Non-Qualified Stock Option Agreement - XM Satellite Radio Holdings Inc.
XM SATELLITE RADIO HOLDINGS INC.
1998 SHARE AWARD PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
Terms defined in the Plan and not otherwise defined in this Agreement
are used in this Agreement as defined in the Plan. In this Agreement, except where the context otherwise indicates,
the following definitions apply:
A. Agreement means this Non-Qualified Stock Option
Agreement, including the Notice of Grant of Stock Options and Option Agreement
B. XM means XM Satellite Radio Holdings Inc., a
C. Committee means the committee appointed by the XM
Board of Directors to administer the Plan.
D. Covered Shares means the Shares subject to the
E. Date of Exercise means the date on which XM
receives notice of the exercise, in whole or in part, of the Option pursuant to
Section 5.A. of this Agreement.
F. Date of Expiration means, subject to the provisions
of Section 3.C and D of this Agreement, ten (10) years after the Date of Grant.
G. Date of Grant means the effective date of grant as
set forth on the Notice of Grant of Stock Options and Option Agreement attached
H. Option means the non-qualified stock option granted
to the Optionee in Section 2 of this Agreement.
I. Option Period means the period beginning on the
Date of Grant and terminating on the Date of Expiration.
J. Option Price means the dollar amount set forth on
the Notice of Grant of Stock Options and Option Agreement attached hereto.
K. Optionee means the person identified as the grantee
on the Notice of Grant of Stock Options and Option Agreement attached hereto.
L. Plan means the XM 1998 Shares Award Plan, as the
same may be amended from time to time.
M. Securities Act means the Securities Act of 1933, as
N. Shares means shares of Class A
Common Stock of XM.
2. Grant of Option.
Pursuant to the Plan and subject to the terms of this Agreement, XM
grants to the Optionee the option to purchase from XM that number of Shares
identified in the Notice of Grant of Stock Options and Option Agreement
attached hereto, exercisable at the Option Price, and effective on the Date of
3. Terms of the Option.
A. Type of Option. The Option is
intended to be a non-qualified stock option and is not an incentive stock
option within the meaning of Section 422 of the Code.
B. Vesting and Exercise. The Option may be
exercised during the Option Period, subject to the limitation that the Option
shall vest in three (3) equal annual installments such that:
a. no portion of the Covered Shares may be exercised during the first year
following the Date of Grant;
b. during the second year following the Date of Grant, the Option may be
exercised to a maximum of
33 1/3 % of the Covered Shares;
c. during the third year following the Date of Grant, the Option may be
exercised to a cumulative maximum of 66 2/3% of the Covered Shares; and
d. thereafter the Option with respect to the Covered Shares may be
exercised in full.
C. Termination of Employment: If the
Optionees employment terminates during the Option Period, the Option may be
exercised for the following periods after such termination: zero (0) months in the case of a termination
for Good Cause; three (3) months in the case of a voluntary termination; six
(6) months following an involuntary termination, or twelve (12) months in the
case of death, disability, retirement or voluntary or involuntary termination
after a Change of Control. Upon the
Optionees termination of employment, the Option shall be exercisable only to
the extent that it was vested and exercisable as of the date of the Optionees
termination, except that in the case of (i) Optionees death or (ii)
involuntary termination within one year of a Change of Control, the Option
shall vest immediately in full and shall be fully exercisable by the Optionee
or the Optionees authorized representative or by his or her properly appointed
attorney-in-fact, guardian, trustee, or conservator, as the case may be. Notwithstanding the foregoing, (x) the
foregoing shall be subject to (and limited by) the terms of any Employment
Agreement in effect from time to time between XM and the Optionee and (y) the
Option (and the Shares issued upon exercise thereof) may be subject to
forfeiture pursuant to other agreements between XM (or its affiliates) and
D. Nontransferability. The Option is not
transferable by the Optionee other than (i) by will or by the laws of descent
and distribution, or (ii) pursuant to a qualified domestic relations order as
defined in Section 414(p) of the Code or Title I of the Employee Retirement
Income Security Act or the rules thereunder, and is exercisable, during the
Optionees lifetime, only by the Optionee or, in the case of the Optionees
legal disability, by the Optionees legal representative except as provided in
paragraph C of this Section 3.
4. Capital Adjustments.
The number of Covered Shares and the Option Price shall be subject to
such adjustment, if any, in accordance with Section 11(a) of the Plan.
5. Method of Exercise.
A. Notice. The Option shall
be exercised, in whole or in part, by the delivery to XM of written notice of
such exercise, in such form as the Committee may from time to time prescribe,
a. full payment in cash or readily available funds or in Shares in the
amount of the Option Price with respect to that portion of the Option being
exercised or pursuant to a cashless exercise program to be established by the
Committee in accordance with Section 4(b) of the Plan;
b. any amount that must be withheld by XM for Federal, State, and/or local
tax purposes, payable either in cash or in Shares, including through
withholding of Shares upon exercise;
c. such representations and documents as the corporation, in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other Federal or State
securities laws or regulations. XM may,
in its absolute discretion, also take whatever additional actions it deems
appropriate to effect such compliance, including, without limitation placing
legends on share certificates and issuing stop-transfer orders to transfer agents
and registrars; and
d. if the Option or portion thereof shall be exercised pursuant to the
provisions of Section 3.C of this Agreement by any person or persons other than
the Optionee, appropriate proof of the right of such person or persons to
exercise the Option or portion thereof.
Until the Committee notifies the Optionee to the contrary, the form
attached to this Agreement as Exhibit A shall be used to exercise the Option.
B. Effect. The exercise, in whole or in part, of the
Option shall cause a reduction in the number of Covered Shares equal to the
number of Shares with respect to which the Option is exercised.
6. Compliance with Law; Disposition of Shares of Common Stock
Issued Upon Exercise.
A. Compliance with Law: Notwithstanding
any other provision of this Agreement, the Optionee agrees, for himself or
herself and his or her successors, that XM shall not be required to honor the
exercise of the Option if XM does not have in effect a registration statement
under the Securities Act relating to the offer of Shares to the Optionee under
the Plan, if XM reasonably determines that the exercise of such Option would
violate the Securities Act. The
Optionee further agrees, for himself or herself and his or her successors, that
upon the issuance of any Shares upon the exercise of the Option, he or she
will, upon the request of the XM, agree in writing that he or she is acquiring
the Shares for investment only and not with a view to resale, and that he or
she will not sell, pledge or otherwise dispose of such shares so issued, unless
and until (a) XM is furnished with an opinion of counsel satisfactory to XM to
the effect that registration of such shares pursuant to the Securities Act is
not required by that Act and the rules and regulations thereunder; (b) the
staff of the Securities and Exchange Commission has issued a no-action letter
with respect to such disposition; or (c) such registration or notification as
is, in the opinion of counsel for the corporation, required for the lawful
disposition of such shares has been filed by XM and has become effective;
provided, however, that XM is not obligated hereby to file any such
registration or notification.
further agrees that so long as the Optionee is an employee of XM he or she will
only sell, pledge or otherwise dispose of such shares issued upon the exercise
of the Option in accordance with all insider trading policies of XM then in
effect. The present version of XMs
policy requires approval of transfers by certain categories of employees, and
notice and certification by other employees.
An approval or notification form based on the current plan is attached
for Optionees convenience, although Optionee is responsible for completing
different or other forms if then required by XMs policy.
B. Disposition or Transfer.
Notwithstanding any other provision of this Agreement, the Optionee
agrees, for himself or herself and his or her successors, that he or she will
not sell, pledge or otherwise dispose of shares issued upon the exercise of the
Option until the first to occur of the following: (i) the average closing price for the
Shares on the Nasdaq National Market system, or principal stock exchange on
which the Shares are then listed, over the 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. If Optionee intends to dispose of shares issued upon the exercise of the
Option, Optionee will provide to XM a written notice describing the proposed
transfer and indicating which of the prior clauses has been satisfied.
7. Representations and Warranties. Upon exercise of the Option in whole or in part, if the shares
underlying the option shall not then be registered under the Securities Act,
the Optionee shall represent, warrant and acknowledge the following:
A. The Optionee has made such investigations as the
Optionee deems necessary and appropriate of the business and/or financial
prospects of XM.
B. The Option is being exercised and the Covered Shares
are being acquired for investment for the Optionees own account and not with
the view to, or for resale in connection with, any distribution or public
offering thereof within the meaning of the Securities Act, and the certificate
for such stock may be legended to that effect, that such stock is not
registered under federal or state securities laws and that the registration
exemptions being relied on are the federal and state private or limited
offering exemptions and the Optionee has no reason to believe that such
exemptions are not applicable to the Optionee.
C. The Optionee acknowledges that XM has made available
to the Optionee the opportunity to obtain information to evaluate the merits
and risks associated with this Agreement and the transactions contemplated
thereby. The Optionee acknowledges that
the investment contemplated by the Option involves a high degree of risk,
including risks associated with XMs business operations and prospects
including competition and the dependence on XMs technology and events beyond
XMs control, the limits on transferability of the Option and Covered Shares,
and the absence of a public market for the Covered Shares.
8. Rights as Stockholder.
The Optionee shall have no rights as a stockholder with respect to any
Covered Shares subject to the Option until and unless a certificate or
certificates representing such shares are issued to the Optionee pursuant to
this Agreement. Except as provided in
Section 4 of this Agreement, no adjustment shall be made for dividends or other
rights for which the record date is prior to the issuance of such certificate
Neither the granting of the Option evidenced by this Agreement nor any
term or provision of this Agreement shall constitute or be evidence of any
understanding, express or implied, on the part of XM to employ or continue the
employment of the Optionee for any period.
Whenever reference is made in this Agreement to the employment of the
Optionee, it means employment by XM or its affiliates.
10. Subject to the Plan.
The Option evidenced by this Agreement and the exercise of the Option
are subject to the terms and conditions of the Plan, which are incorporated
herein by reference and made a part hereof, but the terms of the Plan shall not
be considered an enlargement of any benefits under this Agreement. In addition, the Option is subject to any
rules and regulations promulgated by the Committee.
11. Fractional Shares.
Notwithstanding anything contained herein to the contrary, following a
Public Offering, award exercises and issuances involving the issuance of Shares
may only be effected in whole (and not fractional) shares.
12. Applicable Law.
This Agreement shall be subject to the laws of the State of Delaware,
without giving effect to the principles of conflict of laws thereof.
13. Entire Agreement.
This Agreement is in lieu of and supersedes all prior agreements,
representations, negotiations, or other understandings of the parties with
respect to the subject matter hereof.
It may not be amended or altered except in a writing signed by the
Optionee and the authorized representatives of XM.
14. Waiver and Severability.
A. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
the same or any other breach by either of the parties to this Agreement,
whether prior or subsequent.
B. If any term or provision of this Agreement is
determined by a court of competent jurisdiction to be illegal, invalid, or
unenforceable, the legality, validity, or enforceability of the remainder of
this Agreement shall not thereby be affected, and this Agreement shall be
deemed to be amended to the extent necessary to delete such provision.
15. Headings. The
Section, paragraph, and subparagraph headings contained in this Agreement are
for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
EXERCISE OF OPTION
Chairman, Board of Directors
XM Satellite Radio Holdings Inc.
1500 Eckington Place, N.E.
Washington, D.C. 20002-2194
To the Board:
The undersigned, the Optionee under the Non-Qualified Stock Option
Agreement identified as Option No.
, granted pursuant to the XM Satellite Radio Holdings Inc. 1998 Share
Award Plan, hereby irrevocably elects to exercise the Option granted in the
Agreement to purchase shares of
Class A Common Stock of XM Satellite Radio Holdings Inc. (XM), par value
$0.01 per share (Shares), and herewith makes payment of $ in the form of [cash, Common Stock,
cash plus Common Stock, through the exercise of the cashless exercise program]
for the shares purchased and $
in the form of
[cash, Common Stock, cash plus Common Stock, through the exercise of the
cashless exercise program] to cover the Corporations withholding tax liability
in respect of the purchase. (Please
complete, and complete separate cashless exercise form as appropriate.)
[Note: Shares of Common Stock being delivered in payment of all or any
part of the exercise price must be represented by certificates registered in
the name of the Optionee and duly endorsed by the Optionee and by each and
every other co-owner in whose name the shares may also be registered.]
The Optionee hereby re-affirms his or her agreement under Section 6.B of
the Non-Qualified Stock Option Agreement that he or she will not sell, pledge
or otherwise dispose of Shares issued upon the exercise of the Option until the
first to occur of the following:
(i) the average closing price for the Shares on the Nasdaq National
Market system, or principal stock exchange on which the Shares are then listed,
over the prior 20 trading days equals or exceeds $10, or (ii) [three] years
have elapsed since the Date of Grant.
(Signature of Optionee)
Received by XM Satellite Radio Holdings Inc.:
FORM FOR SALE OF SHARES OF XM STOCK
NUMBER OF SHARES TO BE SOLD:
SALE TO BE COMPLETED BY:
SHARES ACQUIRED THROUGH: [CHECK AS
o MARKET PURCHASE
o STOCK OPTION PLAN
VESTING DATE OF OPTIONS TO BE SOLD ___________________
o OTHER ___________________________________
I CONFIRM I AM NOT AWARE OF ANY MATERIAL
NON-PUBLIC INFORMATION RELATING TO XM SATELLITE RADIO HOLDINGS, INC. OR ITS
APPROVAL OF GENERAL COUNSEL, IF REQUIRED
o NOT Approved
If approved, sale must be completed with
fourteen (14) calendar days from
the date set forth below (or by such other date as specifically stated herein
by the General Counsel)