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Employment and Noncompetition Agreement - CD Radio Inc. and Patrick L. Donnelly

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         This EMPLOYMENT AND NONCOMPETITION AGREEMENT is dated as of May 18,
1998 (the "Agreement"), by and between CD RADIO INC., a Delaware corporation,
(the "Company"), and PATRICK L. DONNELLY (the "Executive"). In consideration of
the mutual covenants and conditions set forth herein, the Company and the
Executive agree as follows:

         1. EMPLOYMENT. The Company hereby employs the Executive and the
Executive hereby accepts employment with the Company subject to the covenants
and conditions of this Agreement.


                  (a) Duties. The Executive shall be employed in the capacity of
an Executive Vice President and General Counsel of the Company responsible for
all legal matters. During the term of this Agreement the Executive shall, on a
fulltime basis, use his skills and render services to the best of his ability in
supervising the programming affairs of the Company and shall, in addition,
perform such other activities and duties as the Chairman and Chief Executive
Officer of the Company shall, from time to time, specify and direct.

                  (b) Reporting Relationship. The Executive shall report to the
Chairman and Chief Executive Officer of the Company.

         3. TERM. The term of this Agreement shall be deemed to have commenced
and be effective on and from May 18, 1998, and end on May 18, 2001, unless
terminated earlier pursuant to the provisions of Paragraph 6 below.

         4. COMPENSATION.

                  (a) Annual Salary. During the term of this Agreement, the
Executive shall be paid a salary of U.S. $260,000 per year, subject to any
increases that the Board of Directors or the compensation committee thereof
shall approve.

                  (b) Stock Options. The Company hereby grants to the Executive
the option to purchase 110,000 shares of the Company's common stock, par value
$0.001 per share (the "Common Stock") at U.S.$33.50 per share, on such terms and
subject to such conditions as are set forth in the option agreement attached
hereto as Exhibit A.

                  (c) Other. All compensation paid to the Executive hereunder
shall be subject to any and all such payroll and withholding deductions as are
required by the law of any applicable jurisdiction, state or federal, with
taxing authority with respect to such compensation.


                  (a) Expenses. The Company shall promptly reimburse the
Executive for all reasonable and necessary business expenses incurred and
advanced by his in carrying out his duties under this Agreement. The Executive
shall present to the Company from time to time an itemized account of such
expenses in such form as may be required by the Company.

                  (b) Benefits. During the term of employment hereunder, the
Executive shall be entitled to participate fully in any benefit plans, programs,
policies and any fringe benefits which may be made available to the corporate
officers of the Company generally including but not limited to medical, dental
and life insurance; provided, however, that the Executive shall participate in
any bonus, stock option or stock purchase or compensation plan currently in
effect or subsequently established by the Company to the extent, and only to the
extent authorized by the plan document or the Board of Directors or the
compensation committee thereof.

         6. TERMINATION.

                  (a) Termination for Cause. The Company has the right and may
elect to terminate this Agreement for Cause. For purposes of this Agreement,
"Cause" shall be limited to (i) action by the Executive involving willful
malfeasance having a material adverse effect on the Company or (ii) the
Executive being convicted of a felony; provided that any action by the Executive
shall not constitute "Cause" if, in good faith, the Executive believed such
action to be in or not opposed to the best interests of the Company, or if the
Executive shall be entitled, under applicable law or the Certificate of
Incorporation or Bylaws of the Company, to be indemnified with respect to such
action. Termination or the Executive for Cause pursuant to this Subparagraph
6(a) shall be communicated by a Notice of Termination. For purposes of this
Agreement a "Notice of Termination" shall mean delivery to the Executive of a
copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the directors present and voting at a meeting of the Company's Board
or Directors called and held for that purpose after reasonable notice to the
Executive and reasonable opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board prior to such vote, finding
that in the good faith opinion of the Board the Executive was guilty of conduct
set forth in the first sentence of this Subparagraph 6(a) and specifying the
particulars thereof in detail (the date of such termination by the Board is
referred hereinafter as the "Termination Date"). For purposes of this Agreement,
no such purported termination of the Executive's employment shall be effective
without such Notice of Termination.

                  (b) Voluntary Resignation. Should the Executive wish to resign
from his position with the Company during the term of his employment, the
Executive shall give thirty (30) days written notice to the Company, setting
forth the reasons and specifying the date as of which his resignation is to
become effective. The date specified in such written notice shall be referenced
herein as the "Termination Date." Failure to provide such notice shall entitle
the Company only to fix the Termination Date as of the last business day on
which the Executive reported for work at his principal place of employment with
the Company and shall have no other effect.

                  (c) Without Cause. The Company shall have the absolute right
to terminate the Executive's employment without cause at any time. If the
Company elects to terminate the Executive without cause, the Company shall give
thirty (30) days written notice to the Executive. Thirty (30) days after such
notice is given to the Executive shall be referenced herein as the "Termination

                  (d) Compensation and Benefits Upon Termination. If the
employment of the Executive is terminated for any reason except (i) by the
Company for Cause or (ii) by the Executive voluntarily, the Executive shall be
entitled to receive, and the Company shall pay without setoff, counterclaim or
other withholding except as set forth in Paragraph 4(c) the following amount (in
addition to any salary, benefits or other sums due the Executive through the
Termination Date) an amount equal to one-half (1/2) of his annual salary then in
effect. Any amount becoming payable under this Paragraph 6(d) shall be paid on
the Termination Date.

employment hereunder, the Executive has executed and delivered to the Company an
agreement addressing the nondisclosure of confidential information (the
"Nondisclosure Agreement") in the form attached hereto as Exhibit B and
incorporated herein by reference as if set forth in full herein.

         8. COVENANT NOT TO COMPETE. For a period beginning on the date of this
Agreement and ending one (1) years after the Termination Date, the Executive
will not, directly or indirectly, enter into the employment of, render services
to or acquire any interest whatsoever in (whether for his own account as an
individual proprietor, or as a partner, associate, shareholder, officer,
director, consultant, trustee or otherwise), or otherwise assist, any person or
entity engaged in any operations in North America involving any satellite
digital audio radio service or any subscription-based digital audio radio
service delivered to cars or other mobile vehicles; provided, however, that
nothing herein shall prevent the purchase or ownership by the Executive by way
of investment of up to four percent (4%) of the shares or equity interest of any
corporation or other entity. Without limiting the generality of the foregoing,
the Executive agrees that during the one (1) year period set forth above the
Executive will not call on or otherwise solicit business or assist others to
solicit business from any of the customers or potential customers of the Company
as to any product or service that competes with any product or service provided
or marketed by or actually under development by the Company at the time of the
Executive's termination. The Executive furthermore agrees that he will not
solicit or assist others to solicit the employment of or hire any employee of
the Company throughout the term of this Covenant Not To Compete without the
prior written consent of the Company.

         9. REMEDIES. The Executive agrees that damages for breach of any of his
covenants under Paragraphs 7 and 8 above will be difficult to determine and
inadequate to remedy the harm

which may be caused thereby, and therefore consents that these covenants may be
enforced by temporary or permanent injunction without the necessity of bond.
Such injunctive relief shall be in addition to and not in place of any other
remedies available at law or equity. The Executive believes, as of the date of
this Agreement, that the provisions of this Agreement are reasonable and that
the Executive is capable of gainful employment without breaching this Agreement.
However, should any court or tribunal decline to enforce any provision of
Paragraph 7 or 8 of this Agreement, this Agreement shall, to the extent
applicable in the circumstances before such court or tribunal, be deemed to be
modified to restrict the Executive's competition with the Company to the maximum
extent of time, scope and geography which the court or tribunal shall find
enforceable, and such provisions shall be so enforced. The losing party shall
reimburse the prevailing party for any costs and attorneys fees incurred in
connection with any action to enforce the covenants under Paragraph 8 above. The
Company and the Executive shall have available to them all remedies at law and
in equity for the enforcement of this Agreement, which remedies (including but
not limited to termination of this Agreement as provided herein) shall be
cumulative and not elective.

         10. INDEMNIFICATION. The Company shall indemnify the Executive to the
full extent provided in the Company's Certi-ficate of Incorporation and Bylaws
and the law of the State of Delaware in connection with his activities as an
officer and director of the Company.

         11. GOLDEN PARACHUTE PAYMENTS. If as a result of a change in control,
the Executive is required to pay an excise tax on "excess parachute payments"
(as defined in Section 280G(b) of the Code) under Section 4999 of the Code, the
Company shall reimburse the Executive for the amount of such taxes paid. In
addition, the Company shall pay the Executive such additional amounts as are
necessary to place the Executive in the same financial position that she would
have been in if she had not incurred any tax liability under Section 4999 of the
Code as a result of such change in control; provided, however, that the Company
shall in no event pay the Executive any amounts with respect to any penalties or
interest due under any provision of the Code. The determination of the amount,
if any, of any "excess parachute payments" and any tax liability under Section
4999 of the Code shall be made by a nationallyrecognized independent accounting
firm agreed to by the Company and the Executive. The fees and expenses of such
accounting firm shall be paid by the Company. The determination of such
accounting firm shall be final and binding on the parties. The Company agrees to
pay to the Executive any amounts to be paid or reimbursed under this Paragraph
11 within thirty (30) days after receipt by the Company of written notice from
the accounting firm which sets forth such accounting firm's determination.

         12. ENTIRE AGREEMENT. The provisions contained herein and the exhibits
hereto constitute the entire agreement between the parties with respect to the
subject matter hereof and supersede any and all prior agreements, understandings
and communications between the parties, oral or written, with respect to such
subject matter.

         13. MODIFICATION. Any waiver, alteration, amendment or modification of
any provisions of this Agreement and the exhibits hereto shall not be valid
unless in writing, approved by a majority of the directors of the Company who
are not fulltime employees of the Company, and signed by both the Executive and
the Company.

         14. SEVERABILITY. If any provision of this Agreement shall be declared
to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof, which shall
remain in full force and effect.

         15. ASSIGNMENT. The Executive may not assign any of his rights or
delegate any of his duties hereunder without the written consent of the Company.
The Company may not assign any of its rights or delegate any of its obligations

         16. BINDING EFFECT. Subject to the limitations set forth in Paragraph
13 above, this Agreement shall be binding upon and inure to the benefit of the
successors in interest of the Executive and the Company.

         17. NOTICE. All notices and other communications required or permitted
hereunder shall be made in writing and shall be deemed effective when initially
transmitted by courier or facsimile transmission and five (5) days after mailing
by registered or certified mail:

                  (i) if to the Company:

                      CD Radio Inc.
                      Sixth Floor

                       1001 22nd Street, N.W.
                       Washington, D.C.  20037
                       Telecopier No.: (202)296-6265

                  (ii) if to the Executive:

                       Patrick L. Donnelly
                       55 Dartmouth Street
                       Garden City, New York 10901
                       Telecopier No.: (516)326-9730

or to such other person or address as either of the parties shall furnish in
writing to the other party from time to time.

         18. CHOICE OF LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within said state jurisdiction.

         19. ATTORNEYS' FEES. In the event of litigation arising out of or in
connection with this Agreement, the prevailing party shall be entitled to
recover from the other party all of its attorneys' fees and other expenses
incurred in connection with such litigation.

         20. NONMITIGATION. After the termination of his employment hereunder,
the Executive shall not be required to mitigate damages or the amount of any
benefit or payment provided under this Agreement by seeking other employment, or
otherwise; nor shall the amount of any benefit or payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above mentioned.

                                              CD RADIO INC.

                                              By: /s/ David Margolese
                                              Name:  David Margolese
                                              Title: Chairman and Chief
                                                     Executive Officer


                                              /s/ Patrick L. Donnelly
                                              Patrick L. Donnelly