EXHIBIT 10.8
EXECUTION COPY
***** Confidential treatment has been requested for portions of this agreement.
The copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as *****. A complete version of this agreement
has been filed separately with the Securities and Exchange Commission.
DISTRIBUTION AGREEMENT
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THIS AGREEMENT, made as of the 7th day of June, 1999, to be effective
as of the Effective Date, is by and between OnStar, a division of General Motors
Corporation, a
Delaware corporation ("Distributor"), and XM Satellite Radio
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Inc., a Delaware corporation ("XM").
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RECITALS:
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A. XM has developed and/or obtained licenses for the technology and
intellectual property rights necessary to provide an S-band Satellite Digital
Audio Radio Service in the Territory pursuant to a license from the FCC.
B. Distributor provides high-technology value-added services for
automobile applications, including GPS systems, emergency call systems, and
others.
C. XM desires that Distributor include XM Receivers in GM Vehicles.
D. Distributor desires to install XM Receivers in GM Vehicles and to
distribute the XM Service exclusively during the Term.
AGREEMENT:
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NOW THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
1. DEFINITIONS:
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In addition to the terms defined elsewhere in this Agreement, and unless
the context otherwise requires, the defined terms set forth below and used in
this Agreement shall have the following meanings:
"Agreement" means this Agreement, including Attachment I hereto, which, by
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this reference, is incorporated in its entirety herein.
"Authorized XM Manufacturer(s)" means a manufacturer(s) licensed from time
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to time by XM to produce XM Receivers for the OEM vehicle radio market.
"Base Subscription Service" means the combination of music and talk
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channels referred to by XM as the basic subscription package; it is currently
anticipated that, as
of the Commencement Date, the basic subscription package will be available for a
monthly subscription fee of $9.95.
"Commencement Date" means the date on which XM commences commercial
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operations, which shall not include any test periods that precede the
commencement of commercial operations.
"Control" (including the correlative terms "controls," "controlled by,"
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"controlling" and "under common control with") means the power to direct the
management and policies of an entity, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise.
"Distributor" ha
s the meaning set forth in the preamble of this Agreement.
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"Effective Date" has the meaning set forth in Section 13(k).
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"Enabled GM Vehicle" means a GM Vehicle with an XM Receiver installed by or
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for GM, including, without limitation, by authorized GM dealers through their
association with the Service Parts Operations.
"FCC" means the U.S. Federal Communications Commission (or any successor
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agency).
"GM" means General Motors Corporation, its subsidiaries and affiliates in
--
which General Motors Corporation has a controlling interest.
"GM Vehicle" means a vehicle manufactured by or for GM and sold in
the
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Territory under one of the GM brands.
"GM/XM Subscriber" means a subscriber to the XM Service who subscribes to
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receive the XM Service on an Enabled GM Vehicle.
"Installation Commission" has the meaning set forth in Section 4(b).
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"Model Year" means the twelve-(12) month period from July 1 of the prior
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year to June 30 of the designated year.
"OEM Commencement Date" means the later of (x) the Commencement Date, or
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(y) provided that Distributor has fulfilled its obligations of timely XM
Receiver ordering and issuance of specifications under Section 2(b), the date
six (6) months following the date on which an Authorized XM Manufacturer
initially delivers a Validated XM Receiver to Distributor.
"Party (ies)" means XM and/or Distributor as the con
text requires.
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"Purchase" means the purchase or lease of a new Enabled GM Vehicle.
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"Purchaser(s)" means the individual(s) or entity(ies) purchasing or leasing
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an Enabled GM Vehicle.
"Regulatory Force Majeure Event" means any action taken by the FCC to
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require receivers capable of receiving the transmission signal of the XM Service
to be interoperable with receivers capable of receiving the transmission signal
of CD Radio Inc. (or any successor thereto) such that it shall become
impermissible for Distributor to install XM Receivers that are exclusively able
to receive the signal of the XM Service.
"SDARS" means S-Band Satellite Digital Audio Radio Service.
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"Subscriber Bounty" has the meaning set forth in Section 4(c).
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"Term" has the meaning set forth in Section 3(a).
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"Territory" means the continental United States (and Alaska and Hawaii,
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when and if the XM Service is transmitted by XM to such States) and the District
of Columbia.
"Validated XM Receiver" means an XM Receiver that conforms to Distributor's
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manufacturing specifications.
"XM" has the meaning set forth in the preamble of this Agreement.
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"XM Receivers" means receivers that are capable of receiving the XM Service
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and that are manufactured by Authorized XM Manufacturers and produced for the
OEM vehicle radio market.
"XM Service" means the service provided using the XM System.
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"XM System" means XM's SDARS transmission system including associated
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terrestrial transmissions.
2. EXCLUSIVITY OBLIGATIONS:
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(a) During the Term, Distributor agrees on behalf of itself and GM (i) to
install and market XM Receivers in certain GM Vehicles, and (ii) to distribute
the XM Service to the exclusion of any other SDARS. In addition, Distributor
agrees that during the Term neither Distributor nor GM will install any radios
or receivers in GM Vehicles capable of receiving CD Radio signals as the only
SDARS service.
(b) XM agrees that, during the nine (9)-month period commencing July
1,
2001, XM shall only activate for commercial sale XM Receivers in Enabled GM
Vehicles to the exclusion of any other vehicle manufacturers (the "Exclusive
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Period");
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provided, however, that if the OEM Commencement Date is delayed such that XM
Receivers cannot be installed in GM Vehicles prior to January 1, 2002, then
the Exclusive Period shall commence on the later of (i) July 1, 2002, or
(ii) the OEM Commencement Date (the later of the dates referred to in
clauses (i) and (ii) hereinafter the "Exclusive Period Start Date") and shall
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expire six (6) months from the Exclusive Period Start Date unless Distributor,
at its option, elects to shorten or eliminate the Exclusive Period. However, if,
as of July 1, 2002 (or as of any six (6)-month anniversary of such date
thereafter), Distributor, in its reasonable discretion, determines that the
Commencement Date
will be delayed by six (6) months beyond such date and there
is, at such time, a mobile SDARS provider in the Territory commercially
distributing a SDARS in the OEM market, then Distributor, at its option, may be
relieved from its exclusivity obligations in Section 2(a). Distributor agrees
that except for delays caused by the actions or inaction of XM, Distributor
shall order XM Receivers (and issue required manufacturing specifications to the
Authorized XM Manufacturer(s)) sufficiently in advance for Distributor to
receive, absent bona fide delays caused by Authorized XM Manufacturer(s),
Validated XM Receivers no later than January 1, 2001.
(c) XM shall have a non-exclusive right to arrange for the installation of
XM Receivers included in OnStar systems in non-GM Vehicles sold for use in the
Territory. The Parties shall mutually agree on the compensation to be paid to XM
for arranging the sale of such OnStar systems (excluding the XM Service).
3. TERM:
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(a) Unless ear
lier terminated pursuant to the terms of this Agreement, the
"Term" of this Agreement shall commence as of the date hereof and shall expire
twelve (12) years from the Commencement Date.
(b) Notwithstanding anything in this Agreement to the contrary, upon the
occurrence of certain events, one or both Parties shall have the rights set
forth below to trigger a renegotiation of certain terms of, or be excused from
certain obligations under, this Agreement as follows:
(i) Distributor-Triggered Renegotiation. Distributor shall be
-----------------------------------
relieved from its exclusivity obligations set forth in Section
2(a) if four (4) years following the Commencement Date, or if
across any successive two (2)-year period during the Term
thereafter, XM's share of mobile aftermarket SDARS subscribers is
less than forty percent (40%) assuming only two (2) mobile
aftermarket SDARS providers and less than
thirty-three percent
(33%) assuming that there are three (3) mobile aftermarket SDARS
providers. XM's share of mobile aftermarket SDARS subscribers
shall be based on a mutually agreed upon source and shall be
based on the most recent figures available at the time of
measurement.
(ii) Installation-Triggered Renegotiation. XM may initially
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trigger a renegotiation of this Agreement four (4) years following the
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***** Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.
Commencement Date if the number of Enabled GM Vehicles by that time is
less than 1.24 million units and every two (2) years during the Term
thereafter, if the number of Enabled GM Vehicles during the prior two
(2) years is inconsistent with the OEM market demand for SDARS radios.
Evidence of consistency with OEM market demand shall be based upon the
concept that GM SDARS radio penetration in new GM Vehicles (expressed
as a percent of new GM Vehicles produced
for the U.S. market in a
given Model Year or across a measurement period) is consistent with
SDARS radio penetration in new vehicles from the balance of non-GM
OEMs (expressed as a percent of non-GM new vehicles produced for the
U.S. market in a given Model Year or across a measurement period).
However, if XM's share of the mobile SDARS aftermarket is below
[*****] percent [*****] across the applicable two (2)-year period,
then the percent install target in new GM Vehicles shall be adjusted
proportionately in accordance with the following table:
Multiplier (times install
XM Share of Mobile target % of new GM Vehicles
SDARS aftermarket across the measurement period)
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[*****] [*****]
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[*****] [*****]
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[*****] [*****]
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[*****] [*****]
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[*****] [*****]
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(iii) For example, if [*****] percent [*****] of non-GM OEM
vehicles were installed with satellite capable radios in a given Model
Year and XM's share of the mobile SDARS aftermarket were [*****]
percent [*****], then Distributor, for purposes of determining
consistency with OEM market demand, would need to install [*****], or
[*****] percent [*****]
, of GM Vehicles with XM Receivers. For
purposes of this clause (ii), Distributor's new GM Vehicle install
requirement shall be deemed to be satisfied if Distributor installs
the lesser of (A) the number of Enabled GM Vehicles required by this
clause (ii), or (B) 600,000 XM Receivers per year for each of the two
(2) years in the measurement period.
(iv) Automatic Renegotiation.
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(A) Upon the occurrence of a Regulatory Force Majeure
Event, XM and Distributor agree to renegotiate mutually
acceptable
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terms in light of the changed landscape arising from such
Regulatory Force Majeure Event.
(B) XM may trigger a renegotiation of the terms of this
Agreement at any time during the term if Distributor elects to
install interoperable radios (i.e., radios capable of receiving
both the XM Service and the CD Radio service, or other SDARS
signals) in the absence of any regulatory requirement.
(c) Upon at least thirty (30) days' prior notice either Party shall have
the right to terminate this Agreement if the other Party has breached any of its
material obligations under this Agreement; provided, however, that if such
breach is of the type that i
s curable, then termination shall not be effective,
and the notifying Party shall not exercise any of its other rights at law or in
equity, unless the notified Party has failed to cure such material breach fully
and to demonstrate to the notifying Party that such material breach has been
cured within the thirty (30)-day period following the notice described in this
Section 3(c).
(d) If the FCC revokes XM's SDARS license as a result of the action(s) or
inaction(s) of XM, then Distributor, at its option, shall have the right to
declare XM in material breach of this Agreement, and such revocation shall not
constitute a force majeure event under Section 10.
4. PAYMENTS TO DISTRIBUTOR:
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(a) Guaranteed Payments. In consideration of Distributor installing
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quantities of XM Receivers in GM Vehicles consistent with the market demand
throughout the Term and distributing (unless Distributor is otherwise expressly
excused from its exc
lusivity obligations in Section 2(a)) only the XM Service
during the Term, for each of the calendar years set forth in the following table
that this Agreement is in effect, XM agrees to pay to Distributor the amount set
forth opposite each pertinent calendar year:
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***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Amount Payable
Calendar Year:* (in thousands):
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2001 [*****]
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2002 [*****]
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2003 [*****]
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2004 [*****]
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2005 [$33,533]
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2006 [*****]
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2007 [*****]
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2008 [*****]
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2009 [$132,889]
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* I
f Distributor is unable (for reasons not attributable to XM's timely
commencement of service) to install XM Receivers beginning with Model Year 2002,
then the payments set forth in the table above shall be delayed and shall
commence in the calendar quarter immediately following the calendar quarter in
which Distributor first installs reasonable quantities of XM Receivers in GM
Vehicles.
In the event that this Agreement is terminated other than on the last day of a
calendar year, then the payment set forth in the table above for such calendar
year shall be prorated to reflect the number of days during such calendar year
that this Agreement was in effect. The payments set forth in the table above
shall be due and payable in four equal installments on or before March 31, June
30, September 30 and December 31 of the pertinent calendar year.
(b) Installation Commission. During the Term, XM agrees to pay
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Distributor a commission of [*****] for each new Enabled
GM Vehicle (the
"Installation Commission"). Distributor shall invoice XM (on a mutually
------------ ----------
agreed upon form) at the end of each calendar month for Installation Commissions
earned during such month. Each invoice shall include the Vehicle Identification
Number ("VIN") of each GM Vehicle for which an Installation Commission is
---
payable, the XM Receiver identification number for each such GM Vehicle and any
other information reasonably necessary to compute the Installation Commission.
The invoice shall be due and payable within thirty (30) days following receipt
by XM. Distributor shall not invoice XM for an Installation Commission until the
GM Vehicle for which such Installation Commission is payable has left the GM
plant and the authorized GM dealer to which such GM Vehicle has been shipped has
been sent a factory-invoice regarding GM Vehicle.
(c) Subscriber Bounty. In addition to the Installation Commission and
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subject to the fo
llowing sentence, XM agrees, during the Term, to pay
Distributor a [*****] commission (the "Subscriber Bounty") for each GM/XM
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Subscriber who Purchases a new Enabled GM Vehicle and subscribes to the XM
Service within twelve (12) months of the initial Purchase of such Enabled
GM Vehicle (a "Qualifying GM/XM
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***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Subscriber"). If a Qualifying GM/XM Subscriber for whom a Subscriber Bounty is
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payable fails to pay XM at least [*****] for receipt of the Base Subscription
Service, then XM shall have the right to credit the difference between the
Subscriber Bounty paid and the amount actually received by XM on account of such
GM/XM Subscriber to future Subscriber Bounty payments. The Subscriber Bounty
shall be paid in two (2) equal installments, the first of which shall be due and
payable n
o later than thirty (30) days following the end of the calendar month
during which a Qualifying GM/XM Subscriber initially subscribes to the XM
Service, and the second of which shall be due and payable no later than thirty
(30) days following the end of the calendar month during which such Qualifying
GM/XM Subscriber makes his initial three (3)-month subscriber payment for
receipt of the XM Service. In no event shall the Subscriber Bounty be payable
more than one time with respect to any one XM Receiver.
(d) Revenue Share. During the Term, Distributor shall receive a
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percentage of the revenue received by XM from GM/XM Subscribers for the Base
Subscription Service (the "Revenue Share"). The percentage shall depend on
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the number of Enabled GM Vehicles at the time such revenue is received as
follows:
If Number of Enabled
GM Vehicles is: Then Distributor's Revenue Share shall be:
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[*****] [*****]
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[*****] [*****]
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[*****] [*****]
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[*****] [*****]
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in excess of 8 million [*****]
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The Revenue Share percentages set forth in the table above shall apply to a
Base Subscription Service price between [*****] and $9.95 per month. If, in
response to competitive pressures, the Base Subscription Service price falls
below [*****] per month, then the Parties shall negotiate in good faith to
modify the Revenue Share in an equitable manner to reflect the realities of the
market. If XM fundamentally changes its business model (e.g., employs a more
aggressive advertising model), and, as a result of such change, the Base
Subscription Service price falls below [*****] per month, then the Revenue Share
payable to Distributor shall be determined as if the Base Subscription Service
price were $9.95 per month. Likewise, if the Base Subscription Service price is
more than $9.95 per month, then the Revenue Share shall be determined as if the
Base Subscription Service price were $9.95 per month.
The Revenue Share shall
be due and payable no later than thirty (30) days
after the end of each calendar month during the Term based upon subscriber
revenues collected during such month.
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***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
5. ADVERTISING AND PROMOTIONAL COMPONENTS:
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(a) Advertising Availability. During each of the calendar years set forth
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in the table below that this Agreement is in effect, XM agrees to make available
to Distributor a number of advertising spots (the "Spots") on XM channels
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comprising the XM Service representing the following dollar amounts (expressed
in thousands):
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Year: 2001 2002 2003 2004 2005 2006 2007 2008 2009
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Dollar
Value: [*****] [*****] [*****] [*****] [*****] [*****] [*****] [*****] [*****]
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The Spots shall only be used by Distributor to advertise and promote GM products
and services. If Distributor does not use all of the Spots made available to
Distributor during any calendar year, Distributor may not carry such unused
Spots forward into any subsequent calendar year during the Term. Distributor,
at its expense, shall create, produce and deliver the Spots to the location(s)
specified by XM. The Spots shall not be adverse to, or competitive with, XM's
business(es) or require XM to make any payments to a third party or obtain any
consents to insert the Spots on the XM Service. Distributor will indemnify the
XM Indemnitees as pro
vided herein in connection with Distributor's use of the
Spots (including, without limitation, the content thereof), and the Spots cannot
be resold by Distributor to a third party. The dollar value of the Spots will
be priced based on the then-current CPM rate sheets. Placement of the Spots
shall be mutually agreed upon by the Parties.
(b) Co-op Advertising. XM agrees that for each calendar year during the
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period commencing January 1, 2001, and ending December 31, 2009, XM shall
allocate [*****] per year of its annual advertising budget to Distributor to be
placed through Distributor's media buying agency for mutually agreed upon co-
operative advertising opportunities, provided that such co-op advertising as it
pertains to the XM Service is consistent with XM's positioning and branding of
the XM Service.
(c) Initial Free Service. Distributor shall use reasonable efforts to
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have all GM Vehicle Purchasers
of Enabled GM Vehicles subscribe to the XM
Service. As an incentive to increase subscriptions to the XM Service by
Purchasers of new Enabled GM Vehicles, Distributor is authorized to offer
Purchasers of new Enabled GM Vehicles up to [*****] months of free trial service
to the Base Subscription Service. If Distributor elects to offer a free trial
service to Purchasers of new GM Vehicles, then, within a reasonable period of
time following receipt of the report described in Section 7(a), XM will activate
the XM Receiver in the new GM Vehicles identified in such report.
(d) XM and Distributor shall mutually agree on the implementation of a
marketing plan to attract additional subscribers to the XM Service by
targeting
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***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Purchasers of Enabled GM Vehicles who have not subscribed to the XM Service. XM
agrees to pay Distributor a Revenue Share for subscribers who initially
subscribe to the XM Service after twelve (12) months from the initial Purchase
of an Enabled GM Vehicle; in consideration therefor, Distributor agrees to pay a
portion of the marketing costs associated with targeting such subscribers, with
such portion to be equal to the then-applicable Revenue Share percentage.
6. BANDWIDTH USAGE:
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(a) During the Term, XM agrees to a
llocate for use by Distributor [*****]
of the bandwidth on the XM System for audio and/or data transmissions by
Distributor to GM/XM Subscribers. Use of such bandwidth shall be subject to
compliance with applicable law, including without limitation, rules and
regulations of the FCC ("FCC Rules"). If requested by Distributor and
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permitted under applicable law, including, without limitation, FCC Rules, XM
will make this bandwidth available for transmissions by Distributor to all
owners of Enabled GM Vehicles regardless of whether they are GM/XM Subscribers.
In such event, Distributor shall provide XM with all information reasonably
necessary to activate and/or to deactivate the XM Receivers by Distributor's
customers that are not GM/XM Subscribers.
(b) Distributor agrees to give XM at last ninety (90) days' prior notice of
its intent to utilize the bandwidth allocated to Distributor hereunder. Such
notice shall set forth the amount of bandwidth to be utilized as wel
l as the
proposed use of such bandwidth. Until actually utilized by Distributor, XM shall
be entitled to use the bandwidth allocated to Distributor hereunder.
(c) To the extent Distributor elects to utilize any or all of the bandwidth
allocated to it hereunder, Distributor, at its expense, shall deliver to a
location in the Territory designated by XM a complete audio signal and/or data
transmission, as the case may be, by transmitting such signal and/or data via a
mutually acceptable means and in a form that will not require XM to modify the
signal and/or data in order to receive or to transmit such signal and/or data
over the XM System. XM, at its expense, shall furnish all other facilities
necessary for the receipt of Distributor's transmission and for the
retransmission of such signals and/or data to subscribers authorized to receive
such signals and/or data.
(d) Distributor agrees that the technical quality of each audio signal
and/or data transmission transmitted by Distributor to XM sha
ll be at least
equal to the technical quality of the audio signals and/or data transmissions
delivered to XM by any third party distributor of audio services and/or data
transmissions, respectively.
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***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
(e) Distributor shall not use the bandwidth allocated to it hereunder to
create or transmit music or entertainment radio services that compete with, or
otherwise use such bandwidth in a manner that could reasonably be expected to
adversely interfere with, the XM business(es). XM shall not use the remainder of
the bandwidth to create a service targeting new GM Vehicle Purchasers that
packages together the essential features of the current OnStar features as
described in Attachment I attached hereto.
(f) Without limiting the provisions of Section
9(c), Distributor shall
indemnify and hold harmless the XM Indemnitees from and against any and all
Costs arising out of Distributor's use of such bandwidth, including, without
limitation, the content of any of Distributor's transmissions via such bandwidth
or the sale or marketing of any products or services via such bandwidth.
7. CUSTOMER RELATIONSHIP:
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(a) Upon the Purchase of an Enabled GM Vehicle, Distributor shall provide
XM with a monthly report (the format and content of which shall be mutually
agreed upon) that, at a minimum, shall include the following information with
respect to each Enabled GM Vehicle sold during such month: (i) the make, model
and VIN of such Enabled GM Vehicle, (ii) the XM Receiver identification number
of the XM Receiver installed in such Enabled GM Vehicle, and (iii) the name and
address of the Purchaser, and, to the extent available and permitted by
applicable law, the telephone number and email address of such Purchaser.
(b) [*****] shall be prepared to handle calls for customer care as it
pertains to the XM Service for GM/XM Subscribers who are also OnStar customers;
provided, however, that [*****]; it being understood, however, that such
reimbursable costs shall not include fixed costs, including, without limitation,
overhead.
(c) Distributor agrees that in connection with customer calls relating to
the XM Service, its customer service representatives shall handle customer
requests, questions and complaints promptly and professionally and with the same
level of care with which such representatives handle customer requests,
questions and complaints regarding the OnStar service.
(d) [*****], at its expense, shall be responsible for the billing of the XM
Service purchased by GM/XM Subscribers.
8. INSTALLATION; TECHNICAL SPECIFICATIONS; TRADEMARKS:
--------------------------------------------------
(a) To assist XM with its business planning, Distributor agrees to meet
with represent
atives from XM on at least a quarterly basis to discuss its
projections for
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installations of XM Receivers in new GM Vehicles over the following twelve (12)
months, including (i) Distributor's forecast as to the number of XM Receivers it
plans to install in new GM Vehicles over the following twelve (12) months, (ii)
the makes and models in which Distributor is installing or proposing to install
XM Receivers, and (iii) the types of packages in which the XM Service may be
included. XM acknowledges that nothing contained in this Agreement shall be
construed as obligating Distributor to fulfill any of the projections or plans
discussed with XM at such meetings, provided that the provisions of Section
3(b)(ii) shall continue to apply. In addition, from June 1, 1999 through May 30,
2000, XM will provide Distributor monthly reports and xx
xx quarterly meetings to
inform Distributor fully about XM's progress toward the Commencement Date. From
June 1, 2000 through June 30, 2001, XM and Distributor shall hold monthly
meetings and include any suppliers, marketing representatives or other necessary
parties to facilitate the timely commencement of XM's commercial operations.
(b) Distributor shall purchase XM Receivers for installation only from
Authorized XM Manufacturers that meet the reasonable requirements of GM's
Worldwide Purchasing Organization. Installation of the XM Receivers shall be in
accordance with reasonable requirements and quality assurances provided by the
Authorized XM Manufacturers or XM, including, without limitation, positioning of
the antenna and antenna shape; provided, however, that such requirements and
assurances meet the manufacturing requirements of Distributor.
(c) Distributor acknowledges that XM does not manufacture the XM Receivers
and cannot guarantee availability or delivery thereof on any specific
date. In
addition, Distributor acknowledges that XM shall have no liability for any use,
property, ad valorem, value added, stamp or other taxes, charges or withholdings
arising out of the XM Receivers or the delivery thereof by Authorized XM
Manufacturers to Distributor.
(d) The technical specifications for the XM Receivers will be determined by
XM in conjunction with the Authorized XM Manufacturers; provided, however, that
XM agrees that its internal technology group will work with Distributor and the
Authorized XM Manufacturers of Distributor's choice to consult in the
development and testing of XM capable OEM radio/communications systems for GM
Vehicles.
(e) Distributor acknowledges that the XM names and marks are the exclusive
property of XM and that Distributor has not and will not acquire any proprietary
rights therein by reason of this Agreement. Distributor agrees to comply with
reasonable branding and trademark usage requirements regarding such names and
marks that are imposed by XM
from time to time and provided in writing to
Distributor.
9. WARRANTIES AND INDEMNITIES:
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(a) Each Party represents and warrants to the other that (i) it is duly
organized, validly existing and in good standing under the laws of the state
under which
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it is organized, (ii) it has the power and authority to enter into this
Agreement and to perform fully its obligations hereunder; (iii) it is under no
contractual or other legal obligation that shall in any way interfere with its
full, prompt and complete performance hereunder; (iv) the individual executing
this Agreement on its behalf has the authority to do so; and (v) the obligations
created by this Agreement, insofar as they purport to be binding on it,
constitute legal, valid and binding obligations enforceable in accordance with
their terms.
(b) XM IS NOT THE MANUFACTURER OF THE XM RECEIVERS AND XM MAKES NO
REPRESENTATIONS OR WARRANTIES OF ANY KIND, NATURE OR DESCRIPTION, EXPRESS OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHA
NTABILITY OR
FITNESS OF ANY OF THE XM RECEIVERS FOR ANY PARTICULAR PURPOSE, OR ANY OTHER
WARRANTY REGARDING THE DESIGN, CONDITION, CAPABILITY OR PERFORMANCE OF THE XM
RECEIVERS, AND XM HEREBY DISCLAIMS THE SAME. XM shall not be responsible for any
loss or damage resulting from any defect of or in the XM Receivers, latent or
otherwise, or resulting from any failure of the XM Receivers to operate or
faulty operation of the XM Receivers, nor for any direct, indirect,
consequential, incidental or other similar damage (including lost profits)
resulting from the transportation, installation, service, operation or use of
the XM Receivers, and shall not be responsible for any such loss or damage
resulting from the maintenance or repair of the XM Receivers. Rather, warranty
claims relating to XM Receivers installed in GM Vehicles shall be handled by the
Authorized XM Manufacturers, in accordance with Distributor's standard practices
with suppliers. In addition, XM shall not be responsible for any breach of any
Au
thorized XM Manufacturer's warranties, indemnities or supply agreements, and
no breach thereof shall affect the limitation on liabilities, rights and
obligations of the Parties set forth in this Agreement.
(c) XM and Distributor shall each indemnify, defend and forever hold
harmless the other, the other's affiliated companies and each of the other's
(and the other's affiliated companies') respective present and former officers,
shareholders, directors, employees, partners and agents ("Distributor
-----------
Indemnitees" and "XM Indemnitees," respectively), against and from any and
----------- --------------
all losses, liabilities, claims, costs, damages and expenses, including, without
limitation, fines, forfeitures, attorneys' fees, disbursements and court or
administrative costs (collectively, "Costs"), arising out of any breach of any
-----
term of this Agreement or any warranty, covenant or representation contained
herein.
(d) XM Indemnification.
------------------
(i) If any Distributor Indemnitee is charged with infringement of a
third party's intellectual property rights, including patent, trademark,
copyright, industrial design right, or other proprietary right, or misuse
or misappropriation of trade secret rights, as a result of the
installation, use, sale, offer for sale or import of XM Receivers in or for
use in GM Vehicles, and if such alleged infringement arises in any way from
an aspect or
- 13 -
function of the XM Receiver that meets a requirement or specification of XM
for receipt of the XM Service by the XM Receiver, XM will, at no expense to
Distributor: (i) defend, hold harmless and indemnify the Distributor
Indemnitees against any Costs relating to such charge or claim, including,
but not limited to, Costs for past infringement; and (ii) to the extent
appropriate, either, (A) procure for Distributor the right to continue the
installation, use, sale, offer for sale or import of XM Receivers in GM
Vehicles, or (B) procure for Distributor the availability of XM Receivers
with a modified design such that XM Receivers no longer infringe, provided
that such modification can be done without substanti
ally impairing its
functionality or performance.
(ii) With respect to claims arising under this Section 9(d),
Distributor will promptly notify XM in writing of any claim of infringement
or indemnification and will provide XM with the authority, information and
assistance necessary to defend or settle such claim; provided, however,
that Distributor will have the right to participate in such defense and to
approve any proposed settlement in advance. Distributor will have the right
to take over from XM the defense of a claim at any time, provided that
Distributor releases XM in writing from any further obligation of defense
or indemnification in connection with such claim unless otherwise mutually
agreed.
(iii) The obligations of XM and Distributor under this Section 9(d)
will survive termination of this Agreement with respect to XM Receivers
installed in GM Vehicles.
(e) A Party claiming indemnity under this Section 9 m
ust give the
indemnifying party prompt notice of any claim, and the indemnifying party shall
have the right to assume the full defense of any claims to which its indemnity
applies. The indemnified party, at the indemnifying party's cost, will cooperate
fully with the indemnifying party in such defense of any such claim. If the
indemnified party compromises or settles any such claim without the prior
written consent of the indemnifying party, then the indemnifying party shall be
released from its indemnity obligations with respect to the claim so settled.
(f) The representations, warranties and indemnities contained in this
Section 9 shall continue throughout the Term and the indemnities shall survive
the termination of this Agreement, regardless of the reason for such
termination.
10. FORCE MAJEURE:
-------------
Neither XM nor Distributor shall have any rights against the other
Party for the non-operation of facilities, the non-furnishing of the XM Service,
or its inability
to perform its terms and obligations under this Agreement if
such non-operation, non-furnishing or inability is due to an act of God or other
cause beyond such Party's
- 14 -
reasonable control, including, but not limited to, the occurrence of a
Regulatory Force Majeure Event.
11. NOTICES:
-------
Any notice or report given under this Agreement shall be in writing,
shall be sent postage prepaid by certified mail, return receipt requested, or by
hand delivery, or by Federal Express or similar overnight delivery service, or
by facsimile transmission, to the other Party, at the following address (unless
either Party at any time or times designates another address for itself by
notifying the other Party by certified mail, in which case all notices to such
Party thereafter shall be given at its most recently so designated address):
To XM: XM Satellite Radio Inc.
1
000 00xx Xxxxxx, X.X., Xxxxx 00
Xxxxxxxxxx, X.X. 00000
Facsimile Number: (000) 000-0000
Attention: President & CEO
cc: General Counsel
To Distributor: OnStar
000 Xxxx Xxx Xxxxxx, Xxxxx 000
Xxxx, XX 00000
Facsimile Number: (000) 000-0000
Attention: Executive Director,
Product Planning and Alliances
cc: General Counsel
Notice or report given by hand delivery shall be deemed received on
delivery. Notice or report given by mail shall be deemed received on the
earlier to occur of actual receipt or on the fifth day following mailing if sent
in accordance with the notice requirements of this Section 11. Notice or report
given by Federal Express or similar overnight delivery service shall be deemed
received on the nex
t business day following delivery of the notice or report to
such service with instructions for overnight delivery. Notice or report given
by facsimile transmission shall be deemed received when there is personal
confirmation of receipt by the person to whom such notice or report is sent.
12. CONFIDENTIALITY:
---------------
Neither XM nor Distributor shall disclose (whether orally or in
writing, or by press release or otherwise) to any third party any information
with respect to the terms and provisions of this Agreement or any information
contained in any data or report required or delivered hereunder or any materials
related thereto, except (a) disclosure as may be required by law, regulation,
court or government agency of
- 15 -
competent jurisdiction (redacted to the greatest extent possible); (b)
disclosure to each Party's respective officers, directors, employees and
attorneys, in their capacity as such; provided, however, that the disclosing
Party agrees to be responsible for any breach of the provisions of this Section
12 by such officers, directors, employees or attorneys; (c) disclosure by XM in
connection with its bona fide financing activities, (d) disclosure by XM of the
provisions relating to XM's exclusive obligations to Distributor to other
automobile manufacturers, (e) in the event that XM becomes subject to the
information reporting requirements of the Securities Exchange Act of 1934, as
amended, this Agreement may be made publicly available by XM to investors in
ac
cordance with the rules and regulations of the Securities and Exchange
Commission; (f) disclosure in the form of a public statement or press release
approved by the other Party hereto in advance of such statement or release; (g)
general marketing information releases describing the nature of this Agreement
in general terms; and (h) as mutually agreed upon, in writing, by XM and
Distributor in advance of such disclosure. This confidentiality provision shall
survive the termination of this Agreement.
13. MISCELLANEOUS:
-------------
(a) Assignment; Binding Effect; Reorganization. This Agreement shall be
------------------------------------------
binding on the respective transferees and successors of the Parties hereto,
except that neither this Agreement nor either Party's rights or obligations
hereunder shall be assigned or transferred by either Party without the prior
written consent of the other Party (which consent shall not be unreasonably
withheld); provided, however, no consent is necessary in the event of an
assignment to a successor entity resulting from a merger, acquisition or
consolidation by either Party or assignment to an entity under common control,
controlled by or in control of either Party.
(b) Regulated Entity. It is understood by the Parties that the business
----------------
of XM is regulated by the FCC and that nothing set forth in this Agreement shall
be construed (i) to require XM to act in a manner inconsistent with FCC Rules,
or the informal interpretations thereof communicated from time to time by the
FCC staff, or (ii) to prevent XM from taking positions on issues relating to its
FCC license or other rules and regulations applicable to XM, or the appropriate
interpretation thereof.
(c) Entire Agreement; Amendments; Waivers; Cumulative Remedies. This
----------------------------------------------------------
Agreement contains the entire understanding of the Parties here
to and supersedes
and abrogates all contemporaneous and prior understandings of the Parties,
whether written or oral, relating to the subject matter hereof. This Agreement
may not be modified except in a writing executed by both Parties hereto. Any
waiver of any provision of this Agreement must be in writing and signed by the
Party whose rights are being waived. No waiver of any breach of any provision
hereof shall be or be deemed to be a waiver of any preceding or subsequent
breach of the same or any other provision of this Agreement. The failure of
Distributor or XM to enforce or seek enforcement of the terms of this Agreement
following any breach shall not be construed as a waiver of such
- 16 -
breach. All remedies, whether at law, in equity or pursuant to this Agreement
shall be cumulative.
(d) Governing Law. This Agreement and all matters or issues collateral
-------------
thereto shall be governed by the laws of the State of New York, without regard
to its choice of law rules.
(e) Relationship. Neither Party shall be, or hold itself out as, the
------------
agent of the other or as joint venturers under this Agreement.
(f) Severability. The invalidity under applicable law of any provision
------------
of this Agreement shall not affect the validity of any other provision of this
Agreement, and in the event that any provision hereof is determined to be
invalid or otherwise ill
egal, this Agreement shall remain effective and shall be
construed in accordance with its terms as if the invalid or illegal provision
were not contained herein.
(g) No Inference Against Author. XM and Distributor each acknowledge
---------------------------
that this Agreement was fully negotiated by the Parties and, therefore, no
provision of this Agreement shall be interpreted against any Party because such
Party or its legal representative drafted such provision.
(h) No Third Party Beneficiaries. The provisions of this Agreement are
----------------------------
for the exclusive benefit of the Parties hereto and their permitted assigns, and
no third party shall be a beneficiary of, or have any rights by virtue of, this
Agreement.
(i) Headings. The titles and headings of the sections in this Agreement
--------
are for convenience only and shall not in any way affect the interpretation of
this Agreement. Any reference in this Ag
reement to a "Section" or "Attachment"
------- ----------
shall, unless the context expressly requires otherwise, be a reference to a
"Section" in, or an "Attachment" to, this Agreement.
(j) Non-Recourse. Notwithstanding anything contained in this Agreement
------------
to the contrary, it is expressly understood and agreed by the Parties hereto
that each and every representation, warranty, covenant, undertaking and
agreement made in this Agreement was not made or intended to be made as a
personal representation, undertaking, warranty, covenant, or agreement on the
part of any individual, and any recourse, whether in common law, in equity, by
statute or otherwise, against any individual is hereby forever waived and
released.
(k) Effective Date. This Agreement shall be effective upon the closing
--------------
of that certain Exchange Agreement between XM Satellite Radio Holdings Inc.,
American Mobile Satellite Corporation, and WorldSpace, Inc., dated as of June
___, 1999, in accordance with the terms and conditions contained therein (the
"Effective Date").
- 17 -
The Parties hereto have executed this Agreement as of the date first above
written.
ONSTAR, a division of
XM SATELLITE RADIO INC.: General Motors Corporation:
By: /s/ Xxxx Xxxxxx By: /s/ Xxxxxxxxx X. Xxxxx
---------------------------------- -------------------------------
Title: President and CEO Title: Executive Director
------------------------------- ----------------------------
- 18 -
ATTACHMENT I
to Distribution Agreement between
XM Satellite Radio Inc.
and
OnStar, a division of General Motors Corporation
See Attached.
------------
- 19 -
