Document:

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                                                                    Exhibit 10.2

                       XM SATELLITE RADIO HOLDINGS INC.

                          --------------------------
                             AMENDED AND RESTATED
                              REGISTRATION RIGHTS
                                   AGREEMENT
                          --------------------------

                                August 8, 2000
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                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                            <C>
Article I.    DEFINITIONS..................................................................    2
             Section 1.1      Definitions..................................................    2
                              -----------

Article II.   REGISTRATION RIGHTS..........................................................    6
             Section 2.1      Demand Registrations.........................................    6
                              --------------------
             Section 2.2      Shelf Registration...........................................   11
                              ------------------
             Section 2.3      Piggyback Registration Rights................................   12
                              -----------------------------
             Section 2.4      Registration Procedures......................................   13
                              -----------------------
             Section 2.5      Hold-Back Agreements.........................................   16
                              --------------------
             Section 2.6      Black-Out Periods for Registration Statements................   16
                              ---------------------------------------------
             Section 2.7      Motient Rights...............................................   17
                              --------------

Article III.  INDEMNIFICATION AND CONTRIBUTION.............................................   18
             Section 3.1      Indemnification by the Company...............................   18
                              ------------------------------
             Section 3.2      Indemnification by Holders...................................   18
                              --------------------------
             Section 3.3      Conduct of Indemnification Proceedings.......................   19
                              --------------------------------------
             Section 3.4      Contribution.................................................   19
                              ------------

Article IV.   MISCELLANEOUS................................................................   20
             Section 4.1      Rule 144.....................................................   20
                              --------
             Section 4.2      Specific Performance.........................................   20
                              --------------------
             Section 4.3      Amendments and Waivers.......................................   20
                              ----------------------
             Section 4.4      Notices......................................................   21
                              -------
             Section 4.5      Transfers....................................................   21
                              ---------
             Section 4.6      Execution in Counterparts....................................   21
                              -------------------------
             Section 4.7      GOVERNING LAW; CHOICE OF FORUM; JURY TRIAL WAIVER............   22
                              -------------------------------------------------
             Section 4.8      Severability.................................................   22
                              ------------
             Section 4.9      Headings.....................................................   22
                              --------
             Section 4.10     No Inconsistent Agreement....................................   22
                              -------------------------
             Section 4.11     Further Assurances...........................................   23
                              ------------------
             Section 4.12     Entire Agreement.............................................   23
                              ----------------
</TABLE>

                                      -i-
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               AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

          This AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this

"Agreement"), dated as of August 8, 2000, is hereby entered into by and among XM
 ---------
Satellite Radio Holdings Inc., a corporation duly organized under the laws of
the State of Delaware (the "Company"); Motient Corporation, a corporation duly
                            -------
organized under the laws of the State of Delaware ("Motient"); the Baron Asset
                                                    -------
Fund series ("Baron Asset") and the Baron iOpportunity Fund series ("Baron
              -----------                                            -----
iOpportunity") of Baron Asset Fund, a business trust organized under the laws of
------------
the Commonwealth of Massachusetts, and the Baron Capital Asset Fund series
("Baron Capital" and collectively with Baron Asset and Baron iOpportunity,
 --------------
"Baron") of Baron Capital Funds Trust, a business trust organized under the laws
 -----
of the State of Delaware; Clear Channel Investments, Inc., a corporation duly
organized under the laws of the State of Nevada ("Clear Channel"); Columbia XM
                                                  -------------
Radio Partners, LLC, a limited liability company duly organized under the laws
of the Commonwealth of Virginia ("Columbia Radio Partners"); DIRECTV
                                  -----------------------
Enterprises, Inc. a corporation duly organized under the laws of the State of
Delaware ("DIRECTV"); General Motors Corporation, a corporation duly organized
           -------
under the laws of the State of Delaware ("GM"); Madison Dearborn Capital
                                          --
Partners III, L.P., ("Madison Capital"), Madison Dearborn Special Equity III,
                      ---------------
L.P. ("Madison Equity") and Special Advisors Fund I, LLC ("Madison Advisors"
       --------------                                      ----------------
and, collectively with Madison Capital and Madison Equity, each an entity duly
organized under the laws of the State of Delaware, "Madison"); Telcom-XM
                                                    -------
Investors, L.L.C., a limited liability company duly organized under the laws of
the State of Delaware ("Telcom"); AEA XM Investors I LLC and AEA XM Investors II
                        ------
LLC, each a limited liability company duly organized under the laws of the State
of Delaware (individually or collectively "AEA XM"); Columbia XM Satellite
                                           ------
Partners III, LLC, a limited liability company duly organized under the laws of
the Commonwealth of Virginia ("Columbia Satellite Partners"), Columbia Capital
                               ---------------------------
Equity Partners III (QP), L.P., a limited partnership duly organized under the
laws of the State of Delaware ("Columbia Equity Partners", and collectively with
                                ------------------------
Columbia Radio Partners and Columbia Satellite Partners, "Columbia"), and
                                                          --------
American Honda Motor Co, Inc., a corporation duly organized under the laws of
the State of California ("Honda"). Baron Asset, Clear Channel, Columbia Radio
                          -----
Partners, DIRECTV, GM, Madison and Telecom, each in its capacity as a holder of
securities in the Company other than Series C Convertible Preferred Stock (as
defined below) or Common Stock (as defined below) issuable upon conversion
thereof, are collectively referred to herein as the "Original Investors."  AEA
                                                     ------------------
XM, Baron, Columbia Satellite Partners, Columbia Equity Partners, Columbia Radio
Partners, DIRECTV, Honda, Madison Capital and Madison Equity, each in its
capacity as a holder of the Series C Convertible Preferred Stock or Common Stock
issuable upon conversion thereof, are collectively referred to herein as the
"Series C Investors."  The Original Investors and the Series C Investors are
 ------------------
collectively referred to herein as the "Investors."  The Company, Motient, and
                                        ---------
the Investors are collectively referred to herein as the "Parties."
                                                          -------

                              W I T N E S S E T H
                              -------------------

                                      -1-
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          WHEREAS, the Original Investors (other than Baron Asset) and Motient
made investments in the Company and now hold Class A Common Stock, Class B
Common Stock and Series A Convertible Preferred Stock (each as hereafter
defined);

          WHEREAS, the Series C Investors made an investment in the Company
through the purchase of Series C Convertible Redeemable Preferred Stock, par
value $.01 per share (the "Series C Convertible Preferred Stock"), pursuant to a
                           ------------------------------------
certain Stock Purchase Agreement, dated ______, 2000, by and among the Company
and the Series C Investors (the "Series C Purchase Agreement");
                                 ---------------------------

          WHEREAS, the Company has agreed to execute this Agreement to provide
the Investors and Motient with certain rights to cause the registration of the
Class A Common Stock held by them or issuable upon conversion of their Class B
Common Stock, Class C Common Stock or preferred stock of the Company;

          WHEREAS, Sony Electronics, Inc., a Delaware corporation ("Sony"), has
                                                                    ----
shelf and piggyback registration rights with respect to the shares of Class A
Common Stock issuable upon exercise of the Company's Common Stock Purchase
Warrant No. 1 issued to Sony (the "Sony Warrant"), which rights are to be pari
                                   ------------                           ----
passu to those of the Original Investors; and
-----

          WHEREAS, this Agreement is to amend and restate that certain
Registration Rights Agreement, dated as of July 7, 1999, by and among the
Company, Motient and the Original Investors (the "1999 Agreement").
                                                  --------------

          NOW, THEREFORE, in consideration of the foregoing and the promises and
covenants contained herein, the Parties agree as follows:

                                   ARTICLE I.

                                  DEFINITIONS

     Section 1.1    Definitions.  Capitalized terms not otherwise defined herein
                    -----------
shall have the respective meanings ascribed to them in the Series C Purchase
Agreement. The following terms, as used herein, have the following meanings:

          "Accredited Investor" has the meaning specified in Rule 501 of
           -------------------
Regulation D promulgated under the Securities Act.

          "Additional Demand Registration" has the meaning specified in Section
           -------------------------------
2.1(e).

          "Agreement" means this Amended and Restated Registration Rights
           ---------
Agreement (including any Schedules hereto), as it may from time to time be
amended, supplemented or modified in accordance with its terms.

          "Baron" has the meaning specified in the Preamble.
           -----

          "Baron Asset" has the meaning specified in the Preamble.
           -----------

                                       2
<PAGE>

          "Baron iOpportunity" has the meaning specified in the Preamble.
           ------------------

          "Business Day" means any day other than a Saturday, Sunday or any
           ------------
other day on which commercial banks are authorized or required by law to be
closed in New York City or the District of Columbia.

          "Capital Stock" means any and all of the Company's shares, interests,
           -------------
warrants, options, rights to acquire equity or equity-linked securities of the
Company, participations or other equivalents (however designated, whether voting
or non-voting) in equity of the Company, whether now outstanding or issued
subsequently hereto, including, without limitation, all series and classes of
Common Stock and preferred stock of the Company, and all convertible securities.

          "Class A Common Stock" means the Class A Common Stock, par value $0.01
           --------------------
per share, of the Company, having one (1) vote per share.

          "Class B Common Stock" means the Class B Common Stock, par value $0.01
           --------------------
per share, of the Company, having three (3) votes per share.

          "Class C Common Stock" means the Class C Common Stock, par value $0.01
           --------------------
per share, of the Company, having zero (0) votes per share.

          "Clear Channel" has the meaning specified in the Preamble.
           -------------

          "Columbia" has the meaning specified in the Preamble.
           --------

          "Columbia Equity Partners" has the meaning specified in the Preamble.
           ------------------------

          "Columbia Radio Partners" has the meaning specified in the Preamble.
           -----------------------

          "Columbia Satellite" has the meaning specified in the Preamble.
           ------------------

          "Commencement of Commercial Operations" means the commencement of
           -------------------------------------
commercial operations of XM Satellite Radio Inc. as publicly announced by it and
as indicated in a filing by the Company with the Federal Communications
Commission of which the Company shall notify the Investors.

          "Commission"  means the Securities and Exchange Commission or any
           ----------
other Federal agency at the time administering the Securities Act.

          "Common Stock" means all classes and series of the common stock of the
           ------------
Company, any stock into which such common stock shall have been changed or
converted or any stock resulting from any capital reorganization or
reclassification of such common stock, and all other stock of any class or
classes (however designated) of the Company the holders of which have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions of any shares entitled to preference.

          "Company" has the meaning specified in the Preamble.
           -------

                                       3
<PAGE>

          "Demand Registration" has the meaning specified in Section 2.1(a).
           -------------------

          "DIRECTV" has the meaning specified in the Preamble.
           -------

          "End of Suspension Notice"  has the meaning specified in Section
           ------------------------
2.6(b).

          "Exchange Act"  means the Securities Exchange Act of 1934, as amended,
           ------------
and the rules and regulations promulgated thereunder, all as the same shall be
in effect at the time.

          "Fair Market Value"  means the price that would be paid in an arm's-
           -----------------
length transaction between an informed and willing seller under no compulsion to
sell and an informed and willing buyer under no compulsion to buy.  If there is
any dispute as to the Fair Market Value of any security of the Company between
the Investor who holds such security and the Company, the Fair Market Value of
such security shall be determined by a firm of independent appraisers of
national standing valuing such security on an as-converted basis.

          "GM" has the meaning specified in the Preamble.
           --

          "High Yield Debt" means secured or unsecured debt securities issued by
           ---------------
the Company or a subsidiary in a registered public offering or an offering to
Qualified Institutional Buyers and/or institutional Accredited Investors under
Rule 144A of the Securities Act of at least $50 million after the Series C
Closing Date, with or without attached warrants or quasi-equity rights issued by
the Company.

          "Holders" means each of Baron, Clear Channel, Columbia, DIRECTV, GM,
           -------
Madison, Telcom, AEA XM, Honda and Motient, severally, and any transferees of
registration rights hereunder permitted pursuant to Section 4.5.

          "Honda" has the meaning specified in the Preamble.
           -----

          "Investors" has the meaning specified in the Preamble.
           ---------

          "January 15 Letter Agreements" means, collectively, (i) that certain
           ----------------------------
letter agreement between Motient, Baron Asset and WorldSpace and (ii) that
certain letter agreement between Motient and WorldSpace, each such letter
agreement dated as of January 15, 1999.

          "Losses" has the meaning specified in Section 3.1.
           ------

          "Madison" has the meaning specified in the Preamble.
           -------

          "Motient" has the meaning specified in the Preamble.
           -------

          "Managing Underwriters" has the meaning specified in Section 2.1(c).
           ---------------------

          "Person" means any individual, partnership, corporation, joint
           ------
venture, limited liability company, association, trust, unincorporated
organization, or a government or agency or political subdivision thereof.

          "Piggyback Registration" has the meaning specified in Section 2.3(a).
           ----------------------

                                       4
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          "Qualified Institutional Buyer" has the meaning specified in Rule 144A
           -----------------------------
promulgated under the Securities Act.

          "Registrable Securities" means the shares of Class A Common Stock of
           ----------------------
the Company outstanding from time to time and those issued or issuable (i) upon
conversion of the Series A Convertible Preferred Stock, (ii) upon conversion of
the Class B Common Stock held by Motient, (iii) upon conversion of the Series C
Convertible Preferred Stock, or (iv) upon conversion of the Class C Common Stock
issuable upon conversion of the Series C Convertible Preferred Stock, that may
be available for registration from time to time pursuant to the terms hereof;
provided, however, that such securities shall cease to be Registrable Securities
--------  -------
when a Registration Statement with respect to the registration of such
securities shall have been declared effective under the Securities Act and such
securities shall have been disposed of pursuant to such Registration Statement,
or when such securities have been sold without restriction pursuant to Rule 144
under the Securities Act.  All references to "Registrable Securities" held by a
Holder shall include all Registrable Securities issuable to such Holder upon
conversion of any Convertible Securities (as such term is defined in the
Shareholders Agreement) held by such Holder.

          "Registration Statement" means a registration statement filed with the
           ----------------------
Commission pursuant to the Securities Act.

          "Securities Act" means the Securities Act of 1933, as amended, or any
           --------------
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.

          "Series A Convertible Preferred Stock" means the Series A Convertible
           ------------------------------------
Preferred Stock, par value $1.00 per share, of the Company, having zero (0)
votes per share.

          "Series A Holders" means each of Baron Asset, Clear Channel, Columbia
           ----------------
Radio Partners, DIRECTV, GM, Madison, Telcom and Motient, each in its capacity
as a holder of securities of the Company other than the Series C Convertible
Preferred Stock or Common Stock issuable upon conversion thereof, severally, and
any transferees of registration rights permitted pursuant to Section 4.5.

          "Series B Convertible Preferred Stock" means the Series B Convertible
           ------------------------------------
Redeemable Preferred Stock, par value $.01 per share, of the Company having zero
(0) votes per share.

          "Series C Closing Date" means the date of closing under the Series C
           ---------------------
Purchase Agreement, or such later date as the Parties hereto shall mutually
agree.

          "Series C Holders" means each of AEA XM, Baron, Columbia Satellite
           ----------------
Partners, Columbia Equity Partners, Columbia Radio Partners, DIRECTV, Honda,
Madison Capital and Madison Equity, each in its capacity as a holder of the
Series C Convertible Preferred Stock or Common Stock issuable upon conversion
thereof, severally, and any transferees of registration rights permitted
pursuant to Section 4.5.

                                       5
<PAGE>

          "Series C Convertible Preferred Stock" has the meaning specified in
           ------------------------------------
the Recitals, consisting of Series C Convertible Redeemable Preferred Stock, par
value $.01 per share, such series having the same voting rights as the Common
Stock determined on an as converted basis.

          "Series C Purchase Agreement" has the meaning specified in the
           ---------------------------
Recitals.

          "Shareholders Agreement" means that certain Amended and Restated
           ----------------------
Shareholders Agreement, dated on or about the date hereof, by and among the
Parties hereto.

          "Shelf Registration" has the meaning specified in Section 2.2(a).
           ------------------

          "Sony" means Sony Electronics, Inc., a Delaware corporation.
           ----

          "Sony Warrant" has the meaning specified in the Recitals.
           ------------

          "Suspension Event" has the meaning specified in Section 2.6(a).
           ----------------

          "Suspension Notice" has the meaning specified in Section 2.6(b).
           -----------------

          "TCM Group" means Telcom, Columbia and Madison, collectively.
           ---------

          "Telcom" has the meaning specified in the Preamble.
           ------

          "Underwritten Offering"  has the meaning specified in Section 2.1(c).
           ---------------------

          "WorldSpace" means WorldSpace, Inc., a corporation duly organized
           ----------
under the laws of the State of Maryland.

                                  ARTICLE II.

                              REGISTRATION RIGHTS

     Section 2.1    Demand Registrations.  No Series A Holder shall have any
                    --------------------
right to exercise any of the demand registration rights granted herein until
July 7, 2000. Except as set forth in Section 2.1(j), no Series C Holder shall
have any right to exercise any of the demand registration rights granted herein
until the date which is twelve (12) months after the Series C Closing Date.

     (a)  Right to Demand.
          ---------------

          (i)  Series A Holders.  At any time after July 7, 2000, any Series A
               ----------------
Holder may notify the Company that it intends to offer to or cause to be offered
for public sale all or any portion of the Registrable Securities held by or
issuable to it (a "Series A Holder Demand Registration"), then, subject to the
                   -----------------------------------
rights of the Company set forth in Section 2.1(b) and the registration rights of
each other Holder set forth in Section 2.3, the Company will use its best
efforts to cause such Registrable Securities as may be requested by such Series
A Holder to be registered under the Securities Act, pursuant to a Registration
Statement on such form as may then be available to the Company for sale in an
underwritten offering or a non-underwritten

                                       6
<PAGE>

offering, as elected by such Series A Holder, and to keep such Registration
Statement effective until the earlier of: (x) the date six months from the date
of effectiveness thereof, or (y) the date on which all of such Series A Holder's
Registrable Securities registered thereunder are sold; provided, however, that
                                                       --------  -------
the requesting Series A Holder must request registration of Registrable
Securities with a Fair Market Value, on the date of such request, of at least
$10 million (unless the Fair Market Value of all of the Registrable Securities
held by or issuable to such Series A Holder is less than $10 million, in which
event all of the Registrable Securities held by or issuable to such Series A
Holder must be included in such registration in order to effect such
registration). Subject to the rights of each Holder as set forth in Section
2.1(e), each of Baron Asset, Clear Channel, DIRECTV, GM and the TCM Group
(which, for purposes of this Section 2.1(a), shall be considered a single
"Series A Holder" and which shall act at the direction of holders of a majority
in interest of the Registrable Securities of such group) shall be entitled to
one Series A Holder Demand Registration as provided herein, and Motient shall be
entitled to two Series A Holder Demand Registrations as provided herein. The
Company may postpone the filing of any Registration Statement required under
this Section 2.1 for a reasonable period of time, not to exceed 120 days
following receipt by the Company of the Series A Holder's request, if a
Suspension Event (as hereinafter defined) has occurred and is continuing.

          (ii) Series C Holders. At any time after the date which is twelve (12)
               ----------------
months after the Series C Closing Date, the Series C Holders, acting as a class
by written consent of the holders of at least twenty percent (20%) of the Series
C Convertible Preferred Stock, may notify the Company that they intend to offer
to or cause to be offered for public sale all or any portion of the Registrable
Securities held by or issuable to them (a "Series C Holder Demand Registration,"
                                           -----------------------------------
and together with a Series A Holder Demand Registration, a "Demand
                                                            ------
Registration"), then, subject to the rights of the Company set forth in Section
------------
2.1(b) and the registration rights of each other Holder set forth in Section
2.3, the Company will use its best efforts to cause such Registrable Securities
as may be requested by the Series C Holders to be registered under the
Securities Act, pursuant to a Registration Statement on such form as may then be
available to the Company for sale in an underwritten offering or a non-
underwritten offering, as elected by the Series C Holders, and to keep such
Registration Statement effective until the earlier of: (x) the date six months
from the date of effectiveness thereof, or (y) the date on which all of the
Series C Holders' Registrable Securities registered thereunder are sold;
provided, however, that the Series C Holders must request registration of
--------  -------
Registrable Securities with a Fair Market Value, on the date of such request, of
at least $10 million (unless the Fair Market Value of all of the Registrable
Securities held by or issuable to the Series C Holders is less than $10 million,
in which event all of the Registrable Securities held by or issuable to the
Series C Holders must be included in such registration in order to effect such
registration).  Subject to the rights of each Holder as set forth in Section
2.1(e), the Series C Holders shall be entitled to two Series C Demand
Registrations as provided herein.  If the Series C Holder Demand Registration is
requested by the holders of less than 100% of the Series C Convertible Preferred
Stock, the Company shall send prompt written notice to the other holders of the
Series C Convertible Preferred Stock, and if such other holders also notify the
Company that they intend to offer to or cause to be offered for public sale all
or any portion of the Registrable Securities held by or issuable to them, such
other holders shall have an equal right to the original requesting holders to
have Registrable Securities registered under the Securities Act.  The Company
may postpone the filing of any Registration Statement required under this
Section 2.1 for a reasonable period of time, not to exceed 120 days following
receipt by the Company of the

                                       7
<PAGE>

Series C Holders' request, if a Suspension Event (as hereinafter defined) has
occurred and is continuing.

     (b) Company Priority on Registration.  Notwithstanding any other provision
         --------------------------------
of this Agreement to the contrary, upon receipt by the Company of a request for
a Demand Registration from a Holder (but not a Special Demand Registration, as
defined in Section 2.1(j)), the Company shall have the right, within 30 days of
receipt of such notice, to notify such Holder of the Company's intention to
commence a primary public offering of securities for its own account (other than
a registration effected solely to implement an employee benefit plan or a
transaction to which Rule 145 or any other similar rule of the Commission under
the Securities Act is applicable) by the filing of a Registration Statement with
the Commission and, in such a case, the Company shall not have any obligation to
honor the request to register the shares held by such notifying Holder; in which
event such request shall be deemed never to have been made; provided, however,
                                                            --------  -------
that the Company shall commence such public offering by the filing of such a
Registration Statement within 60 days of so notifying that Holder.  In addition,
except as set forth in Section 2.1(j), the Company shall not be required to
cause a Registration Statement demanded pursuant to this Section 2.1 to become
effective prior to 120 days following the effective date of a Registration
Statement initiated by the Company, if the request for registration has been
received by the Company subsequent to the giving of written notice by the
Company, made in good faith, to the Holders to the effect that the Company is
commencing to prepare a company-initiated Registration Statement (other than a
registration effected solely to implement an employee benefit plan or a
transaction to which Rule 145 or any other similar rule of the Commission under
the Securities Act is applicable); provided, however, that the Company shall use
                                   --------  -------
its best efforts to achieve such effectiveness promptly.

     (c) Selection of Managing Underwriters.  The offering of Registrable
         ----------------------------------
Securities pursuant to any Registration Statement filed under this Article II
shall be in the form of an underwritten offering ("Underwritten Offering"), if
the Holders of a majority of the Registrable Securities requested to be
registered in such offering so elect.  In such event, the Company shall select
one or more managing underwriters to act in connection with such Underwritten
Offering (the "Managing Underwriters"), which Managing Underwriters shall be
approved by the Holder initiating such offering, which approval shall not be
unreasonably withheld.  Any request by the Holders of Registrable Securities for
an Underwritten Offering shall, in addition to specifying the number of shares
requested to be registered, specify the anticipated per share price range for
such offering.

     (d) Priority on Underwritten Offering.  If the Managing Underwriters for an
         ---------------------------------
Underwritten Offering demanded by the Holders pursuant to this Section 2.1
(except as set forth in Section 2.1(j)), notify the Company and such Holders
that in their opinion the number of Registrable Securities requested to be
included in such offering (together with any other shares of Common Stock which
the Company is required to include in such registration) exceeds the number of
shares which can be sold in such offering in an orderly manner within a price
range acceptable to the Holders of the majority of the Registrable Securities
requested to be included in such offering, the Company will include in such
offering the maximum amount of Registrable Securities requested to be included
pursuant to this Agreement, which, in the opinion of the Managing Underwriters,
can be sold in such offering in an orderly manner within an acceptable price
range, and such amount shall be allocated  pro rata among the Holders thereof on
the basis

                                       8
<PAGE>

of the number of shares of Registrable Securities requested to be included in
such registration by each such Holder pursuant to Section 2.1(a) and Section
2.3(a); provided, however, that Motient's right to register its Registrable
        --------  -------
Securities pursuant to this Section 2.1(d) shall be subordinate to the rights of
the other Holders hereunder.

     (e) Additional Demand.  In the event that, in connection with any exercise
         -----------------
by any Holder of a Demand Registration other Holders exercise Piggyback
Registration rights as provided in Section 2.3, and following such exercise the
Managing Underwriters in an Underwritten Offering notify the Company that in
their opinion the number of Registrable Securities requested to be included in
such offering exceeds the number of shares which can be sold in an orderly
manner in such offering within a price range acceptable to the initiating Holder
such that the initiating Holder is unable to sell at least 75% of the number of
shares originally requested to be registered by it, such initiating Holder shall
be entitled to an additional Demand Registration exercisable at such later time
as such Holder may elect (an "Additional Demand Registration").  If such
Additional Demand Registration is exercised and such initiating Holder is unable
to sell in such offering, cumulatively with the number of shares sold in the
first offering requested by it, at least 75% of the number of shares originally
requested to be registered by it, such initiating Holder shall be entitled to
successive Additional Demand Registrations until it has sold in all such
Additional Demand Registrations, cumulatively with the first offering requested
by it, at least 75% of the amount originally requested to be registered by it.

     (f) Motient Registration Rights.  Motient shall be entitled to exercise two
         ---------------------------
Demand Registrations, subject to the rights of the Company set forth in Section
2.1(b) and subject to the right of each other Holder to exercise Piggyback
Registration rights in connection with a demand by Motient; provided that each
                                                            -------- ----
other Holder shall have priority over Motient (i) with respect to registration
of its Registrable Securities in such offering and (ii) with respect to
registration of Registrable Securities pursuant to Section 2.2(c).  In the event
that Motient, in a Demand Registration it has initiated, is not able to sell at
least 75% of the number of shares originally requested to be registered by it,
then Motient shall be entitled to an Additional Demand Registration exercisable
at such later time as Motient may elect. If such Additional Demand Registration
is exercised and Motient is unable to sell in such offering, cumulatively with
the number of shares sold in the first offering requested by it, at least 75% of
the number of shares originally requested to be registered by it, Motient shall
be entitled to successive Additional Demand Registrations until it has sold in
all such Additional Demand Registrations, cumulatively with the first offering
requested by it, at least 75% of the amount originally requested to be
registered by it.

     (g) Inclusion by the Company of its Common Stock in an Underwritten
         ---------------------------------------------------------------
Offering.  If the Managing Underwriters for an Underwritten Offering notify the
--------
Company that in their opinion the number of Registrable Securities to be
included in an Underwritten Offering is less than the number of shares which can
be sold in an orderly manner in such offering within a price range acceptable to
the Holder initiating such offering, the Company may include in such
registration, on its own behalf, up to the greatest number of shares of Common
Stock which in the opinion of the Managing Underwriters can be sold (together
with the Registrable Securities demanded to be included in such registration) in
an orderly manner within the price range acceptable to the Holder initiating
such offering.

                                       9
<PAGE>

     (h) Participation in Underwritten Registrations.  Notwithstanding any other
         -------------------------------------------
provision of this Section 2.1 or Section 2.3 to the contrary, no Person may
participate in any Underwritten Offering hereunder unless such Person: (i)
agrees to sell such Person's securities on the basis provided in the applicable
underwriting arrangements, which shall contain customary terms and conditions,
and (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements; provided, however, that no Holder of
                                         --------  -------
Registrable Securities included in any Underwritten Offering shall be required
to make any representations or warranties to the Company or the underwriters
other than representations and warranties regarding such Holder and such
Holder's intended method of distribution and no Holder shall be required to
undertake joint or joint and several obligations with any other Person.

     (i) Expenses of Underwriting Offering.  The Company shall pay any and all
         ---------------------------------
registration expenses incident to the filing of each Registration Statement or
otherwise incident to the performance by the Company of, or its compliance with,
its obligations under this Section 2.1.  Each Holder shall pay all underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities included in the Underwritten
Offering and the fees of any counsel retained by such Holder in connection
therewith.

     (j) Special Demand Right Following Change of Control.  Within 90 days
         ------------------------------------------------
following a Change of Control as defined in the Certificate of Designation of
the Series C Convertible Preferred Stock (a "Change of Control"), the Series C
                                             -----------------
Holders, acting as a class by written consent of the holders of at least twenty
percent (20%) of the Series C Convertible Preferred Stock, may notify the
Company that they intend to offer to or cause to be offered for public sale all
or any portion of the Registrable Securities issued or issuable upon conversion
or exchange of the Series C Convertible Preferred Stock held by them (a "Special
                                                                         -------
Demand Registration"), then the Company will use its best efforts to cause such
-------------------
Registrable Securities as may be requested by the Series C Holders to be
registered under the Securities Act, pursuant to a Registration Statement on
such form as may then be available to the Company for sale in an underwritten
offering or a non-underwritten offering, as elected by the Series C Holders, and
to keep such Registration Statement effective until the earlier of: (x) the date
six months from the date of effectiveness thereof, or (y) the date on which all
of such Series C Holders' Registrable Securities registered thereunder are sold;
provided, however, that the Series C Holders must request registration of such
--------  -------
Registrable Securities with a Fair Market Value, on the date of such request, of
at least $10 million (unless the Fair Market Value of all of such Registrable
Securities held by or issuable to the Series C Holders is less than $10 million,
in which event all of such Registrable Securities held by or issuable to the
Series C Holders must be included in such registration in order to effect such
registration). A Special Demand Registration shall be treated like a Demand
Registration for purposes of this agreement, except that the rights of the
Company set forth in Section 2.1(b), the registration rights of other Holders
set forth in Section 2.3, the Company's rights to postpone the filing of any
Registration Statement if a Suspension Event has occurred, and the various
priority provisions and Managing Underwriter cut-backs shall not apply to a
Special Demand Registration.  The Series C Holders shall be entitled to one
Special Demand Registration with respect to each Change of Control.  If the
Special Demand Registration is requested by the holders of less than 100% of the
Series C Convertible Preferred Stock, the Company shall send prompt written
notice to the other holders of the Series C

                                       10
<PAGE>

Convertible Preferred Stock, and if such other holders also notify the Company
that they intend to offer to or cause to be offered for public sale all or any
portion of such Registrable Securities held by or issuable to them, such other
holders shall have an equal right to the original requesting holders to have
such Registrable Securities registered under the Securities Act.

     Section 2.2    Shelf Registration.
                    ------------------

     (a) Shelf Registration.  Following the Commencement of Commercial
         ------------------
Operations and at the request of the Holders (for purposes of this Section 2.2,
Sony shall be considered a "Holder") holding Registrable Securities having a
Fair Market Value of not less than $25 million (collectively, the "Requesting
Holders"), the Company shall notify (such notice a "Shelf Notification") each
Holder not a Requesting Holder of the Company's intention to prepare and file
with the Commission a Registration Statement for an offering to be made on a
delayed or a continuous basis pursuant to Rule 415 (or any appropriate similar
rule that may be adopted by the Commission) under the Securities Act covering
all or a portion of the Registrable Securities, and shall thereafter prepare and
file such Registration Statement (the "Shelf Registration").  Each Holder not a
Requesting Holder shall notify the Company within thirty (30) days of receipt of
a Shelf Notification if it intends to include Registrable Securities held by it
in such Shelf Registration; otherwise, such Holder shall have no right to
include its Registrable Securities in such Shelf Registration or in any
subsequent Shelf Registration; provided that a Holder not a Requesting Holder
                               -------- ----
may subsequently request a Shelf Registration pursuant to this Section 2.2(a) if
such Holder (i) notifies the Company within thirty (30) days of a Shelf
Notification that (a) upon request of the Company, it has agreed not to include
its Registrable Securities in such Shelf Registration, or (b) by reason of
contractual obligation or law, it cannot at the time of the Shelf Notification
include its Registrable Securities in a Shelf Registration and (ii) in each
subsequent request for a Shelf Registration, such Holder (collectively with
other Holders not Requesting Holders making such request) must request
registration of Registrable Securities with an aggregate Fair Market Value on
the date of such request of not less than $25 million in Registrable Securities
held by  or issuable to such Holder(s).  Each Shelf Registration shall be on a
Form S-3 or another appropriate form (unless the Holders of the Registrable
Securities offered thereby reasonably request a specific form) permitting
registration of such Registrable Securities for resale by the Holders in the
manner or manners reasonably designated by them (including, without limitation,
one or more underwritten offerings).  For purposes of this Section 2.2, the term
"Registrable Securities" shall include the shares of Class A Common Stock issued
upon exercise of the Sony Warrant.

     (b) Effectiveness.  The Company shall use reasonable efforts to cause the
         -------------
Shelf Registration to become effective under the Securities Act as soon as
practicable following the date of filing.  Subject to the requirements of the
Securities Act including, without limitation, requirements relating to updating
prospectuses through post-effective amendments or otherwise, the Company shall
use reasonable efforts to keep the Shelf Registration continuously effective
until the date on which all of the Registrable Securities registered thereunder
from time to time are sold.

     (c) Priority in Underwritten Offering from Shelf Registration.  If any of
         ---------------------------------------------------------
the Registrable Securities to be registered pursuant to Shelf Registration are
to be sold in an Underwritten Offering, and if the Managing Underwriters notify
the Company and the Holders of such

                                       11
<PAGE>

Registrable Securities that in their opinion, the number of Registrable
Securities requested to be included in such offering exceeds the number of
shares which can be sold in such offering in an orderly manner within an
acceptable price range, there shall be included in such Underwritten Offering
the maximum amount of Registrable Securities requested to be included, pursuant
to this Agreement, which in the opinion of the Managing Underwriters can be sold
in an orderly manner within an acceptable price range, and such amount shall be
allocated pro rata among the Holders of such Registrable Securities requested to
be included in such Underwritten Offering on the basis of the number of shares
of Registrable Securities requested to be included in such registration by each
such Holder. Motient's right to register its Registrable Securities pursuant to
this Section 2.2(c) shall be subordinate to the rights of the other Holders
hereunder.

     Section 2.3    Piggyback Registration Rights.
                    -----------------------------

     (a) Requests for Piggyback Registration.  If, at any time, the Company
         -----------------------------------
proposes to effect a registered offering of its Common Stock (including pursuant
to Section 2.1 and Section 2.2, but excluding a Special Demand Registration),
the Company will give prompt written notice to all Holders (for purposes of this
Section 2.3, Sony shall be considered a "Holder") of its intention to effect
such a registration and, subject to Section 2.3(b) and Section 2.3(c), will
include in such registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within fifteen
(15) days after the date the Company's notice is given (a "Piggyback
                                                           ---------
Registration"); provided, however, that the Holders shall not have any right to
------------    --------  -------
cause a Piggyback Registration in connection with any offering by the Company of
High Yield Debt or a Special Demand Registration.  For purposes of this Section
2.3, the term "Registrable Securities" shall include the shares of Class A
Common Stock issued upon exercise of the Sony Warrant.

     (b) Priority on Primary Registrations. If, in connection with any proposed
         ---------------------------------
Piggyback Registration in connection with an Underwritten Offering initiated by
the Company, the Managing Underwriters notify the Company that in their opinion
the number of shares of securities requested to be included in such offering
exceeds the number which can be sold in such offering in an orderly manner
within a price range acceptable to the Company, the Company will include in such
offering (i) first, the securities the Company proposes to sell and (ii) second,
the number of the Registrable Securities requested to be included pursuant to
this Agreement, pro rata among the Holders thereof on the basis of the number of
shares requested to be included in such registration by each such Holder, in
each case up to the greatest number of shares of Common Stock which, in the
opinion of the Managing Underwriters, can be sold in an orderly manner in the
price range of such offering; provided, however, that Motient shall not be
                              --------  -------
entitled to participate in any such Piggyback Registration until all shares of
Registrable Securities held by other Holders which have been requested to be
included in such Piggyback Registration have been so included.

     (c) Priority on Secondary Registrations.  If a Piggyback Registration is an
         -----------------------------------
underwritten secondary registration on behalf of holders of the Company's
securities (other than the Registrable Securities), and the Managing
Underwriters notify the Company that in their opinion the number of shares of
securities requested to be included in such offering exceeds the number which
can be sold in an orderly manner within an acceptable price range, except as set
forth in Section 2.1(j), the Company will include in such offering the maximum
amount of Registrable

                                       12
<PAGE>

Securities requested to be included pursuant to this Agreement, which, in the
opinion of the Managing Underwriters, can be sold in such offering in an orderly
manner within an acceptable price range, and such amount shall be allocated pro
rata among the Holders thereof on the basis of the number of shares of
Registrable Securities requested to be included in such registration by each
such Holder pursuant to Section 2.1(a) and Section 2.3(a); provided, however,
                                                           --------  -------
that the initiating Holder shall retain its rights under Section 2.1(e) and that
Motient's right to register its Registrable Securities pursuant to this Section
2.3(c) shall be subordinate to the rights of the other Holders hereunder.

     (d) Participation in Piggyback Registrations.  Notwithstanding any other
         ----------------------------------------
provision of this Section 2.3 to the contrary, no Person may participate in any
Piggyback Registration hereunder unless such Person: (i) agrees to sell such
Person's securities on the basis provided in the applicable underwriting
arrangements, which shall contain customary terms and conditions, and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements; provided, however, that no Holder of Registrable
                           --------  -------
Securities included in any Piggyback Registration shall be required to make any
representations or warranties, jointly or severally, to the Company or the
underwriters other than representations and warranties regarding such Holder and
such Holder's intended method of distribution, and no Holder shall be required
to undertake joint or joint and several obligations with any other Person.

     (e) Expenses of Piggyback Registration.  The Company or Persons other than
         ----------------------------------
the Holders shall pay any and all registration expenses incident to the filing
of each Registration Statement or otherwise incident to the performance by the
Company of or its compliance with, its obligations under this Section 2.3. Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable
Securities included in the Piggyback Registration and the fees of any counsel
retained by such Holder in connection therewith.

     Section 2.4    Registration Procedures.  The Company hereby covenants and
                    -----------------------
agrees that it shall:

     (a) perform its obligations with respect to a Registration Statement
pursuant to Section 2.1, Section 2.2 or Section 2.3 hereof and effect or cause
to be effected the registration of the Registrable Securities under the
Securities Act to permit the sale of such Registrable Securities by the Holders
in accordance with their intended method or methods of distribution, and that it
shall prepare and file with the Commission a Registration Statement with respect
to such Registrable Securities and use its best efforts to cause such
Registration Statement to become effective (provided that, before filing a
Registration Statement or prospectus or any amendments or supplements thereto,
it will furnish to one counsel selected by each Holder participating in such
registration  (each of Baron Asset, Clear Channel, DIRECTV, GM and the TCM Group
shall, for such purposes, be considered a single "Holder" and the Series C
Investors shall, for such purposes, be considered a single "Holder" and, in the
case of TCM Group and the Series C Investors shall act at the direction of
holders of a majority in interest of the Registrable Securities of such group)
copies of all such documents proposed to be filed, which documents will be
subject to the review of such counsel, and it will incorporate in such
Registration

                                       13
<PAGE>

Statement the reasonable comments of such counsel not inconsistent with the
Company's disclosure obligations under applicable securities laws;

     (b) prepare and file with the Commission such amendments and supplements to
such Registration Statement and the prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective for the period
required hereunder (or if no period is so required, a period of not less than
one hundred eighty (180) days or such shorter period which is sufficient to
complete the distribution of the securities registered under the Registration
Statement) and comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such Registration Statement during
such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such Registration Statement;

     (c) furnish to each seller of Registrable Securities, the Managing
Underwriters, if any, and their respective counsel, prior to the filing thereof
with the Commission, such number of copies of such Registration Statement, each
amendment and supplement thereto, the prospectus included in such Registration
Statement (including each preliminary prospectus) and such other documents as
such seller may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller and to use its best efforts to
reflect in each such document, when so filed with the Commission, such comments
as the sellers of Registrable Securities or their counsel shall reasonably
propose;

     (d) use its best efforts to comply with the requirements of any applicable
blue sky laws of such jurisdictions as any seller reasonably requests and do any
and all other acts and things which may be reasonably necessary or advisable to
enable such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller (provided, however, that the Company
                                             --------  -------
will not be required to: (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subparagraph, (ii) subject itself to taxation in any such jurisdictions, or
(iii) consent to general service of process in any such jurisdiction);

     (e) notify each seller of such Registrable Securities as promptly as
practicable in any of the following circumstances: (i) at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such Registration Statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of any such seller, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading; (ii) when a Registration Statement and any
amendment thereto has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become effective; (iii) of
any request by the Commission for amendment or supplements to the Registration
Statement or the prospectus included therein or for additional information; (iv)
of the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings for that
purpose; and (v) the receipt by the Company of any notification with respect to
the suspension of the qualification of the securities included therein for sale
in any jurisdiction or the initiation of any proceeding for such purpose;

                                       14
<PAGE>

     (f) cause all such Registrable Securities to be listed on each securities
exchange or quoted in each quotation system on which similar securities issued
by the Company are then listed or quoted;

     (g) enter into such agreements on terms reasonably acceptable to the
Company (including underwriting agreements) in form, scope and substance as are
customary in underwritten offerings, and take all other reasonable actions
necessary to facilitate the registration or the disposition of the Registrable
Securities included in any Registration Statement including, without limitation,
the participation of senior management in "road shows" and similar activities,
provided that such activities do not interfere with the duties of senior
management in a manner that would likely be detrimental to the best interests of
the Company;

     (h) take such action as may be necessary so that: (i) any Registration
Statement and any amendment thereto and any prospectus forming part thereof and
any amendment or supplement thereto (and each report or other document
incorporated therein by reference in each case) complies in all material
respects with the Securities Act and the Exchange Act and the respective rules
and regulations thereunder; (ii) any Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and (iii) any
prospectus forming part of any Registration Statement, and any amendment or
supplement to such prospectus, does not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading;

     (i) use its best efforts to prevent the issuance, and if issued to obtain
the withdrawal, of any order suspending the effectiveness of any Registration
Statement at the earliest possible time;

     (j) cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold pursuant
to any Registration Statement free of any restrictive legend and registered in
such names as the Holders may request in connection with the sale of Registrable
Securities pursuant to such Registration Statement; and

     (k) obtain and furnish to each selling Holder, immediately prior to the
effectiveness of the Registration Statement (and, in the case of an Underwritten
Offering, at the time of delivery of any Registrable Securities sold pursuant
thereto) a cold comfort letter from the Company's independent public accountants
in the same form and covering the same matters as is typically delivered to
underwriters and, in the event that an underwriter or underwriters have been
retained in connection with such registration, such cold comfort letter to be
provided to the selling Holders shall be the same cold comfort letter delivered
to such underwriter or underwriters.

          Each Holder agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 2.4(e) hereof,
such Holder will immediately discontinue disposition of Registrable Securities
pursuant to a Registration Statement until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 2.4(e) hereof,
and, if so directed by the Company, such Holder will deliver to the Company (at
the expense of the Company) all copies in its possession, other than

                                       15
<PAGE>

permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice. If the Company shall give any such notice to suspend the disposition of
Registrable Securities pursuant to a Registration Statement, the Company shall
extend the period during which the Registration Statement shall be maintained
effective pursuant to this Agreement by the number of days during the period
from and including the date of the giving of such notice to and including the
date when the Holders shall have received copies of the supplemented or amended
prospectus necessary to resume such dispositions.

     Section 2.5    Hold-Back Agreements.
                    --------------------

     (a) Restrictions on Public Sale by the Holders.  Each Holder of Registrable
         ------------------------------------------
Securities shall be deemed to have agreed not to effect any public sale or
public distribution of securities of the Company of the same or similar class or
classes of the securities included in a Registration Statement or any securities
convertible into or exchangeable or exercisable for such securities, including a
sale pursuant to Rule 144 or Rule 144A under the Securities Act, during the 15-
day period prior to, and during such period of time as may be required by the
Managing Underwriter, but not to exceed a 90-day period beginning on, the
effective date of the Registration Statement (except pursuant to an Underwritten
Offering being conducted by the Managing Underwriters), except to the extent
otherwise agreed in writing by the Managing Underwriter. The foregoing
restriction shall apply to all Holders automatically for the period of three (3)
years from October 8, 1999, and thereafter shall apply to those Holders electing
to include Registrable Securities in a Registration Statement for an
Underwritten Offering filed pursuant to Section 2.1, Section 2.2 or Section 2.3.
The restrictions set forth in this Section 2.5(a) shall not apply to any private
sales of Registrable Securities that are exempt from registration under section
4(2) of the Securities Act.

     (b) Restrictions on Public Sale by the Company.  The Company shall not
         ------------------------------------------
effect any public sale or public distribution of any securities which are the
same as or substantially similar to the Registrable Securities being registered
pursuant to a Registration Statement for an Underwritten Offering filed pursuant
to Section 2.1, Section 2.2 or Section 2.3 hereof, or any securities convertible
into or exchangeable or exercisable for such securities during the 15-day period
prior to, and during the 30-day period beginning on, the effective date of a
Registration Statement (except pursuant to the Registration Statement),
provided, however, that the foregoing restrictions shall not apply in the case
of any registration for public sale or public distribution of any securities for
High Yield Debt (regardless of whether or not coupled with warrants, options, or
other equity equivalents) by the Company.

     Section 2.6    Black-Out Periods for Registration Statements.
                    ---------------------------------------------

     (a) Notwithstanding anything to the contrary in this Agreement, except as
set forth in Section 2.1(j), commencing ninety (90) days after the effectiveness
of a Registration Statement, the Company may, not more than once in any 12-month
period, and one additional time during the term of this Agreement (but not
during any other Suspension Event or within ninety (90) days after termination
of any other Suspension Event), direct the Holders to suspend sales of
Registrable Securities registered thereunder, as provided herein, if one or more
of the following events (a "Suspension Event") occurs pending negotiations
                            ----------------
relating to, or consummation of, a material corporate transaction (i) that would
require additional disclosure of material information

                                       16
<PAGE>

by the Company in the Registration Statement (or such filings), (ii) as to which
the Company has a bona fide business purpose for preserving confidentiality and
(iii) which renders the Company unable to comply with Commission requirements,
in each case under circumstances that would make it impractical or inadvisable
to cause the Registration Statement (or such filings) to become effective or to
promptly amend or supplement the Registration Statement on a post-effective
basis, as applicable.

     (b) In the case of a Suspension Event, the Company may give notice (a
"Suspension Notice") to the Holders to suspend sales of the Registrable
------------------
Securities so that the Company may correct or update the Registration Statement
(or such filings).  Each such suspension shall continue only for so long as the
Suspension Event or its effect is continuing, and in no event will any such
suspension exceed ninety (90) days.  The Holders agree that they will not effect
any sales of the Registrable Securities pursuant to such Registration Statement
(or such filings) at any time after they have received a Suspension Notice from
the Company and prior to the termination of such Suspension Event.  If so
directed by the Company, the Holders will deliver to the Company all copies of
the prospectus covering the Registrable Securities held by them at the time of
receipt of the Suspension Notice.  The Holders may recommence effecting sales of
the Registrable Securities pursuant to the Registration Statement (or such
filings) following further notice to such effect (an "End of Suspension Notice")
from the Company, which End of Suspension Notice shall, in the case of a
Suspension Event, be given by the Company not later than five (5) days after the
conclusion of any Suspension Event and shall be accompanied by copies of the
supplemented or amended prospectus necessary to resume such sales.

     (c) If the Company shall give a Suspension Notice pursuant to this Section
2.6, the Company shall extend the period during which the Registration Statement
shall be maintained effective pursuant to this Agreement by the number of days
during the period from the date of the giving of the Suspension Notice to and
including the date when the Holders shall have received the End of Suspension
Notice and copies of the supplemented or amended prospectus necessary to resume
sales.

     Section 2.7    Motient Rights.  Except as otherwise expressly provided
                    --------------
herein, all references to "Holders" herein includes Motient. Notwithstanding
anything to the contrary herein, the rights of Motient under Sections 2.1, 2.2
and 2.3 shall be subordinate to the corresponding rights of the other Holders;
provided, however, that the Company shall in no event hereafter provide any
--------  -------
Person with any rights to request the Company to register any Capital Stock of
the Company, with priority equal to or superior to that of Motient hereunder,
except in connection with any offering of High Yield Debt.

     Section 2.8  Series C Investors Rights.  The Company shall in no event
                  -------------------------
hereafter provide any Person with any rights to request the Company to register
any Capital Stock of the Company, the terms of which are as or more favorable
than the rights of the Series C Investors hereunder without the approval of
holders of at least 60% of the issued and outstanding Series C Convertible
Preferred Stock, except in connection with any offering of High Yield Debt.

                                       17
<PAGE>

                                 ARTICLE III.

                       INDEMNIFICATION AND CONTRIBUTION

     Section 3.1    Indemnification by the Company. The Company shall indemnify,
                    ------------------------------
to the extent permitted by law, each Holder of Registrable Securities, each
Person who controls such Holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and its respective officers,
directors, partners, members, employees, agents and representatives, against all
actions, suits, claims, damages, losses, costs, expenses or proceedings
(collectively, "Losses") caused by, arising out of or based upon any untrue or
                ------
alleged untrue statement of material fact contained in any Registration
Statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which made, not misleading, except insofar as
the same are caused by or contained in any information furnished in writing to
the Company by such Holder expressly for use therein or by such Holder's failure
to deliver a copy of the Registration Statement or prospectus or any amendments
or supplements thereto after the Company has furnished such Holder with a
sufficient number of copies of the same and except insofar as the same are
caused by or contained in any prospectus if such Holder failed to send or
deliver a copy of any subsequent prospectus or prospectus supplement which would
have corrected such untrue or alleged untrue statement of material fact or such
omission or alleged omission of a material fact with or prior to the delivery of
written confirmation of the sale by such Holder after the Company has furnished
such Holder with a sufficient number of copies of the same. In connection with
an Underwritten Offering, the Company will indemnify such Underwriters, each
Person who controls such Underwriters (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and their respective officers,
directors, partners, employees, agents and representatives to the same extent as
provided above with respect to the indemnification of the Holders of Registrable
Securities.

     Section 3.2    Indemnification by Holders. In connection with any
                    --------------------------
Registration Statement in which Holders of Registrable Securities are
participating, each such Holder will furnish to the Company in writing such
information as the Company reasonably requests for use in connection with any
such Registration Statement or prospectus and, to the extent permitted by law,
will indemnify the Company, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and their respective officers, directors, partners, employees, agents and
representatives against any Losses caused by, arising out of or based upon any
untrue or alleged untrue statement of a material fact contained in any
Registration Statement, prospectus, or form of prospectus, or arising out of or
based upon any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which made, not misleading, to the extent, but only to the
extent, that such untrue or alleged untrue statement is contained in, or such
omission or alleged omission is required to be contained in, any information so
furnished in writing by such Holder to the Company expressly for use in such
Registration Statement or prospectus and that such statement or omission was
relied upon by the Company in preparation of such Registration Statement,
prospectus or form of prospectus; provided, however, that such Holder of
Registrable Securities shall not be liable in any such case to the extent that
the Holder has furnished in writing to the Company prior to the filing of any
such Registration Statement or

                                       18
<PAGE>

prospectus or amendment or supplement thereto information expressly for use in
such Registration Statement or prospectus or any amendment or supplement thereto
which corrected or made not misleading, information previously furnished to the
Company, and the Company failed to include such information therein. In no event
shall the liability of any selling Holder of Registrable Securities hereunder be
greater in amount than the dollar amount of the proceeds (net of payment of all
expenses) received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such indemnified party.

     Section 3.3    Conduct of Indemnification Proceedings. If any Person shall
                    --------------------------------------
be entitled to indemnity hereunder such indemnified party shall give prompt
written notice to the party or parties from which such indemnity is sought of
the commencement of any proceeding with respect to which such indemnified party
seeks indemnification or contribution pursuant hereto; provided, however, that
the failure to so notify the indemnifying parties shall not relieve the
indemnifying parties from any obligation or liability except to the extent that
the indemnifying parties have been prejudiced by such failure. The indemnifying
parties shall have the right, exercisable by giving written notice to an
indemnified party promptly after the receipt of written notice from such
indemnified party of such proceeding, to assume, at the indemnifying parties'
expense, the defense of any such proceeding, with counsel reasonably
satisfactory to such indemnified party; provided, however, that an indemnified
party or parties (if more than one such indemnified party is named in any
proceeding) shall have the right to employ separate counsel in any such
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such indemnified party or parties
unless the parties to such proceeding include both the indemnified party or
parties and the indemnifying party or parties, and there exists, in the opinion
of the indemnified party(ies)' counsel, a conflict between one or more
indemnifying parties and one or more indemnified parties, in which case the
indemnifying parties shall, in connection with any one such proceeding or
separate but substantially similar or related proceedings in the same
jurisdiction, arising out of the same general allegations or circumstances, be
liable for the fees and expenses of not more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such indemnified party
or parties. If an indemnifying party assumes the defense of such proceeding, the
indemnifying parties will not be subject to any liability for any settlement
made by the indemnified party without its or their consent (such consent not to
be unreasonably withheld).

     Section 3.4    Contribution. If the indemnification provided for in this
                    ------------
Article III is unavailable to an indemnified party or is insufficient to hold
such indemnified party harmless for any Losses in respect of which this Article
III would otherwise apply by its terms, then each applicable indemnifying party,
in lieu of indemnifying such indemnified party, shall have an obligation to
contribute to the amount paid or payable by such indemnified party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the indemnifying party, on the one hand, and such indemnified party, on
the other hand, in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such indemnifying party, on the one hand, and indemnified
party, on the other hand, shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been taken by, or relates to information supplied by, such
indemnifying party or indemnified party, and the parties' relative

                                       19
<PAGE>

intent, knowledge, access to information and opportunity to correct or prevent
any such action, statement or omission. The amount paid or payable by a party as
a result of any Losses shall be deemed to include any legal or other fees or
expenses incurred by such party in connection with any proceeding, to the extent
such party would have been indemnified for such expenses under Section 3.3, if
the indemnification provided for in Section 3.1 or Section 3.2 was available to
such party. The Parties agree that it would not be just and equitable if
contribution pursuant to this Section 3.4 were determined by pro rata allocation
or by any other method of allocation that does not take account of the equitable
considerations referred to in the second sentence of this paragraph.
Notwithstanding the provisions of this Section 3.4, an indemnifying party that
is a selling Holder of Registrable Securities shall not be required to
contribute any amount in excess of the amount by which the net proceeds received
by such indemnifying party exceeds the amount of any damages that such
indemnifying party has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person adjudged
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.

                                  ARTICLE IV.

                                 MISCELLANEOUS

     Section 4.1    Rule 144.  The Company covenants that it will file any
                    --------
reports required to be filed by it under the Securities Act and the Exchange Act
and that it will take such further action as any Holder may reasonably request,
all to the extent required from time to time to enable Holders to sell
Registrable Securities without registration under the Securities Act within the
limitations of the exemptions provided by (a) Rule 144 or 145 under the
Securities Act, as such rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any Holder, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.

     Section 4.2    Specific Performance.  Each Holder, in addition to being
                    --------------------
entitled to exercise all rights provided herein or granted by law, including
recovery of liquidated or other damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.

     Section 4.3    Amendments and Waivers.  Any term of this Agreement may be
                    ----------------------
amended, and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with respect to any proposed Piggyback Registration in connection with an
Underwritten Offering initiated by the Company, only with the written consent of
(a) the Company, (b) Motient and (c) Investors holding, (i) in the case of
amendments to or waivers of provisions of this Agreement generally, 75% of the
Registrable Securities held by or issuable to Investors, and (ii) in the case of
any other non-material change or technical correction of this Agreement, a
majority of the Registrable Securities held by or issuable to Investors;
provided, however, that in the event the rights, preferences or obligations
hereunder of one or more Investors are being amended or waived in a

                                       20
<PAGE>

manner that is materially adverse to such Investors and in a manner that is
different from those of other Investors, such rights, preferences or obligations
may be so amended or waived only with the consent of the Investors holding in
the aggregate 75% of the Registrable Securities held by Investors whose rights,
preferences or obligations are being materially adversely amended or waived in
such different manner. Any amendment or waiver effected in accordance with this
Section 4.3 shall be binding upon each future Holder and the Company.

     Section 4.4    Notices.  Except as otherwise provided in this Agreement,
                    -------
notices and other communications under this Agreement shall be in writing and
shall be deemed properly served if: (i) mailed by registered or certified mail,
return receipt requested, (ii) delivered by a recognized overnight courier
service, (iii) delivered personally, or (iv) sent by facsimile transmission
addressed to each Party at its address for notices specified on Schedule 4.4
attached hereto, or at such other address, or to the attention of such officer,
as any Party shall have furnished to each other Party in writing pursuant to
this Section 4.4. Such notice shall be deemed to have been received: (i) three
(3) Business Days after the date of mailing if sent by certified or registered
mail, (ii) one (1) Business Day after the date of delivery if sent by overnight
courier, (iii) the date of delivery if personally delivered, or (iv) the next
succeeding Business Day after transmission by facsimile.

     Section 4.5    Transfers.
                    ---------

     (a) Subject to the transfer restrictions set forth in the Shareholders
Agreement, any Holder transferring any portion of its Registrable Securities may
transfer to its transferee any rights granted herein and then held by such
Holder, provided that no Series A Holder may transfer to more than one
        -------- ----
transferee its rights to initiate any Demand Registration pursuant to Section
2.1, (provided that such transferees shall be able to participate in such Demand
Registration and all other registration rights held by such Holder, subject to
the terms and conditions set forth in this Agreement), nor shall any such
transfer be deemed to create any right to initiate additional demand
registrations or obligate the Company to issue notices hereunder to additional
Person(s), except to the extent the Company shall have received actual notice of
such transfer to such Person(s).  A Series C Holder may transfer any
registration rights granted herein and then held by such Series C Holder only to
a transferee that following the transfer holds Series C Convertible Preferred
Stock or Common Stock equal to one percent (1%) or more of the outstanding
Common Stock on a fully diluted basis.

     (b) Any assignment or transfer of any registration rights set forth herein
shall be subject to the assumption by the transferee of the terms and conditions
set forth in this Agreement applicable to the transferor, and any proposed
transferee shall execute such documents and instruments that the Company may
reasonably require to evidence that such transferee is bound by the terms and
conditions of this Agreement.

     Section 4.6    Execution in Counterparts.  This Agreement may be executed
                    -------------------------
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.

                                       21
<PAGE>

     Section 4.7    GOVERNING LAW; CHOICE OF FORUM; JURY TRIAL WAIVER.
                    -------------------------------------------------

          THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY
CONFLICT OF LAW PROVISIONS THEREOF OTHER THAN NEW YORK GENERAL OBLIGATIONS LAW
SECTIONS 5-1401 AND 5-1402.

          IN THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM
FOR RESOLVING DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT IS THE
SUPREME COURT OF THE STATE OF NEW YORK IN AND FOR THE COUNTY OF NEW YORK OR THE
FEDERAL COURTS LOCATED IN SUCH STATE AND COUNTY, AND RELATED APPELLATE COURTS.
THE PARTIES HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND
AGREE TO SAID VENUE.

          THE PARTIES HEREBY IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.

     Section 4.8    Severability.  The holding of any provision of this
                    ------------
Agreement to be invalid or unenforceable by a court of competent jurisdiction
shall not affect any other provision of this Agreement, which shall remain in
full force and effect. If any provision of this Agreement shall be declared by a
court of competent jurisdiction to be invalid, illegal or incapable of being
enforced in whole or in part, such provision shall be interpreted so as to
remain enforceable to the maximum extent permissible consistent with applicable
law and the remaining conditions and provisions or portions thereof shall
nevertheless remain in full force and effect and enforceable to the extent they
are valid, legal and enforceable, and no provisions shall be deemed dependent
upon any other covenant or provision unless so expressed herein.

     Section 4.9    Headings.  The headings in this Agreement are for
                    --------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

     Section 4.10   No Inconsistent Agreement.
                    -------------------------

     (a) The Company will not after the date of this Agreement enter into any
agreement with respect to its securities or any amendment to such an agreement
that is inconsistent with the rights granted to the Holders in this Agreement,
or otherwise conflicts with the provisions hereof.

     (b) The Company shall not grant to any person the right to request the
Company to register any equity securities of the Company, or any securities
convertible or exchangeable or exercisable for such securities, or grant any
rights for additional demand registrations of the Company's securities other
than as provided in this Agreement, without the prior written consent of the
Holders of the Registrable Securities if such right is inconsistent with the
terms of this Agreement (including without limitation the priorities for
registration set forth herein); provided, however, that the foregoing
restrictions shall not apply in the case of any registration for public

                                       22
<PAGE>

sale or public distribution of any securities for High Yield Debt (regardless of
whether or not coupled with warrants, options, or other equity equivalents) by
the Company.

     Section 4.11   Further Assurances.  The Parties agree to execute and
                    ------------------
deliver all such further documents, agreements and instruments and take such
other and further action as may be necessary or appropriate to carry out the
purposes and intent of this Agreement, including making any necessary or
required filings, and obtaining any necessary or required approvals from the
Federal Communications Commission.

     Section 4.12   Entire Agreement.  This Agreement supersedes all other
                    ----------------
agreements, written or oral, concerning the subject matter herein, including the
January 15 Letter Agreements and the 1999 Agreement, which are hereby
terminated.

                        [Signatures begin on next page]

                                       23
<PAGE>

     IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
signed as of the date first above written.

<TABLE>
<S>                                                   <C>
XM SATELLITE RADIO HOLDINGS INC.                      MOTIENT CORPORATION

By: ___________________________________               By: ___________________________________
Name:                                                 Name:
Title:                                                Title:

BARON ASSET FUND                                      CLEAR CHANNEL INVESTMENTS, INC.
on behalf of THE BARON ASSET FUND SERIES

By: ___________________________________               By: ___________________________________
Name:                                                 Name:
Title:                                                Title:

COLUMBIA XM RADIO PARTNERS, LLC                       DIRECTV ENTERPRISES, INC.
By Columbia Capital LLC, its Managing Member

By: ___________________________________               By: ___________________________________
Name:                                                 Name:
Title:                                                Title:

GENERAL MOTORS CORPORATION                            MADISON DEARBORN CAPITAL PARTNERS III, L.P.
                                                      By Madison Dearborn Partners III, L.P., its
                                                      general partner
By: ___________________________________               By Madison Dearborn Partners LLC, its general
Name:                                                 partner
Title:
                                                      By: ___________________________________
                                                      Name:
                                                      Title:

MADISON DEARBORN SPECIAL EQUITY III, L.P.             SPECIAL ADVISORS FUND I, LLC
By Madison Dearborn Partners III, L.P., its general   By Madison Dearborn Partners III, L.P., its
partner                                               manager
By Madison Dearborn Partners LLC, its general         By Madison Dearborn Partners LLC, its general
partner                                               partner

By: ___________________________________               By: ___________________________________
Name:                                                 Name:
Title:                                                Title:

TELCOM--XM INVESTORS, L.L.C.                          AEA XM INVESTORS I LLC
</TABLE>

                                       24
<PAGE>
<TABLE>
<S>                                                   <C>
By: ___________________________________               By: ________________________________
Name:                                                 Name:
Title:                                                Title:

COLUMBIA XM SATELLITE PARTNERS III, LLC               AEA XM INVESTORS II LLC
By:

By: ___________________________________               By: ________________________________
Name:                                                 Name:
Title:                                                Title:

COLUMBIA CAPITAL EQUITY PARTNERS III                  AMERICAN HONDA MOTOR CO., INC.
(QP), L.P.,
By: Columbia Capital Equity Partners III,
L.P., its General Partner

By: ___________________________________               By: ___________________________________
Name:                                                 Name:
Title:                                                Title:

BARON ASSET FUND                                      BARON CAPITAL FUNDS TRUST
on behalf of THE BARON iOPPORTUNITY FUND SERIES       on behalf of THE BARON CAPITAL ASSET FUND SERIES

By: ___________________________________               By: ___________________________________
Name:                                                 Name:
Title:                                                Title:
</TABLE>

                                       25
<PAGE>

                                 SCHEDULE 4.4
                              Schedule of Holders

<TABLE>
<CAPTION>
                     Name                                          Address                            Facsimile
                     ----                                          -------                            ---------
<S>                                             <C>                                            <C>
Motient Corporation                             10802 Parkridge Blvd.                           703-758-6134
                                                Reston, VA 20191-5416
                                                Attn: Randy S. Segal, Esq.

Baron Asset Fund                                767 Fifth Avenue                                212-583-2014
                                                49/th/ Floor
                                                New York, NY 10153
                                                Attn:  Linda Martinson, Esq.

Clear Channel Investments, Inc.                 200 Concord Plaza                               210-822-2299
                                                Suite 600
                                                San Antonio, TX  78216-6940
                                                Attn: Ken Wyker, Esq.

Columbia Radio Partners                         201 North Union Street                          703-519-3904
                                                Suite 300
                                                Alexandria, VA  22314
                                                Attn: Mr. James B. Fleming

DIRECTV Enterprises, Inc.                       2230 E. Imperial Hwy.                           310-964-4114
                                                El Segundo, CA  90245
                                                Attn: Mr. Steven J. Cox

General Motors Corporation                      767 Fifth Avenue                                212-418-6258
                                                14/th/ Floor
                                                New York, NY  10153
                                                Attn: Anne Larin, Esq.

Madison Dearborn Capital Partners III, L.P.,    Three First National Plaza                      312-895-1221
Madison Dearborn Special Equity III, L.P.,      Chicago, IL  60602
Special Advisors Fund I, LLC                    Attn: Mr. James N. Perry, Jr.

Telcom-XM Investors LLC                         211 North Union Street                          703-706-3801
                                                Suite 300
                                                Alexandria, VA  22314
                                                Attn: Hal B. Perkins, Esq.

AEA XM                                          AEA Investors, Inc.                             212-888-1459
                                                65 E. 55/th/ Street
                                                New York, New York 10022
                                                Attn: General Counsel

American Honda Motor Co., Inc.                  American Honda Motor Co., Inc.                  310-783-2210
                                                1919 Torrance Boulevard
                                                Torrance, California 90501-2746
                                                Attention: Shinichi Sakamoto
                                                                                                310-781-4970
                                                Honda North America, Inc.
                                                Law Department
                                                700 Van Ness Avenue
                                                Torrance, California 90501
                                                Attn: Seijun Imai
</TABLE>

                                       26<PAGE>
                                                                   EXHIBIT 4.2

                              ARTEST CORPORATION

                              SERIES A PREFERRED

                           STOCK PURCHASE AGREEMENT

          THIS AGREEMENT is made and entered into on the 28th day of March,
1997, by and among ARTEST CORPORATION, a California corporation (the "Company"),
with its principal office at 12279 Crayside Lane, Saratoga, California 95070,
Mr. Jen Kao, the founder of the Company (the "Founder") and the purchasers
listed on the Schedule of Purchasers attached hereto as Exhibit A (the
                                                        ---------
"Purchasers" or individually a "Purchaser").

SECTION 1. THE INVESTMENT

          1.1  Authorization. Prior to the Closing Date, the Company will
               -------------
authorize the sale and issuance of not less than 14,000,000 shares of Series A
Preferred Stock (the "Series A Preferred Stock"), having the rights, privileges
and preferences as set forth in the Company's Certificate of Amendment to its
Articles of Incorporation (the "Certificate of Amendment") in the form attached
to this agreement as Exhibit B.
                     ---------

          1.2  The Investment. Subject to the terms hereof, on the Closing Date
               --------------
(as defined below), the Purchasers shall purchase from the Company, and the
Company shall issue and sell to the Purchasers an aggregate of up to 14,000,000
shares of Series A Preferred Stock of the Company (the "Shares"), in the amounts
set forth opposite each Purchaser's name on the Schedule of Purchasers, at the
price of $1.00 per share.

SECTION 2. THE CLOSING

          2.1  Closing Date. The closing (the "Closing") hereunder shall be held
               ------------
at the legal office of Mr. Peter Couture, Esq. at 993 Highland Circle, Los
Altos, California 94024 at 10:00 a.m. on or before March 28, 1997 (the "Closing
Date"), or at such other time and place to which the Company and a majority in
interest of the Purchasers may agree. The Company's agreement with each
Purchaser constitutes a separate agreement, but the sale of Shares to all of the
Purchasers shall occur at one Closing.

          2.2  Delivery. At the Closing (i) the Company shall deliver to each
               --------
Purchaser a certificate representing the Shares purchased by such Purchaser
hereunder and (ii) each Purchaser will deliver to the Company a check, wire
transfer funds or
<PAGE>

evidence of cancellation of the Company's indebtedness to such Purchaser in the
aggregate amount of the purchase price for the Shares so purchased and sold.

          2.3  Conditions Precedent to the Company's Obligations at the Closing.
               ----------------------------------------------------------------
The obligations of the Company to issue the Shares at the Closing under this
Section 2 are subject to fulfillment at or before the Closing of the following
conditions:

          (a) The representations and warranties of the Purchasers in Section 4
shall be true at and as of the Closing with the same effect as though such
representations and warranties had been made at the Closing.

          (b) The Certificate of Amendment shall have been duly filed with the
Secretary of State of the State of California.

          (c) All material matters of a legal nature which pertain to this
Agreement and the transactions contemplated hereby shall have been approved by
counsel to the Company.

          2.4  Conditions Precedent to Purchaser's Obligations at the Closing.
               --------------------------------------------------------------
The obligations of the Purchasers under this Section 2 are subject to
fulfillment at or before the Closing of the following conditions:

          (a) The representations and warranties of the Company in Section 3
shall be true at and as of the Closing Date with the same effect as though such
representations and warranties had been made at the Closing Date and the
President of the Company shall have delivered to the Purchasers a certificate
attesting to such effect.

          (b) The Certificate of Amendment shall have been duly filed with the
Secretary of State of the State of California.

          (c) The Company's Board of Directors shall consist of Jen Kao, Alan
Ross, Bough Lin, Terry Gou and a representative of Mitsui Hi-tech.

          (d) All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all material respects.

          (e) All corporate proceedings necessary to authorize the execution of
this Agreement, the issuance of the Shares, and

                                       2
<PAGE>

the completion of the transactions contemplated hereunder shall have been
complete and be fully effective.

          (f) All material matters of a legal nature which pertain to this
Agreement and the transactions contemplated hereby shall have been approved by
counsel to the Purchasers, if any.

SECTION 3. REPRESENTATIONS AND WARRANTIES

          Except as otherwise disclosed in Exhibit C to this Agreement, the
                                           ---------
Company hereby represents and warrants to the Purchasers that as of the Closing
Date the following representation and warranties shall be true and correct:

          3.1  Organization and Standing. The Company has been duly organized
               -------------------------
and is validly existing as a corporation in good standing under the laws of the
State of California. The Articles of Incorporation of the Company are in full
force and effect and the Company has made a copy of the Company's Bylaws as in
effect on the Closing Date available to the Purchasers upon request. The Company
has all requisite corporate power to own and operate its properties and assets,
and to carry on its business as presently conducted and as contemplated. No
jurisdiction has requested that the Company qualify to do business as a foreign
corporation in any jurisdiction and no such qualification is required.

          3.2  Corporation Power. The Company has all requisite corporate power
               -----------------
to enter into this Agreement and to carry out and perform its obligations under
the terms of this Agreement. This Agreement is a legal, valid and binding
obligation of the Company enforceable in accordance with its terms.

          3.3   Authorization. All corporate action on the part of the Company,
                -------------
its officers, directors and shareholders necessary for the execution, delivery
and performance of this Agreement, any agreement referenced herein and the
performance of the Company's obligations hereunder, including the issuance and
delivery of the Shares, has been taken. This agreement is a valid and binding
obligation of the Company enforceable in accordance with its terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies. The Common Stock issuable upon conversion of the
Shares has been duly and validly reserved and, when issued upon conversion of
the Shares, will be validly issued, will be fully paid and nonassessable, will
have

                                       3
<PAGE>

the rights, preferences and privileges described in the Articles, and will be
free of any liens or encumbrances; provided, however, that the Shares (and the
Common Stock issuable upon conversion thereof) may be subject to restrictions on
transfer under federal securities laws as set forth herein. The Shares and the
Common Stock issuable upon conversion thereof are not subject to any preemptive
rights or rights of first refusal.

          3.4  Governmental Consents, etc. No consent, approval or authorization
               --------------------------
of or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the execution and delivery of
this Agreement, any agreement referenced herein, and the performance of the
Company's obligations hereunder or the offer, sale or issuance of the Shares
hereunder except such as has already been obtained or as is not required to be
obtained prior to the Closing.

          3.5  Compliance with Other Instruments. The Company is not in
               ---------------------------------
violation of any term of its Articles or Bylaws or in any material respect of
any material term or provision of any mortgage, indenture, lease agreement,
contract, agreement, instrument, judgment, decree, order, or any statute, rule
or regulation to which the Company is subject and a violation of which would
have a material adverse effect upon the operations of the Company, nor has any
event occurred which with the passage of time or giving of notice would result
in such a violation. The execution, delivery, performance of and compliance with
this Agreement, any agreement referenced herein, and the performance of the
Company's obligations hereunder and the issuance of the Shares pursuant hereto,
will not result in any such violation or be in conflict with or constitute a
default (or an event which with the passage of time or giving of notice would
result in a default) under any such term or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company.

          3.6  Subsidiaries. The Company has no subsidiaries or affiliated
               ------------
companies and does not otherwise own or control, directly or indirectly, any
other corporation, association or business entity and is not a participant in
any joint venture or partnership.

          3.7  Capitalization. Upon the filing of the Certificate of Amendment,
               --------------
the authorized capital stock of the Company consists of 38,000,000 shares of
Common Stock of which 5,240,000 shares are issued and outstanding and 14,000,000

                                       4
<PAGE>

shares of Series A Preferred Stock which are to be sold and issued to the
Purchasers in accordance with this Agreement. Included in Exhibit C is a
                                                          ---------
complete and correct listing of all holders of outstanding shares of Common
Stock of the Company. All issued and outstanding shares of capital stock have
been duly authorized and validly issued, and are fully paid and nonassessable.
The Company has reserved 14,000,000 shares of Common Stock for issuance upon
conversion of the Series A Preferred Stock and 760,000 shares for issuance to
additional founders of the Company. The Company will reserve 4,000,000 shares of
Common Stock for issuance, either directly or through options or warrants, to
employees, consultants or others who render services to or otherwise assist the
Company as approved by the Company's Board of Directors. Except as set forth
above and in the Company's Bylaws, there are no other warrants, options,
convertible securities or other rights requiring the Company to issue any shares
of its capital stock. The Shares, when issued in accordance with the terms of
this Agreement, will be duly authorized and validly issued, fully paid and
nonassessable.

          3.8  Properties and Assets; Liens, etc. The Company has just commenced
               ---------------------------------
operations and except for the amounts to be transferred to the Company under the
terms of the Founder's agreements and this Agreement has no assets or
properties.

          3.9  Patents, Trademarks, etc.
               ------------------------

          (a) The Company owns, has access to, possesses, has the right to use
or reasonably believes that it can develop or acquire on terms that will not
have a material adverse impact on the Company, free and clear of all liens,
charges, claims and restrictions, all patents, trademarks, service marks, trade
names, copyrights, licenses, circuit board designs, wiring designs and other
rights necessary to its business as proposed to be conducted and is not, to the
best of its knowledge, infringing upon or otherwise acting adversely to the
right or claimed right of any person under or with respect to any of the
foregoing. There are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity. The
Company has not received any communications alleging that it has violated or, by
conducting its business as proposed would violate, any of the patents,
trademarks, service marks, trade names, copyrights or trade

                                       5
<PAGE>

secrets or other proprietary rights of any other person or entity.

          (b) The Company is not aware that any of its employees or consultants
is obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would conflict with his obligation to
use his best efforts to promote the interests of the Company. Neither the
execution nor delivery of this Agreement, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as proposed, will, to the Company's knowledge, conflict with or result
in a breach of the terms, conditions or provisions or constitute a default
under, any contract, covenant or instrument under which any such employee or
consultant is now obligated. The Company does not believe it is or will be
necessary to utilize any inventions of any of its employees or consultants (or
people it currently intends to hire or retain) made or owned prior to their
employment or retention by the Company or that it is or will be necessary to
utilize any other assets or rights of any of its employees or consultants (or
people it currently intends to hire or retain) made or owned prior to their
employment with the Company in violation of any limitation or restrictions to
which such person is a party or to which any of such assets or rights may be
subject.

          3.10  Material Contracts and Commitments. The Company has no
                ----------------------------------
contracts, agreements or instruments to which the Company is a party or that are
proposed which involve a total consideration to or from the Company for each
such contract in excess of $25,000 other than those set forth in Exhibit C
                                                                 ---------
hereto, including, but not limited to, pension plans, retirement plans or
obligations, employment contracts, deferred bonus or compensation plans,
agreements with shareholders, collective bargaining agreements, liens, debts,
mortgages, promissory notes, or guarantees. All contracts in Exhibit C are in
                                                             ---------
full force and effect in all material respects, and are valid, binding and
enforceable by the Company, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditor's rights and by general
equitable principles.

          3.11  Litigation, etc. There are no actions suits, proceedings or
                ---------------
investigations pending against the Company or its properties or to which the
Company, or any officer, director, or employee of the Company, is a party in his
capacity as such

                                       6
<PAGE>

before any court or governmental agency (nor is there any threat thereof), that,
either in any case or in the aggregate, might result in any material adverse
change in the business or financial condition of the Company or any of its
properties or assets, or in any material impairment of the right or ability of
the Company to carry on its business as now conducted or as proposed to be
conducted, or in any material liability on the part of the Company, and none
that questions the validity of this Agreement or any action taken or to be taken
in connection herewith.

          3.12  Registration Rights; Preemptive Rights. Except as set forth in
                --------------------------------------
this Agreement, the Company is not under any obligation to register any of its
presently outstanding securities or any of its securities which may hereafter be
issued under the Securities Act of 1933, as amended. The holders of capital
stock of the Company are not entitled to any preemptive rights with respect to
the Shares.

          3.13  Taxes. The Company has filed all necessary or appropriate
                -----
federal, state, local and foreign tax returns and reports and all taxes, fees,
assessments and governmental charges of any nature shown by such returns to be
due and payable have been paid. The Company has never had any material tax
deficiency proposed or assessed against it or executed any waiver of any statute
of limitations on the assessment or collection of any tax. None of the federal
or state income or franchise tax returns of the Company has ever been audited by
governmental authorities.

          3.14  No Brokers or Finders. No person, firm or corporation has, or as
                ---------------------
a result of the transactions contemplated by this Agreement will have, by reason
of any commitment made by the Company, any right, interest or valid claim
against or upon the Purchasers or the Company for any commission, fee or other
compensation as a finder or broker, or in any similar capacity, with respect to
the transactions contemplated by this Agreement.

          3.15  Disclosure. To the best of the Company's knowledge, neither this
                ----------
Agreement nor any Exhibit annexed hereto nor any certificate or other instrument
referred to herein or furnished to the Purchasers by the Company contains, when
considered as a whole with all such other material, any untrue statement of
material fact or omits to state a material fact necessary (in the context of all
such other written information furnished to the Purchasers) in order to make the
statements contained therein or herein, in light of the circumstances under
which they were made, not misleading.

                                       7
<PAGE>

SECTION 4. PURCHASER'S REPRESENTATIONS AND WARRANTIES

          Each Purchaser represents and warrants to the Company as follows:

          4.1  Authority. The execution of this Agreement has been duly
               ---------
authorized by all necessary action by the Purchaser. Further, this Agreement is
a valid and binding agreement of the Purchaser which is enforceable in
accordance with its terms except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
relating to or affecting enforcement of creditors' rights and by general
equitable principles.

          4.2  Accreditation and Experience. The Purchaser is either an
               ----------------------------
"accredited investor" as that term is defined in Regulation D promulgated under
the Securities Act of 1933, as amended (the "Act") or such Purchaser has such
knowledge and experience in business and financial matters that it is capable of
evaluating the merits and risks of its investment hereunder and protecting its
own interests in connection with this transaction.

          4.3  Investment. The Purchaser is acquiring the Shares for investment
               ----------
for its own account, and not with the view to, or for resale in connection with,
any distribution thereof or with any present intention of distributing or
selling the Shares. The Purchaser understands that the Shares will not be
registered under the Act, by reason of a specific exemption from the
registration provisions of the Act which depends upon, among other things, the
bona fide nature of the Purchaser's investment intent as expressed herein.

          4.4  Restrictive Legend. Each certificate representing (i) the Shares,
               ------------------
(ii) shares of the Company's Common Stock issued upon conversion thereof or
(iii) any other securities issued in respect of the Shares or Common Stock
issued upon conversion thereof upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):

     THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
     INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
     SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED WITHOUT AN EFFECTIVE
     REGISTRATION STATEMENT THEREFOR OR AN OPINION OF COUNSEL FOR THE COMPANY
     THAT SUCH

                                       8
<PAGE>

     REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

          4.5  Rule 144. The Purchaser acknowledges that the Shares must be held
               --------
indefinitely unless subsequently registered under the Act or an exemption from
such registration is available. The Purchaser is aware of the provisions of Rule
144 promulgated under the Act ("Rule 144") which permit limited resale of
securities purchased in a private placement (i) by non-affiliates of the Company
not less than three years after a party has purchased and paid for the security
to be sold or (ii) subject to the satisfaction of certain conditions, including,
among other things, the existence of a public market for the securities, the
availability of certain current public information about the Company, the resale
occurring not less than two years after a party has purchased and paid for the
security to be sold, the sale being effected through a "broker's transaction" or
in transactions directly with a "market maker" (as provided by Rule 144(f)) and
the number of securities being sold during any three-month period not exceeding
specified limitations.

          4.6  No Public Market. The Purchaser understands that no public market
               ----------------
now exists for any of the securities issued by the Company.

          4.7  Access to Data. The Purchaser or its representatives have had an
               --------------
opportunity to discuss the terms and conditions of the offering and the
Company's business, management and financial affairs with the Company's
management, to review the Company's books, records and other documents, and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to it or to which
it had access. Nothing contained in this paragraph 4.7 shall alter in any way
the effectiveness of the Company's representations and warranties contained in
Section 3 hereof.

SECTION 5. AFFIRMATIVE COVENANTS OF THE COMPANY

          5.1  Use of Proceeds. The Company intends to apply the proceeds of the
               ---------------
issuance of the Shares to the capital and operating needs of the Company.

          5.2  Financial Information. The Company will furnish the following
               ---------------------
reports to Purchaser for so long as Purchaser is the holder of at least 250,000
Shares:

                                       9
<PAGE>

          (a) As soon as practicable after the end of each fiscal year, and in
any event within 90 days thereafter, consolidated balance sheets of the Company
and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income and consolidated statements of changes in
financial position of the Company and its subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting principles and setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and accompanied by the audit report thereof of an
independent certified public accountant selected by the Company.

          (b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company and in any
event within 45 days thereafter, an unaudited income statement for such fiscal
quarter and an unaudited balance sheet as of the end of such fiscal quarter.

          (c) With reasonable promptness, such other information and data with
respect to the Company and its subsidiaries, if any, as a Purchaser or its
authorized representative may from time to time reasonably request and Purchaser
shall also have the right, at its expense, to visit and inspect any of the
properties of the Company or any of its subsidiaries, and to discuss their
affairs, finances and accounts with their officers, all at such reasonable times
and as often as may be reasonably requested.

          Purchaser agrees that any information obtained by the Purchaser
pursuant to this Section 5.2 that may be proprietary to the Company or otherwise
confidential will not be disclosed without the prior written consent of the
Company. Purchaser further acknowledges and understands that any information so
obtained that may be considered "inside" non-public information will not be
utilized by Purchaser in connection with purchases and/or sales of the Company's
securities except in compliance with applicable state and federal securities
laws.

          5.3  Conduct of Business: The Company, with respect to its assets and
               -------------------
its business, shall use its best efforts to:

          (a) Maintain and preserve its business organization intact and its
relationships with its customers and suppliers.

          (b) Do all things necessary to preserve, renew and keep in full force
and effect and in good standing its corporate

                                       10
<PAGE>

existence, franchises, licenses, technology and proprietary information;

          (c) Avoid the commission of any crime involving moral turpitude or any
felony; and

          (d) Pay and discharge before the same shall become in arrears, all
taxes, assessments, and other governmental charges or levies imposed upon it
and/or its properties, sales and activities, or upon the income or profits
therefrom, as well as all claims for wages, salaries, materials or supplies
which if unpaid might by law become a lien or charge upon any of its properties
unless the validity or amount thereof shall be then currently contested in good
faith by appropriate proceedings.

          5.4  Termination of Covenants. The rights contained in this Section 5
               ------------------------
shall terminate on the day upon which the Company becomes registered under
Section 12(g) of the Securities and Exchange Act of 1934, as amended.

SECTION 6. REGISTRATION RIGHTS

          6.1  Company's Registration. Whenever the Company proposes to register
               ----------------------
any of its Common Stock for its own account under the Act for a public offering
for cash (other than a registration relating to a Rule 145 transaction or
employee benefit plans or any other registration which is not appropriate for
the registration of Shares), the Company shall give the Purchaser written notice
of its intent to do so. Upon the written request of the Purchaser given within
15 days after receipt of such notice, the Company will use its best efforts to
cause to be included in such registration all of the Shares which the Purchaser
requests to be registered.

          6.2  Expenses. All expenses incurred in connection with any
               --------
registrations under Section 6.1 (excluding underwriting commissions and
discounts and fees of counsel for Purchaser) shall be borne by the Company.

          6.3  Underwriting Requirements. In connection with any offering
               -------------------------
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 6.1 to include any of the Shares unless the
Purchasers accept and agree to the terms of the underwriters selected by the
Company. If the total number of shares of the Company's stock which the
Purchaser and any other persons entitled to include shares of stock in a Company
registration (the "Other Participants") request to be included in any offering
involving an underwriting

                                       11
<PAGE>

of shares being issued by the Company (the "Requested Shares") exceeds the
number which the underwriters reasonably believe is compatible with the success
of the offering, then the Company shall only be required to include in the
offering so many Requested Shares as the underwriters believe will not
jeopardize the success of the offering (the Requested Shares to be included
shall be apportioned among the Purchasers and the Other Participants pro rata
according to the number of shares owned by each Purchaser or Other Participant
indicating a desire to participate in such offering); provided, however, that
with respect any offering other than the Company's initial public offering, that
notwithstanding the underwriter's discretion set forth above, a minimum of
thirty percent (30%) of any such offering by the Company shall be reserved for
the inclusion of Shares held by the Purchasers. Purchaser agrees that it will
not, during any underwritten public offering under Section 6.1 offer, sell, or
dispose of shares, except as may be agreed upon with the managing underwriter,
for a period of 180 days from the effective date of the registration statement
for such public offering; provided that this provision shall not apply unless
all officers, directors and greater than 5% shareholders of the Company are
similarly restricted.

          6.4  Information/Indemnification. The Purchaser shall furnish the
               ---------------------------
Company with such information as the Company may request in writing and as shall
be required in connection with any registration under this Article 6 and shall
agree to indemnify the Company and the underwriters of such offering against any
claim or loss resulting from the inaccuracy of such information provided, and on
the condition, that the Company shall agree to provide Purchaser with
indemnification for all other information contained in the registration
statement relating to such registration on usual and customary terms for
offerings of such nature.

          6.5  Definitions. For purposes of this Article 6 the following
               -----------
definitions shall apply:

          (a) The term "Purchaser" shall be deemed to include any transferee of
a Purchaser to whom the Shares may be subsequently transferred; provided that
the transferor shall specifically transfer its rights under this Article 6 to
such transferee and that such transferee holds more than 250,000 Shares.

          (b)  "Shares" shall mean and include any shares of Common Stock issued
or issuable upon conversion of the Series A Preferred Stock sold in accordance
with this Agreement or any

                                       12
<PAGE>

shares of Common Stock issued in respect of such Shares pursuant to any stock
split, dividend, recapitalization and the like.

SECTION 7. RIGHT OF FIRST REFUSAL

          7.1  The Right. The Company will notify the Purchasers and the Founder
               ---------
of any intended offering of New Securities (as defined below) to be undertaken
by the Company after the date of this Agreement and prior to termination of the
right provided herein pursuant to Section 7.3 below. The Purchasers and the
Founder shall have the right of first refusal to participate pro rata in such
offering of New Securities based upon their then existing ownership percentage
in the Company.

          7.2  Notice. The Company shall give to the Purchasers and the Founder
               ------
written notice of the proposed offer to sell and issue any of the New
Securities, which written notice shall contain the terms of such proposed sale
in reasonable detail and shall be delivered to the Purchasers and the Founder at
least thirty (30) days prior to the date such securities are proposed to be sold
and issued to any third party. The Purchasers and the Founder shall have the
right to exercise the right of first refusal granted them pursuant to Section
7.1 above by giving written notice thereof to the Company within fifteen (15)
days after receipt of the Company's notice, specifying the amount of securities
which such person desires to purchase. Failure to so notify the Company within
such period shall be deemed an election not to participate.

          7.3  Termination. The rights granted by this Section 7 shall terminate
               -----------
upon either of the following:

          (a) as to each Purchaser or the Founder, the failure of such person to
exercise its rights under this Article 7 in full with respect to a prior
offering of New Securities; or

          (b) the effectiveness of (and shall not apply to the shares subject
to) a registration statement under the Securities Act on Form S-1, S-2, S-3, SB-
1 or SB-2 (or similar form containing substantially the same information)
covering a firm commitment underwriting of the Company's securities; or

          (c) the closing of a transaction by which the Company is merged into
or acquired by another corporation and in which the shareholders of the Company
hold less than 50% of the voting power of the surviving corporation (and shall
not apply to such transaction).

                                       13
<PAGE>

          7.4  Definitions. For purposes of this Article 7, the following shall
               -----------
apply:

          (a) The term "New Securities" means any shares of Common Stock or any
rights, options, warrants or other debt, equity or hybrid securities
exchangeable for or convertible into shares of Common Stock which the Company
intends to offer, sell or issue after the date of this Agreement except for such
securities which are (i) exchanged for the securities of another corporation as
a result of a statutory merger or consolidation; (ii) issued to another
corporation in exchange for all or substantially all of the assets of such other
corporation; or (iii) shares of Common Stock (or securities convertible into or
rights to acquire shares of Common Stock) issued to fulfill any obligation of
the Company under any existing or future stock option, bonus or other employee
or consultant incentive arrangement or plan for the benefit of the employees,
consultants or directors of the Company.

          (b) For purposes of determining the Founder's "percentage interest" in
the Company, the Founder's holdings of shares of Series A Preferred Stock,
Common Stock and vested options to purchase Common Stock, if any, shall be
aggregated.

          7.5  Transferability. A Purchaser's right to purchase New Securities
               ---------------
under the terms of this Article 7 shall be nontransferable.

SECTION 8. MISCELLANEOUS

          8.1  Governing Law. This Agreement shall be governed in all respects
               -------------
by the substantive laws of the State of California without giving effect to
principles of choice of law.

          8.2  Survival. The representations, warranties, covenants and
               --------
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby.

          8.3  Successors and Assigns. Except as otherwise expressly provided
               ----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.

          8.4  Entire Agreement; Amendment. This Agreement, including the
               ---------------------------
Exhibits hereto, and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof

                                       14
<PAGE>

and thereof. Neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated except by a written instrument signed by the Company
and the Purchasers.

          8.5  Notices, etc. All notices and other communications required or
               ------------
permitted hereunder shall be in writing and shall be sent by facsimile, telex,
telegram or other form of rapid

                                       15
<PAGE>

communications, if possible, or if not, then such notice or communication shall
be mailed by first-class mail, postage prepaid, addressed to the addresses set
forth above or to such other address as a party hereto may specify in writing to
the other. Notice shall conclusively be deemed to have been given when
personally delivered or when deposited in the mail, telex, telegram or fax in
the manner set forth above and shall be deemed to have been received when
delivered.

          8.6  Title and Subtitles. The titles of the paragraphs and
               -------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.

          8.7  Counterparts. This Agreement may be executed in any number of
               ------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

          The foregoing agreement is hereby executed as of the date first above
written.

                            COMPANY:
                            ARTEST CORPORATION,
                            a California corporation

                            By:         /s/ Jen Kao
                                --------------------------------
                                 Jen Kao, President

                            FOUNDER:

                                        /s/ Jen Kao
                            ------------------------------------
                            Jen Kao (for purposes of Article 7 only)

                            PURCHASER:

                            ____________________________________
                            (Printed Name)

                            ____________________________________
                            (Authorized Signatory)

<PAGE>

                            ____________________________________
                            (Address 1)

                            ____________________________________
                            (Address 2)

                            ____________________________________
                            (Address 3)
<PAGE>

communications, if possible, or if not, then such notice or communication shall
be mailed by first-class mail, postage prepaid, addressed to the addresses set
forth above or to such other address as a party hereto may specify in writing to
the other. Notice shall conclusively be deemed to have been given when
personally delivered or when deposited in the mail, telex, telegram or fax in
the manner set forth above and shall be deemed to have been received when
delivered.

          8.6  Title and Subtitles. The titles of the paragraphs and
               -------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.

          8.7  Counterparts. This Agreement may be executed in any number of
               ------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

          The foregoing agreement is hereby executed as of the date first above
written.

                                 COMPANY:
                                 ARTEST CORPORATION,
                                 a California corporation

                                 By: ___________________________________
                                     Jen Kao, President

                                 FOUNDER:

                                 _______________________________________
                                 Jen Kao (for purposes of Article 7 only)

                                 PURCHASER:
                                 SILICONWARE INVESTMENT
                                 COMPANY LTD.

                                 _______________________________________
                                 (Printed Name)

                                            /s/ C. W. Tsai
                                 ---------------------------------------
                                 (Authorized Signatory)

<PAGE>

                                 ____________________________________
                                 (Address 1)

                                 ____________________________________
                                 (Address 2)

                                 ____________________________________
                                 (Address 3)
<PAGE>

communications, if possible, or if not, then such notice or communication shall
be mailed by first-class mail, postage prepaid, addressed to the addresses set
forth above or to such other address as a party hereto may specify in writing to
the other. Notice shall conclusively be deemed to have been given when
personally delivered or when deposited in the mail, telex, telegram or fax in
the manner set forth above and shall be deemed to have been received when
delivered.

          8.6  Title and Subtitles. The titles of the paragraphs and
               -------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.

          8.7  Counterparts. This Agreement may be executed in any number of
               ------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

          The foregoing agreement is hereby executed as of the date first above
written.

                               COMPANY:
                               ARTEST CORPORATION,
                               a California corporation

                               By:     /s/ Jen Kao
                                   -------------------------------
                                    Jen Kao, President

                               FOUNDER:

                                       /s/ Jen Kao
                               -----------------------------------
                               Jen Kao (for purposes of Article 7 only)

                               PURCHASER:

                               Siliconware Foundries, Inc.
                               ----------------------------------------
                               (Printed Name)

                                                /s/ [?]
                               ------------------------------
                               (Authorized Signatory)

<PAGE>

                               4F, No. 12 Kuang Hua E. 1st Street
                               ----------------------------------
                               (Address 1)

                               Hsin-chu City, Taiwan
                               ---------------------
                               (Address 2)

                               ____________________________________
                               (Address 3)

<PAGE>

communications, if possible, or if not, then such notice or communication shall
be mailed by first-class mail, postage prepaid, addressed to the addresses set
forth above or to such other address as a party hereto may specify in writing to
the other. Notice shall conclusively be deemed to have been given when
personally delivered or when deposited in the mail, telex, telegram or fax in
the manner set forth above and shall be deemed to have been received when
delivered.

          8.6  Title and Subtitles. The titles of the paragraphs and
               -------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.

          8.7  Counterparts. This Agreement may be executed in any number of
               ------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

          The foregoing agreement is hereby executed as of the date first above
written.

                                   COMPANY:
                                   ARTEST CORPORATION,
                                   a California corporation

                                   By: ________________________________
                                       Jen Kao, President

                                   FOUNDER:

                                   ____________________________________
                                   Jen Kao (for purposes of Article 7 only)

                                   PURCHASER:

                                   Creative Group Limited
                                   ____________________________________
                                   (Printed Name)

                                           /s/ C. L. Huang
                                   ------------------------------------
                                   (Authorized Signatory)

<PAGE>

                                   P.O. Box 71, Craigmuir Chambers
                                   ---------------------------------
                                   (Address 1)
                                   Road Town, Tortola
                                   ---------------------------------
                                   (Address 2)

                                   British Virgin Islands
                                   ---------------------------------
                                   (Address 3)
<PAGE>

delivered or when deposited in the mail, telex, telegram or fax ill the manner
set forth above and shall be deemed to have been received when delivered.

          8.6  Title and Subtitles. The titles of the paragraphs and
               -------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.

          8.7  Counterparts. This Agreement may be executed in any number of
               ------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

          The foregoing agreement is hereby executed as of the date first above
written.

                                    COMPANY:
                                    ARTEST CORPORATION,
                                    a California corporation

                                    By:         /s/ Jen Kao
                                        --------------------------------
                                    Jen Kao, President

                                    FOUNDER:

                                                  /s/ Jen Kao
                                    ------------------------------------
                                    Jen Kao (for purposes of Article 7 only)

                                    PURCHASER:

                                    SAMUEL D.F. LEE
                                    ------------------------------------
                                    (Printed Name)

                                            /s/ Samuel D. F. Lee
                                    ------------------------------------
                                    (Authorized Signatory)

                                    4th Fl., 237 Fu-Hsing S. Rd.
                                    ------------------------------------
                                    (Address 1)
<PAGE>

                                    Sec. 1, Taipei
                                    ------------------------------------
                                    (Address 2)

                                    ____________________________________
                                    (Address 3)
<PAGE>

delivered or when deposited in the mail, telex, telegram or fax ill the manner
set forth above and shall be deemed to have been received when delivered.

          8.6  Title and Subtitles. The titles of the paragraphs and
               -------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.

          8.7  Counterparts. This Agreement may be executed in any number of
               ------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

          The foregoing agreement is hereby executed as of the date first above
written.

                                 COMPANY:
                                 ARTEST CORPORATION,
                                 a California corporation

                                 By:          /s/ Jen Kao
                                     -----------------------------
                                     Jen Kao, President

                                 FOUNDER:

                                              /s/ Jen Kao
                                 ---------------------------------
                                 Jen Kao (for purposes of Article 7 only)

                                 PURCHASER:

                                 SAMANTHA S.P. LEE
                                 ------------------------------------
                                 (Printed Name)

                                       /s/ Samantha S.P. Lee
                                 ------------------------------------
                                 (Authorized Signatory)

                                 ____________________________________
                                 (Address 1)

                                 ____________________________________
<PAGE>

                                (Address 2)

                                ____________________________________
                                (Address 3)
<PAGE>

communications, if possible, or if not, then such notice or communication shall
be mailed by first-class mail, postage prepaid, addressed to the addresses set
forth above or to such other address as a party hereto may specify in writing to
the other. Notice shall conclusively be deemed to have been given when
personally delivered or when deposited in the mail, telex, telegram or fax in
the manner set forth above and shall be deemed to have been received when
delivered.

          8.6  Title and Subtitles. The titles of the paragraphs and
               -------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.

          8.7  Counterparts. This Agreement may be executed in any number of
               ------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

          The foregoing agreement is hereby executed as of the date first above
written.

                                       COMPANY:
                                       ARTEST CORPORATION,
                                       a California corporation

                                       By: _________________________________
                                           Jen Kao, President

                                       FOUNDER:

                                       _____________________________________
                                       Jen Kao (for purposes of Article 7 only)

                                       PURCHASER:

                                       INTERNATIONAL LEADFRAME CORPORATION
                                       -------------------------------------
                                       (Printed Name)

                                                   /s/ K. Sanefuji
                                       -------------------------------------
                                       (Authorized Signatory)
<PAGE>

                                          BY:  K. SANEFUJI
                                          ITS:  PRESIDENT
                                          ________________________________
                                          (Address 1)

                                          ________________________________
                                          (Address 2)

                                          ________________________________
                                          (Address 3)
<PAGE>

communications, if possible, or if not, then such notice or communication shall
be mailed by first-class mail, postage prepaid, addressed to the addresses set
forth above or to such other address as a party hereto may specify in writing to
the other. Notice shall conclusively be deemed to have been given when
personally delivered or when deposited in the mail, telex, telegram or fax in
the manner set forth above and shall be deemed to have been received when
delivered.

          8.6  Title and Subtitles. The titles of the paragraphs and
               -------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.

          8.7  Counterparts. This Agreement may be executed in any number of
               ------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

          The foregoing agreement is hereby executed as of the date first above
written.

                                   COMPANY:
                                   ARTEST CORPORATION,
                                   a California corporation

                                   By:          /s/ Jen Kao
                                       --------------------------------
                                       Jen Kao, President

                                   FOUNDER:

                                                      /s/ Jen Kao
                                   ------------------------------------
                                   Jen Kao (for purposes of Article 7 only)

                                   PURCHASER:

                                   HSIN SAN LEE
                                   ------------------------------------
                                   (Printed Name)

                                             /s/ Hsin San Lee
                                   ------------------------------------
                                   (Authorized Signatory)

                                   ____________________________________
<PAGE>

                                   (Address 1)

                                   ____________________________________
                                   (Address 2)

                                   ____________________________________
                                   (Address 3)
<PAGE>

communications, if possible, or if not, then such notice or communication shall
be mailed by first-class mail, postage prepaid, addressed to the addresses set
forth above or to such other address as a party hereto may specify in writing to
the other. Notice shall conclusively be deemed to have been given when
personally delivered or when deposited in the mail, telex, telegram or fax in
the manner set forth above and shall be deemed to have been received when
delivered.

          8.6  Title and Subtitles. The titles of the paragraphs and
               -------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.

          8.7  Counterparts. This Agreement may be executed in any number of
               ------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

          The foregoing agreement is hereby executed as of the date first above
written.

                                    COMPANY:
                                    ARTEST CORPORATION,
                                    a California corporation

                                    By:         /s/ Jen Kao
                                        -------------------------------
                                        Jen Kao, President

                                    FOUNDER:

                                                 /s/ Jen Kao
                                    -----------------------------------
                                    Jen Kao (for purposes of Article 7 only)

                                    PURCHASER:

                                    CHIEN TSAI YANG LIN
                                    -----------------------------------
                                    (Printed Name)

                                            /s/ Chien Tsai Yang Lin
                                    -----------------------------------
                                    (Authorized Signatory)

                                    ___________________________________
<PAGE>

                                    (Address 1)

                                    ___________________________________
                                    (Address 2)

                                    ___________________________________
                                    (Address 3)
<PAGE>

                                   EXHIBIT A

                            SCHEDULE OF PURCHASERS

<TABLE>
<CAPTION>
           Name                               Shares             Amount
------------------------------------       ------------       ------------
<S>                                        <C>                <C>
Siliconware Investment Company,             6,000,000          $6,000,000
 Ltd
No. 17, Park Avenue II,
Science-Based Industrial Park
Hsin Chu, Taiwan

Silicon Foundries                           1,000,000           1,000,000
4F, No. 12, Huang-Hua E. 1st Street
Hsin Chu, Taiwan

Creative Group Limited                      2,000,000           2,000,000
P.O. Box 71
Craigmuir Chambers
Road Town, Tortola
British Virgin Islands

 copy all correspondence to:
 Hon Hai Precision Industry Co., Ltd.
 No. 2, Tzu Yu Street, Tu-cheng
 Taipei Hsien, Taiwan R.O.C.

Mr. Samuel D. F. Lee                        1,000,000           1,000,000
4th Floor, 4237
Section 1
Fu-shing South Road
Taipei, Taiwan

Ms. Shiau-Ping Lee                          1,000,000           1,000,000
No. 3 Shiang-Jung Rd., Lane 1
Ta-Shee, Tao-Yuan
Taiwan

International Leadframe Corporation         2,000,000           2,000,000
3350 Victor Court
Santa Clara, CA 95054

Mr. Hsin San Lee                              300,000             300,000
No. 3, Alley 46, Lane 441
Sec. 6, Chung Shan N. Rd
Taipei, Taiwan
</TABLE>
<PAGE>

<TABLE>
<S>                                      <C>                   <C>
Mr. Chien Tsai Yang Lin                      200,000              200,000
No. 7-4, Alley 95, Lane 2
Sec. 2, Chung Shan Rd
Chung Ho City, Taipei Hsien
Taiwan

Mr. Raymond Soong                            500,000              500,000

Lite-On Group
12th Floor, #25
Sec.1, Tunghwa South Rd
Taipei, Taiwan
                                         ___________           __________

 Total                                   $14,000,000           14,000,000
</TABLE>
<PAGE>

                                   EXHIBIT B

                       FORM OF CERTIFICATE OF AMENDMENT

                                      OF

                           ARTICLES OF INCORPORATION

                                       1
<PAGE>

                           CERTIFICATE OF AMENDMENT

                                      OF

                         ARTICLES OF INCORPORATION OF

                              ARTEST CORPORATION

          Jen Kao and Chia Yin Kao certify that:

          1.  They are the President and Secretary, respectively, of Artest
Corporation, a California corporation.

          2.  Article IV of the Articles of Incorporation of this corporation is
amended and restated to read in its entirety, as follows:

                                  "Article IV

          This corporation is authorized to issue two classes of shares
designated "Series A Preferred Stock" and "Common Stock," respectively. The
total number of shares which this corporation shall have the authority to issue
is Thirty Eight Million (38,000,000). The number of shares of Series A
Preferred Stock authorized to be issued is Fourteen Million (14,000,000), and
the number of shares of Common Stock authorized to be issued is Twenty Four
Million (24,000,000).

          A statement of the rights, preferences, privileges and restrictions
granted to or imposed on the Series A Preferred Stock and the holders thereof is
as follows:

          1.  Dividends.
              ---------

          (a) Preference. The holders of outstanding Series A Preferred Stock
              ----------
shall be entitled to receive, when and as declared by the Board of Directors,
out of any assets at the time legally available therefor, dividends in cash at
the rate of $0.08 per share per annum before any dividend is paid on Common
Stock. The right to such dividends on shares of Series A Preferred Stock shall
not be cumulative. Such dividend is payable when and as the Board of Directors
may from time to time determine. Dividends or distributions (other than
dividends payable solely in shares of Common Stock) may be declared and paid
upon shares of Common Stock only if dividends shall have been paid on or
declared and set apart upon all shares of Series A Preferred Stock.

                                       1
<PAGE>

          (b) Non-Cash Dividends. In the event this corporation shall declare a
              ------------------
distribution payable in securities of other persons, evidences of indebtedness
issued by this corporation or other persons, assets (excluding cash dividends)
or options or rights to purchase any such securities or evidences of
indebtedness, then, in each such case the holders of the Series A Preferred
Stock shall be entitled to a proportionate share of any such distribution as
though the holders of the Series A Preferred Stock were the holders of the
number of shares of Common Stock of the corporation into which their respective
shares of Series A Preferred Stock are convertible as of the record date fixed
for the determination of the holders of Common Stock of the corporation entitled
to receive such distribution.

          (c) Consent to Certain Repurchases. As authorized by Section 402.5(c)
              ------------------------------
of the California Corporations Code, Sections 502, 503 and 506 of the California
Corporations Code shall not apply with respect to distributions (as defined in
Section 166 of the California Corporations Code) made by the Company in
connection with the repurchase of shares of Common Stock issued to or held by
employees, consultants, officers and directors upon termination of their
employment or services pursuant to agreements providing for the right of said
repurchase.

          2.  Liquidation Distributions.
              -------------------------

          (a) Series A Preference. In the event of any liquidation, dissolution
              -------------------
or winding up of the corporation, either voluntary or involuntary, the holders
of the Series A Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
corporation to the holders of the Common Stock by reason of their ownership
thereof, the amount of One dollar ($ 1.00) per share. If upon the occurrence of
such event the assets and funds thus distributed among the holders of the Series
A Preferred Stock shall be insufficient to permit the payment to such holders of
the full preferential amount, then the entire assets and funds of the
corporation legally available for distribution shall be distributed ratably
among the holders of the Series A Preferred Stock.

          (b) Distributions on Common. After payment has been made to the
              -----------------------
holders of the Series A Preferred Stock of the full amounts to which they shall
be entitled as set forth in subsection (a) above, the remaining assets of the
corporation available for distribution to shareholders shall be distributed
among the holders of Common Stock pro rata based upon the number of shares of
Common Stock held by each such holder.

                                       2
<PAGE>

          (c) Reorganization. For purposes of this Section 2, a liquidation,
              --------------
dissolution or winding up of the Company shall be deemed to be occasioned by, or
to include, (A) the acquisition of the Company by another entity by means of any
transaction or series of related transactions (including, without limitation,
any reorganization, merger or consolidation but excluding any merger effected
exclusively for the purpose of changing the domicile of the Company) that
results in the transfer of fifty percent (50%) or more of the outstanding voting
power of the Company; or (B) a sale of all or substantially all of the assets of
the Company.

          3.  Conversion. The holders of the Series A Preferred Stock shall have
              ----------
conversion rights as follows (the "Conversion Rights"):

          (a)  Right to Convert.
               ----------------

               (i)   Each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at the office of the
corporation or any transfer agent for the Series A Preferred Stock, into Common
Stock. The initial rate upon which the Series A Preferred Stock shall be
convertible into shares of Common Stock shall be one share of Common Stock for
each share of Series A Preferred Stock converted, subject to adjustment as
provided herein. (The number of shares of Common Stock into which each share of
Series A Preferred Stock may be converted is hereinafter referred to as the
"Conversion Rate".)

               (ii)  Each share of Series A Preferred Stock shall automatically
be converted into shares of Common Stock at the then effective Conversion Rate
immediately upon either (A) the consummation of the corporation's sale of Common
Stock pursuant to a registration statement under the Securities Act of 1933, as
amended, pursuant to an underwritten firm commitment public offering or (B) upon
the written consent to such conversion of holders of more than 50% of the
outstanding shares of Series A Preferred Stock, whichever first shall occur.

               (iii) No fractional shares of Common Stock shall be issued upon
conversion of any Series A Preferred Stock and if any shares of Series A
Preferred Stock surrendered for conversion would otherwise result in a
fractional share of Common Stock, such fractional share shall be redeemed for
the then fair market value thereof as reasonably determined by the corporation's
Board of Directors, payable as promptly as possible whenever funds are legally
available therefor. If more than one share of Series A Preferred Stock is
surrendered for

                                       3
<PAGE>

conversion at any one time by the same holder, the number of full shares of
Common Stock to be issued upon conversion shall be computed on the basis of the
aggregate number of shares of Series A Preferred Stock so surrendered.

          (b) Mechanics of Conversion. Before any holder of Series A Preferred
              -----------------------
Stock shall be entitled to convert the same into shares of Common Stock, such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the corporation or of any transfer agent for the Series A
Preferred Stock, and shall give written notice to the corporation at such office
that such holder elects to convert the same and shall state therein the name or
names in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued. The corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A
Preferred Stock, or to such holder's nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Series A Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date.

          (c) Adjustment of Conversion Rate for Combinations or Consolidations
              ----------------------------------------------------------------
of Common Stock. In the event the corporation at any time or from time to time
---------------
effects a subdivision or combination of its outstanding Common Stock into a
greater or lesser number of shares without a proportionate and corresponding
subdivision or combination of the Series A Preferred Stock, then and in each
such event the Conversion Rate for the Series A Preferred Stock shall be
increased or decreased proportionately.

          (d) No Impairment. The corporation will not, by amendment of its
              -------------
Articles of Incorporation or through any reorganization, re-capitalization,
transfer of assets, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this section 3 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock against impairment.

                                       4
<PAGE>

          4.   Voting Rights.
               -------------

          (a)  General. Each holder of shares of the Series A Preferred Stock
               -------
shall be entitled to the number of votes equal to the number of shares of Common
Stock into which such shares of Series A Preferred Stock could be converted on
the record date for the vote or consent of shareholders and shall have voting
rights and powers equal to the voting rights and powers of the Common Stock. The
holder of each share of the Series A Preferred Stock shall be entitled to notice
of any shareholders' meeting in accordance with the Bylaws of the corporation
and shall vote with holders of the Common Stock upon the election of directors
and upon any other matter submitted to a vote of shareholders, except those
matters required by law to be submitted to a class vote. Fractional votes by the
holders of Series A Preferred Stock shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Series A Preferred Stock held by each holder could
be converted) shall be rounded to the nearest whole number.

          (b)  Special Voting Rights. In addition to any other rights provided
               ---------------------
by law, so long as shares of Series A Preferred Stock are outstanding, the
corporation shall not without first obtaining the affirmative vote or written
consent of the holders of not less than a majority of the then outstanding
shares of the Series A Preferred Stock:

               (i)   sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of transaction in which 50% of the voting power
of the corporation is disposed of;

               (ii)  amend or repeal any provision of, or add any provision to,
this Corporation's Articles of Incorporation if such action would alter or
change the preferences, rights, privileges or powers of, or the restrictions
provided for the benefit of, the Series A Preferred Stock;

               (iii) amend or repeal any provision of, or add any provision to,
this Corporation's Articles of Incorporation if such action would increase the
number of authorized shares of Series A Preferred Stock or the number of
authorized shares of Common Stock;

               (iv)  authorize or issue shares of any class of stock not
authorized herein having any preference or priority as

                                       5
<PAGE>

to dividends or assets superior to or on a parity with any such preference or
priority of the Series A Preferred Stock or authorize or issue any bonds,
debentures, notes or other obligations convertible into or exchangeable for, or
having option rights to purchase, any shares of stock of this Corporation other
than Common Stock; or

               (v)  reclassify any shares of Common Stock and any other shares
of this Corporation other than the Series A Preferred Stock into shares having
any preference or priority as to dividends or assets superior to or on a parity
with any such preference or priority of the Series A Preferred Stock."

          3.   The foregoing Amendment of Articles of Incorporation has been
duly approved by the Board of Directors of this Corporation.

          4.   The foregoing Amendment of the Articles of Incorporation has been
approved by the required vote of shareholders in accordance with Sections 902
and 903 of the Corporations Code. The total number of outstanding shares of
Common Stock of the corporation is 5,240,000. The number of shares voting in
favor of the amendment equaled or exceeded the vote required. The percentage
vote required was more than 50% of the outstanding shares of Common Stock.

                              ____________________________
                              Jen Kao, President

                              ____________________________
                              Chia Yin Kao, Secretary

          The undersigned declares under penalty of perjury that the matters set
forth in the foregoing certificate are true of his/her own knowledge.

             Executed at Saratoga, California, on March __, 1997.

                              ____________________________
                              Jen Kao

                              ____________________________
                              Chia Yin Kao

                                       6
<PAGE>

                                   EXHIBIT C

                            SCHEDULE OF EXCEPTIONS

Exceptions:

  None

Material Contracts:

          The Company has an Agreement dated December 18, 1996, with Shlumberger
Corporation regarding the supply to it of specified automated test equipment and
related technical co-operation.

          The Company has entered into a Sublease Agreement with MicroComp
Industries to lease approximately 8,000 square feet at 678 Almanor Avenue,
Sunnyvale, CA.

Shareholder List:
     Common Stock
        Jen Kao       -     5,000,000
        Alan Ross     -       240,000

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