UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 30, 2001
Commission file number 0-24710
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SIRIUS SATELLITE RADIO INC.
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(Exact name of registrant as specified in its charter)
Delaware 52-1700207
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1221 Avenue of the Americas, 36th Floor
New York, New York 10020
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(Address of principal executive offices) (Zip code)
212-584-5100
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.001 par value 54,163,229 shares
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(Class) (Outstanding as of November 1, 2001)
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A Development Stage Enterprise)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Part I - Financial Information
Consolidated Statements of Operations (Unaudited) for the three and nine month 1
periods ended September 30, 2001 and 2000 and for the period May 17, 1990
(date of inception) to Sepetember 30, 2001
Consolidated Balance Sheets as of September 30, 2001 (Unaudited) and 2
December 31, 2000
Consolidated Statements of Cash Flows (Unaudited) for the nine month periods 3
ended September 30, 2001 and 2000 and for the period May 17, 1990 (date of
inception) to September 30, 2001
Notes to Consolidated Financial Statements (Unaudited) 4
Management's Discussion and Analysis of Financial Condition and Results 8
of Operations
Part II - Other Information 16
Signatures 17
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Cumulative for
For the Three Months For the Nine Months the period
Ended September 30, Ended September 30, May 17, 1990
----------------------- ------------------------ (date of inception)
2001 2000 2001 2000 to September 30, 2001
---------- ---------- ---------- ---------- ---------------------
Revenue $ -- $ -- $ -- $ -- $ --
Operating expenses:
Engineering design and development (15,016) (17,393) (46,781) (51,367) (156,840)
General and administrative (24,850) (12,424) (66,464) (30,352) (170,799)
Non-cash stock compensation
benefit (charge) 9,216 (2,002) (3,373) (5,744) (15,091)
Special charges - -- -- -- (27,682)
-------- --------- --------- --------- ---------
Total operating expenses (30,650) (31,819) (116,618) (87,463) (370,412)
-------- --------- --------- --------- ---------
Other income (expense):
Interest and investment income 5,010 6,265 14,386 20,691 68,025
Interest expense (21,260) (5,616) (60,825) (24,001) (127,610)
-------- --------- --------- --------- ---------
(16,250) 649 (46,439) (3,310) (59,585)
-------- --------- --------- --------- ---------
Loss before income taxes (46,900) (31,170) (163,057) (90,773) (429,997)
Income taxes:
Federal -- -- -- -- (1,982)
State -- -- -- -- (313)
-------- -------- --------- --------- ---------
Net loss (46,900) (31,170) (163,057) (90,773) (432,292)
-------- -------- --------- --------- ---------
Preferred stock dividends (10,336) (9,547) (30,724) (29,871) (122,574)
Preferred stock deemed dividends (170) (166) (509) (8,082) (75,955)
Accretion of dividends in connection
with the issuance of warrants on
preferred stock -- -- -- (900) (7,704)
-------- -------- --------- --------- ---------
Net loss applicable to common
stockholders $(57,406) $(40,883) $(194,290) $(129,626) $(638,525)
======== ======== ========= ========= =========
Net loss per share applicable to
common stockholders (basic and diluted) $ (1.06) $ (0.97) $ (3.77) $ (3.42)
======== ======== ========= ==========
Weighted average common shares
outstanding (basic and diluted) 54,063 42,001 51,575 37,924
======== ======== ======== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
1
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
September 30, December 31,
2001 2000
-------------- ------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 27,790 $ 14,397
Marketable securities, at market 335,310 129,153
Restricted investments, at amortized cost 28,419 41,510
Prepaid expenses and other 13,990 13,288
----------- -----------
Total current assets 405,509 198,348
----------- -----------
Property and equipment 1,070,460 1,016,570
Less: accumulated depreciation (9,683) (3,105)
----------- -----------
1,060,777 1,013,465
Other assets:
FCC license 83,368 83,368
Debt issuance costs, net 19,444 20,124
Deposits and other 1,576 8,277
----------- -----------
Total other assets 104,388 111,769
----------- -----------
Total assets $ 1,570,674 $ 1,323,582
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 41,659 $ 45,057
Satellite construction payable -- 9,310
----------- -----------
Total current liabilities 41,659 54,367
Long-term notes payable and accrued interest 642,885 472,602
Deferred satellite payments and accrued interest 65,548 60,881
Deferred income taxes 2,237 2,237
Other long-term liabilities 54 --
----------- -----------
Total liabilities 752,383 590,087
----------- -----------
Commitments and contingencies:
10-1/2% Series C Convertible Preferred Stock, no par value: 2,025,000
shares authorized, no shares issued or outstanding at September 30, 2001
and December 31, 2000 -- --
9.2% Series A Junior Cumulative Convertible Preferred Stock, $.001 par
value: 4,300,000 shares authorized, 1,595,707 shares issued and
outstanding at September 30, 2001 and December 31, 2000 (liquidation
preference of $159,571), at net carrying value including accrued dividends 173,277 162,380
9.2% Series B Junior Cumulative Convertible Preferred Stock, $.001 par
value: 2,100,000 shares authorized, 715,703 shares issued and
outstanding at September 30, 2001 and December 31, 2000 (liquidation
preference of $71,570), at net carrying value including accrued dividends 75,559 70,507
9.2% Series D Junior Cumulative Convertible Preferred Stock, $.001 par value:
10,700,000 shares authorized, 2,145,688 shares issued and outstanding
at September 30, 2001 and December 31, 2000 (liquidation preference of
$214,569), at net carrying value including accrued dividends 225,408 210,125
Stockholders' equity:
Preferred stock, $.001 par value: 50,000,000 shares authorized,
8,000,000 shares designated as 5% Delayed Convertible Preferred
Stock, none issued or outstanding -- --
Common stock, $.001 par value: 200,000,000 shares authorized,
54,125,824 and 42,107,957 shares issued and outstanding at
September 30, 2001 and December 31, 2000, respectively 54 42
Additional paid-in capital 776,285 559,676
Deficit accumulated during the development stage (432,292) (269,235)
----------- -----------
Total stockholders' equity 344,047 290,483
----------- -----------
Total liabilities and stockholders' equity $ 1,570,674 $ 1,323,582
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
2
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Cumulative for
For the Nine Months Ended the period
September 30, May 17, 1990
------------------------- (date of inception) to
2001 2000 September 30, 2001
----------- ----------- ----------------------
Cash flows from development stage activities:
Net loss $(163,057) $ (90,773) $ (432,292)
Adjustments to reconcile net loss to net cash provided by
(used in) development stage activities:
Depreciation expense 6,578 1,589 10,094
Decrease (increase) in gain on marketable securities (739) 1,348 (3,015)
Loss on disposal of assets -- 249 364
Special charges -- -- 25,557
Accretion of note payable charged as interest expense 70,152 57,557 230,956
Non-cash stock compensation charge 3,373 5,744 15,091
Expense incurred in connection with conversion of debt -- 12,655 14,431
Increase (decrease) in cash and cash equivalents resulting
from changes in assets and liabilities:
Prepaid expenses and other (702) (7,183) (13,990)
Due to related party -- -- 351
Other assets 9,894 (9,503) 4,903
Accounts payable and accrued expenses (36,366) (18,429) (49,820)
Deferred taxes -- -- 2,237
--------- --------- -----------
Net cash used in development stage activities (110,867) (46,746) (195,133)
--------- --------- -----------
Cash flows from investing activities:
Purchases of property and equipment (58,440) (312,948) (1,032,442)
Sales (purchases) of marketable securities and restricted
investments, net (192,242) 99,830 (361,231)
Purchase of FCC license -- -- (83,368)
Acquisition of Sky-Highway Radio Corp. -- -- (2,000)
--------- --------- -----------
Net cash used in investing activities (250,682) (213,118) (1,479,041)
--------- --------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock, net 229,593 100,180 591,674
Proceeds from issuance of preferred stock, net -- 192,450 505,418
Proceeds from issuance of notes payable 145,000 1,882 398,145
Proceeds from issuance of promissory notes and units, net -- -- 306,535
Proceeds from exercise of stock options and warrants 359 8,314 15,389
Proceeds from issuance of promissory notes to related parties -- -- 2,965
Loan from officer -- -- 440
Repayment of notes payable -- (115,957) (115,957)
Repayment of promissory notes -- -- (2,635)
Principal payments under capital lease obligations (10) -- (10)
--------- --------- -----------
Net cash provided by financing activities 374,942 186,869 1,701,964
--------- --------- -----------
Net increase (decrease) in cash and cash equivalents 13,393 (72,995) 27,790
Cash and cash equivalents at the beginning of period 14,397 81,809 --
--------- --------- -----------
Cash and cash equivalents at the end of period $ 27,790 $ 8,814 $ 27,790
========= ========= ===========
The accompanying notes are an integral part of these consolidated financial
statements.
3
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)
1. Business Activites
Sirius Satellite Radio Inc., a Delaware corporation, has developed a
service for broadcasting digital quality programming via satellites to vehicles,
homes and portable radios throughout the continental United States. We will
focus exclusively on providing a consumer service; consumer electronics
manufacturers will manufacture the radios required to receive our broadcasts. In
April 1997, we were the winning bidder in an auction by the Federal
Communications Commission for one of two national satellite broadcast licenses
with a winning bid of approximately $83,300. We paid the bid amount during 1997
and were awarded an FCC license on October 10, 1997. Our principal activities to
date have included obtaining regulatory approval for our service, constructing
and launching our three satellite constellation, constructing our national
broadcast studio, acquiring content for our programming, constructing our
terrestrial repeater network, arranging for the development of radios, strategic
planning and market research, recruiting our management team and securing
financing for capital expenditures and working capital.
2. Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and the
instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial
reporting. Accordingly, our financial statements do not include all of the
information and footnotes required by generally accepted accounting principles.
In the opinion of management, all adjustments (consisting only of normal,
recurring adjustments) considered necessary for fair presentation have been
included. We have not recognized any revenues, accordingly, our financial
statements are presented as those of a development stage enterprise, as
prescribed by Statement of Financial Accounting Standards ("SFAS") No. 7,
"Accounting and Reporting by Development Stage Enterprises." All intercompany
transactions have been eliminated in consolidation. These financial statements
should be read in connection with our consolidated financial statements and
the notes thereto in our Annual Report on Form 10-K for the year ended
December 31, 2000.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of expenses during the
reported period. The estimates involve judgments with respect to, among other
things, various future factors which are difficult to predict and are beyond our
control. Actual amounts could differ from these estimates.
4
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)
Marketable Securities and Restricted Investments
Marketable securities are classified as trading securities and are
stated at market value. Marketable securities consist of U.S. government agency
obligations and commercial paper issued by major U.S. corporations with high
credit ratings. We recognized an unrealized holding gain on marketable
securities of $739 and an unrealized holding loss on marketable securities of
$1,348 for the nine month periods ended September 30, 2001 and 2000,
respectively, and an unrealized holding gain of $3,015 for the period May 17,
1990 (date of inception) to September 30, 2001.
Restricted investments consist of fixed income securities and are
stated at amortized cost plus accrued interest income. Restricted investments
are classified as held-to-maturity securities and unrealized holding gains and
losses are not reflected in earnings. As of September 30, 2001 and December 31,
2000, we had an unrealized holding gain of $320 and an unrealized holding loss
of $16, respectively, related to these securities. We are required to hold the
securities included in restricted investments until May 15, 2002 to pay interest
on our 14-1/2% Senior Secured Notes due 2009.
Property and Equipment
All costs related to activities necessary to prepare our broadcast
system for use are capitalized. To date, such costs consist of satellite
construction, launch vehicle construction, launch insurance, broadcast studio
equipment, terrestrial repeater network construction and capitalized interest.
Net Loss Per Share
Basic net loss per share is based on the weighted average number of
outstanding shares of our common stock during each reporting period. Diluted net
loss per share adjusts the weighted average for the potential dilution that
could occur if common stock equivalents (convertible preferred stock,
convertible debt, warrants and stock options) were exercised or converted into
common stock. As of September 30, 2001 and 2000, approximately 17,044,000 and
19,808,000 common stock equivalents were outstanding, respectively, and were
excluded from the calculation of diluted net loss per share, as they were
anti-dilutive.
Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board issued SFAS No.
141, "Business Combinations" (effective June 30, 2001) and SFAS No. 142,
"Goodwill and Other Intangible Assets" (effective January 1, 2002). The adoption
of SFAS No. 141, which prohibits pooling-of-interests accounting for
acquisitions, had no material impact on our financial statements. SFAS No. 142
specifies that goodwill and certain intangible assets will no longer be
amortized but instead will be subject to periodic impairment testing. We are in
the process of evaluating the financial statement impact of the adoption of SFAS
No. 142.
5
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)
Reclassifications
Certain amounts in the prior years' financial statements have been
reclassified to conform to the current presentation.
3. Deferred Satellite Payments
Space Systems/Loral, Inc. ("Loral") has deferred $50,000 due under our
amended and restated contract (the "Loral Satellite Contract"). The amount
deferred, which approximates fair value, bears interest at 10% per year and was
originally due in quarterly installments beginning in June 2002. However, the
Loral Satellite Contract provides that this date, and subsequent payment dates,
will be extended by the number of days that the achievement of certain
milestones is delayed beyond the dates set forth in the Loral Satellite
Contract. Our fourth, spare, satellite is expected to be delivered to ground
storage in December 2001 and was originally expected to be delivered to ground
storage in October 2000. As a result of Loral's delay in delivering this
satellite, we do not expect to make any required payments with respect to this
deferred amount until August 2003, at the earliest. We have the right to prepay
any deferred payments together with accrued interest, without penalty. As
collateral security for this deferred amount, we have granted Loral a
security interest in our terrestrial repeater network.
4. Long-term Notes Payable
Long-term Notes Payable consists of the following:
September 30, 2001 December 31, 2000
------------------ -----------------
15% Senior Secured Discount Notes due 2007 $ 246,612 $ 218,405
14-1/2% Senior Secured Notes due 2009 175,595 173,361
8-3/4% Convertible Subordinated Notes due 2009 80,836 80,836
Term Loan Facility (current stated interest of 8.54%) 139,842 --
----------- ---------
Long-term Notes Payable $642,885 $ 472,602
=========== =========
5. Commitments and Contingencies
Satellite Contract
We entered into the Loral Satellite Contract to build and launch the
satellites necessary for our service. We are committed to make aggregate
payments of approximately $745,890 under the Loral Satellite Contract. As of
September 30, 2001, $683,390 of this obligation had been satisfied. Our future
payments due on the Loral Satellite Contract, excluding payments for interest
accrued on our deferred satellite payments, are as follows: $12,500 in 2002,
$16,667 in 2003, $25,000 in 2004 and $8,333 in 2005. The amount and timing of
these payments depends upon the delivery of our fourth, spare, satellite.
6
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)
Radio Commitments
Matsushita Communication Industrial Corporation of USA ("Panasonic")
has constructed a dedicated facility in Peachtree City, Georgia, to manufacture
radios capable of receiving our broadcasts. During the first year of production
of our radios at this facility, we are obligated to purchase certain radios not
purchased by other customers. If Panasonic were unable to sell any of the
applicable radios, our cost to purchase these radios could approximate $70,000.
Programming Agreements
We have entered into agreements with providers of non-music
programming. We are obligated, in certain instances, to pay license fees, share
advertising revenue from this programming or purchase advertising on properties
owned or controlled by these providers. These obligations aggregate $11,694,
$13,225, $27,826 and $21,850, respectively, for the years ending December 31,
2002, 2003, 2004 and 2005. We may enter into additional non-music programming
agreements that contain similar provisions.
6. Engineering Design and Development
We have entered into agreements with Agere Systems, Inc. (the successor
to the micro-electronics group of Lucent Technologies, Inc.) to develop and
manufacture integrated circuits ("chip sets") which will be used in radios
capable of receiving our broadcasts. In addition, we have entered into
agreements with Alpine Electronics Inc., Audiovox Corporation, Clarion Co.,
Ltd., Delphi Delco Electronics Systems, Harman International Industries,
Incorporated, Kenwood Corporation, Panasonic, Pioneer Corporation, Recoton
Corporation, Sony Electronics Inc., Visteon Automotive Systems and others to
design, develop and produce radios capable of receiving our broadcasts and have
agreed to pay certain costs associated with these radios. We record expenses
under these agreements as work is performed. Total expenses related to these
agreements were $31,907 and $38,843 for the nine month periods ended September
30, 2001 and 2000, respectively, and $106,588 for the period May 17, 1990 (date
of inception) to September 30, 2001.
7. Stock Option Plans
In April 2001, the Compensation Committee of our Board of Directors
amended the exercise price of approximately 3,982,000 employee stock options. In
accordance with Financial Accounting Standards Board Interpretation No. 44,
"Accounting for Certain Transactions Involving Stock Compensation," repriced
stock options are subject to variable accounting, which requires a compensation
charge or benefit to be recorded each period based on the market value of our
common stock until the repriced stock options are exercised, forfeited or
expire. We recognized a non-cash compensation benefit of $10,000 and a non-cash
compensation charge of $83 for the three-month and nine-month periods ended
September 30, 2001, respectively, related to the repriced stock options. As of
September 30, 2001, approximately 3,891,000 of the repriced stock options
were outstanding. We will record future non-cash stock compensation charges
or benefits based on the market value of our common stock at the end of each
reporting period.
7
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Dollar amounts in thousands, unless otherwise stated)
Special Note Regarding Forward-Looking Statements
The following cautionary statements identify important factors that
could cause our actual results to differ materially from those projected in
forward-looking statements made in this Quarterly Report on Form 10-Q and in
other reports and documents published by us from time to time. Any statements
about our beliefs, plans, objectives, expectations, assumptions, future events
or performance are not historical facts and may be forward-looking. These
statements are often, but not always, made through the use of words or phrases
such as "will likely result," "are expected to," "will continue," "is
anticipated," "estimated," "intends," "plans," "projection" and "outlook." Any
forward-looking statements are qualified in their entirety by reference to the
factors discussed throughout our Annual Report on Form 10-K for the year ended
December 31, 2000 (the "Form 10-K") and in other reports and documents published
by us from time to time, particularly the risk factors described under
"Business--Risk Factors" in Part I of the Form 10-K. Among the significant
factors that could cause our actual results to differ materially from those
expressed in the forward-looking statements are:
o the unavailability of radios capable of receiving our broadcasts and
our dependence upon third parties to manufacture and distribute
them;
o the potential risk of delay in implementing our business plan;
o the unproven market for our service; and
o our need for additional financing.
Because the risk factors referred to above could cause actual results
or outcomes to differ materially from those expressed in any forward-looking
statements made by us or on our behalf, you should not place undue reliance on
any such forward-looking statements. In addition, any forward-looking statements
speak only as of the date on which such statement is made, and we undertake no
obligation to update any forward-looking statement or statements to reflect
events or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events or otherwise. New factors emerge
from time to time, and it is not possible for us to predict which will arise or
to assess with any precision the impact of each factor on our business or the
extent to which any factor, or combination of factors, may cause results to
differ materially from those contained in any forward-looking statements.
Overview
Sirius Satellite Radio Inc. was organized in May 1990 and is in its
development stage. Our principal activities to date have included:
o obtaining regulatory approval for our service;
o constructing and launching our three satellite constellation;
o constructing our national broadcast studio;
o acquiring content for our programming;
8
o constructing our terrestrial repeater network;
o arranging for the development of radios capable of receiving our
broadcasts;
o strategic planning and market research;
o recruiting our management team; and
o securing financing for capital expenditures and working capital.
We plan to launch our service in February in Denver, Houston and
Phoenix. At launch, we expect to broadcast 60 channels of commercial-free
music and 40 channels of news, sports and entertainment.
Our primary source of revenues will be our $12.95 per month
subscription fee and one-time activation fee per subscriber. We expect our
subscription to be included in the sale or lease of certain new vehicles. In
addition, we expect to derive revenues from directly selling limited advertising
on our non-music channels. These advertising revenues are not expected to be
significant until we have acquired a substantial number of subscribers.
Our operating expenses will consist primarily of:
o marketing costs, including advertising, promotions, payments to
retailers, dealers, distributors and automakers, and subsidies to
radio manufacturers;
o programming costs, including royalty payments to copyright holders,
license fees to programming providers and advertising revenue
sharing arrangements;
o expenses of operating and maintaining our broadcast system,
including costs of tracking and controlling our satellites,
operating our terrestrial repeater network, and maintaining our
national broadcast studio;
o expenses associated with the continuing development of our receiver
technology, including the costs of designing and developing
future chip sets; and
o general and administrative costs, including salary and employment
related expenses, rent and occupancy costs, insurance expenses and
other miscellaneous costs, such as legal and consulting fees.
As of November 9, 2001, we had 233 employees. When we launch our
service we expect to have approximately 250 employees, increasing to
approximately 350 employees by December 31, 2002.
9
Results of Operations
Three Months Ended September 30, 2001 Compared with Three Months Ended
September 30, 2000
We had net losses of $46,900 and $31,170 for the three months ended
September 30, 2001 and 2000, respectively. Our total operating expenses were
$30,650 and $31,819 for the three months ended September 30, 2001 and 2000,
respectively.
Engineering design and development costs were $15,016 and $17,393 for
the three months ended September 30, 2001 and 2000, respectively. These
engineering costs represented primarily payments to Agere Systems, Inc. (53% in
the 2001 period and 17% in the 2000 period) and other radio development and
manufacturing partners (12% in the 2001 period and 53% in the 2000 period). The
decrease in costs in the 2001 period was primarily due to the completion of most
activity relating to the development of radios capable of receiving our
broadcasts before the 2001 period.
General and administrative expenses increased for the three months
ended September 30, 2001 to $24,850 from $12,424 for the three months ended
September 30, 2000. General and administrative expenses increased principally
due to the growth of our workforce, operation of our terrestrial repeater
network, depreciation of our broadcast studio equipment and the cost of in-orbit
insurance for our three satellites during the entire 2001 period. The major
components of general and administrative expenses in the 2001 period were
salaries and employment related costs (23%), rent and occupancy costs (17%),
marketing costs (13%) and insurance costs (12%), while in the 2000 period the
major components were salaries and employment related costs (31%), rent and
occupancy (15%), marketing costs (19%) and insurance costs (11%). The remaining
portion of general and administrative expenses (35% in the 2001 period and 24%
in the 2000 period) consisted of other costs such as legal and regulatory,
consulting, travel, depreciation and supplies, with no amount exceeding 10% of
the total.
We recognized a non-cash stock compensation benefit of $9,216 for the
three months ended September 30, 2001 and a non-cash stock compensation charge
of $2,002 for the three months ended September 30, 2000. The non-cash stock
compensation benefit in the 2001 period resulted primarily from the variable
accounting treatment of certain employee stock options repriced in April 2001.
Under variable accounting the decrease in the market value of our common stock
during the period resulted in a non-cash stock compensation benefit of $10,000.
We expect to record future non-cash stock compensation charges or benefits based
on the market value of our common stock at the end of each reporting period.
Interest and investment income decreased to $5,010 for the three months
ended September 30, 2001, from $6,265 for the three months ended September 30,
2000. Despite our higher average balances in cash, cash equivalents and
marketable securities during the 2001 period, lower returns on our investments
in U.S. government securities during the 2001 period resulted in lower interest
and investment income.
Interest expense was $21,260 for the three months ended September 30,
2001 and $5,616 for the three months ended September 30, 2000, net of
capitalized interest of $4,982 and $14,919, respectively. Gross interest expense
for the 2001 period increased by $5,707 and capitalized interest decreased by
$9,937, compared to the 2000 period. The increase in gross interest from the
prior period was primarily due to the amounts outstanding under our Term Loan
Agreement with Lehman Brothers, which was not outstanding during the 2000
period. The decrease in capitalized interest during the 2001 period was
primarily due to the lower level of construction in process. Construction in
process decreased as compared to the 2000 period due to the launch of our
satellites. Construction in process during the period related principally to our
fourth, spare, satellite and construction of our terrestrial repeater network.
10
Nine Months Ended September 30, 2001 Compared with Nine Months Ended
September 30, 2000
We had net losses of $163,057 and $90,773 for the nine months ended
September 30, 2001 and 2000, respectively. Our total operating expenses were
$116,618 and $87,463 for the nine months ended September 30, 2001 and 2000,
respectively.
Engineering design and development costs were $46,781 and $51,367 for
the nine months ended September 30, 2001 and 2000, respectively. These
engineering costs represented primarily payments to Agere Systems, Inc. (48% in
the 2001 period and 40% in the 2000 period) and other radio development and
manufacturing partners (20% in the 2001 period and 35% in the 2000 period). The
decrease in costs in the 2001 period was primarily due to the completion of
most activity relating to the development of radios capable of receiving our
broadcasts during the 2001 period.
General and administrative expenses increased for the nine months ended
September 30, 2001 to $66,464 from $30,352 for the nine months ended September
30, 2000. General and administrative expenses increased principally due to the
growth of our workforce, operation of our terrestrial repeater network,
depreciation of our broadcast studio equipment and the cost of in-orbit
insurance for our three satellites during the entire 2001 period. The major
components of general and administrative expenses in the 2001 period were
salaries and employment related costs (23%), rent and occupancy costs (16%) and
marketing costs (13%), while in the 2000 period the major components were
salaries and employment related costs (34%), rent and occupancy costs (15%) and
marketing costs (15%). The remaining portion of general and administrative
expenses (48% in the 2001 period and 36% in the 2000 period) consisted of other
costs such as legal and regulatory, insurance, consulting, travel, depreciation
and supplies, with only insurance (13%) exceeding 10% of the total in the 2001
period and no amount exceeding 10% of the total in the 2000 period.
Non-cash stock compensation charge decreased for the nine months ended
September 30, 2001 to $3,373 from $5,744 for the nine months ended September 30,
2000. The decrease in charges in the 2001 period resulted primarily from the
decrease in compensation expense associated with stock options granted to
certain employees and consultants. We expect to record future non-cash stock
compensation charges or benefits based on the market value of our common stock
at the end of each reporting period due to variable accounting associated with
the repricing of certain employees stock options in April 2001.
The decrease in interest and investment income to $14,386 for the nine
months ended September 30, 2001, from $20,691 for the nine months ended
September 30, 2000, resulted from lower returns on our investments in U.S.
government securities during the 2001 period.
Interest expense was $60,825 for the nine months ended September 30,
2001 and $24,001 for the nine months ended September 30, 2000, net of
capitalized interest of $14,055 and $52,618, respectively. Gross interest
expense for the 2001 period decreased by $1,739 and capitalized interest
decreased by $38,563, compared to the 2000 period. The decrease in gross
interest from the prior period was due to the expense incurred in the 2000
period related to the induced conversion of a portion of our 8-3/4% Convertible
Subordinated Notes due 2009, net of an increase in gross interest during the
2001 period resulting primarily from the amount outstanding under our Term Loan
Agreement with Lehman Brothers, which was not outstanding during the 2000
period. The decrease in capitalized interest during the 2001 period was
primarily due to the lower level of construction in process. Construction in
process decreased as compared to the 2000 period due to the launch of our
satellites. Construction in process during the period related principally to our
fourth, spare, satellite and construction of our terrestrial repeater network.
11
Liquidity and Capital Resources
At September 30, 2001, we had cash, cash equivalents, marketable
securities and restricted investments totaling $391,519 and working capital of
$363,850 compared with cash, cash equivalents, marketable securities and
restricted investments totaling $185,060 and working capital of $143,981 at
December 31, 2000.
Funding Requirements. We entered into a satellite contract (the "Loral
Satellite Contract") with Space Systems/Loral, Inc. ("Loral") to build and
launch the satellites necessary to transmit our service. The Loral Satellite
Contract requires Loral to:
o construct, launch and deliver three satellites in-orbit and
checked-out;
o construct a fourth satellite for use as a spare; and
o deliver $15,000 of long-lead time parts for a possible fifth
satellite.
We are committed to make aggregate payments of approximately $745,890
under the Loral Satellite Contract. As of September 30, 2001, $683,390 of this
obligation had been satisfied. Our future payments due to Loral, excluding
payments for interest accrued on our deferred satellite payments, are as
follows: $12,500 in 2002, $16,667 in 2003, $25,000 in 2004 and $8,333 in 2005.
The amount and timing of our future payments to Loral depends upon the
completion of construction of our fourth, spare, satellite.
The amount and timing of our other cash requirements will depend upon
numerous factors, including the rate of growth of our business, costs associated
with the design and development of chip sets and radios, costs of financing and
the possibility of unanticipated costs.
Sources of Funding. To date, we have funded our capital needs through
the issuance of debt and equity securities.
As of September 30, 2001, we had received a total of approximately
$1,103,300 in equity capital as a result of the following transactions:
o the sale of shares of our common stock (net proceeds of
approximately $22,000) prior to the issuance of our FCC license in
October 1997;
o the sale of 5,400,000 shares of our 5% Delayed Convertible Preferred
Stock (net proceeds of approximately $121,000) in April 1997 (in
November 1997, we exchanged 1,846,799 shares of our 10-1/2% Series C
Convertible Preferred Stock for all the outstanding shares of our 5%
Delayed Convertible Preferred Stock) (all shares of our 10-1/2%
Series C Convertible Preferred Stock have since been converted into
shares of our common stock);
o the sale of 4,955,488 shares of our common stock (net proceeds of
approximately $71,000) in 1997;
o the sale of 5,000,000 shares of our common stock to Prime 66
Partners, L.P. (net proceeds of approximately $98,000) in November
1998;
o the sale of 1,350,000 shares of our 9.2% Series A Junior Cumulative
Convertible Preferred Stock to Apollo Investment Fund IV, L.P. and
Apollo Overseas Partners IV, L.P. (collectively, the "Apollo
Investors") (net proceeds of approximately $129,000) in December
1998;
12
o the sale of 650,000 shares of our 9.2% Series B Junior Cumulative
Convertible Preferred Stock to the Apollo Investors (net proceeds of
approximately $63,000) in November 1999;
o the sale of 3,450,000 shares of our common stock in an underwritten
public offering (net proceeds of approximately $78,000) in September
and October 1999;
o the sale of 2,000,000 shares of our 9.2% Series D Junior Cumulative
Convertible Preferred Stock to affiliates of The Blackstone Group
L.P. (net proceeds of approximately $192,000) in January 2000;
o the sale of 2,290,322 shares of our common stock to DaimlerChrysler
Corporation (net proceeds of approximately $100,000) in February
2000; and
o the sale of 11,500,000 shares of our common stock in an underwritten
public offering (net proceeds of approximately $229,300) in February
2001.
As of September 30, 2001, we had received a total of approximately
$443,000 in net proceeds from the following public debt offerings:
o 12,910 units, each consisting of $20 aggregate principal amount at
maturity of our 15% Senior Secured Discount Notes due 2007 and a
warrant to purchase additional 15% Senior Secured Discount Notes due
2007 with an aggregate principal amount at maturity of $3 in an
underwritten public offering (net proceeds of approximately
$116,000) in November 1997. All of these warrants were exercised in
1997. The aggregate value at maturity of our 15% Senior Secured
Discount Notes due 2007 is approximately $297,000. Our 15% Senior
Secured Discount Notes due 2007 mature on December 1, 2007 and the
first cash interest payment is due in June 2003.
o 200,000 units, each consisting of $1 aggregate principal amount of
our 14-1/2% Senior Secured Notes due 2009 and three warrants, each
to purchase 4.189 shares of our common stock (as of September 30,
2001) in an underwritten public offering (net proceeds of
approximately $190,000) in May 1999. The warrants are exercisable
through May 15, 2009 at an exercise price of $24.92 per share (as of
September 30, 2001). We invested approximately $79,300 of the net
proceeds from this offering in a portfolio of U.S. government
securities, which we pledged as security for payment in full of
interest due on the 14-1/2% Senior Secured Notes due 2009 through
May 15, 2002.
o $125,000 aggregate principal amount of our 8-3/4% Convertible
Subordinated Notes due 2009 in an underwritten public offering (net
proceeds of approximately $119,000) in September 1999. In October
1999, we issued an additional $18,750 aggregate principal amount of
these notes to the underwriters of that offering in connection with
their over-allotment option (net proceeds of approximately $18,000).
The indentures governing our 14-1/2% Senior Secured Notes due 2009 and
our 15% Senior Secured Discount Notes due 2007 contain limitations on our
ability to issue additional debt. These notes are secured by a pledge of the
stock of Satellite CD Radio, Inc., our subsidiary that holds our FCC license. As
of September 30, 2001, we had acquired $62,914 principal amount of our 8-3/4%
Convertible Subordinated Notes due 2009 in exchange for shares of our common
stock.
13
Loral has deferred a total of $50,000 of payments under the Loral
Satellite Contract originally scheduled for payment in 1999. These deferred
amounts bear interest at 10% per year and were originally scheduled to be paid
in quarterly installments beginning in June 2002. However, the agreement
governing these deferred amounts provides that this date, and subsequent payment
dates, will be extended by the number of days that the achievement of any
milestone under the Loral Satellite Contract is delayed beyond the dates set
forth in the Loral Satellite Contract. Our fourth, spare, satellite was
originally expected to be delivered to ground storage in October 2000 and now is
expected to be delivered to ground storage in December 2001. As a result of this
delay, we do not expect to make any required payments with respect to these
deferred payments until August 2003, at the earliest. As security for these
deferred payments, we have granted Loral a security interest in our terrestrial
repeater network.
On June 1, 2000, we entered into a term loan agreement with Lehman
Commercial Paper Inc. ("LCPI") and Lehman Brothers Inc. On March 7, 2001, we
borrowed $150,000 of term loans from LCPI under this agreement. These term loans
bear interest at an annual rate equal to the eurodollar rate plus 4% or a base
rate, typically the prime rate, plus 5%. These term loans are secured by a
pledge of the stock of Satellite CD Radio, Inc., our subsidiary that holds our
FCC license, and our rights under the Loral Satellite Contract relating to our
fourth, spare, satellite.
The term loans mature in quarterly installments, commencing on March
31, 2003, in an amount equal to the percentage set forth below of the aggregate
principal amount of the loans:
Installment Percentage
----------- ----------
March 31, 2003..................................... 0.25%
June 30, 2003...................................... 0.25%
September 30, 2003................................. 0.25%
December 31, 2003.................................. 0.25%
March 31, 2004..................................... 2.25%
June 30, 2004...................................... 2.25%
September 30, 2004................................. 2.25%
December 31, 2004.................................. 2.25%
March 31, 2005..................................... 22.50%
June 30, 2005...................................... 22.50%
September 30, 2005................................. 22.50%
December 31, 2005.................................. 22.50%
We may prepay the term loans in whole at any time or in part from
time to time. Prepayment prior to March 7, 2004 must be accompanied by a
specified prepayment penalty. We must prepay the term loans:
o with the net proceeds of certain incurrences of indebtedness;
o with the proceeds of asset sales, subject to certain exceptions; and
o commencing with the fiscal year ending December 31, 2002, with
excess cash.
The term loan facility contains customary covenants and events of
default for a senior secured bank loan. These covenants restrict our ability to
issue additional debt and engage in certain activities.
In connection with this term loan facility, we granted LCPI 2,100,000
warrants, each to purchase one share of our common stock, at an exercise price
of $29.00 per share.
14
Shares of our 9.2% Series A Junior Cumulative Convertible Preferred
Stock and 9.2% Series B Junior Cumulative Convertible Preferred Stock are
convertible into shares of our common stock at a price of $30.00 per share.
Dividends on our 9.2% Series A Junior Cumulative Convertible Preferred Stock and
9.2% Series B Junior Cumulative Convertible Preferred Stock are payable in kind
or in cash annually, at our option. Holders of our 9.2% Series A Junior
Cumulative Convertible Preferred Stock and 9.2% Series B Junior Cumulative
Convertible Preferred Stock have the right to vote, on an as-converted basis, on
matters on which the holders of our common stock have the right to vote. Shares
of our 9.2% Series A Junior Cumulative Convertible Preferred Stock and 9.2%
Series B Junior Cumulative Convertible Preferred Stock:
o are callable by us beginning November 15, 2001 at a price of 100% if
the current market price, as defined in the certificates of
designation of the 9.2% Series A Junior Cumulative Convertible
Preferred Stock and 9.2% Series B Junior Cumulative Convertible
Preferred Stock, of our common stock exceeds $60.00 per share for a
period of 20 consecutive trading days;
o will be callable in all events beginning November 15, 2003 at a
price of 100%; and
o must be redeemed by us on November 15, 2011.
Shares of our 9.2% Series D Junior Cumulative Convertible Preferred
Stock are convertible into shares of our common stock at a price of $34.00 per
share. Dividends on our 9.2% Series D Junior Cumulative Convertible Preferred
Stock are payable in kind or in cash annually, at our option. Holders of our
9.2% Series D Junior Cumulative Convertible Preferred Stock have the right to
vote, on an as-converted basis, on matters in which the holders of our common
stock have the right to vote. Shares of our 9.2% Series D Junior Cumulative
Convertible Preferred Stock:
o are callable by us beginning December 23, 2002 at a price of 100% if
the current market price, as defined in the certificate of
designation of the 9.2% Series D Junior Cumulative Convertible
Preferred Stock, of our common stock exceeds $68.00 per share for a
period of 20 consecutive trading days;
o will be callable in all events beginning December 23, 2004 at a
price of 100%; and
o must be redeemed by us on November 15, 2011.
As of November 9, 2001, we had sufficient funds to operate our business
at least until the end of 2002. We will require additional funds to support our
planned operations thereafter until our revenues grow substantially. We plan to
fund our additional capital needs through the issuance of debt and equity
securities.
15
Part II
Other Information
Item 1. Legal Proceedings
On September 18, 2001, a purported class action lawsuit entitled
Sterbenk v. Sirius Satellite Radio, Inc., 2:01-CV-295, was filed against us and
certain of our current and former executive officers in the U.S. District Court
for the District of Vermont. Subsequently, on November 6, 2001, a second
purported class action lawsuit entitled Johnson v. Sirius Satellite Radio, Inc.,
2:01-CV-339, was filed. Both complaints allege violations of Sections 10(b) and
20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder. The complaints allege, among other things, that the defendants
issued materially false and misleading statements and press releases concerning
when our service would be commercially available, which caused the market price
of our common stock to be artificially inflated. The complaints seek an
unspecified amount of money damages. We believe that the allegations in these
complaints have no merit and will vigorously defend against these actions.
Item 5. Other Information
Mr. David Margolese resigned as our Chief Executive Officer on October
16, 2001. In connection with his resignation, he received a severance payment of
$5,000,000.
On October 16, 2001, Sirius entered into an agreement with Mr.
Margolese regarding his continuing responsibilities as non-executive chairman of
the board of directors. Under this agreement:
o Mr. Margolese will receive, at the discretion of the board, a fee of
$200,000 per year;
o The termination date of stock options held by Mr. Margolese will be
extended until April 16, 2007, provided that Mr. Margolese remains
chairman of our board of directors and complies with obligations
under the agreement; and
o Mr. Margolese's existing employment agreement was cancelled.
The agreement also contains non-competition and confidentiality
provisions similar to those contained in Mr. Margolese's cancelled employment
agreement.
The duties of Chief Executive Officer have been assumed, on an interim
basis, by an Office of the Chief Executive consisting of John J. Scelfo, our
Senior Vice President and Chief Financial Officer, and Patrick L. Donnelly, our
Senior Vice President and General Counsel. An intensive search for a new Chief
Executive Officer is being conducted by our board of directors.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
See Exhibit Index attached hereto.
(b) Reports on Form 8-K.
None.
16
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SIRIUS SATELLITE RADIO INC.
By: /s/ Edward Weber, Jr.
--------------------------------------
Edward Weber, Jr.
Vice President and Controller
(Principal Accounting Officer)
November 14, 2001
17
Exhibit Index
Exhibit Description
------- -----------
3.1.1 Certificate of Amendment, dated June 16, 1997, to the
Company's Certificate of Incorporation and the Company's
Amended and Restated Certificate of Incorporation, dated
January 31, 1994 (incorporated by reference to Exhibit 3.1 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999).
3.1.2 Certificate of Ownership and Merger merging Sirius Satellite
Radio Inc. into CD Radio Inc. dated November 18, 1999
(incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-8 (File No. 333-31362)).
3.2 Amended and Restated By-Laws (filed herewith).
3.3 Certificate of Designations of 5% Delayed Convertible
Preferred Stock (incorporated by reference to Exhibit 10.24
to the Company's Annual Report on Form 10-K/A for the year
ended December 31, 1996 (the "1996 Form 10-K")).
3.4 Form of Certificate of Designations of Series B Preferred
Stock (incorporated by reference to Exhibit A to Exhibit 1 to
the Company's Registration Statement on Form 8-A filed on
October 30, 1997 (the "Form 8-A")).
3.5.1 Form of Certificate of Designations, Preferences and
Relative, Participating, Optional and Other Special Rights of
10 1/2% Series C Convertible Preferred Stock (the "Series C
Certificate of Designations") (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form
S-4 (File No. 333-34761)).
3.5.2 Certificate of Correction to Series C Certificate of
Designations (incorporated by reference to Exhibit 3.5.2 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 (the "1997 Form 10-K")).
3.5.3 Certificate of Increase of 10 1/2% Series C Convertible
Preferred Stock (incorporated by reference to Exhibit 3.5.3
to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998).
3.6 Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of the
Company's 9.2% Series A Junior Cumulative Convertible
Preferred Stock (incorporated by reference to Exhibit 3.6 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999).
3.7 Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of the
Company's 9.2% Series B Junior Cumulative Convertible
Preferred Stock (incorporated by reference to Exhibit 3.7 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999).
Exhibit Description
------- -----------
3.8 Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of the
Company's 9.2% Series D Junior Cumulative Convertible
Preferred Stock (incorporated by reference to Exhibit 99.2 to
the Company's Current Report on Form 8-K filed on December
29, 1999).
4.1 Form of certificate for shares of Common Stock (incorporated
by reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-1 (File No. 33-74782 (the "S-1
Registration Statement")).
4.2 Form of certificate for shares of 10 1/2% Series C
Convertible Preferred Stock (incorporated by reference to
Exhibit 4.4 to the Company's Registration Statement on Form
S-4 (File No. 333-34761)).
4.3 Form of certificate for shares of 9.2% Series A Junior
Cumulative Convertible Preferred Stock (incorporated by
reference to Exhibit 4.10.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 (the "1998
Form 10-K")).
4.4 Form of certificate for shares of 9.2% Series B Junior
Cumulative Convertible Preferred Stock (incorporated by
reference to Exhibit 4.10.2 to the 1998 Form 10-K).
4.5 Form of certificate for shares of 9.2% Series D Junior
Cumulative Convertible Preferred Stock (incorporated by
reference to Exhibit 4.5 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1999 (the "1999
Form 10-K")).
4.6.1 Rights Agreement, dated as of October 22, 1997 (the "Rights
Agreement"), between the Company and Continental Stock
Transfer & Trust Company, as rights agent (incorporated by
reference to Exhibit 1 to the Form 8-A).
4.6.2 Form of Right Certificate (incorporated by reference to
Exhibit B to Exhibit 1 to the Form 8-A).
4.6.3 Amendment to the Rights Agreement dated as of October 13,
1998 (incorporated by reference to Exhibit 99.2 to the
Company's Current Report on Form 8-K dated October 13, 1998).
4.6.4 Amendment to the Rights Agreement dated as of November 13,
1998 (incorporated by reference to Exhibit 99.7 to the
Company's Current Report on Form 8-K dated November 17,
1998).
4.6.5 Amended and Restated Amendment to the Rights Agreement dated
as of December 22, 1998 (incorporated by reference to Exhibit
6 to the Amendment No. 1 to the Form 8-A filed on January 6,
1999).
4.6.6 Amendment to the Rights Agreement dated as of June 11, 1999
(incorporated by reference to Exhibit 4.1.8 to the Company's
Registration Statement on Form S-4 (File No. 333-82303) (the
"1999 Units Registration Statement")).
2
Exhibit Description
------- -----------
4.6.7 Amendment to the Rights Agreement dated as of September 29,
1999 (incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K filed on October 13,
1999).
4.6.8 Amendment to the Rights Agreement dated as of December 23,
1999 (incorporated by reference to Exhibit 99.4 to the
Company's Current Report on Form 8-K filed on December 29,
1999).
4.6.9 Amendment to the Rights Agreement dated as of January 28,
2000 (incorporated by reference to Exhibit 4.6.9 to the 1999
Form 10-K).
4.6.10 Amendment to the Rights Agreement dated as of August 7, 2000
(incorporated by reference to Exhibit 4.6.10 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 2000).
4.7 Indenture, dated as of November 26, 1997, between the Company
and IBJ Schroder Bank & Trust Company, as trustee, relating
to the Company's 15% Senior Secured Discount Note due 2007
(incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-3 (File No. 333-34769) (the
"1997 Units Registration Statement")).
4.8 Form of 15% Senior Secured Discount Note due 2007
(incorporated by reference to Exhibit 4.2 to the 1997 Units
Registration Statement).
4.9 Warrant Agreement, dated as of November 26, 1997, between the
Company and IBJ Schroder Bank & Trust Company, as warrant
agent (incorporated by reference to Exhibit 4.3 to the 1997
Units Registration Statement).
4.10 Form of Warrant (incorporated by reference to Exhibit 4.4 to
the 1997 Units Registration Statement).
4.11 Form of Preferred Stock Warrant Agreement, dated as of April
9, 1997, between the Company and each warrantholder thereof
(incorporated by reference to Exhibit 4.12 to the 1997 Form
10-K).
4.12 Form of Common Stock Purchase Warrant granted by the Company
to Everest Capital Master Fund, L.P. and to The Ravich
Revocable Trust of 1989 (incorporated by reference to Exhibit
4.11 to the 1997 Form 10-K).
4.13 Indenture, dated as of May 15, 1999, between the Company and
United States Trust Company of New York, as trustee, relating
to the Company's 14 1/2% Senior Secured Notes due 2009
(incorporated by reference to Exhibit 4.4.2 to the "1999
Units Registration Statement").
4.14 Form of 14 1/2% Senior Secured Note due 2009 (incorporated by
reference to Exhibit 4.4.2 to the 1999 Units Registration
Statement).
3
Exhibit Description
------- -----------
4.15 Warrant Agreement, dated as of May 15, 1999, between the
Company and United States Trust Company of New York, as
warrant agent (incorporated by reference to Exhibit 4.4.4 to
the 1999 Units Registration Statement).
4.16 Common Stock Purchase Warrant granted by the Company to Ford
Motor Company, dated June 11, 1999 (incorporated by reference
to Exhibit 4.4.2 to the 1999 Units Registration Statement).
4.17 Indenture, dated as of September 29, 1999, between the
Company and United States Trust Company of Texas, N.A., as
trustee, relating to the Company's 8 3/4% Convertible
Subordinated Notes due 2009 (incorporated by reference to
Exhibit 4.2 to the Company's Current Report on Form 8-K filed
on October 13, 1999).
4.18 First Supplemental Indenture, dated as of September 29, 1999,
between the Company and United States Trust Company of Texas,
N.A., as trustee, relating to the Company's 8 3/4%
Convertible Subordinated Notes due 2009 (incorporated by
reference to Exhibit 4.01 to the Company's Current Report on
Form 8-K filed on October 1, 1999).
4.19 Form of 83/4% Convertible Subordinated Note due 2009
(incorporated by reference to Article VII of Exhibit 4.01 to
the Company's Current Report on Form 8-K filed on October 1,
1999).
4.20 Common Stock Purchase Warrant granted by the Company to
DaimlerChrysler Corporation, dated January 28, 2000
(incorporated by reference to Exhibit 4.23 to the 1999 Form
10-K).
4.21 Term Loan Agreement, dated as of June 1, 2000 (the "Term Loan
Agreement"), among the Company, Lehman Brothers Inc., as
arranger, and Lehman Commercial Paper Inc., as syndication
and administrative agent (incorporated by reference to
Exhibit 4.22 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2000).
4.22 First Amendment, dated as of October 20, 2000, to the Term
Loan Agreement (filed herewith).
4.23 Second Amendment, dated as of December 27, 2000, to the Term
Loan Agreement (filed herewith).
4.24 Amended and Restated Warrant Agreement, dated as of December
27, 2000, between the Company and United States Trust Company
of New York, as warrant agent and escrow agent (incorporated
by reference to Exhibit 4.27 to the Company's Registration
Statement on Form S-3 (File No. 333-65602)).
4.25 Second Amended and Restated Pledge Agreement, dated as of
March 7, 2001, among the Company, as pledgor, The Bank of New
York, as trustee and collateral agent, United States Trust
Company of New York, as trustee, and Lehman Commercial Paper
Inc., as administrative agent (filed herewith).
4.26 Collateral Agreement, dated as of March 7, 2001, between the
Company, as borrower, and The Bank of New York, as collateral
agent (filed herewith).
4
Exhibit Description
------- -----------
4.27 Amended and Restated Intercreditor Agreement, dated March 7,
2001, by and between The Bank of New York, as trustee and
collateral agent, United States Trust Company of New York, as
trustee, and Lehman Commercial Paper, as administrative agent
(filed herewith).
9.1 Voting Trust Agreement, dated as of August 26, 1997, by and
among Darlene Friedland, as Grantor, David Margolese, as
Trustee, and the Company (incorporated by reference to
Exhibit (c) to the Company's Issuer Tender Offer Statement on
Form 13E-4 filed on October 16, 1997).
10.1.1 Lease Agreement, dated as of March 31, 1998, between
Rock-McGraw, Inc. and the Company (incorporated by reference
to Exhibit 10.1.2 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998).
10.1.2 Supplemental Indenture, dated as of March 22, 2000, between
Rock-McGraw, Inc. and the Company (incorporated by reference
to Exhibit 10.1.2 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2000).
*10.2 Employment Agreement, dated as of March 28, 2000, between the
Company and Joseph S. Capobianco (incorporated by reference
to Exhibit 10.5 to the 1999 Form 10-K).
*10.3 Employment Agreement, dated as of March 28, 2000, between the
Company and Patrick L. Donnelly (incorporated by reference to
Exhibit 10.6 to the 1999 Form 10-K).
*10.4 Employment Agreement, dated as of April 17, 2000, between the
Company and Dr. Mircho Davidov (incorporated by reference to
Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2000).
*10.5 Employment Agreement, dated as of March 7, 2001, between the
Company and John J. Scelfo (incorporated by reference to
Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2001).
*10.6 Employment Agreement, dated as of August 29, 2001, between
the Company and Michael S. Ledford (filed herewith).
*10.7 Agreement, dated as of October 16, 2001, between the Company
and David Margolese (filed herewith).
*10.8 1994 Stock Option Plan (incorporated by reference to Exhibit
10.21 to the S-1 Registration Statement).
*10.9 Amended and Restated 1994 Directors' Nonqualified Stock
Option Plan (incorporated by reference to Exhibit 10.22 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
*10.10 CD Radio Inc. 401(k) Savings Plan (incorporated by reference
to Exhibit 4.4 to the Company's Registration Statement on
Form S-8 (File No. 333-65473)).
5
Exhibit Description
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*10.11 Sirius Satellite Radio 1999 Long-Term Stock Incentive Plan
(incorporated by reference to Exhibit 4.4 of the Company's
Registration Statement on Form S-8 (File No. 333-31362)).
10.12 Form of Option Agreement, dated as of December 29, 1997,
between the Company and each Optionee (incorporated by
reference to Exhibit 10.16.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998).
10.13 Stock Purchase Agreement, dated as of October 8, 1998,
between the Company and Prime 66 Partners, L.P. (incorporated
by reference to Exhibit 99.1 to the Company's Current Report
on Form 8-K dated October 8, 1998).
10.14.1 Stock Purchase Agreement, dated as of November 13, 1998 (the
"Apollo Stock Purchase Agreement"), by and among the Company,
Apollo Investment Fund IV, L.P. and Apollo Overseas Partners
IV, L.P. (incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K dated November 17,
1998).
10.14.2 First Amendment, dated as of December 23, 1998, to the Apollo
Stock Purchase Agreement (incorporated by reference to
Exhibit 10.28.2 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999).
10.14.3 Second Amendment, dated as of December 23, 1999, to the
Apollo Stock Purchase Agreement (incorporated by reference to
Exhibit 99.3 to the Company's Current Report on Form 8-K
filed on December 29, 1999).
10.15 Stock Purchase Agreement, dated as of December 23, 1999 (the
"Blackstone Stock Purchase Agreement"), by and between the
Company and Blackstone Capital Partners III Merchant Banking
Fund L.P. (incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K filed on December 29,
1999).
10.16 Stock Purchase Agreement, dated as of January 28, 2000, among
the Company, Mercedes-Benz USA, Inc., Freightliner
Corporation and DaimlerChrysler Corporation (incorporated by
reference to Exhibit 10.24 to the 1999 Form 10-K).
10.17 Tag-Along Agreement, dated as of November 13, 1998, by and
among Apollo Investment Fund IV, L.P., Apollo Overseas
Partners IV, L.P., the Company and David Margolese
(incorporated by reference to Exhibit 99.6 to the Company's
Current Report on Form 8-K dated November 17, 1998).
'D'10.18 Agreement, dated as of June 11, 1999, between the Company and
Ford Motor Company (incorporated by reference to Exhibit
10.33 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999).
'D'10.19 Joint Development Agreement, dated as of February 16, 2000,
between the Company and XM Satellite Radio Inc. (incorporated
by reference to Exhibit 10.28 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000).
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* This document has been identified as a management contract or compensatory
plan or arrangement.
'D' Portions of these exhibits have been omitted pursuant to Applications for
Confidential treatment filed by the Company with the Securities and
Exchange Commission.
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STATEMENT OF DIFFERENCES
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The registered trademark symbol shall be expressed as.................. 'r'
The section symbol shall be expressed as............................... 'SS'
The dagger symbol shall be expressed as................................ 'D'