Document:

EXHIBIT

10.42

 

AMENDED AND

RESTATED DIRECTOR DESIGNATION AGREEMENT

 

This Amended and Restated

Director Designation Agreement, dated as of February 1, 2003 (this “Agreement”),

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”);

AEA XM Investors I LLC, AEA XM Investors II LLC, AEA XM Investors IA LLC and

AEA XM Investors IIA LLC, each a limited liability company organized under the

laws of the State of Delaware (individually or collectively “AEA XM”);

Clear Channel Investments, Inc., a corporation duly organized under the laws of

the State of Nevada (“Clear Channel”);; Hughes Electronics Corporation,

corporation duly organized under the laws of Delaware (“Hughes”);

American Honda Motor Co., Inc., a corporation duly organized under the laws of

the State of California (“Honda”); and 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”).  AEA XM, Clear Channel, Honda, Hughes and

Madison are collectively referred to herein as the “Investors.”  The Company and the Investors are

collectively referred to herein as the “Parties.”  Columbia XM Radio Partners, LLC, a

limited liability company duly organized under the laws of the Commonwealth of

Virginia (“Columbia Radio Partners”), 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. (“Columbia Equity Partners III”)

and Columbia Capital Equity Partners II (QP), L.P. (“Columbia Equity

Partners II”), each a limited partnership duly organized under the laws of

the State of Delaware, who were parties to the January 2003 Agreement (as

defined below), are becoming parties hereto solely for the purposes of agreeing

to the amendment and restatement of the January 2003 Agreement by this

Agreement and terminating their respective rights and obligations

hereunder.  Upon effectiveness of this

Agreement, each of Columbia Radio Partners, Columbia Satellite Partners,

Columbia Equity Partners II and Columbia Equity Partners III shall cease to be

a party to this Agreement and all of its respective rights and obligations

hereunder shall be terminated.

 

WITNESSETH

 

WHEREAS, the Company, the Investors, Columbia Radio

Partners, Columbia Satellite Partners, Columbia Equity Partners II and Columbia

Equity Partners III are parties to a Director Designation Agreement, dated

January 28, 2003 (the “January 2003 Agreement”), that relates to the

designation of the Company’s directors; and

 

WHEREAS, the Company and each of the Investors believe

it to be in the best interests of the Company and the mutual best interests of

each of the Investors to continue to have certain agreements with respect to

the designation of directors of the Company.

 

NOW, THEREFORE, in consideration for the mutual

covenants contained herein, the adequacy, receipt, and sufficiency of which are

hereby acknowledged, the undersigned hereby agree as follows:

 

 

ARTICLE I.

DEFINITIONS

 

Section 1.1             Definitions.

 

Affiliate:

means, as applied to any Person, any other Person directly or indirectly

controlling, controlled by, or under direct or indirect common control with,

such Person.  For purposes of this

definition, “control” (including, with correlative meanings, the terms

“controlling,” “controlled by” and “under common control with”), as applied to

any Person, means the possession, directly or indirectly, of the power to

direct or cause the direction of the management and policies of such Person,

whether through the ownership of voting securities, by contract or

otherwise.  For purposes of Section 2.1,

a member of a limited liability company or a partner of a partnership shall be

deemed an Affiliate of said company or partnership.

 

Board or Board of

Directors: means the Board of Directors of the Company or a

committee consisting of one or more directors lawfully exercising the powers of

the Board.

 

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 securities, 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 issued by the Company or its Subsidiaries, and 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, including the Series A Convertible Preferred Stock,

the Series B Convertible Preferred Stock, the Series C Convertible Preferred Stock

and the 10% Senior Secured Discount Convertible Notes due 2009 of the Company

and its wholly owned subsidiary XM Satellite Radio Inc. (the “New Notes”).

 

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.

 

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.

 

Common Stock

Deemed Outstanding: means, at any given time, the number of

shares of Common Stock actually outstanding at such time, plus the number of

shares of Common Stock

 

2

 

issuable upon the conversion, exchange, or exercise in full, of all

Convertible Securities, whether or not the Convertible Securities are

convertible into or exercisable or exchangeable for Common Stock at such time.

 

Convertible

Securities: means securities or obligations that are

exercisable for, convertible into or exchangeable for shares of Common

Stock.  The term includes options,

warrants or other rights to subscribe for or purchase Common Stock or to

subscribe for or purchase other securities or obligations that are convertible

into or exercisable or exchangeable for Common Stock, including, without

limitation, the Series A Convertible Preferred Stock, the Series B Convertible Preferred

Stock, the Series C Convertible Preferred Stock and the New Notes.

 

Person:

means any individual, partnership, corporation, joint venture, limited

liability company, association, trust, unincorporated organization, or a

government or agency or political subdivision thereof.

 

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 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

Convertible Preferred Stock: means the Series C Convertible

Redeemable Preferred Stock, par value $.01 per share, of the Company, having

the same voting rights as the Class A Common Stock determined on an as

converted basis.

 

Series C Purchase

Agreement: means the Series C Convertible Preferred Stock

Purchase Agreement, dated as of July 7, 2000, by and among the Company and the

investors named therein.

 

Subsidiary:

means, with respect to any Person, any corporation, association or other

business entity of which more than fifty percent (50%) of the voting power of

the outstanding Capital Stock is owned, directly or indirectly, by such Person

or one or other Subsidiaries of such Person.

 

ARTICLE II.

CORPORATE GOVERNANCE; VOTING AGREEMENT

 

Section 2.1             Board of Directors.

 

(a)           The Board of Directors and the board

of directors of XM Satellite Radio Inc. and any other material Subsidiary of

the Company (other than the board of any joint venture with Sirius Satellite

Radio Inc. so long as the Company’s management provides regular reports to the

Board of Directors as to the status of any such joint venture) (collectively,

the “Boards of Directors”) shall consist of at least seven (7) members,

of whom:

 

3

 

(i)            one (1) member shall be designated

by Clear Channel;

 

(ii)           one (1) member shall be the President

and CEO of the Company;

 

(iii)          one (1) member shall be the Chairman

of the Company;

 

(iv)          two (2) members shall be independent

directors of recognized industry expertise and stature both of whom shall be

approved by the Investors who hold a majority of the Common Stock Deemed

Outstanding that is held by the Investors;

 

(v)           one (1) member shall be designated by

AEA XM who shall be appointed to any Audit Committee and Executive Committee

(subject to meeting the Nasdaq Stock Market’s Audit Committee and Charter

requirements); and

 

(vi)          at Honda’s option, one (1) member

shall be designated by Honda who shall be appointed to any Executive or

comparable committee of the Boards of Directors.

 

(b)                                 Each

Investor agrees to vote its voting securities of the Company in favor of the

persons nominated in accordance with the provisions herein.  The rights of Clear Channel to designate a

director and approve the appointment of independent directors pursuant to this

Section 2.1 shall continue for so long as Clear Channel holds (A) in excess of

5% of the Common Stock Deemed Outstanding or (B) the full amount of its

original investment in the Company.  The

right of AEA XM to designate a director and approve the appointment of

independent directors shall continue for so long as AEA XM (or its Affiliates)

holds at least 50% of the stock that it originally purchased under the Series C

Purchase Agreement, either in Series C Convertible Preferred Stock or as

converted into Class A Common Stock. 

The right of Honda to designate a director and approve the appointment

of independent directors shall continue for so long as Honda (or any of its

Affiliates) retains at least 50% of its investment, including debt and equity

securities, in the Company (measured by the purchase price paid by Honda for

such securities and without regard to (i) whether or not such securities have

been converted into any other security of the Company or (ii) the current

market value of any such securities) as of the date hereof.

 

(c)                                  The

right of Clear Channel to designate a director pursuant to Section 2.1(a)(i)

also shall terminate, and any director designated by Clear Channel shall

promptly resign from the Boards of Directors, if a majority of the ownership

interests of Clear Channel cease to be owned, directly or indirectly, by Clear

Channel Communications, Inc.

 

Section 2.2             Removal of Directors.  The Investors agree to vote so that each

member of the Board of Directors nominated or designated in accordance with

Section 2.1 shall serve as a director of the Company until removed, upon the

instructions of the Party designating such director, and each Party agrees to

vote its shares of Common Stock in accordance with such directions.  To the extent permitted by law, each

Investor agrees not to take any action to remove or replace (and to use all

reasonable efforts to cause the Board of Directors not to replace), with or

without cause, any director of the Company that has not been designated for

removal or replacement by the Party having originally nominated or designated

such director.

 

4

 

Section 2.3             No Group.  It is the intent of the Investors that no

“group” (within the meaning of Section 13(d) of the Securities Exchange Act of

1934, as amended) shall be formed as a result of this Agreement.

 

Section 2.4             Partial Termination.  If the Investors at any time beneficially

own in excess of 50% of the voting securities of the Company, then this

Agreement shall terminate automatically as to the following, in all respects,

first, Clear Channel, second (if necessary), Madison, and, third (if

necessary), AEA XM until the remaining Investors beneficially own 50% or less

of the voting securities of the Company. 

The Parties shall take all actions to reflect any such partial

termination as may be reasonably requested by the Company or any other

Party.  Thirty (30) days prior to a date

for payment of interest (an “Interest Payment”) under any of (i) the New Notes,

(ii) the Series GM 10% Senior Secured Convertible Notes due 2009 of the Company

and XM Satellite Radio Inc., and (iii) the Credit Agreement among the Company,

XM Satellite Radio Inc. and General Motors Corporation, the Company shall

calculate the Investors’ beneficial ownership of voting securities of the

Company (with a copy of such calculation to be furnished to each of the Investors).  Each Investor shall provide the Company with

at least ten (10) days prior written notice of its intent to purchase any

voting securities of the Company.  If

any proposed purchase of voting securities or Interest Payment would cause the

beneficial ownership of the Investors to be in excess of 50%, then the Parties

shall take such actions as necessary to remove Investors as Parties to this

Agreement in the order set forth above.

 

Section 2.5             Transfers.  Any assignment or transfer by an Investor to

a single transferee or a group of Affiliated transferees, whether in a single

transaction or a series of related transactions, of:

 

(i) Convertible

Securities representing more than 1% of the Common Stock Deemed Outstanding,

other than Common Stock sold pursuant to an effective registration statement or

Rule 144 or Rule 145 under the Securities Act of 1934, as amended, or

 

(ii) any New Notes

 

shall be subject to the

assumption by such transferee of the obligation to vote its Common Stock as

provided herein and the obligation to require the same in subsequent such

assignments or transfers.

 

ARTICLE

III.

 

CERTAIN

REPRESENTATIONS

 

Each Party hereby

represents and warrants on behalf of itself to each other Party that:

 

Section 3.1             Existence and Power.

 

(a)           it is an entity duly organized,

validly existing and in good standing under the laws of its jurisdiction of

formation;

 

5

 

(b)           it has the power and authority to own

its assets, carry on its business and execute, deliver, and perform its

obligations under this Agreement; and

 

(c)           it is duly qualified to do business

and is licensed and in good standing under the laws of each jurisdiction where

its ownership, lease or operation of property or the conduct of its business

requires such qualification or license except where such failure to qualify

would not have a material adverse effect on the business or financial condition

of such Party.

 

Section 3.2             Due Authorization; No

Contravention.  The execution,

delivery and performance by it of this Agreement have been duly authorized by

all necessary action, and do not and will not:

 

(a)           Breach or violate the terms of its

certificate of incorporation (or similar constituent document) or bylaws (or

similar constituent document);

 

(b)            Breach or violate the terms of any

material agreement to which it is party; or

 

(c)           Violate any law or regulation

applicable to it, including but not limited to the Communications Act and the

rules and regulations promulgated from time to time by the Federal

Communications Commission (or any successor agency thereto).

 

Section 3.3             Binding Effect.  This Agreement has been duly authorized (to

the extent such Party is an entity), executed and delivered by such Party and

constitutes the legal, valid and binding obligation of such Party enforceable

against such Party in accordance with the terms hereof, subject to applicable

bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and

similar laws affecting creditors’ rights generally and to general principles of

equity (regardless of whether enforcement is sought in a proceeding in equity

or at law).

 

ARTICLE

IV.

 

MISCELLANEOUS

 

Section 4.1             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 I 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 4.1. 

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 with confirmation of receipt.

 

Section 4.2             Amendment.  Any term of this Agreement may be amended

only with the written consent of (a) the Company, (b) Investors holding, (i) in

the case of amendments to provisions of this Agreement generally, 75% of the

aggregate of the Common Stock Deemed

 

6

 

Outstanding held by Investors, and (ii) in the case of any non-material

change or technical correction of this Agreement, a majority of the aggregate

of the Common Stock Deemed Outstanding held by Investors, and (c) in the case

of amendments to any provision of Section 2.1 which adversely affect the right

of any Investor to designate one or more directors, in addition to the consents

listed in clauses (a) and (b) of this Section, the Investor having the right

that would be adversely affected; provided, however, that in the event the

rights, preferences or obligations hereunder of one or more Investors are being

amended in a 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 only with the consent of the

Investors holding at least 75% in the aggregate of the Common Stock Deemed

Outstanding held by Investors whose rights, preferences or obligations are

being materially adversely amended in such different manner. Any amendment

effected in accordance with this Section 4.2 shall be binding upon any future

transferee of an Investor and the Company.

 

Section 4.3             Specific Performance.  Each Party acknowledges (i) that it will be

impossible to measure in money the damage to each other Party if any of them or

any legal representative of any Party fails to comply with any of the

provisions of this Agreement, (ii) that every such provision is material, and

(iii) that in the event of any such failure, the Company and the Investors will

not have an adequate remedy at law or in damages.  Accordingly, each Party hereto consents to the issuance of an

injunction or the enforcement of other equitable remedies against it at the

suit of an aggrieved Party without the posting of any bond or other security,

to compel specific performance of all of the terms hereof, and waives any

defense thereto, including, without limitation, the defenses of (i) failure of

consideration, (ii) breach of any other provision of this Agreement and (iii)

availability or relief in damages.

 

Section 4.4             GOVERNING LAW. THIS

AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE

STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PROVISIONS

THEREOF.

 

EACH OF THE PARTIES

ACKNOWLEDGES THAT (i) IT IS A KNOWLEDGEABLE, INFORMED, SOPHISTICATED BUSINESS

ENTITY CAPABLE OF UNDERSTANDING AND EVALUATING THE PROVISIONS SET FORTH IN THIS

AGREEMENT, AND (ii) IT HAS BEEN REPRESENTED BY SUCH COUNSEL AND OTHER ADVISORS

OF ITS CHOOSING AS IT HAS DEEMED APPROPRIATE IN CONNECTION WITH ITS DECISION TO

ENTER INTO THIS AGREEMENT.

 

Section 4.5             Parties In Interest.  This Agreement shall be binding upon and

shall inure to the benefit of each Party and their respective successors and

permitted assigns as provided for herein, and by their signatures hereto, and

each Party intends to and does hereby become bound.  Nothing expressed or mentioned in this Agreement is intended or

shall be construed to give any Person other than the Parties hereto and their

respective successors and assigns any legal or equitable right, remedy or claim

under or in or in respect of this Agreement or any provision herein contained.

 

7

 

Section 4.6             Severability of Provisions.  In case any one or more of the provisions

contained in this Agreement should be invalid, illegal or unenforceable in any

respect, the validity, legality and enforceability of the remaining provisions

contained herein shall not in any way be affected or impaired thereby.

 

Section 4.7             Plural; Singular.  When used herein, the singular of each term

includes the plural and the plural of each term includes the singular.

 

Section 4.8             Counterparts.  This Agreement may be executed in any number

of counterparts all of which taken together shall constitute one agreement and

any Party hereto may execute this Agreement by signing any such counterpart.

 

Section 4.9             Descriptive Headings.  The descriptive headings of the several

sections of this Agreement are inserted for convenience only and do not

constitute a part of this Agreement.

 

Section 4.10           Future Assurances.  Each Party shall execute and deliver all

such future instruments and take such other and further action as may be

reasonably necessary or appropriate to carry out the provisions of this

Agreement and the intention of the Parties as expressed herein.

 

Section 4.11           Termination.  This Agreement shall be immediately

terminated upon any of the following: 

(i) the unanimous written consent to the termination hereof by the

Parties hereto, (ii) the dissolution, bankruptcy or receivership of the

Company, or (iii) at such time as only one (1) Investor remains a Party

hereto.  This Agreement shall be

immediately terminated in all respects as to any Investor that transfers 95% or

more of its Capital Stock to any Person that is not an Affiliate of such

Investor.

 

Section 4.12           Amendment and Restatement.  This Agreement hereby restates, amends and

supersedes the January 2003 Agreement.

 

8

 

IN WITNESS WHEREOF, the Parties have caused this

Agreement to be duly signed as of the date first above written.

 

 

	

  XM SATELLITE RADIO

  HOLDINGS INC.

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  By:

  	

   /s/ Joseph M. Titlebaum

  	

   

  	

   

  
	

  Name: Joseph M.

  Titlebaum

  	

   

  
	

  Title: EVP, General

  Counsel and Secretary

  	

   

  
				

 

Agreement

to Elect Directors Signature Page

 

9

 

 

	

  CLEAR CHANNEL

  INVESTMENTS, INC.

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  By:

  	

   /s/ Randall Mays

  	

   

  	

   

  
	

  Name: Randall Mays

  	

   

  
	

  Title:  Executive VP and CFO

  	

   

  
				

 

Director

Designation Agreement Signature Page

 

10

 

	

  HUGHES ELECTRONICS

  CORPORATION

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  By:

  	

   /s/ Patrick T. Doyle

  	

   

  	

   

  
	

  Name: Patrick T. Doyle

  	

   

  
	

  Title:  Vice President, Treasurer and Controller

  	

   

  
				

 

Director

Designation Agreement Signature Page

 

11

 

	

  AMERICAN HONDA MOTOR

  CO., INC.

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  By:

  	

   /s/ Thomas G. Elliott

  	

   

  	

   

  
	

  Name: Thomas G. Elliott

  	

   

  
	

  Title:  Executive Vice President

  	

   

  
				

 

Director

Designation Agreement Signature Page

 

12

 

	

  AEA XM INVESTORS I LLC

  	

  AEA XM INVESTORS II LLC

  
	

  By AEA XM Investors I

  LP, its Sole Member

  	

  By AEA XM Investors II

  LP, its Sole Member

  
	

  By AEA XM Investors

  Inc., its General Partner

  	

  By AEA XM Investors

  Inc., its General Partner

  
	

   

  	

   

  
	

   

  	

   

  
	

  By:

  	

  /s/ Roger C.

  Freeman

  	

   

  	

  By:

  	

  /s/ Roger C.

  Freeman

  	

   

  
	

  Name: Roger C. Freeman

  	

  Name: Roger C. Freeman

  
	

  Title:  President

  	

  Title: President

  
	

   

  	

   

  
	

   

  	

   

  
	

  AEA XM INVESTORS IA LLC

  	

  AEA XM INVESTORS IIA

  LLC

  
	

  By AEA XM Investors IA

  LP, its Sole Member

  	

  By AEA XM Investors IIA

  LP, its Sole Member

  
	

  By AEA XM Investors

  Inc., its General Partner

  	

  By AEA XM Investors

  Inc., its General Partner

  
	

   

  	

   

  
	

   

  	

   

  
	

  By:

  	

  /s/ Roger C.

  Freeman

  	

   

  	

  By:

  	

  /s/ Roger C.

  Freeman

  	

   

  
	

  Name: Roger C. Freeman

  	

  Name: Roger C. Freeman

  
	

  Title:  President

  	

  Title: President

  

 

Director

Designation Agreement Signature Page

 

13

 

 

	

  COLUMBIA XM RADIO

  PARTNERS, LLC

  	

  COLUMBIA XM SATELLITE

  PARTNERS III, LLC

  
	

  By Columbia Capital

  LLC, its Managing Member

  	

  By:

  
	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

  By:

  	

   

  	

   

  
	

  Name: 

  	

  Name: 

  
	

  Title:  

  	

  Title: 

  
	

   

  	

   

  
	

  COLUMBIA CAPITAL EQUITY

  PARTNERS III

  	

  COLUMBIA CAPITAL EQUITY

  PARTNERS II

  
	

  (QP), L.P.,

  	

  (QP), L.P.,

  
	

  By: Columbia Capital

  Equity Partners III, L.P., its

  General Partner

  	

  By: Columbia Capital

  Equity Partners III, L.P., its

  General Partner

  
	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

  By:

  	

   

  	

   

  
	

  Name: 

  	

  Name: 

  
	

  Title:  

  	

  Title: 

  

 

Director

Designation Agreement Signature Page

 

14

 

	

  MADISON DEARBORN

  CAPITAL PARTNERS III, L.P.

  	

  MADISON DEARBORN

  SPECIAL EQUITY III, L.P.

  
	

  By Madison Dearborn

  Partners III, L.P., its general partner

  	

  By Madison Dearborn

  Partners III, L.P., its general partner

  
	

  By Madison Dearborn

  Partners LLC, its general partner

  	

  By Madison Dearborn

  Partners LLC, its general partner

  
	

   

  	

   

  
	

   

  	

   

  
	

  By:

  	

  /s/ James N.

  Perry, Jr.

  	

   

  	

  By:

  	

  /s/ James N.

  Perry, Jr.

  	

   

  
	

  Name: 

  	

  Name: 

  
	

  Title:  

  	

  Title: 

  
	

   

  	

   

  
	

  SPECIAL ADVISORS FUND

  I, LLC

  	

   

  
	

  By Madison Dearborn

  Partners III, L.P., its manager

  	

   

  
	

  By Madison Dearborn

  Partners LLC, its general partner

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  By:

  	

  /s/ James N.

  Perry, Jr.

  	

   

  	

   

  
	

  Name: 

  	

   

  
	

  Title:  

  	

   

  

 

Director

Designation Agreement Signature Page

 

15

 

SCHEDULE I

 

NAMES, ADDRESSES AND FACSIMILE NUMBERS OF PARTIES

 

	

  The Company:

  	

   

  	

  XM Satellite Radio Holdings Inc.

  1500 Eckington Place, N.E.

  Washington, DC 

  20002

  Attention: 

  Joseph M. Titlebaum, Esq.

  	

   

  	

  202-380-4500

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Clear Channel:

  	

   

  	

  Clear Channel

  Investments, Inc.

  200 E. Basse Road

  San Antonio, TX  78209

  Attention: 

  Ken Wyker, Esq.

  	

   

  	

  210-822-2299

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  AEA XM:

  	

   

  	

  AEA Investors Inc.

  65 E. 55th Street

  New York, New York 10022

  Attention: 

  General Counsel

  	

   

  	

  212-702-0518

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Columbia:

  	

   

  	

  Columbia Capital LLC

  201 North Union Street, Suite 300

  Alexandria, Virginia 22314

  Attention:  Mr. James B. Fleming

  	

   

  	

  703-519-3904

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Honda:

  	

   

  	

  America Honda Motor Co., Inc.

  1919 Torrance Boulevard

  Torrance, California 90501-2746

  Attention: Shinichi Sakamoto

  	

   

  	

  310-783-2210

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Honda North America, Inc.

  700 Van Ness Avenue

  Torrance, California 90501

  Attention:  Law Department

  	

   

  	

  310-781-4970

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Hughes:

  	

   

  	

  200 N. Sepulveda

  Boulevard

  El Segundo, California

  90245

  	

   

  	

  310-640-1734

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Madison:

  	

   

  	

  Madison Dearborn Partners, Inc.

  Three First National Plaza

  Chicago, Illinois 60602

  Attention:  Mr. James N. Perry

  	

   

  	

  312-895-1221

  

 

16Exhibit

10.50

EMPLOYMENT AGREEMENT

Between

XM SATELLITE RADIO HOLDINGS INC. and 

XM SATELLITE RADIO INC.

and

HUGH PANERO

Dated as of June 1, 2001

Amended March 20, 2003

 

 

THIS AGREEMENT is entered into as of June 1, 2001 (the

“Effective Date”), by and between XM Satellite Radio Holdings Inc., a Delaware

corporation, and its subsidiary XM Satellite Radio Inc., a Delaware

corporation, both having a place of business at 1500 Eckington Place, N.E.,

Washington, D.C. 20002 (hereinafter collectively referred to as “XM”) and Hugh

Panero (“EMPLOYEE”) a resident of the State of Maryland.

WHEREAS, XM is engaged in the development,

implementation and operation of a digital audio satellite service to portable

receivers; and

WHEREAS, XM is interested in employing EMPLOYEE as its

Chief Executive Officer and EMPLOYEE is interested in being employed in that

position subject to the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the foregoing

premises and the mutual covenants and agreements of the parties contained

herein, the parties hereby agree as follows:

ARTICLE 1

DEFINITIONS

For purposes of this Agreement, the terms defined in

this Article 1 shall have the respective meanings set forth below:

1.1           “Affiliate” shall mean any

corporation, partnership or other entity (i) owning more than ten percent

(10%) of the then outstanding voting shares of XM; or (ii) controlling,

controlled by, or under common control with XM.  For purposes of this definition, “control” (including the terms

“controlling” and “controlled”) means the power to direct or cause the

direction of the management and policies of an entity, whether through the

ownership of securities, by contract, or otherwise.

1.2           “Confidential information” shall mean

all information relating to the business of XM known to XM or learned by

EMPLOYEE during the term of employment and not generally known, including any

and all general and specific knowledge, experience, information and data,

technical or non-technical, and whether or not patentable, including, without

limitation processes, skills, information, know-how, trade secrets, data,

designs, formulae, algorithms, specifications, samples, methods, techniques,

compilations, computer programs, devices, concepts, inventions, developments,

discoveries, improvements, and commercial or financial information, in any

form, including without limitation, oral, written, graphic, demonstrative,

machine recognizable, specimen or sample form.

1.3           “Conflicting Product or Service”

shall mean any product or service of any person or organization other than XM,

in existence or under development, which resembles or competes with a product

or service of XM.

 

1

 

1.4           “Conflicting Organization” shall mean

any person or organization engaged in, or about to become engaged in, research

on or development, production, marketing, or selling of a “Conflicting Product

or Service.” 

1.5           “Inventions” shall mean inventions,

designs, discoveries, developments, creations, and improvements created,

discovered, developed, conceived or reduced to practice.

1.6           “Works of Authorship” shall mean all

computer software programs or other writings, including, without limitation,

verbal works, designs, models, drawings, or audio, visual or audiovisual

recordings.

ARTICLE 2

TERM OF AGREEMENT; EMPLOYMENT

2.1          Term. 

Subject to the provisions of Article 4 hereof, this Agreement shall be

in effect for a term of three (3) years commencing as of the Effective

Date.  For the term of this Agreement, each

twelve (12) month period beginning on the Effective Date or any anniversary

thereof shall be considered a “Contract Year.”

2.2          Employment. 

XM agrees to employ EMPLOYEE as Chief Executive Officer and EMPLOYEE

agrees to accept such employment by XM, on the terms and conditions set forth

herein.  EMPLOYEE represents and

warrants that neither the execution and delivery nor performance by him of this

Agreement will violate any agreement, order, judgment or decree to which he is

a party or by which he is bound.

2.3          Duties.

(a)           As Chief Executive Officer of XM,

EMPLOYEE shall have duties and responsibilities related to building the

organization and business, including but not limited to, achieving agreed

revenue, cost, profit and cash-flow targets, and shall report to the Board of

Directors and the Board Chairman.  While

acting as CEO, EMPLOYEE shall also serve as a director of XM.

(b)           EMPLOYEE’s employment with XM shall

be full-time and exclusive.  During the

term of employment, EMPLOYEE shall devote the whole of EMPLOYEE’s business

time, attention, skill, and ability to the faithful and diligent fulfillment of

EMPLOYEE’s duties hereunder.  EMPLOYEE

acknowledges and agrees that EMPLOYEE may be required, without additional

compensation, to perform services for any Affiliates, and to accept such office

or position with any Affiliate as the Board may require, including, but not

limited to, service as an officer or director of XM or any Affiliate, provided

however, that such services, and such office or position, shall be consistent

with EMPLOYEE’s position as Chief Executive Officer of XM.  EMPLOYEE shall comply with all applicable

policies of XM and Affiliates.

(c)           During the term of employme nt, it

shall not be a violation of this Agreement for EMPLOYEE to (i) serve on no more

than one outside corporate board (except the board of a Conflicting

Organization); (ii) serve as an officer or director of a

 

2

 

 

cooperative housing, or civic or charitable

organization or committee; (iii) deliver lectures, fulfill speaking

engagements, or teach at educational institutions; or (iv) manage personal

passive investments, so long as such activities (individually or collectively)

do not conflict or materially interfere with the performance of EMPLOYEE’s

duties hereunder.

2.4          Indemnification.  During and after the term of this Agreement, XM shall

provide EMPLOYEE with directors and officers insurance, and shall indemnify

EMPLOYEE and his legal representatives to the fullest extent permitted by the

laws of the State of Delaware and the By-Laws of XM as in effect on the date

hereof, against all damages, costs, expenses and other liabilities incurred or

sustained by EMPLOYEE or his legal representatives in connection with any suit,

action or proceeding to which EMPLOYEE or his legal representatives may be made

a party by reason of EMPLOYEE being or having been a director or officer of XM

or any Affiliate or having served in any other capacity or taken any other

action purportedly on behalf of or at the request of XM or any Affiliate.  During and after the term of this Agreement

and without the need for further approval by the Board of Directors of XM or

any Affiliate, XM will promptly advance or pay any and all amounts for costs or

expenses (including but not limited to legal fees and expenses incurred by

counsel of EMPLOYEE’s choice retained by EMPLOYEE) for which EMPLOYEE may claim

XM is obligated to indemnify him. EMPLOYEE undertakes to repay such amounts if

it is ultimately determined that he is not entitled to be indemnified by XM as

provided in this Article 2.4.

ARTICLE 3

COMPENSATION

3.1          Base

Salary.  For services rendered by EMPLOYEE pursuant

to this Agreement, XM agrees to pay EMPLOYEE a base salary (“Base Salary”) of

at least Four Hundred Twelve Thousand Dollars ($412,000), beginning January 1,

2003 and continuing for the third Contract Year.  In determining any increase above the minimums set forth in the

preceding sentence, the Board shall consider any increases in the cost of living

and may provide for performance or merit increases as it deems appropriate in

its sole discretion.  Base Salary shall

be payable in accordance with XM’s then-prevailing executive payroll practices.  The term “Base Salary” as used herein shall

include any adjustments thereto made from time to time as permitted by this

Article 3.1.

3.2          Bonuses.

(a)           With respect to each calendar year

during the term of this Agreement, regardless of XM’s performance, EMPLOYEE

shall be entitled to a bonus (the “Leadership Bonus”) equal to thirty percent

(30%) of his Base Salary for the calendar year if, in the reasonable judgment

of the XM Board of Directors, he shall have made the effort and provided the

leadership expected of the CEO.  In any

calendar year in which EMPLOYEE is employed by XM for less than the full year,

the Leadership Bonus will be paid on a pro-rata basis for the portion of the

calendar year for which EMPLOYEE was employed by XM and provided the expected

effort and leadership.

3

 

The Leadership Bonus shall be paid within sixty (60)

days of the end of each calendar year.

(b)           With respect to each calendar year

during the term of this Agreement, EMPLOYEE will be eligible to receive such

bonuses (the “Discretionary Bonus”) as may be authorized and declared by the XM

Board of Directors based upon EMPLOYEE meeting or substantially exceeding

performance criteria to be set by the Board, after consultation with EMPLOYEE,

at the start of each calendar year.  For

2001, such criteria shall be set by July 1, 2001.  Although the actual amount of any Discretionary Bonus will be

determined by the Board, the “target” amount of the annual Discretionary Bonus

will be thirty to seventy percent (30-70%) of EMPLOYEE’s Base Salary for the

calendar year, reflecting the Board’s determination that EMPLOYEE has met (30%)

or substantially exceeded (70%) the established performance criteria.

3.3          Participation

in Benefit Plans.  Subject to applicable eligibility

requirements, and to the terms of this Agreement, EMPLOYEE shall be eligible

during the term of this Agreement to participate in any stock option, employee

stock ownership, pension, thrift, profit sharing, group life or disability

insurance, medical or dental coverage, education, or other retirement or

employee benefit plan or program that XM has adopted or may adopt for the

benefit of its employees, on the same basis as other executive employees.  EMPLOYEE shall be entitled to paid vacation,

paid sick leave, and holidays on the same basis as may from time to time apply

to other XM executive employees generally. 

EMPLOYEE shall also be entitled to supplemental disability insurance

beginning no earlier than April 1, 2003, at the company’s expense.

3.4          Expenses.  XM shall reimburse EMPLOYEE for all reasonable,

ordinary and necessary business expenses actually incurred by EMPLOYEE in

connection with the performance of his duties hereunder, including ordinary and

necessary expenses incurred by EMPLOYEE in connection with travel on XM business.  As Chief Executive Officer of XM, EMPLOYEE

shall be entitled to fly first class. 

All expenses shall be approved in advance by XM in accordance with and

subject to the terms and conditions of XM’s then-prevailing expense

policy.  As a condition precedent to

obtaining reimbursement of expenses, EMPLOYEE shall provide to XM any and all

statements, bills, or receipts evidencing the expenses for which EMPLOYEE seeks

reimbursement, and such related information or materials as XM may from time to

time reasonably require. EMPLOYEE shall account to XM for any expenses that are

eligible for reimbursement under this Section 3.4 in accordance with XM policy.

3.5          Employment and Supplies.  XM shall provide EMPLOYEE with administrative support

relating to the performance of EMPLOYEE’s duties of the same type and at least

the same extent as is provided to other executive employees.  XM shall acquire and/or provide to EMPLOYEE

for his business use:  a multimedia

portable computer and subscriptions to various trade publications and various

trade books.  Such items shall remain

the exclusive property of XM, are to be used solely for XM’s benefit, and shall

be returned promptly to XM upon request at the termination of EMPLOYEE’s employment

for whatever reason.

 

 

4

 

 

3.6          Withholding. 

Anything in this Agreement to the contrary notwithstanding, al payments

required to be made by XM hereunder to EMPLOYEE or EMPLOYEE’s estate or

beneficiaries in connection with EMPLOYEE’s employment hereunder shall be

subject to the withholding of such amounts relating to taxes as XM may

reasonably determine it should withhold pursuant to any applicable law or

regulation.

3.7          Stock

Option Grants.  EMPLOYEE shall receive options to purchase

Class A common stock of XM Satellite Radio Holdings Inc. (“XM Stock”) on the

following terms.

(a)           On the Effective Date of the

Amendment, XM will grant EMPLOYEE an option to purchase Three Hundred Fifty

Thousand (350,000) shares of XM Stock. 

Additional stock options shall be awarded at the discretion of the

Compensation Committee and the Board of Directors.

(b)           The options granted pursuant to

Article 3.7(a) hereof will be non-qualified. 

The exercise price for such options shall be, with respect to each

grant, the closing price of  XM Stock on

the date of grant.

(c)           Subject to the provisions of Article

4 hereof, the options granted pursuant to Article 3.7(a) hereof will vest and

become exercisable on the following schedule: 

with respect to each grant, one third of the shares covered by the

option shall become exercisable on the first anniversary of the grant, one

third of the shares covered by the option shall become exercisable on the

second anniversary of the grant, and one third of the shares covered by the

option shall become exercisable on the third anniversary of the grant.  In addition to the annual vesting

requirement, the initial options granted upon the amendment of the contract

shall also require that EMPLOYEE will not sell, pledge or otherwise dispose of

shares issued upon the exercise of such initial options until the first to

occur of the following: (i) the average closing price of XM Stock on the Nasdaq

National Market system, or principal stock exchange on which shares of XM Stock

are then listed, over any 20 consecutive trading days following the date of

grant equals or exceeds $10, or (ii) seven years have elapsed since the date of

grant. In the event that EMPLOYEE holds non-vested options at the time his

employment by XM terminates, such non-vested options shall vest or shall be

forfeited, as the case may be, in accordance with the provisions of Article 4

hereof.

(d)           Vested options may be exercised

within ten (10) years of the date on which they were granted.  In the event that EMPLOYEE holds unexercised

vested options at the time his employment by XM terminates, such vested options

may be exercised within the time periods set forth in Article 4 hereof.

(e)           XM agrees that the XM Stock to be

issued to EMPLOYEE upon his exercise of the options granted pursuant to Article

3.7(a) hereof will be registered for sale to the public on XM’s Form S-8

Registration Statement.

 

5

 

 

ARTICLE 4

TERMINATION

4.1          General. 

EMPLOYEE’s employment hereunder shall terminate in accordance with the

provisions of this Article 4 upon EMPLOYEE’s death or Disability, upon

EMPLOYEE’s termination by XM with or without Cause, upon EMPLOYEE’s resignation

with or without Good Reason, or upon the expiration of the term of this

Agreement without renewal.

4.2          Death. 

If the EMPLOYEE’s employment terminates because of his death, the date

of termination shall be the date of death.

(a)           If the EMPLOYEE’s employment

terminates because of his death, XM shall continue to pay EMPLOYEE’s then

current Base Salary, pro-rated Leadership Bonus, and pro-rated Discretionary

Bonus (based on the percentage of Base Salary awarded to EMPLOYEE as a

Discretionary Bonus in the prior year), and shall continue to make all

applicable benefits available, to EMPLOYEE’s legal representatives, estate,

beneficiaries or heirs, in accordance with XM’s then-prevailing executive

payroll practices, through the end of the third calendar month following

EMPLOYEE’s death.  In addition, XM shall

continue any health, medical, dental, or similar benefits which members of

EMPLOYEE’s family were receiving for  a

period of one year, or pay such family members an amount equal to their cost

for obtaining equivalent coverage.

(b)           If the EMPLOYEE’s employment

terminates because of his death, EMPLOYEE’s non-vested options shall be

forfeited.  EMPLOYEE’s legal

representatives, estate, beneficiaries or heirs shall be entitled to exercise

any of EMPLOYEE’s vested options within one (1) year after EMPLOYEE’s death.

4.3          Disability. For purposes of this Agreement, EMPLOYEE

shall be deemed to be under a Disability if EMPLOYEE shall be unable, by virtue

of illness or physical or mental incapacity or disability (from any cause or

causes whatsoever), to perform EMPLOYEE’s essential job functions hereunder, whether

with or without reasonable accommodation, in substantially the manner and to

the extent required hereunder prior to the commencement of such disability, for

a period exceeding ninety (90) consecutive days.

(a)           Upon EMPLOYEE’s Disability, the

payment of benefits under XM’s short-term and long-term disability insurance

programs, if any, shall offset XM’s obligations under Article 3.1 hereof to the

extent such benefits are received by EMPLOYEE.

(b)           Subject to any

applicable legal requirements, in the event EMPLOYEE shall remain under a

Disability for a period exceeding one hundred twenty (120) days in any twelve

(12) month period, XM shall have the right to terminate EMPLOYEE’s employment

hereunder.  XM shall effect such

termination by giving EMPLOYEE a notice specifying the effective date of such

termination, which date shall not be earlier than the last day of the calendar

month following the giving of notice.

 

6

 

 

(c)           If XM terminates the EMPLOYEE’s employment

because of Disability, XM shall continue to pay EMPLOYEE’s then current Base

Salary, pro-rated Leadership Bonus, and pro-rated Discretionary Bonus (based on

the percentage of Base Salary awarded to EMPLOYEE as a Discretionary Bonus in

the prior year), and shall continue to make all applicable benefits available,

to EMPLOYEE, in accordance with XM’s then-prevailing executive payroll

practices, through the end of the third calendar month following

termination.  In addition, XM shall

continue any health, medical, dental, or similar benefits which EMPLOYEE

(and/or members of EMPLOYEE’s family) were receiving for  a period of one year, or pay EMPLOYEE an

amount equal to the cost of obtaining equivalent coverage.

(d)           If XM terminates EMPLOYEE’s

employment because of Disability, EMPLOYEE’s non-vested options shall be

forfeited.  EMPLOYEE shall be entitled

to exercise any of his vested options within one (1) year after termination.

4.4          Termination

for Cause or Voluntary Resignation.

(a)           For purposes of this Agreement, Cause

shall mean:  (i) EMPLOYEE’s willful or

gross misconduct, willful or gross negligence in the performance of his duties

for XM, or intentional or habitual neglect of his duties for XM, provided that

XM shall have given EMPLOYEE notice specifying the conduct it believes to fall

within this sentence and EMPLOYEE shall have failed to remedy such conduct

within ten (10) days thereafter; or (ii) EMPLOYEE’s theft or misappropriation

of funds of XM or conviction of a felony. 

XM shall effect a termination for Cause by giving EMPLOYEE a notice

specifying the effective date of such termination.

(b)           For purposes of this Agreement,

voluntary resignation means the EMPLOYEE’s resignation of his employment

hereunder without Good Reason (as defined in Article 4.5(b) hereof.  EMPLOYEE shall effect a termination by

voluntary resignation by giving XM a notice specifying the effective date of

such termination, which date shall not be earlier than thirty (30) days after

the giving of notice.

(c)           In the event EMPLOYEE’s employment is

terminated by XM for Cause or by EMPLOYEE by voluntary resignation:

(i)            XM shall pay to EMPLOYEE, in

accordance with XM’s then-prevailing executive payroll practices, all Base

Compensation, benefits and other payments to which EMPLOYEE was entitled

hereunder through the effective date of termination.

(ii)           In the case of voluntary resignation

only, EMPLOYEE shall be entitled to exercise any of his vested options within

three (3) months after termination. 

Subject to the previous sentence of this Article 4.4(c)(ii), EMPLOYEE’s

non-vested and vested but unexercised options shall be forfeited.

(iii)          Except as set forth

in this Article 4.4, XM shall have no further obligation to EMPLOYEE (or

EMPLOYEE’s legal representatives, estate, beneficiaries or heirs) for any

compensation, benefits or other payments hereunder, 

 

7

 

 

provided that

nothing herein shall be deemed to affect EMPLOYEE’s entitlement, if any, to any

vested pension or similar benefits to which he may be or may become entitled.

 

4.5          Termination

Without Cause or Resignation for Good Reason.

(a)           For the purposes of this Agreement,

termination without Cause is any termination by XM of EMPLOYEE’s employment

hereunder without Cause, as defined in Article 

4.4(a) hereof.  XM shall effect a

termination without Cause by giving EMPLOYEE a notice specifying the effective

date of such termination, which date shall not be earlier than thirty (30) days

after the giving of notice.

(b)           For the purposes of this Agreement,

Good Reason shall mean:  (i) a

substantial diminution of EMPLOYEE’s responsibilities or status; (ii) XM’s

relocation of EMPLOYEE outside the Washington, D.C. area; (iii) a material

breach of this Agreement by XM, provided that EMPLOYEE shall have given XM

notice of the conduct he believes to constitute the material breach and XM

shall have failed to remedy such breach within ten (10) days thereafter; (iv)

the departure of Gary M. Parsons as Chairman of the Board of Directors of XM,

unless the newly named Chairman is reasonably acceptable to EMPLOYEE; or (v) a

Change of Control of XM as defined in Article 4.5(c) hereof.  EMPLOYEE shall effect a termination by

resignation for Good Reason by giving XM a notice specifying the effective date

of such termination.

(c)           For the purposes of

this Agreement, a Change of Control will occur where (i) any person or group

becomes beneficial owner of securities of XM representing more than 40% of the

then voting power of XM; (ii) Board members (together with new members

appointed by at least two thirds (2/3) of those members) at the beginning of a

two-year period no longer constitute two thirds (2/3) of the Board during such

two-year period; (iii) a merger/consolidation of XM occurs wherein the XM

voting securities immediately prior thereto do not constitute at least sixty

percent (60%) of the combined voting securities after the merger/consolidation;

or (iv) the stockholders approve a plan of complete liquidation or winding-up

or an agreement for the sale or disposition of all or substantially all of XM’s

assets.

 

(d)           In the event EMPLOYEE’s employment is

terminated by XM without Cause or by EMPLOYEE by resignation for Good Reason:

(i)            XM shall continue to pay EMPLOYEE’s

then current Base Salary and pro-rated Leadership Bonus, and shall continue to

make all applicable benefits available to EMPLOYEE, in accordance with XM’s

then-prevailing executive payroll practices, for two (2) years from such

termination.  With respect to the

health, medical, dental, or similar benefits which EMPLOYEE (and/or members of

EMPLOYEE’s family) were receiving, XM may pay EMPLOYEE an amount equal to his

cost for obtaining equivalent coverage, as an alternative to continuing such

benefits.

(ii)           XM shall pay EMPLOYEE’s pro-rated

Discretionary Bonus (based on the percentage of Base Salary awarded to EMPLOYEE

as a 

 

8

 

Discretionary Bonus in the prior year), for the

portion of the calendar year EMPLOYEE was employed by XM prior to the termination.

(e)           In the event EMPLOYEE’s employment is

terminated by XM without Cause or by EMPLOYEE by resignation for Good Reason,

all options that have been granted to EMPLOYEE shall immediately vest and

become exercisable, and EMPLOYEE shall be entitled to exercise any of his

vested options within eighteen (18) months after termination.

(f)            If, as a result of a Change of

Control, it is determined that EMPLOYEE would be subject to the excise tax

imposed by Section 4999 of the Internal Revenue Code, XM shall reimburse

EMPLOYEE for the amount of such tax, and shall pay EMPLOYEE such additional

amount as may be necessary to place EMPLOYEE in the same financial position

that he would have been in if he had not incurred such excise tax liability.  All determinations under this Article

4.5(f), including whether EMPLOYEE is liable for the excise tax, and the amount

to be paid to EMPLOYEE by XM, shall be made by a nationally-recognized

accounting firm to be selected by EMPLOYEE and paid by XM.

4.6          Expiration

of Contract Term.

(a)           For the purposes of this Agreement,

Renewal Offer means a bona fide offer by XM to enter into a new employment

agreement with EMPLOYEE, on terms at least as favorable to EMPLOYEE as this

Agreement, made to EMPLOYEE at least four (4) months before the expiration of

this Agreement.

(b)           In the event that XM makes a Renewal

Offer to Employee, but the parties nevertheless do not enter into a new

employment agreement and EMPLOYEE’s employment by XM therefore terminates upon

the expiration of this Agreement, any options scheduled to vest on the third

anniversary of the Effective Date of this Agreement pursuant to Article 3.7(c)

shall immediately vest and become exercisable, all other non-vested options

shall be forfeited, and EMPLOYEE shall be entitled to exercise any of his

vested options within three (3) months after termination.

(c)           In the event that XM does not make a

Renewal Offer to Employee and EMPLOYEE’s employment by XM therefore terminates

at the expiration of the term of this Agreement, all options that have been

granted to EMPLOYEE shall immediately vest and become exercisable, and EMPLOYEE

shall be entitled to exercise any of his vested options within eighteen (18)

months after termination.

ARTICLE 5

RESTRICTIVE COVENANTS

5.1          Confidentiality. 

Except as authorized or directed by XM, EMPLOYEE shall not, at any time

during or subsequent to the term of this Agreement, directly or indirectly

publish or disclose any Confidential Information of XM or of any of its

Affiliates, or Confidential Information of others that has come into the

possession of XM or of any of its Affiliates, or into the EMPLOYEE’s possession

in the course of his 

 

9

 

 

employment with XM or of his services and duties

hereunder, to any other person or entity, and EMPLOYEE shall not use any such

Confidential Information for EMPLOYEE’s own personal use or advantage or make

it available to others for use.  All

Confidential Information, whether oral or written, regarding the business or

affairs of XM or any of its Affiliates, including, without limitation,

information as to their products, services, systems, designs, inventions,

software, finances (including prices, costs and revenues), marketing plans,

programs, methods of operation, prospective and existing contracts, customers

and other business arrangements or business plans, procedures, and strategies,

shall all be deemed Confidential Information, except to the extent the same

shall have been lawfully and without breach of the EMPLOYEE’S confidentiality

obligation made available to the general public without restriction, or that

EMPLOYEE can prove, by documentary evidence, was previously known to EMPLOYEE

prior to the term of EMPLOYEE’s employment. 

The Company shall be under no obligation to identify specifically any

information as to which the protection of this Section 5.1 extends by any

notice or other action.  Upon expiration

or termination of this Agreement for any reason, EMPLOYEE shall promptly return

to XM all Confidential Information, including all copies thereof in EMPLOYEE’s

possession, whether prepared by him or others.

5.2          Unfair

Competition.  During his employment pursuant to this

Agreement and for a period of one (1) year after the termination of his

employment, EMPLOYEE shall not, within the United States, directly or

indirectly, and whether or not for compensation, as a stockholder owning

beneficially or of record more than five percent (5%) of the outstanding shares

of any class of stock of an issuer, or as an officer, director, employee,

consultant, partner, joint venturer, proprietor, or otherwise, engage in or

become interested in any Conflicting Organization in connection with research,

development, consulting, manufacturing, purchasing, accounting, engineering, marketing,

merchandising or selling of any Conflicting Product or Service, directly or

indirectly, in competition with XM or any of its Affiliates (or any of their

successors) as conducted from time to time during such period.  During the period in which EMPLOYEE is

receiving any payments under this Agreement and for a period of one (1) year

thereafter, EMPLOYEE shall not, without the prior written consent of XM,

solicit or hire or induce the termination of employment of any employees or

other personnel providing services to XM, or any of its Affiliates, for any

business activity, other than a business activity owned or controlled, directly

or indirectly, by XM or any of its Affiliates.

5.3          Injunctive

Relief.

(a)           EMPLOYEE acknowledges and warrants

that he will be fully able to earn an adequate livelihood for himself and his

dependents if Section 5.2 should be specifically enforced against him, and that

Section 5.2 merely prevents unfair competition against XM for a limited period

of time.  EMPLOYEE agrees and acknowledges

that, by virtue of EMPLOYEE’s employment with XM, EMPLOYEE shall have access to

and maintain an intimate knowledge of XM’s activities and affairs, including

trade secrets, Confidential Information, and other confidential matters.  As a result of such access and knowledge,

and because of the special, unique, and extraordinary services that EMPLOYEE is

capable of performing for XM or one of its

10

 

competitors, EMPLOYEE acknowledges that the services

to be rendered by EMPLOYEE pursuant to this Agreement are of a character giving

them a peculiar value, the loss of which cannot adequately or reasonably be

compensated by money damages. 

Consequently, EMPLOYEE agrees that any breach or threatened breach by

EMPLOYEE of EMPLOYEE’s obligations under this Article 5 would cause irreparable

injury to XM, and that XM shall be entitled to (i) preliminary and permanent

injunctions enjoining EMPLOYEE from violating such provisions, and (ii) actual

money damages suffered by XM as a result of such breach, in the amount of any

fees, compensation, benefits, profits, or other remuneration earned by EMPLOYEE

as a result of such breach, together with interest, and cost and attorney’s

fees expended to collect such damages or secure such injunctions.  Nothing in this Agreement, however, shall be

construed to prohibit XM from pursuing any other remedy, XM and EMPLOYEE having

agreed that all such remedies shall be cumulative.

(b)           The restrictions set forth in this

Article 5 and the following Article 6 shall be construed as independent

covenants, and shall survive the termination or expiration of this Agreement,

and the existence of any claim or cause of action against XM, whether

predicated upon this Agreement or otherwise, shall not constitute a defense to

the enforcement by XM of the restrictions contained in this Article 5 or the

following Article 6.  EMPLOYEE hereby

consents and waives any objection to the jurisdiction over his person or the

venue of any courts within the State of Virginia with respect to any

proceedings in law or in equity arising out of this Article 5 or the following

Article 6.  If any court of competent

jurisdiction shall hold that any of the restrictions contained in Section 5.2

are unreasonable as to time, geographical area, or otherwise, said restrictions

shall be deemed to be reduced to the extent necessary in the opinion of such

court to make their application reasonable.

ARTICLE 6

INVENTIONS, WORKS OF AUTHORSHIP,

PATENTS AND COPYRIGHTS

6.1          Ownership of

Inventions and Works of Authorship.  EMPLOYEE agrees that all Inventions made,

conceived, discovered, developed or reduced to practice by EMPLOYEE and all

software and other works of authorship created by EMPLOYEE, either alone or

with others, at any time, within or without normal working hours, during the

term of this Agreement, arising out of such employment or based upon

Confidential Information, or pertinent to any field of business or research in

which, during such employment, XM is engaged or (if such is known or

ascertainable by EMPLOYEE) is considering engaging, whether or not patented or

patentable, shall be and remain the sole property of XM with respect to all

rights of EMPLOYEE arising from any discovery, conception, development,

reduction to practice, or creation by EMPLOYEE.  XM shall have the full right to assign, license, or transfer all

rights thereto.

6.2          Disclosure of Inventions and Works of

Authorship.  EMPLOYEE shall promptly make full

disclosure to XM or to an authorized representative thereof of all information

relating to the making, conception, discovery, development, creation or 

 

11

 

reduction to practice of Inventions, or of software

and other works of authorship owned by XM pursuant to Section 6.1 above.

6.3          Patent and

Copyright Applications.  At the request of XM and at XM’s expense,

EMPLOYEE shall execute such documents and perform such acts as XM deems

necessary to obtain patents or the like on such Inventions or copyright registrations

for such software and other works of authorship in any jurisdiction or

jurisdictions.  Such obligation shall

continue beyond the term of this Agreement. 

In the event that XM is unable because of  EMPLOYEE’s mental or physical capacity or for any other reason to

secure EMPLOYEE’s signature to apply for or to pursue any applications for

patent or copyright covering Inventions, software and other works of authorship

owned by XM pursuant to Section 6.1, then EMPLOYEE hereby irrevocably

designates and appoints XM as EMPLOYEE’s agent and attorney in fact, upon prior

notice, to act for and in his behalf and stead to execute and file any such

applications and to do all other lawfully permitted acts to further the

prosecution and issuance of patents and copyright registrations thereon with

the same legal force and effect as if executed by EMPLOYEE.  EMPLOYEE further agrees not to file any

patent applications relating to or describing or otherwise disclosing any

Confidential Information or any such Inventions, or to claim any copyright or

file any applications to register any copyright in such software or other works

of authorship, except with the prior written consent of XM.

6.4          Assignment

of Inventions and Works of Authorship.  EMPLOYEE agrees to assign to XM or it

Affiliates all of EMPLOYEE’s right, title and interest in and to any and all

such Inventions and the patent applications and patents relating thereto and to

the copyright in any and all such software and other works of authorship and

any copyright applications and registrations relating thereto conceived,

reduced to practice, discovered, created or otherwise developed by EMPLOYEE and

owned by XM pursuant to Section 6.1 above.

ARTICLE 7

MISCELLANEOUS

7.1          Assignment.  The rights and obligations of XM under this Agreement

shall be binding upon its successors and assigns and, subject to EMPLOYEE’s

rights under Article 4.5 hereof, may be assigned by XM to the successors in

interest of XM.  The rights and

obligations of EMPLOYEE under this Agreement shall be binding upon EMPLOYEE’s

heirs, legatees, personal representatives, executors or administrators.  This Agreement may not be assigned by

EMPLOYEE, but any amount owed EMPLOYEE upon EMPLOYEE’s death shall inure to the

benefit of EMPLOYEE’s heirs legatees, personal representatives, executors, or

administrators.

7.2          Notice.  For purposes of this Agreement, notices and all other

communications provided for in this Agreement shall be in writing and shall be

deemed to have been duly given when hand delivered, sent by overnight courier,

or mailed by first-class, registered, or certified mail, return receipt

requested, postage prepaid, or transmitted by telegram, telecopy, or telex

addressed as follows:

 

12

 

If to EMPLOYEE: (Copy to XM Executive Office)

Hugh Panero

4609 Derussey Parkway 

Chevy Chase, Maryland 20815

 

 

 

If to XM:

 

 

XM Satellite Radio

Holdings Inc.

1500 Eckington Place, N.E.,

Washington, D.C. 20002

Telephone:            703-758-6116

Telecopy:              703-758-6106

 

 

Attn:       General

Counsel

or to such other address as either party may have

furnished to the other in writing in accordance herewith, except that notices

of change of address shall be effective only upon receipt.

7.3          Entire

Agreement.  From and after the Effective Date, this

Agreement constitutes the entire agreement between the parties hereto, and

expressly supersedes all prior oral or written agreements, commitments or

understandings with respect to the matters provided for herein.

7.4          Headings.  Article and Section headings contained in this

Agreement are inserted for convenience of reference only, shall not be deemed

to be a part of this Agreement for any purpose, and shall not in any way define

or affect the meaning, construction or scope of any of the provisions hereof.

7.5          Severability. 

In the event any provision of this Agreement, or any portion thereof, is

determined by any arbitrator or court of competent jurisdiction to be

unenforceable as written, such provision or portion thereof shall be interpreted

so as to be enforceable.  In the event

any provision of this Agreement, or any portion thereof is determined by any

arbitrator or court of competent jurisdiction to be void, the remaining

portions of this Agreement shall nevertheless be binding upon XM and EMPLOYEE

with the same effect as though the void provision or portion thereof had been

severed and deleted.

7.6          Arbitration. 

Without prejudice to XM’s right to seek an injunction pursuant to

Article 5.3(a) hereof from a court of competent jurisdiction, any dispute

between the parties hereto arising out of this Agreement, or otherwise arising

out of or relating to EMPLOYEE’s employment by XM, or the termination thereof,

shall be submitted to non-binding mediation before a mediator to be agreed upon

by the parties or, failing agreement, to be appointed by the American

Arbitration Association (“AAA”).  In the

event that mediation is unsuccessful, such dispute shall be resolved by binding

arbitration, before a single arbitrator, under the rules of the AAA.  The arbitrator shall 

 

13

 

have the authority

to apportion the costs of arbitration, and to render an award including

reasonable attorney’s fees,  as and to

the extent he deems appropriate under the circumstances.

 

7.7          Governing

Law.  This Agreement, the rights and obligations of the

parties hereto, and any claims or disputes relating thereto, shall be governed

by and construed in accordance with the substantive laws of the State of

Virginia (excluding the choice of law rules thereof).

7.8          Amendment;

Modification; Waiver.  No amendment, modification or waiver of

the terms of this Agreement shall be valid unless made in writing and duly

executed by EMPLOYEE and XM.  No delay

or failure at any time on the part of EMPLOYEE or XM in exercising any right,

power or privilege under this Agreement, or in enforcing any provision of this

Agreement, shall impair any such right, power, or privilege, or be construed as

a waiver of any default or as any acquiescence therein, or shall affect the

right of EMPLOYEE or XM thereafter to enforce each and every provision of this

Agreement in accordance with its terms.

7.9          Additional

Obligations.  Both during and after the term of

employment, EMPLOYEE shall, upon reasonable notice, furnish XM with such

information as may be in EMPLOYEE’s possession or control, and cooperate with

XM, as may reasonably be requested by XM (and, after the term of employment,

with due consideration for EMPLOYEE’s obligations with respect to any new

employment or business activity) in connection with any litigation or other

adversarial proceedings in which XM or any Affiliate is or may become a

party.  XM shall reimburse EMPLOYEE for

all reasonable expenses incurred by EMPLOYEE in fulfilling EMPLOYEE’s

obligations under this Article 7.9.

IN WITNESS WHEREOF, the parties have executed this

Agreement to be effective as of the Effective Date.

 

	

   

  	

  XM Satellite Radio

  Holdings Inc.

  
	

   

  	

  XM Satellite Radio Inc.

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By

  	

   

  
	

   

  	

  Gary M. Parsons

  
	

   

  	

  Chairman of the Board

  
	

   

  	

  Date: 

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  Hugh Panero

  
	

   

  	

  Date:

  	

   

  	

   

  

 

 

14

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