowledge and experience of such Beneficial Noteholder in financial and
business matters is such that it, together with its advisors, is capable of evaluating the
merits and risks of entering into this Agreement;




     (viii) such Beneficial Noteholder acknowledges that no representations, express or
implied, are being made with respect to XM Holdings or any of its subsidiaries or affiliates
or representatives, Sirius or any of its subsidiaries or affiliates or representatives or
otherwise, other than those expressly set forth herein;




     (ix) in making its decision to enter into this Agreement, such Beneficial Noteholder
has relied upon independent investigations made by such Beneficial Noteholder (and has not
relied on XM Holdings or any of its subsidiaries or affiliates, Sirius or any of its
subsidiaries or affiliates or J.P. Morgan Securities Inc. or any of its subsidiaries or
affiliates (collectively, “JPMorgan”)) and, to the extent believed by such
Beneficial Noteholder to be appropriate, such Beneficial Noteholder’s representatives,
including such Beneficial Noteholder’s own legal, tax and other advisors;




     (x) such Beneficial Noteholder and its representatives have been given the opportunity
to examine documents and to ask questions of, and to receive answers from, XM Holdings and
XM Inc. or any of their subsidiaries concerning the terms and conditions of the transactions
contemplated hereby; and




     (xi) such Beneficial Noteholder has been represented by counsel in connection with this
Agreement and the transactions contemplated by this Agreement.



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     8. Amendments and Modifications. Except as otherwise expressly provided in this Agreement,
this Agreement shall not be amended, modified or supplemented, except in writing signed by the
Company, XM Holdings and each of the Beneficial Noteholders.



     9. No Other Waivers. Each of the signatories to this Agreement expressly acknowledges and
agrees that, except as expressly provided in this Agreement, nothing in this Agreement is intended
to, or does, in any manner waive, limit, impair or restrict the ability of any party to this
Agreement to protect and preserve all of its rights, remedies and interests, including, without
limitation, with respect to its claims against the Company and XM Holdings.



     10. Further Assurances. Each of the signatories to this Agreement hereby further covenants
and agrees to execute and deliver all further documents and agreements and take all further action
that may be reasonably necessary or desirable in order to enforce and effectively implement the
terms and conditions of this Agreement, including instructing the registered holder of the Notes to
take the actions described in Section 4 hereof.



     11. Complete Agreement. This Agreement, including the Schedules and Exhibits hereto,
constitutes the complete agreement between the signatories to this Agreement with respect to the
subject matter hereof and supersedes all prior negotiations, agreements and understandings with
respect to the subject matter hereof. The provisions of this Agreement shall be interpreted in a
reasonable manner to effect the intent of the signatories to this Agreement.



     12. Notices. All notices, requests, demands, claims and other communications hereunder
shall be in writing and shall be (a) transmitted by hand delivery, or (b) mailed by first class,
registered or certified mail, postage prepaid, or (c) transmitted by overnight courier, or (d)
transmitted by telecopy, and in each case, if to the Company or XM Holdings, at the address set
forth below:


XM Satellite Radio Inc.

XM Satellite Radio Holdings Inc.

1500 Eckington Place, N.E.

Washington, DC 20002

Fax: (202) 380-4000

Attention: General Counsel



with a copy to: Chief Financial Officer



if to a Beneficial Noteholder, to the address set forth on the signature pages to this Agreement,
with a copy to the Beneficial Noteholders’ counsel:



Notices mailed or transmitted in accordance with the foregoing shall be deemed to have been given
upon receipt.




     13. Governing Law. This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York.



     14. Jurisdiction. Each party hereto irrevocably submits to the jurisdiction of (i) the
Supreme Court of the State of New York, New York County, and (ii) the United States District



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Court for the Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby. Each party hereto
agrees to commence any action, suit or proceeding relating hereto either in the United States
District Court for the Southern District of New York or, if such suit, action or other proceeding
may not be brought in such court for reasons of subject matter jurisdiction, in the Supreme Court
of the State of New York, New York County. Each party hereto irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in (A) the Supreme Court of the State of New
York, New York County, or (B) the United States District Court for the Southern District of New
York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in
any such court that any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.



     15. Consent to Service of Process. Each of the signatories to this Agreement irrevocably
consents to service of process by mail at the address listed with the signature of each such party
on the signature pages to this Agreement. Each of the signatories to this Agreement agrees that its
submission to jurisdiction and consent to service of process by mail is made for the express
benefit of each of the other signatories to this Agreement.



     16. Specific Performance. It is understood and agreed by each of the signatories to this
Agreement that money damages would not be a sufficient remedy for any breach of this Agreement by
any party and the sole remedy for each non-breaching party shall be specific performance as remedy
for any such breach.



     17. Headings. The headings of the sections, paragraphs and subsections of this Agreement
are inserted for convenience only and shall not affect the interpretation hereof.



     18. Successors and Assigns. This Agreement is intended to bind and inure to the benefit of
the signatories to this Agreement and their respective successors, permitted assigns, heirs,
executors, administrators and representatives. The agreements, representations and obligations of
the undersigned parties under this Agreement are, in all respects, several and not joint.



     19. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page by facsimile shall be effective as delivery
of a manually executed counterpart.



     20. No Third-Party Beneficiaries. Unless expressly stated in this Agreement, this
Agreement shall be solely for the benefit of the signatories to this Agreement, and no other person
or entity shall be a third-party beneficiary hereof, except that (i) each person or entity to which
a Beneficial Noteholder transfers a Note from and after the execution hereof shall have the right
to enforce XM Holdings’ and its subsidiaries’ obligations under Section 3, for so long as such
person or entity holds such Note and (ii) JPMorgan shall be a third party beneficiary of the
representations and warranties of the Beneficial Noteholders in Section 7(b).



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     IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed and delivered
by its duly authorized officers as of the date first written above.



	 	 	 	 	 	 	 
	 	 	XM SATELLITE RADIO INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Joseph J. Euteneuer	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Joseph J. Euteneuer	 	 
	 	 	Title:   EVP & CFO	 	 
	 
	 	 	 	 	 	 
	 	 	XM SATELLITE RADIO HOLDINGS INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Joseph J. Euteneuer	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Joseph J. Euteneuer	 	 
	 	 	Title:   EVP & CFO	 	 






 









 






	 	 	 	 	 	 	 
	 	 	FRANKLIN ADVISERS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Edward D. Perks	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Edward D. Perks	 	 
	 	 	Title: Senior Vice President	 	 






 









 






	 	 	 	 	 	 	 
	 	 	UBS SECURITIES LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/  Robert Del Grande	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Robert Del Grande	 	 
	 	 	Title: Executive Director	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/  James B. Fuqua	 	 
	 

	 	 	 	 	 	 
	 	 	Name: James B. Fuqua	 	 
	 	 	Title: Managing Director and Counsel	 	 






 









 






	 	 	 	 	 	 	 
	 	 	JOHN HANCOCK	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/  Diane R. Landers	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Diane R. Landers	 	 
	 	 	Title: Chief Administrative Officer	 	 







 









 








SCHEDULE A




BENEFICIAL OWNERS




 









 








EXHIBIT A




Supplemental Indenture Regarding Waiver





 









 





EXHIBIT A




FORM OF SUPPLEMENTAL INDENTURE




          SUPPLEMENTAL INDENTURE, dated as of July      , 2008 (this “First Supplemental
Indenture”), among XM Satellite Radio Inc., a Delaware corporation (the “Issuer”), XM
Satellite Radio Holdings Inc. (“XM Holdings”), XM Equipment Leasing LLC as subsidiary
guarantor, XM Radio Inc. as subsidiary guarantor (together with XM Equipment Leasing LLC, the
“Subsidiary Guarantors”), and The Bank of New York Mellon, as trustee under the Indenture
referred to below (the “Trustee”).



W I T N E S S E T H:




          WHEREAS, the Issuer, XM Holdings, the Subsidiary Guarantors and the Trustee have heretofore
executed and delivered an Indenture, dated as of May 1, 2006 (the “Indenture”), providing
for the issuance of 9.75% Senior Notes due 2014 (the “Notes”);



          WHEREAS, Section 9.02 of the Indenture provides that compliance with any provision of the
Indenture may be waived with the consent of the Holders (as defined in the Indenture) of a majority
in aggregate principal amount of the then outstanding Notes;



          WHEREAS, the proposed merger of XM Holdings with Vernon Merger Corporation (“Merger
Sub”), a wholly-owned subsidiary of Sirius Satellite Radio Inc. (“Sirius”), pursuant to
the terms of an Agreement and Plan of Merger, dated as of February 19, 2007, as it may be amended,
modified or extended (the “Merger Agreement”), among XM Holdings, Merger Sub and Sirius, or
other business combination in which XM Holdings and Sirius become affiliated (the “Merger”)
may trigger certain obligations of the Issuer pursuant to the Indenture;



          WHEREAS, the Issuer, XM Holdings and certain beneficial owners of the Notes (the
“Beneficial Noteholders”) have entered into a Waiver and Letter Agreement, dated as of July
     , 2008 (the “Waiver and Letter Agreement”), pursuant to which the Beneficial
Noteholders, holding a majority in aggregate principal amount of the Notes, have duly agreed and
consented that, to the extent the consummation of the Merger constitutes a “Change of Control” as
defined under Section 1.01 of the Indenture, the requirements pursuant to Section 4.14 (Offer to
Repurchase Upon Change of Control) of the Indenture that the Issuer repurchase the Notes or make an
offer to the Holders of the Notes to repurchase the Notes and to give notice of such Change of
Control or Offer to Repurchase Upon a Change of Control are waived in respect of such “Change of
Control”; and



          WHEREAS, the execution and delivery of this First Supplemental Indenture have been duly
authorized by all necessary corporate or limited liability company, as the case may be, action on
the part of the Issuer, XM Holdings and the Subsidiary Guarantors and all conditions and
requirements necessary to make this instrument a valid and binding agreement have been duly
performed and complied with.



 









 





          NOW THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the Issuer, XM
Holdings, the Subsidiary Guarantors and the Trustee mutually covenant and agree, for the equal and
ratable benefit of the Holders of the Notes, as follows:



ARTICLE I — WAIVER OF COMPLIANCE




          Section 1.1. Waiver of the “Change of Control” Provision in the Indenture.



               (a) To the extent that the consummation of the Merger constitutes a “Change of Control” as
defined under Section 1.01 of the Indenture, the requirements pursuant to Section 4.14 (Offer to
Repurchase Upon Change of Control) of the Indenture that the Issuer repurchase the Notes or make an
offer to the Holders of the Notes to repurchase the Notes are waived in respect of such “Change of
Control” (the “Waiver”).



               (b) The Waiver shall become effective upon signing and shall cease to be effective as of
August 31, 2008 unless the following events have occurred on or prior to that date:




          (i) the consummation of the Merger;




          (ii) the Issuer or XM Holdings having caused funds to be raised in the amount
of at least $400,000,000 through the issuance of (A) a new series of senior notes
(the “New Senior Notes”) or (B) other securities that will be equal or
junior in right of payment to the new senior unsecured notes to be issued on
substantially the terms set forth on Exhibit B to the Waiver and Letter Agreement
(the “Exchange Notes”), to fund the cash portion of the consideration
payable in the exchange offer to be made for the Notes held by the Beneficial
Noteholders and other “qualified institutional buyers” (as defined in the
Securities Act of 1933, as amended) (and at the Issuer’s option, the other Holders
of the Notes) (the “Exchange Offer”);




          (iii) the Issuer or XM Holdings having raised at least $500,000,000 through a
contribution to the Issuer’s equity capital, the issuance and sale of convertible
or exchangeable notes that will be junior in right of payment to the Exchange
Notes or the issuance and sale of equity securities (it being understood that the
financing conditions in subsection (ii) above and this subsection (iii) are
independent of each other resulting in an aggregate condition of $900,000,000 of
financing);




          (iv) the Issuer or XM Holdings having funded or contributed the necessary
funds into a segregated account to fund the mandatory offer to repurchase all
Senior Floating Rate Notes due 2013 of the Issuer (the “Floating Rate
Notes”) triggered by the Merger;



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          (v) the Issuer or XM Holdings having funded or contributed the necessary
funds into a segregated account to fund the mandatory offer to repurchase
transponders of the XM-4 satellite, triggered by the Merger under the sale and
leaseback transaction pursuant to (A) the Participation Agreement, dated as of
February 13, 2007, by and among XM Holdings, Wells Fargo Bank Northwest in its
capacity as Owner Trustee and other parties, (B) the lease agreement, dated as of
February 13, 2007, by and between Wells Fargo Bank Northwest, as Owner Trustee,
and the Issuer and (C) the other related documents (the “Sale-Leaseback
Transaction”);




          (vi) the Issuer or XM Holdings having repaid all borrowings under Section 13
and related “credit facility” portions of the Third Amended and Restated
Distribution and Credit Agreement, dated as of February 6, 2008, by and among
General Motors Corporation, XM Holdings and the Issuer;




          (vii) with respect to XM Holdings’ 1.75% Convertible Senior Notes due 2009
(the “Convertible Senior Notes”), XM Holdings having obtained the consent
of holders of at least 98% of the aggregate principal amount of such Convertible
Senior Notes to waive a change of control offer, if any, triggered by the Merger
with the interest rate on such Convertible Senior Notes to be increased to 10%
subject to the Merger being completed; and




          (viii) the absence of any occurrence of an event that, with notice or lapse
of time or both, would constitute a default, in the due performance or observance
of any term, covenant or condition contained in the indenture governing the
Exchange Notes.



ARTICLE II — MISCELLANEOUS




          Section 2.1. Effect of Supplemental Indenture. From and after the effective date of
this First Supplemental Indenture, the Indenture and the Notes shall be supplemented in accordance
herewith, and this First Supplemental Indenture shall form a part of the Indenture and the Notes
for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered
under the Indenture shall be bound thereby.



          Section 2.2. Indenture Remains in Full Force and Effect. Except as supplemented by
this First Supplemental Indenture, all provisions in the Indenture and the Notes shall remain in
full force and effect.



          Section 2.3. References to Supplemental Indenture. Any and all notices, requests,
certificates and other instruments executed and delivered after the execution and delivery of this
First Supplemental Indenture may refer to the Indenture without making specific reference to this
First Supplemental Indenture, but nevertheless all such



3









 







references shall include this First Supplemental Indenture unless the context requires
otherwise.



          Section 2.4. Conflict with Trust Indenture Act (“TIA”). If any provision of this First
Supplemental Indenture limits, qualifies or conflicts with any provision of the TIA that is
required under the TIA to be part of and govern any provision of this First Supplemental Indenture,
the provision of the TIA shall control. If any provision of this First Supplemental Indenture
modifies or excludes any provision of the TIA that may be so modified or excluded, the provision of
the TIA shall be deemed to apply to the Indenture as so modified or to be excluded by this First
Supplemental Indenture, as the case may be.



          Section 2.5. Severability. If any court of competent jurisdiction shall determine that
any provision in this First Supplemental Indenture shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.



          Section 2.6. Terms Defined in the Indenture. All capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the Indenture.



          Section 2.7. Headings. The Article and Section headings of this First Supplemental
Indenture have been inserted for convenience of reference only, are not to be considered a part of
this First Supplemental Indenture and shall in no way modify or restrict any of the terms or
provisions hereof.



          Section 2.8. Benefits of First Supplemental Indenture. Nothing in this First
Supplemental Indenture or the Notes, express or implied, shall give to any Person, other than the
parties hereto and thereto and their successors hereunder and thereunder and the Holders of the
Notes any benefit of any legal or equitable right, remedy or claim under the Indenture, this First
Supplemental Indenture or the Notes.



          Section 2.9. Successors. All agreements of the Issuer and XM Holdings in this First
Supplemental Indenture shall bind their respective successors. All agreements of the Trustee in
this First Supplemental Indenture shall bind its successors.



          Section 2.10. Trustee Not Responsible for Recitals. The recitals contained herein
shall be taken as the statements of the Issuer and XM Holdings and the Trustee assumes no
responsibility for their correctness.



          Section 2.11. Certain Duties and Responsibilities of the Trustee. In entering into
this First Supplemental Indenture, the Trustee shall be entitled to the benefit of every provision
of the Indenture and the Notes relating to the conduct or affecting the liability or affording
protection to the Trustee, whether or not elsewhere herein so provided.



          Section 2.12. Governing Law. This First Supplemental Indenture shall be governed by,
and construed in accordance with, the laws of the State of New York.



4









 





          Section 2.13. Counterpart Originals. The parties may sign any number of copies of this
First Supplemental Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement.



          Section 2.14. Effectiveness. This First Supplemental Indenture shall become effective
upon execution hereof by the parties listed on the signature pages hereto.



          Section 2.15. Confirmation. Each of the Issuer, XM Holdings, the Subsidiary Guarantors
and the Trustee hereby confirms and reaffirms the Indenture in every particular except as amended
and supplemented by this First Supplemental Indenture.



          Section 2.16. Notation on Notes. Pursuant to Section 9.05 of the Indenture, new Notes
reflecting the amendments to the Indenture made hereby shall not be issued; however, corresponding
changes to the Notes to reflect the amendments made hereby shall be deemed to be made to the Notes
as of the date of this First Supplemental Indenture. The Trustee may, but shall not be required to,
place an appropriate notation as to this First Supplemental Indenture on any Note hereafter
authenticated in accordance with Section 9.05 of the Indenture.



          Section 2.17. Entire Agreement. This First Supplemental Indenture, together with the
Indenture as amended hereby and the Notes, contains the entire agreement of the parties, and
supersedes all other representations, warranties, agreements and understandings between the
parties, oral or otherwise, with respect to the matters contained herein and therein.



5









 





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



	 	 	 	 	 	 	 
	 	 	XM SATELLITE RADIO INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	XM SATELLITE RADIO HOLDINGS INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	XM EQUIPMENT LEASING LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	XM RADIO INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 






	 	 	 	 	 
	THE BANK OF NEW YORK MELLON,

as Trustee	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 






[XM Satellite Radio Inc. Supplemental Indenture]





 












 








EXHIBIT B




Description of Notes





 









 




EXHIBIT B




DESCRIPTION OF NOTES




     For purposes of this description, references to the “Company,” “we,” “our” and “us” refers XM
Satellite Radio Inc. (not including its parent company or any of its subsidiaries). The term
“Outstanding Notes” refers to the 9.75% Senior Notes due
2014 and the term “Notes” refers to

 the        % Senior Notes due 2014 offered hereby in accordance with Section 3(a)(9) of the Securities
Act.



     The Outstanding Notes were and the Notes will be issued under an Indenture between the Company
and The Bank of New York Mellon, as Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust Indenture Act.



     Certain terms used in this description are defined under the subheading “—Certain
definitions”. Certain defined terms used in this description but not defined herein have the
meanings assigned to them in the Indenture. The following description is only a summary of the
material provisions of the Indenture. We urge you to read the Indenture because it, not this
description, defines your rights as holders of these Notes. You may request copies of the Indenture
at our address set forth under the heading “Where you can find more information”.



Brief description of Notes




     These Notes:




	 	•	 	are unsecured senior obligations of the Company;
	 
	 	•	 	are senior in right of payment to any existing and future Subordinated Obligations
of the Company;
	 
	 	•	 	will be unconditionally guaranteed by the Guarantors (including Holdings) on a
senior basis, subject to the limitations described below under the caption “Note
Guarantee”; and
	 
	 	•	 	are effectively junior to all of the existing and future liabilities of any of the
Company’s Subsidiaries that are not Subsidiary Guarantors.





Principal, maturity and interest




     The Company issued the Outstanding Notes initially with an aggregate principal amount of $600
million. The Company issued the Outstanding Notes in denominations of $1,000 and any integral
multiple of $1,000. As long as we are subject to the debt incurrence covenants under the Existing
Sale and Leaseback Transaction and subject to the indentures governing the Company’s 9.75% Senior
Notes due 2014 or the Company’s Senior Floating Rate Notes due 2013, the Notes will have a maturity
of       , 2014. If at any time prior to       , 2013, the Company is
no longer either (i) subject to the debt incurrence covenants under the Existing Sale and Leaseback
Transaction or (ii) subject to the indentures governing the Company’s 9.75% Senior Notes due 2014
and the Company’s Senior Floating Rate Notes due 2013, to the extent any notes issued thereunder
remain outstanding following the refinancing



 









 




transactions described in this offering memorandum, the Notes will mature on      ,
2013. Subject to our compliance with the covenant described under the subheading “—Certain
covenants—Limitation on indebtedness”, we will be permitted to issue more Notes from time to time
under the Indenture (the “Additional Notes”). The Notes and the Additional Notes, if any, will be
treated as a single class for all purposes of the Indenture, including waivers, amendments,
redemptions and offers to purchase. Unless the context otherwise requires, for all purposes of the
Indenture and this “Description of Notes”, references to the Notes include any Additional Notes
actually issued.




     Interest on these Notes will accrue at the rate of       % per annum and will be payable
semiannually in arrears on       and       of each year, commencing on
        . We will make each interest payment to the holders of record of these Notes on the immediately
preceding       and       . We will pay interest on overdue principal at 1% per
annum in excess of the above rate and will pay interest on overdue installments of interest at such
higher rate to the extent lawful.



     Interest on these Notes will accrue from the date of original issuance or, if interest has
already been paid, from the most recent interest payment date. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months.



Payments on the Notes; paying agent and registrar




     We will pay principal of, premium, if any, and interest on the Notes at the office or agency
designated by the Company in the Borough of Manhattan, The City of New York, except that we may, at
our option, pay interest on the Notes by check mailed to holders of the Notes at their registered
address as it appears in the Registrar’s books. We have initially designated the corporate trust
office of the Trustee in New York, New York to act as our Paying Agent and Registrar. We may,
however, change the Paying Agent or Registrar without prior notice to the holders of the Notes, and
the Company or any of its Restricted Subsidiaries may act as Paying Agent or Registrar.



     We will pay principal of, premium, if any, and interest on, Notes in global form registered in
the name of or held by The Depository Trust Company or its nominee in immediately available funds
to The Depository Trust Company or its nominee, as the case may be, as the registered holder of
such global Note.



Transfer and exchange




     A holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and
the Trustee may require a holder, among other things, to furnish appropriate endorsements and
transfer documents. No service charge will be imposed by the Company, the Trustee or the Registrar
for any registration of transfer or exchange of Notes, but the Company may require a holder to pay
a sum sufficient to cover any transfer tax or other governmental taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any Note for a period of
15 days before a selection of Notes to be redeemed.



     The registered holder of a Note will be treated as the owner of it for all purposes.



2









 





Optional redemption




     We may, at our option, redeem some or all of the Notes at any time and from time to time at a
redemption price equal to the greater of the following amounts, plus, in each case, accrued and
unpaid interest on the principal amount being redeemed to the applicable redemption date:




	 	•	 	100% of the principal amount of the Notes to be redeemed; and
	 
	 	•	 	the sum of the present values of the principal amount and the remaining
scheduled payments of interest on the Notes to be redeemed (not including any
portion of payments of interest accrued as of the applicable redemption date),
discounted to the applicable redemption date in accordance with customary market
practice on a semi-annual basis at a rate equal to the sum of the Treasury Rate
plus 0.50%.





     The redemption prices will be calculated by the Independent Investment Banker assuming a
360-day year consisting of twelve 30-day months. For purposes of calculating the redemption prices,
the following terms will have the meanings set forth below.



     “Comparable Treasury Issue” means the U.S. Treasury security or securities selected by the
Independent Investment Banker as having a maturity comparable to the remaining term of the Notes to
be redeemed that would be used, at the time of selection and in accordance with customary market
practice, in pricing new issues of corporate debt securities of a comparable maturity to the
remaining term of such Notes.



     “Comparable Treasury Price” means, with respect to any redemption date,




	 	•	 	the bid-side price for the Comparable Treasury Issue as of the third Business
Day preceding the redemption date, as set forth in the daily statistical release
(or any successor release) published by the Wall Street Journal in the table
entitled “Treasury Bonds, Notes, and Bills,” as determined by the Independent
Investment Banker, or
	 
	 	•	 	if such release (or any successor release) is not published or does not contain
such prices on such Business Day:






	 	o	 	the average of the Reference Treasury Dealer Quotations
for that redemption date, after excluding the highest and lowest of the
Reference Treasury Dealer Quotations;
	 
	 	o	 	if the Trustee obtains fewer than four Reference
Treasury Dealer Quotations, the average of all Reference Treasury Dealer
Quotations so received; or
	 
	 	o	 	if only one Reference Treasury Dealer Quotation is
received, such quotation.





     “Independent Investment Banker” means one of the Reference Treasury Dealers selected by the
Trustee after consultation with us.



3









 





     “Reference Treasury Dealer” means each of four primary U.S. Government securities dealers in
New York City (each a “Primary Treasury Dealer”), consisting of (i) J.P. Morgan Securities Inc. (or
its affiliate), (ii) Morgan Stanley & Co. Incorporated (or its affiliate), (iii) UBS Securities LLC
and (iv) another nationally recognized investment banking firm (or its affiliate) that we select in
connection with the particular redemption, and their respective successors, provided that if any of
them ceases to be a Primary Treasury Dealer, we will substitute another nationally recognized
investment banking firm (or its affiliate) that is a Primary Treasury Dealer.



     “Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer
and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for
the Comparable Treasury Issue (expressed as a percentage of its principal amount) quoted in writing
to the Trustee by such Reference Treasury Dealer at 3:30 p.m., New York City time, on the third
Business Day preceding that redemption date.



     “Treasury Rate” means, with respect to any redemption date, the rate per year equal to the
semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated on the third
Business Day preceding the applicable redemption date, assuming a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price
for that redemption date.



     Unless we default in the payment of the redemption price, on and after the applicable
redemption date, interest will cease to accrue on the Notes or portions of the Notes called for
redemption.



     If the optional redemption date is on or after an interest record date and on or before the
related interest payment date, the accrued and unpaid interest, if any, will be paid to the Person
in whose name the Note is registered at the close of business, on such record date, and no
additional interest will be payable to holders whose Notes will be subject to redemption by the
Company.



Selection and notice of redemption




     If we are redeeming less than all the Notes at any time, the Registrar will select Notes to be
redeemed using any method that it deems fair and appropriate. However, if the Notes are solely
registered in the name of Cede & Co. and traded through The Depository Trust Company, then The
Depository Trust Company will select the Notes to be redeemed in accordance with its practices.



     We will redeem Notes of $1,000 or less in whole and not in part. We will cause notices of
redemption to be mailed by first-class mail at least 30 but not more than 60 days before the
redemption date to each holder of Notes to be redeemed at its registered address.



     If any Note is to be redeemed in part only, the notice of redemption that relates to that Note
will state the portion of the principal amount thereof to be redeemed. We will issue a new Note in
a principal amount equal to the unredeemed portion of the original Note in the name of the holder
upon cancellation of the original Note. Notes called for redemption become due on the date fixed
for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of
them called for redemption.



4









 





Mandatory redemption; offers to purchase; open market purchases




     We are not required to make any mandatory redemption or sinking fund payments with respect to
the Notes. However, under certain circumstances, we may be required to offer to purchase Notes as
described under the captions “—Change of control” and “—Certain covenants—Limitation on sales of
assets and subsidiary stock”. We may at any time and from time to time purchase Notes in the open
market or otherwise.



Ranking




Senior indebtedness versus Notes




     The indebtedness evidenced by these Notes will be unsecured and will rank pari passu in right
of payment to any other Senior Indebtedness of the Company. Secured debt and other secured
obligations of the Company will be effectively senior to the Notes to the extent of the value of
the assets securing such debt or other obligations.



     As of March 31, 2008, on a pro forma basis after giving effect to the refinancing transactions
described in this offering memorandum, including the offering of the Notes and the application of
the proceeds therefrom, Holdings, the Company and the Subsidiary Guarantors would have had
approximately $2,107.6 million of Indebtedness outstanding, of which $407.6 million is secured
Indebtedness. The amounts we will receive as a result of the refinancing transactions described in
this offering memorandum may vary from those described in this offering memorandum depending on
several factors, including changes in our refinancing plans as a result of market conditions or
other factors, the extent to which holders of existing indebtedness may elect not to accept our
offer to refinance their indebtedness, the timing of the merger and other factors. For more
information on the sources and uses of proceeds associated with the refinancing transactions
described in this offering memorandum, you should read the table under the caption “Use of
proceeds” as well as “The merger,” “Capitalization” and “Summary of historical consolidated
financial data” appearing elsewhere in this offering memorandum.



Liabilities of subsidiaries versus Notes




     A portion of our operations are conducted through our Subsidiaries. Claims of creditors of
Subsidiaries that are not Subsidiary Guarantors, including trade creditors and creditors holding
indebtedness issued by such non-Guarantor Subsidiaries, and claims of preferred stockholders of
such non-Guarantor Subsidiaries generally will have priority with respect to the assets and
earnings of such non-Guarantor Subsidiaries over the claims of our creditors, including holders of
the Notes. Accordingly, the Notes will be effectively subordinated to creditors (including trade
creditors) and preferred stockholders, if any, of our non-Guarantor Subsidiaries.



     As of March 31, 2008, on a pro forma basis after giving effect to the refinancing transactions
described in this offering memorandum, including the offering of the Notes, non-Guarantor
Subsidiaries would have had $25.9 million of liabilities, including trade and other payables.



5









 





     Although the Indenture limits the Incurrence of Indebtedness and preferred stock by certain of
our Subsidiaries, such limitation is subject to a number of significant qualifications. Moreover,
the Indenture does not impose any limitation on the Incurrence by such Subsidiaries of liabilities
that are not considered Indebtedness under the Indenture. See “—Certain covenants—Limitation on
indebtedness”.



     Note Guarantees



     Upon consummation of the Escrow LLC-Company Merger, the Notes will be guaranteed by Holdings
and each of the Company’s current and future Material Subsidiaries. Currently, XM Equipment Leasing
LLC and XM Radio Inc. (to the extent permitted by FCC rules and regulations) are the only
Subsidiary Guarantors. These Note Guarantees will be joint and several obligations of the
Guarantors. The Subsidiary Guarantees will be effectively subordinated to any secured Indebtedness
of the applicable Guarantor to the extent of the value of the assets securing such Indebtedness.
The obligations of each Guarantor under its Note Guarantee will be limited as necessary to prevent
that Note Guarantee from constituting a fraudulent conveyance under applicable law. See “Risk
Factors—Federal and state statutes allow courts, under specific circumstances, to void or
subordinate guarantees and require noteholders to return payments received from guarantors.”



     As of March 31, 2008, on a pro forma basis after giving effect to the refinancing transactions
described in this offering memorandum, including the offering of the Notes and the application of
the proceeds therefrom, the Subsidiary Guarantors and the Parent Guarantor would have had $2,107.6
million in Indebtedness outstanding, of which $407.6 million is secured Indebtedness.



     A Guarantor may not sell or otherwise dispose of all or substantially all of its assets to, or
consolidate with or merge with or into (whether or not such Guarantor is the surviving Person)
another Person, other than the Company or another Guarantor, unless:



     (1) immediately after giving effect to that transaction, no Default or Event of Default
exists; and



     (2) either:



          (a) the Person acquiring the property in any such sale or disposition or the Person formed by
or surviving any such consolidation or merger assumes all the obligations of that Guarantor under
the Indenture and its Note Guarantee pursuant to a supplemental indenture satisfactory to the
Trustee; or




          (b) the Net Proceeds of such sale or other disposition are applied in accordance with the
applicable “Asset Sale” provisions of the Indenture.




     The Note Guarantee of a Guarantor will be released with respect to the Notes:



     (1) in connection with any sale or other disposition of all or substantially all of the assets
of that Guarantor (including by way of merger or consolidation) to a Person that is not (either
before or after giving effect to such transaction) the Company or a Restricted Subsidiary



6









 







of the Company, if the sale or other disposition does not violate the “Asset Sale” provisions
of the Indenture;



     (2) in connection with any sale or other disposition of all of the Capital Stock of that
Guarantor to a Person that is not (either before or after giving effect to such transaction) the
Company or a Restricted Subsidiary of the Company, if the sale or other disposition does not
violate the “Asset Sale” provisions of the Indenture;



     (3) if the Company designates any Restricted Subsidiary that is a Guarantor to be an
Unrestricted Subsidiary in accordance with the applicable provisions of the Indenture; or



     (4) upon legal defeasance or satisfaction and discharge of the Indenture as provided below
under the captions “—Defeasance” and “—Satisfaction and discharge.”



     See “—Limitation on sales of assets and subsidiary stock.”



Book-entry, delivery and form




     The Notes will initially be represented in the form of one or more global notes (the “Global
Notes”) in fully-registered book-entry form without interest coupons that will be deposited upon
issuance with the Trustee under the Indenture, The Bank of New York Mellon, as custodian for The
Depository Trust Company, or “DTC,” and registered in the name of DTC or its nominee, in each case
for credit to an account of a direct or indirect participant as described below.



     Except as set forth below, the global notes may be transferred, in whole and not in part, only
to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the
global notes may not be exchanged for notes in certificated form (the “Certificated Notes”) except
in the limited circumstances described below. See “—Exchange of global notes for certificated
notes.” In addition, transfer of beneficial interests in the global notes will be subject to the
applicable rules and procedures of DTC and its direct or indirect participants, which may change
from time to time. The Notes may be presented for registration of transfer and exchange at the
Corporate Trust Office of the Trustee.



Depository procedures




     The following description of the operations and procedures of DTC is provided solely as a
matter of convenience. These operations and procedures are solely within the control of the
respective settlement systems and are subject to changes by them. We take no responsibility for
these operations and procedures and urge investors to contact the system or their participants
directly to discuss these matters.



     DTC has advised us that DTC is a limited-purpose trust company organized under the laws of the
State of New York, a “banking organization” within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a “clearing corporation” within the meaning of the Uniform
Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participating organizations (collectively,
the “participants”) and to facilitate the clearance and



7









 







settlement of transactions in those securities between participants through electronic
book-entry changes in accounts of its participants. The participants include securities brokers and
dealers (including the initial purchasers of the Outstanding Notes), banks, trust companies,
clearing corporations and certain other organizations. Access to DTC’s system is also available to
other entities such as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly (collectively, the
"indirect participants”). Persons who are not participants may beneficially own securities held by
or on behalf of DTC only through the participants or the indirect participants. The ownership
interests in, and transfers of ownership interests in, each security held by or on behalf of DTC
are recorded on the records of the participants and indirect participants.



     DTC has also advised us that, pursuant to procedures established by it:




	 	(1)	 	upon deposit of the Global Notes, DTC will credit the accounts of participants
designated by the initial purchasers of the Outstanding Notes with portions of the
principal amount of the Global Notes; and
	 
	 	(2)	 	ownership of these interests in the Global Notes will be shown on, and the
transfer of ownership of these interests will be effected only through, records
maintained by DTC (with respect to the participants) or by the participants and the
indirect participants (with respect to other owners of beneficial interests in the
Global Notes).





     Investors in the Global Notes who are participants in DTC’s system may hold their interests
therein directly through DTC. Investors in the Global Notes who are not participants may hold their
interests therein indirectly through organizations which are participants in such system. All
interests in a Global Note may be subject to the procedures and requirements of DTC. The laws of
some states require that certain Persons take physical delivery in definitive form of securities
that they own. Consequently, the ability to transfer beneficial interests in a Global Note to such
Persons will be limited to that extent. Because DTC can act only on behalf of participants, which
in turn act on behalf of indirect participants, the ability of a Person having beneficial interests
in a Global Note to pledge such interests to Persons that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests.



     Except as described below, owners of an interest in the Global Notes will not have Notes
registered in their names, will not receive physical delivery of Notes in certificated form and
will not be considered the registered owners or “Holders” thereof under the Indenture for any
purpose.



     Payments in respect of the principal of, and interest and premium and additional interest, if
any, on a Global Note registered in the name of DTC or its nominee will be payable to DTC in its
capacity as the registered Holder under the Indenture. Under the terms of the Indenture, the
Company and the Trustee will treat the Persons in whose names the Notes, including the Global
Notes, are registered as the owners of the Notes for the purpose of receiving payments and for all
other purposes. Consequently, neither the Company, the Trustee nor any agent of the Company or the
Trustee has or will have any responsibility or liability for:



8









 






	 	(1)	 	any aspect of DTC’s records or any participant’s or indirect participant’s
records relating to or payments made on account of beneficial ownership interests in
the Global Notes or for maintaining, supervising or reviewing any of DTC’s records or
any participant’s or indirect participant’s records relating to the beneficial
ownership interests in the Global Notes; or
	 
	 	(2)	 	any other matter relating to the actions and practices of DTC or any of its
participants or indirect participants.





     Transfers between participants in DTC will be effected in accordance with DTC’s procedures,
and will be settled in same-day funds.



     DTC has advised us that its current practice, upon receipt of any payment in respect of
securities such as the Notes (including principal and interest), is to credit the accounts of the
relevant participants with the payment on the payment date unless DTC has reason to believe it will
not receive payment on such payment date. Each relevant participant is credited with an amount
proportionate to its beneficial ownership of an interest in the principal amount of the relevant
security as shown on the records of DTC. Payments by the participants and the indirect participants
to the beneficial owners of Notes will be governed by standing instructions and customary practices
and will be the responsibility of the participants or the indirect participants and will not be the
responsibility of DTC, the Trustee or the Company. Neither the Company nor the Trustee will be
liable for any delay by DTC or any of its participants in identifying the beneficial owners of the
Notes, and the Company and the Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.



     DTC has advised the Company that it will take any action permitted to be taken by a Holder of
Notes only at the direction of one or more participants to whose account DTC has credited the
interests in the Global Notes and only in respect of such portion of the aggregate principal amount
of the Notes as to which such participant or participants has or have given such direction.
However, if there is an Event of Default under the Notes, DTC reserves the right to exchange the
Global Notes for legended Notes in certificated form, and to distribute such Notes to its
participants.



     Although DTC has agreed to the foregoing procedures in order to facilitate transfers of
interests in the Global Notes among participants, it is under no obligation to perform such
procedures, and such procedures may be discontinued or changed at any time. Neither the Company nor
the Trustee nor any of their respective agents will have any responsibility for the performance by
DTC or its participants or indirect participants of their respective obligations under the rules
and procedures governing their operations.



Exchange of global notes for certificated notes




     A Global Note is exchangeable for Certificated Notes if:




	 	(1)	 	DTC (A) notifies the Company that it is unwilling or unable to continue as
depositary for the Global Notes or (B) has ceased to be a clearing agency registered
under the Exchange Act and, in each case, a successor depositary is not appointed;





9









 






	 	(2)	 	the Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of the Certificated Notes; or
	 
	 	(3)	 	there has occurred and is continuing an Event of Default with respect to the
Notes.





     In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes
upon prior written notice given to the Trustee by or on behalf of DTC in accordance with the
Indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial
interests in Global Notes will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with its customary
procedures).



Exchange of certificated notes for global notes




     Certificated Notes may not be exchanged for beneficial interests in any Global Note unless the
transferor first delivers to the Trustee a written certificate (in the form provided in the
Indenture) to the effect that such transfer will comply with the appropriate transfer restrictions
applicable to such Notes.



Same day settlement and payment




     The Company will make payments in respect of the Notes represented by the Global Notes
(including principal, premium, if any, interest and additional interest, if any) by wire transfer
of immediately available funds to the accounts specified by the Global Note Holder. The Company
will make all payments of principal, interest, premium and additional interest, if any, with
respect to Certificated Notes by wire transfer of immediately available funds to the accounts
specified by the Holders of the Certificated Notes or, if no such account is specified, by mailing
a check to each such Holder’s registered address. The Notes represented by the Global Notes are
expected to be eligible to trade in DTC’s Same-Day Funds Settlement System, and any permitted
secondary market trading activity in such Notes will, therefore, be required by DTC to be settled
in immediately available funds. The Company expects that secondary trading in any Certificated
Notes will also be settled in immediately available funds.



     Because of time zone differences, the securities account of a Euroclear or Clearstream
participant purchasing an interest in a Global Note from a participant will be credited, and any
such crediting will be reported to the relevant Euroclear or Clearstream participant, during the
securities settlement processing day (which must be a Business Day for Euroclear and Clearstream)
immediately following the settlement date of DTC. DTC has advised us that cash received in
Euroclear or Clearstream as a result of sales of interests in a Global Note by or through a
Euroclear or Clearstream participant to a Participant will be received with value on the settlement
date of DTC but will be available in the relevant Euroclear or Clearstream cash account only as of
the Business Day for Euroclear or Clearstream following DTC’s settlement date.


Change
of control


10









 






     Upon the occurrence of any of the following events (each a “Change of Control”), each Holder
shall have the right to require that the Company repurchase such Holder’s Notes at a purchase price
in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and
unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment date):





	 	(1)	 	any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act), other than one or more Permitted Holders, is or becomes the “beneficial owner”
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes
of this clause (1) such person shall be deemed to have “beneficial ownership” of all
shares that any such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more than
50% of the total voting power of the Voting Stock of the Company or Sirius Satellite
Radio Inc. (for the purposes of this clause (1), such other person shall be deemed to
beneficially own any Voting Stock of a Person held by any other Person (the “parent
entity”), if such other person is the beneficial owner (as defined above in this clause
(1)), directly or indirectly, of more than 50% of the voting power of the Voting Stock
of such parent entity);
	 
	 	(2)	 	the first day on which a majority of the members of the Board of Directors of
the Company or Sirius Satellite Radio Inc. are not Continuing Directors, other than in
connection with the Merger;
	 
	 	(3)	 	the adoption of a plan relating to the liquidation or dissolution of the
Company or Sirius Satellite Radio Inc.; or
	 
	 	(4)	 	the direct or indirect sale, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the properties or assets of the Company and its Restricted
Subsidiaries taken as a whole, or of Sirius Satellite Radio Inc. and its Subsidiaries
taken as a whole, to any “person” (as that term is used in Section 13(d)(3) of the
Exchange Act);





     Notwithstanding the foregoing, the consummation of none of the Merger, a Holdings-Company
Merger, the Escrow LLC-Company Merger, a Company-Sirius Merger or a Holdings-Sirius Merger will
constitute a Change of Control under the Indenture.



     Within 30 days following any Change of Control, we will mail a notice to each Holder with a
copy to the Trustee (the “Change of Control Offer”) stating:




	 	(1)	 	that a Change of Control has occurred and that such Holder has the right to
require us to purchase such Holder’s Notes at a purchase price in cash equal to 101% of
the principal amount thereof on the date of purchase, plus accrued and unpaid interest,
if any, to the date of purchase (subject to the right of Holders of record on the
relevant record date to receive interest on the relevant interest payment date);





11









 






	 	(2)	 	the circumstances and relevant facts regarding such Change of Control
(including information with respect to pro forma historical income, cash flow and
capitalization, in each case after giving effect to such Change of Control);
	 
	 	(3)	 	the purchase date (which shall be no earlier than 30 days nor later than 60
days from the date such notice is mailed); and
	 
	 	(4)	 	the instructions, as determined by us, consistent with the Indenture and the
covenant described hereunder, that a Holder must follow in order to have its Notes
purchased.





     We will not be required to make a Change of Control Offer following a Change of Control if a
third party makes the Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer
made by us and purchases all Notes validly tendered and not withdrawn under such Change of Control
Offer.



     We will comply, to the extent applicable, with the requirements of Section 14(e) of the
Exchange Act and any other securities laws or regulations in connection with the repurchase of
Notes as a result of a Change of Control. To the extent that the provisions of any securities laws
or regulations conflict with the provisions of the Indenture and the covenant described hereunder,
we will comply with the applicable securities laws and regulations and shall not be deemed to have
breached our obligations under the Indenture and the covenant described hereunder by virtue of our
compliance with such securities laws or regulations.



     The Change of Control purchase feature of the Notes may in certain circumstances make more
difficult or discourage a sale or takeover of the Company or Sirius Satellite Radio Inc. and, thus,
the removal of incumbent management. The Change of Control purchase feature is a result of
negotiations between the Company and the initial purchasers. We have no present intention to, and
we have no present knowledge of a present intention by Sirius Satellite Radio Inc. to, engage in a
transaction involving a Change of Control, although it is possible that we or Sirius Satellite
Radio Inc. could decide to do so in the future. Subject to the limitations discussed below, we or
Sirius Satellite Radio Inc. could, in the future, enter into certain transactions, including
acquisitions, refinancings or other recapitalizations, that would not constitute a Change of
Control under the Indenture, but that could increase the amount of indebtedness outstanding at such
time or otherwise affect our capital structure or credit ratings. Restrictions on our ability to
Incur additional Indebtedness are affected by the covenants described under “—Certain
covenants—Limitation on indebtedness”, “—Limitation on liens” and “—Limitation on sale/leaseback
transactions”. Such restrictions can only be waived with the consent of the holders of a majority
in principal amount of the Notes then outstanding. Except for the limitations contained in such
covenants, however, the Indenture will not contain any covenants or provisions that may afford
holders of the Notes protection in the event of a highly leveraged transaction.



     Future indebtedness that we may Incur may contain prohibitions on the occurrence of certain
events that would constitute a Change of Control or require the repurchase of such indebtedness
upon a Change of Control. Moreover, the exercise by the holders of their right to require us to
repurchase their Notes could cause a default under existing or future indebtedness,



12









 







even if the Change of Control itself does not, due to the financial effect of such repurchase
on us. Finally, our ability to pay cash to the holders of Notes following the occurrence of a
Change of Control may be limited by our then existing financial resources. There can be no
assurance that sufficient funds will be available when necessary to make any required repurchases.



     The definition of “Change of Control” includes a disposition of all or substantially all of
the assets of the Company or Sirius Satellite Radio Inc. to any Person. Although there is a limited
body of case law interpreting the phrase “substantially all”, there is no precise established
definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a
degree of uncertainty as to whether a particular transaction would involve a disposition of “all or
substantially all” of the assets of the Company or Sirius Satellite Radio Inc. As a result, it may
be unclear as to whether a Change of Control has occurred and whether a holder of Notes may require
the Company to make an offer to repurchase the Notes as described above.



     The provisions under the Indenture relative to our obligation to make an offer to repurchase
the Notes as a result of a Change of Control may be waived or modified with the written consent of
the holders of a majority in principal amount of the Notes.



Certain covenants




     Changes in covenants when Notes rated investment grade



     With respect to the Notes, if on any date following the date of the Indenture:



     (1) the Notes are rated Baa3 or better by Moody’s and BBB- or better by Standard & Poor’s (or,
if either such entity ceases to rate the Notes for reasons outside of the control of the Company,
the equivalent investment grade credit rating from any other “nationally recognized statistical
rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act selected
by the Company as a replacement agency); and



     (2) no Default or Event of Default shall have occurred and be continuing under the Indenture,
then, beginning on that day, the covenants specifically listed under the following captions in this
offering memorandum will no longer be applicable to the series of Notes:



     (1) “—Limitation on sales of assets and subsidiary stock;”



     (2) “—Limitation on restricted payments;”



     (3) “—Limitation on indebtedness;”



     (4) clauses (1)(A) and (3) of the covenant described under the caption “—Limitation on
sale/leaseback transactions;”



     (5) “—Limitation on affiliate transactions;”



     (6) clause (3) of the covenant described below under the caption “—Merger and consolidation;”
and



13









 





     (7) “—Limitation on restrictions on distributions from restricted subsidiaries.”



     There can be no assurance that the Notes will ever achieve an investment grade rating or that
any such rating will be maintained.



     The Indenture contains covenants including, among others, the following:



Limitation on indebtedness




     (a) The Company will not, and will not permit any Restricted Subsidiary to, Incur, directly or
indirectly, any Indebtedness; provided, however, that the Company and any Subsidiary Guarantor will
be entitled to Incur Indebtedness if, on the date of such Incurrence and after giving effect
thereto on a pro forma basis, the Consolidated Leverage Ratio would be less than 6.00 to 1.



     (b) Notwithstanding the foregoing paragraph (a), the Company and the Restricted Subsidiaries
will be entitled to Incur any or all of the following Indebtedness:




	 	(1)	 	Indebtedness incurred by the Company or any of its Restricted Subsidiaries
under this clause (1) that, after giving effect to any such Incurrence, does not exceed
$150 million at any time outstanding;
	 
	 	(2)	 	Indebtedness of the Company in an aggregate principal amount which, when taken
together with all other Indebtedness of the Company Incurred pursuant to this clause
(2) and then outstanding, does not exceed 175% of the Net Cash Proceeds received by the
Company since immediately after the Issue Date from the issue or sale of Capital Stock
of the Company or cash contributed to the capital of the Company, including cash
contributions received by the Company following a Holdings-Company Merger, (in each
case other than proceeds of Disqualified Stock or sales of Capital Stock to the Company
or any of its Subsidiaries); provided, however, that (A) any Indebtedness Incurred
under this clause (2) after June 1, 2012 shall have a weighted Average Life that is
greater than the then remaining weighted Average Life of the Notes and (B) any
Indebtedness Incurred under this clause (2) shall consist only of Subordinated
Obligations; provided further, however, that any Net Cash Proceeds or cash
contributions received by the Company pursuant to this clause (2) and used to Incur
Indebtedness pursuant to this clause (2), shall be excluded from the calculation of
amounts under clause (a)(3)(B) of the covenant described under “—Limitation on
restricted payments”.
	 
	 	(3)	 	Indebtedness owed to and held by the Company or a Restricted Subsidiary;
provided, however, that (A) any subsequent issuance or transfer of any Capital Stock
which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary
or any subsequent transfer of such Indebtedness (other than to the Company or a
Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of
such Indebtedness by the obligor thereon and (B) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly





14









 






	 	 	 	subordinated to the prior payment in full in cash of all obligations with respect to
the Notes;
	 
	 	(4)	 	the Notes (other than any Additional Notes) and the Guarantees;
	 
	 	(5)	 	Indebtedness outstanding on the Issue Date or Incurred in connection with the
refinancing transactions described in this offering memorandum; provided, that the
Indebtedness for borrowed money outstanding immediately prior to the release of
escrowed funds on the Escrow Release Date shall not exceed $1.7 billion on a pro forma
basis after giving effect to the Refinancing Transactions (exclusive of any additional
amount of Indebtedness that may be outstanding as a result of holders of the Company’s
9.75% Senior Notes due 2014, Senior Floating Rate Notes due 2013, 10% Senior Secured
Discount Convertible Notes due 2009 and the Existing Sale and Leaseback Transaction
having declined mandatory offers to repurchase or an exchange offer in respect of such
Indebtedness); provided further, that the aggregate principal amount of Senior
Indebtedness outstanding immediately prior to the release of escrowed funds on the
Escrow Release Date shall not exceed $1.0 billion on a pro forma basis after giving
effect to the Refinancing Transactions (exclusive of any additional amount of
Indebtedness that may be outstanding as a result of holders of the Company’s 9.75%
Senior Notes due 2014, Senior Floating Rate Notes due 2013, 10% Senior Secured Discount
Convertible Notes due 2009 and the Existing Sale and Leaseback Transaction having
declined mandatory offers to repurchase or an exchange offer in respect of such
Indebtedness);
	 
	 	(6)	 	Indebtedness of a Restricted Subsidiary Incurred and outstanding on or prior to
the date on which such Subsidiary was acquired by the Company (other than Indebtedness
Incurred in connection with, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related transactions
pursuant to which such Subsidiary became a Subsidiary or was acquired by the Company);
provided, however, that on the date of such acquisition and after giving pro forma
effect thereto, the Company would have been entitled to Incur at least $1.00 of
additional Indebtedness pursuant to paragraph (a) of this covenant;
	 
	 	(7)	 	Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to
paragraph (a) or pursuant to clause (2), (4), (5) or (6) or this clause (7); provided,
however, that to the extent such Refinancing Indebtedness directly or indirectly
Refinances Indebtedness of a Subsidiary Incurred pursuant to clause (6), such
Refinancing Indebtedness shall be Incurred only by such Subsidiary;
	 
	 	(8)	 	Hedging Obligations directly related to Indebtedness permitted to be Incurred
by the Company and its Restricted Subsidiaries pursuant to the Indenture;
	 
	 	(9)	 	obligations in respect of workers’ compensation claims, self-insurance
obligations, performance, bid and surety bonds and completion guarantees





15









 






	 	 	 	provided by the Company or any Restricted Subsidiary in the ordinary course of
business;
	 
	 	(10)	 	Indebtedness arising from the honoring by a bank or other financial institution
of a check, draft or similar instrument drawn against insufficient funds in the
ordinary course of business; provided, however, that such Indebtedness is extinguished
within five Business Days of its Incurrence;
	 
	 	(11)	 	Unsecured Subordinated Obligations or Disqualified Stock of the Company in an
aggregate principal amount not in excess of $250 million outstanding (at any one time)
incurred to finance the construction, expansion, development or acquisition of music
libraries and other recorded music programming, furniture, fixtures and equipment
(including satellites, ground stations and related equipment) if such Subordinated
Obligations or Disqualified Stock, as applicable, has a weighted Average Life longer
than the weighted Average Life of the Notes and has a final Stated Maturity of
principal later than the Stated Maturity of principal of the Notes;
	 
	 	(12)	 	Indebtedness arising from agreements of the Company or any of its Restricted
Subsidiaries providing for indemnification, adjustment of purchase price or similar
obligations, in each case, Incurred or assumed in connection with the disposition of
any business, assets or Capital Stock of a Restricted Subsidiary, provided, however,
the maximum aggregate liability in respect of all such Indebtedness shall at no time
exceed the gross proceeds actually received by the Company and its Restricted
Subsidiaries in connection with such disposition;
	 
	 	(13)	 	Any Indebtedness which becomes an Obligation of the Company as a result of a
Holdings-Company Merger or a Company-Sirius Merger;
	 
	 	(14)	 	Replacement Satellite Vendor Indebtedness; and
	 
	 	(15)	 	unsecured Subordinated Obligations or Disqualified Stock of the Company in an
aggregate principal amount (or liquidation preference, as applicable) (including the
aggregate principal amount (or liquidation preference, as applicable) of all
Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness or
Disqualified Stock, as applicable, incurred pursuant to this clause (15)) at any time
outstanding not to exceed the product of (a) $100.00 and (b) the number of Subscribers
at such time if such subordinated Indebtedness or Disqualified Stock, as applicable,
has a weighted Average Life longer than the weighted Average Life of the Notes and has
a final maturity date later than the final maturity date of the Notes.





     (c) Notwithstanding the foregoing, the Company will not be entitled to Incur any Indebtedness
pursuant to the foregoing paragraph (b) if the proceeds thereof are used, directly or indirectly,
to Refinance any Subordinated Obligations of the Company unless such Indebtedness shall be
subordinated to the Notes to at least the same extent as such Subordinated Obligations.



     (d) For purposes of determining compliance with this covenant:



16









 






	 	(1)	 	in the event that an item of Indebtedness (or any portion thereof) meets the
criteria of more than one of the types of Indebtedness described above, the Company, in
its sole discretion, will classify such item of Indebtedness (or any portion thereof)
at the time of Incurrence and will only be required to include the amount and type of
such Indebtedness in one of the above clauses;
	 
	 	(2)	 	the Company will be entitled to divide and classify (and later reclassify) an
item of Indebtedness in more than one of the types of Indebtedness described above;
	 
	 	(3)	 	any Indebtedness Incurred under clauses (1) or (2) of paragraph (b) above shall
cease to be deemed Incurred or outstanding for purposes of those clauses, respectively,
but instead shall be deemed to be Incurred for purposes of paragraph (a) above from and
after the first date on which the Company could have Incurred such Indebtedness under
paragraph (a) without reliance on any of such clauses;
	 
	 	(4)	 	Guarantees of, or obligations in respect of letters of credit relating to,
Indebtedness which is otherwise included in the determination of a particular amount of
Indebtedness shall not be included;
	 
	 	(5)	 	any Disqualified Stock of the Company or Preferred Stock of a Restricted
Subsidiary will be deemed to have a principal amount equal to the greater of the
maximum mandatory redemption or repurchase price (not including, in either case, any
redemption or repurchase premium) or the liquidation preference thereof; and
	 
	 	(6)	 	Increases in the amount of Indebtedness solely as a result of fluctuations in
the exchange rate of currencies will not be deemed to be an Incurrence of Indebtedness
for purposes of this covenant.





Limitation on restricted payments



     (a) The Company will not, and will not permit any Restricted Subsidiary, directly or
indirectly, to make a Restricted Payment if at the time the Company or such Restricted Subsidiary
makes such Restricted Payment:




	 	(1)	 	a Default shall have occurred and be continuing (or would result therefrom);
	 
	 	(2)	 	the Company is not entitled to Incur an additional $1.00 of Indebtedness
pursuant to paragraph (a) of the covenant described under “—Limitation on indebtedness”
after giving effect, on a pro forma basis, to such Restricted Payment; or
	 
	 	(3)	 	the aggregate amount of such Restricted Payment and all other Restricted
Payments since the Issue Date would exceed the sum of (without duplication):






	 	(A)	 	100% of Consolidated Operating Cash Flow accrued during the
period (treated as one accounting period) from the beginning of the first
fiscal quarter during which the Company generates positive Consolidated
Operating Cash Flow to the end of the most recent fiscal quarter for which





17









 






	 	 	 	internal financial statements are available less 1.4 times the Consolidated
Interest Expense for the same period; plus
	 
	 	(B)	 	100% of the aggregate Net Cash Proceeds received by the Company
from the issuance or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the Issue Date (other than an issuance or sale to a Subsidiary of
the Company), 100% of any cash capital contribution received by the Company
from its shareholders subsequent to the Issue Date, 100% of the fair market
value (as determined by the Board of Directors) of the consideration (if other
than cash) from the issue or sale of Capital Stock (other than Disqualified
Stock) of the Company and 100% of the fair market value (as determined by the
Board of Directors) of the actual or deemed capital contributions to the common
equity capital of the Company by Holdings from the issuance of Capital Stock of
Holdings in exchange for the retirement of Indebtedness of the Company that
ranks equal to the Notes in right of payment; provided, however, that any Net
Cash Proceeds received by the Company from the issue or sale of its Capital
Stock or cash capital contributions received by the Company and used to Incur
Indebtedness pursuant to clause (b)(2) of the covenant described under
“—Limitation on indebtedness”, shall be excluded from the calculation of Net
Cash Proceeds and cash capital contributions under this clause (B) until and to
the extent any Indebtedness Incurred pursuant to such clause (b)(2) in respect
of such Net Cash Proceeds or cash capital contributions has been treated,
pursuant to clause (d)(3) of such covenant, as Incurred pursuant to paragraph
(a) of such covenant; plus
	 
	 	(C)	 	the amount by which Indebtedness of the Company or any
Restricted Subsidiary is reduced on the Company’s balance sheet upon the
conversion or exchange subsequent to the Issue Date of any Indebtedness
convertible or exchangeable for Capital Stock (other than Disqualified Stock)
of Holdings or the Company (less the amount of any cash, or the fair value (as
determined in good faith by the Board of Directors) of any other property,
distributed by Holdings or the Company upon such conversion or exchange); plus
	 
	 	(D)	 	an amount equal to the sum of (i) the net reduction in the
Investments (other than Permitted Investments) made by the Company or any
Restricted Subsidiary in any Person resulting from repurchases, repayments or
redemptions of such Investments by such Person, proceeds realized on the sale
of such Investment and proceeds representing the return of capital (excluding
dividends and distributions to the extent included in Consolidated Operating
Cash Flow), in each case received by the Company or any Restricted Subsidiary,
and (ii) to the extent such Person is an Unrestricted Subsidiary, the portion
(proportionate to the Company’s equity interest in such Subsidiary) of the fair
market value (as determined in good faith by the Board of Directors) of the net
assets of such Unrestricted Subsidiary at the time such Unrestricted Subsidiary
is










18









 












	 	 	 	designated a Restricted Subsidiary; provided, however, that the foregoing
sum shall not exceed, in the case of any such Person or Unrestricted
Subsidiary, the amount of Investments (excluding Permitted Investments)
previously made (and treated as a Restricted Payment) by the Company or any
Restricted Subsidiary in such Person or Unrestricted Subsidiary.





     (b) The preceding provisions will not prohibit:




	 	(1)	 	any Restricted Payment made within 90 days of the receipt of Net Cash Proceeds
from the sale of, or made by exchange for, Capital Stock of the Company (other than
Disqualified Stock) or a substantially concurrent cash capital contribution received by
the Company; provided, however, that (A) such Restricted Payment shall be excluded from
subsequent calculations of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale or such cash capital contribution (to the extent so used for
such Restricted Payment) shall be excluded from the calculation of amounts under clause
(3)(B) of paragraph (a) above;
	 
	 	(2)	 	any purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Obligations (other than Permitted Subordinated
Obligations) of the Company made within 90 days by exchange for, or out of the proceeds
of, the Incurrence of Indebtedness of such Person which is permitted to be Incurred
pursuant to the covenant described under “—Limitation on indebtedness”; provided,
however, that such purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value shall be excluded from subsequent calculations of the amount of
Restricted Payments;
	 
	 	(3)	 	any purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Obligations of the Company Incurred pursuant to
clause (b)(11) of the covenant described under “—Limitation on indebtedness” made by
exchange for, or out of the proceeds of the substantially concurrent Incurrence of,
Subordinated Obligations that have, at the time of Incurrence, a weighted Average Life
that is greater than the then remaining weighted Average Life of the Notes and a Stated
Maturity that is later than the date that is 91 days after the Stated Maturity of the
Notes; provided, however, that such purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value shall be excluded from subsequent
calculations of the amount of Restricted Payments;
	 
	 	(4)	 	dividends paid within 60 days after the date of declaration thereof if at such
date of declaration such dividend would have complied with this covenant; provided,
however, that such dividend shall be included in subsequent calculations of the amount
of Restricted Payments;
	 
	 	(5)	 	the declaration or payment of dividends on Disqualified Stock issued pursuant
to the covenant described under “—Limitation on indebtedness”; provided, however, that
at the time of declaration of such dividend, no Default shall have occurred and be
continuing (or result therefrom); provided further, however, that such





19









 






	 	 	 	dividends shall be excluded from subsequent calculations of the amount of Restricted
Payments;
	 
	 	(6)	 	repurchases of Capital Stock deemed to occur upon exercise of stock options,
warrants or other convertible securities if such Capital Stock represents a portion of
the exercise price thereof; provided, however, that such Restricted Payments shall be
excluded from subsequent calculations of the amount of Restricted Payments;
	 
	 	(7)	 	cash payments in lieu of the issuance of fractional shares in connection with a
reverse stock split of the Capital Stock of the Company or the exercise of warrants,
options or other securities convertible into or exchangeable for Capital Stock of the
Company; provided, however, that any such cash payment shall not be for the purpose of
evading the limitation of the covenant described under this subheading (as determined
in good faith by the Board of Directors); provided further, however, that such payments
shall be excluded in subsequent calculations of the amount of Restricted Payments;
	 
	 	(8)	 	in the event of a Change of Control or to the extent permitted by the covenant
described under “—Limitation on sales of assets and subsidiary stock”, and if no
Default shall have occurred and be continuing, the payment, purchase, redemption,
defeasance or other acquisition or retirement of Subordinated Obligations of the
Company, in each case, at a purchase price not greater than 101% of the principal
amount of such Subordinated Obligations, plus any accrued and unpaid interest thereon;
provided, however, that prior to such payment, purchase, redemption, defeasance or
other acquisition or retirement, the Company (or a third party to the extent permitted
by the Indenture) has made a Change of Control Offer, or sale of assets offer, with
respect to the Notes and has repurchased all Notes validly tendered and not withdrawn
in connection with such Change of Control Offer, or sale of assets offer; provided
further, however, that such payments, purchases, redemptions, defeasances or other
acquisitions or retirements shall be excluded from subsequent calculations of the
amount of Restricted Payments;
	 
	 	(9)	 	payments of intercompany subordinated Indebtedness, the Incurrence of which was
permitted under clause (3) of paragraph (b) of the covenant described under
“—Limitation on indebtedness”; provided, however, that no Default has occurred and is
continuing or would otherwise result therefrom; provided further, however, that such
payments shall be excluded from subsequent calculations of the amount of Restricted
Payments;
	 
	 	(10)	 	the repurchase, redemption or other acquisition or retirement for value of any
equity interests of the Company or any Restricted Subsidiary (other than Disqualified
Stock) held by any employee of the Company made in lieu of withholding taxes resulting
from the exercise, exchange or conversion of stock options, warrants or other similar
rights; provided, however, that no Default has occurred and is continuing or would
otherwise result therefrom; provided further,










20









 












	 	 	 	however, that such payments shall be excluded from subsequent calculations of the
amount of Restricted Payments;
	 
	 	(11)	 	cash dividends, distributions, loans or other transfers to Holdings in amounts
equal to:






	 	(A)	 	for so long as the Company is a member of a group filing a
consolidated or combined tax return with Sirius Satellite Radio Inc., payments
to Holdings or Sirius Satellite Radio Inc. in respect of an allocable portion
of the tax liabilities of such group that is attributable to Holdings and its
Subsidiaries (“Tax Payments”). The Tax Payments shall not exceed the lesser of
(i) the amount of the relevant tax (including any penalties and interest) that
Holdings would owe if Holdings were filing a separate tax return (or a separate
consolidated or combined return with its Subsidiaries that are members of the
consolidated or combined group), taking into account any carryovers and
carrybacks of tax attributes (such as net operating losses) of Holdings and
such Subsidiaries from other taxable years and (ii) the net amount of the
relevant tax that Sirius Satellite Radio Inc. actually owes to the appropriate
taxing authority. Any Tax Payments received from the Company shall be paid
over to the appropriate taxing authority within 30 days of the receipt by
Holdings or Sirius Satellite Radio Inc. of such Tax Payments or refunded to the
Company;
	 
	 	(B)	 	the amounts required for Holdings to pay franchise taxes and
other fees required to maintain its legal existence; and
	 
	 	(C)	 	an amount not to exceed $3.0 million in any fiscal year to
permit Holdings to pay their corporate overhead expenses Incurred in the
ordinary course of business, and to pay salaries or other compensation of
employees who perform services for both (1) Sirius Satellite Radio Inc. or
Holdings, on the one hand, and (2) the Company, on the other hand; and
	 
	 	(D)	 	any fees and expenses related to any equity offering or other
financing of any direct or indirect parent of the Company to the extent the
proceeds of such offering or financing are contributed to the Company.






	 	(12)	 	Any Restricted Payment to an Affiliate for the provision of administrative,
management, content or other business services, in each case to the extent permitted by
the covenant described under “—Limitation on affiliate transactions;”
	 
	 	(13)	 	any purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Obligations (other than Permitted Subordinated
Obligations) of the Company with an aggregate principal amount not exceed $50 million
at a purchase price not greater than 100% of the principal amount or accreted value
thereof, as the case may be, together with accrued interest, if any;





21









 






	 	(14)	 	any purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Obligations (other than Permitted Subordinated
Obligations) of the Company with an aggregate principal amount not exceed $450 million
at a purchase price not greater than 100% of the principal amount or accreted value
thereof, as the case may be, together with accrued interest, if any; provided, however,
that at the time of such purchase, no amounts shall be outstanding under any senior
secured credit agreements or senior secured letter of credit facilities to which the
Company is party; provided, further, that prior to making any such purchase the Company
has made an offer to repurchase Notes at a purchase price not less than 100% of the
principal amount or accreted value thereof, as the case may be, together with accrued
interest, if any with at least the same aggregate principal amount as the Subordinated
Obligations to be repurchased pursuant to this clause;
	 
	 	(15)	 	any purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value of Obligations of the Company under the Existing Sale Leaseback
Transaction that are triggered by the Merger; provided, however, that such payments
shall be excluded from subsequent calculations of the amount of Restricted Payments;
and
	 
	 	(16)	 	other Restricted Payments in an amount not to exceed $40 million per calendar
year (with unused amounts in any calendar year being permitted to be carried over for
the next succeeding calendar years); provided, however, such Restricted Payments, when
taken together with all other Restricted Payments made pursuant to this clause (15) do
not exceed $100 million in the aggregate in any calendar year; provided further,
however, that no Default has occurred and is continuing or would otherwise result
therefrom; provided further, however, that such payments shall be excluded from
subsequent calculations of the amount of Restricted Payments.





     The amount of all Restricted Payments (other than cash) shall be the fair market value on the
date of such Restricted Payment of the asset(s) or securities proposed to be paid, transferred or
issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to such
Restricted Payment. The fair market value of any cash Restricted Payment shall be its face amount
and any non-cash Restricted Payment shall be determined conclusively by the Board of Directors of
the Company acting in good faith.



Limitation on restrictions on distributions from restricted subsidiaries




     The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise
cause or permit to exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions on its
Capital Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company
or Restricted Subsidiary, (b) make any loans or advances to the Company or Restricted Subsidiary or
(c) transfer any of its property or assets to the Company or Restricted Subsidiary, except:



22









 






	 	(1)	 	with respect to clauses (a), (b) and (c),






	 	(A)	 	any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date;
	 
	 	(B)	 	any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Capital Stock or
Indebtedness Incurred by such Restricted Subsidiary on or prior to the date on
which such Restricted Subsidiary was acquired by the Company (other than
Indebtedness Incurred as consideration in, or to provide all or any portion of
the funds or credit support utilized to consummate, the transaction or series
of related transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company) and outstanding on such
date;
	 
	 	(C)	 	any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (A) or (B) of clause (1) of this covenant or this clause
(C) or contained in any amendment modifications, restatements, renewals,
increases, supplements, refundings or replacements to an agreement referred to
in clause (A) or (B) of clause (1) of this covenant or this clause (C);
provided, however, that the encumbrances and restrictions with respect to such
Restricted Subsidiary contained in any such refinancing agreement or amendment
are no less favorable in any material respect to the Noteholders than
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in such predecessor agreements on the Issue Date or the date such
Restricted Subsidiary became a Restricted Subsidiary, whichever is applicable;
	 
	 	(D)	 	any encumbrance or restriction with respect to a Restricted
Subsidiary (or any of its property or assets) imposed pursuant to an agreement
entered into for the sale or disposition of all or substantially all the
Capital Stock or assets of such Restricted Subsidiary (or the property or
assets that are subject to such restriction) pending the closing of such sale
or disposition;
	 
	 	(E)	 	any encumbrance or restriction consisting of net worth
provisions or restrictions on cash or other deposits in leases and other
agreements entered into by the Company or any Restricted Subsidiary in the
ordinary course of business;
	 
	 	(F)	 	any encumbrance or restriction consisting of customary
provisions in joint venture agreements relating to joint ventures that are not
Restricted Subsidiaries and other similar agreements entered into in the
ordinary course of business; and
	 
	 	(G)	 	customary non-assignment provisions in contracts, licenses and
leases entered into in the ordinary course of business.





23









 






	 	(2)	 	with respect to clause (c) only,






	 	(A)	 	any encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to the extent
such provisions restrict the assignment or transfer of the lease or the
property leased thereunder;
	 
	 	(B)	 	any encumbrance or restriction contained in security
agreements, pledges or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such encumbrance or restriction restricts the transfer
of the property subject to such security agreements, pledges or mortgages;
	 
	 	(C)	 	any encumbrance or restriction consisting of (i) purchase money
obligations for property acquired in the ordinary course of business and (ii)
Capitalized Lease Obligations permitted under the Indenture, in each case, that
impose encumbrances or restrictions of the nature described in clause (c) of
the first paragraph of this covenant on the property so acquired;
	 
	 	(D)	 	any encumbrance or restriction pursuant to customary provisions
restricting dispositions of real property interests set forth in any reciprocal
easement agreements of the Company or any Restricted Subsidiary;
	 
	 	(E)	 	applicable law; and
	 
	 	(F)	 	Liens securing Indebtedness that limit the right of the debtor
to dispose of the assets subject to such Lien.





Limitation on sales of assets and subsidiary stock



     (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, consummate any Asset Disposition unless:




	 	(1)	 	the Company or such Restricted Subsidiary receives consideration at the time of
such Asset Disposition at least equal to the fair market value (including as to the
value of all non-cash consideration), as determined in good faith by the Board of
Directors of the Company, of the shares and assets subject to such Asset Disposition;
	 
	 	(2)	 	at least 75% of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of cash or cash equivalents;
	 
	 	(3)	 	an amount equal to 100% of the Net Available Cash from such Asset Disposition
is applied by the Company or such Restricted Subsidiary, as the case may be






	 	(A)	 	first, to the extent the Company or such Restricted Subsidiary
elects (or is required by the terms of any Indebtedness), to prepay, repay,
redeem or purchase Senior Indebtedness of the Company (including the Notes) or





24









 






	 	 	 	Indebtedness (other than any Disqualified Stock) of any Wholly Owned
Subsidiary (in each case other than Indebtedness owed to the Company or an
Affiliate of the Company) within one year from the later of the date of such
Asset Disposition or the receipt of such Net Available Cash;
	 
	 	(B)	 	second, to the extent of the balance of such Net Available Cash
after application in accordance with clause (A), to the extent the Company or
such Restricted Subsidiary elects, to acquire Additional Assets within one year
from the later of the date of such Asset Disposition or the receipt of such Net
Available Cash; provided, however, that the Company shall have an additional
six months to apply such Net Available Cash pursuant to this clause (B) if it
shall have entered into a binding acquisition or purchase contract in respect
of Additional Assets prior to the expiration of such one-year period; and
	 
	 	(C)	 	third, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B), to make an offer to
the holders of the Notes (and to holders of other Senior Indebtedness of the
Company designated by the Company) to purchase Notes (and such other Senior
Indebtedness of the Company) pursuant to and subject to the conditions
contained in the Indenture;




provided, however, that in connection with any prepayment, repayment or purchase of Indebtedness
pursuant to clause (A) or (C) above, the Company or such Restricted Subsidiary shall permanently
retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently
reduced in an amount equal to the principal amount so prepaid, repaid or purchased, provided,
further, that the prior proviso shall not affect the ability of the Company or such Restricted
Subsidiary to Incur Indebtedness under paragraph (b) of the covenant described under “—Limitation
on indebtedness”.




     Notwithstanding the foregoing provisions of this covenant, the Company and the Restricted
Subsidiaries will not be required to apply any Net Available Cash in accordance with this covenant
except to the extent that the aggregate Net Available Cash from all Asset Dispositions which is not
applied in accordance with this covenant exceeds $10 million. Pending application of Net Available
Cash pursuant to this covenant, such Net Available Cash shall be invested in Temporary Cash
Investments or applied to temporarily reduce revolving credit indebtedness.



     For the purposes of this covenant, the following are deemed to be cash or cash equivalents:




	 	(1)	 	the assumption or discharge of Indebtedness of the Company (other than
obligations in respect of Disqualified Stock of the Company) or any Restricted
Subsidiary or other liabilities (as shown on the most recent balance sheet (or notes
thereto) of the Company or the Restricted Subsidiary) and the release of the Company or
such Restricted Subsidiary from all liability on such Indebtedness or from such other
liabilities in connection with such Asset Disposition (in which





25









 






	 	 	 	case the Company will, without further action, be deemed to have applied such deemed
cash to Indebtedness in accordance with clause (3)(A) above); and
	 
	 	(2)	 	securities received by the Company or any Restricted Subsidiary from the
transferee that are converted within 30 days by the Company or such Restricted
Subsidiary into cash, to the extent of cash received in that conversion.





     (b) In the event of an Asset Disposition that requires the purchase of Notes (and other Senior
Indebtedness of the Company) pursuant to clause (a)(3)(C) above, the Company will purchase Notes
tendered pursuant to an offer by the Company for the Notes (and such other Senior Indebtedness) at
a purchase price of 100% of their principal amount (or, in the event the Notes or such other Senior
Indebtedness of the Company was issued with significant original issue discount, 100% of the
accreted value thereof) without premium, plus accrued but unpaid interest (or, in respect of such
other Senior Indebtedness of the Company, such lesser price, if any, as may be provided for by the
terms of such Senior Indebtedness) in accordance with the procedures (including prorating in the
event of oversubscription) set forth in the Indenture. If the aggregate purchase price of the
securities tendered exceeds the Net Available Cash allotted to their purchase, the Company will
select the securities to be purchased on a pro rata basis but in round denominations, which in the
case of the Notes will be denominations of $1,000 principal amount or multiples thereof. The
Company shall not be required to make such an offer to purchase Notes (and other Senior
Indebtedness of the Company) pursuant to clause (a)(3)(C) of this covenant if the Net Available
Cash available therefor is less than $5 million (which lesser amount shall be carried forward for
purposes of determining whether such an offer is required with respect to the Net Available Cash
from any subsequent Asset Disposition). Upon completion of such an offer to purchase, Net Available
Cash will be deemed to be reduced by the aggregate amount of such offer.



     (c) The Company will not, and will not permit any Restricted Subsidiary to, engage in any
Asset Swaps, unless:




	 	(1)	 	at the time of entering into such Asset Swap and immediately after giving
effect to such Asset Swap, no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
	 
	 	(2)	 	in the event such Asset Swap involves the transfer by the Company or any
Restricted Subsidiary of assets having an aggregate fair market value, as determined by
the Board of Directors of the Company in good faith, in excess of $5 million, the terms
of such Asset Swap have been approved by a majority of the members of the Board of
Directors of the Company; and
	 
	 	(3)	 	in the event such Asset Swap involves the transfer by the Company or any
Restricted Subsidiary of assets having an aggregate fair market value, as determined by
the Board of Directors of the Company in good faith, in excess of $20 million, the
Company has received a written opinion from an Independent Qualified Party that such
Asset Swap is fair to the Company or such Restricted Subsidiary, as the case may be,
from a financial point of view.





26









 





     (d) The Company will comply, to the extent applicable, with the requirements of Section 14(e)
of the Exchange Act and any other securities laws or regulations in connection with the repurchase
of Notes pursuant to the Indenture and this covenant. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to have breached its
obligations under the Indenture and this covenant by virtue of its compliance with such securities
laws or regulations.



Limitation on affiliate transactions



     (a) The Company will not, and will not permit any Restricted Subsidiary to, enter into or
permit to exist any transaction (including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service) with, or for the benefit of,
any Affiliate of the Company (an “Affiliate Transaction”) unless:




	 	(1)	 	the terms of the Affiliate Transaction are no less favorable to the Company or
such Restricted Subsidiary than those that could be obtained at the time of the
Affiliate Transaction in arm’s-length dealings with a Person who is not an Affiliate;
	 
	 	(2)	 	if such Affiliate Transaction involves an amount in excess of $5 million, the
terms of the Affiliate Transaction are set forth in writing and a majority of the
directors of the Company who have no direct financial interest with respect to such
Affiliate Transaction (other than as a stockholder of the Company, Holdings or Sirius
Satellite Radio Inc.) have determined in good faith that the criteria set forth in
clause (1) are satisfied and have approved the relevant Affiliate Transaction as
evidenced by a resolution of the Board of Directors; and
	 
	 	(3)	 	if such Affiliate Transaction involves an amount in excess of $20 million, the
Board of Directors of the Company shall also have received a written opinion from an
Independent Qualified Party to the effect that such Affiliate Transaction is fair, from
a financial standpoint, to the Company and its Restricted Subsidiaries or is not less
favorable to the Company and its Restricted Subsidiaries than could reasonably be
expected to be obtained at the time in an arm’s-length transaction with a Person who
was not an Affiliate or is fair from a financial point of view.





     (b) The provisions of the preceding paragraph (a) will not prohibit:




	 	(1)	 	any Investment (other than a Permitted Investment) or other Restricted Payment,
in each case permitted to be made pursuant to (but only to the extent included in the
calculation of the amount of Restricted Payments made pursuant to paragraph (a)(3) of
the covenant described under “—Limitation on restricted payments”;
	 
	 	(2)	 	any issuance of securities, or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership or other employee benefit plans approved by the Board of
Directors of the Company or Sirius Satellite Radio Inc. or entered into in the ordinary
course of business;





27









 






	 	(3)	 	to the extent permitted by applicable law, loans or advances to employees in
the ordinary course of business in accordance with the past practices of the Company or
its Restricted Subsidiaries, but in any event not to exceed $2 million in the aggregate
outstanding at any one time;
	 
	 	(4)	 	the payment of reasonable and customary fees to, and indemnity provided on
behalf of, directors of the Company and its Restricted Subsidiaries who are not
employees of the Company or its Restricted Subsidiaries;
	 
	 	(5)	 	any transaction with the Company, a Restricted Subsidiary or joint venture or
similar entity which would constitute an Affiliate Transaction solely because the
Company or a Restricted Subsidiary owns an equity interest in or otherwise controls
such Restricted Subsidiary, joint venture or similar entity;
	 
	 	(6)	 	the issuance or sale of any Capital Stock (other than Disqualified Stock) of
the Company to Affiliates of the Company and the granting of registration and other
customary rights in connection therewith;
	 
	 	(7)	 	any agreement as in effect on the Issue Date and described in this offering
memorandum, as these agreements may be amended, modified, supplemented, extended or
renewed from time to time (so long as any amendment, modification, supplement,
extension or renewal is not less favorable in any material respect to the Company or
the Restricted Subsidiaries) and the transactions evidenced thereby;
	 
	 	(8)	 	any transaction by the Company or any Restricted Subsidiary with an Affiliate
related to the purchase, sale or distribution of XM radios, subscription to XM services
or other products or services in the ordinary course of business including any such
transaction with an automotive manufacturer or similar business partner, which has been
approved by a majority of the members of the Board of Directors of the Company who have
no direct financial interest with respect to such Affiliate Transaction (other than as
a stockholder of the Company, Holdings or Sirius Satellite Radio Inc.);
	 
	 	(9)	 	a Holdings-Company Merger or a Company-Sirius Merger; and
	 
	 	(10)	 	any transaction between the Company and a Restricted Subsidiary or between
Restricted Subsidiaries.





Limitation on line of business




     The Company will not, and will not permit any Restricted Subsidiary, to engage in any business
other than a Related Business.



Limitation on the sale or issuance of capital stock of restricted subsidiaries




     The Company



28









 






	 	(1)	 	will not, and will not permit any Restricted Subsidiary to, sell, lease,
transfer or otherwise dispose of any Capital Stock of any Restricted Subsidiary to any
Person (other than the Company or a Wholly Owned Subsidiary), and
	 
	 	(2)	 	will not permit any Restricted Subsidiary to issue any of its Capital Stock
(other than, if necessary, shares of its Capital Stock constituting directors’ or other
legally required qualifying shares) to any Person (other than to the Company or a
Wholly Owned Subsidiary),





unless





	 	(A)	 	immediately after giving effect to such issuance, sale or other
disposition, neither the Company nor any of its Subsidiaries own any Capital
Stock of such Restricted Subsidiary;
	 
	 	(B)	 	such issuance, sale or other disposition is treated as an Asset
Disposition and immediately after giving effect to such issuance, sale or other
disposition, such Restricted Subsidiary would continue to be a Restricted
Subsidiary; or
	 
	 	(C)	 	immediately after giving effect to such issuance, sale or other
disposition, such Restricted Subsidiary would no longer constitute a Restricted
Subsidiary and any Investment in such Person remaining after giving effect
thereto is treated as a new Investment by the Company and such Investment would
be permitted to be made under the covenant described under “—Limitation on
restricted payments” if made on the date of such issuance, sale or other
disposition.





     For purposes of this covenant, the creation of a Lien on any Capital Stock of a Restricted
Subsidiary to secure Indebtedness of the Company or any of its Restricted Subsidiaries will not be
deemed to be a violation of this covenant; provided, however, that any sale or other disposition by
the secured party of such Capital Stock following foreclosure of its Lien will be subject to this
covenant.



Limitation on liens




     The Company will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, Incur or permit to exist any Lien (the “Initial Lien”) of any nature whatsoever on any
of its properties (including Capital Stock of a Restricted Subsidiary), whether owned at the Issue
Date or thereafter acquired, securing any Indebtedness, other than Permitted Liens, without
effectively providing that the Notes shall be secured equally and ratably with (or prior to) the
obligations so secured for so long as such obligations are so secured.



     Any Lien created for the benefit of the Holders of the Notes pursuant to the preceding
sentence shall provide by its terms that such Lien shall be automatically and unconditionally
released and discharged upon the release and discharge of the Initial Lien.



Limitation on sale/leaseback transactions



29









 





     The Company will not, and will not permit any Restricted Subsidiary to, enter into any
Sale/Leaseback Transaction with respect to any property unless:




	 	(1)	 	the Company or such Restricted Subsidiary would be entitled to (A) Incur
Indebtedness in an amount equal to the Attributable Debt with respect to such
Sale/Leaseback Transaction pursuant to the covenant described under “—Limitation on
indebtedness” and (B) create a Lien on such property securing such Attributable Debt
without equally and ratably securing the Notes pursuant to the covenant described under
“—Limitation on liens”;
	 
	 	(2)	 	the net proceeds received by the Company or any Restricted Subsidiary in
connection with such Sale/Leaseback Transaction are at least equal to the fair market
value (as determined by the Board of Directors of the Company) of such property; and
	 
	 	(3)	 	the Company applies the proceeds of such transaction in compliance with the
covenant described under “—Limitation on sales of assets and subsidiary stock”.





Merger and consolidation




     The Company will not consolidate with or merge with or into, or convey, transfer, lease,
assign or otherwise dispose of, in one transaction or a series of transactions, directly or
indirectly, all or substantially all its assets to, any Person, unless:




	 	(1)	 	the resulting, surviving or transferee Person (the “Successor Company”) shall
be a Person organized and existing under the laws of the United States of America, any
State thereof or the District of Columbia and the Successor Company (if not the
Company) shall expressly assume, by an indenture supplemental thereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of
the Company under the Notes and the Indenture;
	 
	 	(2)	 	immediately after giving pro forma effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any Subsidiary as
a result of such transaction as having been Incurred by such Successor Company or such
Subsidiary at the time of such transaction), no Default shall have occurred and be
continuing;
	 
	 	(3)	 	immediately after giving pro forma effect to such transaction, the Successor
Company would have a Consolidated Leverage Ratio equal to or better than the Company’s
Consolidated Leverage Ratio immediately prior to the transaction; and
	 
	 	(4)	 	the Company shall have delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with the Indenture.




provided, however, that clause (3) will not be applicable to (A) a Restricted Subsidiary
consolidating with, merging into or transferring all or part of its properties and assets to the


30









 






Company (so long as no Capital Stock of the Company is distributed to any Person) or (B) the
Company merging with an Affiliate of the Company solely for the purpose and with the sole effect of
reincorporating the Company in another jurisdiction. In addition, the Company will not, directly
or indirectly, lease all or substantially all of the properties and assets of it and its Restricted
Subsidiaries taken as a whole, in one or more related transactions, to any other Person.




     This “Merger and consolidation” covenant will not apply to a consolidation, merger, sale,
assignment, transfer, conveyance or other disposition of properties or assets between or among the
Company and any of its Restricted Subsidiaries or pursuant to the Merger or the Escrow LLC-Company
Merger. This “Merger and consolidation” covenant will apply to a Holdings-Company Merger or a
Company-Sirius Merger, except that for purposes of compliance with the first paragraph of this
“Merger and consolidation” covenant, clause (3) shall be replaced with the following: (3)
immediately after giving pro forma effect to such transaction, either (A) the Successor Company
would have a Senior Secured Leverage Ratio and a Senior Unsecured Leverage Ratio equal to or better
than the Company’s Senior Secured Leverage Ratio and Senior Unsecured Leverage Ratio, respectively,
immediately prior to the transaction or (B) the Successor Company would be permitted to incur at
least $1.00 of additional Indebtedness pursuant to paragraph (a) of the covenant described above
under the caption “—Limitation on Indebtedness”.



     For purposes of this covenant, the sale, lease, conveyance, assignment, transfer or other
disposition of all or substantially all of the properties and assets of one or more Subsidiaries of
the Company, which properties and assets, if held by the Company instead of such Subsidiaries,
would constitute all or substantially all of the properties and assets of the Company on a
consolidated basis, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.



     The Successor Company will be the successor to the Company and shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under the Indenture, and
the predecessor Company, except in the case of a lease, shall be released from the obligation to
pay the principal of and interest on the Notes.



     Future Subsidiary Guarantors



     The Company shall cause any Person that becomes a Material Subsidiary of the Company at any
time on or after the Issue Date to execute and deliver a supplemental indenture, duly executed on
behalf of such Material Subsidiary by an Officer thereof, to the Trustee reasonably promptly after
such event.



     The obligations of each Subsidiary Guarantor will be limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and
after giving effect to any collections from or payments made by or on behalf of any other
Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under its
Subsidiary Guarantee or pursuant to its contribution obligations under the Indenture, result in the
obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law.



31









 





SEC Reports




     Whether or not the Company is subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, Holdings will file with the SEC (subject to the next sentence) and provide the
Trustee and noteholders with such annual and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such Sections, such
reports to be so filed and provided at the times specified for the filings of such reports under
such Sections and containing all the information, audit reports and exhibits required for such
reports. If at any time, Holdings is not subject to the periodic reporting requirements of the
Exchange Act for any reason, the Company or Holdings will nevertheless continue filing the reports
specified in the preceding sentence with the SEC within the time periods required unless the SEC
will not accept such a filing. Holdings agrees that it will not take any action for the purpose of
causing the SEC not to accept any such filings. If, notwithstanding the foregoing, the SEC will not
accept such filings for any reason, the Company or Holdings will post the reports specified in the
preceding sentence on its website within the time periods that would apply if Holdings were
required to file those reports with the SEC.



     If the combined operations of the Parent Guarantor and its subsidiaries, excluding the
operations of the Company and its Restricted Subsidiaries and excluding cash and cash equivalents,
would, if held by a single Unrestricted Subsidiary of the Company, constitute a Significant
Subsidiary of the Company, then the quarterly and annual financial information required by the
preceding paragraphs will include a reasonably detailed presentation, either on the face of the
financial statements or in the footnotes thereto, and in Management’s Discussion and Analysis of
Financial Condition and Results of Operations, of the financial condition and results of operations
of the Company and the Company’s Restricted Subsidiaries separate from the financial condition and
results of operations of the Parent Guarantor and its other Subsidiaries; provided however, that
the requirements of this paragraph shall not apply if the Company files with the SEC the reports
referred to in the immediately preceding paragraph, and any such report contains the information
described in this paragraph.



     In addition, Holdings shall furnish to noteholders, prospective investors, broker-dealers and
securities analysts, upon their request, any information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act so long as the Notes are not freely transferable under the
Securities Act.



     Following a Company-Holdings Merger, a Holdings-Sirius Merger or a Company-Sirius Merger, the
obligations of Holdings under this covenant shall be assumed by the Company or Sirius, as the case
may be.



Defaults




     Each of the following is an Event of Default:




	 	(1)	 	a default in the payment of interest on the Notes when due, continued for 30
days;
	 
	 	(2)	 	a default in the payment of principal of any Note when due at its Stated
Maturity, upon optional redemption, upon required purchase, upon declaration of
acceleration or otherwise;





32









 






	 	(3)	 	the failure by the Company to comply with its obligations under the covenant
described under “—Certain covenants—Merger and consolidation” above;
	 
	 	(4)	 	the failure by the Company to comply for 30 days after notice with any of its
obligations in the covenants described above under “Change of control” (other than a
failure to purchase Notes) or under “—Certain covenants” under “—Limitation on
indebtedness”, “—Limitation on restricted payments”, “—Limitation on restrictions on
distributions from restricted subsidiaries”, “—Limitation on sales of assets and
subsidiary stock” (other than a failure to purchase Notes), “—Limitation on affiliate
transactions”, “—Limitation on the sale or issuance of capital stock of restricted
subsidiaries”, or “—Limitation on liens”, or “—SEC reports”;
	 
	 	(5)	 	the failure by the Company to comply for 60 days after notice with its other
agreements contained in the Indenture (other than a failure to give notice described in
clause (4) above);
	 
	 	(6)	 	Indebtedness of the Company or any Significant Subsidiary (other than with
respect to the Notes) is not paid within any applicable grace period after final
maturity or is accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $25 million (the “cross
acceleration provision”);
	 
	 	(7)	 	certain events of bankruptcy, insolvency or reorganization of the Company or
any Significant Subsidiary (the “bankruptcy provisions”);
	 
	 	(8)	 	any final, nonappealable judgment or decree for the payment of money which,
when taken together with all other final, nonappealable judgments or decrees for the
payment of money, causes the aggregate amount of such judgments or decrees entered
against the Company or any Significant Subsidiary to exceed $25 million (net of any
amounts with respect to which a reputable and creditworthy insurance company has
acknowledged liability in writing), remains outstanding for a period of 60 consecutive
days following such judgment and is not discharged, waived or stayed (the “judgment
default provision”); or
	 
	 	(9)	 	any Subsidiary Guarantee of a Significant Subsidiary ceases to be in full force
and effect (except as contemplated by the terms of the Indenture) or is declared null
and void in a judicial proceeding or any Subsidiary Guarantor that is a Significant
Subsidiary denies or disaffirms its obligations under the Indenture or its Subsidiary
Guarantee.





     However, a default under clauses (4) and (5) will not constitute an Event of Default until the
Trustee or the holders of 25% in principal amount of the outstanding Notes notify the Company of
the default and the Company does not cure such default within the time specified after receipt of
such notice.



     If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in
principal amount of the outstanding Notes may declare the principal of and accrued but unpaid



33









 







interest, if any, on all the Notes to be due and payable. Upon such a declaration, such
principal and interest shall be due and payable immediately. In the event of a declaration of
acceleration of the Notes because an Event of Default described in clause (6) under “Defaults” with
respect to other Senior Indebtedness has occurred and is continuing, the declaration of
acceleration of the Notes shall be automatically annulled if the event of default or payment
default triggering such Event of Default pursuant to clause (6) shall be remedied or cured by the
Company or a Restricted Subsidiary of the Company or waived by the holders of the relevant
Indebtedness within 20 days after the declaration of acceleration with respect thereto and if (1)
the annulment of the acceleration of the Notes would not conflict with any judgment or decree of a
court of competent jurisdiction and (2) all existing Defaults or Events of Default, except
nonpayment of principal, premium or interest on the Notes that became due solely because of the
acceleration of the Notes, have been cured or waived. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the Company occurs and is continuing, the
principal of and interest on all the Notes will ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any holders of the
Notes. Under certain circumstances, the holders of a majority in principal amount of the
outstanding Notes may waive all past defaults and rescind any such acceleration with respect to the
Notes and its consequences.



     Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an
Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any
of the rights or powers under the Indenture at the request or direction of any of the holders of
the Notes unless such holders have offered to the Trustee indemnity or security satisfactory to it
against any loss, liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no holder of a Note may pursue any remedy with
respect to the Indenture or the Notes unless:




	 	(1)	 	such holder has previously given the Trustee notice that an Event of Default is
continuing;
	 
	 	(2)	 	holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy;
	 
	 	(3)	 	such holders have offered the Trustee security or indemnity satisfactory to it
against any loss, liability or expense;
	 
	 	(4)	 	the Trustee has not complied with such request within 60 days after the receipt
thereof and the offer of security or indemnity; and
	 
	 	(5)	 	holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day period.





     Subject to certain restrictions, the holders of a majority in principal amount of the
outstanding Notes are given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on
the Trustee. If an Event of Default occurs (and is not cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct of his own



34









 







affairs. The Trustee, however, may refuse to follow any direction that conflicts with law or
the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other
holder of a Note or that would involve the Trustee in personal liability. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its rights or powers under
the Indenture at the request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or expense and then
only to the extent required by the terms of the Indenture.



     If a Default occurs, is continuing and is known to the Trustee, the Trustee must mail to each
holder of the Notes notice of the Default within 90 days after it occurs. Except in the case of a
Default in the payment of principal of or interest on any Note, the Trustee may withhold notice if
and so long as a committee of its Responsible Officers in good faith determines that withholding
notice is not opposed to the interest of the holders of the Notes. In addition, we are required to
deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating
whether the signers thereof know of any Default that occurred during the previous year. We are
required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of
any event which would constitute certain Defaults, their status and what action we are taking or
propose to take in respect thereof.



Amendments and waivers




     Subject to certain exceptions, the Indenture, the Notes and the Guarantees may be amended with
the consent of the holders of a majority in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer for the Notes) and
any past default or compliance with any provisions may also be waived with the consent of the
holders of a majority in principal amount of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange offer for the Notes). However, without the
consent of each holder of an outstanding Note affected thereby, an amendment or waiver may not,
among other things:




	 	(1)	 	reduce the amount of Notes whose holders must consent to an amendment;
	 
	 	(2)	 	reduce the rate of or extend the time for payment of interest on any Note;
	 
	 	(3)	 	reduce the principal of or change the Stated Maturity of any Note;
	 
	 	(4)	 	reduce the amount payable upon the redemption of any Note or change the time at
which any Note may be redeemed as described under “—Optional redemption” above;
	 
	 	(5)	 	make any Note payable in money other than that stated in the Note;
	 
	 	(6)	 	impair the right of any holder of the Notes to receive payment of principal of
and interest on such holder’s Notes on or after the due dates therefor or to institute
suit for the enforcement of any payment on or with respect to such holder’s Notes;
	 
	 	(7)	 	release any Guarantor from its Guarantee under the Indenture except in
accordance with the Indenture;





35









 






	 	(8)	 	make any change in the amendment provisions which require each holder’s consent
or in the waiver provisions; or
	 
	 	(9)	 	make any change in the ranking or priority of any Note that would adversely
affect the Noteholders.





     Notwithstanding the preceding, without the consent of any holder of the Notes, the Company,
the Guarantors and the Trustee may amend the Indenture:




	 	(1)	 	to cure any ambiguity, omission, defect or inconsistency;
	 
	 	(2)	 	to provide for the assumption by a successor corporation of the obligations of
the Company under the Indenture;
	 
	 	(3)	 	to provide for uncertificated Notes in addition to or in place of certificated
Notes (provided that the uncertificated Notes are issued in registered form for
purposes of Section 163(f) of the Code, or in a manner such that the uncertificated
Notes are described in Section 163(f)(2)(B) of the Code);
	 
	 	(4)	 	to add Guarantees with respect to the Notes, including any subsidiary
guarantees, or to secure the Notes;
	 
	 	(5)	 	to add to the covenants of the Company or any of its Restricted Subsidiaries
for the benefit of the holders of the Notes or to surrender any right or power
conferred upon the Company or any of its Restricted Subsidiaries;
	 
	 	(6)	 	to make any change that does not adversely affect the rights of any holder of
the Notes;
	 
	 	(7)	 	to comply with any requirement of the SEC in connection with the qualification
of the Indenture under the Trust Indenture Act;
	 
	 	(8)	 	add Guarantees with respect to the Notes or release a Subsidiary Guarantor upon
its designation as an Unrestricted Subsidiary; provided, however, that the designation
is in accord with the applicable provisions of the Indenture;
	 
	 	(9)	 	release a Subsidiary Guarantor from its obligations under its Subsidiary
Guarantee or the Indenture in accordance with the applicable provisions of the
Indenture;
	 
	 	(10)	 	conform the text of the Indenture, the Notes or the Subsidiary Guarantees to
any provision of this “Description of Notes”;
	 
	 	(11)	 	to make any amendment to the provisions of the Indenture relating to the
transfer and legending of Notes; provided, however, that (a) compliance with the
Indenture as so amended would not result in Notes being transferred in violation of the
Securities Act or any other applicable securities law and (b) such amendment does not
materially and adversely affect the rights of Holders to transfer Notes; or





36









 






	 	(12)	 	provide for the issuance of exchange securities which shall have terms
substantially identical in all respects to the Notes (except that the transfer
restrictions contained in the Notes shall be modified or eliminated as appropriate) and
which shall be treated, together with any outstanding Notes, as a single class of
securities.





     The consent of the holders of the Notes is not necessary under the Indenture to approve the
particular form of any proposed amendment. It is sufficient if such consent approves the substance
of the proposed amendment.



     After an amendment under the Indenture becomes effective, we are required to mail to holders
of the Notes a notice briefly describing such amendment. However, the failure to give such notice
to all holders of the Notes, or any defect therein, will not impair or affect the validity of the
amendment.



     Neither the Company nor any Affiliate of the Company may, directly or indirectly, pay or cause
to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as
an inducement to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to all Holders and is paid to all
Holders that so consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or agreement.



Transfer




     The Notes will be issued in registered form and will be transferable only upon the surrender
of the Notes being transferred for registration of transfer. We may require payment of a sum
sufficient to cover any tax, assessment or other governmental charge payable in connection with
certain transfers and exchanges.



Satisfaction and discharge




     When we (1) deliver to the Trustee all outstanding Notes for cancellation or (2) all
outstanding Notes have become due and payable or will become so within one year, whether at
maturity or on a redemption date as a result of the mailing of notice of redemption, and, in the
case of clause (2), we or a Subsidiary Guarantor irrevocably deposit with the Trustee funds
sufficient to pay at maturity or upon redemption all outstanding Notes, including interest thereon
to maturity or such redemption date, and if in either case we pay all other sums payable under the
Indenture by us, then the Indenture shall, subject to certain exceptions, cease to be of further
effect.



Defeasance




     At any time, we may terminate all our obligations under the Notes and the Indenture (“legal
defeasance”), except for certain obligations, including those respecting the defeasance trust and
obligations to register the transfer or exchange of the Notes, to replace mutilated, destroyed,
lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes. If we
exercise our legal defeasance option, the Guarantees in effect at such time will terminate.



37









 





     In addition, at any time we may terminate our obligations under “—Change of control” and under
the covenants described under “—Certain covenants” (other than the covenant described under
"—Merger and consolidation”), the operation of the cross acceleration provision, the bankruptcy
provisions with respect to Significant Subsidiaries, the judgment default provision and the
Subsidiary Guarantee provision described under “—Defaults” above and the limitations contained in
clause (3) of the first paragraph under “—Certain covenants—Merger and consolidation” above
(“covenant defeasance”).



     We may exercise our legal defeasance option notwithstanding our prior exercise of our covenant
defeasance option. If we exercise our legal defeasance option, payment of the Notes may not be
accelerated because of an Event of Default with respect thereto. If we exercise our covenant
defeasance option, payment of the Notes may not be accelerated because of an Event of Default
specified in clause (4), (6), (7) (with respect only to Significant Subsidiaries) or (8) under
"—Defaults” above or because of the failure of the Company to comply with clause (3) of the first
paragraph under “—Certain covenants—Merger and consolidation” above.



     In order to exercise either of our defeasance options, we or a Guarantor must irrevocably
deposit in trust (the “defeasance trust”) with the Trustee money or U.S. Government Obligations for
the payment of principal and interest on the Notes to redemption or maturity, as the case may be,
and must comply with certain other conditions, including delivery to the Trustee of an Opinion of
Counsel (subject to customary exceptions and exclusions) to the effect that holders of the Notes
will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amounts and in the same manner
and at the same times as would have been the case if such deposit and defeasance had not occurred
(and, in the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of
the Internal Revenue Service or other change in applicable Federal income tax law).



Concerning the Trustee




     The Bank of New York Mellon is to be the Trustee under the Indenture. We have appointed The
Bank of New York Mellon as Registrar and Paying Agent with regard to the Notes.



     The Indenture contains certain limitations on the rights of the Trustee, should it become a
creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions; provided, however, if it acquires any conflicting
interest it must either eliminate such conflict within 90 days, apply to the SEC for permission to
continue or resign.



No personal liability of directors, officers, employees and stockholders




     No director, officer, employee, incorporator or stockholder of the Company, any of its
Restricted Subsidiaries or any Guarantor will have any liability for any obligations of the
Company, any of its Restricted Subsidiaries or any Guarantor under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of such obligations or their creation. Each



38









 







Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver and release may not be
effective to waive liabilities under the U.S. Federal securities laws, and it is the view of the
SEC that such a waiver is against public policy.



Governing law




     The Indenture and the Notes will be governed by, and construed in accordance with, the laws of
the State of New York.



Certain definitions




     “Additional Assets” means:




	 	(1)	 	any property, plant, license or equipment used in a Related Business;
	 
	 	(2)	 	the Capital Stock of a Person that becomes a Restricted Subsidiary as a result
of the acquisition of such Capital Stock by the Company or another Restricted
Subsidiary; or
	 
	 	(3)	 	Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary;




provided, however, that any such Restricted Subsidiary described in clause (2) or (3) above is
primarily engaged in a Related Business.




     “Affiliate” of any specified Person means any other Person, directly or indirectly,
controlling or controlled by or under direct or indirect common control with such specified Person.
For the purposes of this definition, “control” when used with respect to any Person means the power
to direct the management and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing. For purposes of the covenants described
under “—Certain covenants—Limitation on restricted payments”, “—Certain covenants—Limitation on
affiliate transactions” and “—Certain covenants—Limitation on sales of assets and subsidiary stock”
only, “Affiliate” shall also mean any beneficial owner of Capital Stock representing 10% or more of
the total voting power of the Voting Stock (on a fully diluted basis) of the Company (excluding any
Person permitted to report such ownership on Schedule 13G under the Exchange Act) or of rights or
warrants to purchase such Capital Stock (whether or not currently exercisable) and any Person who
would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof.



     “Asset Disposition” means any sale, lease (other than an operating lease entered into in the
ordinary course of business), transfer or other disposition (or series of related sales, leases,
transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition
by means of a merger, consolidation or similar transaction (each referred to for the purposes of
this definition as a “disposition”), of:



39









 






	 	(1)	 	any shares of Capital Stock of a Restricted Subsidiary (other than directors’
qualifying shares or shares required by applicable law to be held by a Person other
than the Company or a Restricted Subsidiary);
	 
	 	(2)	 	all or substantially all the assets of any division or line of business of the
Company or any Restricted Subsidiary; or
	 
	 	(3)	 	any other assets of the Company or any Restricted Subsidiary outside of the
ordinary course of business of the Company or such Restricted Subsidiary





(other than, in the case of clauses (1), (2) and (3) above,





	 	(A)	 	a disposition by a Restricted Subsidiary to the Company or by
the Company or a Restricted Subsidiary to a Restricted Subsidiary;
	 
	 	(B)	 	for purposes of the covenant described under “—Certain
covenants—Limitation on sales of assets and subsidiary stock” only, (i) a
disposition that constitutes a Restricted Payment (or would constitute a
Restricted Payment but for the exclusions from the definition thereof) and that
is not prohibited by the covenant described under “—Certain
covenants—Limitation on restricted payments”; (ii) the making of an Asset Swap
and (iii) a disposition of all or substantially all the assets of the Company
in accordance with the covenant described under “—Certain covenants—Merger and
consolidation”;
	 
	 	(C)	 	a disposition of assets with a fair market value of less than
$10 million;
	 
	 	(D)	 	a disposition of cash or Temporary Cash Investments;
	 
	 	(E)	 	the creation of a Lien (but not the sale or other disposition
of the property subject to such Lien);
	 
	 	(F)	 	the licensing or sublicensing of intellectual property or other
general intangibles and licenses, leases or subleases of other property,
provided, however, such licensing or sublicensing shall not interfere in any
material respect with the Company’s continuing use of such intellectual
property or other general intangibles and licenses, leases or subleases of
other property;
	 
	 	(G)	 	the sale or lease of equipment, inventory, accounts receivable
or other assets in the ordinary course of business;
	 
	 	(H)	 	any issuance or sale of Capital Stock of an Unrestricted
Subsidiary;
	 
	 	(I)	 	foreclosure on assets; and
	 
	 	(J)	 	disposition of damaged, obsolete or worn-out property in the
ordinary course of business.)





40









 





     “Asset Swap” means concurrent purchase and sale or exchange of Related Business Assets between
the Company or any of its Restricted Subsidiaries and another Person; provided that any cash
received must be applied in accordance with the covenant described under “—Limitation on sales of
assets and subsidiary stock.”



     “Attributable Debt” in respect of a Sale/Leaseback Transaction means, as at the time of
determination, the present value (discounted at the interest rate borne by the Notes, compounded
annually) of the total obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale/Leaseback Transaction (including any period for which such lease
has been extended); provided, however, that if such Sale/Leaseback Transaction results in a Capital
Lease Obligation, the amount of Indebtedness represented thereby will be determined in accordance
with the definition of “Capital Lease Obligation”.



     “Average Life” means, as of the date of determination, with respect to any Indebtedness, the
quotient obtained by dividing:




	 	(1)	 	the sum of the products of the numbers of years from the date of determination
to the dates of each successive scheduled principal payment of or redemption or similar
payment with respect to such Indebtedness multiplied by the amount of such payment by
	 
	 	(2)	 	the sum of all such payments.





     “Board of Directors” means the Board of Directors of the Company or Sirius Satellite Radio
Inc., as the case may be, or any committee thereof duly authorized to act on behalf of such Board.



     “Business Day” means each day which is not a Legal Holiday.



     “Capital Lease Obligation” means an obligation that is required to be classified and accounted
for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of
Indebtedness represented by such obligation shall be the capitalized amount of such obligation
determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date upon which such
lease may be terminated by the lessee without payment of a penalty. For purposes of the covenant
described under “—Certain covenants—Limitation on liens”, a Capital Lease Obligation will be deemed
to be secured by a Lien on the property being leased.



     “Capital Stock” of any Person means any and all shares, interests (including partnership
interests), rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred Stock, but
excluding any debt securities convertible into such equity.



     “Code” means the Internal Revenue Code of 1986, as amended.



     “Company-Sirius Merger” means (a) a merger or consolidation of the Company with or into Sirius
Satellite Radio Inc. or a merger or consolidation of Sirius Satellite Radio Inc. with or into the
Company or (b) any assignment, transfer, conveyance or other disposition of all or



41









 







substantially all of the properties or assets of the Company to Sirius Satellite Radio Inc. or
of Sirius Satellite Radio Inc. to the Company.



     “Consolidated Current Liabilities” as of the date of determination means the aggregate amount
of liabilities of the Company and its consolidated Restricted Subsidiaries which may properly be
classified as current liabilities (including taxes accrued as estimated), on a consolidated basis,
after eliminating:




	 	(1)	 	all intercompany items between the Company and any Restricted Subsidiary; and
	 
	 	(2)	 	all current maturities of long-term Indebtedness, all as determined in
accordance with GAAP consistently applied.





     “Consolidated Income Tax Expense” means, with respect to the Company for any period, the
provision for federal, state, local and foreign taxes based on income or profits (including
franchise taxes) payable by the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.



     “Consolidated Interest Expense” means, for any period, the total interest expense of the
Company and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including amortization of debt issuance costs and original issue discount), non-cash
interest payments, the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations and Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter of credit or
bankers’ acceptance financings, and net of the effect of all payments made or received pursuant to
Hedging Obligations.



     “Consolidated Leverage Ratio” as of any date of determination means the ratio of (x) the
aggregate amount of Indebtedness of the Company and its Restricted Subsidiaries as of such date of
determination to (y) Consolidated Operating Cash Flow for the most recent four consecutive fiscal
quarters ending prior to such date of determination for which financial information is available
(the “Reference Period”); provided, however, that:




	 	(1)	 	if the transaction giving rise to the need to calculate the Consolidated
Leverage Ratio is an Incurrence of Indebtedness, the amount of such Indebtedness shall
be calculated after giving effect on a pro forma basis to such Indebtedness;
	 
	 	(2)	 	if the Company or any Restricted Subsidiary has repaid, repurchased, defeased
or otherwise discharged any Indebtedness that was outstanding as of the end of such
fiscal quarter or if any Indebtedness is to be repaid, repurchased, defeased or
otherwise discharged on the date of the transaction giving rise to the need to
calculate the Consolidated Leverage Ratio (other than, in each case, Indebtedness
Incurred under any revolving credit agreement), the aggregate amount of Indebtedness
shall be calculated on a pro forma basis and Consolidated Operating Cash Flow shall be
calculated as if the Company or such Restricted Subsidiary had not earned the interest
income, if any, actually earned during the Reference Period in respect of cash or
Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge
such Indebtedness;





42









 






	 	(3)	 	if since the beginning of the Reference Period the Company or any Restricted
Subsidiary shall have made any Asset Disposition, the Consolidated Operating Cash Flow
for the Reference Period shall be reduced by an amount equal to the Consolidated
Operating Cash Flow (if positive) directly attributable to the assets which are the
subject of such Asset Disposition for the Reference Period or increased by an amount
equal to the Consolidated Operating Cash Flow (if negative) directly attributable
thereto for the Reference Period;
	 
	 	(4)	 	if since the beginning of the Reference Period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted
Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of
assets which constitutes all or substantially all of an operating unit of a business,
Consolidated Operating Cash Flow for the Reference Period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if
such Investment or acquisition had occurred on the first day of the Reference Period;
and
	 
	 	(5)	 	if since the beginning of the Reference Period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or any Restricted
Subsidiary since the beginning of such Reference Period) shall have made any Asset
Disposition, any Investment or acquisition of assets that would have required an
adjustment pursuant to clause (3) or (4) above if made by the Company or a Restricted
Subsidiary during the Reference Period, Consolidated Operating Cash Flow for the
Reference Period shall be calculated after giving pro forma effect thereto as if such
Asset Disposition, Investment or acquisition had occurred on the first day of the
Reference Period.





     For purposes of this definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in accordance with GAAP in good faith by a responsible financial
or accounting Officer of the Company. If any Indebtedness bears a floating rate of interest and is
being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate
in effect on the date of determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate
Agreement has a remaining term in excess of 12 months). If any Indebtedness is Incurred under a
revolving credit facility and is being given pro forma effect, the interest on such Indebtedness
shall be calculated based on the average daily balance of such Indebtedness for the four fiscal
quarters subject to the pro forma calculation to the extent such Indebtedness was Incurred solely
for working capital purposes.



     “Consolidated Net Income” means, for any period, the net income of the Company and its
consolidated Subsidiaries; provided, however, that there shall not be included in such Consolidated
Net Income:




	 	(1)	 	any net income of any Person (other than the Company) if such Person is not a
Restricted Subsidiary, except that:





43









 






	 	(A)	 	subject to the exclusion contained in clauses (3), (4) and (5)
below, the Company’s equity in the net income of any such Person for such
period shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Person during such period to the
Company or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution paid to a Restricted
Subsidiary, to the limitations contained in clause (2) below); and
	 
	 	(B)	 	the Company’s equity in a net loss of any such Person for such
period shall be included in determining such Consolidated Net Income to the
extent such loss has been funded with cash from the Company or a Restricted
Subsidiary;






	 	(2)	 	any net income of any Restricted Subsidiary if such Restricted Subsidiary is
subject to restrictions, directly or indirectly, on the payment of dividends or the
making of distributions by such Restricted Subsidiary, directly or indirectly, to the
Company, except that:






	 	(A)	 	subject to the exclusion contained in clauses (3), (4) and (5)
below, the Company’s equity in the net income of any such Restricted Subsidiary
for such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash that could have been distributed by such Restricted
Subsidiary during such period to the Company or another Restricted Subsidiary
as a dividend or other distribution (subject, in the case of a dividend or
other distribution paid to another Restricted Subsidiary, to the limitation
contained in this clause); and
	 
	 	(B)	 	the Company’s equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such Consolidated
Net Income;






	 	(3)	 	any gain (or loss) realized upon the sale or other disposition of any assets of
the Company or its consolidated Restricted Subsidiaries (including pursuant to any
Sale/Leaseback Transaction) which is not sold or otherwise disposed of in the ordinary
course of business and any gain (or loss) realized upon the sale or other disposition
of any Capital Stock of any Person;
	 
	 	(4)	 	extraordinary gains or losses; and
	 
	 	(5)	 	the cumulative effect of a change in accounting principles,




in each case, for such period. Notwithstanding the foregoing, for the purposes of the covenant
described under “—Certain covenants—Limitation on restricted payments” only, there shall be
excluded from Consolidated Net Income any repurchases, repayments or redemptions of Investments,
proceeds realized on the sale of Investments or return of capital to the Company or a Restricted
Subsidiary to the extent such repurchases, repayments, redemptions, proceeds or returns increase
the amount of Restricted Payments permitted under such covenant pursuant to clause (a)(3)(D)
thereof.




44









 








     “Consolidated Operating Cash Flow” means, with respect to the Company and its Restricted
Subsidiaries on a consolidated basis, for any period, an amount equal to Consolidated Net Income
for such period increased (without duplication) by the sum of:




	 	(a)	 	Consolidated Income Tax Expense accrued for such period to the extent deducted
in determining Consolidated Net Income for such period;
	 
	 	(b)	 	Consolidated Interest Expense for such period to the extent deducted in
determining Consolidated Net Income for such period; and
	 
	 	(c)	 	depreciation, amortization and any other noncash items for such period to the
extent deducted in determining Consolidated Net Income for such period (other than any
noncash item which requires the accrual of, or a reserve for, cash charges for any
future period) of the Company and the Restricted Subsidiaries (including amortization
of capitalized debt issuance costs for such period, any noncash compensation expense
realized for grants of stock options or other rights to officers, directors,
consultants and employees and noncash charges related to equity granted to third
parties), all of the foregoing determined on a consolidated basis in accordance with
GAAP, and decreased by noncash items to the extent they increase Consolidated Net
Income (including the partial or entire reversal of reserves taken in prior periods,
but excluding reversals of accruals or reserves for cash charges taken in prior
periods) for such period.





     “Consolidated Total Assets” means the total assets of the Company and its consolidated
Restricted Subsidiaries, as shown on the most recent balance sheet of the Company, determined on a
consolidated basis in accordance with GAAP.



     “Continuing Directors” means, as of any date of determination, any member of the Board of
Directors who:



     (1) was a member of such Board of Directors on the Issue Date; or



     (2) was nominated for election or elected to such Board of Directors with the approval of a
majority of the Continuing Directors who were members of such board at the time of such nomination
or election.



     “Default” means any event which is, or after notice or passage of time or both would be, an
Event of Default.



     “Disqualified Stock” means, with respect to any Person, any Capital Stock which by its terms
(or by the terms of any security into which it is convertible or for which it is exchangeable at
the option of the holder) or upon the happening of any event:




	 	(1)	 	matures or is mandatorily redeemable (other than redeemable only for Capital
Stock of such Person which is not itself Disqualified Stock) pursuant to a sinking fund
obligation or otherwise;





45









 






	 	(2)	 	is convertible or exchangeable at the option of the holder for Indebtedness or
Disqualified Stock; or
	 
	 	(3)	 	is mandatorily redeemable or must be purchased upon the occurrence of certain
events or otherwise, in whole or in part;




in each case on or prior to the date that is 91 days after the Stated Maturity of the Notes;
provided, however, that any Capital Stock that would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person to purchase or redeem
such Capital Stock upon the occurrence of an “asset sale” or “change of control” shall not
constitute Disqualified Stock if:





	 	(A)	 	the “asset sale” or “change of control” provisions applicable
to such Capital Stock are not more favorable to the holders of such Capital
Stock than the terms applicable to the Notes and under the covenants described
under “—Certain covenants—Limitation on sales of assets and subsidiary stock”
and “—Certain covenants—Change of control”; and
	 
	 	(B)	 	any such requirement only becomes operative after compliance
with such terms applicable to the Notes, including the purchase of any Notes
tendered pursuant thereto.





     The amount of any Disqualified Stock that does not have a fixed redemption, repayment or
repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if
such Disqualified Stock were redeemed, repaid or repurchased on any date on which the amount of
such Disqualified Stock is to be determined pursuant to the Indenture; provided, however, that if
such Disqualified Stock could not be required to be redeemed, repaid or repurchased at the time of
such determination, the redemption, repayment or repurchase price will be the book value of such
Disqualified Stock as reflected in the most recent financial statements of such Person.



     “Equity Offering” means a primary public or private offering of Capital Stock of Sirius
Satellite Radio Inc. pursuant to an effective registration statement under the Securities Act, an
offering memorandum, private placement memorandum or otherwise, other than offerings with respect
to the Common Stock, or options, warrants or rights of Sirius Satellite Radio Inc., registered on
Form S-4 or S-8, the Net Cash Proceeds of which are contributed to the Company’s equity capital
within 90 days after receipt by Sirius Satellite Radio Inc. of such cash proceeds.



     “Escrow LLC-Company Merger” means a merger of the Escrow LLC with or into the Company upon
release of the funds held in escrow to Escrow LLC to effectuate a special redemption or to fund the
exercise of the change of control puts.



     “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.



     “Existing Sale and Leaseback Transaction” means the Sale/Leaseback Transaction pursuant to (i)
the transponder purchase agreement, dated as of February 13, 2007, by and between Holdings and
Wells Fargo Bank Northwest in its capacity as Owner Trustee, (ii) the



46









 







lease agreement, dated as of February 13, 2007, by and between Wells Fargo Bank Northwest, as
Owner Trustee, and the Company and (iii) the other related documents.



     “FCC License Subsidiary” means XM Radio Inc., a wholly owned subsidiary of the Company that
owns all of the Company’s FCC Licenses to provide satellite digital radio service in the United
States.



     “GAAP” means generally accepted accounting principles in the United States of America as in
effect as of the Issue Date, including those set forth in:




	 	(1)	 	the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants;
	 
	 	(2)	 	statements and pronouncements of the Financial Accounting Standards Board;
	 
	 	(3)	 	such other statements by such other entity as approved by a significant segment
of the accounting profession; and
	 
	 	(4)	 	the rules and regulations of the SEC governing the inclusion of financial
statements (including pro forma financial statements) in periodic reports required to
be filed pursuant to Section 13 of the Exchange Act, including opinions and
pronouncements in staff accounting bulletins and similar written statements from the
accounting staff of the SEC.





     “GM Facility” means the Third Amended and Restated Distribution and Credit Agreement, dated as
of February 6, 2008, by and among General Motors Corporation, Holdings and the Company.



     “Guarantee” means any obligation, contingent or otherwise, of any Person directly or
indirectly guaranteeing any Indebtedness of any Person and any obligation, direct or indirect,
contingent or otherwise, of such Person:




	 	(1)	 	to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness of such Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods, securities or
services, to take-or-pay or to maintain financial statement conditions or otherwise);
or
	 
	 	(2)	 	entered into for the purpose of assuring in any other manner the obligee of
such Indebtedness of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part);




provided, however, that the term “Guarantee” shall not include endorsements for collection or
deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding
meaning.




     “Guarantor” means the Parent Guarantor and each Subsidiary Guarantor.



47









 





     “Hedging Obligations” of any Person means the obligations of such Person under:




	 	(1)	 	currency exchange or interest rate swap agreements, currency exchange or
interest rate cap agreements or currency exchange or interest rate collar agreements;
or
	 
	 	(2)	 	other agreements or arrangements designed to protect such Person against
fluctuations in currency exchange or interest rate prices.





     “Holder” or “Noteholder” means the Person in whose name a Note is registered on the
Registrar’s books.



     “Holdings” refers to XM Satellite Radio Holdings Inc.



     “Holdings-Company Merger” means (a) a merger or consolidation of the Company with or into
Holdings or a merger or consolidation of Holdings with or into the Company or (b) any assignment,
transfer, conveyance or other disposition of all or substantially all of the properties or assets
of the Company to Holdings or of Holdings to the Company.



     “Holdings-Sirius Merger” means (a) a merger or consolidation of Holdings with or into Sirius
Satellite Radio Inc. or a merger or consolidation of Sirius Satellite Radio Inc. with or into
Holdings or (b) any assignment, transfer, conveyance or other disposition of all or substantially
all of the properties or assets of Holdings to Sirius Satellite Radio Inc. or of Sirius Satellite
Radio Inc. to Holdings.



     “Incur” means issue, assume, Guarantee, incur or otherwise become liable for; provided,
however, that any Indebtedness of a Person existing at the time such Person becomes a Restricted
Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Person at the time it becomes a Restricted Subsidiary. The term “Incurrence” when
used as a noun shall have a correlative meaning. Solely for purposes of determining compliance with
the covenant described under “—Certain covenants—Limitation on indebtedness”:




	 	(1)	 	amortization of debt discount or the accretion of principal with respect to a
non-interest bearing or other discount security;
	 
	 	(2)	 	the payment of regularly scheduled interest in the form of additional
Indebtedness of the same instrument or the payment of regularly scheduled dividends on
Capital Stock in the form of additional Capital Stock of the same class and with the
same terms; and
	 
	 	(3)	 	the obligation to pay a premium in respect of Indebtedness arising in
connection with the issuance of a notice of redemption or making of a mandatory offer
to purchase such Indebtedness will not be deemed to be the Incurrence of Indebtedness.





48









 





     “Indebtedness” means, with respect to any Person on any date of determination (without
duplication):




	 	(1)	 	the principal in respect of (A) indebtedness of such Person for money borrowed
and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable, including, in each case,
any premium on such indebtedness to the extent such premium has become due and payable;
	 
	 	(2)	 	all Capital Lease Obligations of such Person and all Attributable Debt in
respect of Sale/Leaseback Transactions entered into by such Person;
	 
	 	(3)	 	all obligations of such Person issued or assumed as the deferred purchase price
of property, all conditional sale obligations of such Person and all obligations of
such Person under any title retention agreement (but excluding any accounts payable or
other liability to trade creditors arising in the ordinary course of business), in each
case only if and to the extent due more than 12 months after the delivery of property;
	 
	 	(4)	 	the principal component of all obligations of such Person for the reimbursement
of any obligor on any letter of credit or bankers’ acceptance (other than obligations
with respect to letters of credit securing obligations (other than obligations
described in clauses (1) through (3) above) entered into in the ordinary course of
business of such Person, including obligations relating to the MLB Letter Agreement, to
the extent such letters of credit are not drawn upon or, if and to the extent drawn
upon, such drawing is reimbursed no later than the tenth Business Day following payment
on the letter of credit;
	 
	 	(5)	 	the principal component of the amount of all obligations of such Person with
respect to the redemption, repayment or other repurchase of any Disqualified Stock of
such Person or, with respect to any Preferred Stock of any Restricted Subsidiary of
such Person, the principal amount attributable to such Preferred Stock to be determined
in accordance with the Indenture (but excluding, in each case, any accrued dividends);
	 
	 	(6)	 	all obligations of the type referred to in clauses (1) through (5) of other
Persons and all dividends of other Persons for the payment of which, in either case,
such Person is responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any Guarantee;
	 
	 	(7)	 	all obligations of the type referred to in clauses (1) through (6) of other
Persons secured by any Lien on any property or asset of such Person (whether or not
such obligation is assumed by such Person), the amount of such obligation being deemed
to be the lesser of the fair market value of such property or assets and the amount of
the obligation so secured; and
	 
	 	(8)	 	to the extent not otherwise included in this definition, Hedging Obligations of
such Person.





49









 





     Notwithstanding the foregoing, in connection with the purchase by the Company or any
Restricted Subsidiary of any business, the term “Indebtedness” will exclude post-closing payment
adjustments to which the seller may become entitled to the extent such payment is determined by a
final closing balance sheet or such payment depends on the performance of such business after the
closing; provided, however, that, at the time of closing, the amount of any such payment is not
determinable and, to the extent such payment thereafter becomes fixed and determined, the amount is
paid within 30 days thereafter. Furthermore, in no event shall the Company’s obligations to pay
amounts under any programming or content acquisition arrangements, in each case, consistent with
past practice, be considered Indebtedness.



     The amount of Indebtedness of any Person at any date shall be the outstanding balance at such
date of all obligations as described above; provided, however, that in the case of Indebtedness
sold at a discount, the amount of such Indebtedness at any time will be the accreted value thereof
at such time.



     “Independent Qualified Party” means an investment banking firm, accounting firm, appraisal
firm, economic consulting firm or management consulting firm, each of national standing; provided,
however, that such firm is not an Affiliate of the Company.



     “Investment” in any Person means any direct or indirect advance, loan (other than advances to
customers in the ordinary course of business that are recorded as accounts receivable on the
balance sheet of the lender) or other extensions of credit (including by way of Guarantee or
similar arrangement) or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such
Person. If the Company or any Restricted Subsidiary issues, sells or otherwise disposes of any
Capital Stock of a Person that is a Restricted Subsidiary such that, after giving effect thereto,
such Person is no longer a Restricted Subsidiary, any Investment by the Company or any Restricted
Subsidiary in such Person remaining after giving effect thereto will be deemed to be a new
Investment at such time. Except as otherwise provided for herein, the amount of an Investment shall
be its fair market value at the time the Investment is made and without giving effect to subsequent
changes in value; provided that none of the following will be deemed to be an Investment:




	 	(1)	 	Hedging Obligations entered into in the ordinary course of business and in
compliance with the Indenture;
	 
	 	(2)	 	endorsements of negotiable instruments and documents in the ordinary course of
business;
	 
	 	(3)	 	an acquisition of assets by the Company or a Subsidiary for consideration to
the extent such consideration consists of Capital Stock of the Company; and
	 
	 	(4)	 	advances, deposits, escrows or similar arrangements in respect of retail or
automotive distribution arrangements, programming or content acquisitions or
extensions.





50









 





     For purposes of the definition of “Unrestricted Subsidiary”, the definition of “Restricted
Payment” and the covenant described under “—Certain covenants—Limitation on restricted payments”,
“Investment” shall include:




	 	(1)	 	the portion (proportionate to the Company’s equity interest in such Subsidiary)
of the fair market value of the net assets of any Subsidiary of the Company at the time
that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that
upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary
equal to an amount (if positive) equal to (A) the Company’s “Investment” in such
Subsidiary at the time of such redesignation less (B) the portion (proportionate to the
Company’s equity interest in such Subsidiary) of the fair market value of the net
assets of such Subsidiary at the time of such redesignation; and
	 
	 	(2)	 	any property transferred to or from an Unrestricted Subsidiary shall be valued
at its fair market value at the time of such transfer, in each case as determined in
good faith by the Board of Directors of the Company.





     “Issue Date” means       , 2008.



     “Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions are not
required to be open in the State of New York.



     “Lien” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind
(including any conditional sale or other title retention agreement or lease in the nature thereof).



     “Material Subsidiary” means, any domestic Restricted Subsidiary (including the FCC License
Subsidiary but only to the extent permitted under applicable law) that has Guaranteed any
Indebtedness or other obligation of the Company or any Restricted Subsidiary in excess of $2.0
million.



     “Merger” means the merger pursuant to the Agreement and Plan of Merger, dated as of February
19, 2007, by and among Sirius Satellite Radio Inc., Vernon Merger Corporation and XM Satellite
Radio Holdings Inc.



     “Moody’s” means Moody’s Investors Service, Inc. and any successor to its rating agency
business.



     “Net Available Cash” from an Asset Disposition means cash payments received therefrom
(including any cash payments received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise and proceeds from the sale or other disposition of any
securities received as consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other non-cash form), in each
case net of:



51









 






	 	(1)	 	all legal, title and recording tax expenses, commissions and other fees and
expenses Incurred, and all Federal, state, provincial, foreign and local taxes required
to be accrued as a liability under GAAP, as a consequence of such Asset Disposition;
	 
	 	(2)	 	all payments made on any Indebtedness which is secured by any assets subject to
such Asset Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms, or in
order to obtain a necessary consent to such Asset Disposition, or by applicable law, be
repaid out of the proceeds from such Asset Disposition;
	 
	 	(3)	 	all distributions and other payments required to be made to minority interest
holders in Restricted Subsidiaries as a result of such Asset Disposition;
	 
	 	(4)	 	the deduction of appropriate amounts provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the property or other
assets disposed in such Asset Disposition and retained by the Company or any Restricted
Subsidiary after such Asset Disposition; and
	 
	 	(5)	 	any portion of the purchase price from an Asset Disposition placed in escrow,
whether as a reserve for adjustment of the purchase price, for satisfaction of
indemnities in respect of such Asset Disposition or otherwise in connection with that
Asset Disposition; provided, however, that upon the termination of that escrow, Net
Available Cash will be increased by any portion of funds in the escrow that are
released to the Company or any Restricted Subsidiary.





     “Net Cash Proceeds”, with respect to any issuance or sale of Capital Stock or Indebtedness,
means the cash proceeds of such issuance or sale net of attorneys’ fees, accountants’ fees,
underwriters’ or placement agents’ fees, discounts or commissions and brokerage, consultant and
other fees actually incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.



     “Obligations” means, with respect to any Indebtedness, all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements and other amounts payable pursuant to
the documentation governing such Indebtedness.



     “Officer” means the Chairman of the Board, the President, any Vice President, the Treasurer or
the Secretary of the Company.



     “Officers’ Certificate” means a certificate signed by two Officers.



     “Opinion of Counsel” means a written opinion from legal counsel who is acceptable to the
Trustee. The counsel may be an employee of or counsel to the Company or the Trustee.



     “Parent Guarantor” means Holdings, in its capacity as a guarantor of the Notes pursuant to the
Indenture.



     “Permitted Holder” means Holdings, Sirius Satellite Radio Inc. or any of their Affiliates.



52









 





     “Permitted Investment” means an Investment by the Company or any Restricted Subsidiary in:




	 	(1)	 	the Company, a Restricted Subsidiary or a Person that will, upon the making of
such Investment, become a Restricted Subsidiary; provided, however, that the primary
business of such Restricted Subsidiary is a Related Business;
	 
	 	(2)	 	another Person if, as a result of such Investment, such other Person is merged
or consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Company or a Restricted Subsidiary; provided, however, that such
Person’s primary business is a Related Business;
	 
	 	(3)	 	cash and Temporary Cash Investments;
	 
	 	(4)	 	receivables owing to the Company or any Restricted Subsidiary if created or
acquired in the ordinary course of business and payable or dischargeable in accordance
with customary trade terms; provided, however, that such trade terms may include such
concessionary trade terms as the Company or any such Restricted Subsidiary deems
reasonable under the circumstances;
	 
	 	(5)	 	payroll, travel and similar advances to cover matters that are expected at the
time of such advances ultimately to be treated as expenses for accounting purposes and
that are made in the ordinary course of business;
	 
	 	(6)	 	loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary not to
exceed $2.0 million at any time outstanding;
	 
	 	(7)	 	stock, obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any Restricted Subsidiary or in
satisfaction of judgments or pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of a debtor;
	 
	 	(8)	 	any Person to the extent such Investment represents the non-cash portion of the
consideration received for (A) an Asset Disposition as permitted pursuant to the
covenant described under “—Certain covenants—Limitations on sales of assets and
subsidiary stock” or (B) a disposition of assets not constituting an Asset Disposition;
	 
	 	(9)	 	any Person where such Investment was acquired by the Company or any of its
Restricted Subsidiaries (A) in exchange for any other Investment or accounts receivable
held by the Company or any such Restricted Subsidiary in connection with or as a result
of a bankruptcy, workout, reorganization or recapitalization of the issuer of such
other Investment or accounts receivable or (B) as a result of a foreclosure by the
Company or any of its Restricted Subsidiaries with respect to any secured Investment or
other transfer of title with respect to any secured Investment in default;





53









 






	 	(10)	 	any Person to the extent such Investments consist of prepaid expenses,
negotiable instruments held for collection and lease, utility and workers’
compensation, performance and other similar deposits made in the ordinary course of
business by the Company or any Restricted Subsidiary;
	 
	 	(11)	 	any Person to the extent such Investments consist of Hedging Obligations
otherwise permitted under the covenant described under “—Certain covenants—Limitation
on indebtedness”;
	 
	 	(12)	 	any Person to the extent such Investment exists on the Issue Date, and any
extension, modification or renewal of any such Investments existing on the Issue Date,
but only to the extent not involving additional advances, contributions or other
Investments of cash or other assets or other increases thereof (other than as a result
of the accrual or accretion of interest or original issue discount or the issuance of
pay-in-kind securities, in each case, pursuant to the terms of such Investment as in
effect on the Issue Date);
	 
	 	(13)	 	Persons to the extent such Investments, when taken together with all other
Investments made pursuant to this clause (13) that are at the time outstanding, do not
exceed the greater of (x) $500.0 million or (y) 15% of Tangible Assets (as determined
based on the consolidated balance sheet of the Company as of the end of the most recent
fiscal quarter for which internal financial statements are available prior to such
Investment), at the time of such Investment (with the fair market value of each
Investment being measured at the time made and without giving effect to subsequent
changes in value);
	 
	 	(14)	 	Any Investment that becomes an Investment of the Company as a result of a
Holdings-Company Merger or a Company-Sirius Merger;
	 
	 	(15)	 	any Asset Swap made in accordance with the covenant described under “Certain
covenants—Limitation on sales of assets and subsidiary stock”.





     “Permitted Liens” means, with respect to any Person:




	 	(1)	 	pledges or deposits by such Person under worker’s compensation laws,
unemployment insurance laws or similar legislation, or good faith deposits in
connection with bids, tenders, contracts (other than for the payment of Indebtedness)
or leases to which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States government bonds to
secure surety or appeal bonds to which such Person is a party, or deposits as security
for contested taxes or import duties or for the payment of rent, in each case Incurred
in the ordinary course of business;
	 
	 	(2)	 	Liens imposed by law, such as carriers’, warehousemen’s and mechanics’ Liens,
in each case for sums not yet due or being contested in good faith by appropriate
proceedings or other Liens arising out of judgments or awards against such Person with
respect to which such Person shall then be proceeding with an appeal or other
proceedings for review and Liens arising solely by virtue of any statutory or





54









 






	 	 	 	common law provision relating to banker’s Liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided, however, that (A) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against access
by the Company in excess of those set forth by regulations promulgated by the
Federal Reserve Board and (B) such deposit account is not intended by the Company or
any Restricted Subsidiary to provide collateral to the depository institution;
	 
	 	(3)	 	Liens for taxes, assessments or other governmental charges not yet subject to
penalties for non-payment or which are being contested in good faith by appropriate
proceedings;
	 
	 	(4)	 	Liens in favor of issuers of surety bonds, performance bonds or letters of
credit issued pursuant to the request of and for the account of such Person in the
ordinary course of its business, including with respect to the MLB Letter Agreement;
provided, however, that such letters of credit do not constitute Indebtedness;
	 
	 	(5)	 	minor survey exceptions, minor encumbrances, easements or reservations of, or
rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other restrictions as to the
use of real property or Liens incidental to the conduct of the business of such Person
or to the ownership of its properties which were not Incurred in connection with
Indebtedness and which do not in the aggregate materially adversely affect the value of
said properties or materially impair their use in the operation of the business of such
Person;
	 
	 	(6)	 	Liens securing Indebtedness Incurred to finance the construction, purchase or
lease of, or repairs, improvements or additions to, property, plant or equipment of
such Person; provided, however, that the Lien may not extend to any other property
owned by such Person or any of its Restricted Subsidiaries at the time the Lien is
Incurred (other than assets and property affixed or appurtenant thereto), and the
Indebtedness (other than any interest thereon) secured by the Lien may not be Incurred
more than 180 days after the later of the acquisition, completion of construction,
repair, improvement, addition or commencement of full operation of the property subject
to the Lien;
	 
	 	(7)	 	Liens existing on the Issue Date;
	 
	 	(8)	 	Liens on property or shares of Capital Stock of another Person at the time such
other Person becomes a Restricted Subsidiary of such Person; provided, however, that
the Liens may not extend to any other property owned by such Person or any of its
Restricted Subsidiaries (other than assets and property affixed or appurtenant
thereto);





55









 






	 	(9)	 	Liens on property at the time such Person or any of its Restricted Subsidiaries
acquires the property, including any acquisition by means of a merger or consolidation
with or into such Person or a Subsidiary of such Person; provided, however, that the
Liens may not extend to any other property owned by such Person or any of its
Restricted Subsidiaries (other than assets and property affixed or appurtenant
thereto);
	 
	 	(10)	 	Liens securing Indebtedness or other obligations of a Subsidiary of such Person
owing to such Person or a Wholly Owned Subsidiary of such Person;
	 
	 	(11)	 	Liens securing Hedging Obligations so long as such Hedging Obligations are
permitted to be Incurred under the Indenture;
	 
	 	(12)	 	Liens to secure Indebtedness permitted under the provisions described in clause
(b)(1) of the covenant described under “—Certain covenants—Limitation on indebtedness”;
	 
	 	(13)	 	leases, licenses, subleases and sublicenses of assets (including, without
limitation, real property and intellectual property rights) which do not materially
interfere with the ordinary conduct of the business of the Company or any of its
Restricted Subsidiaries;
	 
	 	(14)	 	Liens arising from Uniform Commercial Code financing statement filing regarding
operating leases entered into by the Company and its Restricted Subsidiaries in the
ordinary course of business;
	 
	 	(15)	 	Liens in connection with advances, deposits, escrows and similar arrangements
in the ordinary course of business in respect of retail or automotive distribution
arrangements, programming and content acquisitions and extensions; and
	 
	 	(16)	 	Liens to secure any Refinancing (or successive Refinancings) as a whole, or in
part, of any Indebtedness secured by any Lien referred to in clauses (6), (7), (8), (9)
or (20); provided, however, that:






	 	(A)	 	such new Lien shall be limited to all or part of the same
property and assets that secured or, under the written agreements pursuant to
which the original Lien arose, could secure the original Lien (plus
improvements and accessions to, such property or proceeds or distributions
thereof); and
	 
	 	(B)	 	the Indebtedness secured by such Lien at such time is not
increased to any amount greater than the sum of (i) the outstanding principal
amount or, if greater, committed amount of the Indebtedness described under
clause (6), (7), (8) or (9) at the time the original Lien became a Permitted
Lien and (ii) an amount necessary to pay any fees and expenses, including
premiums, related to such refinancing, refunding, extension, renewal or
replacement;






	 	(17)	 	any interest or title of a lessor under any Capital Lease Obligation;





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	 	(18)	 	any Lien that becomes a Lien of the Company as a result of a Holdings-Company
Merger or Company-Sirius Merger;
	 
	 	(19)	 	Liens relating to Replacement Satellite Vendor Indebtedness, including
Refinancing Indebtedness in respect thereof covering only the assets acquired,
constructed or improved with such Indebtedness;
	 
	 	(20)	 	Liens securing Indebtedness incurred pursuant to the $100.0 million term loan
maturing on May 5, 2009, with UBS AG, Stamford branch, acting as administrative agent
and JPMorgan Chase Bank, N.A. as collateral agent;
	 
	 	(21)	 	Liens incurred in connection with the Letter Agreement and Binding Term Sheet
(“MLB Letter Agreement”), dated as of October 15, 2004, between XM Satellite Radio Inc.
and the Office of the Commissioner of Baseball, as agent for Major League Baseball
Clubs (“MLB”), together with all agreements subsequently entered into between XM
Satellite Radio Inc. and MLB or any of their respective affiliates, regarding the
broadcast of Major League Baseball games and related programming on XM Satellite Radio,
the creation of and liens on an escrow account to hold funds payable to MLB or other
matters contemplated by the MLB Letter Agreement; and
	 
	 	(22)	 	Liens incurred in the ordinary course of business of the Company or any
Restricted Subsidiary with respect to obligations that do not exceed $20.0 million at
any one time outstanding.





     Notwithstanding the foregoing, “Permitted Liens” will not include any Lien described in clause
(6), (8) or (9) above to the extent such Lien applies to any Additional Assets acquired directly or
indirectly with Net Available Cash pursuant to the covenant described under “—Certain
covenants—Limitation on sales of assets and subsidiary stock”. For purposes of this definition, the
term “Indebtedness” shall be deemed to include interest on such Indebtedness.



     “Permitted Subordinated Obligations” means Subordinated Obligations of the Company that at the
time of Incurrence have a weighted Average Life of not less than the lesser of five years and the
remaining weighted Average Life of the Notes and that are convertible at the option of the holders
thereof into Capital Stock (other than Disqualified Stock) of the Company or Sirius Satellite Radio
Inc.



     “Person” means any individual, corporation, partnership, limited liability company, joint
venture, association, joint-stock company, trust, unincorporated organization, government or any
agency or political subdivision thereof or any other entity.



     “Preferred Stock”, as applied to the Capital Stock of any Person, means Capital Stock of any
class or classes (however designated) which is preferred as to the payment of dividends or
distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class of such Person.



     “principal” of a Note means the principal of the Note plus the premium, if any, payable on the
Note which is due or overdue or is to become due at the relevant time.



57









 





     “Purchase Money Indebtedness” means Indebtedness:




	 	(1)	 	consisting of the deferred purchase price of an asset, conditional sale
obligations, obligations under any title retention agreement and other purchase money
obligations, in each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and
	 
	 	(2)	 	Incurred to finance the acquisition by the Company or a Restricted Subsidiary
of such asset, including additions and improvements;




provided, however, that such Indebtedness is Incurred within 180 days after the acquisition by the
Company or such Restricted Subsidiary of such asset.




     “Refinance” means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay,
prepay, purchase, redeem, defease or retire, or to issue other Indebtedness in exchange or
replacement for, such Indebtedness. “Refinanced” and “Refinancing” shall have correlative meanings.



     “Refinancing Indebtedness” means Indebtedness that Refinances any Indebtedness of the Company
or any Restricted Subsidiary existing on the Issue Date or Incurred in compliance with the
Indenture, including Indebtedness that Refinances Refinancing Indebtedness; provided, however,
that:




	 	(1)	 	such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced or, if such Refinancing Indebtedness is a
Subordinated Obligation, no earlier than 91 days after the Stated Maturity of the
Notes;
	 
	 	(2)	 	such Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the Average Life of the
Indebtedness being Refinanced or, if such Refinancing Indebtedness is a Subordinated
Obligation, equal to or greater than the then remaining Average Life of the Notes;
	 
	 	(3)	 	such Refinancing Indebtedness has an aggregate principal amount (or if Incurred
with original issue discount, an aggregate issue price) that is equal to or less than
the aggregate principal amount (or if Incurred with original issue discount, the
aggregate accreted value) then outstanding (plus fees and expenses, including any
premium and defeasance costs) under the Indebtedness being Refinanced; and
	 
	 	(4)	 	if the Indebtedness being Refinanced is subordinated in right of payment to the
Notes, such Refinancing Indebtedness (a) is subordinated in right of payment to the
Notes at least to the same extent as the Indebtedness being Refinanced, (b) has a
Stated Maturity that is at least 91 days after the later of (x) the Stated Maturity of
the Notes and (y) the Stated Maturity of the Indebtedness being Refinanced and (c) has
an Average Life at the time such Refinancing Indebtedness is Incurred that is greater
than (x) the Average Life of the Notes and (y) the Average Life of the Indebtedness
being Refinanced;





58









 




provided further, however, that Refinancing Indebtedness shall not include (A) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Company or (B) Indebtedness of the Company or a
Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary.




     “Refinancing Transactions” means (i) the Merger, (ii) the Company having sufficient amounts to
fund, having funded or having obtained waivers with respect to, the mandatory offers to repurchase
notes triggered by the Merger under the Company’s 9.75% Senior Notes due 2014 or 10% Senior Secured
Discount Convertible Notes due 2009, (iii) the Company having sufficient amounts to fund or having
funded the mandatory offers to repurchase notes (or transponders of the XM-4 satellite, in the case
of the Existing Sale and Leaseback Transaction) triggered by the Merger under the Company’s 9.75%
Senior Notes due 2014, Senior Floating Rate Notes due 2013, 10% Senior Secured Discount Convertible
Notes due 2009 and the Existing Sale and Leaseback Transaction, (iv) the Company having repaid all
borrowings under the GM Facility and (v) with respect to Holdings’ 1.75% Convertible Senior Notes
due 2009, Holdings having obtained the consent of each holder of such notes to waive a change of
control offer, if any, triggered by the Merger or Holdings having a sufficient amount to fund, or
funded, such change of control offer with respect to the 1.75% Convertible Senior Notes due 2009 of
each holder that has not delivered a consent.



     “Related Business” means any business in which the Company or any of the Restricted
Subsidiaries was engaged on the Issue Date and any business related, ancillary or complementary to
such business or that constitutes a reasonable extension or expansion thereof, including in
connection with the Company’s existing and future technology, trademarks and patents or any
business the assets of which, in the good faith determination of the Board of Directors, are useful
or may be used in any such business.



     “Related Business Assets” means assets used or useful in a Related Business.



     “Replacement Satellite Vendor Indebtedness” means Indebtedness of the Company provided by a
satellite or satellite launch vendor, insurer or insurance agent or Affiliate thereof for the (i)
construction, launch and insurance of all or part of one or more replacement satellites or
satellite launches for such satellites, where “replacement satellite” means a satellite that is
used for continuation of the Company’s satellite service as a replacement for, or supplement to, a
satellite that is retired or relocated (due to a deterioration in operating useful life) within the
existing service area or reasonably determined by the Company to no longer meet the requirements
for such service or (ii) the replacement of a spare satellite that has been launched or that is no
longer capable of being launched or suitable for launch. Replacement Satellite Vendor Indebtedness
includes any Refinancing Indebtedness thereof.



     “Responsible Officer” means, when used with respect to the Trustee, any officer within the
corporate trust department of the Trustee, including any vice president, assistant vice president,
assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who
customarily performs functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred because of such
person’s knowledge of and familiarity with the particular subject and who shall have direct
responsibility for the administration of this Indenture.



59









 





     “Restricted Payment” with respect to any Person means:




	 	(1)	 	the declaration or payment of any dividends or any other distributions of any
sort in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the direct or
indirect holders of its Capital Stock (other than (A) dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock), (B) dividends or
distributions payable solely to the Company or a Restricted Subsidiary and (C) pro rata
dividends or other distributions made by a Subsidiary that is not a Wholly Owned
Subsidiary to minority stockholders (or owners of an equivalent interest in the case of
a Subsidiary that is an entity other than a corporation));
	 
	 	(2)	 	the purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value of any Capital Stock of the Company held by any Person (other than
by a Restricted Subsidiary) or of any Capital Stock of a Restricted Subsidiary held by
any Affiliate of the Company (other than by a Restricted Subsidiary), including in
connection with any merger or consolidation and including the exercise of any option to
exchange any Capital Stock (other than into Capital Stock of the Company that is not
Disqualified Stock);
	 
	 	(3)	 	(A) the purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value of Permitted Subordinated Obligations of the Company or (B) the
purchase, repurchase, redemption, defeasance or other acquisition or retirement for
value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment of any Subordinated Obligations of the Company (other than, in the case of this
clause (B), (i) from the Company or a Restricted Subsidiary or (ii) the purchase,
repurchase, redemption, defeasance or other acquisition or retirement of Subordinated
Obligations (other than Permitted Subordinated Obligations), purchased in anticipation
of satisfying a sinking fund obligation, principal installment or final maturity, in
each case due within one year of the date of such purchase, repurchase, redemption,
defeasance or other acquisition or retirement); or
	 
	 	(4)	 	the making of any Investment (other than a Permitted Investment) in any Person.





     “Restricted Subsidiary” means any Subsidiary of the Company that is not an Unrestricted
Subsidiary.



     “Sale/Leaseback Transaction” means an arrangement relating to property owned by the Company or
a Restricted Subsidiary on the Issue Date or thereafter acquired by the Company or a Restricted
Subsidiary whereby the Company or a Restricted Subsidiary transfers such property to a Person and
the Company or a Restricted Subsidiary leases it from such Person.



     “SEC” means the U.S. Securities and Exchange Commission.



     “Secured Indebtedness” means any Indebtedness of the Company secured by a Lien.



     “Securities Act” means the U.S. Securities Act of 1933, as amended.



60









 





     “Senior Indebtedness” means with respect to any Person:




	 	(1)	 	Indebtedness of such Person, whether outstanding on the Issue Date or
thereafter Incurred; and
	 
	 	(2)	 	all other Obligations of such Person (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to such Person
whether or not post-filing interest is allowed in such proceeding) in respect of
Indebtedness described in clause (1) above




unless, in the case of clauses (1) and (2), in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that such Indebtedness or other
obligations are subordinate in right of payment to the Notes; provided, however, that Senior
Indebtedness shall not include:





	 	(a)	 	any obligation of such Person to the Company or any Subsidiary;
	 
	 	(b)	 	any liability for Federal, state, local or other taxes owed or owing by such
Person;
	 
	 	(c)	 	any accounts payable or other liability to trade creditors arising in the
ordinary course of business;
	 
	 	(d)	 	any Indebtedness or other Obligation of such Person which is subordinate or
junior in any respect to any other Indebtedness or other Obligation of such Person;
	 
	 	(e)	 	that portion of any Indebtedness which at the time of Incurrence is Incurred in
violation of the Indenture; or
	 
	 	(f)	 	any Capital Stock.





     “Senior Secured Leverage Ratio” as of any date of determination means the ratio of (x) the
aggregate amount of secured Senior Indebtedness of the Company and its Restricted Subsidiaries as
of such date of determination to (y) Consolidated Operating Cash Flow for the most recent four
consecutive fiscal quarters ending prior to such date of determination for which financial
information is available (the “Reference Period”); provided, however, that:




	 	(1)	 	if the transaction giving rise to the need to calculate the Senior Secured
Leverage Ratio is an Incurrence of Indebtedness, the amount of such Indebtedness shall
be calculated after giving effect on a pro forma basis to such Indebtedness;
	 
	 	(2)	 	if the Company or any Restricted Subsidiary has repaid, repurchased, defeased
or otherwise discharged any Indebtedness that was outstanding as of the end of such
fiscal quarter or if any Indebtedness is to be repaid, repurchased, defeased or
otherwise discharged on the date of the transaction giving rise to the need to
calculate the Senior Secured Leverage Ratio (other than, in each case, Indebtedness
Incurred under any revolving credit agreement), the aggregate amount of Indebtedness
shall be calculated on a pro forma basis and Consolidated





61









 






	 	 	 	Operating Cash Flow shall be calculated as if the Company or such Restricted
Subsidiary had not earned the interest income, if any, actually earned during the
Reference Period in respect of cash or Temporary Cash Investments used to repay,
repurchase, defease or otherwise discharge such Indebtedness;
	 
	 	(3)	 	if since the beginning of the Reference Period the Company or any Restricted
Subsidiary shall have made any Asset Disposition, the Consolidated Operating Cash Flow
for the Reference Period shall be reduced by an amount equal to the Consolidated
Operating Cash Flow (if positive) directly attributable to the assets which are the
subject of such Asset Disposition for the Reference Period or increased by an amount
equal to the Consolidated Operating Cash Flow (if negative) directly attributable
thereto for the Reference Period;
	 
	 	(4)	 	if since the beginning of the Reference Period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted
Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of
assets which constitutes all or substantially all of an operating unit of a business,
Consolidated Operating Cash Flow for the Reference Period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if
such Investment or acquisition had occurred on the first day of the Reference Period;
and
	 
	 	(5)	 	if since the beginning of the Reference Period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or any Restricted
Subsidiary since the beginning of such Reference Period) shall have made any Asset
Disposition, any Investment or acquisition of assets that would have required an
adjustment pursuant to clause (3) or (4) above if made by the Company or a Restricted
Subsidiary during the Reference Period, Consolidated Operating Cash Flow for the
Reference Period shall be calculated after giving pro forma effect thereto as if such
Asset Disposition, Investment or acquisition had occurred on the first day of the
Reference Period.





     For purposes of this definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in accordance with GAAP in good faith by a responsible financial
or accounting Officer of the Company. If any Indebtedness bears a floating rate of interest and is
being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate
in effect on the date of determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate
Agreement has a remaining term in excess of 12 months). If any Indebtedness is Incurred under a
revolving credit facility and is being given pro forma effect, the interest on such Indebtedness
shall be calculated based on the average daily balance of such Indebtedness for the four fiscal
quarters subject to the pro forma calculation to the extent such Indebtedness was Incurred solely
for working capital purposes.



62









 





     “Senior Unsecured Leverage Ratio” as of any date of determination means the ratio of (x) the
aggregate amount of unsecured Senior Indebtedness of the Company and its Restricted Subsidiaries as
of such date of determination to (y) Consolidated Operating Cash Flow for the most recent four
consecutive fiscal quarters ending prior to such date of determination for which financial
information is available (the “Reference Period”); provided, however, that:




	 	(1)	 	if the transaction giving rise to the need to calculate the Senior Unsecured
Leverage Ratio is an Incurrence of Indebtedness, the amount of such Indebtedness shall
be calculated after giving effect on a pro forma basis to such Indebtedness;
	 
	 	(2)	 	if the Company or any Restricted Subsidiary has repaid, repurchased, defeased
or otherwise discharged any Indebtedness that was outstanding as of the end of such
fiscal quarter or if any Indebtedness is to be repaid, repurchased, defeased or
otherwise discharged on the date of the transaction giving rise to the need to
calculate the Senior Unsecured Leverage Ratio (other than, in each case, Indebtedness
Incurred under any revolving credit agreement), the aggregate amount of Indebtedness
shall be calculated on a pro forma basis and Consolidated Operating Cash Flow shall be
calculated as if the Company or such Restricted Subsidiary had not earned the interest
income, if any, actually earned during the Reference Period in respect of cash or
Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge
such Indebtedness;
	 
	 	(3)	 	if since the beginning of the Reference Period the Company or any Restricted
Subsidiary shall have made any Asset Disposition, the Consolidated Operating Cash Flow
for the Reference Period shall be reduced by an amount equal to the Consolidated
Operating Cash Flow (if positive) directly attributable to the assets which are the
subject of such Asset Disposition for the Reference Period or increased by an amount
equal to the Consolidated Operating Cash Flow (if negative) directly attributable
thereto for the Reference Period;
	 
	 	(4)	 	if since the beginning of the Reference Period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted
Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of
assets which constitutes all or substantially all of an operating unit of a business,
Consolidated Operating Cash Flow for the Reference Period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if
such Investment or acquisition had occurred on the first day of the Reference Period;
and
	 
	 	(5)	 	if since the beginning of the Reference Period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or any Restricted
Subsidiary since the beginning of such Reference Period) shall have made any Asset
Disposition, any Investment or acquisition of assets that would have required an
adjustment pursuant to clause (3) or (4) above if made by the Company or a Restricted
Subsidiary during the Reference Period, Consolidated Operating Cash Flow for the
Reference Period shall be calculated after giving pro





63









 






	 	 	 	forma effect thereto as if such Asset Disposition, Investment or acquisition had
occurred on the first day of the Reference Period.





     For purposes of this definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in accordance with GAAP in good faith by a responsible financial
or accounting Officer of the Company. If any Indebtedness bears a floating rate of interest and is
being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate
in effect on the date of determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate
Agreement has a remaining term in excess of 12 months). If any Indebtedness is Incurred under a
revolving credit facility and is being given pro forma effect, the interest on such Indebtedness
shall be calculated based on the average daily balance of such Indebtedness for the four fiscal
quarters subject to the pro forma calculation to the extent such Indebtedness was Incurred solely
for working capital purposes.



     “Significant Subsidiary” means any Restricted Subsidiary that would be a “Significant
Subsidiary” of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the
SEC.



     “Standard & Poor’s” means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.,
and any successor to its rating agency business.



     “Stated Maturity” means, with respect to any security, the date specified in such security as
the fixed date on which the final payment of principal of such security is due and payable,
including pursuant to any mandatory redemption provision (but excluding any provision providing for
the repurchase of such security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).



     “Subordinated Obligation” means, with respect to a Person, any Indebtedness of such Person
(whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in
right of payment to the Notes pursuant to a written agreement to that effect.



     “Subscriber” means a subscriber in good standing to the XM Radio Service that has paid
subscription fees for at least one month of such service and whose subscription payments are not
delinquent.



     “Subsidiary” means, with respect to any Person, any corporation, association, partnership or
other business entity of which more than 50% of the total voting power of shares of Voting Stock is
at the time owned or controlled, directly or indirectly, by:




	 	(1)	 	such Person;
	 
	 	(2)	 	such Person and one or more Subsidiaries of such Person; or
	 
	 	(3)	 	one or more Subsidiaries of such Person.





64









 





     “Subsidiary Guarantee” means, individually, any Guarantee of payment of the Notes by a
Subsidiary Guarantor pursuant to the terms of the Indenture and any supplemental indenture thereto,
and, collectively, all such Guarantees. Each such Subsidiary Guarantee will be in the form
prescribed by the Indenture.



     “Subsidiary Guarantor” means the Restricted Subsidiaries of the Company who are party to the
Indenture on the date of the Escrow LLC- Company Merger and any other Restricted Subsidiary of the
Company that later becomes a Subsidiary Guarantor in accordance with the Indenture.



     “Tangible Assets” means the Consolidated Total Assets, less goodwill and intangibles, of the
Company and its consolidated Restricted Subsidiaries, as shown on the most recent balance sheet of
the Company, determined on a consolidated basis in accordance with GAAP.



     “Temporary Cash Investments” means any of the following:




	 	(1)	 	any investment in direct obligations of the United States of America or any
agency thereof or obligations guaranteed by the United States of America or any agency
thereof;
	 
	 	(2)	 	investments in demand and time deposit accounts, certificates of deposit and
money market deposits maturing within 365 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the United
States of America, any State thereof or any foreign country recognized by the United
States of America, and which bank or trust company has capital, surplus and undivided
profits aggregating in excess of $50.0 million (or the foreign currency equivalent
thereof) and has outstanding debt which is rated “A” (or such similar equivalent
rating) or higher by at least one nationally recognized statistical rating organization
(as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by
a registered broker dealer or mutual fund distributor;
	 
	 	(3)	 	repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (1) above entered into with a bank meeting
the qualifications described in clause (2) above;
	 
	 	(4)	 	investments in commercial paper, maturing not more than 365 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a rating at the time as
of which any investment therein is made of “P-2” (or higher) according to Moody’s or
“A-2” (or higher) according to Standard & Poor’s;
	 
	 	(5)	 	auction rate preferred stock issued by a corporation and certificates issued by
a corporation or municipality or government entity (other than an Affiliate of the
Company) organized and in existence under the laws of the United States of America or
any foreign country recognized by the United States with a rating at





65









 






	 	 	 	the time of which any Investment therein is made of “A” (or higher) according to
Moody’s or Standard & Poor’s;
	 
	 	(6)	 	investments in securities with maturities of twelve months or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States of America, or by any political subdivision or taxing authority
thereof, and rated at least “A” by Standard & Poor’s or “A” by Moody’s; and
	 
	 	(7)	 	investments in money market funds that, in the aggregate, have at least $1,000
million in assets.





     “Trustee” means The Bank of New York Mellon until a successor replaces it and, thereafter,
means the successor.



     “Trust Indenture Act” means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in
effect on the Issue Date.



     “Uniform Commercial Code” means the New York Uniform Commercial Code as in effect from time to
time.



     “Unrestricted Subsidiary” means:




	 	(1)	 	any Subsidiary of the Company that at the time of determination shall be
designated an Unrestricted Subsidiary by the Board of Directors in the manner provided
below; and
	 
	 	(2)	 	any Subsidiary of an Unrestricted Subsidiary.





     The Board of Directors may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any
of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any property
of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary
to be so designated; provided, however, that either (A) the Subsidiary to be so designated has
total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, such
designation would be permitted under the covenant described under “—Certain covenants—Limitation on
restricted payments”.



     The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such designation (A) the
Company could Incur $1.00 of additional Indebtedness under paragraph (a) of the covenant described
under “—Certain covenants—Limitation on indebtedness” and (B) no Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect
to such designation and an Officers’ Certificate certifying that such designation complied with the
foregoing provisions.



     “U.S. Government Obligations” means direct obligations (or certificates representing an
ownership interest in such obligations) of the United States of America (including any agency or



66









 







instrumentality thereof) for the payment of which the full faith and credit of the United
States of America is pledged and which are not callable at the issuer’s option.



     “Voting Stock” of a Person means all classes of Capital Stock of such Person then outstanding
and normally entitled (without regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof.



     “Wholly Owned Subsidiary” means a Restricted Subsidiary all the Capital Stock of which (other
than directors’ qualifying shares) is owned by the Company or one or more other Wholly Owned
Subsidiaries.




67












 








EXHIBIT C




Waiver of Registered Holders





 












 





EXHIBIT C




FORM OF WAIVER OF NOTEHOLDER

TO COMPLIANCE WITH CERTAIN PROVISIONS OF INDENTURE




(Custodian Letterhead)




, 2008




The Depository Trust Company

55 Water Street

New York, NY 10041

Attn: Proxy Department





			
	RE:	 	XM Satellite Radio Inc. – 9.75% Senior Notes due 2014 

(CUSIP: •)                 
                 
                 
                 
          




Gentlemen:



Please have your nominee, Cede & Co., sign the attached Waiver of Bondholder (the “Waiver”) in
order to evidence our customer’s waiver of compliance with certain provisions of the Indenture (the
“Indenture”), dated as of May 1, 2006, by and among XM Satellite Radio Inc. (the “Issuer”), XM
Satellite Radio Holdings, Inc., XM Equipment Leasing LLC as subsidiary guarantor, XM Inc. as
subsidiary guarantor, and The Bank of New York as trustee (the “Trustee”) governing the Issuer’s
9.75% Senior Notes due 2014 (the “Notes”). Our customer, [INSERT BENEFICIAL OWNER NAME] (the
“Customer”), is the beneficial owner of $• aggregate principal amount of the Notes which are
credited to our DTC Participant account on the date hereof. You, or your nominee, are the
registered holder of the Notes.



In addition to acknowledging that this request is subject to the indemnification provided for in
DTC Rule 6, the undersigned certifies to DTC and Cede & Co. that the information and facts set
forth in the attached Waiver are true and correct, including the aggregate principal amount of
Notes credited to our DTC Participant account that are beneficially owned by the Customer.



Effective July •, 2008, the beneficial owners (held through accounts with Direct and/or Indirect
DTC Participants) of a majority in aggregate principal amount of the Notes then outstanding (the
“Majority Noteholders”), waived, by means of written waivers executed by the Majority Noteholders
(the “Noteholder Waivers”) (copies of which are attached hereto), and delivered to the Issuer,
compliance by the Issuer with Section 4.14 of the Indenture, that would, but for the Noteholder
Waivers, require the Issuer to offer to repurchase or to repurchase any of the Notes (whether held
by the Majority Noteholders executing such Noteholder Waivers or by any other holder of Notes) as
the result of a Change of Control (as defined in the Indenture) caused by the proposed merger of XM
Holdings with Vernon Merger Corporation, a wholly-owned subsidiary


 









 






of Sirius Satellite Radio Inc. (“Sirius”), pursuant to the terms of an Agreement and Plan of
Merger, dated as of February 19, 2007, as it may be amended, modified or extended (the “Merger
Agreement”), among XM Satellite Radio Holdings, Inc., Merger Sub and Sirius, or other business
combination in which XM Satellite Radio Holdings, Inc. and Sirius become affiliated (such merger,
the “Merger” and the event a “Sirius Change of Control Event”). Such Noteholder Waivers by their
terms do not apply to any Change of Control other than a Sirius Change of Control Event.



Subject to certain exceptions, Section 9.02 of the Indenture provides that the registered
holders of a majority in aggregate principal amount of the Notes then outstanding may waive
compliance with any provisions of the Indenture. You, or your nominee, are the registered holder
of the Notes and, as such, are being asked to execute the Waiver, as of July •, 2008, which Waiver
evidences the actions of the Majority Noteholders, as set forth in the Noteholder Waivers.



Please make the Waiver available for pick-up by (insert name of firm or person responsible for
picking up documents from DTC) or Federal Express to (insert address & contact at Custodian).



Our Federal Express account number is (insert number).




	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	[CUSTODIAN]	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 






Medallion Stamp




 









 





Cede & Co.

C/O The Depository Trust Company

55 Water Street

New York, NY 10041




, 2008




XM Satellite Radio Inc.

XM Satellite Radio Holdings Inc.

1500 Eckington Place, N.E.

Washington, DC 20002





			
	RE:	 	XM Satellite Radio Inc. – 9.75% Senior Notes due 2014

(CUSIP: •)                 
                 
                 
                 
          




Attention: Chief Financial Officer and General Counsel



Cede & Co., the nominee of The Depository Trust Company (“DTC”), is the registered holder of 9.75%
Senior Notes due 2014 (the “Notes”) of XM Satellite Radio Inc. (the “Issuer”) which are governed by
that certain Indenture (the “Indenture” ), by and among the Issuer, XM Satellite Radio Holdings,
Inc., XM Equipment Leasing LLC as subsidiary guarantor, XM Inc. as subsidiary guarantor, and The
Bank of New York as trustee (the “Trustee”). DTC is informed by its Participant, [INSERT CUSTODIAN
NAME] (the “Participant”), that on July •, 2008 and on the date hereof $• aggregate principal
amount of the Notes credited to Participant’s DTC account are beneficially owned by [INSERT
BENEFICIAL OWNER NAME], a customer of Participant (the “Customer”).



Effective July •, 2008, the beneficial owners (held through accounts with Direct and/or Indirect
DTC Participants) of a majority in aggregate principal amount of the Notes then outstanding (the
“Majority Noteholders”), waived, by means of written waivers executed by the Majority Noteholders
(the “Noteholder Waivers”), and delivered to the Issuer, compliance by the Issuer with Section 4.14
of the Indenture, that would, but for the Noteholder Waivers, require the Issuer to offer to
repurchase or to repurchase any of the Notes (whether held by the Majority Noteholders executing
such Noteholder Waivers or by any other holder of Notes) as the result of a Change of Control (as
defined in the Indenture) caused by the proposed merger of XM Holdings with Vernon Merger
Corporation, a wholly-owned subsidiary of Sirius Satellite Radio Inc. (“Sirius”), pursuant to the
terms of an Agreement and Plan of Merger, dated as of February 19, 2007, as it may be amended,
modified or extended (the “Merger Agreement”), among XM Satellite Radio Holdings, Inc., Merger Sub
and Sirius, or other business combination in which XM Satellite Radio Holdings, Inc. and Sirius
become affiliated (such merger, the “Merger” and the event a “Sirius Change of Control Event”).
Such Noteholder Waivers by their terms do not apply to any Change of Control other than a Sirius
Change of Control Event.



Subject to certain exceptions, Section 9.02 of the Indenture provides that the registered
holders of a majority in aggregate principal amount of the Notes then outstanding may waive
compliance


 









 






with any provisions of the Indenture. We, or our nominee, are the registered holder of the Notes
and as such are executing this Waiver, as of July •, 2008, which Waiver evidences the actions of
the Majority Noteholders, as set forth in the Noteholder Waivers.



While Cede & Co. is furnishing this consent as the registered holder of the Notes, it does so at
the request of Participant and only as a nominal party for the true party in interest, the
Customer. Cede & Co., has no interest in this matter other than to take those steps which are
necessary to ensure that the Customer is not denied his rights as the beneficial owner of the
Notes, and Cede & Co. assumes no further responsibility in this matter.




	 	 	 	 	 	 	 
	Dated as of July •, 2008	 	Very truly yours,

Cede & Co.	 	 
	 
	 	 	 	 	 	 
	 

	 	BY:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title: