Form S-1 Registration Statement

No exercise

Full exercise

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FYSqjm4CbkgSa0lMOz7K2babo/WgtzTMq074EcJJP8wyyECC9Kzh9GIiSQ6GR8fM eOFwnmpMvgXpv6VhZimd+Q== 0001193125-05-075692.txt : 20050413 0001193125-05-075692.hdr.sgml : 20050413 20050413164621 ACCESSION NUMBER: 0001193125-05-075692 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 26 FILED AS OF DATE: 20050413 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WorldSpace, Inc CENTRAL INDEX KEY: 0001315054 IRS NUMBER: 521732881 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-124044 FILM NUMBER: 05748696 BUSINESS ADDRESS: STREET 1: 2400 N STREET, NW CITY: WASHINGTON STATE: DC ZIP: 20037 BUSINESS PHONE: (202)969-6000 MAIL ADDRESS: STREET 1: 2400 N STREET, NW CITY: WASHINGTON STATE: DC ZIP: 20037 S-1 1 ds1.htm FORM S-1 REGISTRATION STATEMENT Form S-1 Registration Statement

As filed with the Securities and Exchange Commission on April 13, 2005

Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

WORLDSPACE, INC.

(Exact name of registrant as specified in its charter)

Delaware

4832

52-1732881

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

2400 N Street, N.W.

Washington, D.C. 20037

(202) 969-6000

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Donald J. Frickel, Esq.

General Counsel

WorldSpace, Inc.

2400 N Street, N.W.

Washington, D.C. 20037

(202) 969-6000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With copies to:

Jeffrey E. Cohen, Esq.

Coudert Brothers LLP

1114 Avenue of the Americas

New York, New York 10036

(212) 626-4400

Peter D. Nesgos, Esq.

James H. Ball, Jr., Esq.

Milbank, Tweed, Hadley & McCloy LLP

One Chase Manhattan Plaza

New York, New York 10005

(212) 530-5000

Approximate date of commencement of proposed sale to public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. ¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered

Proposed Maximum Aggregate
Offering Price (1)

Amount of

Registration Fee

Class A Common Stock, par value $.01 per share

$100,000,000

$11,770

(1)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) of the Securities Act of 1933.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and is not soliciting an offer to buy these securities, in any jurisdiction where the offer or sale is not permitted.


PRELIMINARY PROSPECTUS		Subject to Completion		, 2005

Shares

LOGO

Class A Common Stock

This is the initial public offering of shares of our Class A Common Stock. No public market currently exists for our common stock. We are offering all of the shares of Class A Common Stock offered by this prospectus. We expect the public offering price of our Class A Common Stock to be between $ and $ per share.

We have applied to have our Class A Common Stock approved for quotation on the NASDAQ National Market under the symbol “WINR.”

Investing in our Class A Common Stock involves a high degree of risk. Before buying any shares, you should carefully read the discussion of material risks of investing in our common stock under “ Risk factors” beginning on page 9 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.


	Per Share	Total
Public offering price	$	$
Underwriting discounts and commissions	$	$
Proceeds, before expenses, to us	$	$

The underwriters may also purchase up to an additional shares of our Class A Common Stock at the public offering price, less the underwriting discounts and commissions payable by us, to cover over-allotments, if any, within 30 days from the date of this prospectus. If the underwriters exercise this option in full, the total underwriting discounts and commissions will be $ and our total proceeds, before expenses, will be $ .

The underwriters are offering our Class A Common Stock as set forth under “Underwriting.” Delivery of the shares will be made on or about , 2005.

UBS Investment Bank

[Inside Cover Page of Prospectus: contains a map of Africa, Asia and Western Europe, showing the broadcast coverage area for (i) each of the three beams projected by WorldSpace’s AfriStar satellite and (ii) each of the three beams projected by WorldSpace’s AsiaStar satellite. Beneath the map is the caption: “Broadcast coverage footprint of WorldSpace’s AfriStar and AsiaStar satellites.”]

You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized anyone to provide you any information other than the information contained in this prospectus. We are not, and the underwriters are not, making an offer to sell, or seeking offers to buy, shares of our Class A Common Stock in any jurisdiction where such offer or sale is not permitted. You should assume that the information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our Class A Common Stock.

TABLE OF CONTENTS


Prospectus summary		1
Risk factors		9
Special note regarding forward-looking statements		30
Industry data		31
Use of proceeds		32
Dividend policy		32
Capitalization		33
Dilution		34
Selected historical consolidated financial data		35
Management’s discussion and analysis of financial condition and results of operations		37
Business		57
Government regulation		86


Management		95
Pre-offering recapitalization		103
Certain relationships and related party transactions		105
Principal stockholders		115
Description of capital stock		117
Shares eligible for future sale		122
Certain material U.S. income tax consequences to non-U.S. holders		125
Underwriting		129
Legal matters		133
Experts		133
Where you can find additional information		133
Index to consolidated financial statements		F-1

Through and including , 2005 (25 days after the commencement of this offering), federal securities laws may require all dealers that effect transactions in our Class A Common Stock, whether or not participating in this offering, to deliver a prospectus. This requirement is in addition to the dealers’ obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.

Note concerning Class A Common Stock and Class B Common Stock: We have two classes of common stock, Class A Common Stock and Class B Common Stock. Our Class A Common Stock and our Class B Common Stock vote as a single class on all matters, except as otherwise required by law, and each share of Class A Common Stock and each share of Class B Common Stock entitles its holder to one vote. There are certain restrictions on the right of holders of shares of our Class B Common Stock to receive distributions, including dividends, in respect of such shares, in the event that any such distributions are made. These restrictions do not apply to holders of our Class A Common Stock. The existence of such restrictions with respect to our Class B Common Stock is the only difference between the two classes of common stock. See “Description of capital stock.” Only shares of our Class A Common Stock are being sold in this offering.

Prospectus summary

This summary highlights selected information contained elsewhere in this prospectus. This summary may not contain all the information that you should consider before investing in our common stock. You should carefully read the entire prospectus, including the section entitled “Risk factors” and the consolidated financial statements and related notes included elsewhere in this prospectus, before making an investment decision.

Unless the context requires otherwise, the words “WorldSpace,” “Company,” “we,” “us” and “our” refer to WorldSpace, Inc. and its subsidiaries.

OUR BUSINESS

We were founded in 1990 by our Chairman and Chief Executive Officer, Noah Samara, who pioneered the development of satellite-based digital radio services, commonly known as Digital Audio Radio Service (DARS). His vision was to offer on an international basis a variety and quality of international, national and regional radio programming not available from AM and FM broadcasters through low-cost portable and mobile radio receivers owned by customers.

In pursuit of this vision, we were the first company to establish an operational DARS system and today are the only licensed DARS provider outside of North America, South Korea and Japan. We were one of the principal founding shareholders of XM Satellite Radio Holdings, Inc. (XM) and were instrumental in its development. In 1999, we sold our interest in XM. XM is licensed to use and develop our technology, which it has utilized, along with other technology, to become the dominant DARS provider in the United States with approximately 3.8 million reported subscribers as of March 31, 2005.

Through the end of December 2004, we have spent approximately $1.2 billion in connection with the development and launch of our business. Our infrastructure is a fully operational system consisting of three main elements: two geostationary satellites, AfriStar (launched in 1998) and AsiaStar (launched in 2000); the associated ground systems that provide content to and control the satellites; and the receivers owned by our customers. Our broadcast coverage area encompasses the most densely populated parts of Asia, including India and China, all of Africa and the Middle East and most of Western Europe, an area that includes approximately five billion people and 300 million automobiles. Each of our two operational satellites can service three large geographic areas through three beams capable of carrying up to 80 channels each. As a result, we have the technical capacity to broadcast a tailored mix of up to 80 channels in each of our target markets on a subscription basis for fees currently averaging between $3 and $5 per month. We intend to enhance our infrastructure with the addition of networks of terrestrial repeaters (i.e., “gap fillers”) in our target markets and next generation receivers designed to receive broadcasts from our networks of terrestrial repeaters as well as from our satellites, which will allow us to expand our service offering to include a mobile service for automobiles.

choice of programming largely unavailable in their local markets. Our subscription service provides a number of advantages over existing radio programming in our target markets, including greater diversity of content, multi-lingual programming, broader geographic coverage and limited advertising.

As the only company licensed to offer DARS in our broadcast coverage area (other than in South Korea and Japan), we are able to roll out our subscription service on a sequential basis in the markets we find the most attractive, subject to obtaining any required local regulatory approvals. The main limitation, historically, to our ability to roll out our service and acquire subscribers has been our limited access to capital. We began offering service in Africa in 2000 on a free-to-air basis. In 2002, we began trials of our subscription service by offering a limited number of encrypted channels and began transitioning our free-to-air customers into paying subscribers. As of March 31, 2005, we had more than 53,000 paying subscribers, including more than 22,000 in India. We have focused our recent efforts on refining our business plan and intensifying our subscriber acquisition marketing efforts in India, where we have begun the roll-out of our service; continuing planning for the roll-out of our service in China, where our core broadcast infrastructure is in place; and in planning for the roll-out of our service in Western Europe—the markets in which we believe demand for our service is greatest. Our strategy is to establish a strong set of local alliances and strategic partnerships to assist in distribution, content procurement, regulatory compliance and the build-out of a terrestrial infrastructure prior to embarking on a full roll-out in a particular market.

While we have in place our satellite infrastructure for China, we have not yet begun commercial operations in China. We believe that there will be significant demand for our service in China, which has a population of more than 1.3 billion people, 360 million households, as estimated by China Media Monitor, a large and growing middle class and one of the fastest growing automobile markets in the world. We intend to use a portion of the proceeds from this offering to continue development of our China business plan as well as for the roll-out of our service in China. We are currently in discussions with two media entities under the direct supervision of China’s State Administration of Radio, Film and Television (SARFT) and other media entities to establish joint ventures for content to be broadcast on the WorldSpace system in China, and we are discussing with SARFT approval of content to be provided by these entities as well as content we expect to provide to independent Chinese broadcasters. Pursuant to a series of agreements, China Satellite Communications Corporation (ChinaSat), our agent and one of six state-owned telecommunications operators in China, has acquired spectrum allocation and certain other

approvals necessary to operate our system and provide our service in China. Additionally, we have established, with ChinaSat, an uplink station in Beijing for our AsiaStar satellite.

We are also continuing business development in Western Europe, which we believe offers a significant opportunity for mobile DARS. We have conducted system tests with and negotiated preliminary agreements with major automobile manufacturers such as Citroën, a division of PSA Peugeot-Citroën, for the integration of DARS receivers in certain of their vehicles. Although we can provide DARS in Western Europe today through portable receivers, we believe that significant demand will be generated once we launch our mobile DARS targeted at Western Europe’s approximately 200 million automobiles. We believe the demand for mobile DARS in Western Europe may be greater than that of the United States, given Western Europe’s wide variety of ethnic and linguistic groups as well as a significant portion of the population that has emigrated to other parts of Europe from their countries of origin. Our regulatory franchise positions us to be the likely provider of DARS in Western Europe. However, as in India and China, we will need to develop a terrestrial repeater network prior to offering a mobile DARS in Western Europe. In addition, in various Western European jurisdictions, we will need to obtain additional local regulatory approvals.

Although our first commercial trial activities were focused on our AfriStar broadcast coverage area, our markets in Asia, particularly in India and China, proved to be more attractive for the dedication of our previously limited resources. However, we intend to capitalize on our brand recognition and the number of receivers sold within the AfriStar broadcast coverage area to build focused subscriber businesses in that coverage area where the opportunities prove attractive.

We also intend to target selected other markets as business and marketing opportunities arise. For example, we currently target U.S. and U.K. expatriates living in our broadcast coverage area, who we believe will be receptive to our services as a “voice from home,” and we anticipate targeting our service to other potentially receptive demographic groups, including Indian and Chinese expatriates living within our broadcast coverage area. We also intend to offer our services to business and government entities, including government agencies in India and the United States, who we believe would be interested in using our technology and broadcast footprint to provide inexpensive and wide-range audio and data transmission services. Since 2002, we have had initial success with U.S. government agencies, receiving and performing more than $8 million in contracts.

OUR STRENGTHS

We believe our competitive strengths include:

significant regulatory and economic barriers to entry for additional DARS providers;

history of innovation in the DARS industry;

established infrastructure in India, primed for full national roll-out;

extensive satellite broadcast coverage area; and

strong strategic relationships for developing the WorldSpace system and services.

OUR STRATEGY

The key elements of our strategy are to:

roll out our subscription-based DARS on a sequential basis in markets with strong demand for subscription radio service, starting with India, followed by China and then Western Europe;

develop and provide unique and compelling content targeted to the markets we serve;

continue to lower chipset and receiver costs and increase receiver capabilities;

offer a mobile service designed for automobiles; and

form partnerships with name-brand manufacturers, distributors and content providers in each of the markets we serve.

RECENT DEVELOPMENTS

Pre-offering recapitalization. On December 30, 2004 we issued $155 million of senior convertible notes to seven institutional investors. The notes are convertible into shares of our Class A Common Stock.

Immediately prior to the issuance of such notes, (i) we converted approximately $2 billion of outstanding debt and interest owed to Stonehouse Capital Limited (Stonehouse) into a contingent royalty obligation, pursuant to which we are required to pay Stonehouse 10% of our earnings before interest, taxes, depreciation and amortization (EBITDA), if any, for each year from January 1, 2005 through December 31, 2015, and (ii) we canceled approximately $256 million of outstanding debt and accrued interest owed to Yenura Pte. Ltd. in exchange for shares of our Class B Common Stock. As a result of these transactions, we eliminated all of our long-term debt, other than the new convertible notes. See “Pre-offering recapitalization.”

Alcatel settlement. On February 25, 2005, we entered into a Memorandum of Agreement on Settlement with Alcatel Space (Alcatel) settling certain amounts we owed to Alcatel for the construction of our two operational satellites and two additional satellites (one of which is fully assembled) that are currently in storage. The Memorandum of Agreement on Settlement supersedes the earlier contracts between Alcatel and ourselves and reduces the amount that we must pay to Alcatel from approximately $40 million to $19 million, of which $10 million has been paid and of which $2 million in cash and $7 million in shares of our Class A Common Stock (valued at the price per share of shares sold in this offering) will be delivered to Alcatel at the closing of this offering. See Note O to our consolidated financial statements contained elsewhere within this prospectus.

OUR CORPORATE INFORMATION

Our principal executive office is located at 2400 N Street, N.W., Washington, D.C. 20037 and our telephone number at that office is (202) 969-6000. We anticipate relocating our principal executive offices to 8515 Georgia Avenue, Silver Spring, Maryland in July 2005. Our website is located at www.worldspace.com. Information contained on our website is not part of, and is not incorporated into, this prospectus.

The offering

Class A Common Stock offered by us

Common stock to be outstanding immediately

after this offering

Class A Common Stock

Class B Common Stock

Total

Voting rights

Class A Common Stock and Class B Common Stock vote together as a single class on all matters, except as otherwise required by law, and each share of Class A Common Stock and each share of Class B Common Stock entitles its holder to one vote.

Use of proceeds after expenses

Our net proceeds from this offering after deducting the underwriting discounts and commissions and estimated offering expenses will be approximately $ million, or approximately $ million if the underwriters exercise their over-allotment option in full, assuming an initial public offering price of $ (the midpoint of the estimated price range set forth on the cover page of this prospectus). We intend to use the net proceeds of this offering in connection with the implementation of our India business plan, including build-out of the terrestrial repeater network, service launch in key cities in India and marketing expenses related to subscriber acquisitions in India; business development activities in China, Western Europe and other selected markets within our broadcast coverage area; and the roll-out of our services in China. Pending specific application of the net proceeds, we intend to invest the net proceeds received from this offering in short-term, investment grade interest-bearing instruments.

NASDAQ National Market symbol

“WINR”

Unless otherwise indicated, all share amounts in this prospectus assume the underwriters do not exercise their option to purchase up to additional shares of our Class A Common Stock to cover over-allotments, if any.

The number of shares of our common stock outstanding immediately after this offering is based on shares outstanding at , 2005. This number excludes:

shares of Class A Common Stock and shares of Class B Common Stock issuable upon the exercise of options outstanding as of , 2005, at a weighted average exercise price of $ per share in the case of options for Class A Common Stock and at a weighted average exercise price of $ per share in the case of options for Class B Common Stock;

shares of Class A Common Stock issuable upon exercise of warrants outstanding as of , 2005, at a weighted average exercise price of $ per share; and

shares of Class A Common Stock and Class B Common Stock reserved for issuance under the 2005 Shares Option Plan.

Summary historical consolidated financial data

The following table presents summary historical consolidated financial data as of, and for the years ended, December 31, 2000, 2001, 2002, 2003 and 2004, which data have been derived from our audited consolidated financial statements. You should read this information in conjunction with the information set forth in “Selected historical consolidated financial data,” “Management’s discussion and analysis of financial condition and results of operations” and our consolidated financial statements and related notes for the years ended December 31, 2002, 2003 and 2004, which are included elsewhere in this prospectus.


	Years Ended December 31,
Consolidated statements of operations data:	2000			2001			2002			2003			2004
	(in thousands, except share and per share data)
Revenue	$	3,683		$	10,114		$	9,589		$	13,074		$	8,581
Cost of revenue		29,661			12,798			21,454			22,941			14,677

Gross loss		(25,978	)		(2,684	)		(11,865	)		(9,867	)		(6,096	)
Operating expenses
Research and development		2,331			1,030			902			64			—
Selling, general and administrative		62,823			58,036			35,855			33,425			32,765
Stock-based compensation		32,398			5,178			3,981			3,528			90,323
Depreciation and amortization		50,958			63,029			61,354			60,909			61,183

Total operating expenses		148,510			127,273			102,092			97,926			184,271

Operating loss		(174,488	)		(129,957	)		(113,957	)		(107,793	)		(190,367	)
Other income (expense)
Interest income		3,853			649			337			542			431
Interest expense		(134,144	)		(142,312	)		(114,349	)		(108,371	)		(119,302	)
Other		(37,738	)		(15,935	)		(2,890	)		(2,089	)		(877	)

Total other expense		(168,029	)		(157,598	)		(116,902	)		(109,918	)		(119,748	)

Loss before income taxes and cumulative effect of accounting changes		(342,517	)		(287,555	)		(230,859	)		(217,711	)		(310,115	)
Income tax provision (benefit)		28,458			—			—			—			(267,272	)

Loss before cumulative effect of accounting changes		(314,059	)		(287,555	)		(230,859	)		(217,711	)		(577,387	)
Cumulative effect of accounting changes		—			—			—			—			—
Impairment of goodwill		—			—			(44,255	)		—			—

Net loss	$	(314,059	)	$	(287,555	)	$	(275,114	)	$	(217,711	)	$	(577,387	)

Loss per share—basic and diluted
Loss per share before accounting change	$	(35.23	)	$	(31.07	)	$	(24.94	)	$	(23.52	)	$	(61.87	)
Cumulative effect per share of a change in accounting principle		—			—			(4.78	)		—			—

Net loss per share	$	(35.23	)	$	(31.07	)	$	(29.72	)	$	(23.52	)	$	(61.87	)

Weighted average number of shares outstanding		8,914,693			9,255,789			9,255,789			9,255,789			9,332,179


	As of December 31,
Consolidated balance sheet data:	2000			2001			2002			2003			2004
	(in thousands)
Current assets
Cash and cash equivalents	$	28,702		$	1,368		$	2,788		$	1,740		$	154,362
Other current assets		40,570			21,471			15,736			9,615			6,322

Total current assets		69,272			22,839			18,524			11,355			160,684
Restricted cash and investments		4,783			4,195			3,996			3,819			1,775
Property and equipment, net		25,608			21,191			15,664			11,696			11,431
Satellites and related systems, net		682,026			634,238			576,721			520,539			459,426
Deferred finance costs, net		34,756			30,721			26,688			22,654			14,724
Investments in affiliates and other assets		69,665			57,607			6,364			1,982			1,047

Total assets	$	886,110		$	770,791		$	647,957		$	572,045		$	649,087

Long-term debt, current portion		—			—			10,000			1,411,723			—
Other current liabilities		68,698			69,673			76,892			526,923			114,338
Long-term debt, net of current portion		1,387,026			1,413,956			1,430,891			56,098			155,000
Contingent royalty obligation		—			—			—			—			1,814,175
Other long-term liabilities		124,830			263,664			377,606			37,811			254,980

Total liabilities		1,580,554			1,747,293			1,895,389			2,032,555			2,338,493
Shareholder’s deficit		(694,444	)		(976,502	)		(1,247,432	)		(1,460,510	)		(1,689,406	)

Total liabilities and shareholder’s deficit	$	886,110		$	770,791		$	647,957		$	572,045		$	649,087

Risk factors

An investment in our common stock involves a high degree of risk. You should carefully consider the following risks and other information in this prospectus before you decide whether to invest in shares of our Class A Common Stock. Our business, prospects, financial condition, operating results or cash flows may be materially and adversely affected by the following risks, or other risks and uncertainties that we have not yet identified or currently consider to be immaterial. In that event, the trading price of our Class A Common Stock could decline, and you could lose all or part of your investment.

RISKS RELATED TO OUR BUSINESS

Our business has experienced significant losses and we may not be able to generate sufficient revenue to become profitable.

Through the end of December 2004, we have spent approximately $1.2 billion in connection with the development and launch of our business. To date, the build-out of our infrastructure and our day-to-day operations have been financed substantially by our financing activities, and we have had limited revenue from operations. As of December 31, 2004, we had incurred aggregate losses of approximately $2.1 billion. We plan to dedicate significant resources to our current business strategy, including increased marketing and construction of terrestrial repeater networks in India, development of next generation mobile receivers and launch of service in China. In addition, to the extent we have positive annual earnings before income, taxes, depreciation and amortization (EBITDA), we are required to make a payment of 10% of our EBITDA under our royalty agreement with Stonehouse Capital Limited (Stonehouse). We anticipate that, in the near term, we will continue to rely on the proceeds from our private placement of senior convertible notes in the aggregate principal amount of $155 million in December 2004 and the proceeds from this offering to sustain our operations. In the future, we will need to generate significant revenue in order to achieve a profit from operations, and we can offer you no assurance that we will ever become profitable.

There may not be sufficient demand for our service to allow us to become profitable.

We are the only company licensed to offer DARS in our current target markets of India, China and Western Europe. We cannot estimate with any degree of certainty the potential market demand in our target markets for a subscription-based digital satellite radio service or the degree to which our service will meet such market demand. We will achieve or fail to gain market acceptance depending upon many factors, some of which are not within our control, including:

whether we can offer sufficient high-quality programming consistent with our potential customers’ preferences;

the willingness of consumers, on a mass-market basis, to pay subscription fees to obtain satellite radio broadcasts;

the extent to which we can limit customer turnover, either as a result of customers electing voluntarily to discontinue our service (including customers who discontinue following rate increases at the end of any promotion) or as a result of customers being discontinued due to nonpayment;

the cost, availability and consumer acceptance of radios capable of receiving our broadcasts;

our marketing and pricing strategies, as well as those of our receiver manufacturers;

competition from other media and entertainment in our target markets;

the development of alternative technologies or services; and

the general economic, political and social conditions in our target markets.

Risk factors

If for any reason we cannot achieve a rapid and significant level of consumer acceptance for our service, we may not achieve the market penetration rates necessary for us to execute our business plan successfully.

High subscriber acquisition costs could adversely affect our profitability.

In order to attract subscribers to our service in India, we are subsidizing a portion of the costs of purchasing the lowest-cost receiver capable of receiving our broadcast that is offered in our Indian market. We intend to continue to subsidize a portion of the costs of purchasing receivers in our Indian market and in other markets as we introduce our service. We are also in the process of launching a large advertising and sales campaign and other promotional activities as we roll out our services in different markets in India. Consequently, our subscriber acquisition costs are expected to increase substantially. Our subscriber acquisition costs may increase even further if we determine that more aggressive advertising, promotions or other marketing efforts are necessary to promote faster subscriber growth or to respond to competition, or are otherwise advisable. If these subscriber acquisition costs become sufficiently high they could materially adversely affect our business and financial performance.

We may not be able to compete effectively against conventional radio stations or other potential providers of consumer audio services.

In seeking market acceptance, we will encounter competition for both listeners and future advertising revenue from many sources, including traditional and, when available, digital AM/FM radio, shortwave radio, Internet based audio providers, direct broadcast satellite television audio service, systems that carry audio service and digital music players. We could also face competition from Terrestrial Digital Radio services in the future, although such services are not currently offered in India or China, our two immediate target markets. Unlike our service, traditional AM/FM radio already has a well-established market presence for its services and generally offers free-to-air broadcast reception supported by commercial advertising, rather than by a subscription fee. Also, many radio stations offer information programming of a local nature, such as news and sports reports, which we may not be able to offer as effectively as local radio. To the extent that consumers place a high value on these features of traditional AM/FM radio, we are at a competitive disadvantage to the traditional providers of audio entertainment services. In addition, although potential competition in our target markets with other satellite broadcast radio services is limited by regulatory and other restrictions, such competition could emerge. If an alternative satellite radio broadcast system that is comparable or superior to our system were to be introduced in our target markets, or if any competitor were to begin offering another mobile radio service before us, we could experience competitive pressure or be at a competitive disadvantage.

We operate with very limited staffing of accounting functions and we will be relying on new accounting staff and establishing new and enhanced systems of internal controls; as our business expands globally, the demands on our accounting staff will also grow.

We have experienced severe working capital constraints for several years and, as a result, we have operated with very limited staffing of key functions, including accounting. We have also experienced turnover of our accounting staff, including the replacement of our Chief Financial Officer and the loss of our Controller in September 2004. These circumstances have increased demands on our internal accounting and financial staff. While we are currently actively seeking to hire additional staff at both the senior and junior levels in our finance and accounting areas, we have retained an external consultant to perform certain core accounting functions to address temporarily our accounting undercapacity. External consultants performing core accounting functions are unlikely to understand our business and operations to the same extent that our internal staff would be expected to, and we believe it is important, as we hire additional senior and junior staff, that we transition all such accounting functions in-house as rapidly as possible.

Risk factors

Our independent auditors have identified material weaknesses and significant deficiencies in our internal controls in their 2004 Internal Control Letter to us. We have engaged PricewaterhouseCoopers as a third-party consultant with respect to the development of appropriate internal controls. We are in the process of establishing such new and enhanced systems of internal controls as we believe necessary to allow management to report on, and our independent auditors to attest to, our internal controls, as required by the management certification and auditor attestation requirements mandated by the Sarbanes-Oxley Act of 2002. We will be performing system and process evaluation and testing (and any necessary remediation) of our internal control system on an ongoing basis. While we anticipate being able to implement fully the requirements relating to internal controls and all other applicable requirements of the Sarbanes-Oxley Act of 2002 in a timely fashion, we cannot be certain as to the timing of completion of our evaluation and testing and any necessary remediation or the impact of the same on our operations. Our development, implementation and maintenance of appropriate internal controls will depend materially both on our successful hiring and retention of key senior accounting personnel.

In addition to addressing the accounting and internal controls of our current operations, our employees, providers and systems will have to accommodate increasingly complex financial reporting demands as we expand our operations in India and as we introduce our services in other markets, including China. We will also have to be able to retain and attract appropriately qualified personnel in key staff areas to maintain an effective accounting and internal controls system.

If we are unable to attract and retain qualified personnel, to implement and integrate financial reporting and accounting systems or if we are unable to scale these systems to our growth, we may not have adequate, accurate or timely financial information, and we may be unable to meet our reporting obligations or comply with the requirements of the SEC, the NASDAQ National Market or the Sarbanes-Oxley Act of 2002, as a result whereof we might be subject to sanctions, including the suspension or delisting of our Class A Common Stock from the NASDAQ National Market and the inability of registered broker dealers to make a market in our Class A Common Stock, or investigation by regulatory authorities. Any such action or other negative results caused by our inability to meet our reporting requirements or comply with legal and regulatory requirements or by disclosure of an accounting, reporting or control issue could adversely affect the price of our Class A Common Stock.

Our satellites have a limited life and may fail in orbit.

Satellites utilize highly complex technology and, accordingly, are subject to in-orbit failures after they have been successfully placed into operation. Our AfriStar satellite was launched in October 1998, and our AsiaStar satellite was launched in March 2000. Our satellites are designed to operate in orbit for approximately 12 years after launch. After this period, our satellites’ performance in delivering our service may deteriorate. Each satellite has an orbital maneuver life of 15 years, which means that each satellite has been designed to maintain its assigned orbital position (within 0.1 degrees) for 15 years. The useful life of our satellites may vary from our estimate. In addition to AfriStar and AsiaStar, we have two additional satellites, one fully assembled satellite (F3) and another satellite (F4) for which the long lead parts have been procured and partially assembled, which are currently maintained in storage in Toulouse, France. The F3 satellite, which can be used to replace either AfriStar or AsiaStar, may also be modified and launched to provide DARS in Western Europe. In such case, it is envisioned that the F4 satellite, upon full assembly, would be maintained as an on-ground spare satellite that could be launched in the event that one of our other three satellites experiences an in-orbit failure. Nevertheless, if one of our satellites were to fail or suffer significant performance degradation prematurely and unexpectedly, it would cause interruption in the continuity of our service or impair the quality of our service and harm our business and financial performance. In addition, if we were to launch another satellite, there is no

Risk factors

assurance that it would not be damaged or destroyed during launch, that it would successfully reach geostationary orbit or that it would function properly once in orbit.

A number of factors could decrease the useful lives of our in-orbit satellites, including:

expected gradual environmental degradation of solar panels;

defects in the quality of construction;

failure of satellite components or systems that are not protected by back-up units;

loss of the on-board station-keeping system that maintains the geosynchronous position;

unexpected increase in use of fuel; and

in rare cases, damage or destruction by electrostatic storms or collisions with other objects in space.

Our AfriStar satellite has developed a defect in its solar panels. The panels are collecting less power than intended, and we expect that this will affect that satellite’s operation starting in 2008. At that time we will need to make an operating decision regarding the use of our AfriStar satellite, since it would be possible to extend the useful life of the satellite through careful management of the power generated by the solar array. This may require broadcasting a smaller number of channels over one or more of its beams in order to conserve power or reducing the power radiated by one or more of its beams with resulting reduction of the broadcast coverage area. Our target markets of India and China are served by the AsiaStar satellite and are not affected by the performance of our AfriStar satellite.

Our insurance may not cover all risks of operating our satellites.

We currently maintain in-orbit insurance coverage for our AsiaStar satellite, which would reimburse us for a portion of the insured satellite value in the event of a partial loss or for the full insured value in the event of a total loss. Our current one-year policy expires on March 21, 2006. In addition, we intend to acquire in-orbit insurance coverage on our AfriStar satellite by the end of April 2005. We anticipate that our in-orbit insurance policies will continue to be on a year-to-year basis. Although we intend to maintain insurance on our AsiaStar and AfriStar satellites, any determination we make as to whether to purchase or maintain in-orbit insurance coverage will depend on a number of factors, including the availability of insurance in the market and the cost of available insurance. We will also consider the exclusions to coverage, if any, required by insurers and the other terms and conditions upon which the insurance is available. Even if we seek to obtain replacement insurance in the future, we may not be able to obtain this insurance on reasonable terms and conditions. Moreover, this insurance coverage may be costly, if available at all. The cost of insurance may increase or its terms may become disadvantageous with respect to exclusions and deductibles as a result of several factors, including the failure or degradation of performance of one of our in-orbit satellites or the failure of a similar satellite owned by another operator.

Even when we have obtained in-orbit insurance for a satellite, such insurance coverage will not protect against all losses to the satellite. Our current insurance policy for AsiaStar contains specified exclusions, deductibles and material change limitations. These exclusions include losses resulting from acts of war, insurrection or military action, as well as lasers, directed energy beams, or nuclear or anti-satellite devices. These exclusions also relate to losses resulting from government confiscation and nuclear reaction or radioactive contamination. In addition, our insurance does not protect us against lost or delayed revenue, business interruption or lost business opportunities. In addition to other material, adverse effects on us, the partial or total loss of an uninsured satellite would cause us to recognize a loss equal to the book value of any such total loss or, in the case of a partial loss, an amount equal to the proportion of the satellite’s book value corresponding to such partial loss.

Risk factors

Our exposure to exchange rate fluctuations could materially affect our reported results of operation.

We anticipate that the vast majority of our revenue will be derived from our operations outside the United States, particularly India, China and Western Europe. We present our financial statements in U.S. dollars. Accordingly, changes in the exchange rates between the local currencies of our operations and the U.S. dollar could materially affect the translation of financial results into U.S. dollars for purposes of reporting our financial results. Because we report our financial results in U.S. dollars, our financial statements will include gains and losses from foreign currency translation adjustments, and these adjustments could have a material impact on our reported results of operations and could result in significant period-to-period fluctuations in our reported results of operations which are not attributable to, and may be at variance with, our actual business performance. Exchange rate fluctuations may also affect the relative values of working capital advances between our various subsidiaries and of payments to and receipts from third parties, the effects of which impact our results of operations.

Royalty payments to Stonehouse could materially limit our available working capital and negatively impact our results of operations.

We have significant contingent annual payment obligations for the next ten years under our royalty agreement with Stonehouse. We are obligated to pay to Stonehouse 10% of our annual EBITDA, if any, for each annual period through December 31, 2015. In addition, we must maintain a segregated reserve account to be funded in each quarter of any year in which EBITDA is forecast to be positive at the rate of 25% of the estimated annual payment. The royalty agreement also places limitations on our ability to dispose of assets. The royalty payment and reserve account obligation and the restrictions imposed by the royalty agreement could limit our cash flow and funds available for our working capital, and could result in a charge against our earnings which could have a material, adverse effect on our results of operations. See “Pre-offering recapitalization” and “Certain relationships and related party transactions.”

We may incur significant delays and expense in the development and installation of terrestrial repeater transmitters, and we cannot be certain that the systems will function properly.

Our planned introduction of a mobile service in India requires the installation of a network of terrestrial repeating transmitters (terrestrial repeaters), which serve as gap fillers to avoid signal disruption in the markets in which we plan to offer mobile products. The eventual roll-out of our mobile services in China and Western Europe will also require the installation of networks of terrestrial repeaters.

We intend to install terrestrial repeaters to rebroadcast our satellite signals in various cities in India as we expand our terrestrial network and roll out our services. We are currently developing new technology for the future terrestrial repeaters in cooperation with SED Systems (SED), a division of Calian Ltd. We may experience significant delays in deploying the repeater network in India if the terrestrial repeater technology turns out to be more complex than we currently expect. Moreover, since we rely on SED to provide key technical expertise, personnel-related delays may be out of our control. As our current receivers are not compatible with the terrestrial repeaters, we will also need to offer a next generation of receivers that can receive these rebroadcasts as well as broadcasts directly from our satellites. There can be no assurance that our mobile service will function using the terrestrial repeaters until we have installed and tested a substantial portion of the new equipment. In addition, some areas may still experience “dead zones” and we may incur additional costs to install terrestrial repeaters to cover these areas. We also may experience significant delays and expense in the implementation of our current plan to install terrestrial repeaters in the event that third-parties with existing terrestrial repeater networks, including radio broadcasters, upon whom we may be relying to secure optimal sites and install our terrestrial repeater network, do not cooperate with us or do not act in a timely and effective manner.

Risk factors

We may also experience signal interference with our new receivers in India and later in China and Western Europe, due to terrestrial transmissions in portions of the L band spectrum. When we identify a signal that is interfering with our terrestrial rebroadcasts, we will seek to negotiate a solution with the local operator of the transmitter. However, we may not always be able to reach a timely agreement through the relevant government authorities responsible for frequency management that will allow our customers to receive our service without any interference.

We may be unable to obtain the licenses required to operate our terrestrial repeater networks in India or to retain the necessary authorizations to operate a subscription service.

The Indian government does not currently have a regulatory framework or written policy governing satellite radio services, and we are presently the only satellite radio services provider in the country. We have received government authorizations to provide our existing subscription service and to import receivers. However, in order to deploy complementary terrestrial repeaters in India, we will be required to obtain spectrum allocation, transmitter and service licenses. In addition, we will be required to obtain licenses for a next generation of receivers, unless they can be classified as radio receivers. Moreover, in a public consultation paper issued on December 29, 2004, the Telecom Regulatory Authority of India (TRAI) indicated that it may recommend imposing foreign ownership restrictions on terrestrial repeater licenses, similar to those currently applicable to FM radio licenses. The consultation paper discussed whether certain exemptions should apply for subscription-based satellite radio services, and also suggested that WorldSpace might be licensed automatically under any new regulatory framework for satellite radio. Recommendations of TRAI are not binding on the Indian government. The Indian government has specific regulations for other broadcasting sectors wherein it regulates issues like foreign ownership and management eligibility criteria, and technical specifications. The Indian government may issue specific regulations for our business which can impose restrictions or require additional licenses for our existing business as well as on the implementation of the terrestrial repeater component. There can be no assurance that we will be able to obtain all the required licenses in India. In addition, there can be no assurance that the Indian government will not revoke or change the terms of the authorizations we have received for subscription audio services and the importation of receivers. Authorizations for our repeater networks will also be required in China and Western Europe. Any failure to obtain any required licenses or any material changes in our current authorizations or imposition of any additional restrictions could adversely affect our ability to conduct business.

We may experience delays and incur significant costs in the development and production of our receivers.

The timely manufacture and distribution of our receivers at a price that is attractive to consumers is a critical factor in the execution of our business plan. The receivers for our Indian market are manufactured by a limited number of third-party vendors. We expect the same will be true for the receivers for our Chinese market. Because the current market for our receivers is limited, the financial incentive for manufacturers to produce significant quantities of our receivers at an attractive price is similarly limited. If we are unable to maintain established relationships with our manufacturers or develop comparable relationships with new vendors, we could experience delays in the development, supply and availability of our receivers at acceptable quality and price levels. Significant delays in the development, manufacture and availability of receivers at an attractive price to consumers would materially impact our ability to carry out our business plan. Our business plan also depends on the reduction of the cost of our receivers in order to make them available to consumers at an attractive price. Currently, to encourage sales of our receivers, we subsidize our lowest-cost receivers in India. There can be no assurance that we will not need to continue to subsidize the cost of our receivers by offering them to consumers at a price below their cost to us.

Risk factors

Our next generation of receivers will eventually replace our current receivers, which may result in increased costs, higher subscriber turnover, or lower receiver sales.

In connection with the introduction of our mobile DARS and the introduction of our next generation of receivers, we intend to begin broadcasting our signal in a modified waveform. Our current receivers will not be able to decode the modified waveform signal. While we intend to broadcast in both waveforms for a period of time, we will eventually cease broadcasting in the older waveform. We will have to transition our subscribers from the older receivers to our next generation receivers. Because our next generation of receivers will, when introduced, be more expensive than our existing receivers, we will face increased costs to the extent we decide to subsidize the transition of our current subscribers to our next generation receivers. In addition, new customers may not be willing to pay for the higher priced new receivers. We may also experience higher subscriber turnover if existing subscribers decide not to purchase a new receiver.

Our ability to conduct our business in China may be adversely affected if we cannot maintain our relationship with ChinaSat or another licensed Chinese telecommunications operator and with Chinese manufacturers of our receivers and obtain approval for our content from the appropriate Chinese regulatory authorities.

Our next critical target market after India is China. Due to the ownership restrictions under Chinese law, we have depended on China Satellite Communication Corporation (ChinaSat), in which we have no ownership, to obtain the necessary regulatory authorizations from the Ministry of Information Industry. ChinaSat, as our agent, has acquired the required government approvals for spectrum allocation and operation allocation. Our relationship with ChinaSat is based upon a five-year renewable agreement that expires in August 2005. We have an option, exercisable until July 2005, to extend this relationship with ChinaSat for an additional three-year term. We are also a party to two active agreements with Chinese companies to manufacture the receivers necessary for our customers to receive our service. We will also need to partner with local companies to obtain regulatory approval from the Chinese State Administration of Radio, Film and Television (SARFT) for our audio content broadcast by our service and approval from the appropriate Chinese regulatory authorities for data content. Our ability to execute our business plan in China will depend on our relationship with ChinaSat (or with another of the licensed Chinese telecommunications operators that are able to obtain and hold the necessary spectrum and operations licenses), SARFT and the receiver manufacturers. Therefore, any disruption in these relationships could materially delay or impair the implementation of our China business plan and our future profits. In addition, should ChinaSat, one of the receiver manufacturers or any other entity with which we partner in China fail to perform its obligations under our agreements, we may have to rely on legal remedies under Chinese law. The laws and regulations relating to contractual arrangements and foreign investment in China are relatively new and their interpretation and enforcement involve uncertainties, which could limit our ability to enforce these agreements in China.

Failure of our ground network infrastructure would adversely affect our ability to broadcast content up to our satellites.

We rely on our ground network infrastructure, including our satellite control network and our broadcast facilities, for key operations, including transmitting broadcast signals up to our satellites. We have limited broadcast facilities to transmit content to our satellites for broadcast to our customers. We rely primarily on our Singapore uplink station, which is hosted by Singapore Telecom, to transmit content to our India market, as our Melbourne, Australia uplink station only has the transmitting power to transmit approximately four channels. Our uplink stations were uniquely built for us and, therefore, it will take a significant amount of time to obtain replacement parts in the event they are needed. If a natural or other disaster significantly damaged our broadcast system, particularly our Singapore uplink station, if key parts were to fail for any reason, or if Singapore Telecom failed to support the Singapore uplink station

Risk factors

properly or terminated their host services contract, our ability to provide service to subscribers, at least on an interim basis, would be limited substantially, and, accordingly, our business and operating results would be materially and adversely affected.

We have faced in the past, and may face in the future, challenges and constraints in obtaining financing.

There can be no assurance that we will not need to raise additional financing to carry out our current business plan. Several factors could delay or impair our ability to obtain additional financing or result in increased costs, including the following:

our inability to receive regulatory approval for our mobile terrestrial repeater network in India;

our inability to receive content or other regulatory approvals in China;

social, economic or political conditions in our target markets and globally;

our inability to generate sufficient market demand for our service;

high subscriber costs necessary to attract subscribers;

failure or performance degradation of one or both of our satellites;

delays by our receiver manufacturers in making and keeping commitments to produce the necessary number of receivers;

delays in the finalization of chipset development for our next generation receivers or in the installation of terrestrial repeater networks;

changes in government laws or regulations, including those relating to competing modes of audio broadcasts; and

any delay in, or increased costs of, implementing our business plan for India or China.

In addition, we have faced, and in the future may continue to face, many challenges and constraints in financing our development and operations. For several years we have experienced severe working capital constraints and have incurred substantial delays in implementing our business plan largely as a result of our inability to raise financing. For example, prior to 2005, financing shortfalls forced us to limit our Indian marketing effort and the roll-out of our services. We cannot guarantee that in the future we will not experience periods where we have limited funding and difficulty in raising any necessary capital on favorable terms, if at all. During any such period, we would continue to need significant amounts of cash to fund our capital expenditures, administrative and overhead costs, and contractual obligations. In such circumstances, if we were not able to obtain additional financing, we could be forced to curtail, or even cease, operations.

We depend on key personnel.

Our success will depend, in part, upon key technical and managerial personnel, as well as our ability to attract and retain additional highly-qualified personnel as we expand our services in India and launch service in China. In particular, we believe that our success will depend to a significant extent upon Noah Samara, our founder, Chairman and Chief Executive Officer. The loss of Mr. Samara would have a material, adverse effect on our business. We currently anticipate obtaining “key-man” insurance for Mr. Samara by the end of April 2005. Loss of other key personnel or the inability to hire and retain qualified personnel in the future could have a material, adverse effect on our financial performance, results of operations and financial condition.

Risk factors

Failure to maintain our FCC license authority, to comply with obligations under our Deed of Agreement with the ACA or to receive license renewals and extensions for our AfriStar and AsiaStar satellites from the relevant regulatory agencies could have a material, adverse effect on our business and operations.

The operation of our AsiaStar satellite is authorized by a Deed of Agreement (the Deed) issued by the Australian Communications Authority (ACA). The Deed remains in force as long as our wholly-owned (indirect) Australian subsidiary, AsiaSpace Ltd. (AsiaSpace), fulfills its obligations as specified therein, which relate to compliance with the International Telecommunications Union (ITU) Radio Regulations, maintenance of the telemetry, tracking and control facility in Australia and our subsidiary’s continued incorporation in Australia. If AsiaSpace is determined to have violated the terms of the Deed, the Australian Space Licensing and Safety Office has the discretion to terminate the Deed and suppress the ITU notification of the network. Additionally, once the AsiaStar satellite reaches the end of its service life, we will need to apply to the ACA for authorization to launch and operate a replacement satellite at the same orbital location. However, there can be no guarantee that the ACA will grant such an authorization, and in that case, the orbital location currently occupied by our AsiaStar satellite could become available for use by other satellite operators.

The AfriStar satellite is licensed by the U.S. Federal Communications Commission (FCC). Our FCC license provides for a ten-year license term that expires in January 2010, which is subject to renewal at that time. If we fail to comply with the terms of this license, the FCC may deny our request to renew the license. We have filed an application with the FCC for a second satellite, called AfriStar-2, to be co-located with AfriStar. The purpose of the AfriStar-2 application is to launch and operate a second satellite to enhance our service coverage in North Africa, the Mediterranean basin and Western Europe and to extend the useful life of AfriStar which has been affected by a defect in its solar panels described above. See “—Our satellites have a limited life and may fail in orbit.” The FCC’s rules do not guarantee that it will grant licenses for replacement satellites or for additional co-located satellites. In practice, however, the FCC generally grants such requests to a licensee in good standing. If at the end of the useful life of AfriStar the FCC denies our request to extend the term of our current license for AfriStar or does not issue to us a license to launch and operate a second or replacement satellite, the orbital location currently occupied by our AfriStar satellite could become available for use by other satellite operators. Finally, the FCC could impose milestone and bond requirements on either the AfriStar-2 license or any subsequent satellite license, which would require that we post a bond of up to $3 million, the value of which would be reduced as certain stipulated milestones are met. If we were to fail to meet any milestone, we could forfeit the bond and potentially lose our license.

Future changes to the regulations and policies governing the telecommunications and media industries in the markets in which we operate may have a material, adverse effect on our business and operations.

Possible future changes to regulations and policies of the local governments applicable to the telecommunications and media industries in the markets in which we operate could have a material, adverse effect on our business and operations. Regulations and legal requirements governing the telecommunications industry are relatively new and evolving in many jurisdictions throughout the world. For example, many European jurisdictions are reevaluating their existing regulatory frameworks to accommodate DARS-type services, and other jurisdictions, including India and China, have only recently begun to develop the framework that will apply to such services. Because these restrictions are particularly new in the markets in which we operate, their interpretation and enforcement may involve significant uncertainty.

Our technology may become obsolete.

The satellite industry and the audio entertainment industry are both characterized by rapid technological change, frequent new product innovation, changes in customer requirements and expectations and

Risk factors

evolving industry standards. Our success will depend in part on our ability to develop and introduce on a timely basis new technology that keeps pace with technological developments and emerging industry standards, and addresses the increasingly sophisticated and changing needs of our customers. We also depend on technologies being developed by third parties to implement key aspects of our system. The development of new technologically advanced services and equipment is a complex and uncertain process requiring capital commitments and high levels of innovation, as well as the accurate anticipation of technological and market trends. We may be unable to obtain more advanced technologies on a timely basis or on reasonable terms, or our competitors may obtain more advanced technologies and we may not have access to these technologies. Our failure to anticipate or respond adequately to changes in technology and consumer preferences, or any significant delays in the development or introduction of new or enhanced technology, could have a material, adverse impact on our business, financial condition and results of operation.

Our business is international and subject to country and region risks.

Our DARS broadcast coverage area and most of our subsidiaries are outside the United States, and many are in developing countries. As a result, we are subject to certain risks on a country-by-country (or region-by-region) basis, including:

exchange controls;

tariffs and other trade barriers;

expropriation;

changes in national (or regional) regulations;

changes in national (or regional) licensing requirements;

currency exchange fluctuations;

changes in a specific country’s or region’s political or economic conditions;

challenges inherent in effectively managing an increased number of employees over larger geographic distances, including the need to implement appropriate systems, policies, and benefit and compliance programs; and

limited or unfavorable intellectual property protections.

Certain of these risks may be greater in developing countries or regions, where economic, political or diplomatic conditions may be significantly more volatile than those commonly experienced in the United States and other industrialized countries.

For specific risks relating to the conduct of our business in our initial markets of India and China, see “—Risks related to the conduct of our business in India” and “—Risks related to the conduct of our business in China.”

Our failure to acquire new content or maintain our current content may make our service less desirable to subscribers.

Third-party content is an important part of our service, and if we are unable to obtain or retain third-party content and brands at reasonable costs, we will not be able to carry out our business plan successfully. We may face increased costs in the future with respect to third-party content. We currently offer 21 channels of third-party content in India, and plan to offer additional channels in the future. We also plan to add additional channels of third-party content in any new markets into which we expand our service, including China, in order to tailor our service to such market. We may not be able to obtain or retain the third-party content we need at all or within the costs contemplated by our business plan.

Risk factors

In addition, we may not be able to retain the third-party brand name content offered on our channels. Broadcasters of brand name content can choose one or more of several alternative methods of reaching our coverage area, such as television, radio and the Internet. If we do not develop and maintain a subscriber base that is an attractive audience for some of our brand name content broadcasters, they may not wish to continue broadcasting through our service. Brand name broadcasters may also demand greater compensation than we may be willing or able to pay. If we lose brand name content and are unable to replace it with similar programming, our ability to deliver diverse programming will suffer and our service may become less desirable to our current and future subscribers.

Extensive government regulation of the telecommunications and broadcasting industries restricts our direct entry into China and may limit our ability to attract customers or generate profits.

Our business in China is highly regulated and subject to restrictions on foreign investment in the telecommunications industry and restrictions on the broadcasting industry in China.

Foreign companies are currently not allowed to directly provide satellite communications services to Chinese end users, and must conduct such business through qualified local telecommunications operators holding appropriate licenses and permits. Spectrum utilization by our AsiaStar satellite for service to individual households in China was initially authorized to ChinaSat, as our agent, by the Ministry of Information Industry (MII) in September 2000 for purposes of commercial testing. That authorization lapsed in September 2001, but was reissued on an indefinite basis in October 2004, subject to the annual review by the MII. Although we currently anticipate that a similar re-issuance of a service license will be granted to ChinaSat, there can be no assurance that it will be granted, or that either the spectrum allocation or the service license will continue to remain in effect if the regulatory landscape in China changes.

Additional examples of issues, risks and uncertainties relating to the Chinese government’s regulation of the telecommunications industry include:

evolving licensing practices may subject the permits, licenses or approvals required for our operations to challenge, and may also subject us to onerous operating conditions, compromise the enforceability of related contractual arrangements or have other harmful effects on us;

the lack of transparency in rules governing censorship and acceptable content in China may cause an unintentional breach of applicable standards and subject us to temporary blockage of our media content, complete cessation of our business or lead to the imposition of civil or criminal penalties;

the subscription fees that we are permitted to charge in China may be subject to approval by China’s Pricing Bureau; the Pricing Bureau may require us to offer subscriptions at an unprofitably or unsustainably low rate; and

China restricts or prohibits, as the case may be, foreign ownership of its telecommunications and broadcast industries, and there can be no assurance that such restrictions will be liberalized in the future or that our business model will not be adversely affected through an unfavorable interpretation of such laws and regulations.

We are dependent on key suppliers and distributors and a failure to maintain and continue these relationships could adversely impact our business.

We have a number of key relationships with suppliers, distributors and other parties, the loss of which would have a material, adverse effect on our business. Our receivers are manufactured by a limited number of third-party vendors. In India, one manufacturer accounted for approximately 98% of all the

Risk factors

WorldSpace receivers sold in 2004. While we expect other manufacturers to initiate and expand production for the Indian market in the next few years, we expect receiver supply to remain dominated by a handful of manufacturers. We anticipate a similar dynamic in our China market.

In addition, key component parts of our DARS system are also developed and supplied by third-party vendors with which we have established working relationships. For example, Analog Devices is currently developing next-generation chipsets for our receivers and working with receiver manufacturers on the integration of their chipsets into our next generation of receivers. We are dependent on Singapore Telecom to operate our primary uplink station for our AsiaStar satellite. We are dependent on ChinaSat for our license to operate service in China.

If we are unable to maintain such established relationships, develop comparable relationships with new parties, or should any of our key relationships fail to work effectively, we could experience, among other problems, delays in the production of receivers, interruption in the broadcast of our services or loss of our ability to operate in a particular market.

We may not be able to manage rapid growth.

We expect to experience significant and rapid growth in the scope and complexity of our business as we expand the commercial operations of our service. We do not currently employ sufficient staff to handle all of our expected sales and marketing efforts in India and China. Although we have hired experienced executives in this area, we must hire additional employees as we expand commercial operations of our service.

In addition, our growth may strain our management and operational and financial infrastructure. In particular, our growth will make it more difficult for us to:

develop, implement and improve our management, operational and financial controls and maintain adequate reporting systems and procedures;

recruit, hire and train sufficient skilled personnel to perform all of the functions necessary to provide our service effectively;

manage our subscriber base and business; or

maintain subscriber and broadcaster satisfaction.

The improvements and increased staff required to manage our growth will require us to make significant expenditures and allocate valuable management resources. If we fail to manage our growth effectively, our operating performance will suffer and we could lose part of our subscriber and broadcaster base.

Consumers may steal our service.

Like all radio transmissions, our signal is subject to interception. Consumers may be able to obtain or rebroadcast our signal without paying the subscription fee. Although we use encryption technology to mitigate signal piracy, we may not be able to eliminate theft of our signal. Widespread signal theft could reduce the number of consumers willing to pay us subscription fees and materially adversely affect our results of operations.

Our patents and licenses may not provide sufficient intellectual property protection.

We hold licenses from third parties to utilize patents covering various types of technology used in our system, including our digital compression technology. In addition, we have obtained patents and have patent applications pending with respect to our proprietary intellectual property. Although these licenses and patents cover various features of satellite radio technology, they may not cover all aspects of our

Risk factors

system. Others may duplicate aspects of our system that are not covered by our patents without liability to us. In addition, competitors may challenge, invalidate or circumvent our patents. We may be forced to enforce our patents or determine the scope and validity of other parties’ proprietary rights through administrative proceedings, litigation or arbitration. If we were to be involved in administrative proceedings, litigation or arbitration, we might have to spend significant amounts of time and money. In addition, any administrative proceeding, litigation or arbitration could divert our management time and efforts. An adverse ruling arising out of any intellectual property dispute could subject us to significant liability for damages, prevent us from operating our system, preclude us from preventing a third-party from operating a similar system or require us to license disputed rights from or to third parties. In the event that we need to license rights from third parties, we may not be able to obtain the licenses on satisfactory terms, if at all. We also hold a blanket license granted by the Composers and Authors Society of Singapore (COMPASS) to broadcast, perform, transmit, and otherwise use all musical works which COMPASS has or will have the right to license. Although we believe the license granted to us by COMPASS would cover all necessary broadcasting rights for transmissions from our Singapore uplink station to India, China and other countries within the AsiaStar broadcast coverage area, it is possible that other sister rights societies in other jurisdictions within the AsiaStar broadcast coverage area will not recognize such license and will seek to require separate licenses for broadcasts into their jurisdictions. This could increase our cost of broadcasting in such jurisdiction.

RISKS RELATED TO THE CONDUCT OF OUR BUSINESS IN INDIA

Future changes to Indian regulations and policies governing the market in which we operate may have a material, adverse effect on our business and operations.

The TRAI consultation paper dated December 29, 2004 highlights certain areas of potential changes in the regulation of satellite services, including:

Ban on private radio stations’ broadcasts of news and current affairs. Private FM operators in India are currently precluded from broadcasting news and current affairs, including the re-broadcast of foreign channels such as BBC World Service based on security concerns. The TRAI consultation paper asks whether the ban on private FM operators, which does not apply to satellite TV, should be extended to satellite DARS providers. If the ban on private radio broadcasts of news and current affairs were to be imposed on satellite DARS, we could be forced to discontinue broadcast of prime news channels such as BBC Asia West, NPR, Fox, NDTV 24*7 and others.

Uplinking. TRAI could require satellite radio programs to be uplinked from India under a new regulatory regime.

License fees. DARS providers could be subjected to high license fees similar to the “fixed fees” currently charged to private FM radio broadcasters. In the alternative, a revenue sharing model may be adopted.

Eligibility criteria. DARS providers could be subjected to eligibility criteria similar to those for private FM radio or other broadcasters.

Changes in the policies of the government of India or political instability could delay the further liberalization of the Indian economy and adversely affect economic conditions in India, which could adversely impact our business.

The role of the Indian central and state governments in the Indian economy is significant. Although the current government of India supports liberalization of the Indian economy, this economic liberalization

Risk factors

may not continue in the future and specific laws and policies affecting technology companies, foreign investment, currency exchange and other matters affecting our business could change as well. Changes in the policies of the government of India or political instability could delay further liberalization of the Indian economy and could adversely affect business and economic conditions in India in general and our business in particular.

The imposition of economic sanctions could affect our operations in India and adversely impact our business.

The United States, Japan and certain other nations have announced and imposed economic sanctions against India in the past. For example, as required under Section 102 of the Arms Export Control Act, sanctions were imposed in response to the detonation by India of nuclear devices. Although most of the current sanctions imposed by the United States restrict the United States from providing assistance to India and do not directly limit the activities of U.S. businesses, the precise ramifications of the sanctions are not expected to be known for some time. Further, although the current sanctions do not directly affect U.S. businesses, additional sanctions could be imposed which could have a material adverse effect on U.S. businesses with operations, sales or suppliers in India. Although our operations have not been substantially affected by the sanctions to date and we do not believe our activities will be affected by the current sanctions, we cannot assure you that our technologies will not, in the future, be included in the specific technologies subject to sanctions or affected by the prohibition on items exported by third parties.

Terrorist attacks, wars, or regional conflicts could adversely affect the Indian economy, disrupt our operations and cause our business to suffer.

Terrorist attacks, such as the attacks of September 11, 2001, in the United States, and other acts of violence or war, such as a conflict between India and Pakistan, have the potential to directly impact our customers and the Indian economy by making travel more difficult, interrupting lines of communication and effectively curtailing our ability to deliver our services to our customers. These obstacles may increase our expenses and negatively affect our operating results. In addition, military activity, terrorist attacks and political tensions between India and Pakistan could adversely affect the Indian economy and demand for our services, which could adversely affect our business.

Any resulting financial turmoil in other countries could cause our business or the price of our stock to suffer. Financial turmoil in several Asian countries has in the recent past adversely affected market prices in the world’s securities markets, including India and the United States. Continuation or worsening of the financial downturns in these countries could cause further decreases in prices for securities of companies located in developing economies, such as us. Such events would also make it more difficult for us to raise additional capital in order to expand our business.

Companies operating in India are subject to a variety of central and state government taxes and surcharges.

Tax and other levies imposed by the central and state government in India that affect the tax liability of our India operations include: (i) central and state taxes and other levies; (ii) income tax; (iii) value added tax; (iv) turnover tax; (v) service tax; and (vi) other special taxes and surcharges which are introduced on a temporary or permanent basis from time to time.

The central and state tax scheme in India is extensive and subject to change from time to time. The statutory corporate income tax in India, which includes an education tax, is currently 36.6%. The central or state government may in the future increase the corporate income tax it imposes. Any such future increases or amendments may affect the overall tax efficiency of companies operating in India and may result in significant additional taxes becoming payable. Additional tax exposure could have a material adverse effect on our India operations’ business, financial condition and results.

Risk factors

Risks of litigation in India could adversely affect our business.

The telecommunications sector is one of the fastest growing sectors in India and is therefore confronted with a high volume of litigation. Lawsuits may impede our business development and operations in India as it may divert our management’s attention making it difficult for us to conduct our business. The legal system in India, is fairly complex and time consuming. The process of litigation may extend for several years in India adversely affecting and restricting our ability to expand to the needs of the consumers and cause loss of time, energy and revenue. An injunction granted against us may further restrict us in carrying out our business and may cause loss of revenue. In addition, public interest litigation is also common in India and highly litigated sectors such as telecommunications are very prone to such litigation. Public interest litigation would further inhibit our ability to carry out our business efficiently.

Content liability could adversely affect our business.

We may be held liable for any content provided via our satellite transmission network which could be deemed to be obscene, against national security, defamatory, infringing any copyright, patent or trademark or in violation of any similar laws. Any such violation can affect our authorizations and licenses. Additionally, any liability due to content could have a material, adverse effect on our Indian business.

RISKS RELATED TO THE CONDUCT OF OUR BUSINESS IN CHINA

Our business in China may be adversely affected by future changes to Chinese telecommunications and broadcasting regulations and policies, as well as possible future industry restructurings.

Our businesses and operations may be adversely affected by any possible future changes to regulations and policies governing the telecommunications and broadcasting industry in China. In accordance with Chinese law, foreign ownership of basic telecommunications services is severely restricted and foreign ownership of digital radio channels is completely prohibited. Our business model and our relationships with ChinaSat may be subject to scrutiny and adverse change if additional restrictive policies are instituted in the future. In addition, any future regulatory changes, such as those relating to the issuance of licenses, price setting for subscriptions or channel lease fees, changes in technical and service standards, spectrum and number allocations, may have a material, adverse effect on our Chinese business and operations.

Currently, most radio broadcasting in China is restricted to Putonghua, the national language of China. The likely continuation of such restrictions will reduce the availability of overseas content for use in our business operations and could adversely impact our business.

Even if we are in compliance with Chinese governmental regulations relating to licensing and foreign investment prohibitions, the Chinese government could prevent us from distributing particular content and subject us to liability for content that it believes is inappropriate.

China has enacted regulations governing the distribution of news and other information. In the past, the Chinese government has stopped the distribution of information that it believes to violate Chinese law, including content that it believes is obscene, incites violence, endangers national security, is contrary to China’s national interest or is defamatory. SARFT and the Ministry of Culture regulate and monitor the censorship of information provided via radio, film and television. We are subject to potential liability for content distributed through our satellite transmission network that is deemed inappropriate and for any unlawful actions of our customers. We may face liability for defamation, negligence, copyright, patent or trademark infringement and other claims based on the nature and content of the materials that are

Risk factors

provided via our satellite transmission network. Our technical and content providing business through WorldSpace (China) may be adversely affected if we do not get sufficient flexibility in our programming content to attract customers in China. However, it is difficult to determine the type of content that may result in liability for us, and if we broadcast such content, we may be prevented from operating our services. If the Chinese government were to take any action to limit or prohibit the distribution of information via our satellite broadcasting services or technical and content providing business, or to limit or regulate any current or future content or services available to users on our network, our business could be materially and adversely affected.

If any of our business conducted through WorldSpace (China) is found to be in violation of Chinese laws, rules or regulations regarding the legality of foreign investment in China, we could be subject to severe penalties.

Our wholly owned subsidiary, WorldSpace (China), provides technical and content services to local Internet content providers who hold appropriate licenses granted by the MII to engage in value-added telecommunication services in China. In addition, WorldSpace (China) intends, through local Chinese media entities or joint ventures with local Chinese media entities, to provide such services to local radio broadcasters and other media groups who hold appropriate licenses granted by SARFT to engage in radio broadcast and television programming business in China, and is in discussions with automobile manufacturers who are seeking a key sales differentiator. It is possible that Chinese authorities could, at any time, assert that any portion of WorldSpace (China)’s business violates Chinese laws, regulations or policies. If WorldSpace (China) were found to be in violation of Chinese laws or regulations, the relevant authorities would have broad discretion in dealing with such violations, including, without limitation, the following:

levying fines;

revoking WorldSpace (China)’s business license;

shutting down WorldSpace (China)’s provision of technical and content services; and

requiring us to restructure our ownership structure or operations.

China’s economic, political and social conditions, as well as government policies, could affect our business.

While China’s economy has experienced significant growth in the past twenty years, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall economy of China, but may also have a negative effect on us. For example, our operating results and financial condition may be adversely affected by government control over capital investments, changes in tax regulations applicable to us or price controls affecting subscription rates.

Since the late 1970s, the Chinese government has been reforming the Chinese economic system to emphasize enterprise autonomy and utilization of market mechanisms. Although we believe that these reform measures have had a positive effect on economic development in China, we cannot be sure that they will be effective or that they will continue. For example, in recent years, the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises; however, a substantial portion of productive assets in China is still owned by the Chinese government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-

Risk factors

denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Chinese industrial policies may negatively impact our ability to operate or expand in China if, among other risks, such policies impose additional limitations on the development of the communications industry or allocate resources in a manner which impairs growth in demand for our products and services.

China is currently perceived to be economically and politically stable. In the event of economic, social or political turmoil, such as possible instability resulting from a significant recession or conflict in the Taiwan Straits, it is likely that companies such as ours, with foreign ownership and that are engaged in China’s broadcast industry, would be subject to greater scrutiny and possibly additional restrictive regulation.

Government control of currency conversion may adversely affect our operations and financial results.

Although Chinese governmental policies introduced in 1996 allow the convertibility of Renminbi into foreign currency for current account items, conversion of Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of the State Administration of Foreign Exchange. These approvals, however, do not guarantee the availability of foreign currency. We may be unable to obtain all required conversion approvals for our operations and Chinese regulatory authorities may impose greater restrictions on the convertibility of Renminbi in the future. Because a significant amount of our future revenue may be in Renminbi, any inability to obtain the requisite approvals or any future restrictions on currency exchanges will limit our ability to utilize revenue denominated in Renminbi to fund our business activities outside China, pay dividends, or to repay foreign currency obligations, including any debt obligations.

Our business insurance in China may not be adequate and this may impact our ability to recover from a natural disaster or other business interruption.

Although insurance companies in China offer adequate insurance products, except for earthquake coverage, and are responsible for paying property damage claims, they tend to be slow in paying business interruption and third-party general liability claims, since the insurance industry is continually developing. As a result, while we currently have business liability insurance coverage for our operations in China, payments under the insurance policy may be slow and we may not be able to recover sufficient amounts.

RISKS RELATED TO THE DEVELOPMENT OF MOBILE DARS IN WESTERN EUROPE

Our ability to develop a mobile DARS business in Western Europe may be adversely affected by the fragmented and diverse nature of the European market.

Although we can provide DARS in Western Europe today through portable receivers, we believe that the region, with approximately 200 million automobiles, offers a more significant opportunity for the development of mobile DARS. As a result, we are continuing various business development activities, including mobile DARS system tests and the negotiation of preliminary agreements with major automobile manufacturers such as Citroën, a division of PSA Peugeot Citroën, that foresee the integration of DARS receivers in some of their vehicles. While we believe the demand for mobile DARS in Western Europe may be greater than in the United States, given Western Europe’s fragmented markets and wide variety of ethnic and linguistic groups, we may face challenges in developing and maintaining an appealing mix of content and programming in various languages to address the needs and preferences of the target listener segments. Our inability to develop and maintain appropriate programming for the diverse ethnic and linguistic listener segments in Western Europe could adversely impact our future plans to provide mobile DARS in the region.

Risk factors

We may be unable to obtain licenses required to operate terrestrial repeater networks in Western Europe or to obtain and retain the necessary authorizations to operate a mobile DARS subscription service.

While we believe our regulatory franchise positions us favorably to become a provider of mobile DARS in Western Europe, we will need to obtain additional spectrum allocation, transmitter and service licenses from local regulatory authorities to develop a terrestrial repeater network and to operate a mobile DARS subscription service in Western Europe. In addition, we must coordinate the use of our allocated L band spectrum in Western Europe with providers of Terrestrial Digital Audio Broadcasting, or T-DAB, to avoid any instances of harmful inter-system interference. Any failure to obtain required licenses or authorizations to develop a terrestrial repeater network and operate a mobile DARS subscription service in Western Europe could adversely affect our ability to conduct business in the region.

RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

Control by our executive officers and directors will limit your ability to influence the outcome of matters requiring stockholder approval and could discourage our potential acquisition by third-parties.

Immediately following this offering, our Chairman and Chief Executive Officer, Noah Samara, will own, in the aggregate, directly or through entities which he controls or in which he has shared control, 32,662,318 shares of our Class B Common Stock, constituting approximately % of our Class A Common Stock and our Class B Common Stock. In addition, Mr. Samara holds options to acquire an additional 12,540,763 shares of our Class B Common Stock. Accordingly, Mr. Samara’s vote will likely be decisive with respect to all matters requiring approval by our stockholders, including the election of our board of directors and the approval of mergers or other business combination transactions. This concentration of ownership could have the effect of delaying or preventing a change in our control or otherwise discourage a potential acquirer from attempting to obtain control of us, which in turn could have an adverse effect on the market price of our common stock or prevent our stockholders from realizing a premium over the market price for their shares of our common stock.

Allegations of ties between certain of our former investors and terrorism could negatively affect our reputation and stock price.

Certain of our former investors have been the subject of allegations that could adversely affect our reputation in the eyes of investors and negatively impact the price of our common stock. These former investors, which include three members of the Bin Mahfouz family, Mohammed H. Al-Amoudi and Mr. Salah Idris, all of whom are Saudi Arabian citizens, have been the subject of allegations that they and/or charities they were involved in have supported terrorism, and three of these investors have also been named, along with a number of Saudi Arabian government officials and prominent Saudi Arabian citizens, in civil actions brought on behalf of victims of the September 11, 2001 terrorist attacks on the United States. None of the Bin Mahfouzs, Mr. Al-Amoudi or Mr. Idris any longer have any direct debt or equity in our company or have any voting control rights in our company. An entity controlled by two Bin Mahfouz sons is entitled to conditional royalty payments from us for each annual period through December 31, 2015. Mr. Idris holds only non-voting shares in Yenura Pte. Ltd. (Yenura), a Singapore company, which owns 27.9 million shares of our Class B Common Stock and which is controlled by our Chairman and Chief Executive Officer, Mr. Samara, although Mr. Idris, through his ownership of non-voting shares of Yenura, holds a majority of the economic interest in Yenura. See “Pre-offering recapitalization” and “Principal stockholders.” We cannot assure you that past or future allegations against these individuals will not impair our ability to retain advisors, impair our future attempts to raise additional financing or negatively impact the price of our stock.

Risk factors

We may face claims from former employees regarding previously granted stock options.

We could face claims from a number of former employees that they were promised options to purchase shares of our Class A Common Stock, or that they were told that they had been granted stock options exercisable for periods after termination of their employment. Although no such claims have been asserted against us, and the Company believes that any such claims would have expired several years ago, the public offering of our Class A Common Stock could increase the likelihood of such claims. Such claims could seek contract damages or other remedies relating to putative options to purchase shares of our Class A Common Stock at prices significantly less than the offering price.

There has been no public market for our Class A Common Stock, and you may be unable to resell your shares at or above the offering price.

There currently is no public market for our Class A Common Stock, and we cannot assure you that an active trading market will develop or be sustained after this offering. The initial public offering price for the shares will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of the market price for our Class A Common Stock after this offering. The market price of our Class A Common Stock could fluctuate significantly in response to the risks inherent in our business, as well as to events unrelated to us.

In recent years, the U.S. stock market has experienced significant price and volume fluctuations. Our Class A Common Stock may experience volatility unrelated to our own operating performance for reasons that include:

demand for our Class A Common Stock;

revenue and operating results failing to meet the expectations of securities analysis or investors in any particular quarter;

changes in expectations as to our future financial performance or changes in financial estimates, if any, of public market analysts;

investor perception of our industry or our prospects;

general economic trends, particularly those in India and China;

political and social conditions in the markets in which we operate, in particular India and China;

changes in governmental regulations, particularly those in India and China;

limited trading volume of our stock;

actual or anticipated quarterly variations in our operating results;

our involvement in litigation;

announcements relating to our business or the business of our competitors;

our liquidity; and

our ability to raise additional funds.

In the past, companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation. We may be involved in securities class action litigation in the future. Such litigation often results in substantial costs and a diversion of management’s attention and resources and could have a material, adverse effect on our business and results of operations.

Risk factors

The future sale of our Class A Common Stock could negatively affect our stock price after this offering.

After this offering, we will have shares of common stock outstanding, including shares of Class A Common Stock and 32,662,318 shares of Class B Common Stock. Shares of our Class B Common Stock are not listed. Sales of a substantial number of our shares of Class A Common Stock in the public market following this offering or the expectation of such sales could cause the market price of our Class A Common Stock to decline. All the shares sold in this offering will be freely tradable except that any shares purchased by our affiliates will remain subject to certain restrictions. Beginning 180 calendar days following completion of this offering, the holders of our Convertible Notes will be entitled to registration rights with respect to the shares of Class A Common Stock issuable upon conversion of the notes. The noteholders may require us to register for resale all of the conversion shares upon demand until such time as we file a shelf registration statement for the resale, from time to time and at any time, of any unsold conversion shares. We are obligated to file a shelf registration statement one year after this offering. Any sales of our Class A Common Stock by the noteholders could be negatively perceived in the trading markets and negatively affect the price of our Class A Common Stock. We also intend to file a registration statement after consummation of this offering to register all shares of Class A Common Stock that we may issue to our employees under our stock option plan and stock incentive plan. After this registration statement is effective, some of these shares will be eligible for resale in the public market without restriction. For more information, see “Shares eligible for future sale.”

Purchasers in this offering will experience immediate and substantial dilution and will experience further dilution from any future exercise of stock options.

If you purchase shares of our Class A Common Stock in this offering, you will pay more for your shares than the per share book value as of December 31, 2004. As a result, the value of your investment based on the net tangible book value per share of our common stock will be less than what it would have been had you and all of the existing stockholders and existing option holders paid the same amount per share of common stock as you will pay in this offering. The net tangible book value dilution to new investors in this offering will be $ per share at an assumed initial public offering price of $ per share. The exercise of outstanding options and notes convertible into common stock may result in further dilution to you. See “Dilution” for a more complete description of how the value of your investment in our common stock will be diluted upon completion of this offering.

The price at which our Class A Common Stock will initially be offered to the public will be the result of negotiations between us and the underwriters and may not be representative of the price that will prevail in the open market. See “Underwriting” for a discussion of the determination of the initial offering price.

We are subject to anti-takeover provisions which could affect the price of our common stock.

Certain provisions of Delaware law and of our certificate of incorporation and by-laws could have the effect of making it more difficult for a third-party to acquire, or of discouraging a third-party from attempting to acquire, control of us. For example, our certificate of incorporation and by-laws provide for a classified board of directors, limit the persons who may call special meetings of stockholders and allow us to issue preferred stock with rights senior to those of the common stock without any further vote or action by our stockholders. In addition, we will be subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which could have the effect of delaying, deterring or preventing another party from acquiring control of us. These provisions could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company or may otherwise discourage a potential acquirer from attempting to obtain control of our company, which in turn could have a material, adverse effect on the market price of our common stock.

Risk factors

Our management has broad discretion over the use of the net proceeds from this offering, and you may not agree with how they use the proceeds.

Our management has significant flexibility in the use of the proceeds we receive in this offering. Because the proceeds are not required to be allocated to any specific purpose, investment or transaction, you cannot determine the value or propriety of our management’s application of the proceeds on our behalf. See “Use of proceeds” for a more detailed description of how management intends to apply the proceeds of this offering.

Special note regarding forward-looking statements

This prospectus contains forward-looking statements. These statements relate to our growth strategy and our future financial performance, including our operations, economic performance, financial condition and prospects, and other future events. We generally identify forward-looking statements by using such words as “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “seek,” “should,” “will,” or variations of such words or other similar expressions and the negatives of such words. These forward-looking statements are only predictions and are based on our current expectations.

In addition, a number of known and unknown risks, uncertainties and other factors could affect the accuracy of these statements, including the risks outlined under “Risk factors” and elsewhere in this prospectus. Some of the more significant known risks that we face are uncertainty regarding market acceptance of our products and services and our ability to generate revenue or profit. Other important factors to consider in evaluating our forward-looking statements include:

our possible inability to execute our strategy due to changes in our industry or the economy generally;

our possible inability to execute our strategy due to changes in political, economic and social conditions in the markets in which we operate;

uncertainties associated with currency exchange fluctuations;

changes in laws and regulations governing our business and operations or permissible activities;

changes in our business strategy; and

the success of our competitors and the emergence of new competitors.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee our future results, levels of activity or performance. Any or all of our forward-looking statements in this prospectus may turn out to be inaccurate. We have based these forward-looking statements on our current expectations and projections about future events and financial, political and social trends and assumptions we made based on information currently available to us. These statements may be affected by inaccurate assumptions we might have made or by known or unknown risks and uncertainties, including the risks and uncertainties described in “Risk factors.” In light of these assumptions, risks and uncertainties, the forward-looking events and circumstances discussed in this prospectus may not occur as contemplated, and actual results could differ materially from those anticipated or implied by the forward-looking statements.

Forward-looking statements contained herein speak only as of the date of this prospectus. Unless required by law, we undertake no obligation to update publicly or revise any forward-looking statements to reflect new information or future events or otherwise. You should, however, review the factors and risks we describe in the reports we will file from time to time with the Securities and Exchange Commission (SEC) after the date of this prospectus. See “Where you can find additional information.”

Industry data

Unless otherwise indicated, all population data in this prospectus have been derived from the 2004 World Population Data Sheets published by the Population Reference Bureau. Unless otherwise indicated, all data in this prospectus relating to the sales of automobiles and the number of automobiles in use in India, China, Western Europe and the WorldSpace broadcast coverage area have been drawn from J.D. Power and Associates. Unless otherwise indicated, purchasing power parity income statistics for segments of, respectively, the Indian and Chinese economies have been taken from the World Bank’s World Development Indicators. The sources for other statements concerning the definition, size and development of potential markets for our products and services are set forth in the text of this prospectus. Where the cited source for any statement is a specified website, such website should not be deemed to be a part of, or to be incorporated into, this prospectus.

The market data included herein, whether based on external sources or based on our internal research, constitute our best current estimates of the markets described. However, the assumptions underlying such data may not prove to be correct and unanticipated events may occur which could materially affect our actual markets. Moreover, the risks associated with market analysis are heightened in this case because the analysis deals with products and services that are not directly comparable to any products or services with which you may be familiar. Consequently, the actual markets for our products and services should be expected to vary from the estimated markets used by us in designing our products and services as described in this prospectus and such variations may be material.

CURRENCY INFORMATION

Unless otherwise indicated, references herein to “U.S. dollars,” “dollars” or “$” are to United States Dollars, the legal currency of the United States; references to “Rupees” or “Rs.” are to Rupees, the legal currency of the Republic of India; references to “Renminbi,” “Renminbi Yuan” or “Yuan” are to Renminbi, the legal currency of the People’s Republic of China.

This prospectus contains conversions of certain amounts in Dollars, Rupees and Renminbi solely for the convenience of the reader.

On March 31, 2005, the U.S. dollar traded for approximately 43.6 Indian Rupees and approximately 8.3 Chinese Renminbi Yuan at the noon day buying rate. Unless otherwise indicated, U.S. dollar amounts in this prospectus have been translated from Rupees at the March 31, 2005 noon day buying rate. Any discrepancies between the U.S. dollar translations presented within this prospectus and the arithmetical translations are due to rounding. Exchange rates are subject to significant volatility and also undergo long-term shifts based on economic policies in the United States and abroad as well as market expectations.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Except as otherwise stated, any discrepancies between the numbers presented within this prospectus and those found within the Company’s consolidated financial statements are due to rounding.

Use of proceeds

The net proceeds to us from the sale of the shares of our Class A Common Stock we are offering will be approximately $ million, after deducting the underwriting discounts and commissions and estimated expenses payable by us and assuming we sell the shares for $ per share (the midpoint of the estimated price range set forth on the cover page of this prospectus). If the underwriters exercise their over-allotment option in full, we estimate that the net proceeds to us (including those shares) will be approximately $ million.

We intend to use the net proceeds of this offering in connection with the implementation of our India business plan, including build-out of the terrestrial repeater network, service launch in key cities in India and marketing expenses related to subscriber acquisitions in India; business development activities in China, Western Europe and other selected markets within our broadcast coverage area; and the roll-out of our services in China. Pending specific application of the net proceeds, we intend to invest the net proceeds received from this offering in short-term, investment grade interest-bearing instruments.

Dividend policy

We have never declared or paid cash dividends on our capital stock. We currently intend to retain our future earnings, if any, to finance the further development and expansion of our business and do not currently anticipate declaring or paying cash dividends on our capital stock in the foreseeable future. Any future determination to declare and pay dividends, should we legally be entitled to do so based on our surplus or earnings, will be at the discretion of our board of directors and will depend on our financial condition, results of operations, cash flow, capital requirements, restrictions contained in financing instruments to which we are a party and such other factors as our board of directors deems relevant. Our royalty agreement with Stonehouse places limitations on our ability to make distributions, including dividend payments, to holders of shares of our Class B Common Stock; there are no contractual restrictions on dividends or other distributions to holders of shares of our Class A Common Stock, including the shares of Class A Common Stock being offered by this prospectus. See “Description of capital stock.”

Capitalization

The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2004:

on an actual basis; and

on an adjusted basis to give effect to the sale by us in this offering of shares of our Class A Common Stock at an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

You should read this table together with “Management’s discussion and analysis of financial condition and results of operations,” “Description of capital stock,” and our consolidated financial statements and related notes for the years ended December 31, 2002, 2003 and 2004 which are included elsewhere in this prospectus.


	As of December 31, 2004
	Actual			As Adjusted for Offering
	(in thousands)
Cash and cash equivalents	$	154,362		$


Convertible Notes issued December 30, 2004		155,000

Stockholders’ Deficit
Preferred Stock, par value $.01 per share; 25,000,000 shares authorized; no shares issued and outstanding, actual and as adjusted		—
Class A Common Stock, par value $.01 per share; 100,000,000 shares authorized; 4,475,789 shares issued and 9,255,789 outstanding		45
Class B Common Stock, par value $.01 per share; 75,000,000 shares authorized; 32,662,318 shares issued and outstanding, actual; shares issued and outstanding, as adjusted		326
Additional paid-in capital		425,108
Deferred compensation		(1,085	)
Accumulated other comprehensive loss		(354	)
Deficit accumulated		(2,113,446	)

Total stockholders’ deficit		(1,689,406	)


Total capitalization	$	(1,534,406	)	$

Dilution

If you invest in our Class A Common Stock, your interest will be diluted immediately to the extent of the difference between the public offering price per share of our Class A Common Stock and the net tangible book value per share of our common stock after this offering.

Our net tangible book value as of December 31, 2004 was approximately $(1,689,406), or $(181.03) per share of common stock. We determined the net tangible book value per share by dividing our net tangible book value, which is the total book value of our tangible assets less our total liabilities, by the number of shares of common stock outstanding as of December 31, 2004. After giving effect to the sale of the shares of Class A Common Stock in this offering at the assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, our adjusted net tangible book value as of December 31, 2004 would have been approximately $ million, or $ per share. This represents an immediate increase in net tangible book value of $ per share to existing stockholders and an immediate dilution of $ per share to new investors purchasing shares in this offering. The following table illustrates this per share dilution:


Assumed initial public offering price per share		$
Net tangible value per share as of December 31, 2004	$
Increase in net tangible value per share attributable to this offering
Net tangible value per share after giving effect to this offering

Dilution per share of Class A Common Stock issued to new investors		$

The following table summarizes, on an as adjusted basis as of December 31, 2004, after giving effect to this offering, the total number of shares of our common stock purchased from us and the total consideration and the average price per share paid by existing stockholders and by new investors:


	Total shares			Total Consideration			Average price per share
	Number	%		Amount	%		Average price per share
Existing shareholders		%		$	%		$
New investors

Total		100	%	$	100	%

The discussion and tables above exclude the following:

shares of Class A Common Stock issuable upon exercise of warrants outstanding as of , 2005, at a weighted average exercise price of $ per share; and

shares of Class A Common Stock and Class B Common Stock reserved for issuance under the 2005 Shares Option Plan.

Selected historical consolidated financial data

The following table presents selected historical consolidated financial data as of, and for the years ended, December 31, 2000, 2001, 2002, 2003 and 2004, which data have been derived from our audited consolidated financial statements. You should read this information in conjunction with the information set forth in “Management’s discussion and analysis of financial condition and results of operations,” and our consolidated financial statements and related notes for the years ended December 31, 2000, 2001, 2002, 2003 and 2004 which are included elsewhere in this prospectus. These historical financial data are not necessarily indicative of our future results or performance.


	Years Ended December 31,
Consolidated statements of operations data:	2000			2001			2002			2003			2004
	(in thousands, except share and per share data)
Revenue	$	3,683		$	10,114		$	9,589		$	13,074		$	8,581
Cost of revenue		29,661			12,798			21,454			22,941			14,677

Gross loss		(25,978	)		(2,684	)		(11,865	)		(9,867	)		(6,096	)
Operating expenses
Research and development		2,331			1,030			902			64			—
Selling, general and administrative		62,823			58,036			35,855			33,425			32,765
Stock-based compensation		32,398			5,178			3,981			3,528			90,323
Depreciation and amortization		50,958			63,029			61,354			60,909			61,183

Total operating expenses		148,510			127,273			102,092			97,926			184,271

Operating loss		(174,488	)		(129,957	)		(113,957	)		(107,793	)		(190,367	)
Other income (expense)
Interest income		3,853			649			337			542			431
Interest expense		(134,144	)		(142,312	)		(114,349	)		(108,371	)		(119,302	)
Other		(37,738	)		(15,935	)		(2,890	)		(2,089	)		(877	)

Total other expense		(168,029	)		(157,598	)		(116,902	)		(109,918	)		(119,748	)

Loss before income taxes and cumulative effect of accounting changes		(342,517	)		(287,555	)		(230,859	)		(217,711	)		(310,115	)
Income tax provision (benefit)		28,458			—			—			—			(267,272	)

Loss before cumulative effect of accounting changes		(314,059	)		(287,555	)		(230,859	)		(217,711	)		(577,387	)
Cumulative effect of accounting changes		—			—			—			—			—
Impairment of goodwill		—			—			(44,255	)		—			—

Net loss	$	(314,059	)	$	(287,555	)	$	(275,114	)	$	(217,711	)	$	(577,387	)

Loss per share—basic and diluted
Loss per share before accounting change	$	(35.23	)	$	(31.07	)	$	(24.94	)	$	(23.52	)	$	(61.87	)
Cumulative effect per share of a change in accounting principle		—			—			(4.78	)		—			—

Net loss per share	$	(35.23	)	$	(31.07	)	$	(29.72	)	$	(23.52	)	$	(61.87	)

Weighted average number of shares outstanding		8,914,693			9,255,789			9,255,789			9,255,789			9,332,179

Selected historical consolidated financial data


	As of December 31,
Consolidated balance sheet data:	2000			2001			2002			2003			2004
	(in thousands)
Current assets
Cash and cash equivalents	$	28,702		$	1,368		$	2,788		$	1,740		$	154,362
Other current assets		40,570			21,471			15,736			9,615			6,322

Total current assets		69,272			22,839			18,524			11,355			160,684
Restricted cash and investments		4,783			4,195			3,996			3,819			1,775
Property and equipment, net		25,608			21,191			15,664			11,696			11,431
Satellites and related systems, net		682,026			634,238			576,721			520,539			459,426
Deferred finance costs, net		34,756			30,721			26,688			22,654			14,724
Investments in affiliates and other assets		69,665			57,607			6,364			1,982			1,047

Total assets	$	886,110		$	770,791		$	647,957		$	572,045		$	649,087

Long-term debt, current portion		—			—			10,000			1,411,723			—
Other current liabilities		68,698			69,673			76,892			526,923			114,338
Long-term debt, net of current portion		1,387,026			1,413,956			1,430,891			56,098			155,000
Contingent royalty obligation		—			—			—			—			1,814,175
Other long-term liabilities		124,830			263,664			377,606			37,811			254,980

Total liabilities		1,580,554			1,747,293			1,895,389			2,032,555			2,338,493
Shareholder’s deficit		(694,444	)		(976,502	)		(1,247,432	)		(1,460,510	)		(1,689,406	)

Total liabilities and shareholder’s deficit	$	886,110		$	770,791		$	647,957		$	572,045		$	649,087

Management’s discussion and analysis of financial condition and results of operations

The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes which appear elsewhere in this prospectus. It contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus, particularly under the heading “Risk factors.”

OVERVIEW

We are a global provider of satellite-based digital audio radio services (DARS). Since our inception, we have pursued various activities designed to secure frequency allocations to provide our service, develop the technology and build a network of satellites to cover our target markets and launch a commercial service. We have established our business in an environment where most of the critical elements for conducting such a business, including a regulatory framework, technology and satellites, did not exist prior to our initiatives. We are currently the only company positioned to offer DARS in our broadcast coverage area (other than in South Korea and Japan), which includes India, China and Western Europe. Our immediate target markets of India and China are areas where traditional broadcast media and internet services are limited.

Development of the WorldSpace system

Our principal activities from 1990 to date have included:

obtaining regulatory approval, licensing and the use of 25 MHz of L-Band frequencies for our satellites to operate and provide DARS over Africa, Asia and Europe;

designing and developing the technology for the WorldSpace satellite network system;

constructing three satellites, successfully launching two satellites (AfriStar in 1998 and AsiaStar in 2000) and securing critical components for a fourth satellite;

establishing a global ground network system to operate the satellites and state-of-the-art programming studios for content in Washington, D.C.;

developing 22 WorldSpace branded channels and 41 channels for which content is provided by international, national and regional third parties;

developing and arranging for the manufacturing of our receivers;

testing of our commercial subscription service;

developing a focused business plan for rolling out commercial subscription services in India and China, our immediate target markets, and continuing our business development activities in Western Europe, our next target market;

continuing the development of selected additional markets in Africa and the Middle East; and

securing financing for capital expenditures and working capital.

Until 2004, we were a development stage company with no significant revenue-generating operations. During 2004, we began generating sales in India related to our DARS business and exited the development stage, as defined by Statement of Financial Accounting Standards (SFAS) No. 7, Accounting

Management’s discussion and analysis of financial condition and results of operations

and Reporting by Development Stage Enterprises. Since January 2005, subsequent to a New Investment Transaction (as described below under “—Stonehouse restructuring and pre-offering recapitalization”) we have initiated the commercial roll-out of our services in India.

Our business environment

We offer on an international basis a variety of quality international, national and regional radio programming not available from AM and FM broadcasters. This programming is accessible through low-cost portable and mobile radio receivers. We were the first company to establish an operational DARS system and today are the only company licensed to provide DARS outside of North America, Japan and South Korea.

The U.S. business model has been characterized by strong subscriber growth and declining subscriber acquisition costs as the U.S. DARS subscriber base grows. In the U.S., the DARS industry is an FCC-licensed duopoly between XM and Sirius Satellite Radio, Inc. (Sirius). The consumer response to the launch of XM’s and Sirius’ programming in November 2001 and July 2002, respectively, has been positive, with XM reporting approximately 3.8 million subscribers as of March 31, 2005 and Sirius reporting 1.1 million subscribers as of December 31, 2004. We believe the competitive advantages of DARS in the United States as compared with traditional AM and FM radio include significantly greater programming quality and choice, commercial free music, coast-to-coast coverage, improved audio quality and greater availability of innovative products. In the United States, satellite radio subscribers have been primarily acquired through agreements with car manufacturers and partnerships and alliances with retail distributors.

Our international DARS broadcast coverage area encompasses the most densely populated parts of Asia, including India and China, all of Africa and the Middle East and most of Western Europe—an area that includes approximately 5 billion people and 300 million automobiles. To compete effectively against existing media and entertainment which are prevalent in our markets, including AM and FM radio, we must provide high quality programming, including a wide variety of music, news and entertainment channels. It is also important to deliver content to satisfy demand in specific markets that is otherwise unavailable in such markets. DARS subscription service can provide several advantages over existing radio programming in our target markets, including greater diversity of content, multi-lingual programming, broader geographic coverage and the inclusion of only limited advertising. Our business is characterized by both regulatory and economic barriers to entry. These barriers include the expertise needed to acquire and maintain the necessary licenses and approvals required by a complex and evolving international and national regulatory framework and the high capital costs required to build and launch satellites and construct the infrastructure necessary for the provision of DARS.

Our business trends

We believe that the most important factor for our success will be the successful acquisition and retention of paying subscribers. As of March 31, 2005, we had more than 53,000 paying subscribers, including more than 22,000 in India. We have recently refined our business plan and intensified our subscriber acquisition marketing efforts, focusing first on acquiring subscribers in India and continuing preparation for the roll-out of our service in China, where we have taken steps toward obtaining required regulatory approvals and content partnerships. We are also planning for the subsequent roll-out of our service in Western Europe, which we believe offers a significant opportunity for a mobile DARS targeted at Western Europe’s approximately 200 million automobiles. Our regulatory franchise positions us to be the likely provider of DARS in Western Europe; however, we will need to obtain additional local regulatory approvals as well as develop a terrestrial repeater network prior to offering mobile DARS in Western Europe.

Management’s discussion and analysis of financial condition and results of operations

We have also provided services to the U.S. government and other governmental entities around the world. We intend to continue to offer our services to business and government entities, including government agencies in India and the United States, who we believe would be interested in using our technology and broadcast footprint to provide inexpensive and a wide range of audio and data transmission services. Since 2002, we have had initial success with U.S. government agencies, receiving and performing more than $8.0 million in contracts. We also intend to target select markets as relevant business and marketing opportunities arise. For example, we currently target U.S. and U.K. expatriates living in our service areas, who we believe will be receptive to our services as a “voice from home.” In the future, we anticipate targeting our service to other niche markets, including Indian and Chinese expatriates living in our broadcast coverage area.

As noted above, our satellite and ground network system covering the chosen markets of India and China is substantially completed. However, we expect to incur significant operating losses for the next several years as we first roll out our commercial subscription services in India, then in China and eventually in Western Europe. We expect to fund marketing and distribution costs from the proceeds of this offering as we increase the number of subscribers to our service to a level sufficient to generate a stream of cash flows to cover these and other operating costs. We also intend to enhance our infrastructure in India with the addition of terrestrial repeater (i.e., “gap filler”) networks and a next generation of receivers designed to receive broadcasts from our networks of repeaters as well as from our satellites, which will allow us to expand our service offering to include mobile DARS. As described under “—Liquidity and capital resources—Historical sources of cash,” while the net proceeds of $142.3 million from our December 2004 sale of senior convertible notes in the aggregate principal amount of $155.0 million (Convertible Notes) together with the net proceeds from this offering are expected to cover our financing requirements to execute our current business plan with respect to India and China, our ultimate profitability and the timing and extent of any need for additional capital resources are materially dependent on the ability to generate our revenue through substantial increases in subscribers, among other factors.

2004 Reorganization

In December 2004, the former WorldSpace group of companies was reorganized and recapitalized. On December 30, 2004, the group’s principal operating company, WorldSpace International Network Inc., a British Virgin Islands company (WIN), was merged with and into the group’s former holding company, WorldSpace, Inc., a Maryland corporation (WorldSpace Maryland). Immediately thereafter, for purposes of reincorporating WorldSpace Maryland in Delaware, WorldSpace Maryland was merged into a newly-formed Delaware company, also named WorldSpace, Inc. (WorldSpace or the Company).

Stonehouse restructuring and pre-offering recapitalization

On September 30, 2003, WorldSpace Maryland entered into a Loan Restructuring Agreement with Stonehouse, WIN, and WorldSpace Satellite Company Ltd. to extinguish approximately $2.0 billion in the aggregate of outstanding debt and accrued interest owed to Stonehouse by WIN, and guaranteed by WorldSpace Satellite Co. and WorldSpace Maryland, in exchange for certain royalty payments to be made to Stonehouse pursuant to a related Royalty Agreement. On December 31, 2004, the Loan Restructuring Agreement closed and the Royalty Agreement contemplated thereby became effective. Under the Royalty Agreement, we are required to pay Stonehouse 10% of our EBITDA (earnings before income, taxes, depreciation and amortization), if any, for each year from January 1, 2005 through December 31, 2015. On December 31, 2004, we also issued the Convertible Notes to a group of private investors (New Investment Transaction). See “Certain relationships and related party transactions” and “—Liquidity and capital resources—Historical sources of cash” for a more detailed description of the reorganization, the Loan Restructuring Agreement, the Royalty Agreement and the New Investment Transaction.

Management’s discussion and analysis of financial condition and results of operations

Revenue

We derive revenue from subscription fees for our services, sales of receivers, our provision of services to governments, leasing of satellite capacity, and certain other items, including technology licensing. We do not expect our historical revenue mix to be indicative of our future revenue streams. Since we began to roll out our subscription-based service in India during 2004, subscription revenue has become an increasingly significant component of our revenue. We expect that subscription fees will be the main source of revenue for the Company in the future, followed by revenue from receiver sales and from the provision of government services. Although we expect revenue from receiver sales to increase as we fully roll out our subscription services, initially in India and subsequently in China, we expect that receiver sales as a percentage of total revenue will decline. We do not expect revenue from leasing capacity to constitute a significant portion of our future revenue as we are intending to focus primarily on subscriber acquisition and will utilize our capacity to broadcast content tailored to consumer demand in the different markets within our broadcast coverage area. We believe we have established adequate reserves to offset uncollectable revenue from capacity leases and from receiver sales.

Cost of revenue

Our cost of revenue consists of engineering and broadcast operations expenses, content and programming expenses, customer care, billing and collections expenses and other costs of revenue expenses. Currently, our primary expenses are from engineering and operations, content and programming and other costs of revenue. We do not expect our historical cost of revenue mix to be indicative of our future cost of revenue mix. Because we intend to increase our subscription services in India and other target markets, we expect our cost of revenue to increase, especially in the initial phases of our expansion into these markets. We further expect that our engineering and operations costs will increase as we establish terrestrial repeater networks in India and pay for in-orbit insurance for our AsiaStar and AfriStar satellites, and that our content and programming expenses will rise as we both increase headcount to produce in-house programming content and acquire additional content, pay additional royalties and potentially provide additional compensation to content providers in connection with the acquisition or development of programming content. In addition, we expect our customer care, billing and collections costs to significantly increase in the future as we increase the number of our subscribers. We anticipate our other costs of revenue, currently consisting principally of receiver hardware costs, will increase as the sale of our receivers increases in conjunction with the planned expansion of our services.

Operating expense overview

Our operating expenses include research and development expenses, selling, general and administrative expenses, stock based compensation and depreciation and amortization. We do not expect our historical operating expense mix to be indicative of our future operating expense mix. We expect that our research and development expenses will increase as we invest in the development of next generation receivers for use in homes and automobiles as well as in our terrestrial repeater network. We currently expect that we will incur significant costs in 2005 and beyond related to financial reporting requirements and developing, implementing and maintaining internal controls, including those mandated by the Sarbanes-Oxley Act of 2002, and that the costs related to maintaining such controls will continue in subsequent years. We anticipate that our professional fee expenses, including costs of compliance with reporting and other requirements as a public company, which we classify as part of our selling, general and administrative expenses, will also continue to increase as our business expands and we continue the roll-out of our service. As we implement our business plan, we expect our sales and marketing expenses, which we classify as part of our selling, general and administrative expenses, to increase significantly in 2005 and in subsequent years. We anticipate that this increase will primarily be due to higher subscriber acquisition costs as we increase subscribers in India and other target markets, implement large marketing and advertising campaigns and increase the sales incentives we make available to our distribution partners.

Management’s discussion and analysis of financial condition and results of operations

Beginning July 1, 2005, the Company will be required to adopt FAS 123R, Accounting for Stock Based Compensation. This rule will require the Company to record stock-based employee compensation plans at their fair value. Presently, the Company uses the intrinsic value method as prescribed by APB Opinion No. 25 Accounting For Stock Issued to Employees. Since FAS 123R’s application depends on the number of new employee options granted in the future, it is not clear how this new requirement will affect future compensation expense. To the extent old options are not yet fully vested, there may be an adverse impact; options already fully vested will not be impacted. As a result of a significant stock option adjustment made in 2004, which increased compensation expense, it is unlikely that adopting FAS 123R in 2005 will increase compensation expense beyond that level.

Our depreciation and amortization expenses have remained relatively constant over the past three years due in large part to the long-life of our depreciable assets. However, we expect to deploy terrestrial repeater networks to support the full roll-out of commercial operations in 2005 and to launch a third satellite in subsequent years, which will increase our depreciation expense.

Other income (expense)

Our interest income is currently not material since we have not typically had significant cash balances. Interest income will increase in 2005 and beyond as a result of the cash raised in the New Investment Transaction and in this offering.

Our interest expense increased from 2002 through December 2004 due to our now extinguished long-term debt owed to Stonehouse, related-party long-term notes and related-party working capital notes and advances. As a result of the transactions in December 2004 described under “Stonehouse restructuring and pre-offering recapitalization” above, we currently have no long-term debt other than the Convertible Notes and, therefore, we expect interest expense in 2005 to decline, as compared with 2004. In the future, we may need to raise debt capital as we continue to expand our business, which would increase our total interest expense.

Insurance

Insurance premiums related to satellite launches and subsequent in-orbit testing are capitalized and amortized over the term of the insurance policy. Although we intend to maintain insurance on both of our satellites, any determination we make as to whether to purchase or maintain in-orbit insurance coverage will depend on a number of factors, including the availability of insurance in the market and the cost of available insurance.

CRITICAL ACCOUNTING POLICIES

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. We base our estimates and judgments on historical experience and on various other assumptions which we believe are reasonable under the circumstances. Due to the inherent uncertainty

Management’s discussion and analysis of financial condition and results of operations

involved in making estimates, actual results could differ from those estimates. We believe the following critical accounting policies require the most significant management estimates and judgments used in the preparation of the financial statements.

Subscription revenue recognition

Revenue from subscribers consists of subscription fees and non-refundable activation fees. We recognize subscription fees as our service is provided to a subscriber. We record deferred revenue for prepaid subscription fees and amortize these prepayments to revenue ratably over the term of the respective subscription plan. Activation fees are recognized ratably over the term of the subscriber relationship, currently estimated to be 40 months. The estimated term of a subscriber relationship is based on management’s judgment and, if necessary, will be refined in the future as historical data becomes available. If the actual term of our subscriber relationships is significantly greater or less than our current estimate of 40 months, the period over which we recognize the non-refundable activation fee will be extended or shortened to reflect the actual term of our subscriber relationships. Promotions and discounts are treated as an offset to revenue during the period of promotion. Sales incentives, consisting of discounts to subscribers, offset earned revenue. Management estimates the amount of required allowances for the potential non-collectibility of accounts receivable based upon past collection experience and consideration of other relevant factors. However, past experience may not be indicative of future collections and therefore reserves for doubtful accounts may increase as a percentage of accounts receivable and sales.

Evaluation of satellites and other long-lived assets for impairment and satellite insurance coverage

We assess the recoverability of our long-lived assets pursuant to Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The costs of specific satellites are grouped together with other associated assets when assessing recoverability. Periodically, and when a change in circumstances occurs, this group of assets is compared with the expected future undiscounted cash flows to be generated by us from the related satellite. Any excess of the net book value for this group of assets over the expected future undiscounted cash flows of the related satellite would result in an impairment charge that would be recorded in our statement of operations in the period the determination is made. The impairment charge would be measured as the excess of the carrying value of the asset or group of assets over the present value of estimated expected future cash flows related to the asset or asset group using a discount rate commensurate with the risks involved. Changes in estimates of future cash flows could result in a write-down of the asset in a future period. Estimated future cash flows could be impacted by, among other things:

changes in estimates of the useful life of the satellite;

changes in estimates of our ability to operate the satellite at expected levels;

changes in the manner in which the satellite is to be used; and

the loss of one or several significant customer contracts for capacity on the satellite.

If an impairment loss was indicated, such amount would be recognized in the period of occurrence, net of any insurance proceeds to be received so long as such amounts are determinable and receipt is probable.

Depreciable satellite lives

We calculate depreciation on a straight line basis over a ten-year period. As the communications industry is subject to rapid technological change and our satellites have been subject to certain anomalies, we may be required to revise the estimated useful lives of our satellites and communications equipment or to

Management’s discussion and analysis of financial condition and results of operations

adjust their carrying amounts. Accordingly, the estimated useful lives of our satellites are periodically reviewed using current engineering data. If a significant change in the estimated useful lives of our satellites is identified, we would account for the effects of such changes on depreciation expense on a prospective basis. Reductions in the estimated useful lives of our satellites would result in additional depreciation expense in future periods and may necessitate acceleration of planned capital expenditures in order to replace or supplement the satellite earlier than planned. If the reduction in the estimated useful life of a satellite results in undiscounted future cash flows for the satellite, which are less than the carrying value of the satellite, an impairment charge would be recorded.

Stock-based compensation

We account for employee and director stock options using the intrinsic-value method in accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations and have adopted the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. Stock options issued to non-employees are recorded at their fair value as determined in accordance with SFAS No. 123 and Emerging Issues Task Force (EITF) No. 96-18, Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, and amortized over the service period.

Stock compensation expense, which is a noncash charge, has resulted from the following:

stock option grants made to employees at exercise prices below the deemed fair value of the underlying common stock on the date of grant (intrinsic value method);

modification of stock options that created a new measurement date for purposes of recording compensation expense equal to the excess of the intrinsic value of the modified options over the intrinsic value of the options when originally issued; and

stock option grants made to non-employees at the fair value of the option granted as determined using the Black-Scholes valuation model.

We have recorded deferred compensation representing the difference between the option exercise price and the fair value of our common stock on the grant date for financial reporting purposes. Deferred compensation is amortized to stock compensation expense on a straight line basis over the vesting period of the underlying option, generally five years. The amount of deferred compensation expense to be recorded in future periods may decrease if unvested options for which we have recorded deferred compensation are subsequently cancelled or expire. Of the $90.3 million of stock compensation recorded during 2004, $87.0 million was attributed to recording compensation related to modified options. In the future, it is unlikely that stock-based compensation expense will exceed 2004 levels.

Pro forma information regarding net loss and net loss per share is required in order to show our net loss as if we had accounted for employee stock options under the fair value method of SFAS No. 123, as amended by SFAS No. 148. This information is contained in Note B to our consolidated financial statements contained elsewhere within this prospectus. The fair values of options and shares issued pursuant to our option plan at each grant date were estimated using the Black-Scholes option-pricing model.

We currently are not required to record stock-based compensation charges if the employee stock option exercise price equals or exceeds the deemed fair value of our common stock at the date of grant. In December 2004, the FASB issued SFAS No. 123 (Revised 2004) Share Based Payment, which is a revision to SFAS 123 and supersedes APB 25 and SFAS No. 148. This statement requires that the estimated fair value resulting from all share-based payment transactions be recognized in the financial

Management’s discussion and analysis of financial condition and results of operations

statements. If we had estimated the fair value of the options on the date of grant in our financial statements, and then amortized this estimated fair value over the vesting period of the options, our net loss would have increased in 2004, 2003 and 2002. See Note B to our consolidated financial statements contained elsewhere within this prospectus for the pro forma impact of stock compensation on net loss and net loss per share.

Valuation of deferred income taxes and income tax reserves

The Company is subject to taxation by federal, state and international jurisdictions. The Company’s annual provision for income taxes and the determination of the resulting deferred tax assets and liabilities involve a significant amount of management judgment and are based on the best information available at the time. The Company believes that it has recorded adequate liabilities and reviews those balances on a quarterly basis.

Judgment is also applied in determining whether deferred tax assets will be realized in full or in part. When it is more likely than not that all or some portion of specific deferred tax assets will not be realized, a valuation allowance is established for the amount of the deferred tax assets that are determined not to be realizable. Realization of our deferred tax assets may depend upon the Company’s ability to generate future taxable income, which is dependent upon the Company’s ability to successfully introduce and market its product, general economic conditions, competitive pressures, and other factors beyond management’s control.

Fiscal year ended December 31, 2004 compared with fiscal year ended December 31, 2003

Revenue

The table below presents our operating revenue for the years ended December 31, 2004 and 2003, together with the relevant percentage of total revenue represented by each revenue category.


	Years ended December 31,
	2003			2004
Revenue:			Percent of total			Percent of total
	(in thousands)
Subscription	$	226	1.7	$	1,038	12.1
Capacity lease		3,449	26.4		2,002	23.3
Government services		5,636	43.1		1,945	22.7
Receiver sales		1,942	14.9		1,704	19.9
Other		1,821	13.9		1,892	22.0

Total revenue:	$	13,074	100.0	$	8,581	100.0

Total revenue for 2004 was $8.6 million, a 34.4% decrease compared with $13.1 million in 2003. This decrease in total revenue was primarily due to a reduction in revenue from government service contracts, capacity leases and receiver sales partially offset by increased revenue from subscribers to our DARS service. Our total revenue consists of subscription fees, leasing of satellite capacity, government services, receiver sales, and other items such as advertising and technology licensing. The mix of our revenue changed during 2004 as we emerged from development stage and launched subscription services in a limited manner.

Subscription revenue. Subscription revenue for 2004 was approximately $1.0 million, or 12.1% of total revenue, an increase of 359.3% compared with $0.2 million, or 1.7% of total revenue, generated in

Management’s discussion and analysis of financial condition and results of operations

2003. This increase in subscription revenues was primarily due to the increase in our paying subscribers from approximately 15,000 in 2003 to approximately 40,000 in 2004 and an increase in average monthly per subscriber revenue from $1.70 in 2003 to $3.00 in 2004.

Capacity lease revenue. Satellite capacity leasing revenue for 2004 was $2.0 million, or 23.3% of total revenue, a decrease of 42.0% compared with $3.4 million, or 26.4% of total revenue, in 2003. This decrease was a result of a reduction in the number of broadcasters contracting to use our satellite capacity for their broadcasts as we shifted focus toward acquiring new subscribers and away from the capacity leasing business. In 2004, we increased our reserve for doubtful accounts with respect to capacity leasing to $0.7 million as compared with $0.3 million in 2003.

Government services revenue. Government services revenue for 2004 was $1.9 million, or 22.7% of total revenue, a decrease of 65.5% compared with $5.6 million, or 43.1% of total revenue, in 2003. Government services revenues decreased principally because in 2003 we completed and recognized payment for the bulk of the services rendered under a $10.0 million multi-year contract with a United States government agency, or the PEI Contract, which included $3.5 million in receiver sales accounted for under government services revenue.

Receiver sales revenue. Receiver sales revenue was approximately $1.7 million for 2004, or 19.9% of total revenue, a decrease of 12.3% compared with $1.9 million, or 14.9% of total revenue, in 2003. This decrease was primarily due to the greater availability of low-cost receivers and, as a result, a reduction in high-end receiver sales. Excluding approximately 40,000 receivers sold in 2003 under the PEI Contract, as described above, we sold a total of approximately 19,000 receivers in 2004, compared with approximately 16,000 receivers sold in 2003. In 2004, we increased our reserve for doubtful accounts with respect to receiver sales to $0.2 million as compared with $0.1 million in 2003. Although receiver sales revenue decreased in 2004, receiver sales revenue as a percentage of total revenue increased due to the decline in total revenue.

Other revenue. Other revenue, including licensing revenue, for 2004 was $1.9 million, or 22.0% of total revenue, an increase of 3.9% compared with $1.8 million, or 13.9% of total revenue, in 2003. This increase was related to factors which we do not consider operationally significant, including an increase in advertising barter revenue, which offset a decrease in licensing and syndication revenue.

Cost of revenue

The table below presents our costs of revenue for the years ended December 31, 2004 and 2003, together with the relevant percentages of total revenue represented by each revenue category.


	Years ended December 31,
	2003			2004
Cost of revenue:			Percent of total			Percent of total
	(in thousands)
Engineering & broadcast operations	$	10,148	44.2	$	8,278	56.4
Content & programming		2,510	10.9		2,600	17.7
Customer care, billing & collection		—	—		488	3.3
Other cost of revenue		10,283	44.9		3,311	22.6

Total cost of revenue:	$	22,941	100.0	$	14,677	100.0

Total cost of revenue for 2004 was $14.7 million, a 36.0% decrease compared with $22.9 million in 2003. This decrease was primarily due to a $4.8 million write-down on receiver inventory in 2003, the

Management’s discussion and analysis of financial condition and results of operations

expiration and non-renewal of in-orbit insurance for our AfriStar satellite in October 2003 and the reduction in the number of receivers sold in 2004 compared with 2003. Other cost of revenue remained relatively constant as we deferred full roll-out of commercial operations to focus on obtaining new financing.

Engineering and broadcast operations. Engineering and broadcast expense, including the cost of operating our two satellites, ground control systems and telecommunications links as well as our in-orbit insurance, for 2004 was $8.3 million, or 56.4% of our total costs of revenue, a decrease of 18.4% compared with $10.1 million, or 44.2% of total cost of revenue, in 2003. This decrease was primarily due to the expiration and non-renewal of WorldSpace’s in-orbit insurance on the Afristar satellite in October 2003.

Content and programming. Content and programming expense, which include content production, music royalties and other content acquisition costs, for 2004 was $2.6 million, or 17.7% of our total costs of revenue, an increase of 3.6% compared with $2.5 million, or 10.9% of our total cost of revenue, in 2003. While content and programming expense remained materially unchanged from 2003 to 2004, this expense increased as a percentage of revenue because revenue declined as we deferred full roll-out of commercial operations to focus on obtaining new financing.

Customer care, billing and collections. Customer care, billing and collections expense for 2004 was $0.5 million, or 3.3% of our total cost of revenue. We commenced our customer care, billing and collections in 2004 to support the limited launch of our subscription services in India. Prior to this limited launch in 2004, our two subscription service packages were being tested, and as a result expenses related to customer care, billing and collections in 2003 were minimal.

Other cost of revenue. Other cost of revenue for 2004 was $3.3 million, or 22.6% of total cost of revenue, a decrease of 67.8% compared with $10.3 million, or 44.9% of total cost of revenue, in 2003. This decrease was primarily due to a decrease in receiver hardware cost of goods sold to $2.5 million in 2004 from $9.5 million in 2003, which included a $4.8 million write-down on receiver inventory. This write-down was a result of currency exposure under a contract where our payment obligation was denominated in Euros.

Operating expense

The table below presents our operating expenses for the years ended December 31, 2004 and 2003, together with the relevant percentage increase (decrease) year-over-year.


	Years ended December 31,
	2003				2004
Operating expense:			Percent increase (decrease)				Percent increase (decrease)
	(in thousands)
Research & development	$	64	(92.9	)	$	—	(100.0	)
Selling, general & administrative		33,425	(6.8	)		32,765	(2.0	)
Stock-based compensation		3,528	(11.4	)		90,323	2,460.2
Depreciation and amortization		60,909	(0.7	)		61,183	0.4

Total operating expense:	$	97,926	(4.1	)	$	184,271	88.2

Total operating expense for 2004 was $184.3 million, an 88.2% increase compared with $97.9 million in 2003. This increase was primarily due to increase in our stock-based compensation. Our selling,

Management’s discussion and analysis of financial condition and results of operations

general and administrative expense for 2004 was $32.8 million, a decrease of 2.0% compared with $33.4 million in 2003 due to a compensation accrual reversal recorded in 2004. Our stock based compensation expense was $90.3 million in 2004, an increase of 2,460.2% compared with $3.5 million in 2003. This increase was due to a stock-based compensation expense the Company recorded in 2004 in connection with the conversion of WIN options into WorldSpace options pursuant to the merger transaction described under “Pre-offering recapitalization.” For additional detail, please see Note K to the Financial Statements. Depreciation and amortization expense between 2004 and 2003 was relatively flat: $61.2 million in 2004 and $60.9 million in 2003. Research and development had a minimal impact on our expenses in 2004 and 2003.

Other income (expense)

Interest income. Interest income for 2004 was $0.4 million, a decrease of 20.5% compared with $0.5 million in 2003. In 2004 and 2003 interest income was minimal and was a direct result of cash and restricted cash equivalents.

Interest expense. Interest expense for 2004 was $119.3 million, an increase of 10.1% compared with $108.4 million in 2003. This increase was primarily due a rise in interest rates which increased our interest obligations under our floating rate long-term debt held by Stonehouse. Interest expense for 2004 and 2003 was attributable to long-term debt held by Stonehouse, related-party long-term notes and related-party working capital notes and advances.

Income tax

In September 2003 the Company’s predecessor, WorldSpace Maryland, entered into a Restructuring Agreement, which closed in December 2004, to extinguish approximately $2.0 billion in the aggregate of outstanding debt and interest owed by WIN, and guaranteed by WorldSpace Satellite Co. and WorldSpace Maryland, in exchange for certain royalty payments to Stonehouse as governed by a Royalty Agreement. For U.S. tax purposes, this transaction caused the Company to realize cancellation of indebtedness, or COD, income. In connection with this transaction, the Company reduced its U.S. tax attributes by approximately $1,726.0 million and, as a result, the U.S. Company’s U.S. net operating loss and capital loss carryforwards at December 31, 2004 were eliminated, and the remaining tax basis in its satellite assets, U.S. fixed assets and stock in its foreign subsidiaries were also reduced to zero.

Net loss

For the years ended December 31, 2004 and 2003, as result of the factors referred to above, we incurred net losses of $577.4 million and $217.7 million, respectively, an increase of 165.2%.

Management’s discussion and analysis of financial condition and results of operations

Fiscal year ended December 31, 2003 compared with fiscal year ended December 31, 2002

Revenue

The table below presents our operating revenue for the years ended December 31, 2003 and 2002, together with the relevant percentages of total revenue represented by each revenue category.


	Years ended December 31,
	2002			2003
Revenue:			Percent of total			Percent of total
	(in thousands)
Subscription	$	118	1.2	$	226	1.7
Capacity lease		3,098	32.3		3,449	26.4
Government services		819	8.5		5,636	43.1
Receiver sales		3,735	39.0		1,942	14.9
Other		1,819	19.0		1,821	13.9

Total revenue:	$	9,589	100.0	$	13,074	100.0

Total revenue for 2003 was $13.1 million, a 36.3% increase compared with $9.6 million in 2002. This increase was primarily attributable to a substantial increase in government service contract revenue, primarily under the PEI Contract, including $3.5 million in receiver sales accounted for thereunder, as well as a $0.4 million increase in capacity lease revenue. Excluding these government receiver sales, revenues from receiver sales declined as compared with 2002.

Subscription revenue. Subscription revenue for 2003 was approximately $0.2 million, or 1.7% of total revenue, an increase of 91.5% compared with $0.1 million, or 1.2% of total revenue, generated in 2002. The increase was primarily attributable to an increase in our paying subscribers as a result of the launch of two subscription packages in India during the second half of 2002.

Capacity lease revenue. Satellite capacity leasing revenue for 2003 was $3.4 million, or 26.4% of total revenue, an increase of 11.3% compared with $3.1 million, or 32.3% of total revenue, in 2002. This slight increase was attributable to an increase in revenue from our broadcaster relationships. In 2003, we reduced our reserve for doubtful accounts with respect to capacity lease revenue to $0.3 million as compared with $1.0 million in 2002, as we believed that two major contracts had become collectible in 2003.

Government services revenue. Government services revenue for 2003 was $5.6 million, or 43.1% of total revenue, an increase of 588.2% compared with $0.8 million, or 8.5% of total revenue, in 2002. Government services revenue increased principally because in 2003 we completed and recognized payment for the bulk of the services rendered, including $3.5 million in receiver sales under the PEI Contract.

Receiver sales revenue. Receiver sales revenue was approximately $1.9 million for 2003, or 14.9% of total revenue, a decrease of 48.0% compared with $3.7 million, or 39.0% of total revenue, in 2002. This decrease in receiver sales revenue, excluding approximately 40,000 receivers sold in 2003 under government services contracts, as described above, was due to the significant working capital constraints we experienced in 2003 which prevented us from purchasing receivers for sale. In 2003, we reduced our reserve for doubtful accounts with respect to receiver sales to $0.1 million as compared with $0.2 million in 2002.

Management’s discussion and analysis of financial condition and results of operations

Other revenue. Other revenue, including licensing revenue, increased 0.1% to $1.8 million or 13.9% of total revenue, as compared with 19.0% of total revenues in 2002 due to a decline in total revenues.

Cost of revenue

The table below presents our costs of revenue for the years ended December 31, 2003 and 2002, together with the relevant percentages of total revenue represented by each revenue category.


	Years ended December 31,
	2002			2003
Cost of revenue:			Percent of total			Percent of total
	(in thousands)
Engineering & broadcast operations	$	9,762	45.5	$	10,148	44.2
Content & programming		2,926	13.6		2,510	10.9
Customer care, billing & collection		—	—		—	—
Other cost of revenue		8,766	40.9		10,283	44.9

Total cost of revenue:	$	21,454	100.0	$	22,941	100.0

Total cost of revenue for 2003 was $22.9 million, a 6.9% increase compared with $21.5 million in 2002. This minimal increase is attributable to higher receivers sales in 2003 as compared with 2002, as well as a $1.9 million write-down on receiver inventory and associated hardware. Other cost of revenue remained relatively constant as we deferred full roll-out of commercial operations to focus on obtaining new financing.

Engineering and broadcast operations. Engineering and broadcast expense, including the cost of operating our two satellites, ground control systems and telecommunications links as well as our in-orbit insurance, for 2003 was $10.1 million, or 44.2% of total cost of revenue, an increase of 4.0% compared with $9.8 million, or 45.5% of total cost of revenue, for 2002. This marginal increase was due to an estimate adjustment in the accounting for the life of in-orbit insurance premiums.

Content and programming. Content and programming expense, which include content production, music royalties and other content acquisition costs, for 2003 was $2.5 million, or 10.9% of total cost of revenue, a 14.2% decrease compared with $2.9 million, or 13.6% of total cost of revenue, for 2002. This decrease was primarily due to a reduction in the number of content product employees in 2003 as compared with 2002.

Customer care, billing and collections. In 2003 and 2002, we did not incur meaningful expense related to customer care, billing and collections as we were still testing our subscription service in India.

Other cost of revenue: Other cost of revenue for 2003 were $10.3 million, or 44.8% of total cost of revenue, an increase of 17.3% compared with $8.8 million in 2002, or 40.9% of total costs of revenue, in 2002. This increase was due to an increase in receiver hardware cost of goods sold to $9.5 million, which included a $4.8 million write-down on receiver inventory recorded in 2003 as a result of currency exposure under a contract where our payment obligation was denominated in Euros. This increase was partially offset by lower costs of receiver hardware. In addition, a $1.9 million write-down on receiver inventory and associated hardware had a negative impact on other costs of revenue in 2002.

Management’s discussion and analysis of financial condition and results of operations

Operating expense

The table below presents our operating expense for the years ended December 31, 2003 and 2002, together with the relevant percentage increase (decrease) year-over-year.


	Years ended December 31,
	2002				2003
Operating Expense:			Percent increase (decrease)				Percent increase (decrease)
	(in thousands)
Research & development	$	902	(12.4	)	$	64	(92.9	)
Selling, general & administrative		35,855	(38.2	)		33,425	(6.8	)
Stock-based compensation		3,981	(23.1	)		3,528	(11.4	)
Depreciation and amortization		61,354	(2.7	)		60,909	(0.7	)

Total operating expense:	$	102,092	19.8		$	97,926	(4.1	)

Total operating expense for 2003 was $97.9 million, a 4.1% decrease compared with $102.1 million in 2002. This decrease was primarily due to a decline in sales and marketing expenses. Our selling, general and administrative expense for 2003 was $33.4 million, a decrease of 6.8% compared with $35.9 million in 2002. This decrease was due in part to a reduction in costs associated with maintaining our employee base, the closing of several foreign offices, temporary across the board salary reductions and a considerable reduction in sales and marketing expenses due to financial constraints. Stock based compensation expense for 2003 was $3.5 million a decrease of 11.4% compared with $4.0 million in 2002. The decrease was attributed to forfeited options initially issued at an exercise price less than the fair value, related to terminated employees. Depreciation and amortization expense were relatively constant over the two years as a result of fixed line depreciation on our existing assets and insubstantial replacement capital expenditures. Research and development and professional fees had a minimal impact on our operating expense in 2004 and 2003.

Other income and expense

Interest income: Interest income for 2003 was $0.5 million, an increase of 60.8% compared with $0.3 million in 2002. This increase was due to an increase in interest rates and increased income on XM licensing revenue (effective in the fourth quarter of 2002). Interest income has been minimal and resulted mainly from cash and restricted cash equivalents.

Interest expense: Interest expense for 2003 was $108.4 million, a decrease of 5.2% compared with $114.3 million in 2002. This decrease was primarily due to a minor decline in interest rates. Interest expense was primarily attributable to long-term debt held by Stonehouse, related-party long-term notes and related-party working capital notes and advances. We will no longer incur any interest expense on these debts (see the discussion in “Certain relationships and related party transactions” section of this prospectus).

Income tax

For the year ended December 31, 2003, we had approximately $861.0 million in domestic net operating loss and capital loss carryforwards and approximately $77.9 million in foreign net operating losses, which expire at varying dates through 2025. As discussed above, in 2004 our domestic net operating loss was fully extinguished upon the restructuring of our debt.

Management’s discussion and analysis of financial condition and results of operations

Net loss

For the years ended December 31, 2003 and 2002 we incurred consolidated net losses of $217.7 million and $275.1 million, respectively. Net losses decreased by 20.9% between 2002 and 2003 due to a one time charge of $44.3 million related to impairment of goodwill which was taken in 2002.

LIQUIDITY AND CAPITAL RESOURCES

We assess our liquidity in terms of our ability to generate cash to fund our operating and investing activities.

Cash requirements

As of December 31, 2004, following the cancellation of approximately $256.0 million of debt owed to Yenura Pte. Ltd. in exchange for shares of our Class B Common Stock (Yenura Transaction), the extinguishment of debt pursuant to the Loan Restructuring Agreement, and the New Investment Transaction, we had cash and cash equivalents of $154.4 million. During 2004, 2003 and 2002, our monthly operating expense averages were $3.3 million, $3.3 million and $4.0 million, respectively, or approximately $40.0 million per year. We anticipate that our annual cash expenditures will increase to support the execution of our business plan and our planned increased level of activities. We believe our cash and cash equivalents at December 31, 2004 will provide adequate liquidity and capital to fund our operations for at least the next 12 months in accordance with our business plan.

We intend to use the net proceeds of this offering, together with the net proceeds from the New Investment Transaction ($142.3 million after payment of all transaction expenses), to execute our business plan, which includes the build-out of the terrestrial repeater network; service launch in key cities and marketing expenses related to subscriber acquisitions in India; business development activities in China, Western Europe and other selected markets within our broadcast coverage area; and the roll-out of our services in China. We expect that the majority of our expenditures in 2005 will be directed towards sales and marketing activities, including developing subscriber operations, increasing content and programming development, capital expenditures, operating and corporate expenses and several one-time corporate expenses.

We had operating losses of $190.4 million in 2004 compared with $107.8 million in 2003. As of December 31, 2004, we had total assets of $649.1 million and total liabilities of $2,338.5 million (or $277.0 million net of contingent royalty obligations and deferred tax liability) compared with total assets of $572 million and total liabilities of $2,032.6 million as of December 31, 2003.

The following table sets forth our net cash flows from operating activities, investing activities and financing activities for the periods indicated:


	Years ended December 31,
Net Cash Flow:	2002			2003			2004
	(in thousands)
Net cash provided by (used in) operating activities	$	(35,970	)	$	(27,672	)	$	(17,838	)
Net cash provided by (used in) investing activities		718			(1,038	)		(444	)
Net cash provided by (used in) financing activities		36,672			27,662			170,904

Increase (decrease) in cash and cash equivalents		1,420			(1,048	)		152,622
Cash and cash equivalents at beginning of period		1,368			2,788			1,740

Cash and cash equivalents at end of period	$	2,788		$	1,740		$	154,362

Management’s discussion and analysis of financial condition and results of operations

Cash flow items

Net cash provided by (used in) operating activities. For the year ended December 31, 2004, net cash used in operating activities was $17.8 million. Net cash used in operating activities was related principally to the offset of $577.4 million in net loss by non-cash expenses including $247.3 in deferred tax expense related to the series of transactions described in “Pre-offering recapitalization,” $90.3 million in stock-based compensation, $86.7 in accrued interest, $61.2 million in depreciation and amortization and a reduction of $41.3 million attributable to the changes in assets and liabilities and, $31.0 million in amortization of debt discount liabilities and deferred financing costs.

For the year ended December 31, 2003, net cash used in operating activities was $27.7 million. Net cash used by operating activities in 2003 was related principally to the offset of $217.7 million in net loss by non-cash expenses, including $77.3 in accrued interest, $60.9 million in depreciation and amortization, $31.0 million in amortization of debt discount and deferred financing cost and a reduction of $11.7 million attributable to the changes in assets and liabilities.

For the year ended December 31, 2002, net cash used in operating activities was $36.0 million. Net cash used in operating activities was related principally to the offset of $275.1 million in net loss by non-cash expenses including $83.3 million in accrued interest, $61.4 million in depreciation and amortization, $31.0 million in amortization of debt discount and deferred financing cost, $44.3 million in goodwill impairment loss and $8.7 million attributable to the changes in assets and liabilities.

Net cash provided by (used in) investing activities. For the year ended December 31, 2004, net cash used in investing activities was $0.4 million. Our investing activities were minimal.

For the year ended December 31, 2003, net cash used in investing activities was $1.0 million. Our investing activities consisted of $1.0 million of capital expenditures for property and equipment.

For the year ended December 31, 2002, net cash provided by investing activities was $0.7 million. Our investing activities consisted of a $2.1 million refund on satellite and related systems partially offset by $0.6 million of capital expenditures for property and equipment and $0.8 million for purchases of satellite and related systems.

Net cash provided by (used in) financing activities. For the year ended December 31, 2004, net cash provided by financing activities was $170.9 million, consisting of $142.3 million in net proceeds from the issuance of the Convertible Notes in the New Investment Transaction, of $26.5 million in proceeds from short-term borrowings and notes payable and a $2.1 million decrease in restricted cash.

For the year ended December 31, 2003, net cash provided by financing activities was $27.7 million, consisting principally of $27.5 million in proceeds from the issuance of long-term debt to Yenura as described under “Pre-offering recapitalization” and “Certain relationships and related party transactions.”

For the year ended December 31, 2002, net cash provided by financing activities was $36.7 million, consisting principally of $36.5 million in proceeds from the issuance of long-term debt to Yenura as described under “Pre-offering recapitalization” and “Certain relationships and related party transactions.”

Management’s discussion and analysis of financial condition and results of operations

Historical sources of cash

Historically, we have financed our business primarily through issuances of equity and debt and the sale of our interest in XM. As of December 31, 2004, we have raised approximately $1.5 billion, net of expenses, interest reserve and repayments of debt, as described below. We believe that the net proceeds from the New Investment Transaction, together with the net proceeds from this offering, should be sufficient for us to fund our operations, in accordance with our business plan, for at least the next 12 months.

To date, our net proceeds of approximately $1.5 billion are from the following sources:

New Investment Transaction. We issued senior convertible notes in the aggregate principal amount of $155.0 million to a group of private investors. The net proceeds, after deducting expenses, were $142.3 million.

Stonehouse Capital Limited. We received approximately $1.1 billion from Stonehouse and its predecessors in interest in several different transactions as described under “Pre-offering recapitalization—Stonehouse obligations.”

Yenura Pte. Ltd. We received approximately $118.5 million from Yenura, a Singapore company controlled by our founder Noah A. Samara, as described under “Pre-offering recapitalization—Yenura obligations.”

XM Satellite Radio Holdings, Inc. Sale. In 1999 in connection with the sale of our interest in XM to Motient, we received approximately $75.0 million and 8.6 million shares of Motient common stock, which at the date of the sale had a market value of $176.6 million. From 1999 to 2001, we sold 6.0 million shares of Motient common stock, and realized net proceeds of approximately $120.0 million before the shares lost virtually all of their value in Motient’s bankruptcy proceeding. The net proceeds from the sale of our XM interest, net of our initial investment of $144.0 million, was approximately $51.0 million.

In addition to the transactions discussed above, we also received a total of approximately $73.1 million from Saifcom Establishment, a Liechtenstein entity (Saifcom), and Industrial Development Inc. (Industrial Development).

From inception through December 31, 2004, the Company has received approximately $46.4 million in interest income.

The Yenura Transaction, the Stonehouse restructuring and the New Investment Transaction were all part of a series of transactions by which we reorganized and recapitalized our debt. See “Pre-offering recapitalization.”

Uses of cash

While we had raised approximately $1.5 billion as of December 31, 2004, we have paid $719.5 million in capital expenditures, and incurred $497.7 million in operating expenses.

Satellite and Ground Systems. Alcatel Space (Alcatel) has delivered two satellites, AfriStar and AsiaStar, in-orbit, and we have two additional satellites, one fully assembled (F3) and another partially assembled (F4), which are currently maintained in Toulouse, France. Alcatel also provided us with ground equipment and software for our service system as well as certain launch and operations support services, including launch insurance. Ground equipment costs were related to the acquisition of satellite control

Management’s discussion and analysis of financial condition and results of operations

facilities, programming production studios and various other equipment and facilities. Approximately $666.0 million of the $719.5 million has been paid to Alcatel since inception through December 31, 2004. Approximately $40.1 million has accrued in unpaid amounts, including accrued interest. In addition, we are required to pay to Alcatel approximately $29.0 million if construction of our partially assembled satellite, F4, is restarted, excluding costs in connection with launch services and insurance.

On February 25, 2005, we reached an agreement with Alcatel to reduce our debt for the construction of our satellites to $19.0 million, of which $10.0 million has been paid in cash. The remainder of the debt will be paid to Alcatel at the closing of this offering with a $2.0 million cash payment and $7.0 million in unregistered shares of our Class A Common Stock, valued at the same price per share of shares sold in this offering.

Property and Equipment. As of December 31, 2004, we spent $45.7 million in aggregate for property and equipment, which principally include computers, furniture, fixtures and leasehold improvements.

Operating Expenses. From inception through December 31, 2004, we have spent $497.7 million in total operating expenses, which principally include expenses related to personnel costs, facilities, outside services, travel, programming and content costs and ground tracking stations.

Future sources of cash

Although in 2004 we launched subscription services on a limited basis in India, we anticipate that we will continue to require significant funds to cover our cash requirements until we generate sufficient cash flow from operations to cover our expenses. With the commencement of our operations, our monthly operating expenses have increased substantially compared with our development-stage operations.

Although we believe the net proceeds from the New Investment Transaction, together with the proceeds from this offering, will be sufficient to fund our operations, in accordance with our business plan, for at least the next 12 months, our estimated cash requirements may change and we may require additional financing. We will need cash to cover the incremental roll-out of our India business plan, including the build-out of terrestrial repeater networks, accelerating service launch in key cities in India and marketing expenses related to subscriber acquisitions over the next three years. Furthermore, we will require additional cash to continue our business development activities in China and Western Europe, as well as for working capital and selling, general and administrative corporate expenses. We anticipate securing all the required regulatory clearances in China and we intend to use a portion of the proceeds of this offering to fund the roll-out of our services in China and continue our business development activities in Western Europe.

Our ability to generate revenue and ultimately to become profitable will depend on several factors, including whether we can attract enough subscribers and advertisers; whether our system continues to operate at an acceptable level; whether we compete successfully; and whether the local regulators grant us all additional necessary authorizations in a timely fashion.

We may undertake additional financing activities in the future to acquire additional financing as necessary to further develop and support our business plan. However, there can be no assurance that we will be successful in securing financing or that it will be available to us at attractive terms.

Our ability to obtain the financing in the future will depend on several factors, including future market conditions; our success in developing, implementing and marketing our satellite radio service; our future creditworthiness; and restrictions contained in agreements with our investors or lenders. If we fail to obtain any necessary financing on a timely basis or on attractive terms, our results of operations could be materially adversely affected. In addition, we could default on our commitments to creditors or others and we may have to discontinue operations or seek a purchaser for our business or assets.

Management’s discussion and analysis of financial condition and results of operations

OFF-BALANCE SHEET ARRANGEMENTS

We have not entered into any off-balance sheet arrangements.

CONTRACTUAL OBLIGATIONS

The following table shows our contractual obligations as of December 31, 2004:


	Payments Due By Period
	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
	(in millions of U.S. dollars)
Long-term debt(1)	$	155.0	$	—	$	—	$	—	$	155.0
Operating lease obligations		59.7		8.1		23.2		15.5		12.7
Satellite and ground systems commitments		42.2		42.2		—		—		—
Purchase obligations		13.3		13.3		—		—		—

Total contractual obligations	$	270.2	$	63.6	$	23.2	$	15.5	$	167.7

(1)

Excludes Stonehouse royalty payment referenced under “—Stonehouse restructuring and pre-offering recapitalization.”

Capital expenditures

We have spent approximately $719.5 million on capital expenditures related to the development and launch of our satellites, for our ground systems and for property and equipment. We expect to spend additional amounts to enhance our infrastructure with terrestrial repeaters. Our future capital expenditures will depend on our business strategy and our response to opportunities and trends in our industry and our markets.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rates

Our market risk from changes in interest rates is not material because our long-term debt only includes the Convertible Notes which have a fixed interest rate.

Foreign Currency

We anticipate that the vast majority of our revenue will be derived from our operations outside of the United States, particularly India, China and Western Europe, which subjects us to foreign currency risk. Because we report our financial results in U.S. dollars, changes in the exchange rates between the local currencies of our operations and the U.S. dollar could materially affect the translation of financial results into U.S. dollars for purposes of reporting our financial results. In addition, currency controls, devaluations, trade restrictions and other disruptions in the currency convertibility and in the market for currency exchange could limit our ability to timely convert sales earned abroad into United States dollars, which could adversely affect our ability to fund our United States dollar costs and finance capital expenditures.

A significant amount of our expenses are incurred in Rupees and the balance is primarily incurred in U.S. dollars, Chinese Renminbi, the Australian dollar, South African Rand and European currencies. Although we currently pay all expenses in the local currency in which they were incurred, we do incur an exchange risk in connection with the initial funds transfer and repatriation. As we expand our services, we anticipate that we will incur a greater proportion of our expenses in both Chinese Renminbi and European currencies.

Management’s discussion and analysis of financial condition and results of operations

RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, and as revised in December 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities. This interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, addresses consolidation by business enterprises of variable interest entities. Prior to this interpretation, two enterprises had been generally included in consolidated financial statements, because one enterprise controlled the other through voting interests. This interpretation defines the concept of variable interests, and requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse the risks among the parties involved. The Company’s adoption of this interpretation in fiscal year 2004 did not have an impact on its financial position or results of operations.

In December 2004, the FASB issued revised SFAS No. 123R, Share-Based Payment. SFAS No. 123R sets accounting requirements for share-based compensation to employees and requires companies to recognize, in the income statement, the grant-date fair value of stock options and other equity-based compensation. SFAS No. 123R is effective in interim or annual periods beginning after June 15, 2005. The Company will be required to adopt SFAS No. 123R in its third quarter of fiscal year 2005. The Company is currently evaluating the impact of the adoption of SFAS 123R on its financial position and results of operations, including the valuation methods and support for the assumptions that underlie the valuation of the awards.

Also in December 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary Assets—An Amendment of APB Opinion No. 29. SFAS No. 153 amends APB Opinion No. 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. SFAS No. 153 is to be applied prospectively for non-monetary exchanges occurring in fiscal periods beginning after June 15, 2005. The Company’s adoption of SFAS No. 153 is not expected to have a material impact on its financial position or results of operations.

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OVERVIEW

We were founded in 1990 by our Chairman and Chief Executive Officer, Noah Samara, who pioneered the development of satellite-based digital radio service, commonly known as Digital Audio Radio Service (DARS). His vision was to offer on an international basis a variety and quality of international, national and regional radio programming not available from AM and FM broadcasters through low-cost portable and mobile radio receivers owned by customers.

Through the end of December 2004, we have spent approximately $1.2 billion in connection with the development and launch of our business. Our infrastructure is a fully operational system consisting of three main elements: two geostationary satellites, AfriStar (launched in 1998) and AsiaStar (launched in 2000); the associated ground systems that provide content to and control the satellites; and the receivers owned by our customers. Our broadcast coverage area encompasses the most densely populated parts of Asia, including India and China, all of Africa and the Middle East and most of Western Europe, an area that includes approximately 5 billion people and 300 million automobiles. Each of our two operational satellites can service three large geographic areas through three beams capable of carrying up to 80 channels each. As a result, we have the technical capacity to broadcast a tailored mix of up to 80 channels in each of our target markets on a subscription basis for fees currently averaging between $3 and $5 per month. We intend to enhance our infrastructure with the addition of networks of terrestrial repeaters (i.e., “gap fillers”) in our target markets and a next generation of receivers designed to receive broadcasts from our networks of terrestrial repeaters as well as from our satellites, which will allow us to expand our service offering to include a mobile service for automobiles.

We provide high quality radio programming, including a wide variety of music, news and entertainment channels. Our programming philosophy is to meet the demands of listeners from different linguistic and cultural backgrounds by providing channels of international interest such as BBC, CNN, Virgin Radio as well as channels with more national and regional focus, such as, in India, NDTV and RM Radio. We also develop and broadcast WorldSpace-branded programming in response to demand in specific markets that is otherwise unavailable in such markets. For example, in India, we broadcast international music channels such as Upop, Maestro, Riff and UpCountry and proprietary Indian niche channels such as Ghandharv, Shruti and Farishta. By providing programming from leading international, national and regional content providers, together with our own WorldSpace-branded channels developed to meet the demands of specific markets, we are able to offer our subscribers a choice of programming largely unavailable in their local markets. Our subscription service provides a number of advantages over existing radio programming in our target markets, including greater diversity of content, multi-lingual programming, broader geographic coverage and limited advertising.

As the only company licensed to offer DARS in our broadcast coverage area (other than in South Korea and Japan), we are able to roll-out our subscription service on a sequential basis in the markets we find the most attractive, subject to obtaining any required local regulatory approvals. The main limitation, historically, to our ability to roll out our services and acquire subscribers has been our limited access to capital. We began offering service in Africa in 2000 on a free-to-air basis.

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In 2002, we began trials of our subscription service by offering a limited number of encrypted channels and began transitioning our free-to-air customers into paying subscribers. As of March 31, 2005, we had more than 53,000 paying subscribers, including more than 22,000 in India. We have focused our recent efforts on refining our business plan and intensifying our subscriber acquisition marketing efforts in India, where we have begun the roll-out of our service; continuing planning for the roll-out of our service in China, where our core broadcast infrastructure is in place; and in planning for the roll-out of our service in Western Europe—the markets in which we believe demand for our service is greatest. Our strategy is to establish a strong set of local alliances and strategic partnerships to assist in distribution, content procurement, regulatory compliance and the build-out of a terrestrial infrastructure prior to embarking on a full roll-out in a particular market.

We believe India represents the most attractive immediate market opportunity for our subscription service given its significant size, with more than one billion people, including a large and growing middle class. The National Council of Applied Economic Research estimates that India has 188 million households. We have commenced the roll-out of our service in India and are initially targeting the most affluent segments of India’s population living in India’s top eight metropolitan areas, which, according to Org-Marg, a division of A.C. Nielsen, comprise approximately 70 million people and 14 million households. The most affluent 20% of India’s population has an annual income level of approximately $37,500 per household, on a purchasing power parity basis (i.e., adjusted for the general differences in the costs of living in India as compared to the United States). We believe that this target group is underserved by the existing radio infrastructure and programming offered in India and has the disposable income to afford our services. We believe we are well positioned to expand our service in India given that we have the necessary operating licenses and that our system and our technology are operational and scalable. We are in the process of developing a mobile DARS and, in connection therewith, we will need to establish a terrestrial repeater network to improve the reliability of our service in urban areas. We are currently in discussions with regulators to put into place new terrestrial repeater networks in two of India’s major metropolitan areas, New Delhi and Bangalore, which will allow us to supplement our broadcast coverage area and offer a mobile subscription service for automobiles. In addition we have worked with leading local manufacturers, such as BPL Limited (BPL), to provide low-cost receivers in India. For our next generation of receivers, we are working with Analog Devices Inc. (Analog Devices), the manufacturer of our second-generation chipsets, and other receiver manufacturers to develop enhanced capabilities and services.

While we have in place our satellite infrastructure for China, we have not yet begun commercial operations and we believe that there will be significant demand for our service in China, which has a population of more than 1.3 billion people, 360 million households, as estimated by China Media Monitor, a large and growing middle class and one of the fastest growing automobile markets in the world. We intend to use a portion of the proceeds from this offering to continue development of our China business plan as well as for the roll-out of our service in China. We are currently in discussions with two media entities under the direct supervision of China’s State Administration of Radio, Film and Television (SARFT) and other media entities to establish joint ventures for content to be broadcast on the WorldSpace system in China, and we are discussing with SARFT approval of content to be provided by these entities as well as content we expect to provide to independent Chinese broadcasters. Pursuant to a series of agreements, China Satellite Communications Corporation (ChinaSat), our agent and one of six state-owned telecommunications operators in China, has acquired spectrum allocation and certain other approvals necessary to operate our system and provide our service in China. Additionally, we have established, with ChinaSat, an uplink station in Beijing for our AsiaStar satellite.

We are also continuing business development in Western Europe, which we believe offers a significant opportunity for mobile DARS. We have conducted system tests with and negotiated preliminary

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agreements with major automobile manufacturers such as Citroën, a division of PSA Peugeot Citroën, for the integration of DARS receivers in certain of their vehicles. Although we can provide DARS in Western Europe today through portable receivers, we believe that significant demand will be generated once we launch our mobile DARS targeted at Western Europe’s approximately 200 million automobiles. We believe the demand for mobile DARS in Western Europe may be greater than that of the United States, given Western Europe’s wide variety of ethnic and linguistic groups as well as a significant portion of the population that has emigrated to other parts of Europe from their countries of origin. Our regulatory franchise positions us to be the likely provider of DARS in Western Europe. However, as in India and China, we will need to develop a terrestrial repeater network prior to offering mobile DARS in Western Europe. In addition, in various Western European jurisdictions, we will need to obtain additional local regulatory approvals.

INDUSTRY BACKGROUND

Development of industry

In 1991, we received the first DARS license for broadcasting satellite-based digital radio over the S band (between 2310 and 2360 MHz) granted by the FCC. This license granted us the authority to launch a satellite and broadcast into Africa.

The 1992 International Telecommunication Union (ITU) World Radiocommunication Conference allocated the L band (between 1452 and 1492 MHz) for satellite broadcasting services, such as DARS, on a global basis, with the upper 25-MHz segment of the L band made available for immediate licensing. The lower 15-MHz segment of the L band will not be available for allocation until the conclusion of a planning conference of the ITU, which has not yet been scheduled. Following the 1992 conference, the FCC converted our S band license into an L band license.

The 1992 World Radiocommunication Conference also allocated the S band (between 2535 and 2655 MHz) for satellite broadcasting services in a limited number of countries, including India, Japan, South Korea, Pakistan and Thailand, with the upper 25 MHz segment of the S band (between 2630 and 2655 MHz) available for immediate use. In most of the countries in our broadcast coverage area, the L band has been reserved for DARS broadcasts and the S band is used by other services. Since the 1992 frequency allocation decisions, the Indian government has accepted the WorldSpace L band DARS system for operations in India, but has taken no action for use of the S band for DARS. Because the

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United States used the L band spectrum for mobile aeronautical applications in 1992, it selected an alternative 50 MHz allocation for DARS in the S band (between 2310 and 2360 MHz), which was subsequently reduced to 25 MHz (between 2322.5 and 2347.5 MHz). Currently, XM and Sirius share that allocation in the United States. India and Mexico have also accepted the S band from 2310 to 2360 MHz as an additional allocation for DARS.

We currently are licensed to broadcast in the 1467 to 1492 MHz portion of the L band on a global basis outside of the United States.

Since L band satellites require less transmitted power than S band satellites to achieve the same link margin, or quality of service, the L band is generally more cost effective as compared to the S band for the provision of satellite DARS operation. Therefore, L band satellites may be either less expensive to build or they may provide a higher quality of service as compared with equivalently priced S band satellites. In addition, L band terrestrial repeaters provide improved terrestrial link margin, or quality of service, compared to S band repeaters for the same emitted power. This could either reduce the L band terrestrial repeater power and associated costs, or increase the radius of terrestrial coverage of each terrestrial repeater, which reduces the number of terrestrial repeaters required for a given market.

U.S. DARS providers

The U.S. DARS industry is an FCC-licensed duopoly between XM and Sirius Satellite Radio, Inc. (Sirius). In April 1997, the FCC auctioned two 12.5 MHz DARS licenses in the S band to XM and Sirius. These licenses permit XM and Sirius to offer satellite radio service in the United States. The consumer response to the launch of XM’s and Sirius’s programming in November 2001 and July 2002, respectively, has been very positive, with XM reporting approximately 3.8 million subscribers as of March 31, 2005 and Sirius reporting 1.1 million subscribers as of December 31, 2004. As reported by GreyStone Communications and Yankee Group, satellite radio was the second-fastest consumer technology (after DVD players) to reach one million users as of October 2003.

We believe the competitive advantages of DARS in the United States as compared to traditional AM and FM radio include significantly greater programming quality and choice, commercial free music, coast-to-coast coverage, improved audio quality and greater availability of innovative products. To date, the U.S. DARS business model has been characterized by high barriers to entry, strong subscriber growth and declining customer acquisition expenses as the subscriber-base grows. In the United States, satellite radio subscribers have been primarily generated through agreements with car manufacturers and partnerships and alliances with retail distributors.

Non-U.S. DARS providers

We are the only company currently providing DARS outside of North America, Japan and South Korea.

In Japan and South Korea, a joint venture between Mobile Broadcasting Corporation of Japan (MBCO) and SK Telecom of Korea (SK), launched the MBSAT broadcast communications satellite in 2004. MBCO was established to provide cars and mobile terminals with digital satellite broadcasting for audio, video and data services throughout Japan and has been authorized by the Japanese government. SK is Korea’s leading wireless telecommunications services provider. The MBSAT satellite has four high power transponders for direct broadcast services and the satellite is expected to deliver high quality interactive music, video and data to mobile users in Japan and Korea. The MBSAT satellite has focused broadcast beams that only target the Korean peninsula and Japan. It broadcasts in the S band (from 2630 to 2655 MHz) and its broadcast does not interfere with our satellite’s broadcast over the L band into Japan and Korea. MBCO has begun selling receivers and is broadcasting on a trial basis.

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OUR STRENGTHS

We have several key strengths that we believe will help promote our success:

Significant regulatory and economic barriers to entry for additional DARS providers

We have built, launched, and are currently operating two satellites for our broadcasts, and we have constructed multiple uplink stations to send content to our satellites for broadcast. We believe that no other similar DARS network is in active development and that a comparable DARS system would require substantial capital expenditures and take a significant amount of time to develop. In addition, we have successfully completed ITU frequency coordination for the use by each of our two satellites—AfriStar and AsiaStar—of the whole 25 MHz DARS allocation in the L band (1467 to 1492 MHz) that was made available for use in 1992. ITU regulations give us the right to use the whole 25 MHz of the L band spectrum currently available for DARS in our broadcast coverage area. The combined operations of the two satellites currently utilize most of these 25 MHz. Since under the rules of the ITU, a competitor may not broadcast in a fashion that would interfere with the Company’s broadcast signal, and because our satellites broadcast over most of the allocated range, we do not believe a competitor can broadcast into our target markets in the allocated range without causing unacceptable interference. We believe that the regulatory approvals, required satellite coordination and capital necessary to establish a DARS system in the markets in which we operate make a direct DARS competitor in the near term unlikely.

History of innovation in the DARS industry

We pioneered the early development of the DARS industry and the technology used extensively in the industry today and we continue to develop state-of-the-art transmission, antenna and receiver technology. Our Chairman and Chief Executive Officer, Noah Samara, has been involved in the industry since its inception. Mr. Samara was instrumental in the international allocation of broadcast spectrum for DARS. We received the first experimental license for DARS from the FCC, which was later converted into a full license, and are currently the only entity providing DARS in the internationally allocated L band. We were the first company to establish an operational DARS system and also the first company to demonstrate a mobile receiver service for automobiles that uses satellite broadcasts and complementary terrestrial repeater networks. We developed the state-of-the-art transmission, antenna and receiver technology, which represents the foundation of both our own satellite-based digital broadcasting network and XM’s DARS system. WorldSpace, which was one of the initial investors in, and a principal shareholder of, XM from 1997, sold its interest in XM in 1999.

Established infrastructure in India, primed for full national roll-out

Our service is fully operational in India, where we currently broadcast 39 channels of music, talk, sports and news from our AsiaStar satellite. We have the capacity to expand our service to 80 channels, and will continue to tailor our programming to the needs and preferences of major, as well as niche, target listener segments within each geographic region in India. Our receivers are manufactured in India by BPL, a leading electronics manufacturer in India which has historically produced the majority of our receivers for the Indian market, and by three other electronics manufacturers. Our receivers are being marketed through four WorldSpace-branded “Experience Stores” and a limited retail distribution network, located primarily in Bangalore, with a recently expanded distribution platform in Chennai and a smaller set of outlets in New Delhi. Based on our discussion with receiver manufacturers, we believe that they are able to increase production to meet our anticipated demand. We have established a fully scalable back-office infrastructure to support our Indian operations, including billing, customer care, customer management, installation and support services necessary to support the growth of our business.

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Extensive satellite broadcast service area

Our satellite broadcast coverage area includes approximately five billion people, representing more than 75% of the world’s population, and approximately 300 million automobiles. Now that our satellites are launched and operational and our ground uplink stations are established, subject to obtaining required regulatory approvals, we can broadcast to subscribers in this entire area at relatively small additional expense.

Strong strategic relationships for developing the WorldSpace system and services

We have established strong relationships in developing our satellite system, system equipment, receivers and services. As we pursue our plans to launch our mobile receivers for use in automobiles, we will seek development alliances with companies in the automobile, telematics and terrestrial infrastructure segments. We work with leading local manufacturers, including BPL, one of India’s leading electronics manufacturers, to produce low-cost receivers for the Indian market, and are currently working with Analog Devices to produce a chipset that will increase the functionality of our receivers. Other strategic relationships include:

System Technology: Fraunhofer Gesellschaft, a technology developer; ST Microelectronics, a chip manufacturer; and Micronas, a chip manufacturer.

Receiver Manufacturing: Xi’an Tongshi Technology Limited (Tongshi), a Chinese electronics manufacturer; Flextronics International USA, Inc. (Flextronics), an electronics manufacturing services provider; and Nippon Audiotronics Ltd. (Nippon Audiotonics), an Indian mobile receiver manufacturer developing mobile receivers.

Content Providers: BBC, CNN, Bloomberg, Fox and leading Indian providers such as NDTV and RM Radio.

Local Authorities: Indian Meteorological Department, Press Trust of India and SARFT.

OUR STRATEGY

We intend to use the net proceeds of this offering in connection with the implementation of our India business plan, including build-out of the terrestrial repeater network, service launch in key cities and marketing expenses related to subscriber acquisitions in India; business development activities in China, Western Europe and other selected markets within our broadcast coverage area and the roll-out of our services in China. Our strategy is as follows:

Roll out our subscription-based DARS on a sequential basis in markets with strong demand for subscription radio service

As the only company licensed to use the L band to offer DARS in our broadcast coverage area other than South Korea and Japan, we are well-positioned to roll out our subscription service, on a sequential basis, in the markets we find the most attractive, subject to obtaining required local regulatory approvals and funding. Our broadcast coverage area includes India, in which we have commenced commercial operations, and China, which will be our next focus of a targeted launch. These markets are characterized by large and growing populations, strong economic growth and increasing demand for entertainment services.

We have obtained all the required authorizations for the national roll-out of our subscription DARS in India and are in the process of establishing joint ventures with Chinese entities to broadcast content in China. Following our initial roll-out in India, we plan to extend our services and marketing efforts into China. In addition, we have begun to develop DARS for Western Europe and are establishing the necessary partnerships for the launch of mobile DARS in Western Europe.

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Develop and provide unique and compelling content targeted to the markets we serve

Our goal is to satisfy the demand for compelling content in our target markets by offering the most varied, high quality, must-have programming line-up in each of our target markets. We will continue to pick from the best content available globally, nationally and regionally and, where appropriate, create in-house programming to meet the needs of our target audiences. Satellite radio has significant advantages in our target markets, including:

Choice and variety: We can deliver up to 80 channels to any specific location in our broadcast coverage area. This is significantly more than the FM sources in our target markets are capable of carrying. We can provide excellent quality and variety of programming for popular genres, as well as target potentially lucrative niche markets that are ignored by current FM services. We can provide a choice of quality programming and deliver 24-hour genre specific formats that are unavailable in most of our markets.

Quality: We can offer a level of audio fidelity that is digital quality and superior to analog FM signals.

Coverage area: Instead of broadcasting signals within a 50-km radius as in a traditional radio broadcast, we deliver content throughout the coverage area of a beam, which is approximately 14 million square kilometers. For instance, one can be anywhere in India and receive the same content without any of the fade-offs that are routinely encountered as one moves away from cities covered by FM.

Limited advertising: Although we carry limited advertising on some of our channels, most of our programming is either commercial-free or carries substantially less advertising than FM services in our target markets. There are no commercials on the WorldSpace-branded channels.

“Voice from home”: Through us, segments of the population can receive the ethnic or home content of their choice. In the case of India, there are 17 principal languages and the people who speak them are dispersed throughout India, the Middle East and Southeast Asia. For instance, there are millions of Tamil speakers outside their native Tamil Nadu region and yet there are virtually no radio stations catering to those Tamil speakers living in cities such as New Delhi or Mumbai. A large number of Indian expatriates and people of Indian origin are located in countries that are covered by the same beam as India. There are also large numbers of U.S. and U.K. expatriates living in our target markets. Through our services, all of these people are able to receive content from their homeland or in their preferred language.

Continue to lower chipset and receiver costs and increase receiver capabilities

Lowering the price of our receivers is an important factor in our ability to acquire subscribers. Our strategy consists of three main elements: (i) to continue to lower the costs of the enabling receiver technology for our receivers in order to bolster sales of stand-alone receivers; (ii) to provide a “WorldSpace-Embedded” solution whereby consumer electronics manufacturers can embed our chipsets into their hi-fi systems and televisions; and (iii) to provide WorldSpace functionality through separate “attachment products” which will allow customers to upgrade their current home or automobile systems to receive the WorldSpace service. We are working closely with Analog Devices (manufacturer of our second generation chipset) as well as product manufacturers and distributors to ensure the execution of this plan.

For our stand-alone receiver products, we will seek to continue to lower the costs of the receivers and increase their functionality. We currently offer a number of receiver products to address both the high- end consumer and the more price sensitive segments of our target markets. Our initial receivers sold between 2000 and 2001 retailed for between $200 and $300. Working with our receiver manufacturing partners, WorldSpace receivers currently sell for between Rs.3,790 and Rs.11,690 (approximately $85 to $270), and BPL, one of the largest consumer electronics manufacturers in India, offers a low-cost receiver for Rs.2,790 (approximately $65), after subsidy from WorldSpace. Our next generation receivers will

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have a number of improvements over our current receivers; we anticipate that these will initially be offered at prices between Rs.4,500 and Rs.10,000 (approximately $100 to $230). We expect prices of our next generation receivers to fall over time as sales volumes increase and technology follows a trend, similar to our first generation devices. We plan to continue selectively subsidizing receivers in order to drive subscriber acquisition.

In addition, we intend to work with our producers to enhance the features and lower the costs of our chipsets to allow for these producers to offer “WorldSpace-Embedded” consumer electronics, enabling our manufacturing partners to offer devices such as TVs and hi-fi systems with our chipsets embedded inside without adding materially to the price of these devices. BPL is currently considering embedding TVs and hi-fis with our chips. Similar efforts are underway in China.

Offer a mobile service designed for automobiles

Together with Analog Devices, we are developing an automobile compatible mobile receiver and service, initially for the Indian market and eventually for the Chinese and Western European markets as well. To commercialize this product, we will need to:

Establish a network of terrestrial repeaters, which will make our service more reliable in urban areas. The establishment of a terrestrial repeater network will allow us to market a mobile service for automobiles similar to the service that Sirius and XM offer in the United States. Our geostationary satellites have relatively high elevation angles and our L band technology is more efficient, thus allowing us to minimize the additional capital investment required to supplement our infrastructure with networks of terrestrial repeaters to enhance reception in target urban markets.

Leverage established strategic relationships with chipset manufacturers, system integrators and receiver manufacturers including relationships with Analog Devices, Webel Mediatronics Limited (Webel), Nippon Audiotronics and Flextronics. We have been working closely with our partners to develop the needed technology and product form factors.

Form partnerships with name-brand manufacturers, distributors and content providers in each of the markets we serve

In order to penetrate any given market, we will attempt to work together with the strongest partners for distribution, receiver manufacturing, content and other key areas in each market to ensure the timely launch and successful execution of our business plan. Our position as the only DARS service provider in our target markets allows us to select strong local partners on a basis favorable to us. In contrast, in the United States, XM and Sirius compete for automobile manufacturers, content providers and distributor relationships. We believe we have been successful in India and intend to employ similar strategies in other markets as well, including China. In India, we partnered with BPL, which is a leading consumer electronics manufacturer and distributor in India. We also secured relationships in India with other leading distributors and consumer electronic dealers. As we introduce our mobile receivers, we intend to establish relationships with automobile manufacturers that will allow us to integrate receivers in their automobiles and promote product awareness. Since the after-market automobile accessory market is well-established in India, we are also working with those accessory retailers and installers who we believe will be responsible for most of the early mobile service sales and installations. We have also established relationships with some of the strongest Indian news, sports, music and general programming providers, such as NDTV, a leading Indian news and information provider, RM Radio and others.

In China, we are poised to become the only broadcaster, foreign or domestic, with the ability to nationally broadcast directly to individuals, homes and automobiles in China. We have a partnership with ChinaSat, which has acquired certain of the licenses required to operate our system. Additionally, we have established a programming uplink station in Beijing for the AsiaStar satellite. We are currently

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awaiting approvals from SARFT relating to our content and finalizing partnerships with China National Radio and China Radio International, both subsidiaries of SARFT, for Chinese content and programming. As is the case in India, we are working with local government broadcasters and local media companies who are attracted by our national, regional and local coverage reaching virtually all of China as well as Chinese expatriates within our broadcast coverage area.

Target other short-term niche opportunities

Expatriate market. There are more than 12 million Indians and 25 million Chinese living outside of India and China, but within our broadcast coverage area according to the High Level Committee on Indian Diaspora established by the Indian Government and the China Overseas Communication Society. There are approximately 3.3 million U.S. expatriates, and we believe a similar number of U.K. expatriates, living within the broadcast coverage area of our satellites. We believe this expatriate market will be receptive to the programming that we currently offer. Our programming will serve as a “voice from home” that connects them with the day-to-day events and culture of their country of origin. For example, we believe that CNN, NPR and Fox News will appeal to western expatriates, while Indians living abroad will appreciate the chance to receive NDTV news channels. We also expect that, because we can provide programming in expatriate subscribers’ native languages, there will be demand for our services despite the local entertainment and news services already available to them in their host country.

Seek relationships with government agencies. Our technology is capable of disseminating information other than traditional radio programming. For example, we have strategic relationships with U.S. developmental and defense agencies, as well as a relationship with the Indian Meteorological Department, with whom we plan to create a service to provide coastal fishing vehicles with a low-cost up-to-the-minute weather report system capable of displaying graphical depictions of local weather patterns. We continue to seek, on a case-by-case basis, relationships with other governments and regulatory agencies similar to those we currently have in place.

OUR MARKETS

Within our broadcast coverage area, we believe that India and then China, followed by Western Europe, are the most attractive target markets for initial launch of our service. We are in the process of launching a marketing campaign in India that is designed to expand significantly our subscriber base, continuing the roll-out of our business, and planning for a mobile market with terrestrial repeater networks in selected urban areas. Following our roll-out in India, we plan to extend our services and marketing efforts into China.

India market opportunity

India is our initial target market and the initial focus of our business plan. We believe that there is high potential demand for our services in India as a result of the size and diversity of the market, the potential for sustained economic growth, the relative underdevelopment of local traditional radio markets and the high potential for consumer adoption of our services that was identified by a recent market survey conducted by IDC. India has the second-largest population in the world behind China, with approximately 1.1 billion people; Org-Marg, an A.C. Nielsen company, reports that India has 32 major cities with populations of more than 1 million people. India’s economy is one of the fastest growing in the world. A Moody’s investor service report, dated April 30, 2004, estimates that India’s real GDP grew by 4.4% in 2000, 5.8% in 2001, 4.0% in 2002, 8.5% in 2003 and was anticipated to grow by 6.9% in 2004. With more than 7 million passenger cars, India has experienced robust growth in passenger car sales over the past few years. Total annual passenger car sales were 570,000 in 2001, 598,000 in 2002 and 701,000 in 2003; Asia Times estimates that passenger car sales were approximately 1.1 million in 2004.

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While Hindi and English are the two main national languages of India, many of the people in India identify with an alternative language associated with their ethnic group. In total, 17 principal languages are spoken in India.

The Indian radio market remained underdeveloped and was dominated by AM transmissions until the beginning of 2001, when India’s government permitted private FM broadcasters to enter the radio market on a limited basis across the country. Although an aggregate of 22 private FM channels are broadcast in India, none of these private FM broadcasters is permitted to broadcast news and current affairs content according to a 2004 report by the Telecom Regulatory Authority of India (TRAI). Currently, the Information and Broadcasting Ministry limits the number of licenses available for FM broadcasting in each market to seven. The FM channels rely on advertising revenue and therefore cater to the widest market. As a result, their formats and content are generally similar in nature. Additionally, the programming quality and signal power of the FM stations are limited.

Over the last several years, India has experienced rapid growth in consumer adoption of subscription-based services such as mobile phones, cable television, direct-to-home satellite television (DTH) and Internet services. The rapid growth in subscription-based services demonstrates demand for, and adoption of, new technologies and services, as well as the financial ability to pay for these services.

Indian mobile phone services have experienced substantial growth over the past two years. Cellular Operator Association of India reports that, from December 2002 to December 2004, mobile phone subscriptions grew by 256%. India now has more than 37 million mobile phone subscribers, representing a market penetration rate of approximately 3.5%, with Bharti Tele-Ventures Limited, a large Indian mobile phone operator, reporting subscribers paying an average fee of approximately Rs.520 ($12) per month for service in 2004. A low-end mobile phone in India retails for approximately Rs.3,500 to Rs.4,000 (approximately $80 to $90).

India has an estimated 45 million cable television subscribers, according to the website of the Daily Dispatch, representing a 52% penetration of households. The cable television market in India is highly fragmented, with numerous independently owned operators controlling different geographic regions. A small low-end television retails for approximately Rs.6,000 (approximately $140).

DTH television in India is relatively new. Aside from the Indian government-owned entity, Doordarshan, there is only one private broadcaster that is currently operational, Zee Telefilms, with a second competitor, Star, in development. While there is no independent data, numbers released by Zee Telefilms indicate a base of approximately 180,000 subscribers in India as of February 2005, with subscription prices between Rs.100 and Rs.450 (approximately $2 to $10) per month and with an average monthly subscription price of Rs.170 (approximately $4). According to Doordarshan, the initial cost of hardware, which is a decoder set top and a satellite dish, is approximately Rs.3,000 to Rs.3,500 (approximately $70 to $80).

In 2003, India had approximately 18.5 million total Internet users and nearly 4.1 million paying subscribers, as reported by websites of Internet World Stats and the Internet Service Providers Association of India. According to TRAI, the monthly subscription fee for Internet service is approximately Rs.310 (approximately $7) per month. The cost of a low-end personal computer in India is approximately Rs.30,000 (approximately $690) according to Euromonitor plc.

Our target market comprises upper, upper middle and middle class households, which currently number approximately 60 million and is anticipated to reach 105 million by 2010 according to estimates of the U.S. National Council of Applied Economic Research. The most affluent 20% of the Indian population (approximately 37 million households) has an average income level of $37,500 per year, converted on a purchasing power parity basis.

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We believe that there is significant demand for our satellite radio service in India. An IDC market study completed in January 2005 indicates that approximately 40% of the respondents in our target markets would be interested in our services, would be willing to pay between Rs.100 and Rs.150 (approximately $2 to $3) per month for our services and would be willing to purchase receivers for Rs.5,000 to Rs.5,500 (approximately $115 to $125).

Our India business plan

Existing infrastructure. We have spent the past four years building the required infrastructure to execute our business plan in India. We have developed and implemented the necessary technology, satellites, regulatory authorizations, distribution network and customer care service to deliver home audio services. We began broadcasting our home audio service in India in 2000 on a free-to-air basis. Concentrating our initial marketing efforts in one metropolitan area, Bangalore, we have added content to our subscription service and are transitioning certain free-to-air content to subscription service. As of March 31, 2005, we had more than 22,000 paying subscribers in India, at an average subscription rate of Rs.1,200 (approximately $30) per year. We currently offer our subscribers in India 39 channels of music, entertainment and information programming in eight languages, and anticipate introducing six new channels in the near future. This programming ranges from regional to national and international in its focus.

Distribution and market penetration. In 2005, we intend to concentrate on the largest metropolitan areas in India: New Delhi, Mumbai (formerly known as Bombay), Chennai (formerly known as Madras), Hyderabad and Bangalore. In the second half of the year, we plan to expand our market to include Ahmedabad, Kolkata (formerly known as Calcutta), Chandigarh and Pune (formerly known as Poona). In 2006, we plan to expand our service to nine additional Indian cities with populations greater than 1 million people.

Our distribution strategy includes (i) consumer electronics retail outlets, (ii) branded WorldSpace experience stores, (iii) direct-to-consumer sales, and (iv) corporate sales and corporate gift programs. We plan to distribute our receivers through more than 250 retail outlets in target metropolitan markets during 2005. We currently distribute to retail outlets through regional distributors, but we expect to outsource distribution to third parties as we increase our sales and penetrate additional markets. We selected the retail outlets in cooperation with our regional distributors based on their traffic volume and marketing focus. About a third of the retailers will participate in our Priority Retailer Program in 2005, which includes in-store support from WorldSpace, the ability to utilize certain locations to test particular marketing and sales tactics, and particular inventory and space commitments from the retailer. We have begun to establish exclusive WorldSpace brand showrooms in key metropolitan markets as part of our branding and distribution strategy. We currently operate one showroom in Bangalore and have franchised one other WorldSpace-only brand store in Bangalore and one in Chennai. We expect our priority retailers and branded showrooms stores to generate a significant portion of our subscriber additions, as well as offer an ideal environment for potential customers to understand and appreciate the value of our services. For our direct-to-consumer channel, we have established a network of agents with experience serving the consumer electronics and telecommunications industries in India. Corporate sales are expected to come mainly from telecommunications, credit card, hospitality and pharmaceutical companies, and are expected to include, for example, bundling solutions with gifts or special offers to their own employees and clients.

We have manufacturing arrangements in place with BPL, Tongshi, P.T. Hartono Istana Teknologi (Polytron) and G-Hanz GmbH (G-Hanz) to produce and develop our receivers.

Content. The basic subscription package that we offer in India consists of international news and sports channels; WorldSpace-branded English language channels playing a full range of international music;

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Indian niche genre channels such as Jhankaar, Ghandharv, Shruti and Farishta; Indian regional news channels such as NDTV India and NDTV 24*7; and Indian regional music channels such as Sparsha, Spandana, Radio Tara, KL Radio and RM Radio. The channels are broadcast 24 hours a day.

We intend to launch six new channels: Moksha, a lifestyle and meditation channel; a regional music and lifestyle channel in the Punjabi language; a business channel; a sports channel; and an educational channel. We also intend to start to broadcast four of our channels live. Our long term strategy focuses on live music broadcasting, as well as increasing channels with a regional, talk and children focus.

Mobile service. We plan to introduce a terrestrially augmented mobile service in India after receiving appropriate regulatory approvals and to develop next generation receivers capable of receiving signals from both our satellites and from the terrestrial repeater networks that we will establish in certain urban areas once they have been authorized. One of our chipset developers, Analog Devices, is now in the advanced stages of implementing terrestrial waveform reception capability on its proprietary Blackfin Digital Signal Processor.

We plan to use India’s extensive electronics and automobile aftermarket networks to sell our early automobile-mountable mobile receivers. Currently, we have an agreement with BPL to manufacture and sell automobile aftermarket mobile receivers worldwide. We plan to establish partnerships with automobile manufacturers so that they can offer factory-installed WorldSpace receivers in their new cars. We also plan to establish distribution relationships with auto accessories store chains, which play an important role in the Indian aftermarket.

Sales, marketing and customer care. Retail outlets currently carry WorldSpace products in New Delhi, Mumbai, Bangalore and Chennai. Our local retailers and distributors make the initial sales of receivers and subscription packages, collect customer information and assist customers in setting up our service.

Our marketing plan includes advertising in various types of traditional media, experiential selling in stores and malls with a high volume of customer traffic and through events, promotions and co- marketing arrangements. We will initially focus on category creation, trade acceptance and experiential placements with a focus on product and service awareness and expansion in stores with a high level of customer service and an ability to demonstrate the subscription service.

We have a proprietary Subscriber Management System that is operating in India. Our call center function has been outsourced to Spanco, a leading Indian call center service provider. Installation and support is provided by ACCEL, a leading Indian customer care and installation service provider.

China market opportunity

China is the most populous nation in the world with approximately 1.3 billion people and 8 million passenger cars. According to China Median Monitor, there are 360 million households in China. At the end of 2002, China had 30 major cities with populations greater than five million, and nine cities with populations greater than 50 million. In addition, China’s economy is one of the fastest growing in the world. China’s real GDP grew by 8.0% in 2000, 7.3% in 2001, 8.0% in 2002 and 9.1% in 2003. A Moody’s investor report estimates that China’s real GDP grew 9.0% in 2004 and is expected to grow by 7.8% in 2005. The most affluent 20% of the Chinese population (approximately 72 million households) has an average income level of $38,500 per year, converted on a purchasing power parity basis with the United States.

China is also one of the fastest growing automobile markets in the world and is the third largest behind the United States and Europe. We believe there are unique opportunities to market our automobile

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receivers in this developing market just as the industry itself is experiencing significant growth. There are currently more than 8 million passenger cars, of which 735,000 were sold in 2001, 1.1 million in 2002 and 2 million in 2003. An estimated 2.8 million passenger cars were sold in 2004, which would represent a 40% growth over the prior year.

China has eight recognized languages with numerous additional minority and ethnic languages. China is a communist state with a centrally planned economy and business and popular entertainment remains highly regulated.

Traditional radio, the Internet and television are the largest comparable services now available in China. China has developed a large infrastructure for each. Zenith Optimedia reports that there are approximately 330 million radios and televisions in China. According to Media & Marketing Limited, there are over 40 channels of cable and an average of 10-15 FM stations in each of China’s major metropolitan markets.

Mobile phone use has become extremely common in China. The website of the China Internet Information Center reports that there are approximately 330 million mobile phone subscribers. The Chinese mobile phone market has experienced double-digit growth over the past four years; Euromonitor plc. reports that, in 2003, mobile phone subscriptions grew by 30%. China’s approximately 330 million mobile phone subscribers represent a penetration rate of approximately 25%, with subscribers paying an average fee of $12 per month for service (reported by Sino Cast China IT Watch). Euromonitor plc. reports that a mobile phone in China currently retails for between $60 to $600 depending on the brand name, design and functionality, with the average mobile phone costing an average of approximately $200.

In February 2005, the New York Times reported that China has an estimated 105 million cable television subscribers, representing a 30% penetration of television households. Monthly cable subscription fees vary depending on the level of consolidation of the industry in a particular region, with subscription packages, as reported by Zenith Optimedia, at approximately $1.80 per month.

China Internet Network Information Center (CNNIC) and the Industry Standard report that there are approximately 94 million Internet users and 72 million Internet subscribers, representing a 5.5% penetration rate of the total population. A monthly subscription fee for Internet services ranges from $6 to $24 per month (reported by CNNIC). According to Euromonitor plc., the average cost of a personal computer in China is approximately $1,250 for a desk-top and $1,600 for a notebook, with prices varying depending on brand and functionality, among other variables.

Our China Business Plan

Although China is one of the most highly regulated countries with respect to media and has not committed to increasing openness in the broadcasting industry, we believe that we are well-positioned to benefit from its increasing openness to Western companies following China’s accession to the World Trade Organization.

We began exploring business opportunities in China with the establishment of a representative office in Beijing in 1998. We chartered a wholly foreign-owned enterprise, WorldSpace (China) Information Technology Ltd., in January 2002. Our primary goals with respect to China have been to establish a presence in the Chinese market, to open and solidify relations with the central government and its regulatory agencies and to convert these relationships into contractual, regulatory and operational approvals and consents into cooperative ventures.

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In 2000, ChinaSat secured spectrum allocation from the Ministry of Information Industry and our agent, ChinaSat, constructed a state-of-the-art uplink station for ChinaSat in Beijing. After conducting a beta test of our system, SARFT approved our technology, including our “China-Only” receiver, for use in China. We have developed important relationships with SARFT and with two media entities under direct supervision of SARFT, China National Radio and China Radio International, as well as with ChinaSat, our agent in China. We expect, in cooperation with local partners, to gain acceptance as the first non-government direct-to-consumer broadcast satellite service in China.

We have developed a “China-Only” version of our receivers, which is programmed to decode only those broadcasts intended for listeners within China. This feature will ensure that programming from outside China will not be decoded by China-Only receivers within China. To facilitate local low-cost production in China, we have entered into agreements with China-based receiver producers Tongshi and Tesonic. Receivers from these suppliers are expected to retail for approximately $85 to $150.

Initially, we intend to introduce our Chinese service in Beijing, Shanghai and Guangzhou. Thereafter, we intend to expand to the next five largest metropolitan areas, then to all developed provincial capitals and, finally, to all of China. Our short-term goals in China are to: (i) conduct research in order to determine appropriate content; (ii) acquire programming content; (iii) identify compatible receiver distributors and put distribution agreements into place; and (iv) identify and implement our regional office staffing needs. With respect to content, we intend to focus on three initial types of service:

business services such as stock quotes, business news, business management and training techniques and financial services;

educational services such as distance English education, primary and secondary school lessons, professional training, English language training and business English; and

entertainment services such as music, general entertainment, sports and telematics, among others.

We believe we are well positioned to offer an initial DARS system to the Chinese market, subject to any required local government approvals with respect to broadcast content. We have already entered into memoranda of understanding with several third-party providers of content relating to these services, including China National Radio, China Radio International, SEEC, Hunan Radio & TV and Guoxin/Tongshi.

PROGRAMMING AND CONTENT

Consumer radio

Our approach to content comprises three key strategies: (i) to form partnerships with the best international, national and regional content providers; (ii) to create high-quality original content where appropriate; and (iii) to aggregate in each of our markets the most appealing mix of audio programs. The mix of audio content provided in each market is tailored to the needs and preferences of major, as well as niche, target listener segments within such market. Each of our satellites broadcasts three beams of information covering different parts of the satellite’s footprint. Each beam has the capability to broadcast up to 80 channels with its own individual mix of programming. For example, our AsiaStar satellite offers one set of content on the beam primarily targeting India and will offer a different set of content on the two beams targeting China and the surrounding areas.

Overall, we currently broadcast a total of 63 separate digital channels, delivering music and multilingual news, sports, information and data. Currently, 41 channels are provided by international, national and regional third parties and 22 are WorldSpace-branded channels produced by us, or by third parties

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uniquely for us. The WorldSpace-branded channels represent the most popular international music formats, including contemporary hits, country, classic rock and jazz. In our studios in Washington D.C., Bangalore, India and Nairobi, Kenya, we create 16 original music and lifestyle channels for distribution on the WorldSpace platform. In the Washington, D.C. studios, we also create 4 original music channels for distribution on the XM platform.

In order to protect the programming offered on our satellites, we use encryption technology to mitigate signal piracy and to protect access to, copying of and tampering with the manner and method through which our content is offered as well as the content itself. Our next generation receivers will use improved compression technology, eventually allowing a greater number of channels to be sent over our existing bandwidth.

We have agreed to provide free of charge 5% of the capacity of each of our satellites to First Voice through the life of such satellites and to provide uplink service for First Voice’s content for two years. First Voice is a nonprofit organization whose establishment was inspired by our Chairman and Chief Executive Officer, Noah Samara, and which provides free informational and educational programming to local communities within our broadcast coverage area. Mr Samara is also the Chairman of First Voice.

AsiaStar

The northwest beam of our AsiaStar satellite offers 39 channels to our primary market of India. As we increase our marketing, we intend to increase the number of channels offered to approximately 50.

The chart provided below details the type of content offered on each of the 39 channels currently offered in India. We are presently preparing to launch six new channels, including Moksha, a lifestyle/meditation channel, and a regional music and lifestyle channel in the Punjabi language. Some of our channels are available free-to-air, but most require a subscription service. In the chart, “Broadcaster” channels are channels for which we acquire the content from a third-party broadcaster and “WS-branded” channels are channels for which we produce the content or have the content produced for us.

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				India Channels
Channels	Language	Program	Type	Free-to-Air	Premium
International Music
UPop	English	Global Hits	WS-branded		ü
The System	English	Electronica Dance	WS-branded		ü
Orbit Rock	English	Classic Rock	WS-branded		ü
Bob	English	Modern Rock	WS-branded		ü
Riff	English	Jazz	WS-branded		ü
WorldZone	English	World Music	WS-branded		ü
The Hop	English	Oldies Rock & Roll	WS-branded		ü
Up Country	English	Country	WS-branded		ü
Maestro	English	Classical	WS-branded		ü
Potion	English	Adult R&B	WS-branded		ü
Voyager	English	Adult Pop	WS-branded		ü

International News
BBC—Asia West	English/ Multi	Regional News	Broadcaster	ü
BBC Global Service World News	English	Global News	Broadcaster		ü
CNN International	English	News	Broadcaster	ü
NPR	English	News	Broadcaster		ü
Bloomberg	English	News	Broadcaster		ü
RFI	French	News	Broadcaster	ü
WRN	English	News	Broadcaster	ü
Fox News	English	News	Broadcaster		ü

International Sports
talkSPORT	English	U.K. Sports	Broadcaster		ü

International LifeStyle
Infusion Radio	English	Motivational	Broadcaster		ü

Indian Regional Music
KL Radio	Tamil	Tamil Film Music	Broadcaster		ü
RM Radio	Malayam	Kerala Music	Broadcaster		ü
Sparsha	Kannada	Kannada Regional Music & Lifestyle	WS-branded		ü
Spandana	Telugu	Telugu Pop & Lifestyle	WS-branded		ü
Tara	Bengali/English	Bengali Pop & Lifestyle	WS-branded		ü
Spin	English	Western Pop	WS-branded		ü

India Regional News
NDTV India	Hindi	Indian News	Broadcaster		ü
NDTV 24x7	English	Indian News	Broadcaster		ü

India Niche Genres
Sahara 1	Hindi/English	General Entertainment	Broadcaster	ü
Sahara 3	Hindi/English	Indian News/ Current Events	Broadcaster	ü
Sahara 7	Hindi/English	Hindi Film Oldies	Broadcaster	ü
Sahara 9	Hindi/English	Youth Oriented	Broadcaster	ü
Shruti	Multilingual	Carnatic Classical	WS-branded		ü
Gandharv	Hindi/English	Hindustani Classical	WS-branded		ü
Jhankaar	Hindi/English	Current Bollywood	WS-branded		ü
Farishta	Hindi/English	Retro Film Hits	WS-branded		ü
Sai Global Harmony	Several	Devotional, Meditations	Broadcaster	ü
Asia Development	English & Nepalese	Informational	Broadcaster	ü

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We plan to use the other two beams on the AsiaStar satellite to broadcast in China and Southeast Asia.

AfriStar

Our AfriStar satellite offers 41 channels, most of which are available on all three beams. The programs offered on these channels are broadcast into Africa, the Mediterranean basin countries, the Middle East and parts of Western Europe. This programming includes all of our international music and news programming, and also includes regionally specific programming such as Radio Caroline, Virgin Radio U.K., East FM, Lamp FM, Europe 1 and Sunrise Radio.

RECEIVERS AND MULTIMEDIA AND DATA DEVICES

Consumer audio receivers

WorldSpace receivers are currently available in a range of individual, home and office models. Models available on the market today include portable, durable individual units specially suited to meet the needs of travelers, the military and rural conditions to boom-box type units with CD, AM and FM features designed to interest the younger, electronics savvy consumer. Working with Analog Devices, we are developing our next generation of receivers based on a new digital signal processing chipset. These next generation receivers will have a number of additional capabilities. In order to take advantage of those capabilities, we will have to broadcast our signal in a new waveform. However, our current generation of receivers will not be able to interpret this new signal. As we introduce and market our next receivers, we expect to broadcast in both waveforms. However, at some point in the future as our next receivers achieve broad market acceptance, we expect that we will discontinue broadcasting the signal used by our current generation of receivers.

Current products

Our customers can access our digital audio service using special receivers with a small antenna (about 6-8 cm). All receivers have liquid crystal display screens capable of displaying text messages of up to 32 characters in length and can paginate to allow longer messages. This capability is not currently utilized. This text could include messages such as information on the music being played (e.g., the artist’s name, song title, words and record company), advertisements and/or ordering information, weather updates, financial information or other public service announcements. In addition, each of our receivers includes a data port, so that any receiver can be used to receive multimedia or data services at 128 kbps. Some of our current receivers can also be mounted on automobile dashboards with their antenna placed on the roof. As long as line of sight with our satellites is not obscured, the receiver will operate. This mobile solution will be improved upon in our next generation receivers and by the creation of a terrestrial repeater network.

Our receivers used in India are manufactured by a number of third-party companies, including BPL, AMI, Tongshi, Polytron and JS Information & Communication Co., Ltd. (JS Info). They are sold in the retail market at prices currently ranging from Rs.3,790 to Rs.11,690 (approximately, $85 to $275). In addition, BPL offers a low-cost receiver for Rs.2,790 (approximately $65). To help achieve this price point, we currently provide a subsidy for this receiver. A key strategy is to reduce the price of receivers by licensing manufacturing in the local markets, and obtaining manufacturers’ commitments to reduce receiver prices over time. We continue to pursue all opportunities to reduce receiver costs. At the same time, we encourage manufacturers to produce a diversity of receiver products to appeal across market segments.

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The table below shows the different types of our receivers that are currently offered in the India market.


Name of unit	Manufacturer	Price	Picture
Celeste I	BPL	Rs.6,890 (approximately $160)

Celeste II	BPL	Rs.6,690 (approximately $155)

Celeste IV—Vibe	BPL	Rs.2,790 (approximately $65)

DAMB-R	Tongshi	Rs.9,990 (approximately $230)

Diva	BPL	Rs.3,790 (approximately $85)

PWS 1 & 2	Polytron	Rs.11,690 (approximately $270)

WSSR 11	G-Hanz	Rs.3,790 (approximately $85)

New product line

We are working with Analog Devices and our receiver manufacturers to produce a next generation of receivers with advanced capabilities. These receivers will use Digital Signal Processing (DSP), technology in their chipset. The DSP technology allows a stock chipset to be programmed to operate in our receivers. These new receivers will incorporate interleaver processing technology that will allow them to buffer broadcast signals for approximately 4 seconds, reducing signal disruption due to temporary blockages (such as passing under a bridge). The new receivers will be capable of receiving a multi carrier modulated (MCM) replica signal from a network of terrestrial repeaters. The new receivers will also use improved audio compression technology, allowing us to broadcast high quality audio from our satellites using less bandwidth. This will eventually allow us to distribute more channels per satellite beam. When we begin marketing these receivers, we will introduce an over-the-air authorization channel (OAAC). This will allow us to activate or deactivate these receivers quickly without the customers having to enter passwords manually into their receivers.

Our new product line will include receivers specifically intended for automobile use. Initially, we plan to introduce after-market oriented products, which will be housed in a docking station on the automobile’s dashboard and will use an omni-directional antenna mounted on the automobile’s roof. Similar to the receivers used by Sirius and XM, these automobile receivers would access our satellite when in line of sight of our satellite or a terrestrial repeater network when line of sight to our satellite is blocked, which would generally only be the case when the receiver is in a major metropolitan area and large buildings,

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trees and other natural obstructions obscure line of sight with our satellites. We intend to introduce automobile receivers that can function as a plug-in add-on to existing sound systems and as an integrated after-market receiver that will entirely replace a traditional automobile receiver in 2006. We also intend to include telematics services delivered to a dashboard receiver and display unit, as well as audio services in our next generation of receivers and services. The types of telematics services that we would offer include navigational aids and downloads of news and information, weather data and streamed content.

We are currently in negotiations with third-party companies, including BPL and Nippon Audiotronics, to manufacture our next generation of receivers. We expect that the initial line of our next generation products will retail for prices ranging from Rs.4,500 to Rs.10,000 (approximately $100 to $225). We may, as part of our marketing program, selectively subsidize receivers in the future.

To take advantage of the chipset in our next generation receivers, we will have to establish a terrestrial repeater network. We have contracted with LCC, Inc., a U.S. wireless design, deployment and management company with experience in India, and Webel in India to assist in building a terrestrial network. We expect that approximately 150 terrestrial repeaters will be necessary to establish adequate network coverage for India’s major markets. These terrestrial repeaters will be clustered primarily around the major metropolitan areas where obstruction of line of sight to our satellites is more common.

Our satellites can broadcast up to 80 channels per beam. We currently carry no more than 39 channels on any single beam, so we currently have the capability to broadcast substantially our entire programming choice in both current and new waveforms. But, to the extent we increase the number of channels we offer, our ability to do this will decrease. In addition, we have agreed to provide free of charge 5% of the capacity of each of our satellites to First Voice through the life of our satellites. We intend to initially broadcast approximately 25 channels in the new waveform. Gradually the number of channels offered in the new waveform will increase until all our programming is available in that format. In order to free bandwidth for additional programming in the new waveform, we will begin to discontinue broadcasting in the current format. The pace of this transition will be dependent on our ability and opportunity to add new channels and the acceptance of our next generation receivers.

In addition to the receivers we currently offer, we intend to integrate our next generation receivers into televisions and high-end audio systems. Adding WorldSpace functionality to a television or stereo system would increase the cost for the total system, but we believe the added cost to the customer will be significantly less than purchasing a standalone receiver.

Multimedia and data devices

We plan to target our multimedia and data broadcasting services to the business-to-business and business-to-government market. We have two primary products dedicated to multimedia and data services at 128 kbps, the Personal Computer (PC) card kit and the Digital Data Adapter (DDA). This technology is well suited for multicast applications and closed user group settings. Both of our primary multimedia and data port products allow the reception of our audio channels and multimedia data. The PC card kit consists of an internal card to be installed on the PCI bus of a PC, an antenna and a standard length of cable. This card contains two chipsets so that two broadcast channels can be received simultaneously; our audio programming and multimedia data. Since June 2001, we have made available a USB compliant Digital Data Adapter (DDA) as an external unit that extracts the data from our receivers and forwards it to the PC. Our customers can purchase the DDA to link their PC with their receiver and access multimedia and data services. We are exploring relationships with certain Indian governmental agencies and plan to focus more on multimedia and data broadcasting when we enter the Chinese market.

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MARKETING

We have been broadcasting our service and our receivers have been on the market in India since 2000. Initially, we broadcast only free-to-air channels, but in July 2002 we began offering a limited subscription service consisting of a package of three international music channels. In October 2002, we added another subscription package of three Hindi language channels. By the end of 2003, we had approximately 12,000 subscribers for these services in India. In March 2004, we encrypted the majority of our channels. As of March 31, 2005, we had more than 22,000 subscribers in India. Previous funding constraints severely limited our ability to market our service in India. In each of 2002 and 2003, we spent only $200,000 on marketing in India. In 2004, we spent $550,000 on marketing in India.

Using the proceeds of our December 2004 sale of senior convertible notes in the aggregate principal amount of $155 million together with the proceeds from this offering, we intend to increase our marketing efforts, principally in India. Our marketing plan encompasses advertising in different types of media, demonstration based sales in high customer traffic stores and malls, events, promotions, incentives for key retail partners and co-marketing arrangements. We intend to focus initially on target markets in India that have a population that is more likely to consume high-end entertainment goods and services. We intend to spend approximately $10 million in 2005 on our marketing efforts in India.

The marketing agency Ogilvy Mather will help us to refine our advertising strategy in India. We intend to open at least one experience store in a high traffic area of each of our target cities where we will offer in-store demonstrations and samples of our products. We anticipate that this will require us to open approximately 11 experience stores in the near term. We currently operate one such store in Bangalore and have franchised to third parties the operations of another store in Bangalore and one in Chennai. We also plan to use mobile experience environments housed in trucks in the future. In order to attract sufficient customers, we have contracted with specialized promotional agencies to organize promotional activities in high traffic malls. We plan to stage promotions and events such as concerts, using our content as the central focus. Each event would be followed with direct sales efforts through our direct selling agents. Finally, we intend to enter into co-marketing arrangements with various retail stores and locations, some of which already play our channels, such as restaurants, malls, theaters, stores and pubs. In each such location we will provide channels for customers to experience that match the ambience of that location, and in certain instances we will provide listening posts with fully operational receivers at which customers can listen to all 39 channels that we offer. In addition to the above, we will market through the local daily press and national media to establish a brand name in the media landscape. We intend to rely in part on public relations initiatives that portray us as a potent, new, creditable and serious media in order to attract media attention and garner a certain amount of non-paid editorial led media space.

Customer service

We have outsourced our customer care and call center operations to Spanco, an established operator in India with a centralized call center in Bangalore. A typical customer uses a uniform toll free number that is accessible to everyone across India in order to reach our customer care center. The call center is responsible for collecting customer information and providing passwords, handling customer queries over the phone, scheduling calls for service visits, handling sales inquiries and providing service information.

Except in Bangalore, where we offer this service ourselves, we have a contract with a single service agency, ACCEL, that has a presence in the major metropolitan areas in order to ensure a uniform and consistent service delivery if a customer requires assistance to install a receiver at the time of purchase or to resolve any other complaints related to receiving satellite signals.

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Government services

In 2002, we launched our Government Sales Unit, which is focused on sales to U.S. and non-U.S. governments and government agencies, primarily in response to the U.S. government’s communication needs after September 11, 2001. Our service is capable of providing a secure, reliable and low-cost method of voice and other data broadcasting without additional terrestrial infrastructure. We have entered into contracts with U.S. and Indian governmental agencies for the provision of dedicated broadcasts using our system and receivers. To date, we have received more than $8 million in revenue from these contracts. We are also working with the Indian Meteorological Department to provide a dedicated service broadcasting weather forecasts and other data to India’s fishing industry.

Expatriate sales

In the areas where we broadcast there are many millions of people living outside of their home country. There are more than 12 million people of Indian origin and 25 million people of Chinese origin living outside of India and China, but inside our broadcast coverage area, according to the High Level Committee on Indian Diaspora and the website of China Oversees Communication Society. There are also approximately 3.3 million U.S. expatriates, and we believe a similar number of U.K. expatriates, living in our broadcast coverage area. We believe these people are often more affluent than their countrymen living at home, thereby making our services an attractive and affordable proposition even at higher price points. We can offer compelling programming such as CNN, the BBC, NPR, Virgin Radio U.K. and Fox News, as well as local Indian programming tailored for specific ethnic populations, to these groups. We believe that these groups will be receptive to programming developed for their native countries and appreciative of being able to receive that programming in their host country.

THE WORLDSPACE SYSTEM

Our system is a complete digital audio, data and multimedia system comprising three major components: the space segment, the ground segment, which includes satellite control and content uplinking, and the user segment. The space segment is designed to cover most of the geographical areas of the world (except North America and Australia) using three high-powered geostationary satellites. We have spent approximately $674 million on required infrastructure, including the satellites and the earth stations. Presently, two of the satellites, AsiaStar and AfriStar and their associated ground control systems, are providing operational services to Asia, all of the Middle East and Africa, and parts of Western Europe. We have two more satellites, one fully assembled (which we plan to use to provide mobile DARS in Europe) and another that is partially assembled and for which we have procured all parts (which will serve as a ground spare). The satellites are designed to provide digital audio, multimedia and data broadcasting to small fixed and portable L band receivers in their line of sight anywhere in their broadcast coverage area. We also plan to implement terrestrial repeater networks that will be part of our system in selected markets within our satellite broadcast coverage area. With the addition of suitably located terrestrial repeater networks, the system can provide more reliable urban broadcast services to receivers in automobiles (similar to the services provided by XM, whose system is based on our proprietary technology).

The ground segment consists of the ground control system and the network management system. The ground control system provides the capability to monitor and maintain our satellites in-orbit over the desired life of the satellite. The network management system consists of centralized hub stations, or individual broadcast stations, with the ability to aggregate the program channels and uplink to the satellite within their view. Individual broadcasters that choose to uplink to a satellite directly from their broadcast facilities lease or purchase individual feeder link stations from suppliers approved by us. Using program encryption/decryption, the system provides subscriber management service through selective addressing of receivers and supports small messaging services.

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We built our system working with industry leaders, including Alcatel Space, EADS Astrium and Arianespace (France), SED (Canada), GSI (USA), Fraunhofer Institute (Germany), ST Microelectronics (Italy), Micronas (Germany) and others, to realize high quality and reliability of service.

Space segment

Both our AfriStar and AsiaStar satellites are Matra Marconi Eurostar 2000+ buses built by Alcatel Space and EADS Astrium, formerly known as Matra Marconi Space. Both are geostationary orbit satellites broadcasting programs in the L band frequency (1452-1492 MHz range). Each of the two satellites has three downlink spot beams, with each beam covering approximately 14 million square kilometers of the earth. The AfriStar satellite, launched in October 1998, is located at the 21º East Longitude orbital location with beams covering all regions of Africa, the Mediterranean basin countries, the Middle East and parts of Europe. The AsiaStar satellite, launched in March 2000, is located at the 105º East Longitude orbital location with beams covering the most densely populated parts of Asia, including India, China and the southern part of Russia. The third satellite, which is fully assembled and ready for launch, is currently in storage at EADS Astrium’s facilities in Toulouse, France. A fourth satellite of identical design, for which long lead parts have been procured and partially assembled, is also maintained in storage in Toulouse, France and can be integrated and tested for launch in an abbreviated period of time.

Each satellite has a design life of twelve years, with an orbital maneuver life of 15 years, which means that each satellite has been designed to maintain its assigned orbital position (within 0.1 degrees) for 15 years. After that point, the satellite must be decommissioned. Our AfriStar satellite has developed a defect in its solar panels. As a result of this defect, the panels are collecting less power than intended and we expect that the defect will affect that satellite’s operation starting in 2008. At that point, the panels will not be collecting enough energy to fully power all three broadcast beams. As a result, we will have to make an operating decision in order to conserve power at that time, which may include broadcasting a smaller number of channels over one of the beams, or reducing our broadcast coverage area in our least utilized beams.

We use a digital data transmission scheme to transmit programs to portable receivers. Our digital format incorporates interleaving, Reed-Solomon and convolution encoding techniques to protect our service against transmission errors. Each of our satellites provides two types of channel capacity: transparent and processed. In the transparent mode, signals from ground stations are sent to the satellite in a time sequence known as time division multiplex (TDM). In this mode, different channels are brought to a central hub station for aggregation and uplink to the satellite. The satellite receives and rebroadcasts these channels to ground receivers within its coverage area. The three downlink beams receive programs from corresponding uplinks in different frequencies. In the processed mode, the satellite has the ability to process the received signals before retransmission. This second mode allows individual broadcasters to uplink to the satellite directly from their respective studios. In the processed mode, any program uplinked on a single frequency can be broadcast in any or all of the downlink beams.

Common to both types of transmission modes is the concept of Prime Rate Channels (PRCs). A PRC is a basic 16 kbps channel. Each beam consisting of two TDM carriers has a maximum capacity of 192 PRCs leading to a total capacity of 3,072 kbps. The PRCs can be combined to produce various levels of service for broadcasters—from 16 kbps to 128 kbps to meet the quality needs of programs. Channels can be split in real-time so that low data rate services, such as voice tracks or advertisements, can blend seamlessly with high data rate services, such as high quality music programming. We can provide up to 80 program channels per beam, ranging from mono AM to near CD quality audio, using this capacity and MP3 audio encoding. We can also provide multimedia channels combining audio, video and data of

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desired quality. With advanced coding techniques, such as AAC+, we will be able to realize our desired quality of service with less capacity usage, provided that appropriate modifications are made to the user receivers.

We are presently working to introduce mobile service using both satellite and ground retransmission capabilities. For this service we have modified the satellite waveform with the introduction of a long interleaver. It also uses advanced audio source coding techniques such as AAC+, which uses less bandwidth and also provides better audio quality. We are developing new receivers to receive mobile services, which will have the ability to receive programs coded in both MP3 and AAC+ formats. With the introduction of our mobile service, we will need to transmit separate broadcasts to our existing customers using our new products for a limited time.

Ground segment

Operation of each satellite currently in-orbit is monitored and controlled by the ground control system, comprising a regional operations center (ROC), two telemetry, command and ranging (TCR) stations and one communications system monitoring (CSM) station that performs monitoring of the downlink signal quality and control of each satellite. Our regional operations centers are located in Washington, D.C. for AfriStar and Melbourne, Australia for AsiaStar. The regional operating centers, through their satellite control centers, manage the performance and status of the satellite by controlling the satellite and monitoring the status of the onboard communications payload. In addition, the regional operations centers, through mission control centers, facilitate delivery and control the quality of the signals from the individual uplink stations to the satellites by assigning signals to the appropriate uplink frequencies and routing them to their appropriate downlink carriers. The system architecture is identical for each region.

The regional operating centers control the satellites via dedicated data lines to the TCR stations. Each satellite has two TCR stations with sufficient geographic distance between them so that if natural disasters or any unforeseen events were to make one inoperable, a back-up station will be available. TCR stations consist of an X-band uplink command and control system and an L band telemetry monitoring system. A backup mode has also been provided using an S band link from Bangalore, India. The TCR stations for AfriStar are located in Bangalore, India and Port Louis, Mauritius and for AsiaStar in Melbourne, Australia and Port Louis, Mauritius.

In addition to the TCR stations, a Communications System Monitoring (CSM) station is associated with each satellite to monitor continuously the quality of the downlink services. Our CSM facilities are located in Libreville, Gabon for AfriStar and Melbourne, Australia for AsiaStar.

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Network management system

Our network management system provides the connectivity between the programming sources, the satellites and the receivers. The satellite transponders permit (i) a multiplicity of uplinks to the satellites directly from the broadcaster’s studio or from common hub feeder link stations (linked terrestrially to broadcasters through dedicated communication lines) and (ii) downlinks directly to receivers.

[There follows in the text a map depicting the current WorldSpace broadcast center network, including Production Operations Centers (POC) (Washington, D.C., and Bangalore, India) where programming is produced and Broadcast Operations Centers (BOC) (London, U.K.; Toulouse, France; Nairobi, Kenya; Dakar, Senegal; Johannesburg, South Africa; Beijing, China; Singapore; and Melbourne, Australia) where content is gathered and transmitted to one of our satellites. The satellites and BOCs are coded in white or in black to show which BOCs communicate with which of our two in-orbit satellites. The depiction also shows the communication paths from the POCs to the BOCs.]

In the common hub mode, the WorldSpace-branded broadcast channels, all audio channels from external broadcasters and multimedia content are backhauled and aggregated to a broadcast operations center (BOC) and the content is fed directly to a transparent hub feeder link station (TFLS). The external broadcaster’s contents are backhauled to the BOC using off-the-shelf codec equipment and dedicated communication lines. The TFLS multiplexes all the incoming audio channels and data, translates the encoded signal into PRCs in the TDM format compatible with the receivers. The TFLS then uses a single carrier frequency to uplink transmissions to the satellite. Onboard the satellite, the signal is routed by the transparent transponder to a specific downlink beam and transmitted via L band frequencies to the receivers. A TFLS located in Johannesburg provides the uplink to the AfriStar satellite. A station in Singapore provides the uplink for the west and south beams of the AsiaStar satellite. The north beam of the AsiaStar satellite is supported by a TFLS located in Beijing, China.

As an alternative to the TFLS, individual broadcasters may also uplink directly to the satellite from their own facilities or from a central location via a Processed Feeder Link Station (PFLS). The PFLS can be installed at the broadcaster’s location or a location central to several broadcasters (to which programming is transmitted by the broadcasters via dedicated communication lines). The PFLS, after coding, translates the signal into PRCs for onward transmission to the processed transponder onboard the satellite. The processed payload transponder receives multiple uplink signals and processes them for rebroadcast in L band. PFLSs in London, Nairobi and Dakar provide access to AfriStar. PFLSs in

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Melbourne and Singapore provide access to AsiaStar. The TFLSs and the PFLSs are equipped with custom-built encryption nodes to encrypt any channel or a group of channels to support the subscription management service.

We will also introduce an over-the-air authorization channel, which will allow any suitably equipped receiver to be activated or de-activated using a dedicated channel without requiring consumers to enter passwords directly into a receiver. This will facilitate quick and easy activation and deactivation of receivers over the air without requiring the manual entry of passwords into a receiver. The over-the-air authorization channel will also have the capability to send short messages to individual receivers.

User segment

Users must purchase a receiver compatible with the L band frequency in order to access our system. The radio receiver processes, decodes and descrambles the signals to allow users to receive our programming content. Our broadcast frequency and satellites require a special receiver design incorporating a small patch antenna measuring approximately 6 to 8 cm (2.4 to 3.2 inches) which folds neatly into the receiver unit. Each receiver is individually addressable via a unique identifier that can be used to unlock specially coded audio or multimedia signals. This capability provides us with the flexibility to deliver free, subscription and/or premium services to consumers.

The small, attached receiver antenna facilitates satellite reception within the line of sight of the satellite. To allow for indoor use of the receiver, the antenna can be detached and placed against a window for line-of-sight view of the satellite. Where direct line of sight to the satellite is not possible, we offer a long-range Yagi antenna, which can be mounted outdoors and connected to the receiver. As with any wireless broadcast service, we expect that our transmission coverage will be subject to occasional “dead zones” where the service from the satellite may be blocked or interrupted and reception adversely affected by nearby tall buildings, elevations in topography, tree clusters, highway overpasses and similar obstructions.

Terrestrial system

Since line of sight reception may be difficult in the urban areas in which we operate, we intend to install terrestrial repeating transmitters to rebroadcast our satellite signals in the largest cities in India. Our next generation receivers would be capable of receiving this broadcast. The development of next generation mobile receivers will coincide with our installation of terrestrial repeating transmitters in the markets in which we operate in order to increase the reach of our broadcasts. The satellite component of the system will be based on the same TDM signal we currently use, but will use a modified waveform with several significant enhancements designed to improve in vehicle reception in areas partially shadowed by trees or other obstructions.

COMPETITION

We expect competition for our services from a diverse mix of audio, video and data providers ranging from traditional AM/FM and shortwave broadcasters, cable television and DTH satellite broadcasters, Internet-based radio broadcasters and other potential satellite DARS providers.

Traditional radio

We face competition from traditional AM/FM and shortwave radio broadcasters. The shortwave and AM/FM radio industries are well established and generally offer free-to-air reception paid for by commercial advertising. In addition, certain stations offer free-to-air programming without commercial interruption. Many shortwave and AM/FM radio stations also offer information programming of a local nature, such as local news or traffic, which we may not be able to offer. Radio stations compete for listeners and advertising revenue directly with other radio stations within their markets on the basis of a

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variety of factors, including program content, on-air talent, transmitter power, audience characteristics, local program acceptance and the number and characteristics of other radio stations in the market. In India, traditional AM/FM radio is not as important a source of competition as in other markets because of the poorer quality and narrow selection of programming currently offered. We may also face competition from Terrestrial Digital Radio (TDR) services in the future. TDR is a digital technological upgrade of traditional radio that offers up to CD-quality radio in over-the-air broadcasts with text information such as song title, weather and news alerts included. TDR experimental services are being conducted in a number of countries worldwide, including China, parts of Europe, India and Israel. A few countries, including Canada, the U.K. and Germany, have started regular commercial TDR services. Standards for providing such services in the United States were authorized by the FCC in October 2002. However, commercial TDR is not currently offered in any of our target markets, and we do not have reason to believe that the experimental services currently offered in some of our markets will be commercialized in the near future.

Satellite television and cable

Traditional cable operators and DTH satellite broadcasters programming television distributors offer programming that may compete with ours. Many cable television operators provide a set of music channels as an ancillary service for cable subscribers. Delivery of television via DTH satellite transmission is a growing phenomenon worldwide, including in most of the countries we have targeted, and these satellites may broadcast audio channels. Many DTH satellite services provide a set of music channels accessible through fixed dish receivers mounted on a home or building as an ancillary service for customers investing in the television dish and receiver, and paying the monthly or annual subscription price. DTH and cable audio programs may offer high quality signals and a customer’s choice of available programming is considerably broadened by these offerings—both aspects common to our planned service. Cable services and DTH television, however, are not portable and can only be heard through televisions or stereo receivers wired into the satellite antenna or cable television system, so they will not compete with our portable receivers, including our intended mobile automotive service. In addition, most DTH and cable audio services are presently limited to packaged recorded music and are secondary in marketing emphasis to television. However, there are a few existing providers of DTH radio, such as Digital Music Express, which offers over ninety channels of digital commercial free sound through a subscription service.

Internet radio broadcasts

There are large numbers of Internet radio broadcasts which can be accessed from any PC connected to the Internet anywhere in the world. In general, the audio quality of these broadcasts is dependent on the bandwidth available and the quality of the Internet connection. To the extent that higher quality sound is available, for the listener to experience a high quality broadcast they must have a broadband connection to the Internet and the listeners must connect their PC to quality speakers. This is currently unlikely to be a portable solution in the markets that we are targeting. Much of the current radio broadcasts are pre-programmed music playlists, not traditional radio type broadcasts with live DJs or up-to-the-minute news programming.

PC users can download music in formats suitable for storage and playback on their PCs. In contrast to music that is played on a PC directly from the Internet, the sound quality of music that is downloaded from specialty Internet sites for future listening on PCs can be comparable to our broadcasts.

Other satellite DARS providers

Direct satellite DARS competition in the L band is limited by the digital satellite radio spectrum allocation established by the 1992 WRC, referred to as WARC-92, and by our current use of this allocation. Although a number of countries have since submitted filings to the ITU for potential use of the same unique L band frequencies allocated to satellite radio, we are not aware of any commercial

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undertakings to offer L band satellite radio services. While new competitors could emerge, particularly if our service proves to be a commercial success, any potential satellite users of the L band are required to protect our receivers from harmful interference. Moreover, our two satellites currently occupy most of the L band spectrum allocation in our target regions.

Direct satellite DARS competition is also possible in the S band frequencies that WARC-92 set aside for satellite radio. While all of our target countries have selected the L band allocation for satellite radio, India, Pakistan, Mexico and Thailand have also selected the S band as an additional allocation within their respective territories. We are not, however, aware of any ITU satellite filings or related commercial undertakings aimed at offering S band satellite radio services in India or any other country within our broadcast coverage area, other than in Japan and Korea.

Music players

In addition, listeners increasingly have additional choices for high quality music reproduction, such as CDs, cassettes and MP3 players. Prices for devices to play these media may be lower than the price for our receivers. However, CDs, cassettes and MP3 players cannot provide the “real-time” news and public affairs programming offered on radio. The vast majority of mass-produced, portable MP3 players do not have any AM, FM or satellite radio capability.

INTELLECTUAL PROPERTY/TRADEMARKS/PATENTS

We use and hold intellectual property rights for a number of trademarks, service marks and logos for our system and services and for our receivers. We have two main marks—“WORLDSPACE” and the “Orbital Logo”—both of which are registered in over 25 countries in the international categories for satellite communications or radio and data business. We also hold, in various jurisdictions, a small number of regional taglines or channel brand names including but not limited to “AmeriSpace,” “AmeriStar,” “AfriStar,” and “AsiaStar.” In addition, we currently own or have applied for more than 45 patents in more than 40 countries relating to various aspects of our system and receivers, and at any time we may file additional patent applications in the appropriate countries for various aspects of our system. Our patents cover various aspects of the satellite direct radio broadcast system and terrestrial repeaters with formatting of broadcast data, and the processing thereof by the satellite and reception by remote radio receivers. In India we have six patents pending, and in China we have been issued two patents and have five additional patents pending. We also have exclusive rights in various Fraunhofer Gesellschaft patents.

We believe that all intellectual property rights used in our system were independently developed or duly licensed by us, by those we license the rights from or by the technology companies who supplied portions of our system. We cannot assure you, however, that third parties will not bring suit against us for patent or other infringement of intellectual property rights.

We have granted XM Satellite Radio Holdings Inc. a royalty-free, non-exclusive and irrevocable license to use and sublicense all improvements to our technology. This license renews automatically on an annual basis unless terminated for a breach which has not been or cannot be remedied.

We also hold a blanket license granted by the Composers and Authors Society of Singapore (COMPASS), to broadcast, perform, transmit and otherwise use all musical works which COMPASS has or will have the right to license. The license is deemed to continue from year to year unless terminated by notice in writing by either party at least 60 days before the end of the prior covered year. It was granted concurrently with the launch of transmissions through our AsiaStar satellite. The license covers the transmission of our signals to and from AsiaStar on a direct-to-receiver basis only, but does not cover third-party retransmissions.

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Although we believe the license granted by COMPASS would cover all necessary broadcasting rights for transmissions from our Singapore uplink station to India, China and other countries within the AsiaStar broadcast coverage area, it is possible that sister rights societies in other jurisdictions within the AsiaStar broadcast coverage area will not recognize such license and will seek to require separate licenses for broadcasts into their jurisdictions. This could increase our cost of broadcasting in such jurisdictions.

EMPLOYEES

As of March 31, 2005, we had 219 full time employees. Of these employees, 83 were located in the United States and 47 in India, with the other 89 employees located in China, Europe, the Middle East and Africa. None of our employees is represented by a labor union. We believe that our relationship with our employees is good.

PROPERTIES

As of March 15, 2005, we leased approximately 253,000 square feet of executive offices, regional offices, studio and production facilities, broadcast operations centers, uplink stations and sales offices in various locations as indicated in the chart below.


Location	Type of Facility	Square footage	Lease Expiration
North America
Washington D.C.	Headquarters, studio for WorldSpace-branded International channels and Regional Operations Center servicing AfriStar.	148,325	Sept. 1, 2005

India
Bangalore	WorldSpace India headquarters	7,050	June 30, 2006
Bangalore	Experience Brand Store	1,750	Nov. 8, 2008
Bangalore	WorldSpace Franchise Store	392	Dec. 11, 2007
Bangalore	WorldSpace Studios	6,000	March 9, 2008
Bangalore	Warehouse	2,600	April 11, 2005
New Delhi	Regional Office	1,800	Nov. 14, 2007
Chennai	Regional Office	1,500	Dec. 31, 2005
Chennai	WorldSpace Franchise Store	1,359	June 20, 2007
Mumbai	Regional Office	2,200	Nov. 9, 2008
Hyderabad	Branch Office	2,400	Feb. 29, 2008
Hyderabad	WorldSpace-Branded Store	1,335	Feb. 29, 2008

China
Beijing, China	Regional Office	4,161	March 20, 2006

AsiaStar support
Melbourne, Australia	TCR, ROC, Uplink and PFLS Stations broadcasting for AsiaStar	34,107	Dec. 31, 2007
Singapore	Host services contract with Sing Tel for TFLS Hub and PFLS station broadcasting for AsiaStar	3,725	expired; renewal under negotiation

Europe
Paris, France	Regional office	215	Month-to-month
Toulouse, France	Research and development engineering group	5,522	Jan. 14, 2012
London, United Kingdom	Hub Feeder Link Station for AfriStar	12,000	March 25, 2018

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Location	Type of Facility	Square footage	Lease Expiration

Middle East
Dubai, UAE	Regional Office	1,417	March 10, 2007

AfriStar support
Johannesburg, South Africa	Uplink Station for AfriStar (Hub Feeder)	10,743	expired; renewal under negotiation
Nairobi, Kenya	PFLS Station broadcasting for AfriStar	4,054	July 30, 2008

In addition to the locations leased by WorldSpace listed above, the following locations are owned or operated by partners of WorldSpace:


Location		Type of Facility
India
Bangalore		TCR Station broadcasting for AfriStar

China
Beijing		TFLS Hub broadcasting for AsiaStar

AsiaStar support
Singapore		Host services contract with Sing Tel for TFLS Hub and PFLS Station broadcasting for AsiaStar
Mauritius		TCR Station broadcasting for AsiaStar

Europe
London, UK		Hub Feeder Link Station for AfriStar operated by WRN

AfriStar support
Johannesburg, South Africa		Uplink Station for AfriStar (Hub Feeder) under contract with SA Telecom
Libreville, Gabon		CSM for AfriStar
Mauritius		TCR Station broadcasting for AfriStar

We anticipate relocating our principal executive offices from Washington, D.C. to 8515 Georgia Avenue, Silver Spring, Maryland in July 2005.

LEGAL PROCEEDINGS

We are subject to various claims and assessments during the normal course of business. In our opinion, these matters are not expected to have a material, adverse impact on our financial position or results of operations.

Government regulation

As an international satellite system operator and provider of DARS, we are subject to regulation at the international and national levels. At the international level, we are subject to the radio frequency spectrum allocation process and satellite coordination procedures of the ITU. Additionally, at the national level, we are subject to regulation by jurisdictions that have licensed our satellites and their associated ground segments. Finally, while provision of our service in most markets does not require service authorization, a limited number of jurisdictions do require that we obtain an authorization for provision of our DARS service.

REGULATION AT THE INTERNATIONAL LEVEL

The ITU radio-frequency spectrum allocation process

The ITU, a specialized agency of the United Nations with over 190 member countries, meets every three to four years at a World Radiocommunication Conference (WRC). The purpose of the WRC is to update frequency allocation decisions and other conditions for use of radio frequency spectrum at the international level. Once the ITU allocates a particular frequency band to a given service, individual member countries may assign and license frequencies within that band to specific communications and media service providers in such countries.

At WARC-92, the ITU allocated the 1452-1492 MHz frequency band (within the so-called “L Band”) to Broadcasting-Satellite Service (Sound), (BSS (Sound)) referred to as DARS in the United States, on a global basis. Recognizing the line of sight physics of satellite broadcasting and the need to provide seamless coverage in urban areas, the ITU specified that the global allocation covered BSS (Sound) and complementary terrestrial broadcasting. The allocation is co-primary with fixed terrestrial microwave, broadcasting and mobile services. Further, WARC-92 limited BSS (Sound) initial operations to the upper 25 MHz of the L Band allocation (1467-1492 MHz), with the use of the lower 15 MHz of the L Band to commence after the conclusion of a planning conference, which has not yet been scheduled.

ITU satellite coordination

Our use of the orbital locations assigned to us in our licenses is subject to the frequency coordination and registration process of the ITU. In order to protect satellite systems from harmful radio frequency interference from other satellite communications systems, the ITU maintains a Master International Frequency Register (MIFR), of radio frequency assignments and their associated orbital locations. Each ITU member state (referred to as an “administration”) is required by treaty to give notice of, coordinate, and register its proposed use of radio frequency assignments and associated orbital locations with the ITU’s Radiocommunication Bureau.

In our case, the governments of the United States, Australia and Trinidad and Tobago have licensed our AfriStar, AsiaStar and AmeriStar satellites, respectively, and are therefore the notifying administrations for each of those respective satellites. As our notifying administrations, they are responsible for filing and coordinating our allocated radio frequency assignments and associated orbital locations for each satellite with both the ITU’s Radiocommunication Bureau and the national administrations of other countries in each satellite’s service region.

BSS (Sound) services share the L Band frequencies on a co-primary basis with terrestrial services (including fixed, mobile and broadcasting services). Therefore, our satellites were required to be coordinated with existing systems either lawfully operating in our service regions or enjoying date priority ahead of us. While our notifying administrations, as the formal members of the ITU, are responsible for coordinating our

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satellites, in practice they require that we, as the satellite licensee, identify any potential interference concerns with existing systems or those enjoying date priority ahead of us, and coordinate with such systems. If we are unable to reach agreement and finalize coordination, our notifying administrations would then assist us with such coordination.

When the coordination process is completed, the ITU formally enters each satellite system’s orbital and frequency use characteristics in the MIFR. Such registration notifies all proposed users of frequencies that such registered satellite system is protected from interference from subsequent or nonconforming uses by other nations.

In the event disputes arise during coordination, the ITU’s Radio Regulations do not contain mandatory dispute resolution or enforcement mechanisms. Rather, the Radio Regulations’ dispute resolution procedures are based on the willingness of the parties concerned to reach a mutually acceptable agreement. Neither the ITU specifically, nor international law generally, provides clear remedies if this voluntary process fails.

REGULATION AT THE NATIONAL LEVEL

Regulation of the satellites

AfriStar: Regulation by the United States. On December 17, 1999, the FCC granted AfriSpace, Inc., our wholly-owned subsidiary (AfriSpace), a license authorizing AfriSpace to launch and operate the AfriStar satellite at the 21° East Longitude orbital location to provide commercial digital audio broadcasting services in the L Band to Africa and the Middle East. The license specifically provides for a ten year license term and expires in January 2010. It is renewable at that time.

We successfully coordinated the operation of the AfriStar satellite with each of the administrations in the satellite’s coverage area. In June 1999, on behalf of AfriSpace the FCC (as the U.S. government notifying administration before the ITU) submitted to the ITU the relevant satellite frequency assignments to be registered in the MIFR. Formal registration of AfriStar in the MIFR remains pending due to administrative delays at the ITU. However, these delays in no manner diminish our priority with respect to use of the relevant radio frequencies and the associated orbital position.

As noted above, AfriSpace received its license to serve the Africa and Middle East regions. As a U.S.-licensed satellite system, AfriStar is subject to the FCC’s general policies governing satellite services. In this regard, in its DISCO I Report and Order, the FCC gave U.S. satellite operators the flexibility to serve any market within their satellites’ footprint, provided the United States’ international obligations to coordinate the spacecraft are satisfied. AfriStar has been fully coordinated for service throughout its service region, which includes not only the Middle East and Africa, but also portions of South Asia and Western Europe. Therefore, on April 8, 2004, AfriSpace notified the FCC that it intended to provide service to all regions within the satellite’s footprint.

AfriStar-2: Regulation by the United States. On April 13, 2004 we submitted an application with the FCC to launch and operate AfriStar-2, and to co-locate it with AfriStar-1 at the 21° East Longitude orbital location. The satellite would operate within the same authorized frequency band (from 1467 to 1492 MHz) as Afristar and is expected to enhance our service coverage in North America, the Mediterranean basin and Western Europe, as well as provide certain “overlap” redundancy for the northwestern and northeastern portions of AfriStar’s current coverage area. On April 21, 2004 the FCC submitted a request to the ITU for coordination with respect to AfriStar-2. Due to certain minor technicalities relating to the proposed AfriStar-2 feeder link antenna beam operating parameters, the

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satellite application was dismissed twice without prejudice and was resubmitted with the FCC on March 11, 2005 and is currently pending before the FCC. The application was placed on public notice on March 18, 2005. Objections and/or comments to the March 11, 2005 filing are due on April 18, 2005.

While there is no guarantee that the FCC will grant our AfriStar-2 satellite application, in practice, the FCC generally grants such requests if the applicant is found to be technically, financially and legally qualified under the FCC’s rules. Given our current standing before the FCC, we expect that our AfriStar-2 application will be granted this year. In accordance with its current rules and regulations, the FCC may impose date-based satellite construction, launch and deployment milestones and a performance bond requirement on the AfriStar-2 satellite.

Finally, a number of ITU filings for the L Band currently have date priority over our AfriStar-2 filing. Although we are required to coordinate our AfriStar-2 filing with these prior-in-time filings, those filings must themselves be coordinated with our AfriStar and AsiaStar satellite notifications.

Other United States regulation. We are also subject to U.S. export controls laws and regulations, specifically the Arms Export Control Act, the International Traffic in Arms Regulations, the Export Administration Regulations and the trade sanctions laws and regulations administered by the U.S. Department of the Treasury’s Office of Foreign Assets Controls in the operation of our business. We have obtained all the specific authorizations currently needed to operate our business and believe that the terms of these licenses are sufficient given the scope and duration of the activities to which they pertain.

AsiaStar: regulation by Australia

Satellite operations in Australia are currently subject to regulation under the Space Activities Act of 1998 (Cth), the Radiocommunications Act 1992 (Cth) and the Radiocommunications License Conditions (Apparatus License) Determination 2003 (Cth).

In 1995, the Australian government agreed to be the ITU notifying administration for our AsiaStar satellite, operated by AsiaSpace Ltd., our wholly-owned (indirect) Australian subsidiary (AsiaSpace). In 1999, following the ACA filings with the ITU on behalf of AsiaStar, a Deed of Agreement between the ACA and AsiaSpace was executed that provided for the frequency coordination and operational control of the AsiaStar satellite network from Australia (the Deed).

The Deed remains in force as long as AsiaSpace fulfills its obligations as specified therein, which relate to compliance with the ITU Radio Regulations, maintenance of a telemetry, tracking and control facility in Australia and AsiaSpace’s continued incorporation in Australia. If AsiaSpace is determined to have violated the terms of the Deed, the ACA has the discretion to terminate the Deed and suppress the ITU notification of the network. Additionally, once the AsiaStar satellite reaches the end of its service life, we will need to apply to the Australian Space Licensing and Safety Office for authorization to launch and operate a replacement satellite at the same orbital location. However, there can be no guarantee that the ACA will grant such an authorization, and in that case, the orbital location currently occupied by our AsiaStar satellite could become available for use by other satellite operators. AsiaSpace also currently holds apparatus licenses 1105214 and 1105215 which authorize the use of certain frequencies and facilities necessary in Australia for the operation of the AsiaStar satellite. The licenses remain in force so long as AsiaSpace fulfills its obligations under them.

AsiaSpace has successfully coordinated the AsiaStar satellite at the 105º East Longitude orbital location and, by letter dated October 8, 2004, the ACA (as the Australian notifying administration before the ITU) has been notified by the ITU that the relevant satellite frequency assignments for AsiaStar are registered in the MIFR.

Government regulation

AmeriStar: regulation by Trinidad and Tobago

On December 30, 1992, the Government of Trinidad and Tobago granted a special license to WorldSpace Caribbean Ltd., a wholly-owned (indirect) subsidiary, to provide commercial digital audio broadcasting services from the 95° West Longitude orbital location. This license expired on April 2, 2000 and was subsequently renewed in December 2001 and remains effective until 2013.

As a result of a lengthy coordination process, the initial filing for AmeriStar expired in January 2002. The Government of Trinidad and Tobago subsequently submitted a new advance publication filing to the ITU effective the same month, and a request for coordination filing with a July 2002 date of receipt. Coordination of this new filing, which is identical in all respects to the expired one, is on-going.

REGULATION OF THE WORLDSPACE GROUND SYSTEM

Operation of the satellites

Our satellites are monitored and controlled by the ground control system, which is comprised of regional operations centers (ROCs) in Washington, D.C. and Melbourne, Australia; telemetry, command and ranging (TCR) stations in Bangalore, India, Melbourne, Australia and Mauritius; and in-orbit testing/communications system monitoring (IOT/CSM) stations in Libreville, Gabon and Melbourne, Australia that control and monitor the downlink signal quality of each satellite. Pursuant to our contracts with relevant in-country service providers such as Gabon Télécom, Antrix Corporation Limited of India and Mauritius Telecom, the responsibility for obtaining and maintaining all necessary regulatory authorizations for operation of the ROC, TCR and IOT/CSM stations not owned or operated by WorldSpace resides with the applicable local service providers. We believe that our ground system service providers have obtained all necessary regulatory authorizations for the operation and monitoring of the AfriStar and AsiaStar satellites. In certain locations, including Mauritius, Gabon and South Africa, the agreements with our ground system service providers have expired and we are currently negotiating extensions or renewals of such contracts.

Regulation of Receivers. Our receiver manufacturers have the broad responsibility to market the receivers. Pursuant to our receiver development, production, marketing and license agreements, the relevant receiver manufacturers are responsible for obtaining and maintaining any permits and similar approvals relating to the sale of the receivers and for complying with all applicable export compliance laws.

We believe that the single and multiband receivers which will be used as part of our system will be regulated internationally in the same manner as current analog radios. Thus, customs restrictions and tariff levels may vary from country-to-country or region-to-region. However, there can be no assurance that some countries will not apply to the receivers a separate regulatory regime than that applied to conventional analog radios.

In the international trade of products, most countries follow the Harmonized Commodity and Coding System, also referred to as the Harmonized System (HS), as a basis to calculate customs tariffs. To date, most countries that have allowed the importation of satellite DARS receivers have used the Harmonized System 85.27 classification, which also applies to conventional analog radios.

India

We began offering free-to-air service to India in 2000, and started providing the first subscription digital radio service in India in 2002. We are now in the early stages of seeking approval to offer a “hybrid” digital radio service in India. This service will utilize terrestrial repeaters located in urban and other areas

Government regulation

where reception is problematic, in conjunction with our AsiaStar satellite, in order to develop a new mobile service intended for use in automobiles. Each successive step in our Indian business strategy entails an increased level of regulation, and involves various regulatory authorities. These include: the Telecom Regulatory Authority of India (TRAI), an autonomous government entity charged with regulating the telecommunications sector and providing recommendations to the government; the Ministry of Information and Broadcasting; the Wireless Planning & Coordination (WPC) Wing of the Ministry of Communications & Information Technology, which sets spectrum policy in India; the Ministry of Home Affairs; the Department of Space; and the Standing Advisory Committee on Radio Frequency Allocation (SACFA). The regulatory aspects of the different stages of our business plan for India, as well as the respective roles of these governmental bodies, are described in more detail below.

Free-to-air services. India does not currently require downlink service/frequency authorizations to provide free-to-air, satellite-only digital radio services, including ancillary data transmissions. Currently, only Indian companies are authorized to uplink television channels from India. With respect to protection from interference into our L Band frequencies, the Indian administration has adopted the WARC-92 allocation for BSS (Sound) in its national table of allocations on a co-primary basis with the fixed service. Any potential interference issues are coordinated on a case-by-case basis.

Satellite-based subscription services. We have secured a general business license that permits WorldSpace India to carry out various activities on behalf of WorldSpace, including the collection of revenue for WorldSpace. This, in turn, allows WorldSpace to provide subscription audio services in India. We also hold an import license for our receivers.

“Hybrid” services. For the terrestrial retransmission component of our “hybrid” digital radio services, we must obtain a spectrum allocation, spectrum license, transmitter license and service authorization from the Indian government. Our terrestrial component will require only 2 x 2.5 MHz frequency “slots” in each urban/suburban area where the satellite signal will be retransmitted. The WPC will allocate terrestrial frequencies after assessing the spectrum requirement and utilization in each city. The WPC will carry out this exercise in advance of issuing a full wireless operating license, and in parallel with the separate process of obtaining a service authorization.

The transmitter license, which is issued by SACFA, will cover the transmitter equipment inclusive of antenna, RF, IF and Baseband. All radio transmitters require SACFA and WPC clearance, which is issued by the WPC after it receives the equipment specifications. The transmitter license is also required for importing equipment into India, as is a Telecommunications Engineering Center certificate. The manufacturers of our receivers are contractually required to obtain all relevant regulatory authorizations.

In addition to the SACFA and WPC licenses described above, the terrestrial retransmission component will require a service authorization from the Ministry of Information and Broadcasting to operate a digital “multiplex” of channels. At the moment, the Ministry does not have regulations governing service authorizations for hybrid DARS.

An Indian company involved in the development of our mobile technology is currently operating a single terrestrial repeater in Bangalore for laboratory testing purposes. In addition, we are preparing to apply for an experimental license to operate a complementary terrestrial repeater network in New Delhi. We intend to process the experimental license into an operational license in advance of the launch of our mobile DARS service by 2006.

Pending DARS proceeding. In response to the gap described above in the regulations of the Ministry of Information and Broadcasting, TRAI issued a consultation paper in December 2004 with a view to

Government regulation

issuing recommendations to the Ministry on appropriate terms and conditions for satellite DARS licensees. As we are currently the only DARS provider in India, WorldSpace India is participating in the TRAI consultation process.

When a regulatory regime is established, WorldSpace may be required to obtain approval from the WPC, SACFA, the Ministry of Home Affairs, the Department of Space or another government body. WorldSpace may also be required to partner with a local entity to provide service, as a satellite radio regulatory regime may include foreign ownership restrictions as do the laws governing most other telecommunications and broadcasting services in India. We anticipate that WorldSpace will be able to continue providing service in India in some fashion, either through its wholly-owned subsidiary, a joint venture with a locally-owned service provider, or some other arrangement.

WorldSpace India maintains good relationships with a number of Indian governmental entities, including contracts with:

The Press Trust of India, a government owned autonomous news agency, which plans to use our DARS system to disseminate news and information.

The Indian Department of Science & Technology, which currently provides a marine service using AsiaStar to transmit weather and other pertinent information to Indian fishermen.

We also intend to work with Webel, a leading government-owned electronics manufacturer, and other possible local manufacturers and operators, for the supply, installation, operations and maintenance of terrestrial repeater hardware.

China

Our wholly owned subsidiary, WorldSpace (China), provides technical and content services to local Internet content providers who hold appropriate licenses granted by the MII to engage in value-added telecommunication services in China. In addition, WorldSpace (China) intends, through local Chinese media entities or joint ventures with local Chinese media entities, to provide such services to local radio broadcasters and other media groups who hold appropriate licenses granted by SARFT to engage in radio broadcast and television programming business in China. While we are not yet providing commercial DARS service in China, we have established the necessary satellite infrastructure that will allow us, through joint ventures with local Chinese media entities, or cooperation with local China media entities, to begin providing service.

The telecommunications industry in China is subject to extensive government regulation. The Ministry of Information Industry (MII) is the primary agency of the Chinese government for regulating the telecommunications industry in China. As such, MII is responsible for, among other things: formulating and enforcing telecommunications industry policies and regulations; establishing technical standards; granting telecommunications services licenses; supervising the operations and quality of service of telecommunications operators; allocating and administering telecommunications resources, such as spectrum and telephone numbers; and, together with other relevant government agencies, formulating tariff standards.

Currently, a national telecommunications law is in the process of being drafted. If and when the telecommunications law is adopted, it is expected to become the basic telecommunications statute and provide a new regulatory framework for the telecommunications industry in China. The Telecommunications Regulations, effective as of September 25, 2000, were promulgated by the State Council, and provide the primary regulatory framework for China’s telecommunications industry until finalization and adoption of the new telecommunications law. The Telecommunications Regulations primarily address: entry into the telecommunications industry; network interconnection; telecommunications resource allocation; tariffs; and service standards.

Government regulation

The Telecommunications Regulations distinguish between basic and value-added telecommunications services, which are subject to different licensing requirements. According to the Catalog of Telecommunications Services, promulgated by the MII and made effective as of April 1, 2003, satellite communications services are categorized as basic telecommunications services. All operators of telecommunications businesses in China must obtain appropriate licenses or permits. An operator of a basic telecommunications business is required to obtain certain authorizations, such as a license for providing VSAT service, a license for leasing a satellite transmitter and a frequency approval, in order to provide such specific telecommunications services. Further, foreign investment in basic telecommunications services, including but not limited to satellite communications services, is highly restricted and regulated.

Currently spectrum utilization by our AsiaStar satellite for broadcasting services to individual households in China must be, and is, implemented through a local satellite service provider with appropriate license(s) granted by the MII. In 2000, we entered into several agreements, including an exclusive agency agreement, with China Communications Broadcasting Satellite Corporation (ChinaSat) through which ChinaSat became the sole agent to lease channels of our AsiaStar satellite and develop our satellite leasing business in China. ChinaSat is one of six state-owned telecommunications operators in China and is the largest satellite operator. All existing licenses/permits regarding our satellite leasing business in China were granted to ChinaSat by the MII, including a frequency approval, a basic telecommunications business license, and an operation license for leasing a satellite transmitter. According to the agency agreement, ChinaSat assumes full responsibility for obtaining the requisite government approvals, licenses and permits (if any) to ensure the legality of our satellite leasing business. The frequency approval was initially authorized to ChinaSat by the MII in September 2000, together with a service license, both of which were effective for one year in connection with commercial testing of our system. Both authorizations lapsed in September 2001. The frequency authorization was reissued in October 2004 on an indefinite basis, and is subject to annual review by the MII. We currently anticipate that a similar re-issuance of the service license will be granted to ChinaSat.

Foreign investment in value-added telecommunications services, including but not limited to Internet data center and Internet access services, electronic data interchange services and information transmission services, is also subject to regulatory restrictions. In connection with China’s entry into the World Trade Organization (WTO), the threshold of the foreign investment in a company, which is engaged in value-added telecommunications services, can be up to 50%. It is, however, not permitted in China to operate value-added telecommunications services by either a foreign company or its wholly foreign-owned enterprise. Under such a WTO commitment, we, through our wholly-owned subsidiary, WorldSpace (China), provide technical and content services to local content providers, radio broadcasters and other media groups who hold appropriate licenses to engage in value-added telecommunication services in China. WorldSpace (China) is duly incorporated in China and holds a business license to engage in, among others, researching and developing technologies for multimedia information services, providing e-business information services, and providing technology services, consultations and training.

The radio and television industry in China is highly regulated by the Chinese government. The SARFT, along with the Ministry of Culture and the Information Office of the State Council regulate and censor the information which can be provided via radio, film and television. Foreign investors are currently prohibited from operating radio and television stations, radio and television transmission networks comprising transmission stations, relaying stations, satellite up-link stations, satellite receiving stations, microwave stations, monitoring stations and cable broadcasting and television transmission networks as well as publishing and playing broadcast and television programs. However, as of November 28, 2004, foreign investors are allowed, subject to approval by the SARFT and the Ministry of Commerce, to

Government regulation

cooperate with local partners in China to produce and release television and radio programs and films, provided that the local Chinese partners hold a majority of the interests.

Although beginning in 2004, the regulatory framework for the radio and television industry in China has become more deregulated and transparent, restrictions remain tight on foreign investment in the radio and television fields in China and censorship procedures remain relatively restrictive with respect to content that is to be broadcast in China. The SARFT has indicated its intention to further liberalize this industry, however, it is uncertain as to when and how these restrictions will be liberalized. Under the current Chinese regulatory regime, we are neither allowed to hold a license or permit with respect to the broadcasting business, nor are we currently engaged in the radio or television broadcasting business in China. If the Chinese government further opens the radio and television industries and grants licenses and permits to foreign investors or foreign-invested companies, we intend to implement a broadcast service using our AsiaStar satellite.

In China, a permit from the Ministry of Commerce or its local counterparts is required for any technology licensing agreements between foreign companies and the Chinese licensees for technology which is subject to restrictions on importation under Chinese Laws. With regards to technology that may be freely imported, Chinese licensees are required to register the technology licensing agreements with the Ministry of Commerce or its local counterparts and obtain a registration certificate. Chinese licensees are also required to present the permit or the registration certificate, as the case may be, to the Chinese foreign currency control departments, local banks, taxation departments and customs when they make payment of the royalties to us. We have entered into technology license agreements with several Chinese companies to manufacture the receivers necessary for Chinese customers to listen to our programming.

Singapore

In February 2000, The Singapore Broadcasting Authority issued an International Satellite Radio Service License to WorldSpace Asia which authorizes WorldSpace to downlink its DARS service into Singapore. The license expired on January 31, 2005, but has been renewed for an additional 5 year term.

United Kingdom

In May 2001, the Radio Authority issued WorldSpace UK a Radio Authority Satellite Service License under Part III of the Broadcasting Act 1990, which authorizes WorldSpace UK to offer a multi-channel service receivable via custom-built receivers and carried on the AfriStar satellite. The Radio Authority ceased to exist on December 29, 2003, and its duties were assumed by a new communications regulator, the Office of Communications (Ofcom). Ofcom varied the license in December 2003 to conform with the requirements of the Communications Act 2003. The license will remain in effect until surrendered by WorldSpace UK or revoked in accordance with the conditions of the license, and requires payment of such fees as Ofcom may specify.

Regulatory status in Europe

Digital radio broadcasting services constitute a relatively new commercial sector in Europe; consequently, many European administrations are re-examining their existing regulatory frameworks to accommodate the potential new services. At the pan-European level, European administrations recently established a frequency plan, known as the Maastricht 2002 plan, to facilitate and encourage the introduction of national terrestrial digital radio networks. As described below, one consequence of the terrestrial frequency plan is the reduction of the available spectrum in Europe for the deployment of satellite radio networks.

In July 1995, the European Conference of Postal and Telecommunications Administrations (CEPT), met in Wiesbaden, Germany and agreed on a Special Arrangement concerning the introduction and planning

Government regulation

of Terrestrial Digital Audio Broadcasting (T-DAB), in the VHF frequencies (174-230 MHz) and L Band (1452-1467.5 MHz) in the territories of the signatory Administrations (referred to as the WI-95 arrangement). In the Special Arrangement, each of the signatory administrations received a certain number of allotments, consisting of T-DAB frequency blocks that were geographically limited and pre-coordinated so as not to interfere with each other, and distributed with a view to forming two complete national coverages per country.

Subsequently, terrestrial digital radio proponents requested that additional L Band spectrum resources above 1467.5 MHz be allocated for T-DAB, in addition to the WI-95 plan. In October 2000, the European Radiocommunications Committee (ERC), the highest body within the CEPT in charge of radio communications matters, authorized seven additional frequency blocks (approximately 12 MHz) from the satellite-only part of the upper 25 MHz of the L Band to be used for the planning of one further T-DAB coverage in each country. A CEPT Conference took place in June 2002 in Maastricht to develop this third coverage plan and to transfer former L Band T-DAB allotments from the WI-95 arrangement into the resulting new “MA-02 Special Arrangement.”

The resulting MA-02 plan leaves 12.5 MHz (1479.5—1492 MHz) of the original WARC-92 allocation for satellite digital audio broadcasting, including ancillary terrestrial components, and our AfriStar satellite has been coordinated to use this frequency range within its broadcast coverage area, which includes most of Europe. We believe the 12.5 MHz set aside by the MA-02 plan provides sufficient radio-frequency spectrum to execute our business development plans in Western Europe, including our contemplated provision of DARS and mobile DARS.

Management

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information concerning each of our executive officers and directors:


Name	Age	Position(s)
Noah A. Samara	47	Chairman, Chief Executive Officer and President
Sridhar Ganesan	42	Executive Vice President—Chief Financial Officer
Andy Ras-Work	41	Chief Operating Officer
M.G. Chandrasekhar	53	Executive Vice President—Technology and Product Development
Donald J. Frickel	62	Executive Vice President and General Counsel and Secretary
Jack Kemp	69	Director
James R. Laramie	55	Director & Assistant Secretary
Charles McC. Mathias	83	Director
Dr. Michael Nobel	65	Director
L.G. Schafran	66	Director
William Schneider, Jr.	63	Director

(1)

Member of the nominating and corporate committee.

(2)

Member of the audit committee.

(3)

Member of the compensation committee.

Noah A. Samara has served as the Chairman, Chief Executive Officer and President of WorldSpace and its predecessors since inception. Mr. Samara has been involved in the development of both geostationary and low earth orbit (LEO) satellite systems since the mid-1980s. Mr. Samara’s early career was in satellite telecommunications, first with Geostar Corporation and later with the Washington law firm of Venable, Baetjer, Howard & Civiletti.

Sridhar Ganesan has served as Executive Vice President—Chief Financial Officer of WorldSpace and its predecessors since October 2004. Mr. Ganesan joined the WorldSpace group in September 2001 as Senior Vice President, Corporate Strategy & Development. Prior to joining the WorldSpace group, Mr. Ganesan was the founder and Chief Executive officer of a U.S.-based applications services provider, Skymach Corporation, from 2000 to 2001. Mr. Ganesan has more than twenty years of experience in business development, implementation of international businesses and projects and marketing and sales in the satellite, telecommunication, Internet, information technology and media areas.

Andy Ras–Work has been the Chief Operating Officer of WorldSpace and its predecessors since March 2002. From March 2000 to February 2002, Mr. Ras-Work was President and Chief Executive Officer of Semantix Inc., an enterprise software firm. Prior to joining Semantix, Mr. Ras-Work held several senior management positions at Hewlett Packard, most recently as E-Commerce Group Manager from 1990 to 2000. Mr. Ras-Work’s career experience includes international marketing and corporate development and supply chain management in the information technology as well as the telecommunications industries.

Management

M.G. Chandrasekhar has served as Executive Vice President—Technology and Product Development of WorldSpace and its predecessors since July 2003. Prior to joining the WorldSpace group in 1997, Dr. Chandrasekhar was involved in the Indian space program. In 1988, he was elected Scientific Secretary of ISRO, the Indian Space Research Organization, and Member-Secretary of the Apex Management Council of ISRO. Dr. Chandrasekhar is an internationally renowned and award-winning professional in the space industry, is a “Fellow” of a number of Indian and International Academic institutions and has won numerous awards in recognition of his contribution to satellite technology and its applications.

Donald J. Frickel has served as Executive Vice President, General Counsel and Secretary of WorldSpace and its predecessors since January 1999. Mr. Frickel joined the WorldSpace group in March 1996 as Senior Vice President, Legal & Regulatory Affairs. Prior to joining the WorldSpace group, Mr. Frickel served as Associate General Counsel for Mobil Oil Corporation.

Jack Kemp has served as a director of WorldSpace and its predecessors since 2003. Mr. Kemp serves as the Chairman of the board of directors of FreeMarket Global, Limited, which conducts merchant banking, trading and investment activities with global interests in natural resources, energy markets and real estate. Mr. Kemp also serves as the Chairman of Kemp Partners, a strategic consulting firm he founded in 2003. Mr. Kemp is Co-Chair of Freedom Works Empower America and previously served on the Board of Directors of Empower America, a public policy and advocacy organization he co-founded in 1993. Prior to founding Empower America, Mr. Kemp served for four years as Secretary of Housing and Urban Development. In 1996, Mr. Kemp was the Republican Party’s vice presidential candidate. From 1971 to 1989, Mr. Kemp represented the Buffalo area and Western New York in the United States House of Representatives. Mr. Kemp serves as a Distinguished Fellow at the Heritage Foundation, a Visiting Fellow at the Hoover Institution, and is on the board of directors of Habitat for Humanity, the Opportunities Industrialization Centers, Howard University, Oracle Corporation, IDT Corporation and Hawk Corporation. Prior to joining Congress, Mr. Kemp played professional football as a quarterback for thirteen years for the San Diego Chargers and the Buffalo Bills. He also co-founded the AFL Players Association and was elected president for five terms.

James R. Laramie has served as a director and Assistant Secretary of WorldSpace and its predecessors since 1990. Mr. Laramie also served as the General Counsel of WorldSpace’s predecessors from November 1995 to 1998. Mr. Laramie is the President of Laramie & Associates, a management consulting company. From February 2002 to April 2004, Mr. Laramie served as the Chairman of Freeport Technologies, Inc., a company that provides collaborative conferencing systems for business development and management.

Charles McC. Mathias has served as a director of WorldSpace and its predecessors since 2000. From 1993 to 1999, Mr. Mathias served as President and Chairman of the board of directors of First American Bankshares, Inc. and, from 1987 to 1993, he was a partner of the law firm of Jones, Day, Reavis & Pogue. From 1968 to 1986, Mr. Mathias represented the State of Maryland in the United States Senate, where he served as chairman of the Committee on Rules and served on such committees as the Foreign Relations, Judiciary, Appropriations and Intelligence Committees. Prior to being elected to the Senate, Mr. Mathias served four terms in the House of Representatives as a representative from the Sixth Congressional District of Maryland. Mr. Mathias has served as President of the North Atlantic Assembly, the organization of NATO parliamentarians, having previously served as Vice-President and as Chairman of the United States Senate delegation to the Assembly.

Dr. Michael Nobel has served as a director of WorldSpace and its predecessors since 2001. Since 1990, Dr. Nobel has served as the Chief Executive Officer of a group of companies which performs diagnostic

Management

imaging services. Dr. Nobel also serves as the chairman of the Nobel Family Society. Dr. Nobel has been a consultant to UNESCO in Paris and the United Nation’s Social Affairs Division in Geneva on methods for substance abuse prevention. Dr. Nobel also worked for seven years as a researcher in social sciences at the Institute for Mass Communication at the Lausanne University and at the Institute of Social and Preventive Medicine in the field of primary drug abuse prevention. He also participated in the introduction of magnetic resonance imaging as vice president of Europe for Fonar Corporation and has remained in this field since 1980. He is a member of the board of several privately-held international companies involved in advanced medical diagnostics and treatment as well as internet service provision, management consulting and e-learning, and sits on several prominent international prize committees.

L. G. Schafran has served as a director of WorldSpace and its predecessors since 2000. Mr. Schafran is a Managing Director of Providence Capital, Inc. and the Managing General Partner of L. G. Schafran & Associates, LLP, a private real estate investment and development firm. Mr. Schafran serves as a director of PubliCARD, Inc., Tarragon Corporation and Glasstech, Inc., was a director, Chairman, Chief Executive Officer and interim president of the Banyan Strategic Realty Trust and served as as a co-liquidating trustee of a special liquidating trust succeeding the Banyan Strategic Realty Trust.

William Schneider, Jr. has been a Director of the Company since January 2005. He is a Washington, D.C. based economist and defense analyst, is President of International Planning Services, Inc., an international trade and finance advisory firm, and an Adjunct Fellow of the Hudson Institute. From 1981 to 1982, he served as the Associate Director for National Security and International Affairs at the Office of Management and Budget and from 1982 to 1986, as Under Secretary of State for Security Assistance, Science and Technology. Subsequent to his government service, Dr. Schneider served, from 1987 to 1993, as an advisor to the U.S. government in several capacities, including Chairman of the President’s General Advisory Committee on Arms Control and Disarmament, and is currently Chairman of the Defense Science Board of the Department of Defense as well as a member of the Defense Trade Advisory Group of the Department of State. He is the author of several works on defense policy, including Why IBM? Policy Issues in the Missile Defense Controversy (1969), and Arms, Men, and Military Budgets, an annual review of defense budget issues, and has also published numerous articles and monographs.

BOARD OF DIRECTORS

Our business and affairs are managed under the direction of our board of directors. Our board of directors is divided into the following three classes, with the members of the respective classes serving for staggered three-year terms:

Class 1 directors, whose terms will expire at our annual meeting of stockholders to be held in 2005;

Class 2 directors, whose terms will expire at our annual meeting of stockholders to be held in 2006; and

Class 3 directors, whose terms will expire at our annual meeting of stockholders to be held in 2007.

Mr. Samara, Mr. Schafran and Mr. Schneider are our Class 1 directors, Mr. Laramie and Mr. Mathias are our Class 2 directors and Mr. Kemp and Dr. Nobel are our Class 3 directors.

Management

COMMITTEES OF THE BOARD OF DIRECTORS

Audit committee

We have an audit committee that oversees our accounting and financial reporting processes and the audits of our financial statements. Our audit committee is authorized to, among other things:

oversee the integrity of our financial statements and other financial information we provide to our stockholders;

approve, retain and oversee the independent auditor to conduct the annual audit of our financial statements;

meet with our independent auditor and with internal financial personnel regarding our financial statements and controls;

oversee the adequacy of our internal controls and disclosure controls;

review and pre-approve the independent auditor’s audit and non-audit services rendered;

review our financial statements and our periodic reports in advance of the filings of such reports;

review, administer and approve any change in or waiver to our code of ethics for our principal executive and senior financial officers;

review and pre-approve transactions between us and our directors, officers and affiliates; and

establish and maintain procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls and auditing matters.

Messrs. , and are currently serving as members of our audit committee. Each of the members of our audit committee meets the independence and financial literacy requirements of the NASDAQ National Market, Inc. (NASDAQ), the SEC and applicable law. All members of our audit committee are able to read and understand fundamental financial statements, including the balance sheet, income statement and cash flow statement. The board of directors has determined that Mr. is an “audit committee financial expert” pursuant to the definition adopted by the SEC. Mr. serves as the Chair of our audit committee.

Compensation committee

We have a compensation committee that discharges responsibilities relating to compensation of our executives. Our compensation committee is authorized to, among other things:

review and approve corporate goals and objectives relevant to the compensation of the Chief Executive Officer, evaluate the performance of the Chief Executive Officer in light of those goals and objectives and determine, or recommend to the board of directors for determination, the level of the Chief Executive Officer’s compensation based on this evaluation;

determine, or recommend to the board of directors for determination, the base and incentive compensation of our other executive officers and senior officers with a rank of Vice President or above;

make recommendations to the board of directors with respect to our equity-based compensation plans;

administer our equity-based compensation plans; and

oversee, in consultation with management, our regulatory compliance with respect to compensation matters.

Management

Messrs. , and are currently serving as members of our compensation committee. Each of the members meets the independence requirement of the NASDAQ and applicable law. Mr. serves as Chair of our compensation committee.

Nominating and corporate governance committee

We have a nominating and corporate governance committee. Our nominating and corporate governance committee is authorized to, among other things:

identify and recommend to the board of directors the individuals to be nominated for election as directors and the persons to be elected by the board of directors to fill any vacancies on the Board;

review with the board of directors, on an annual basis, the requisite skills and criteria for new board of directors members as well as the composition of the board of directors as a whole;

oversee the board of directors in the board of directors’ annual review of its performance;

recommend to the board the directors to be appointed to each committee of the board of directors; and

review annually our Corporate Governance Guidelines.

Messrs. , and are currently serving as members of our nominating and corporate governance committee. Each of the members meets the independence requirement of the NASDAQ and applicable law. Mr. serves as Chair of our nominating and corporate governance committee.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of our present or former officers or other employees serves as a member of our compensation committee. During the 2004 fiscal year, none of our executive officers served on the board of directors or compensation committee (or other committee serving a similar function) of any entity, one of whose executive officers served as a member of our board of directors or compensation committee.

DIRECTOR COMPENSATION

After the closing of this offering, each of our non-employee directors will receive an annual retainer of $ and a fee of $ for each board of directors meeting attended.

Management

EXECUTIVE COMPENSATION

We have entered into employment agreements with certain of our executives for terms of up to three years, as described in “—Employment agreements” below. The following table sets forth information for the three years ended December 31, 2004 regarding the compensation of our chief executive officer and each of our other four most highly-compensated executive officers, referred to in this prospectus as the named executive officers.

Summary compensation table


		Annual compensation
Name and principal position(s)	Year	Salary ($)		Bonus ($)		All other compensation ($) (1)
Noah A. Samara Chairman of the Board and Chief Executive Officer	2004 2003 2002	482,004 407,032 455,239	(2) (3)	— — —	(4) (5)	— — —

Andy Ras-Work Chief Operating Officer	2004 2003 2002	250,000 242,188 200,000		— — —		— — —

Mesfin Ayenew Executive Vice President—Government Sales	2004 2003 2002	225,000 218,488 204,058		— — —	(6)	— — —

Donald J. Frickel Executive Vice President and General Counsel, Secretary of the Board	2004 2003 2002	219,289 211,400 202,989		— — —		— — —

M.G. Chandrasekhar Executive Vice President—Technology and Product Development	2004 2003 2002	205,600 198,365 163,664		— — —		— — —

(1)

In accordance with the rules of the SEC, all other compensation in the form of perquisites and other personal benefits has been omitted in those instances where the aggregate amount of such perquisites and other personal benefits constituted less than the lesser of $50,000 or 10% of the total annual salary and bonuses for the officer for such year.

(2)

Paid in January 2005.

(3)

Of this amount, $234,570 was paid in January 2005.

(4)

Does not include $375 automobile allowance.

(5)

Does not include $1,000 automobile allowance and $325 health club benefit.

(6)

Does not include $325 health club benefit.

Stock option grants in year ended December 31, 2004

No stock options to purchase our common stock were granted to the named executive officers during the year ended December 31, 2004 other than Donald J. Frickel.

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Aggregate option exercises in last fiscal year and fiscal year-end option values

The following table sets forth as of December 31, 2004 the number and value of options held by each of our named executive officers. With respect to the named executive officers, no options or stock appreciation rights were exercised during 2004, and no stock appreciation rights were outstanding as of December 31, 2004.


Name of executive officers	Number of securities underlying unexercised options at December 31, 2004		Value of unexercised in-the-money options at December 31, 2004 ($) (1)
	Exercisable	Unexercisable	Exercisable	Unexercisable
Noah A. Samara	12,540,763	—
Andy Ras-Work	—	—
Mesfin Ayenew	180,000	45,000
Donald J. Frickel	1,462,500	—
M.G. Chandrasekhar	191,250	33,750

(1)

There was no public trading market for our common stock as of December 31, 2004. Accordingly, these values have been calculated on the basis of the initial public offering price of $ per share, less the applicable exercise price per share, multiplied by the number of shares underlying the options.

Employment agreements

Prior to the completion of this offering, we intend to standardize our employment arrangements with our executive officers.

SEVERANCE AGREEMENTS

Our former Chief Financial Officer, Ron Johnston, had his employment with us terminated in September 2004. Pursuant to a severance arrangement with Mr. Johnston, we made payments, the last of which was paid in January 2005.

EMPLOYEE BENEFIT PLANS

2005 Shares option plan

Prior to the completion of this offering, we plan to adopt the 2005 WorldSpace Incentive Award Plan, an omnibus benefit plan.

1996 Shares option plan

Our predecessor’s, WorldSpace International Network Inc.’s 1996 Shares Option Plan was approved by our board of directors and became effective in December 1996. This 1996 plan provides for the grant of non-qualified stock options. Our employees and consultants, and employees and consultants of any parent or subsidiary of us, are eligible to receive awards under the 1996 Shares Option Plan.

A total of 15,000,000 shares of our Class B Common Stock are authorized for issuance under the 1996 Shares Option Plan. Under the terms of the 1996 Shares Option Plan, our board of directors or any committee of the board of directors is authorized to establish the exercise price for an award at the time of grant. The 1996 Shares Option Plan also provides that in the event that we experience a recapitalization, reorganization or stock split or dividend, the options shall be adjusted to account for the changed circumstances.

Options granted under the 1996 Shares Option Plan generally become vested in increments over a period of years, and no options granted under the 1996 Shares Option Plan plan may have a term longer than 10 years.

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A terminated employee may only exercise options granted under the 1996 Shares Option Plan if the employee’s award agreement provides for post-termination exercise, and only if the termination was involuntary, but not for good cause, or voluntary, but with the consent of our board of directors.

Generally, in the event of a change in control, the successor corporation is required to assume each option or replace it with a substitute option. If the outstanding options are not assumed or substituted after a change in control, the vesting of the options will generally accelerate in full.

Options granted under the 1996 Shares Option Plan generally do not provide for the transferability of awards. Shares acquired pursuant to option award agreements under the 1996 Shares Option Plan generally must be offered to us for repurchase following the date of exercise, with acceptance of such offer to be made within 30 days, and we generally reserve the right of first refusal with respect to any subsequent third party offers to purchase the shares.

Prior to December 30, 2004, awards under the 1996 Shares Option Plan to acquire a total of $10.1 million shares of WIN’s Class B Common Stock were issued and outstanding at a weighted average price of $9.77 per share.

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Pre-offering recapitalization

Prior to this Offering, in December 2004, the former WorldSpace group of companies was reorganized and recapitalized. On December 30, 2004, the group’s principal operating company, WorldSpace International Network Inc., a British Virgin Islands company (WIN), was merged with and into the group’s former holding company, WorldSpace, Inc., a Maryland corporation (WorldSpace Maryland). Immediately thereafter, for purposes of reincorporating WorldSpace Maryland in Delaware, WorldSpace Maryland was merged into a newly-formed Delaware company, also named WorldSpace, Inc. (WorldSpace or the Company).

As discussed in more detail below, immediately following these mergers, (i) all of WorldSpace’s predecessor companies’ outstanding long-term debt obligations were converted, in the case of certain of such obligations, into shares of Class B Common Stock and, in the case of other of such debt obligations, into a right to royalty payments based on the Company’s annual EBITDA, if any, for each year through December 31, 2015 and (ii) WorldSpace issued $155 million of senior convertible notes (Convertible Notes) to a group of private investors (New Investors). As a result of these transactions, our only long-term debt is the Convertible Notes. The background to the conversion of such debt obligations and the issuance of the Convertible Notes is described in more detail below.

STONEHOUSE OBLIGATIONS

During the mid-1990s, two Saudi Arabian citizens, Mr. Mohammed H. Al Amoudi and Mr. Khalid Bin Mahfouz (through companies controlled by them and through Credit Suisse as a fiduciary) provided a majority of the capital necessary to develop the WorldSpace system and commence commercial operations. In total, they provided approximately $1.1 billion in cash to the WorldSpace group.

In 1999, Mr. Al Amoudi transferred all of his interests, direct or indirect, in any of the WorldSpace companies to the Bin Mahfouz family. Pursuant to certain rescission transaction agreements dated as of April 21, 2000 (Rescission Transaction Agreements), all of the direct and indirect Bin Mahfouz family debt and equity interests in the WorldSpace group were consolidated into a single debt obligation owed by the WorldSpace group to Stonehouse Capital Limited (Stonehouse), a Cayman Islands company wholly owned by two sons of Mr. Bin Mahfouz.

On December 30, 2004, a Loan Restructuring Agreement (Loan Restructuring Agreement) and a Royalty Agreement (Royalty Agreement), each dated September 30, 2003 and amended through December 30, 2004, superseded the Rescission Transaction Agreements. Pursuant to the Restructuring Agreement and the Royalty Agreement, the debt owed by the WorldSpace companies to Stonehouse, upon the effective date of such agreements, was cancelled and replaced by an obligation to make certain annual royalty payments to Stonehouse. Under the terms of the Royalty Agreement, WorldSpace is required to pay to Stonehouse 10% of the EBITDA (earnings before interest, taxes, depreciation and amortization), if any, of WorldSpace and its consolidated subsidiaries for each year from January 2005 through December 31, 2015. The principal condition to the effectiveness of the Loan Restructuring Agreement and the Royalty Agreement was the receipt by the Company of at least $50 million in funding from outside investors. Simultaneously with the issuance by the Company, on December 30, 2004, of the Convertible Notes to the New Investors, Stonehouse and WorldSpace agreed that the conditions to effectiveness had been satisfied, and the Loan Restructuring Agreement and Royalty Agreement became effective.

The terms of the Loan Restructuring Agreement, the Royalty Agreement and related documents are described more fully in the “Certain relationships and related party transactions” section of this prospectus.

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YENURA OBLIGATIONS

Prior to 1998, Salah Idris, a Saudi Arabian citizen, was a director of WIN and held 4,674,826 shares of WIN through his wholly-owned British Virgin Islands company, Industrial Development Inc. (Industrial Development). In 1998, Mr. Idris and WIN agreed to exchange the shares owned by Industrial Development for debt. Pursuant to this agreement, WIN issued a $56,097,912 convertible note dated November 20, 1998 to Industrial Development in return for all of the shares of WIN held by Industrial Development. A further $10 million loaned by Mr. Idris to WIN was later recorded in a promissory note dated as of October 29, 1998, which was issued by WIN in favor of Industrial Development in October 2000.

Between 2001 and 2004, most of the operating expenses of the WorldSpace group of companies were funded by advances made by Mr. Idris and by the Company’s Chairman and Chief Executive Officer, Noah A. Samara, to WorldSpace Maryland. Most of these advances were made through Yenura Pte. Ltd., a Singapore company (Yenura) owned by Mr. Samara and Mr. Idris. Mr. Samara owns all of the voting shares of Yenura. Mr. Idris owns only non-voting shares, but holds a majority of the economic interest in Yenura. The advances made by Yenura were formally reflected in a September 21, 2002 Loan Agreement and Guarantee, dated as September 21, 2002 between WorldSpace Maryland, WIN, WorldSpace Satellite Company and Yenura (as amended to date, the Loan Amendment and Guarantee). Pursuant to this Loan Agreement and Guarantee, and in consideration for the funds advanced, WorldSpace Maryland issued three Senior Convertible Notes in favor of Yenura in an aggregate principal amount of $118,512,579 through December 29, 2004.

With WIN’s consent, in December 2004, Yenura entered into agreements with Industrial Development and with one other holder of WIN debt (Saifcom) whereby Yenura purchased all of the then outstanding WIN debt held by such entities in the aggregate amount of $73,097,912. On December 30, 2004, immediately after the merger of WIN into WorldSpace Maryland and the subsequent merger of WorldSpace Maryland into WorldSpace, Yenura exchanged its pre-existing debt and the debt it acquired from Industrial Development and the unrelated holder, together with allocated interest thereon (all of which debt, as a result of the mergers, were now obligations of the Company), for 27.9 million shares of Class B Common Stock in WorldSpace. As a result of this exchange, WorldSpace and its subsidiaries owe no debt to Yenura or Industrial Development.

The terms of the agreements among Yenura and members of the WorldSpace group pursuant to which this debt was acquired and exchanged are described more fully in the “Certain relationships and related party transactions” section of this prospectus.

NEW INVESTORS

As discussed above, in addition to the reorganization of the WorldSpace group of companies and the restructuring of debt, on December 30, 2004 we issued $155 million of Convertible Notes to the New Investors pursuant to the terms of a Securities Purchase Agreement dated December 30, 2004 (Securities Purchase Agreement). In connection with the issuance of the Convertible Notes, we granted to the New Investors certain registration rights with respect to the shares of Class A Common Stock underlying the Convertible Notes. Our obligation to register such shares is embodied in a registration rights agreement with the New Investors dated December 30, 2004 (Registration Rights Agreement). The terms of the Convertible Notes, the Securities Purchase Agreement and the Registration Rights Agreement are more fully described in the “Certain relationships and related party transactions” section of this prospectus.

As a result of the transactions described above, none of the Bin Mahfouz family, Mr. Al-Amondi or Mr. Idris hold any direct debt or equity interest in our company or has any voting control rights in our company. An entity controlled by two Bin Mahfouz sons is entitled to conditional royalty payments from us for each annual period through December 31, 2015. Yenura, a company whose voting shares are controlled by our Chairman and Chief Executive Officer, Mr. Samara, holds 27.9 million shares of WorldSpace Class B Common Stock. Although Mr. Idris holds only non-voting shares, he holds the majority of the economic interest in Yenura.

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The summaries of the agreements described below are not complete and are subject to, and qualified in their entirety by, the provisions of the actual agreements. These agreements have been filed as exhibits to the registration statement of which this prospectus is a part and we suggest you read the agreements in their entirety.

We have engaged, and in the future may engage, in transactions with our shareholders and companies affiliated with our shareholders. We believe that these transactions have been made on terms no less favorable than could have been obtained from unaffiliated third parties. We comply with Delaware law with respect to transactions involving potential conflicts. Delaware law requires that all transactions between us and any director or executive officer are subject to full disclosure and approval of the majority of the disinterested members of our board of directors, approval of the majority of our stockholders or the determination that the contract or transaction is intrinsically fair to us.

Other than the transactions described below, for the last three full fiscal years there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we are or will be a party:

in which the amount involved exceeded or will exceed $60,000; and

in which any director, executive officer, holder of more than 5% of our common stock on an as-converted basis or any member of their immediate family has or will have a direct or indirect material interest.

LOAN RESTRUCTURING AGREEMENT

On September 30, 2003, WorldSpace Maryland entered into a Loan Restructuring Agreement with Stonehouse, WIN and WorldSpace Satellite Company Ltd. (Satellite Co.). This agreement superseded the Amended and Restated Loan Agreement (the Loan Agreement) and certain Security Agreements (Security Agreements) each dated as of April 21, 2000, among the same parties and, upon its effectiveness, provided for the extinguishment of the debt owed thereunder by WIN, Satellite Co. and WorldSpace Maryland, collectively referred to as the WorldSpace Parties, in exchange for certain royalty payments (the Restructuring), provided that certain conditions were met prior to September 30, 2004 (the Outside Date).

On September 28, 2004 the parties to the Loan Restructuring Agreement entered into a First Amendment to Loan Restructuring Agreement and Royalty Agreement (the Amendment) to amend certain provisions of the aforementioned arrangements, including the extension of the Outside Date to March 31, 2005. The Restructuring was completed on December 31, 2004.

Under the Loan Restructuring Agreement, Stonehouse cancelled, released and discharged all obligations and liabilities of the WorldSpace Parties arising under the Loan Agreement, and all liens and security interests under the Security Agreements upon satisfaction or waiver of certain conditions precedent, including, among other things, the delivery of executed release agreements and the Royalty Agreement described below, the completion of a third-party investment of not less than $50 million in the WorldSpace Parties and their affiliates (see “—New Investment Transaction” below), which we refer to as the WorldSpace Enterprise, and payment of a $1.25 million success fee to Houlihan, Lokey, Howard and Zukin. Each of the conditions precedent was satisfied or waived on December 30, 2004, and, thereafter, the releases and Royalty Agreement were released from escrow and the Royalty Agreement became effective.

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ROYALTY AGREEMENT

The WorldSpace Parties entered into a Royalty Agreement with Stonehouse dated as of September 30, 2003, which was placed, along with the Original Agreement Release described below, into escrow until the completion of the Restructuring. The Royalty Agreement, as amended by the Amendment as of September 29, 2004, was released from escrow on December 30, 2004 and became effective on December 31, 2004. Together with the Loan Restructuring Agreement, the Royalty Agreement provides for all WorldSpace Parties’ debt to Stonehouse to be replaced with an obligation by WorldSpace to make royalty payments to Stonehouse in the amount of 10% of the annual consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) (the Royalty Payment) for each calendar year from 2003 through 2015 (the Term). An interim payment of 80% of any Royalty Payment owed is to be made within 60 days of the end of a calendar year, with the remaining 20% to be paid within 180 days of the end of the calendar year.

The Royalty Agreement requires that WorldSpace establish and maintain a segregated reserve account with a sub-account for each calendar year during the Term. WorldSpace must deposit into the appropriate sub-account, within 45 days after the beginning of each quarter, an amount equal to 25% of the Royalty Payment for such year as estimated in good faith by WorldSpace on the basis of the best information then reasonably available. Each of those separated accounts or sub-accounts constitute deposit accounts within the meaning of the New York Uniform Commercial Code (UCC) and will be subject to the ‘control’ (within the meaning of the UCC) of Stonehouse during the Term. Except as otherwise agreed, funds that have been deposited by WorldSpace in the accounts in respect of any royalty payment obligations may only be invested in certain agreed permitted investments.

The Royalty Agreement provides that in the event that all or substantially all of the assets of any WorldSpace Party are sold or any WorldSpace Party is liquidated (each Scale-Down Transaction) Stonehouse may, at its option, receive a fee, (a Scale-Down Fee) in lieu of future royalty payments with respect to the WorldSpace Party that was the subject of the Scale Down Transaction. In the event that Stonehouse elects to receive a Scale-Down Fee with respect to a Scale-Down Transaction, WorldSpace will pay a Scale-Down Fee equal to 60% of the portion of the proceeds (whether cash or property) of the sale or liquidation that is to be included in any distributions to WorldSpace’s stockholders as of December 31, 2004 in such Scale-Down Transaction; provided, however, that the percentage of proceeds owed to Stonehouse in respect of any Scale-Down Transaction will be reduced by 10% (i.e., 60% to 54%) for each $50 million in royalty or scale-down fee payments actually made to Stonehouse theretofore.

In addition to the foregoing, the Royalty Agreement provides that upon a sale, liquidation bankruptcy of a foreclosure on WorldSpace at any time prior to December 31, 2015, then to the extent that the portion of the total distributions to the WorldSpace Parties’ stockholders as at December 31, 2004 which is received by Noah A. Samara (and his affiliates, and other related parties) exceeds the cumulative amounts received by Stonehouse, Noah A. Samara will immediately pay Stonehouse a cash payment equal to one-half of such excess amounts.

The Royalty Agreement provides further that “Distributions” (i.e., dividends, return of capital, etc.) by the WorldSpace Parties on the Class B Shares held by Noah A. Samara and his affiliates may only be paid out of certain excess funds (i.e., unspent funds earned by WorldSpace in any calendar year less the royalty payment owed to Stonehouse for the year) available at calendar year-end, on or after the 180th day of the calendar year, and only after the Royalty Payment due and payable on the 180th day of the calendar year has been paid in full. In addition, no Distribution may be paid to such stockholders unless on the date of such payment the WorldSpace Parties are current on all expenses and other amounts owed to any person, and the contemplated payment of the Distribution will not result in any reasonably foreseeable or likely shortfall in funds available to meet future expenses and other amounts which will become due to any person during the subsequent twelve-month period.

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Moreover, for a period of three years from the date of the Restructuring, none of the WorldSpace Parties may voluntarily liquidate, without the prior written consent of Stonehouse, which consent will not be unreasonably withheld.

WorldSpace is required to apply the proceeds of the new fiduciary required as a condition to effectiveness of the Royalty Agreement substantially in accordance with the funding expenditure plan that was provided to Stonehouse on September 30, 2003. In December 2004, Stonehouse approved the funding expenditure plan with respect to the proceeds of the new financing described below.

Stonehouse will have the right to audit the books and accounts of the WorldSpace Parties at any time during the Term, but not more frequently than once per year, upon reasonable advance notice for the purpose of determining or confirming any calculation of WorldSpace EBITDA.

ORIGINAL AGREEMENT RELEASE

The WorldSpace Parties entered into an Original Agreement Release with Stonehouse on September 30, 2003 whereby Stonehouse and the WorldSpace Parties permanently and irrevocably cancelled, released and discharged each other from all obligations and liabilities, including the WorldSpace debt owed under the Loan Agreement in the amount of $1,872,769,237 and all liens and security interests arising under the Security Agreements or any related agreement. This release became effective on December 31, 2004 upon completion of the Restructuring.

EXCHANGE AGREEMENT

In connection with the Restructuring, we entered into an Exchange Agreement dated as of December 29, 2004 with WorldSpace Maryland, WIN and Yenura Pte. Ltd., (Yenura) a Singapore company in which our Chairman, Noah A. Samara, holds all voting shares and in which Salah Idris holds all non-voting shares, but a majority of the economic interest. Pursuant to this Agreement, we cancelled and discharged debt obligations in an aggregate principal amount of $120,084,654 owed by WorldSpace Maryland and WIN, as further described below, for 27.9 million shares of our Class B Common Stock.

Pursuant to a Purchase and Sale Agreement dated December 29, 2004, (the Industrial Purchase and Sale Agreement), Yenura purchased from Industrial Development two notes issued by WIN to Industrial Development in the original principal amounts of $10,000,000 and $56,097,912. On December 29, 2004, Yenura separately purchased from Saifcom Establishment, a Liechtenstein company (Saifcom) a note issued by WIN to Saifcom in the original principal amount of $10,000,000.

In addition, pursuant to the Loan Agreement and Guarantee dated as of September 21, 2002 among WorldSpace Maryland, WIN and Yenura, WorldSpace Maryland issued to Yenura a convertible note in the principal amount of $52,925,000. Pursuant to the First Supplemental Loan Agreement and Guarantee dated June 23, 2003 among the same parties, WorldSpace Maryland issued to Yenura a further convertible note in the principal amount of $24,750,000. Pursuant to the Second Supplemental Loan Agreement and Guarantee dated December 29, 2004 among the same parties, WorldSpace Maryland issued to Yenura a convertible note in the aggregate amount of $44,343,242.

In exchange for the cancellation and discharge of all of the WIN and WorldSpace Maryland debt obligations described above, we, as the successor corporation of both WIN and WorldSpace Maryland, issued to Yenura 27.9 million shares of WorldSpace Class B Common Stock.

Yenura has agreed to indemnify and hold us, our predecessor companies, our affiliates, shareholders, directors, officers, employees, attorneys, accountants and agents harmless from and against any loss suffered or incurred by a WorldSpace indemnitee resulting from or arising out of the inaccuracy of any

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representation or warranty made by Yenura or the failure by Yenura to perform any covenant, agreement or other obligation contained in the Exchange Agreement. We agreed to indemnify Yenura and hold it, its affiliates, shareholders, directors, officers, employees, attorneys, accountants and agents harmless from and against any loss suffered or incurred by a Yenura indemnitee resulting from or arising out of the inaccuracy of any representation or warranty we made or by our failure to perform any covenant, agreement or other obligation contained in the Exchange Agreement.

NEW INVESTMENT TRANSACTION

On December 31, 2004, in connection with the Restructuring, New Investors acquired an aggregate principal amount of $155 million of senior unsecured convertible notes (Convertible Notes). In connection with this purchase, we granted to the New Investors certain registration rights. The terms of the Securities Purchase Agreement, Registration Rights Agreement, and Convertible Notes are discussed below:

Securities purchase agreement

We entered into a Securities Purchase Agreement dated as of December 30, 2004 with WorldSpace Maryland and Highbridge International LLC, Amphora Limited and certain other private equity investors whereby we issued to them the Convertible Notes. Each Convertible Note is convertible into shares of our Class A Common Stock which are subject to the Registration Rights Agreement. The principal terms of the Securities Purchase Agreement may be summarized as follows:

Proceeds. We are using the proceeds from the sale of the Convertible Notes for the repayment of certain amounts payable to Alcatel Space for the construction of the Company’s satellites, working capital and other general corporate purposes. Proceeds may not be used for (i) the repayment of our indebtedness or that of any of our subsidiaries or for (ii) the redemption or repurchase of any of our equity securities.

Dilutive Issuances. So long as any New Investor beneficially owns Convertible Notes, we will not issue (x) any Convertible Notes other than to the New Investors as contemplated by the Securities Purchase Agreement and (y) any other securities that would cause a breach or default under the Convertible Notes. After the registration of our Class A Common Stock becomes effective under the Securities Exchange Act of 1934 and for as long as any Convertible Notes remain outstanding, we will not, subject to certain exceptions provided in the Securities Purchase Agreement: (i) issue or sell common stock equivalents that allow the holder thereof to convert, exchange or exercise such common stock equivalents for shares of common stock at a conversion, exchange or exercise price which varies or may vary with changes in its market price (commonly known as “death spiral” or “toxic” converts), subject to exceptions for net share settlement and stock option plan transactions. After giving effect to the Yenura Exchange Agreement and the mergers of WIN into WorldSpace Maryland and WorldSpace Maryland into us, we may not lower the price at which any common stock equivalents outstanding on December 31, 2004 are exercisable or exchangeable for or convertible into shares of Class A Common Stock or Class B Common Stock.

We have agreed not to issue any additional shares of Class B Common Stock or Class B Common Stock equivalents without the consent of the New Investors.

Voting Rights. If we have not paid cash interest on the Convertible Notes on six consecutive interest dates and our qualifying initial public offering (IPO) has not occurred, the holders of the Convertible Notes will be entitled to elect not less than two additional directors to our board of directors.

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Capital Stock. Prior to our IPO, we may not amend any voting powers, designations, preferences, rights or qualifications, limitations or restrictions of any of our capital stock without the prior written consent of the New Investors.

Listing. After our IPO, we must secure and maintain the listing of all shares underlying the Convertible Notes (Conversion Shares) on the NASDAQ National Market (and on each other national securities exchange and automated quotation system on which our Class A Common Stock is then listed).

Convertible notes

As noted above, on December 30, 2004 we issued Convertible Notes due December 31, 2014 in an aggregate principal amount of $155 million. The principal terms of the Convertible Notes are as follows:

Ranking. Prior to our Qualifying IPO (as described below) the Convertible Notes will not be subordinate to any Indebtedness (as defined in the Convertible notes) and all payments will be senior to other debt of the company, other certain permitted pari passu indebtedness and royalty payments, any Scale Down Fees and foreclosure. Following our Qualifying IPO, the Convertible Notes may be expressly made subordinate and junior in right of payment to indebtedness payment incurred after the Qualifying IPO.

Optional Repurchase. The holders may require us to repurchase all or any portion of the Convertible Notes on the third anniversary of the issuance date at a price equal to 100% of the principal amount of the Convertible Notes plus any accrued and unpaid interest in cash.

Interest. Interest will accrue at a rate of 5% per annum and be payable quarterly in arrears. The interest rate will increase if new pari passu debt with a higher rate of interest is issued (in which event the rate on the Convertible Notes will increase to the rate of the new debt). Further, unless the interest rate has already been increased due the issuance of pari passu indebtedness at a higher rate of interest, the interest rate will increase by 100 basis points if the registration statement for our Qualifying IPO is not declared effective before December 31, 2005. If we have not completed our Qualifying IPO within two years of the issuance of the Convertible Notes, the interest rate will be the greater of the interest rate then in effect or 10% per annum.

Upon an event of default, the interest rate will be the greater of the interest rate then in effect or 15% per annum. If interest on the Convertible Notes is not paid in full on any interest payment date, the principal amount of the Convertible Notes will be increased for subsequent interest accrual periods by an amount that reflects the accretion of the unpaid interest at an annual rate equal to the interest rate then in effect plus 2%, calculated on a quarterly basis, from, and including, the first day of the relevant interest accrual period to, but excluding, the subsequent interest payment date.

Redemption. We may redeem the Convertible Notes on the later of (a) 18 months after the issuance date of the Convertible Notes or (b) the first anniversary of our Qualified IPO. Thereafter, subject to the satisfaction of certain Equity Conditions (as described below) we may redeem the Convertible Notes, provided that our Class A Common Stock publicly trades at a price, determined by a 20 day moving average, in excess of 150% of the IPO, at a redemption price in cash equal to 100% of the principal amount thereof plus any accrued and unpaid interest in cash upon 30 days notice; provided further that we will be obligated to pay the present value of all future interest coupons that would have accrued and been payable until the third anniversary of the issuance date of the Convertible Notes. Upon call for redemption, the holders will continue to have the right to convert the Convertible Notes into our Class A Common Stock prior to the date of redemption. The “Equity Conditions” that must be satisfied in order for the Company to redeem Convertible Notes may be summarized as follows: (a) a registration

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statement covering the remaining Conversion Shares must be effective and available for resale of such shares or all of such shares must be eligible for resale under Rule 144(k), (b) the Class A Common Stock must be listed on the New York Stock Exchange or the NASDAQ National Market (c) there shall not have occurred either (i) the public announcement of a pending, proposed or intended fundamental transaction (e.g., merger, sale of all or substantially all of WorldSpace’s assets or certain other similar events in which the Company does not survive or control of the Company changes) which has not been abandoned, terminated or consummated or (ii) a default or an event of default under the Convertible Notes and (d) the Company must otherwise be in material compliance with the terms of the Stock Purchase Agreement, Convertible Notes and Registration Rights Agreement.

After the third anniversary of the issuance date of the Convertible Notes, we may (if a Qualified IPO has been completed), subject to the satisfaction of the Equity Conditions, redeem any or all of the outstanding Convertible Notes at 100% of the principal amount thereof plus all accrued and unpaid interest.

Following a change of control, the holders of the Convertible Notes may require us to redeem the Convertible Notes at a price equal to the greatest of (i) the sum of (A) the product of (x) the amount of the Convertible Notes being redeemed (including principal and accrued but unpaid interest) and (y) the quotient determined by dividing (I) the closing sale price of the Class A Common Stock immediately following the public announcement of such proposed change of control by (II) the then applicable conversion price and (B) the present value of the remaining interest payments on the Convertible Notes through the third anniversary of their issuance, (Present Value of Interest); (ii) the sum of (A) the value of the consideration, assuming that the entire principal amount and accrued but unpaid interest being redeemed were converted into shares of Class A Common Stock at the then prevailing conversion rate, issuable per share of common stock in such change of control for the entire principal amount of the Convertible Notes and accrued but unpaid interest being redeemed and (B) the Present Value of Interest (if any), or (iii) the sum of (A) the principal amount of the Convertible Notes and accrued but unpaid interest being redeemed and (B) the Present Value of Interest (if any).

The holders have the right to require us to redeem some or all of their remaining Notes (at their principal amount, plus accrued but unpaid interest) on the third anniversary of the issuance of the Notes

Conversion. The Convertible Notes may, at the option of the holder, be converted into shares of our Class A Common Stock at any time.

The currently applicable conversion price for the Notes is $8.45. Immediately following the completion of this offering, the conversion price will be the lesser of (i) the then applicable pre-IPO conversion rate or (ii) the product of (x) 0.9 and (y) the IPO price. The conversion price will be subject to adjustment as described under “—Anti-dilution; Adjustments to Conversion Price” below.

Events of Default. Events of default under the terms of the Convertible Notes include:

failure to file (or have declared effective) on a timely basis, any registration statement required under the terms of the Registration Rights Agreement;

the suspension from trading or failure of the Class A Common Stock to be listed on an eligible securities exchange (which includes the NASDAQ National Market) for a period of five (5) consecutive days or for more than an aggregate of ten (10) days in any 365-day period;

failure to cure a conversion failure by delivery of the required number of shares of Class A Common Stock within ten (10) business days after the applicable conversion date, or certain other related conversion failures;

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failure to maintain the agreed number of shares available for conversion of the shares underlying the Convertible Notes;

failure to pay to a holder any amount of principal, interest, late charges or other amounts when and as due under the Convertible Notes;

any default under (after the expiration of all applicable grace periods), redemption of or acceleration prior to maturity of any indebtedness of us or any of our subsidiaries, which individually or in the aggregate is equal to or greater than $5 million principal amount of indebtedness;

certain bankruptcy or insolvency events;

a final judgment or judgments for the payment of money, which in the aggregate are in excess of $1 million, are rendered against us or any of our subsidiaries which are not bonded, discharged or stayed pending appeal, or are not discharged within 60 days thereof; and

a breach of any representation, warranty, covenant or agreement in the Convertible Notes, Stock Purchase Agreement or Registration Rights Agreement that would have a material adverse effect or a breach of certain specific representations of the Securities Purchase Agreement that relate to compliance with law, breach of a letter agreement between Mr. Samara and Mr. Idris or any breach of the prohibitions on the incurrence of debt set forth in the terms of the Convertible Notes.

In addition to penalty interest, we are required to allow the holders of the Convertible Notes to redeem all or a portion of their Convertible Notes following an event of default. Certain events of default require payment of a 25% premium over the redemption price.

“Qualified IPO” means a firm commitment, fully underwritten public offering in the United States of our Class A Common Stock by a nationally recognized investment banking firm at a per share price of not less than $7.50 with gross proceeds to us of not less than $100 million, with the shares of our Class A Common Stock listed on either The New York Stock Exchange or the NASDAQ National Market. If the offering contemplated by this prospectus is consummated, we will have completed a “Qualifying IPO” within the meaning of this definition.

Voting Rights. As discussed above under the description of the Securities Purchase Agreement, the holders of Convertible Notes are not entitled to any voting rights unless interest has accrued and remains unpaid in cash after six consecutive quarters and no Qualified IPO has occurred, in which case the holders, as a class, may, subject to certain conditions, elect two additional directors to our board of directors or such greater number as may be commensurate with the implied ownership interest percentage of holders of the Convertible Notes based upon the number of shares of Class A Common Stock to which they would then be entitled upon conversions.

Pass-Through Dividends. All cash dividends or distributions paid or payable on the Class A Common Stock must also be paid concurrently to holders of Convertible Notes in respect of their Conversion Shares on an as-converted basis.

Effectiveness of Form S-1 Registration. If a Form S-1 registration statement is not declared effective prior to December 31, 2005 then (a) the initial coupon rate will be increased by an additional 1% and (b) the conversion price would be reduced to $7.86 per share (subject to adjustment for stock splits and similar circumstances).

Limitations on Incurrence of Debt. We may incur up to $175 million of debt that ranks pari passu with the Convertible Notes, inclusive of the Convertible Notes (i.e., $20 million of additional pari passu debt), provided, however, that we may not issue additional pari passu debt if the amount of our Alcatel

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payables is greater than the pari passu basket (i.e., $175 million less the principal amount outstanding at any relevant time on the Convertible Notes). Prior to the consummation of a Qualified IPO, we may not incur any indebtedness that ranks senior to the Convertible Notes. Should new debt be incurred on a secured basis then the Convertible Notes shall share ratably in such security.

Anti-dilution; Adjustments to Conversion Price. The formula for adjusting the conversion rate on the conversion date and number of shares of our Class A Stock to be delivered are subject to customary anti-dilution adjustments if certain events occur. In addition, prior to the occurrence of the Qualified IPO (subject to an exception for certain securities issued to our officers, directors and employees for compensatory purposes), if any equity security is issued at a price lower than the then applicable conversion price, then the conversion price of all shares underlying the Convertible Notes will be adjusted to that lower price. Following the consummation of the Qualified IPO, the conversion price of the shares underlying the Convertible Notes will be subject to adjustment (on a weighted basis determined on the basis of the number of shares issued, the consideration received and the number of shares outstanding prior to the issuance) if any equity securities are issued at a price lower than the then current market price of a share of the Class A Common Stock.

Registration rights agreement

On December 30, 2004, and in connection with the Securities Purchase Agreement described above, we entered into a Registration Rights Agreement with the New Investors pursuant to which we agreed to provide certain registration rights to the New Investors with respect to the Convertible Notes.

Right to Demand Registration. Beginning 180 calendar days after the Offering, the New Investors will have the right to demand, at any time or from time to time, that we file up to three registration statements registering for resale all or part of the shares of Class A Common Stock issuable upon conversion of the Convertible Notes. Only Highbridge International LLC, Amphora Limited and their affiliates who hold Convertible Notes, or if none hold any securities subject to the Registration Rights Agreement, a holder or holders holding at least $40 million or more of the aggregate principal amount of Convertible Notes, may request a demand registration. We are not obligated to effect a demand registration unless the reasonably anticipated aggregate offering price to the public of all registrable securities for which registration has been requested by the New Investors, together with any shares sold by us for our account, will be at least $25 million. After a demand registration statement has been declared effective by the SEC, the New Investors may not request an additional demand registration for 90 calendar days. In the event of a demand registration, each New Investor has agreed to a 30 day lock-up of registrable securities following the effectiveness of the registration statement filed pursuant to the exercise of a demand registration right, other than sales under such registration statement.

Required Shelf Registration. Within 10 calendar days of the first anniversary of this offering, we are required to file a shelf registration statement on Form S-3 covering the resale of all registrable securities held by all New Investors. Once we have filed the shelf registration statement, the New Investors will have no right to request any further demand registrations provided that the shelf registration statement is declared effective by the SEC within 120 days of the filing.

Registration Deadlines and Default Penalties. Upon a request for a demand registration, we must file a registration statement with the SEC within 90 calendar days and have it declared effective within 180 days of such request. We must file a shelf registration statement no later than 10 calendar days after the first anniversary of our IPO and have that registration statement declared effective within 120 days from filing with the SEC.

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If a demand registration statement or the shelf registration statement is not filed with the SEC or not declared effective before the applicable deadline, which constitute a “filing failure” and an “effectiveness failure”, respectively, or if we fail to keep the registration statement effective for the applicable length of time, which constitute a “maintenance failure”, then we are obligated to pay to each of the New Investors holding registrable securities an amount in cash equal to 1% of the aggregate purchase price of such New Investor’s Notes on the date of the filing failure, the effectiveness failure or the maintenance failure, as applicable, and 2% of the aggregate purchase price of such New Investor’s Notes on every 30th day thereafter, until such failure is cured.

Blackout Periods. We are entitled to postpone a demand registration and to require the New Investors to discontinue disposition of their securities covered by the shelf registration if our board of directors determines in good faith that effecting such a registration or continuing such disposition at that time would not be advisable in light of pending or anticipated corporate developments or if we possess material, non-public information which the board of directors determines in good faith is not in our best interests to disclose at that time. We may exercise this right for two periods of up to 30 days or one period of up to 45 days in any 12 month period.

Piggyback Registration Rights. The Registration Rights Agreement provides that if we propose to allow any of our stockholders to participate in our IPO by selling a number of common shares that would likely result in aggregate gross proceeds to such stockholders in excess of $5 million, then the New Investors would be permitted to participate and sell a number of common shares in the offering that would likely result in aggregate gross proceeds to the New Investors in an amount not in excess of the amount being sold by stockholders less $5 million.

At any time at which there is not an effective registration statement in respect of the New Investors registrable securities (i.e., shares of Class A Common Stock underlying the Convertible Notes) and we propose or are required to register securities under the Securities Act, we are required to give notice to the New Investors and the New Investors will have a right to participate in the registration. This right does not apply to any registration in connection with our initial public offering or registrations on Forms S-4, S-8 or S-3 for compensatory, bonus or other similar plans, dividend reinvestment plans and stock purchase plans.

Underwritten Offerings. We have agreed to effect up to a maximum of three underwritten offerings under the Registration Rights Agreement, whether as demand registrations or sales under the shelf registration.

Expenses. We will pay all registration expenses in connection with any registration statement under the Registration Rights Agreement. Each New Investor will pay all their pro rata portion of discounts and commissions payable to underwriters, selling brokers, managers or other similar persons engaged in a distribution.

Termination. Our registration obligations under the Registration Rights Agreement will terminate upon the earlier of the date when a New Investor may sell all of our registrable securities pursuant to Rule 144(k) of the Securities Act.

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Certain relationships and related party transactions

GIFTING AGREEMENT

WorldSpace has entered into a gifting agreement with First Voice International, a nonprofit Washington, D.C. corporation recognized under the U.S. tax laws as a charitable corporation (First Voice). Under this agreement, we gifted to First Voice 5% of the capacity of the AfriStar and AsiaStar satellites for social welfare and human development use. The gifting was for the remaining life of the satellites, subject to five year reviews by WorldSpace to ensure First Voice’s performance in making social welfare contributions in the coverage area of the satellites. Additionally, we agreed to provide uplink service to the satellites on a gifted basis for at least the first two years of the gifting agreement’s term. The Company’s Chairman is also the Chairman of First Voice.

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Principal stockholders

The following table sets forth certain information regarding the beneficial ownership of our common stock immediately prior to, and as adjusted to reflect the sale of the common stock offered hereby, by:

each person known to us to own beneficially more than 5% of our common stock;

our Chairman and Chief Executive Officer and our four other most highly compensated executive officers;

each of our directors; and

all of our directors and executive officers as a group.

The beneficial ownership of our common stock set forth in the table is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by any stockholder and the percentage ownership of such stockholder, shares of common stock subject to options held by that person that are currently exercisable or exercisable within 60 days of the date hereof are deemed to have been exercised and to be outstanding. Such shares, however, are not deemed to have been exercised and to be outstanding for purposes of computing the percentage ownership of any other person.

Beneficial ownership of shares of Class A Common Stock and Class B Common Stock are shown separately; however, because shares of Class A Common Stock and shares of Class B Common Stock vote as a single class on all matters, except as otherwise required by law, with each share of Class A Common Stock and each share of Class B Common Stock entitling its holder to one vote, the percentage of beneficial ownership is calculated on the basis of the total number of shares of Class A Common Stock and Class B Common Stock outstanding. For a discussion of differences between Class A Common Stock and Class B Common Stock, see “Description of capital stock.” Accordingly, the calculation of the percentage of beneficial ownership is based on 37,138,107 shares of common stock (4,475,789 shares of Class A Common Stock and 32,662,318 shares of Class B Common Stock) outstanding on March 31, 2005. Unless otherwise indicated in the footnotes below, the persons and entities named in the table have sole voting and investment power as to all shares beneficially owned. Unless otherwise indicated below, the address of each person listed in the table is c/o WorldSpace, Inc., 2400 N Street, N.W., Washington, D.C. 20037.

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Principal stockholders


	Shares of common stock owned (1)			Percentage of total common stock Held
Name of beneficial owner	Shares of class A common stock	Shares of class B common stock	Total	Before offering	After offering
Yenura Pte. Ltd.(2)	—	27,882,308	27,882,308	75.1
Amphora Limited (3)	6,508,956	—	6,508,956	14.9
Highbridge International LLC(4)	6,508,956	—	6,508,956	14.9
Eyob Samara(5)	3,077,500	3,000,000	6,077,500	15.3
TelUS Communications(6)	—	3,000,000	3,000,000	8.1

Noah A. Samara(7)	—	45,203,081	45,203,081	91.0
Jack Kemp	25,000	—	25,000	*
James R. Laramie	2,667,500	—	2,667,500	6.7
Charles McC. Mathias	100,000	—	100,000	*
Dr. Michael Nobel	75,000	—	75,000	*
L.G. Schafran	100,000	—	100,000	*
William Schneider, Jr.	—	—	—	*
M.G. Chandrasekhar(8)	191,250	—	191,250	*
Mesfin Ayenew	180,000	—	180,000	*
Donald J. Frickel(8)	1,462,500	—	1,462,500	3.8
Andy Ras-Work	—	—	—	*
Directors and Executive Officers as a Group (12 persons)	4,801,250	45,203,081	50,004,331	91.8

Less than 1%

(1)

Unless otherwise indicated, the amounts shown as being beneficially owned by each stockholder or group listed above represent shares over which that stockholder or group holds sole voting and sole investment power.

(2)

Yenura Pte. Ltd. is a Singapore company in which all voting shares are beneficially owned by Noah A. Samara, the Chairman and Chief Executive Officer of the Company. See “Pre-offering recapitalization.” The address of Yenura Pte. Ltd. is 7 Temasek Boulevard, #21-02 Suntec Tower One, Singapore 038987.

(3)

The shares of common stock attributed to Highbridge International LLC are shares of Class A Common Stock underlying a convertible note issued to Highbridge which is exercisable within 60 days of the date of this prospectus. The address of Highbridge International LLC is c/o Highbridge Capital Management, LLC, 9 West 57^th Street, 27^th Floor, New York, New York 10019. Under the terms of the convertible notes, Highbridge International may not convert the convertible notes to the extent such conversion would cause Highbridge International, together with its affiliates, to beneficially own a number of shares of Class A Common Stock which would exceed 9.99% of our then outstanding shares of Common Stock following such conversion (excluding for purposes of such determination shares of Class A Common Stock issuable upon conversion of the convertible notes which have not been converted).

(4)

The shares of common stock attributed to Amphora Limited are shares of Class A Common Stock underlying a convertible note issued to Amphora which is exercisable within 60 days of the date of this prospectus. The address of Amphora Limited is c/o Amaranth Advisors L.L.C., One American Lane, Greenwich, CT 06831. Under the terms of the convertible notes, Amphora Limited may not convert the convertible notes to the extent such conversion would cause Amphora Limited, together with its affiliates, to beneficially own a number of shares of Class A Common Stock which would exceed 9.99% of our then outstanding shares of Common Stock following such conversion (excluding for purposes of such determination shares of Class A Common Stock issuable upon conversion of the convertible notes which have not been converted).

(5)

The shares of common stock attributed to Eyob Samara include 3,000,000 shares of Class B Common Stock held by TelUS Communications, over which he shares voting and dispositive power under certain circumstances with his brother, Noah A. Samara, the Chairman and Chief Executive Officer of the Company.

(6)

TelUS Communications is a Washington, D.C. corporation controlled by Noah A. Samara; however, in certain circumstances, Noah A. Samara and Eyob Samara share voting and dispositive power.

(7)

The shares of common stock attributed to Noah A. Samara include all of the shares of Class B Common Stock held by TelUS Communications, over which he shares voting and dispositive power under certain circumstances with Eyob Samara, and all of the shares of Class B Common Stock that are held by Yenura Pte. Ltd., over which he holds sole voting, investment and dispositive power. Also included are 11,250,000 shares of Class B Common Stock in respect of options that have been granted to Mr. Noah Samara and are exercisable within 60 days of the date of this prospectus.

(8)

The shares of common stock attributed to each of M.G. Chandrasekhar and Donald J. Frickel (all of which are shares of Class A Common Stock) represent options that have been granted to each of Mr. Chandrasekhar and Mr. Frickel which are exercisable within 60 days of the date of this prospectus.

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Description of capital stock

GENERAL

In this section, “we,” “us” and “our” refer only to WorldSpace and not its subsidiaries. The following description of the material terms of our capital stock is only a summary. You should refer to our certificate of incorporation and by-laws as in effect upon the closing of this offering, which are included as exhibits to the registration statement of which this prospectus is a part.

We are currently authorized to issue 200 million shares consisting of 100 million shares of Class A Common Stock, par value $0.01 per share, 75 million shares of Class B Common Stock, par value $0.01 per share and 25 million shares of preferred stock, par value $.01 per shares.

COMMON STOCK

As of March 31, 2005, we had 37.1 million shares of our common stock outstanding, including 4.5 million shares of our Class A Common Stock held by 40 holders of record and 32.7 million shares of our Class B Common Stock held by 3 holders of record. No shares of our preferred stock have been issued or are outstanding.

Holders of a majority of the shares of our Class A Common Stock and Class B Common Stock entitled to vote in any election of directors may elect all of the directors standing for election, subject to the rights of holders of any outstanding preferred stock. Holders of the Class A Common Stock will be entitled to receive ratably any dividends that the board of directors may declare out of funds legally available therefor, subject to any preferential dividend rights of outstanding preferred stock. Holders of the Class B Common Stock will be entitled to receive ratably (with the holders of the Class A Common Stock) dividends that the board of directors may declare out of funds legally available therefore if, and only to the extent that, the proposed distribution complies with the terms of the Royalty Agreement described above in the “Certain relationships and related party transactions” section of this prospectus. Upon our liquidation, dissolution or winding up, the holders of Class A Common Stock will be entitled to receive ratably our net assets available after the payment of all debts and other liabilities and subject to the prior rights of holders of any outstanding preferred stock. Holders of the Class B Common Stock will be entitled to receive ratably (with the holders of the Class A Common Stock) our net assets only to the extent that the distribution of the net assets complies with the requirements of the Royalty Agreement described above in the “Certain relationships and related party transactions” section of this prospectus. Holders of our Class A Common Stock and Class B Common Stock have no preemptive, subscription, redemption or conversion rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of our capital stock are fully paid and nonassessable, and the shares of Class A Common Stock to be issued on completion of this offering will be fully paid and nonassessable.

All of the issued and outstanding Class B Common Stock is owned by Noah A. Samara and two entities affiliated with Noah A. Samara (Yenura Pte. Ltd. and TelUS Communications). Under the terms of our Certificate of Incorporation, all of the shares of the Class B Common Stock will automatically become shares of Class A Common Stock on the earlier of: (i) July 1, 2016; or (ii) the date the final royalty payment is made under the terms of the Royalty Agreement.

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Description of capital stock

PREFERRED STOCK

Our certificate of incorporation authorizes our board of directors, subject to limitations prescribed by law, to establish one or more series or preferred stock and to determine, with respect to any series of preferred stock, the terms and rights of that series, including:

the designation of the series;

the number of shares of the series, which our board of directors may, except where otherwise provided in the preferred stock designation, increase and decrease, but not below the number of shares then outstanding;

whether dividends, if any, will be cumulative or non-cumulative and the dividend rate of the series;

the dates at which dividends, if any, will be payable;

the redemption rights and price or prices, if any, for shares of the series;

the terms and amounts of any sinking fund provided for the purchase or redemption of shares of the series;

the amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding-up of our affairs;

whether the shares of the series will be convertible into shares of any other class or series, or any other security, of our company or any other corporation, and, if so, the specification of the other class or series or other security, the conversion price or prices or rate or rates, any rate adjustments, the date or dates as of which the shares will be convertible and all other terms and conditions upon which the conversion may be made;

restrictions on the issuance of shares of the same series or of any other class or series; and

the voting rights, if any, of the holders of the series.

The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisition and other corporate purposes, could have the effect of making it more difficult for a third-party to acquire, or discourage a third-party from acquiring, a majority of our outstanding voting stock.

Our board of directors may issue preferred stock with voting and conversion rights that could adversely affect the voting power of the holders of our common stock. There are no current agreements or understandings for the issuance of preferred stock, and our board of directors has no present intention to issue any shares of preferred stock.

REGISTRATION RIGHTS

In December 2004, we and certain holders of our Convertible Notes (Noteholders) entered into a registration rights agreement pursuant to which we granted to the holders of the Convertible Notes certain registration rights. The Noteholders party to the registration rights agreement have the right to require us, subject to certain terms and conditions, to register their shares of our common stock under the Securities Act at any time.

The stockholders will collectively have an aggregate of three demand registration rights following the offering. In addition, if the shelf registration is not the offering and if we propose to register any of our capital stock under the Securities Act, the Noteholders will be entitled to customary “piggyback” registration rights. The registration rights granted under the registration rights agreement are subject to

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Description of capital stock

customary exceptions and qualifications and compliance with certain registration procedures. As of the date of this offering, we may be required to register up to shares of Class A Common Stock under the registration rights agreement.

For more information, see “Certain relationships and related party transactions” and the registration rights agreement, which is filed as an exhibit to the registration statement of which this prospectus is a part.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

Delaware law authorizes corporations to limit or eliminate the personal liability of officers and directors to corporations and their shareholders for monetary damages for breach of officers’ and directors’ fiduciary duties of care. The duty of care requires that, when acting on behalf of the corporation, officers and directors must exercise an informed business judgment based on all material information reasonably available to them.

Our certificate of incorporation and by-laws provide that we must indemnify our directors and officers to the fullest extent authorized by Delaware law. We will also be expressly authorized to carry directors’ and officers’ insurance providing indemnification for our directors, officers and employees for some liabilities. We believe that the limitation of liability provisions in our certificate of incorporation and insurance are useful to attract and retain qualified directors and executive officers.

At present we are not aware of any pending litigation or proceeding involving any director, officer, employee or agent of our company in the person’s capacity with our company where indemnification will be required or permitted. We are also not aware of any threatened litigation or proceeding that might result in a claim for indemnification.

ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE OF INCORPORATION AND BYLAWS

Our certificate of incorporation and by-laws contain provisions that may have anti-takeover effects. Provisions of Delaware law may have similar effects.

Classified board

Our certificate of incorporation provides that our board of directors will be divided into three classes of directors, with the classes as nearly equal in number as possible. As a result, approximately one-third of our board of directors will be elected each year. The classification of directors will have the effect of making it more difficult for stockholders to change the composition of our board of directors. Our certificate of incorporation provides that the number of directors will be fixed in the manner provided by a resolution adopted by a majority of the board of directors. Our certificate of incorporation and by-laws provide that the number of directors will be fixed from time to time solely pursuant to a resolution adopted by the board of directors. Upon completion of this offering our board of directors will have seven members.

Removal of directors; Vacancies

Under Delaware law, unless otherwise provided in our certificate of incorporation, directors serving on a classified board of directors may be removed by the stockholders only for cause. Our certificate of incorporation and by-laws provide that directors may be removed only for cause upon the affirmative vote of holders of a majority of the voting power of all the then outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class.

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Description of capital stock

Our by-laws provide that any vacancy created by removal of a director shall be filled by a majority of the remaining members of the board of directors even though such majority may be less than a quorum.

No cumulative voting

Delaware law provides that stockholders are not entitled to the right to cumulative votes in the election of directors unless our certificate of incorporation provides otherwise. Our certificate of incorporation does not expressly provide for cumulative voting.

No stockholder action by written consent; Calling of special meetings of stockholders

Our certificate of incorporation prohibits stockholder action by written consent effective upon our becoming subject to the Securities Exchange Act of 1934, as amended. It also provides that special meetings of our stockholders may be called only by the board of directors, the Chief Executive Officer or the chairman of the board of directors.

Advance notice requirements for stockholder proposals and director nominations

Our by-laws provides that stockholders seeking to nominate candidates for election as directors or to bring business before an annual meeting of stockholders must provide timely notice of their proposal in writing to the corporate secretary.

Generally, to be timely, a stockholder’s notice must be received at our principal executive offices not less than 90 nor more than 120 days prior to the first anniversary of the previous year’s annual meeting. Our by-laws also specify requirements as to the form and content of a stockholder’s notice. These provisions may impede stockholders’ ability to bring matters before an annual meeting of stockholders or make nominations for directors at an annual meeting of stockholders.

Amendment provisions

Our certificate of incorporation will grant our board of directors the authority to amend and repeal our by-laws without a meeting of stockholders in any manner not inconsistent with the laws of the State of Delaware or our certificate of incorporation.

DELAWARE ANTI-TAKEOVER STATUTE

We are a Delaware corporation and are subject to section 203 of the Delaware General Corporation Law. In general, section 203 prevents an “interested stockholder” (defined generally as a person owning 15% or more of our outstanding voting stock) from engaging in a merger, acquisition or other “business combination” (as defined in section 203) with us for three years following the time that person becomes an interested stockholder unless:

before that person became an interested stockholder, our board of directors approved the transaction in which the interested stockholder became an interested stockholder or approved the business combination;

upon completion of the transaction that resulted in the interested stockholder becoming an interested stockholder, the interested stockholder owns at least 85% of the voting stock outstanding at the time the transaction commenced (excluding stock held by our directors who are also officers and by employee stock plans that do not provide employees with the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer); or

following the transaction in which that person became an interested stockholder, the business combination is approved by our board of directors and authorized at a meeting of stockholders by the affirmative vote of the holders of at least two-thirds of the outstanding voting stock not owned by the interested stockholder.

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Description of capital stock

Generally, a “business combination” for these purposes includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An “interested stockholder” for these purposes is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting securities. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. We also anticipate that Section 203 may discourage attempts that might result in a premium over the market price for the shares of common stock held by stockholders.

Authorized but unissued capital stock

Delaware law does not require stockholder approval for any issuance of authorized shares. However, the listing requirements of the NASDAQ National Market, which would apply so long as our Class A Common Stock is listed on the NASDAQ National Market, require stockholder approval of certain issuances equal to or in excess of 20% of the voting power or the number of shares of Class A Common Stock and Class B Common Stock. These additional shares may be used for a variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate acquisitions.

One of the effects of the existence of unissued and unreserved common stock or preferred stock may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of our company by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive the stockholders of opportunities to sell their shares of common stock at prices higher than prevailing market prices.

LISTING

Our Class A Common Stock has been approved for quotation on the NASDAQ National Market under the trading symbol “WINR.”

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our Class A Common Stock is .

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Shares eligible for future sale

Prior to this offering, there has not been a public market for our common stock. Future sales of substantial amounts of our common stock in the public market, or the possibility of these sales, could adversely affect the trading price of the Class A Common Stock and could impair our future ability to raise capital through the sale of our equity at a time and price we deem appropriate.

Upon completion of this offering, we will have outstanding shares of Class A Common Stock. Of these shares, the shares sold in this offering and additional shares of Class A Common Stock will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by our “affiliates,” as defined in Rule 144 under the Securities Act, which would be subject to the limitations and restrictions described below.

of the remaining shares of Class A Common Stock outstanding upon completion of this offering will be “restricted securities” as defined in Rule 144.

In addition, we will have issued and outstanding 3.7 million shares of our Class B Common Stock. The Class B Common Stock will not be registered under Section 12 of the Exchange Act or listed for trading on the NASDAQ National Market or any other stock exchange. However, all of the Class B Common Stock will automatically become shares of Class A Common Stock after the payment of the final royalty payment due under the terms of the Royalty Agreement for the year ending December 31, 2015 or at such earlier time if and as the Company and Stonehouse amend the Royalty Agreement to eliminate the restrictions on “Distributions” contained in the Royalty Agreement.

There are also options granted on the Company’s Class A Common Stock and Class B Common Stock. As of the date hereof options to acquire 16.6 million shares of Class A Common Stock and 12.5 million Class B Common Stock are exercisable within the next 60 days.

As of the date of this prospectus, the Convertible Notes may be immediately converted into an aggregate of approximately 18.3 million shares of our Class A Common Stock. All of these shares would be restricted securities for purposes of the Securities Act. The holders of the Convertible Notes have certain registration rights with respect to the shares of Class A Common Stock underlying their Convertible Notes. Specifically, beginning 180 calendar days following completion of the Offering, certain holders of the Convertible Notes may initiate up to three demand registrations of their conversions shares. In addition, we have agreed to file a shelf registration statement on Form S-3 in respect of any unsold conversion shares one year after the completion of our initial public offering. The registration rights agreement with the holders of the Convertible Notes also provides for certain “piggyback” registration rights, allowing the holders of the Convertible Notes to register their shares on registration statements filed by the Company on behalf of other investors. The terms and conditions of the registration rights agreement are discussed in more detail in the “Certain relationships and related party transactions” section of this prospectus.

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Shares eligible for future sale

Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144 and 144(k) promulgated under the Securities Act, which rules are summarized below. Subject to the lock-up agreements described below and the provisions of Rules 144 and 144(k), additional shares of Class A Common Stock will be available for sale in the public market as follows:


Number of Shares		Date
		After the date of this prospectus.
		After 180 days from the date of this prospectus.

All of these restricted securities will be eligible for sale in the public market, subject in some cases to the volume limitations and other restrictions of Rule 144, beginning upon expiration of the lock-up agreements described below.

RULE 144

In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person (or persons whose shares are required to be aggregated), including an affiliate, who has beneficially owned shares of our common stock for at least one year is entitled to sell in any three-month period a number of shares that does not exceed the greater of:

1% of then-outstanding shares of our common stock, which is approximately shares of our common stock immediately after the completion of this offering; or

the average weekly reported trading volume of our common stock on the NASDAQ National Market during the four calendar weeks preceding the filing of a Form 144 with respect to the sale, subject to certain restrictions.

Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us.

RULE 144(k)

In addition, a person who is not deemed to have been an affiliate of ours at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years, would be entitled to sell those shares under Rule 144(k) without regard to the manner of sale, public information, volume limitation or notice requirements of Rule 144.

LOCK-UP AGREEMENTS

We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the SEC a registration statement under the Securities Act relating to any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of UBS Securities LLC for a period of 180 days after the date of this prospectus.

Our officers, directors and all of our stockholders have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock (other than

123

Shares eligible for future sale

shares they may sell in this offering) or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of UBS Securities LLC until 180 days after the date of this prospectus. UBS Securities LLC may, in its sole discretion at any time without notice, release all or any portion of the shares of our common stock subject to these lock-up agreements.

124

Certain material U.S. income tax consequences to non-U.S. holders

The following summary describes material United States federal income tax consequences of the ownership and disposition of common stock by a Non-U.S. Holder (as defined below) as of the date of this prospectus. This discussion does not address all aspects of United States federal income taxation and does not deal with estate, gift, foreign, state and local tax consequences that may be relevant to such Non-U.S. Holders in light of their personal circumstances. Special U.S. tax rules may apply to certain Non-U.S. Holders, such as “controlled foreign corporations,” “passive foreign investment companies,” corporations that accumulate earnings to avoid U.S. federal income tax, investors in partnerships or other pass-through entities for U.S. federal income tax purposes, dealers in securities, holders of securities held as part of a “straddle,” “hedge,” “conversion transaction” or other risk reduction transaction, and certain former citizens or long-term residents of the United States that are subject to special treatment under the Internal Revenue Code of 1986, as amended, or the Code. Such entities and persons should consult their own tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them. Furthermore, the discussion below is based upon the provisions of the Code, and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified with or without retroactive effect so as to result in United States federal income tax consequences different from those discussed below.

If a partnership (or an entity treated as a partnership for U.S. federal income tax purposes) holds the common stock, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Persons who are partners in partnerships holding the common stock should consult their tax advisors.

The authorities on which this summary is based are subject to various interpretations, and any views expressed within this summary are not binding on the Internal Revenue Service (which we also refer to as the IRS) or the courts. No assurance can be given that the IRS or the courts will agree with the tax consequences described in this prospectus.

As used herein, a “Non-U.S. Holder” means a beneficial owner of our common stock that is not any of the following for U.S. federal income tax purposes:

a citizen or resident of the United States;

a corporation, or other entity treated as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

an estate the income of which is subject to United States federal income taxation regardless of its source; or

a trust (i) which is subject to primary supervision by a court situated within the United States and as to which one or more United States persons have the authority to control all substantial decisions of the trust, or (ii) that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person.

A “Non-U.S. Holder” does not include a non-resident alien individual who is present in the United States for 183 days or more in the taxable year of disposition and who is not otherwise a resident of the United States for U.S. federal income tax purposes. Such an individual (who, under current law, is subject to a

125

Certain material U.S. income tax consequences to non-U.S. holders

30% tax imposed on the gain derived from the sale or exchange of common stock) is urged to consult his or her own tax advisor regarding the U.S. federal income tax consequences of the sale, exchange or other disposition of common stock.

Prospective purchasers are urged to consult their own tax advisors regarding the U.S. federal income tax consequences, as well as other U.S. federal, state, and local income and estate tax consequences, and non-U.S. tax consequences, to them of acquiring, owning, and disposing of our common stock.

DIVIDENDS

If we make distributions on our common stock, such distributions paid to a Non-U.S. Holder will generally constitute dividends for U.S. federal income tax purposes to the extent such distributions are paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings and profits, the excess will be treated as a tax-free return of the Non-U.S. Holder’s investment to the extent of the Non-U.S. Holder’s adjusted tax basis in our common stock. Any remaining excess will be treated as capital gain.

Dividends paid to a Non-U.S. Holder generally will be subject to withholding of United States federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. A Non-U.S. Holder of common stock who wishes to claim the benefit of an applicable treaty rate for dividends will be required to (a) complete IRS Form W-8BEN (or appropriate substitute form) and certify, under penalty of perjury, that such holder is not a U.S. person and is eligible for the benefits with respect to dividends allowed by such treaty or (b) hold common stock through certain foreign intermediaries and satisfy the certification requirements for treaty benefits of applicable Treasury regulations. Special certification requirements apply to certain Non-U.S. Holders that are “pass-through” entities for U.S. federal income tax purposes. A Non-U.S. Holder eligible for a reduced rate of United States withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.

This United States withholding tax generally will not apply to dividends that are effectively connected with the conduct of a trade or business by the Non-U.S. Holder within the United States, and, if a treaty applies, attributable to a United States permanent establishment or fixed base of the Non-U.S. Holder. Dividends effectively connected with the conduct of a trade or business, as well as those attributable to a United States permanent establishment or fixed base of the Non-U.S. Holder under an applicable treaty, are subject to United States federal income tax generally in the same manner as if the Non-U.S. Holder were a U.S. person, as defined under the Code. Certain IRS certification and disclosure requirements must be complied with in order for effectively connected income to be exempt from withholding. Any such effectively connected dividends received by a Non-U.S. Holder that is a foreign corporation may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.

GAIN ON DISPOSITION OF COMMON STOCK

A Non-U.S. Holder generally will not be subject to United States federal income tax (or any withholding thereof) with respect to gain recognized on a sale or other disposition of common stock unless:

the gain is effectively connected with a trade or business of the Non-U.S. Holder in the United States and, where a tax treaty applies, is attributable to a United States permanent establishment or fixed base of the Non-U.S. Holder; or

126

Certain material U.S. income tax consequences to non-U.S. holders

we are or have been a “U.S. real property holding corporation” within the meaning of Section 897(c)(2) of the Code, also referred to as a USRPHC, for United States federal income tax purposes at any time within the five-year period preceding the disposition (or, if shorter, the Non-U.S. Holder’s holding period for the common stock).

Gain recognized on the sale or other disposition of common stock and effectively connected with a United States trade or business, or attributable to a United States permanent establishment or fixed base of the Non-U.S. Holder under an applicable treaty, is subject to United States federal income tax on a net income basis generally in the same manner as if the Non-U.S. Holder were a U.S. person, as defined under the Code. Any such effectively connected gain from the sale or disposition of common stock received by a Non-U.S. Holder that is a foreign corporation may, under certain circumstances, also be subject to an additional “branch profits tax” at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.

We believe that we currently are not a USRPHC. In addition, based on these financial statements and current expectations regarding the value and nature of our assets and other relevant data, we do not anticipate becoming a USRPHC.

If we become a USRPHC, a Non-U.S. Holder nevertheless will not be subject to United States federal income tax if our common stock is regularly traded on an established securities market, within the meaning of applicable Treasury regulations, and the Non-U.S. Holder holds no more than 5% of our outstanding common stock, directly or indirectly, during the five-year testing period identified in the second bullet point immediately above. We expect that our common stock will be quoted on the NASDAQ National Market and may be regularly traded on an established securities market in the United States so long as it is so quoted.

INFORMATION REPORTING AND BACKUP WITHHOLDING

We must report annually to the IRS and to each Non-U.S. Holder the amount of dividends paid to such holder and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the Non-U.S. Holder resides under the provisions of an applicable income tax treaty.

The United States imposes a backup withholding tax on dividends and certain other types of payments to United States persons (currently at a rate of 28%) of the gross amount. Dividends paid to a Non-U.S. Holder will not be subject to backup withholding if proper certification of foreign status (usually on an IRS Form W-8BEN) is provided, and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person, or the holder is a corporation or one of several types of entities and organizations that qualify for exemption, also referred to as an exempt recipient.

Information reporting and backup withholding generally are not required with respect to the amount of any proceeds from the sale or other disposition of shares of common stock by a Non-U.S. Holder outside the United States through a foreign office of a foreign broker that does not have certain specified connections to the United States. However, if a Non-U.S. Holder sells or otherwise disposes of shares of common stock through the U.S. office of a United States or foreign broker, the broker will be required to report the amount of proceeds paid to such holder to the IRS and to apply the backup withholding tax (currently at a rate of 28%) to the amount of such proceeds unless appropriate certification (usually on an IRS Form W-8BEN) is provided to the broker of the holder’s status as either an exempt recipient or a

127

Certain material U.S. income tax consequences to non-U.S. holders

non-U.S. person, and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person. Information reporting also applies if a Non-U.S. Holder sells or otherwise disposes of its shares of common stock through the foreign office of a broker deriving more than a specified percentage of its income from United States sources or having certain other connections to the United States and the foreign broker does not have certain documentary evidence in its files of the Non-U.S. Holder’s foreign status.

Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against such holder’s U.S. federal income tax liability provided the required information is timely furnished to the IRS.

128

Underwriting

We are offering the shares of our Class A Common Stock described in this prospectus through the underwriters named below. UBS Securities LLC is the representative of the underwriters. UBS Securities LLC is the sole book-running manager of this offering. We have entered into an underwriting agreement with the representative. Subject to the terms and conditions of the underwriting agreement, each underwriter has severally agreed to purchase the number of shares of Class A Common Stock listed next to its name in the following table.


Underwriters		Number of Shares
UBS Securities LLC

Total

The underwriting agreement provides that the underwriters must buy all of the shares if they buy any of them. However, the underwriters are not required to take or pay for the shares covered by the underwriters’ over-allotment option described below.

Our Class A Common Stock is offered subject to a number of conditions, including:

receipt and acceptance of our Class A Common Stock by the underwriters; and

the underwriters’ right to reject orders in whole or in part.

We have been advised by the representative that the underwriters intend to make a market in our Class A Common Stock, but that they are not obligated to do so and may discontinue making a market at any time without notice.

In connection with this offering, certain of the underwriters or securities dealers may distribute prospectuses electronically.

OVER-ALLOTMENT OPTION

We have granted to the underwriters an option to purchase up to an aggregate of additional shares of our Class A Common Stock. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with this offering. The underwriters have 30 days from the date of this prospectus to exercise this option. If the underwriters exercise this option, they will each purchase additional shares in proportion to the amounts specified in the table above.

COMMISSIONS AND DISCOUNTS

Shares sold by the underwriters to the public will initially be offered at the initial offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $ per share from the initial public offering price. Any of these securities dealers may resell any shares purchased from the underwriters to other brokers or dealers at a discount of up to $ per share from the initial public offering price. If all the shares are not sold at the initial public offering price, the representative may change the offering price and the other selling terms. Sales of shares made outside of the United States may be made by affiliates of the underwriters. Upon execution of the underwriting agreement, the underwriters will be obligated to purchase the shares at the prices and upon

129

Underwriting

the terms stated therein, and, as a result, will thereafter bear any risk associated with changing the offering price to the public or other selling terms. The representative of the underwriters has informed us that it does not expect sales to accounts over which such representative exercises discretionary authority to exceed 5% of the shares of Class A Common Stock to be offered.

The following table shows the per share and total underwriting discounts and commissions we will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase up to an additional shares.

We estimate that the total expenses of this offering payable by us, not including the underwriting discounts and commissions, will be approximately $ million.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act. If we are unable to provide this indemnification, we have agreed to contribute to payments the underwriters may be required to make in respect of those liabilities.

NO SALES OF SIMILAR SECURITIES

We, our executive officers and directors and all of our existing shareholders have entered into lock-up agreements with the underwriters. Under these agreements, we and each of these persons may not, without the prior written approval of UBS Securities LLC, offer, sell, contract or agree to sell, hypothecate, hedge, pledge, grant any option to purchase or otherwise dispose of, directly or indirectly, any of our common stock or securities convertible into or exchangeable for our common stock, or warrants or other rights to purchase our common stock. These restrictions will be in effect for a period of 180 days after the date of this prospectus. At any time and without public notice, UBS Securities LLC may in its sole discretion, release all or some of the securities from these lock-up agreements. The lock-up period may be extended for up to 37 additional days under certain circumstances where we release, or pre-announce a release of, our earnings or material news or a material event shortly before or after termination of the 180-day period.

NASDAQ NATIONAL MARKET QUOTATION

We have applied to have our Class A Common Stock approved for quotation on The NASDAQ National Market under the trading symbol “WINR.”

PRICE STABILIZATION, SHORT POSITIONS

In connection with this offering, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of our Class A Common Stock including:

stabilizing transactions;

short sales;

purchases to cover positions created by short sales;

imposition of penalty bids; and

syndicate covering transactions.

130

Underwriting

Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of our Class A Common Stock while this offering is in progress. These transactions may also include making short sales of our Class A Common Stock, which involves the sale by the underwriters of a greater number of shares of Class A Common Stock than they are required to purchase in this offering and purchasing Class A Common Stock in the open market to cover positions created by short sales. Short sales may be “covered short sales,” which are short positions in an amount not greater than the underwriters’ over-allotment option referred to above, or may be “naked short sales,” which are short positions in excess of that amount.

The underwriters may close out any covered short position by either exercising their over-allotment option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option.

Naked short sales are in excess of the over-allotment option. The underwriters must close out any naked short position, by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the Class A Common Stock in the open market that could adversely affect investors who purchased in this offering.

The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representative has repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions.

As a result of these activities, the price of our Class A Common Stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued by the underwriters at any time. The underwriters may carry out these transactions on the NASDAQ National Market, in the over-the-counter market or otherwise.

DETERMINATION OF OFFERING PRICE

Prior to this offering, there has been no public market for our Class A Common Stock. The initial public offering price of our Class A Common Stock will be determined by negotiation by us and the representative of the underwriters. The principal factors to be considered in determining the initial public offering price include:

the information set forth in this prospectus and otherwise available to the representative;

our history and prospects, and the history of and prospects for the industry in which we compete;

our past and present financial performance and an assessment of our management;

our prospects for future earnings and the present state of our development;

the general condition of the securities markets at the time of this offering;

the recent market prices of, and demand for, public traded common stock of generally comparable companies; and

other factors deemed relevant by the underwriters and us.

131

Underwriting

DIRECTED SHARE PROGRAM

At our request, certain of the underwriters have reserved up to 5% of the Class A Common Stock being offered by this prospectus for sale to our directors, officers, employees, strategic partners and other individuals associated with us and members of their families at the initial offering price. The sales will be made by UBS Securities LLC through a directed share program. We do not know if these persons will choose to purchase all or any portion of these reserved shares, but any purchases they do make will reduce the number of shares available to the general public. These persons must commit to purchase no later than the close of business on the day following the date of this prospectus. Any employees, strategic partners or other persons purchasing such reserved shares will be prohibited from disposing of or hedging such shares for a period of at least 180 days after the date of this prospectus.

AFFILIATIONS

Certain of the underwriters and their affiliates have in the past and may in the future provide from time to time certain commercial banking, financial advisory, investment banking and other services for us in the ordinary course of their business for which they will be entitled to receive separate fees. UBS Securities LLC arranged the private placement of the Convertible Notes in December 2004, for which it received customary fees. In connection with the restructuring of debt we owed to Yenura and Stonehouse, a consultant currently affiliated with UBS received cash compensation and warrants exercisable for shares of our Class A Common Stock in exchange for providing financial advisory services to us (See Note K to our consolidated financial statements contained elsewhere in this prospectus). At the time we entered into our arrangement with this consultant, the consultant was not a UBS affiliate and this arrangement is no longer in place.

132

Legal matters

The validity of the Class A Common Stock offered hereby will be passed upon for us by Coudert Brothers LLP, New York, New York. Certain legal matters in connection with the offering will be passed upon for the underwriters by Milbank, Tweed, Hadley & McCloy LLP, New York, New York.

Experts

The consolidated financial statements of WorldSpace, Inc. as of December 31, 2004 and 2003 and for each of the three years ended December 31, 2004, 2003 and 2002 included in this prospectus have been audited by Grant Thornton LLP, independent registered public accountants, as set forth in its report thereon appearing elsewhere herein, and which have been included herein in reliance on said report of such firm given on its authority as experts in auditing and accounting.

Where you can find additional information

We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act of 1933, as amended, with respect to the Class A Common Stock we are offering. This prospectus, which constitutes part of the registration statement filed with the Commission, does not include all of the information included in the registration statement and the exhibits and schedules thereto. For further information with respect to us and our common stock, you should refer to the registration statement and to the exhibits and schedules thereto.

You may inspect a copy of the registration statement and the exhibits and schedules to the registration statement without charge at the public reference room of the Commission, which is located at Judiciary Plaza, 450 Fifth Street, N.W. Washington, D.C. 20549. You may obtain copies of all or any part of the registration statement from the public reference room, upon the payment of the prescribed fees. You may obtain information on the operation of the public reference room by calling the Commission at 1-800-SEC-0330. The Commission maintains a web site at www.sec.gov that contains reports, proxy and information statements and other information regarding registrants like us that file electronically with the Commission. You can inspect the registration statement on this website.

Upon completion of this offering, we will be subject to the information requirements of the Securities Exchange Act of 1934, as amended, and, in accordance therewith, we will file annual, quarterly and current reports, proxy statements and other information with the Commission.

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Index to consolidated financial statements


Report of Independent Registered Public Accounting Firm		F-2

Consolidated Financial Statements

Consolidated Balance Sheets		F-3

Consolidated Statements of Operations		F-4

Consolidated Statements of Changes in Shareholders’ Deficit and Comprehensive Loss		F-5

Consolidated Statements of Cash Flows		F-6

Notes to Consolidated Financial Statements		F-7

Schedule II—Valuation and Qualifying Accounts		F-25

F-1

Report of Independent Registered Public Accounting Firm

Board of Directors

WorldSpace, Inc.

We have audited the accompanying consolidated balance sheets of WorldSpace, Inc. (the Company), as of December 31, 2004 and 2003, and the related consolidated statements of operations, changes in shareholders’ deficit and comprehensive loss, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of WorldSpace, Inc., as of December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedule II is presented for purposes of additional analysis and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/s/ GRANT THORNTON LLP

Vienna, Virginia

March 31, 2005

F-2

Consolidated Balance Sheets


December 31,	2004			2003
	(in thousands, except share information)
*Assets*
Current Assets
Cash and cash equivalents	$	154,362		$	1,740
Accounts receivable, net		1,738			4,175
Prepaid expenses		2,240			3,130
Inventory, net		1,154			1,376
Other current assets		1,190			934

Total Current Assets		160,684			11,355
Restricted Cash and Investments		1,775			3,819
Property and Equipment, net		11,431			11,696
Satellites and Related Systems, net		459,426			520,539
Deferred Financing Costs, net		14,724			22,654
Investments in Affiliates and Other Assets		1,047			1,982

Total Assets	$	649,087		$	572,045

*Liabilities and Shareholders’ Deficit*
Current Liabilities
Accounts payable	$	54,496		$	37,255
Accrued expenses		14,380			13,933
Income taxes payable		20,000			—
Accrued purchase commitment		13,258			13,105
Current maturities of long-term debt, net of discount		—			1,411,723
Short-term note payable		—			7,157
Related-party working capital notes and advances		—			93,560
Accrued interest		10,801			361,913
Deferred tax liability		1,403			—

Total Current Liabilities		114,338			1,938,646
Long-term Debt		155,000			56,098
Accrued Interest		—			28,672
Deferred Tax Liability		245,869			—
Other Liabilities		9,111			9,139
Contingent Royalty Obligation		1,814,175			—

Total Liabilities		2,338,493			2,032,555

Commitments and Contingencies		—			—
Shareholders’ Deficit
Preferred Stock, $.01 par value; 25,000,000 shares authorized; no shares issued and outstanding as of December 31, 2004 and 2003		—			—
Class A Common stock, $.01 par value; 100,000,000 shares authorized; 4,475,789 and 9,255,789 shares issued and outstanding as of December 31, 2004 and 2003		45			93
Class B Common stock, $.01 par value; 75,000,000 shares authorized; 32,662,318 shares and no shares issued and outstanding as of December 31, 2004 and 2003		326			—
Additional paid-in capital		425,108			80,995
Deferred compensation		(1,085	)		(4,593	)
Accumulated other comprehensive loss		(354	)		(946	)
Accumulated deficit		(2,113,446	)		(1,536,059	)

Total Shareholders’ Deficit		(1,689,406	)		(1,460,510	)

Total Liabilities and Shareholders’ Deficit	$	649,087		$	572,045

F-3

Consolidated Statements of Operations


Years ended December 31, 2004, 2003 and 2002
	2004			2003			2002
	(in thousands, except per share information)
Revenue	$	8,581		$	13,074		$	9,589
Cost of revenue		14,677			22,941			21,454

Gross Loss		(6,096	)		(9,867	)		(11,865	)
Operating Expenses
Research and development		—			64			902
Selling, general and administrative		32,765			33,425			35,855
Stock-based compensation		90,323			3,528			3,981
Depreciation and amortization		61,183			60,909			61,354

Total Operating Expenses		184,271			97,926			102,092

Operating Loss		(190,367	)		(107,793	)		(113,957	)
Other Income (Expense)
Interest income		431			542			337
Interest expense		(119,302	)		(108,371	)		(114,349	)
Other		(877	)		(2,089	)		(2,890	)

Total Other Expense		(119,748	)		(109,918	)		(116,902	)

Loss Before Income Taxes and Cumulative Effect
of Accounting Change		(310,115	)		(217,711	)		(230,859	)
Income Tax Provision		(267,272	)		—			—

Loss before Cumulative Effect of Accounting Change		(577,387	)		(217,711	)		(230,859	)
Cumulative Effect of Accounting Change
Impairment of goodwill		—			—			(44,255	)

Net Loss	$	(577,387	)	$	(217,711	)	$	(275,114	)

Loss per share—basic and diluted
Loss per share before accounting change	$	(61.87	)	$	(23.52	)	$	(24.94	)
Cumulative effect per share of a change in accounting principle		—			—			(4.78	)

Net Loss per Share	$	(61.87	)	$	(23.52	)	$	(29.72	)

Weighted Average Number of Shares Outstanding		9,332,179			9,255,789			9,255,789

F-4

Consolidated Statements of Changes in Shareholders’ Deficit and Comprehensive Loss

Years ended December 31, 2004, 2003 and 2002


	Class A Common Stock					Class B Common Stock			Additional Paid-in Capital			Deferred Compensation			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total			Comprehensive Loss
	Shares		Amount			Shares	Amount		Additional Paid-in Capital			Deferred Compensation						Accumulated Deficit			Total			Comprehensive Loss
	(in thousands, except for share information)
Balance, December 31, 2001	9,255,789		$	93		—	$	—	$	84,264		$	(15,371	)	$	(2,254	)	$	(1,043,234	)		$(976,502	)
Employee stock-based compensation	—			—		—		—		(2,975	)		6,956			—			—			3,981		—
Foreign currency translation adjustment	—			—		—		—		—			—			203			—			203		203
Net loss	—			—		—		—		—			—			—			(275,114	)		(275,114	)	(275,114	)

Comprehensive loss																								(274,911	)
Balance, December 31, 2002	9,255,789			93		—		—		81,289			(8,415	)		(2,051	)		(1,318,348	)		(1,247,432	)
Employee stock-based compensation	—			—		—		—		(294	)		3,822			—			—			3,528		—
Foreign currency translation adjustment	—			—		—		—		—			—			1,105			—			1,105		1,105
Net loss	—			—		—		—		—			—			—			(217,711	)		(217,711	)	(217,711	)

Comprehensive loss																								(216,606	)
Balance, December 31, 2003	9,255,789			93		—		—		80,995			(4,593	)		(946	)		(1,536,059	)		(1,460,510	)
Conversion of common stock	(4,780,000	)		(48	)	4,780,000		48		—			—			—			—			—		—
Issuance of common stock	—			—		10		—		—			—			—			—			—		—
Debt conversion	—			—		27,882,308		278		255,239			—			—			—			255,517		—
Warrants issued to consultant	—			—		—		—		2,059			—			—			—			2,059		—
Employee stock-based compensation	—			—		—		—		86,815			3,508			—			—			90,323		—
Foreign currency translation adjustment	—			—		—		—		—			—			592			—			592		592
Net loss	—			—		—		—		—			—			—			(577,387	)		(577,387	)	(577,387	)

Comprehensive loss																								(576,795	)
Balance, December 31, 2004	4,475,789		$	45		32,662,318	$	326	$	425,108		$	(1,085	)	$	(354	)	$	(2,113,446	)	$	(1,689,406	)

F-5

Consolidated Statements of Cash Flows


Years ended December 31, 2004, 2003 and 2002
	2004			2003			2002
Cash Flows from Operating Activities
Net loss	$	(577,387	)	$	(217,711	)	$	(275,114	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		61,183			60,909			61,354
Amortization of deferred financing costs		4,034			4,034			4,034
Amortization of debt discount		26,932			26,932			26,932
Accrued interest		86,690			77,341			83,261
Stock-based compensation		90,323			3,528			3,981
Allowance for doubtful account receivable		808			828			1,279
Loss on inventory write-off		322			4,797			1,878
Loss on disposition of assets		639			—			1,380
Deferred tax expense		247,272			—			—
Equity in losses of AboveCable		—			—			2,086
Goodwill impairment loss		—			—			44,255
Other		—			—			(5	)
Changes in assets and liabilities:
Accounts receivable and other assets		3,533			531			12,837
Accounts payable and accrued expenses		17,841			10,134			(6,254	)
Income taxes payable		20,000			—			—
Other liabilities		(28	)		1,005			2,126

Net Cash Used in Operating Activities		(17,838	)		(27,672	)		(35,970	)

Cash Flows from Investing Activities
Purchase of property and equipment		(444	)		(1,033	)		(621	)
Purchase of satellite and related systems		—			(5	)		(761	)
Refund on satellite and related systems		—			—			2,100

Net Cash (Used in) Provided by Investing Activities		(444	)		(1,038	)		718

Cash Flows from Financing Activities
Proceeds from the issuance of convertible debt, net of issuance costs		142,335			—			—
Proceeds from short-term borrowings and notes payable		26,525			—			—
Proceeds from the issuance of long-term debt		—			27,485			36,474
Decrease in restricted cash, net		2,044			177			198

Net Cash Provided by Financing Activities		170,904			27,662			36,672

Net Increase (Decrease) in Cash and Cash Equivalents		152,622			(1,048	)		1,420
Cash and Cash Equivalents, beginning of year		1,740			2,788			1,368

Cash and Cash Equivalents, end of year	$	154,362		$	1,740		$	2,788

Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	—		$	—		$	—
Cash paid for income taxes	$	—		$	—		$	—

F-6

WorldSpace, Inc.

Notes to Consolidated Financial Statements

December 31, 2004, 2003 and 2002

NOTE A—ORGANIZATION AND LIQUIDITY

WorldSpace, Inc. (WSI) was organized on July 29, 1990, and incorporated in the State of Maryland on November 5, 1990. WorldSpace, Inc. and Subsidiaries (the Company) is engaged in the design, development, construction, deployment and financing of a satellite-based radio and data broadcasting service, which serve areas of the world where traditional broadcast media or internet services are limited. The Company, which operates in 10 countries, has one satellite in orbit over Africa (accepted for service in 1999) and another over Asia (accepted for service in 2000). The Company has a completed third satellite currently in storage at EADS Astrium’s facilities in France. This satellite, which can be used to replace either of the Company’s two operational satellites, may also be modified and launched to provide DARS in Western Europe.

During March 2004, the Company began generating sales in India related to its satellite-based radio and data broadcasting service and exited the development stage, as defined by Statement of Financial Accounting Standards (SFAS) No. 7, Accounting and Reporting by Development Stage Enterprises.

In December 2004, WorldSpace International Network, Inc. (WIN), a wholly owned subsidiary of the Company, was merged into WSI. Immediately following the merger, WSI was merged into a newly created company of the same name incorporated in the State of Delaware.

Adequate liquidity and capital are critical to the Company’s ability to continue as a going concern. As shown in the accompanying financial statements, the Company incurred a substantial net loss of $577 million for fiscal year 2004 and has an accumulated deficit as of December 31, 2004 of $2,113 million. The Company’s continued existence is dependent upon the Company’s ability to successfully introduce and market its satellite-based radio and data broadcasting services. In addition the Company may need to undertake additional financing activities. In a series of related transactions occurring on December 31, 2004, the Company converted approximately $256 million in long-term debt and accrued interest to equity. The Company also raised $155 million in exchange for the issuance of convertible promissory notes and restructured $1,814 million in debt, net of debt discount and deferred financing costs. These transactions are described further in Note C. The cash on hand at December 31, 2004 was $154 million and consisted mainly of proceeds from the issuance of the convertible promissory notes. These proceeds, net of transaction expenses, will be used to fund marketing, subscriber management, content development, capital expenditures (including the roll-out of terrestrial repeater networks), and working capital needs to support the growth of its subscriber base in India, increase sales to agencies of the United States Government, and to provide developmental funding in additional markets. The Company believes that its existing capital resources will be adequate to fund projected operations through at least December 31, 2005 based on projections of subscriber growth, other revenue and planned spending levels. The Company believes its cash and cash equivalents at December 31, 2004 will provide adequate liquidity and capital to fund its operations over the next 12 months in accordance with its business plan. The Company is subject to certain business risks associated with operating a satellite-based broadcasting company including, but not limited to, in-orbit failures, regulatory compliance, and additional challenges such as developing successful satellite receiver and subscription sales programs adequate to fund operations, developing program content acceptable to and desired by its target audiences and assuring the availability of appropriate levels of satellite radio receivers. There can be no assurances as to when, or if, the Company will be successful in meeting these challenges, some of which are not under its control.

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The Company is currently in negotiations with its insurance carrier to obtain a new in-orbit policy on the AfriStar satellite. The absence of insurance coverage on the AfriStar satellite represents a potential loss to the Company. Should a failure occur involving this satellite, the future financial condition and operations of the Company could be adversely affected. In March 2005, the Company obtained a new insurance policy on the AsiaStar satellite with no lapse in coverage.

Note B—Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of WorldSpace, Inc. and its majority and wholly-owned controlled subsidiaries. The equity method of accounting is used to account for investments in enterprises over which the Company has significant influence, but of which it has less than 50 percent ownership. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements which conform to accounting principles generally accepted in the United States of America requires that management make estimates and assumptions relating to the amounts of assets and liabilities reported and the contingent assets and liabilities disclosed as of the date of the financial statements. Estimates and assumptions must also be made concerning the amounts of revenues and expenses reported in the financial statements. Actual results may differ from management’s estimates.

Revenue Recognition

Revenue from the Company’s principal activities, subscription audio services and capacity leasing, is recognized as the services are provided. Revenue from subscribers, which is generally billed in advance, consists of fixed charges for service, which are recognized as the service is provided, and non-refundable activation fees that are recognized ratably over the expected 40-month life of the customer relationship, which was estimated based upon Management’s judgement. Direct activation costs are expensed as incurred. Advertising revenue is recognized in the period in which the spot announcement is broadcast. Revenue from the sale of satellite radio receivers is recognized when the product is shipped.

The Company provides for an allowance for doubtful accounts equal to the estimated uncollectible receivables. The Company’s estimate is based on historical collection experience and a review of the current status of trade accounts receivable. The Company has recorded an allowance for doubtful accounts of $2,530,000 and $1,617,000 at December 31, 2004 and 2003, respectively.

Foreign Currency Translation

Assets and liabilities were translated into U.S. dollars at the exchange rates in effect as of the respective balance sheet dates. Revenues and expenses were translated into U.S. dollars at the weighted-average exchange rates in effect during the periods reported. Translation adjustments have been reported as a component of accumulated other comprehensive income or loss in the accompanying consolidated statements of changes in shareholders’ deficit and comprehensive loss.

Comprehensive Income and Loss

In accordance with the requirements of SFAS No. 130, Reporting Comprehensive Income, the Company reports the net effects of foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities as comprehensive income or loss, and reflects the accumulated balance as a component of shareholders’ deficit in the accompanying consolidated financial statements.

F-8

Fair Value of Financial Instruments

The financial instruments included in the accompanying consolidated balance sheets consist of cash and cash equivalents, short-term investments, restricted cash and investments, accounts receivable, accounts payable, short- and long-term debt, dividends payable, and royalty obligation. The recorded values of cash and cash equivalents, short-term investments, restricted cash and investments, accounts receivable, accounts payable, dividends payable, and short-term debt approximate their fair values based on their short-term nature. Management is unable to estimate the fair value of convertible notes and royalty obligation due to the unique features of these arrangements (see Note C).

Cash and Cash Equivalents

All liquid investments, defined as having initial maturities of three months or less, have been classified as cash equivalents. Cash equivalents, as of December 31, 2004 and 2003, consisted primarily of demand deposits. Cash balances in individual banks exceed insurable amounts.

Restricted Cash and Investments

Cash and investments that are deposited with a lessor or committed to support letters-of-credit issued pursuant to lease agreements have been classified as restricted cash and investments in the accompanying consolidated balance sheets.

Inventories

Inventories are stated at the lower of cost or market value using the first in, first out (FIFO) method of accounting. Inventories primarily consist of satellite radio receivers manufactured to the Company’s specifications by independent third parties. Provisions in the amount of $322,000, $4,796,000 and $1,879,000 have been recognized in 2004, 2003 and 2002, respectively, to reduce excess or obsolete inventories to their estimated net realizable value.

Property and Equipment

Property and equipment consisted of the following (in thousands):


December 31,	2004			2003
Computers and equipment	$	16,960		$	16,474
Furniture and fixtures		4,784			4,722
Leasehold improvements		22,094			21,859

		43,838			43,055
Less: accumulated depreciation and amortization		(32,407	)		(31,359	)

	$	11,431		$	11,696

Property and equipment is stated at cost, net of accumulated depreciation and amortization, which is computed using the straight-line method over the estimated useful lives of the related assets. Estimated useful lives are three to five years for computers and equipment, and five to seven years for furniture and fixtures. Estimated useful lives for leasehold improvements are the shorter of the estimated useful lives or the remaining lease terms.

F-9

Satellites and Related Systems

Satellites and related systems consisted of the following (in thousands):


December 31,	2004			2003
Satellites	$	471,972		$	471,972
Ground segment		81,363			80,094
Satellites and related systems under construction		188,330			195,970

		741,665			748,036
Less: accumulated depreciation and amortization		(282,239	)		(227,497	)

	$	459,426		$	520,539

Expenditures relating to the development and construction of satellites and related systems consist of satellite design, manufacture, launch, launch insurance, and ground system design and construction. Interest costs related to financing satellites and related systems under construction are capitalized and included in the costs of construction. There was no interest capitalized in 2004, 2003 and 2002.

After a satellite has been successfully launched, tested and accepted, the satellite and related systems are placed in service, and the related costs are depreciated over an estimated useful life of 10 years. Certain software related to tracking advertising and subscription revenue is capitalized and amortized over periods of three to five years. The AfriStar satellite was launched in October 1998 and accepted in April 1999. The AsiaStar satellite was launched in March 2000 and accepted in July 2000. A third satellite was delivered on the ground and accepted in January 2001. This third satellite, which can be used to replace either of the Company’s two operational satellites, may also be modified and launched to provide DARS in Western Europe. A fourth satellite, for which the long lead parts have been procured and partially assembled, is currently maintained in storage at the manufacturer’s facility in Toulouse, France.

As required by Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-lived Assets, the Company reviews the carrying values of its long-lived assets for impairment whenever current events or changes in circumstances indicate that the carrying values of its long-lived assets may not be recoverable, requiring that a loss be recognized. The Company wrote down assets in the amount of approximately $3.6 million in 2004 related to the impairment of certain ground system assets which were determined to be impaired. The write-down is included in depreciation expense in the accompanying consolidated statement of operations as of December 31, 2004. In the first quarter of 2003, the Company filed a notice of loss relating to a progressive degradation problem with the solar array output power of its AfriStar satellite which Management withdrew in April 2005. The amount of the claim was $6,527,800. The aggregate sum insured at that time in the event of the total or constructive total loss of the satellite was $200 million. Based upon discussions with the insurance carriers and further evaluation of this matter, management determined it was not in the best interest of the Company to pursue recovery further and withdrew this claim during the first quarter of 2005. The Company has determined that the satellite will continue to function through the end of its estimated useful life; therefore, no adjustment has been made to its useful life. The Company’s management will continue to monitor this situation carefully with the aid of the satellite manufacturer, and may adjust the estimated useful life of this satellite based on future information. The Company has not recorded any impairment charge due to its forecasted cash flows, which are sufficient to recover the system assets. However, should the Company reduce or fail to meet its forecasted cash flows, or reduce the estimated useful lives of the satellites, it may be required to record an impairment, which may be substantial, at that time. Management believes its remaining investment in long lived assets is fully recoverable and no further adjustment for impairment is warranted. However, due to events and circumstances not necessarily under the Company’s control, such as changes in technology,

F-10

regulatory actions, the availability of financing sufficient to enable the execution of management’s business plan, and the competitive environment, it is possible that material reductions in the carrying value of long-lived assets may be required in the future.

Prepaid or Deferred Rent Expense

It is the Company’s policy to allocate the total cost of leasing space, including rent abatements and fixed or scheduled increases in rent, over the life of the lease on a straight-line basis. Differences between rent expense recognized and rent paid are carried in the balance sheet as prepaid or deferred rent.

Deferred Financing Costs

Costs incurred in raising debt are deferred and amortized as interest expense over the term of the related debt. Unamortized deferred financing costs associated with the restructured debt were reclassified as a reduction of the carrying value of the restructured debt as described in Note C. Amortization of deferred financing costs was $4.0 million for each of the years ended December 31, 2004, 2003 and 2002, respectively. Accumulated amortization of deferred financing costs was $0 and $31.7 million at December 31, 2004 and 2003, respectively. The Company recorded $14.7 million in deferred financing costs associated with the convertible note financing on the accompanying balance sheet at December 31, 2004.

Stock-based Compensation

SFAS No. 123, Accounting for Stock-based Compensation, encourages, but does not require, companies to record stock-based employee compensation plans at their fair value. The Company has elected to account for stock-based compensation using the intrinsic-value method as prescribed in Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Accordingly, compensation cost for employee stock options is measured as the excess, if any, of the quoted market price of the Company’s stock at the date of grant over the exercise price an employee must pay to acquire the stock. The Company accounts for equity instruments issued to nonemployees in accordance with Emerging Issues Task Force 96-18, Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with, Selling, Goods, or Services. Accordingly, the estimated fair value of the equity instrument is recorded on the earlier of the performance commitment date or the date on which services required are completed.

The following table illustrates the effect on net loss if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation.


December 31,	2004			2003			2002
Net loss as reported (in thousands)	$	(577,387	)	$	(217,711	)	$	(275,114	)
Add: stock-based employee compensation expense included in reported net loss		90,323			3,528			3,981
Deduct: total stock-based employee compensation expense determined under fair value-based method for all awards		(137,620	)		(34,014	)		(34,702	)

Proforma net loss	$	(624,884	)	$	(248,197	)	$	(305,835	)

Net loss per share as reported—basic and diluted	$	(61.87	)	$	(23.52	)	$	(29.72	)
Proforma net loss per share—basic and diluted	$	(66.94	)	$	(26.82	)	$	(33.04	)

Research and Development Costs

Research and development costs and costs associated with the Company’s third-party product development agreements are charged to expense as incurred.

F-11

Advertising

Advertising costs are charged to expense as incurred, and are included in general and administrative expenses. The Company incurred advertising expense of $1.6 million, $363,000 and $2.2 million for the years ending December 31, 2004, 2003 and 2002, respectively.

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities, the financial reporting amounts at each year-end, and operating loss carryforwards, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Goodwill and Other Intangible Assets—Adoption of SFAS No. 142

SFAS No. 142, Goodwill and Other Intangible Assets, which became effective beginning in 2002, provides that goodwill, as well as identifiable intangible assets with indefinite lives, should not be amortized, but instead be reviewed annually (or more frequently if impairment indicators arise) for impairment. Intangible assets that are not deemed to have indefinite lives will continue to be amortized over their useful lives. Accordingly, with the adoption of SFAS No. 142 in 2002, the Company discontinued the amortization of goodwill and indefinite-lived intangibles. As a result of an impairment assessment performed by the Company, an impairment loss of $44.3 million was recorded during 2002, as a change in accounting principle.

Net Loss Per Share

The Company calculates basic and diluted loss per share in accordance with SFAS 128, “Earnings Per Share.” Basic loss per share is computed by dividing net loss by the weighted-average number of outstanding shares of common stock. Diluted loss per share is computed by dividing net loss by the weighted-average number of shares adjusted for the potential dilution that could occur if stock options, warrants and other convertible securities were exercised or converted into common stock.

For the years ended December 31, 2004, 2003 and 2002, options, warrants and other convertible securities to purchase 47.3, 25.6 and 24.6 million shares of common stock, respectively, were outstanding, but not included in the computation of diluted earnings per share, because the effect would have been anti-dilutive.

Recent Accounting Pronouncements

In January 2003, and as revised in December 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities. This interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, addresses consolidation by business enterprises of variable interest entities. Prior to this interpretation, two enterprises had been generally included in consolidated financial statements, because one enterprise controls the other through voting interests. This interpretation defines the concept of variable interests, and requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse the risks among the parties involved. The Company’s adoption of this interpretation in fiscal year 2004 did not have an impact on its financial position or results of operations.

In December 2004, the FASB issued revised SFAS No. 123R, Share-Based Payment. SFAS No. 123R sets accounting requirements for share-based compensation to employees and requires companies to

F-12

recognize, in the income statement, the grant-date fair value of stock options and other equity-based compensation. SFAS No. 123R is effective in interim or annual periods beginning after June 15, 2005. The Company will be required to adopt SFAS No. 123R in its third quarter of fiscal year 2005. The Company is currently evaluating the impact of the adoption of SFAS 123R.

Also in December 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary Assets—An Amendment of APB Opinion No. 29. SFAS No. 153 amends APB Opinion No. 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. SFAS No. 153 is to be applied prospectively for non-monetary exchanges occurring in fiscal periods beginning after June 15, 2005. The Company’s adoption of SFAS No. 153 is not expected to have a material impact on its financial position or results of operations.

Concentration of Credit Risk

In 2004, 2003 and 2002, the Company had revenue from the U.S. government of approximately $1.7 million, $5.5 million and $819,000, representing 19.8 percent, 42.1 percent and 8.5 percent of total revenue, respectively.

Reclassifications

Certain prior-year amounts have been reclassified to conform to the current-year consolidated financial statement presentation.

NOTE C—DEBT

Short-term Notes Payable

In January 1999, the Company obtained a loan of $10 million for working capital purposes. The Company repaid $3 million of that loan in March 2000. The remaining balance of $7 million was payable immediately if the Company received proceeds in excess of $100 million from one or more financing transactions entered into after February 28, 2000. During 2004, as noted below, this loan was purchased by Yenura Pte. Ltd. (Yenura), following which Yenura released the Company for this and other debts in exchange for Class B Common Stock.

Long-Term Debt

Long-term debt consists of the following (in thousands):


	2004		2003
Restructured debt (net of debt discount)	$	—	$	1,401,723
Convertible promissory notes		155,000		66,098

		155,000		1,467,821
Less: current maturities		—		(1,411,723	)

	$	155,000	$	56,098

Convertible Debt Financing and Debt Restructuring

On September 30, 2003, the Company concluded definitive agreements (the Restructuring Agreements) with a lender to restructure $1,553 million in notes payable and advances. The executed Restructuring Agreements were placed in escrow until the Company met certain conditions, the principal condition

F-13

being the raising of $50 million from one or more parties unrelated to the Company’s equity and debt holders within one year of the signing of the Restructuring agreements. On September 28, 2004 the Restructuring Agreements were amended to provide the Company until March 31, 2005 to meet the conditions precedent for the restructuring. On December 31, 2004, the Restructuring Agreements were released from escrow and became effective pursuant to the Company raising net $142 million ($155 million, less $13 million in issuance costs) by issuing $155 million of 5 percent convertible promissory notes to several investors.

The convertible promissory notes mature on December 31, 2014, and are convertible into reserved Class A shares of the Company’s common stock at the lesser of $8.45 per share or 90 percent of the price of an initial public offering (IPO) common share, subject to certain adjustments as defined in the promissory note agreements. In accordance with Emerging Issues Task Force 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios” the Company may record additional interest expense upon conversion of the debt. Interest payments are due quarterly beginning on March 31, 2005 or may be added to the principal balance outstanding, at the option of the Company. The promissory note agreements contain provisions that will cause the interest rate to increase if the Company does not file for or complete an IPO by specified dates. If the registration statement for an IPO is not filed with the Securities and Exchange Commission (SEC) within 6 months of the promissory notes issuance date, the interest rate will be increased by 1 percent. The interest rate will increase an additional 1 percent if the IPO is not completed at the end of one year and an additional 3 percent if still not completed in two years. Certain other events could cause the interest rate to increase further as defined in the agreements. The related registration rights agreement also provides that beginning 180 days after an IPO of the Company’s common stock, the investors have the right to demand that the Company file up to three registration statements with the Securities and Exchange Commission (SEC) at any time during the period defined in the related registration rights agreement, in order to sell some or all of the Class A Common Stock received upon any conversion of the convertible promissory notes. If a registration statement is not filed by the Company with the SEC by the applicable deadline, a penalty of 1 percent of the aggregate purchase price of the promissory notes will be imposed. If the filing still has not been made within 30 days of the applicable deadline, an additional penalty of 2 percent of the aggregate purchase price of the promissory notes will be imposed then and on every 30^th day thereafter. Three years following the effective date of the issuance of the convertible promissory notes, the investors may require the Company to redeem the unpaid principal and accrued interest.

Under the Restructuring Agreements, the ongoing obligations of the Company to the lender were set forth in a separate Royalty Arrangement (Royalty Agreement), under which the Company is required to pay the lender 10 percent of earnings before interest, taxes, depreciation, and amortization, if any, for each year through 2015 in exchange for the lender releasing all claims. The Company is subject to certain covenants regarding the disposition of assets, liquidation of the Company, reporting, and distributions or payments to certain of the current shareholders. The Royalty Agreement also requires the Company to have a segregated reserve, to be funded each quarter in any year in which payment under the Royalty Agreement is projected, at the rate of 25 percent of the estimated annual payment. In addition, 80 percent of the annual payment is required to be made within 60 days after year-end, and the remaining portion within 180 days following year-end. Even though management is satisfied that the debt may not be reinstated, in accordance with SFAS No. 15, Extinguishment of Debt, the debt restructuring is not considered an extinguishment of debt because the future payments under the agreement are indeterminate. Accordingly, the carrying value of the debt and accrued interest of $1,814 million has been reclassified as a contingent royalty obligation on the accompanying balance sheet at December 31, 2004. The obligation will be reduced by the future payments made under the Royalty Agreement and will remain on the Company’s balance sheet until 2015, the last year payment under the Royalty Agreement is required.

F-14

Conversion of Debt to Equity

As of December 31, 2003, the Company had issued convertible promissory notes to Yenura, a related entity controlled by the Chief Executive Officer of the Company, in exchange for $94 million in working capital advances dating back to 2002. During 2004, Yenura made additional advances of $25 million and received additional convertible promissory notes.

In connection with the convertible debt financing and restructuring, the Company converted $256 million in debt, consisting of $119 million of convertible promissory notes issued to Yenura, $7 million of short-term notes and $66 million of convertible promissory notes acquired by Yenura, and accrued interest of $64 million, to 27,882,308 shares of the Company’s Class B Common Stock. The Company determined the number of shares to issue based on the conversion price stated in the promissory notes or based upon a negotiated conversion rate.

Line-of-Credit

On October 24, 2002, WorldSpace India Private Limited, a wholly owned subsidiary of the Company, entered into a $1,000,000 line-of-credit agreement in order to purchase inventory. The Company and four directors of WorldSpace India Private Limited have guaranteed the debt. Substantially the entire inventory serves as collateral under the agreement. As of December 31, 2004 and 2003, $229,000 and $0, respectively, was outstanding on the line-of-credit and the amount is included in accounts payable in the accompanying balance sheet at December 31, 2004.

NOTE D—COMMON STOCK

During December 2004, upon incorporation in Delaware the Company’s Board of Directors authorized the issuance of Class A and Class B Common Stock. The Company converted 4,780,000 shares of common stock held, directly or indirectly, by the Company’s CEO to Class B Common Stock and the remaining 4,475,789 shares of outstanding common stock converted to Class A Common Stock.

On December 31, 2004, Yenura, which is controlled by Mr. Samara, was issued 27,882,308 shares of Class B Common Stock in exchange for the assumption and cancellation of debt as described in Note C.

Rights and Privileges of Common Stock

As provided in the Company’s certificate of incorporation, holders of shares of Class A and Class B Common Stock are entitled to vote as one class on all corporate matters with the exception of amendments to the Certificate of Incorporation that relate solely to the terms of one or more series of outstanding preferred stock. As of December 31, 2004, no preferred stock was issued or outstanding.

The authorized, issued and outstanding shares of Class B Common Stock automatically convert into shares of Class A Common Stock upon the earlier of (i) July 1, 2016 or (ii) the date the final royalty payment is made under the terms of the Royalty Agreement, as further described in Note C.

Shareholders of Class A and Class B stock are entitled to receive ratably any dividends, as and when declared by the Board of Directors, subject to any preferential right of preferred shareholders and provided, however, that the Class B Shareholders are only entitled to dividends if annual payments required under the Company’s Royalty Agreement described in Note C have been paid in full.

In the event of any distribution of assets upon a liquidation, dissolution or winding up of the Company, Class A and Class B shareholders, subject to rights granted to preferred shareholders, are entitled to receive equally and ratably any assets available for distribution after the payment of all debts and other

F-15

liabilities of the Company, provided, however, that Class B Shareholders may be required, at the lender’s option, to pay a scale-down fee under the Royalty Agreement equal to 60% of the liquidation distribution. The initial scale-down fee percentage would be applicable until the first $50 million in payments is made by the Company in royalty payments. Each additional $50 million in royalty payments made by the Company would reduce the scale-down fee percentage by 10%.

NOTE E—RELATED-PARTY TRANSACTIONS

The Company had a short-term note payable of $125,000, and a note receivable of $1.6 million, with the Chairman and Chief Executive Officer (CEO) as of December 31, 2003. In December 2004, the Chairman and CEO repaid in its entirety such $1.6 million indebtedness to the Company and, in January 2005, the Company repaid in its entirety such $125,000 note payable to the Chairman and CEO.

In April 2003, the Company made a loan of $200,000 to an equity method investee. This loan was written off in 2003.

NOTE F—COMMITMENTS AND CONTINGENCIES

Leases

The Company leases office space under various non-cancelable operating leases that expire through 2012. The minimum annual rental commitments under non-cancelable leases as of December 31, 2004, are as follows (in thousands):


2005	$	8,170,208
2006		7,852,281
2007		7,881,433
2008		7,551,753
2009		7,681,553
Thereafter		20,598,361

	$	59,735,589

Minimum payments exclude minimum sublease rental income of $8.2 million due in the future under non-cancelable subleases, which end in September 2008. Rent expense was approximately $7.9 million, $7.0 million, and $9.0 million for 2004, 2003 and 2002, respectively. As security for two of its lease commitments, the Company issued letters-of-credit in the amount of $3.8 million to the lessors. In 2002, these letters were converted to cash deposits held by the lessor. This cash is held in interest-bearing accounts and has been included in restricted cash and investments in the accompanying consolidated balance sheets.

In November 11, 2004, the Company entered into an amendment to the Washington D.C. Headquarters office lease under which the Company may elect, at its option, to vacate the premises during the first six months of 2005. The Company also has the option to extend for an additional 60 days its entire lease with the exception of space that has been subleased by the Company to a third-party. Alternatively, the Company has an option to enter into a new lease for a term of up to three years covering its currently occupied premises other than the first floor, may reduce the space under lease to the area located on the 1^st floor of the building. The latter option is contingent upon the successful closing of the sale of the building to a new owner. The Company is currently considering its options and is actively pursuing an alternative location for its Headquarters facility. The Company agreed to forfeit a $1.9 million payment of its security deposit in connection with the lease amendment. This is recorded as selling, general and administration expense in 2004.

F-16

Litigation, Claims and Income Taxes

The Company is subject to various claims and assessments. In the opinion of management, these matters will not have a material adverse impact on the Company’s financial position or results of operations. In evaluating the exposure associated with various tax filing positions, the Company accrues charges for probable exposures. Based on annual evaluations of tax positions, the Company believes it has appropriately accrued for probable exposures. To the extent the Company were to prevail in matters for which accruals have been established or be required to pay amounts in excess of reserves, the Company’s effective tax rate in a given financial statement period may be materially impacted.

Contribution of Satellite Capacity

WorldSpace has entered into a gifting agreement with First Voice International, a nonprofit Washington, D.C. corporation recognized under the U.S. tax laws as a charitable corporation (First Voice). Under this agreement, the Company gifted to First Voice five percent of the capacity for the AfriStar and AsiaStar satellites for social welfare and human development use. The gifting was for the remaining life of the satellites, subject to five year reviews by WorldSpace to ensure First Voice’s performance in making social welfare contributions in the coverage area of the satellites. Additionally, the Company agreed to provide uplink service to the satellites on a gifted basis for at least the first two years of the gifting agreement’s term. The Company values the services provided during 2004, 2003 and 2002 at approximately $2.5 million, $2.6 million and $2.6 million, respectively, which is not recorded in the Company’s financial statements. The Company’s Chairman and CEO is also the Chairman of First Voice.

Design and Production Agreement

The Company is committed to purchasing 726,445 satellite radio receiver chipsets for approximately $18.3 million as of December 31, 2004. The chipsets have not been purchased as of March 31, 2005. The Company has recorded a liability, equal to the excess of the aggregate purchase price over the expected sales price, of $13.3 million and $13.1 million at December 31, 2004 and 2003, respectively, as accrued purchase commitment on the accompanying consolidated balance sheets.

NOTE G—SATELLITES AND GROUND STATION CONSTRUCTION AGREEMENTS

Contractual Agreements

On January 21, 1995, the Company entered into an in-orbit delivery contract (the IOD Contract) with Alcatel Espace (Alcatel), under which Alcatel was to deliver three in-orbit satellites, one ground spare satellite, ground stations, mission control stations, and related documentation and training. Alcatel was also obligated to provide launch services and launch insurance for the three in-orbit satellites. The risk of loss of each satellite transfers to the Company after the successful first eclipse following launch. For launched satellites title to each satellite passes to the Company after the satellite has been placed in orbit and the Company has completed an in-orbit acceptance review. In July 1999, the Company decided to delay the construction of the ground spare satellite. As a result, the Company has incurred, and will continue to incur, costs related to storage and resuming construction (if that decision is made). In January 2001, the Company decided to accept the third satellite constructed by Alcatel under the IOD Contract on the ground rather than in orbit. The third satellite is also now in storage and title passed to the Company during the first quarter of 2005. During 2004, 2003 and 2002, $1.3 million, $1.4 million and $1.7 million, respectively, were charged to expenses relating to storage for these two satellites.

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Under the IOD Contract, the Company was allowed to defer certain payments until construction was completed by Alcatel and approved by the Company. Interest accrued on deferred payments at the three-month London Interbank Offered Rate (LIBOR). As of December 31, 2004, the Company had incurred IOD Contract, storage and interest costs of $657.7 million under the IOD Contract, of which $625.2 million had been paid and $32.4 million had been accrued as a liability. The total value of the IOD Contract with Alcatel is $764.8 million.

On June 26, 1996, the Company entered into the On-Station Operation Services contract (the OSOS Contract) with Alcatel, under which Alcatel would provide on-station operations for three in-orbit satellites through the in-orbit acceptance review after the launch, document various operating procedures for the first in-orbit satellite (AfriStar), and supervise operations of each satellite during the first eclipse period after launch. As of December 31, 2004, the Company had incurred costs of $10.3 million under the OSOS Contract, of which $9.4 million had been paid and $900,000 had been accrued as a liability.

In addition to the IOD and OSOS Contracts, on November 9, 1995, the Company entered into the End-to-End (EtE) contract with Alcatel. Under this contract, Alcatel performed the engineering and validation tests, and procured broadcast stations, broadcast control systems and radio receiver prototypes to validate and test the entire system. The value of this contract is $34.1 million, of which $31.6 million has been paid and $2.5 million has been accrued. This contract was expensed as research and development cost as incurred.

On January 7, 2000, Alcatel agreed to defer certain payments from the Company, related to the IOD Contract, the OSOS Contract, the EtE contract and cost for the satellite construction delay. Under this arrangement and subsequent understandings, the Company was required to pay interest on the outstanding deferred payment balance at the rate of LIBOR plus 3 percent. As of December 31, 2004, the Company has paid Alcatel a total of $666.0 million and has accrued approximately $40.1 million, consisting of $29.0 million of deferred payments and other invoices and $11.1 million of interest. The Company continued to accrue interest on the remaining deferred payment until a settlement agreement was entered into with Alcatel subsequent to December 31, 2004. In February 2005, the Company entered into a Memorandum of Agreement on Settlement with Alcatel to reduce the total amount owed as further discussed in Note O. This Agreement also terminated the OSOS Contract, the IOD Contract and the EtE Contract.

NOTE H—PURCHASE OPTION

In January 2001, the Company purchased an option to purchase all shares of a receiver manufacturer for a specified price. As consideration for the option, the Company paid approximately $1.1 million. The Company could have exercised the option during the option period, which ended in January 2002. In 2002, the Company did not exercise the option, and wrote off the $1.1 million option.

NOTE I—EMPLOYEE BENEFIT PLAN

The Company maintains a defined contribution plan (Plan) that covers all employees provided that certain service requirements are met. Participants may elect to contribute a specified portion of their salary to the Plan on a tax deferred basis. The Company makes discretionary matching contributions to the Plan up to 3% of the employee’s annual salary. For the years ended December 31, 2004, 2003 and 2002, the Company contributed to the Plan $0, $0 and $54,000, respectively.

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NOTE J—INCOME TAXES

The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or income tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and the tax basis of assets and liabilities, using enacted tax rates for the year in which the differences are expected to reverse.

The significant components of the Company’s income tax provision for 2004, 2003 and 2002 are as follows (in thousands):


	2004		2003		2002
Current Provision
Federal	$	20,000	$	—	$	—
State		—		—		—
Foreign		—		—		—

Total	$	20,000		—		—

Deferred Provision
Federal	$	208,542		—		—
State		38,730		—		—
Foreign		—		—		—

Total	$	247,272		—		—

Total	$	267,272	$	—	$	—

The reconciliation between the Company’s statutory tax rate and the effective tax rates for 2004, 2003 and 2002 is as follows:


	2004		2003		2002
U.S. federal statutory rate	(35.00	)%	(35.00	)%	(35.00	)%
State income taxes, net of federal benefit	31.31		(6.50	)	(6.50	)
Non-deductible goodwill	0.00		0.00		6.73
Withholding taxes	6.45		0.00		0.00
Change in valuation allowance	(120.21	)	40.56		55.17
Adjustment of NOLs	9.17		0.91		(20.41	)
Cancellation of debt	194.27		0.00		0.00
Other	0.19		0.03		0.01

Effective tax rate	86.18	%	0.00	%	0.00	%

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As of December 31, 2004 and 2003, the significant components of deferred taxes are as follows (in thousands):


	2004			2003
Deferred Tax Assets:
Deferred interest expense	$	—		$	3,930
Depreciation		—			(18,803	)
Investment in equity securities		—			359
Capitalized start-up costs		—			3,915
Unrealized inventory loss		89			10,197
Stock option compensation		56,194			13,502
Other		4,914			14,664
Net operating losses		33,127			378,212

		94,324			405,976
Less: valuation allowance		(33,127	)		(405,976	)

Total deferred tax assets		61,197			—

Deferred Tax Liabilities:
Depreciation		(185,958	)		—
Intercompany receivables		(118,621	)		—
Other		(3,890	)		—

Total deferred tax liabilities		(308,469	)		—

Net deferred tax liabilities	$	(247,272	)	$	—

As of December 31, 2004, the Company had foreign net operating losses of approximately $77.9 million, which expire at varying dates through 2025. Management has established a full valuation allowance against the benefit of these losses as a result of uncertainty surrounding their ultimate utilization. The change in the valuation allowance from December 31, 2003 to December 31, 2004 was a decrease of $372.8 million and related primarily to the reduction of tax attributes under Internal Revenue Code Section 108.

As discussed in Note C, during 2004 the Company entered into Restructuring Agreements with respect to certain notes payable. Under the Restructuring Agreements, the ongoing obligations of the Company to the investor were set forth in a separate Royalty Arrangement. For US tax purposes, this transaction caused the Company to realize cancellation of indebtedness (“COD”) income. Under US tax law, a Company that realized COD income is entitled to exclude such income from taxable income to the extent of the Company’s insolvency. Under Internal Revenue Code Section 108, a Company that excludes COD income is required to reduce certain tax attributes in an amount equal to the COD income excluded from taxable income. Accordingly, the Company reduced its US tax attributes by approximately $1,726 million. As a result of such attribute reduction, the US Company’s US net operating loss and capital loss carryforwards at December 31, 2004 were eliminated, and the remaining tax basis in its satellite assets, fixed assets and stock in its foreign subsidiaries were also reduced to zero.

NOTE K—STOCK OPTIONS AND WARRANTS

From time to time, WSI has issued options (WSI Options) to its founders, employees, directors, creditors and consultants. WSI Options vest over various periods up to five years and have a maximum life of 10 years from the date of grant, but have been extended in several instances. WIN, prior to the merger with WSI in December 2004, was a wholly owned, consolidated subsidiary of the Company, and had a

F-20

separate stock option plan, the WorldSpace 1996 Shares Option Plan, under which options were granted (WIN Options). The exercise price and vesting schedule for options was determined by the Board of Directors, or a committee thereof, which was established to administer the WIN Options. WIN Options vested over periods ranging from one to five years and had a maximum life of 10 years.

Pursuant to the merger, 10,092,900 WIN options were converted into 22,709,025 WSI options at a conversion rate of 1 WIN to 2.25 WSI. In addition, the exercise price for each WIN option was divided by 2.25 to arrive at the converted WSI exercise price. The 2.25 conversion factor was based on the relative fair values of each entity as of the date of merger. All remaining terms of the WIN options were unchanged. Based upon the guidance in APB 25, “Accounting for Stock Issued to Employees” and related interpretations, the modification of the WIN options created a new measurement date. Accordingly, the Company was required to record as stock-based compensation expense the excess of the intrinsic value of the modified options over the intrinsic value of the options when originally issued. This resulted in a charge to stock-based compensation expense of $87 million as of December 31, 2004. A portion of this charge totaling $48 million related to a grant of 5,000,000 WIN options to the CEO in April 2000 to purchase WIN common stock at $9.43 per share. These options converted into 11,250,000 of WSI options upon the merger and the exercise price was reduced to $4.19. In connection with the restructuring of debt, these options became fully vested and exercisable as of December 31, 2004.

WSI Option activity is as follows:


	WSI Shares Subject to Options		Weighted- Average Exercise Price
Balance, January 1, 2002:	5,844,842		$	2.04
Expired	—			—

Balance, December 31, 2002:	5,844,842			2.04
Granted	25,000			10.00
Expired	—			—

Balance, December 31, 2003:	5,869,842		$	2.07
Forfeited	(260,000	)		(3.72	)
Converted WIN Options	22,709,025			4.34

Balance, December 31, 2004	28,318,867		$	3.91

Exercisable	28,180,087		$	3.90

Exercise prices for WSI Options outstanding as of December 31, 2004, are as follows:


Outstanding				Excercisable
Range of Exercise Prices	Number Outstanding as of December 31, 2004	Weighted- Average Contractual Life Remaining	Weighted- Average Exercise Price	Number Exercisable as of December 31, 2004	Weighted- Average Exercise Price
$ 0.74-1.66	5,455,067	0.37	$1.61	5,455,067	$1.61
2.22	2,537,055	2.20	2.22	2,537,055	2.22
3.78-5.00	12,327,590	5.23	4.18	12,327,590	4.18
5.33-6.67	7,687,980	5.50	5.45	7,549,200	5.45
9.00-10.00	311,175	5.77	9.36	311,175	9.36

	28,318,867			28,180,087

F-21

WIN Option activity was as follows:


	WIN Shares Subject to Options		Weighted- Average Exercise Price
Balance, January 1, 2002:	9,399,040		$	9.61
Granted	500,000			12.00
Forfeited	(172,200	)		11.91

Balance, December 31, 2002:	9,726,840			9.69
Granted	300,000			12.00
Forfeited	(22,540	)		12.23

Balance, December 31, 2003:	10,004,300			9.75
Granted	100,000			12.00
Forfeited	(11,400	)		13.31
Converted to WSI Options	(10,092,900	)		9.77

Balance, December 31, 2004	—		$	—

The Company recorded $3,310,000, $3,528,000 and $3,981,000 of compensation expense in 2004, 2003 and 2002, respectively, relating to issuing options issued below their fair value in 2000.

As part of performing the proforma calculations, the fair values of options granted during 2004 were estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions:


Risk-free interest rate		4%
Expected life of options		8 years
Expected stock price volatility		0%
Expected dividend yield		0%

The weighted-average grant-date fair value of WIN Options granted during 2004, 2003 and 2002, was $-0-for each year.

The Company issued 300,000 warrants to a consultant during 2003 in exchange for investment banking services to be received. The warrants have an exercise price of $1.00 per share and a contractual period of 10 years. Following the successful completion of the Company’s December 31, 2004 convertible note financing, 250,000 of the warrants vested and became exercisable. The remaining 50,000 warrants will vest and become exercisable in the event of an IPO. The fair value of the 250,000 warrants on December 31, 2004, as determined by the Black-Scholes option pricing model, was $2.1 million and is recorded as deferred financing costs in the accompanying balance sheet at December 31, 2004 as these costs were direct and incremental to the financing.

At various dates from 1994 to 1998, the Company has issued 430,000 warrants to non-employees in consideration for services received. The exercise prices range from $1.66 to $5.00 per share and expire in 2006.

F-22

NOTE L—NON-CASH INVESTING AND FINANCING ACTIVITIES

The Company recorded $2.1 million in deferred financing costs in connection with the fair value of warrants issued to a consultant, as described in Note K, and converted $256 million of debt to Class B common shares, as described in Note C.

NOTE M—GEOGRAPHIC AREAS


	Geographical Area Data
	2004		2003		2002
	(in thousands)
Revenues from External Customers
United States	$	4,216¹	$	9,234²	$	3,625
France		2,323		1,833		1,774
Kenya		986		583		877
South Africa		—		537		1,068
Singapore		85		221		202
India		763		384		1,114
Other foreign countries		208		282		929

	$	8,581	$	13,074	$	9,589

Customers from which 10 percent or more of revenue is derived.

¹Includes $1.7 million from USAID

²Includes $5.5 million from USAID

Long-lived Segment Assets


United States	$	469,283	$	530,194	$	589,670
Foreign countries		1,574		2,042		2,715

Excludes deferred financing costs, investments in restricted assets and investments in affiliates and other assets.

F-23

NOTE N—QUARTERLY FINANCIAL DATA (UNAUDITED)




2004	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total for Year
	(Amounts in thousands, except per share data)
Revenue	$	2,874		$	1,877		$	1,557		$	2,273		$	8,581
Gross loss		(421	)		(1,625	)		(2,061	)		(1,989	)		(6,096	)
Net loss		(51,009	)		(51,609	)		(57,068	)		(417,701	)¹		(577,387	)
Net loss per share—basic and diluted		(5.51	)		(5.58	)		(6.17	)		(44.61	)		(61.87	)



2003	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total for Year
	(Amounts in thousands, except per share data)
Revenue	$	4,232		$	3,703		$	3,122		$	2,017		$	13,074
Gross loss		(3,693	)		(2,065	)		(1,338	)		(2,771	)		(9,867	)
Net loss		(55,901	)		(53,417	)		(52,557	)		(55,836	)		(217,711	)
Net loss per share—basic and diluted		(6.04	)		(5.77	)		(5.68	)		(6.03	)		(23.52	)

During the quarter ended December 31, 2004, the Company recorded estimated income taxes, stock compensation expense and deferred income tax expense in connection with the merger of WIN into WSI and the related debt restructuring. The following table shows the impact on net loss and net loss per share:


Quarter ended December 31, 2004	Net Loss			Net Loss Per Share
Net Loss before adjustments (Unaudited)	$	(63,416	)	$	(7.57	)
Conversion of WIN Options (Note K)		(87,013	)		(9.10	)
Income tax expense (Note J)		(267,272	)		(27.94	)

Net Loss for Quarter (Unaudited)	$	(417,701	)	$	(44.61	)

NOTE O—SUBSEQUENT EVENTS

Alcatel agreement

On February 25, 2005 the Company entered into a Memorandum of Agreement (Agreement) with Alcatel under which the total amount of deferred payments and accrued interest due of $40 million at December 31, 2004 was reduced to $19 million. Of that amount, $10 million has been paid as of March 31, 2005, $2 million is payable at the earlier of 15 days after the closing of an IPO or on August 31, 2005 and $7 million will be payable through the issuance of shares of the Company’s common stock at the closing of the IPO. If the IPO does not occur by January 31, 2006, the $7 million will be due and payable in cash. The Company may also be subject to additional payments of at least $2 million if certain events occur as defined in the Agreement. The Company will record, in 2005, $12 million of the reduction in deferred payments and accrued interest as a gain on the extinguishment of debt and the remaining $9 million as a decrease in Satellites and related systems under construction.

F-24

Schedule II—Valuation and Qualifying Accounts

WorldSpace, Inc., and Subsidiaries

December 31, 2004, 2003 and 2002


Col. A	Col. B		Col. C Additions		Col. D		Col. E
Description	Balance at beginning of the period		Charged to costs and expenses	Charged to other accounts	Deductions		Balance at the end of the period
	(in thousands)

Year Ended December 31, 2002
Allowance for doubtful receivables	$	488	1,279	—	(544	)	1,223
Valuation allowance on inventory		—	1,879	—	(1,879	)¹	—
Valuation allowances on deferred tax assets		164,370	150,617	—	—		314,987

Year Ended December 31, 2003
Allowance for doubtful receivables	$	1,223	828	—	(434	)	1,617
Valuation allowance on inventory		—	4,796	—	(4,796	)¹	—
Valuation allowances on deferred tax assets		314,987	90,989	—	—		405,976

Year Ended December 31, 2004
Allowance for doubtful receivables	$	1,617	808	105	—		2,530
Valuation allowance on inventory		—	322	—	(322	)¹	—
Valuation allowances on deferred tax assets		405,976	—	—	(372,849	)	33,127

¹) Write-off of Inventory

F-25

Inside Back Cover Page Prospectus: contains a collage with individual words, naming, various cities in WorldSpace’s coverage area, types of content offered and aspects of the service. Superimposed over the words are pictures of persons in the coverage area enjoying music.]

LOGO

Part II

Information not required in Prospectus

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth the expenses expected to be incurred by the Registrant in connection with the offering described in this Registration Statement, other than underwriting discounts and commissions. All amounts are estimates, other than the SEC registration fee, the NASD filing fee and the NASDAQ National Market listing fee.


SEC registration fee	$	*
NASD filing fee		*
NASDAQ National Market listing fee		*
Printing and engraving expenses		*
Legal fees and expenses		*
Accounting fees and expenses		*
Blue sky fees and expenses		*
Transfer agent and registrar fees and expenses		*
Miscellaneous		*

Total	$

To be provided by amendment.

We will pay all of the expenses to be incurred in connection with the issuance and distribution of the securities registered hereby.

Item 14. Indemnification of Directors and Officers.

Delaware General Corporation Law. Section 145 of the Delaware General Corporation Law provides that a Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the action, suit, or proceeding, provided the person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. A similar standard of care is applicable in the case of actions by or in the right of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which such person will have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action was brought determines that, despite the adjudication of liability but in view of all of the circumstances of the case, the person is fairly and reasonably entitled to indemnity for expenses that the Delaware Court of Chancery or other court shall deem proper.

Charter and by-laws. Our certificate of incorporation and bylaws provide that we will indemnify and advance expenses to our directors, officers and employees to the fullest extent permitted by Delaware law

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Part II

in connection with any threatened, pending or completed action, suit or proceeding to which such person was or is a party or is threatened to be made a party by reason of the fact that he or she is or was our director, officer or employee, or is or was serving at our request as a director, officer, employee or agent of another corporation or enterprise. Prior to the closing of this offering, we intend to enter into indemnification agreements with each of our directors and executive officers that provide them with rights to indemnification and expense advancement to the fullest extent permitted under the Delaware General Corporation Law.

Indemnification agreements. Prior to the consummation of this offering, we intend to purchase directors’ and officers’ liability insurance to insure our directors and officers against liability for actions or omissions occurring in their capacity as a director or officer, subject to certain exclusions and limitations.

SEC Position. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.

Pursuant to the underwriting agreement, in the form filed as an exhibit to this registration statement, the underwriters will agree to indemnify directors and our officers and persons controlling us, within the meaning of the Securities Act against certain liabilities that might arise out of or are based upon certain information furnished to us by any such underwriter.

Item 15. Recent Sales of Unregistered Securities.

Since its inception, we have issued securities in the following transactions, each of which was exempt from the registration requirements of the Securities Act of 1933 (Securities Act), as amended (Securities Act), under Sections 3(a)(9) and 4(2) of the Securities Act. All of the below-referenced securities issued pursuant to the exemption from registration under section 4(2) of the Securities Act are deemed restricted securities for the purposes of the Securities Act.

On December 30, 2004, we reincorporated from Maryland to Delaware and, in connection therewith, we issued shares of our Class A Common Stock or shares of our Class B Common Stock to the shareholders of our Maryland predecessor on a one-for-one basis based on their shares in the predecessor. On the same date, we issued 27.9 million shares of our Class B Common Stock to Yenura Pte. Ltd. (Yenura), a Singapore company controlled by our Chairman and Chief Executive Officer, in exchange for notes in the aggregate amount of $256 million (principal and accrued interest) issued by us and held by Yenura. The aforesaid transactions were exempt from registration pursuant to section 3(a)(9) of the Securities Act. Also on the same day, we issued $155 million of senior convertible notes to seven institutional investors. This transaction was exempt from registration under section 4(2) of the Securities Act.

In 2003, our predecessor issued warrants to purchase 300,000 shares of common stock to a financial advisor, which was an accredited investor. This transaction was exempt from registration under section 4(2) of the Securities Act.

In 2003, our predecessor issued options to purchase 25,000 of its shares of common stock to one of its directors. In each of 2002, 2003 and 2004, our predecessor issued options to purchase 100,000 shares of common stock to one of its officers. In 2002, our predecessor issued options to purchase 200,000 shares of common stock to a second of its officers. In each of 2002 and 2003, our predecessor issued options to purchase 200,000 shares of common stock to a third of its officers. These transactions were exempt from registration under section 4(2) of the Securities Act or under Rule 701 under the Securities Act.

II-2

Part II

Item 16. Exhibits and Financial Statement Schedules.


Exhibit No.	Description	Page No.
1.1	Form of Underwriting Agreement*

2.1	Agreement and Plan of Merger dated December 28, 2004, between WorldSpace, Inc., a Maryland corporation, and the Company

3.1	Certificate of Incorporation of the Company

3.2	By-Laws of the Company

4.1	Securities Purchase Agreement dated December 30, 2004 among the Company, WorldSpace, Inc., a Maryland corporation, Highbridge International LLC, Amphora Limited, OZ Master Fund, Ltd., AG Offshore Convertibles, Ltd., AG Domestic Convertibles, L.P., Citadel Equity Fund Ltd., and Citadel Credit Trading Ltd.

4.2	Registration Rights Agreement dated December 30, 2004 among the Company, Highbridge International LLC, Amphora Limited, OZ Master Fund, Ltd., AG Offshore Convertibles, Ltd., AG Domestic Convertibles, L.P., Citadel Equity Fund Ltd., and Citadel Credit Trading Ltd.

4.3	Form of Notes issued under the Securities Purchase Agreement

5.1	Opinion of Coudert Brothers LLP*

10.1	Exchange Agreement dated December 29, 2004 among the Company, WorldSpace, Inc., a Maryland corporation, WorldSpace International Network Inc. and Yenura Pte. Ltd.

10.2	Loan Restructuring Agreement dated September 30, 2003 among Stonehouse Capital Ltd., WorldSpace, Inc., a Maryland corporation, WorldSpace International Network Inc. and WorldSpace Satellite Company Ltd., as amended by the First Amendment to the Loan Restructuring Agreement and Royalty Agreement dated September 28, 2004 among the same parties and the Second Amendment to the Loan Restructuring Agreement and Royalty Agreement dated December 30, 2004 among the same parties as well as the Company

10.3	Royalty Agreement dated September 30, 2003 among Stonehouse Capital Ltd., WorldSpace, Inc., a Maryland corporation, WorldSpace International Network Inc. and WorldSpace Satellite Company Ltd., as amended by the First Amendment to the Loan Restructuring Agreement and Royalty Agreement dated September 28, 2004 among the same parties and the Second Amendment to the Loan Restructuring Agreement and Royalty Agreement dated December 30, 2004 among the same parties as well as the Company

10.4	Warrant Agreements of WorldSpace, Inc., a Maryland corporation*

10.5	Memorandum of Agreement on Settlement dated as of February 25, 2005 among WorldSpace, Inc., WorldSpace Satellite Company Ltd. and Alcatel Space**

10.6	Strategic Cooperation Agreement Between Analog Devices, Inc. and WorldSpace, Inc. For The Development And Marketing Of WorldSpace-Ready Analog DSP Platforms dated November 5, 2003

II-3

Part II


Exhibit No.	Description	Page No.
10.7	Standard Production, Marketing and License Agreement for China WorldSpace PC Card and China WorldSpace Receiver dated August 18, 2001 between WorldSpace International Network Inc. and Xi’an Tongshi Technology Limited and Cooperation Agreement dated December 12, 2001 between WorldSpace Corporation and Xi’an Tongshi Technology Limited

10.8	Supply Agreement and Standard WorldSpace Receiver Development, Production, Marketing and License Agreement, both dated December 1, 2000 between BPL Limited and WorldSpace International Network Inc.

21.1	List of Subsidiaries of the Company*

23.1	Consent of Coudert Brothers LLP (filed as Exhibit 5.1 hereto)

23.2	Consent of Grant Thornton LLP

24.1	Power of Attorney (contained on signature page)

To be filed by amendment

Confidential treatment requested

Item 17. Undertakings.

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act will be deemed to be part of this registration statement as of the time it was declared effective.

2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-4

Signatures

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in New York, New York, on this 13th day of April, 2005.


WORLDSPACE, INC.

By:		/S/ NOAH A. SAMARA
		Noah A. Samara Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on April 13, 2005. Each person whose signature appears below as a signatory to this registration statement hereby constitutes and appoints Noah A. Samara and Donald J. Frickel, or either one of them, as such person’s true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person’s name, place and stead, in any and all capacities, to sign any and all amendments and post effective amendments to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as that person might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or any substitute therefore may lawfully do or cause to be done by virtue hereof.


Signatures		Title
/S/ NOAH A. SAMARA Noah A. Samara		Chairman of the Board, Chief Executive Officer and President (Chief Executive Officer)

/S/ SRIDHAR GANESAN Sridhar Ganesan		Executive Vice President—Chief Financial Officer (Chief Financial Officer)

/S/ STUART M. FISHKIN Stuart M. Fishkin		Senior Vice President—Finance & Treasurer (Chief Accounting Officer)

/S/ JACK F. KEMP Jack F. Kemp		Director

/S/ JAMES R. LARAMIE James R. Laramie		Director

Charles McC. Mathias		Director

/S/ MICHAEL NOBEL Michael Nobel		Director

/S/ LARRY G. SCHAFRAN Larry G. Schafran		Director

/S/ WILLIAM SCHNEIDER, JR. William Schneider, Jr.		Director

II-5

Exhibit Index


Exhibit No.	Description	Page No.
1.1	Form of Underwriting Agreement*

2.1	Agreement and Plan of Merger dated December 28, 2004, between WorldSpace, Inc., a Maryland corporation, and the Company

3.1	Certificate of Incorporation of the Company

3.2	By-Laws of the Company

4.1	Securities Purchase Agreement dated December 30, 2004 among the Company, WorldSpace, Inc., a Maryland corporation, Highbridge International LLC, Amphora Limited, OZ Master Fund, Ltd., AG Offshore Convertibles, Ltd., AG Domestic Convertibles, L.P., Citadel Equity Fund Ltd., and Citadel Credit Trading Ltd.

4.2	Registration Rights Agreement dated December 30, 2004 among the Company, Highbridge International LLC, Amphora Limited, OZ Master Fund, Ltd., AG Offshore Convertibles, Ltd., AG Domestic Convertibles, L.P., Citadel Equity Fund Ltd., and Citadel Credit Trading Ltd.

4.3	Form of Notes issued under the Securities Purchase Agreement

5.1	Opinion of Coudert Brothers LLP*

10.1	Exchange Agreement dated December 29, 2004 among the Company, WorldSpace, Inc., a Maryland corporation, WorldSpace International Network Inc. and Yenura Pte. Ltd.

10.2	Loan Restructuring Agreement dated September 30, 2003 among Stonehouse Capital Ltd., WorldSpace, Inc., a Maryland corporation, WorldSpace International Network Inc. and WorldSpace Satellite Company Ltd., as amended by the First Amendment to the Loan Restructuring Agreement and Royalty Agreement dated September 28, 2004 among the same parties and the Second Amendment to the Loan Restructuring Agreement and Royalty Agreement dated December 30, 2004 among the same parties as well as the Company

10.3	Royalty Agreement dated September 30, 2003 among Stonehouse Capital Ltd., WorldSpace, Inc., a Maryland corporation, WorldSpace International Network Inc. and WorldSpace Satellite Company Ltd., as amended by the First Amendment to the Loan Restructuring Agreement and Royalty Agreement dated September 28, 2004 among the same parties and the Second Amendment to the Loan Restructuring Agreement and Royalty Agreement dated December 30, 2004 among the same parties as well as the Company

10.4	Warrant Agreements of WorldSpace, Inc., a Maryland corporation*

10.5	Memorandum of Agreement on Settlement dated as of February 25, 2005 among WorldSpace, Inc., WorldSpace Satellite Company Ltd. and Alcatel Space**

10.6	Strategic Cooperation Agreement Between Analog Devices, Inc. and WorldSpace, Inc. For The Development And Marketing Of WorldSpace-Ready Analog DSP Platforms dated November 5, 2003

II-6

Exhibit Index


Exhibit No.	Description	Page No.

10.7	Standard Production, Marketing and License Agreement for China WorldSpace PC Card and China WorldSpace Receiver dated August 18, 2001 between WorldSpace International Network Inc. and Xi’an Tongshi Technology Limited and Cooperation Agreement dated December 12, 2001 between WorldSpace Corporation and Xi’an Tongshi Technology Limited

10.8	Supply Agreement and Standard WorldSpace Receiver Development, Production, Marketing and License Agreement, both dated December 1, 2000 between BPL Limited and WorldSpace International Network Inc.

21.1	List of Subsidiaries of the Company*

23.1	Consent of Coudert Brothers LLP (filed as Exhibit 5.1 hereto)

23.2	Consent of Grant Thornton LLP

24.1	Power of Attorney (contained on signature page)

To be filed by amendment

Confidential treatment requested

II-7

EX-2.1 2 dex21.htm AGREEMENT AND PLAN OF MERGER DATED DECEMBER 28, 2004 Agreement and Plan of Merger dated December 28, 2004

EXHIBIT 2.1

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (the “Agreement”) dated as of December 28, 2004 between WorldSpace, Inc., a corporation organized and existing under the laws of the State of Maryland (“WorldSpace Maryland”), and WorldSpace, Inc., a corporation organized and existing under the laws of the State of Delaware (“WorldSpace Delaware”).

W I T N E S S E T H

WHEREAS, the respective boards of directors of each of WorldSpace Maryland and WorldSpace Delaware have approved and declared advisable the merger of WorldSpace Maryland with and into WorldSpace Delaware (the “Merger”) pursuant to which, upon the terms and subject to the conditions set forth in this Agreement, each issued and outstanding share of the Common Stock, par value $.01 per share, of WorldSpace Maryland (a “Maryland Share” or, collectively, the “Maryland Shares”) will be converted into one share of Class A common stock, par value $.01 per share, of WorldSpace Delaware (the “Class A Stock”) or into one share of Class B common stock, par value $.01 per share, of WorldSpace Delaware (the “Class B Stock”, and together with the Class A Stock, the “Delaware Common Stock”);

WHEREAS, the respective boards of directors of each of WorldSpace Maryland and WorldSpace Delaware have determined that the Merger is in furtherance of and consistent with their respective long-term business strategies and is fair to and in the best interest of their respective stockholders;

WHEREAS, the respective stockholders of WorldSpace Maryland and WorldSpace Delaware have approved the Merger in accordance with the Maryland General Corporation Law (the “MGCL”) and the Delaware General Corporation Law (the “DGCL”); and

WHEREAS, WorldSpace Maryland and WorldSpace Delaware desire to make certain representations, warranties, covenants and agreements in connection with this Agreement.

NOW, THEREFORE, in consideration for the premises, and of the representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows:

ARTICLE 1

THE MERGER; EFFECTIVE TIME

Section 1.1 The Merger. Upon the terms and subject to the conditions set forth in this Agreement and in accordance with the MGCL, at the Effective Time (as defined in Section 1.2) WorldSpace Maryland shall be merged with and into WorldSpace Delaware, and the separate corporate existence of WorldSpace Maryland shall thereupon cease. WorldSpace Delaware shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the “Surviving Corporation”), and shall succeed to and assume all the rights and obligations of WorldSpace Maryland in accordance with the MGCL and the DGCL.

Section 1.2 Effective Time. The Merger shall be effective upon the acceptance for filing of articles of merger with respect to the Merger (the “Articles of Merger”) with the State Department of Assessments and Taxation of the State of Maryland and a certificate of merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware, whichever is later (the “Effective Time”), provided that no filing of the Articles of Merger or Certificate of Merger shall be made until WorldSpace Delaware has received any necessary approval of the Merger from the U.S. Federal Communications Commission.

Section 1.3 Effects of the Merger. The Merger shall have the effects set forth in Section 259 of the DGCL and Section 3-114 of the MGCL.

Section 1.4 Abandonment. Notwithstanding the approval and adoption of this Agreement by the Board of Directors of WorldSpace Maryland and WorldSpace Delaware, and the stockholders of WorldSpace Maryland and WorldSpace Delaware, this Agreement may be terminated at any time prior to the Effective Time by the Board of Directors of either WorldSpace Delaware or WorldSpace Maryland.

Section 1.5 Further Assurances. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts, agreements or things are necessary, desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation its right, title and interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of either WorldSpace Maryland or WorldSpace Delaware or (ii) otherwise to carry out the purposes of this Agreement, the Surviving Corporation and its proper officers and directors or their designees shall be authorized to execute and deliver, in the name and on behalf of either WorldSpace Maryland or WorldSpace Delaware all such deeds, bills of sale, assignments and assurances and to do, in the name and on behalf of either WorldSpace Maryland or WorldSpace Delaware, as appropriate, all such other acts and things as may be necessary, desirable or proper to establish, perfect or confirm the Surviving Corporation’s right, title and interest in, to and under any of the rights, privileges, powers, franchises, properties or assets of such party to the Merger and otherwise to carry out the purposes of this Agreement.

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ARTICLE II

CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING

CORPORATION

Section 2.1 The Certificate of Incorporation. The certificate of incorporation of WorldSpace Delaware as in effect immediately prior to the Effective Time shall be the certificate of incorporation of the Surviving Corporation (the “Charter”), until thereafter duly amended by applicable law.

Section 2.2 The By-laws. The bylaws of WorldSpace Delaware in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation (the “By-laws”), until thereafter duly amended as provided therein or by applicable law.

ARTICLE III

OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION

Section 3.1 Directors. The directors of WorldSpace Delaware immediately prior to the Effective Time shall, from and after the Effective Time, be the directors of the Surviving Corporation to hold office until such time as their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Charter and the By-laws.

Section 3.2 Officers. The officers of WorldSpace Delaware immediately prior to the Effective Time shall, from and after the Effective Time, be the officers of the Surviving Corporation to hold office until such time as their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Charter and the By-laws.

ARTICLE IV

EFFECT OF THE MERGER ON CAPITAL STOCK;

EXCHANGE OF CERTIFICATES

Section 4.1 Effect on Capital Stock. At the Effective Time, as a result of the Merger and without any action on the part of the holder of any capital stock of WorldSpace Maryland:

(a) Conversion of WorldSpace Maryland Shares. Each Maryland Share issued and outstanding immediately prior to the Effective Time, other than Dissenting Shares (as defined in Section 4.1(b)), shall be converted into and become, without any action on the part of the stockholder, one validly issued, fully paid and nonassessable share of Class A Stock, except that each Maryland Share held of record by Mr. Noah A. Samara and TelUS Corp. shall be converted into and become without any action on the part of the stockholder, one validly issued, fully paid and nonassessable share of Class B Stock. At the Effective Time, all Maryland Shares shall no longer be

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outstanding and shall be cancelled and shall cease to exist, and each certificate (a “Certificate”) formerly representing any of such Maryland Shares (other than Dissenting Shares) shall thereafter represent the shares of Delaware Common Stock into which such Maryland Shares have been converted.

(b) Shares of Dissenting Stockholders. Notwithstanding anything in this Agreement to the contrary, any issued and outstanding Maryland Share held by a person (a “Dissenting Stockholder”) who has neither voted in favor of the Merger nor consented in writing thereto and otherwise complies with all the applicable provisions of the MGCL concerning the right of holders of Maryland Shares to dissent from the Merger and demand payment of fair value for their Maryland Shares (“Dissenting Shares”) shall not be converted as described in Section 4.2(a) but shall be converted into the right to receive such consideration as may be determined to be due to such Dissenting Stockholder pursuant to the laws of the State of Maryland. If, after the Effective Time, such Dissenting Stockholder withdraws his demand of payment or fails to perfect or otherwise loses his right to demand payment, in any case pursuant to the MGCL, his Maryland Shares shall be converted as of the Effective Time into the number of shares of Class A or Class B Stock, as applicable, as are equal to his Maryland Shares. WorldSpace Maryland shall give WorldSpace Delaware prompt notice of any demands for appraisal of Maryland Shares received by WorldSpace Maryland. WorldSpace Maryland shall not, without the prior written consent of WorldSpace Delaware, make any payment with respect to, or settle, offer to settle, or otherwise negotiate, any such demands.

Section 4.2 Exchange of Certificates for Delaware Common Stock.

(a) Exchange Procedures. Upon surrender, duly endorsed, of a Certificate for cancellation to the Surviving Corporation, the holder of such Certificate shall be entitled to receive in exchange therefor a certificate representing the number of shares of Class A or Class B Stock, as applicable, that such holder is entitled to receive pursuant to this Article IV. The Certificate so surrendered shall forthwith be cancelled. In the event of a transfer of ownership of Maryland Shares that is not registered in the transfer records of WorldSpace Maryland, a certificate representing the proper number of shares of Class A or Class B Stock, as applicable, may be issued to the transferee thereof, if the Certificate formerly representing such Maryland Shares is presented to the Surviving Corporation, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid. If any certificate for shares of Delaware Common Stock is to be issued in a name other than that in which the Certificate surrendered in exchange therefor is registered, it shall be a condition of such exchange that (i) the person requesting such exchange shall pay any transfer or other taxes required by reason of the issuance of certificates of shares of Delaware Common Stock in a name other than that of the register holder of the Certificate surrendered, or shall establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable, and (ii) the Certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer.

(b) No Further Ownership Rights in Maryland Shares. The issuance of Delaware Common Stock in accordance with the terms of this Article IV shall be

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deemed to have been in full satisfaction of all rights pertaining to the Maryland Shares theretofore represented by such Certificates. At the Effective Time, the stock transfer books of WorldSpace Maryland shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Maryland Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, except notation that a stockholder has elected to exercise his right to payment of fair value pursuant to the MGCL, they shall be cancelled and exchanged as provided in this Article IV.

(c) Lost Certificates. In the event that any Certificate shall have been lost, stolen or destroyed, the Surviving Corporation shall issue the shares of Delaware Common Stock in respect of such lost, stolen or destroyed Certificate, upon the making of an affidavit of that fact by the person claiming that the Certificate is lost, stolen or destroyed and upon the posting by such person of a bond in an amount reasonably specified by the Surviving Corporation as indemnity against any claim that may be made against it with respect to such Certificate or the providing of such assurances as the Surviving Corporation in its discretion may require.

Section 4.3 Distributions with Respect to Unexchanged Shares; Voting. All shares of Delaware Common Stock to be delivered pursuant to the Merger shall be deemed issued and outstanding as of the Effective Time and whenever a dividend or other distribution is declared by WorldSpace Delaware in respect of any class of Delaware Common Stock, the record date for which is at or after the Effective Time, that declaration shall include dividends or other distributions in respect of all Delaware Common Stock of such class issuable pursuant to this Agreement, provided that no dividends or other distributions declared or made in respect of Delaware Common Stock with a record date that is ten days or more after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of Delaware Common Stock represented thereby until the holder of such Certificate shall surrender such Certificate or deliver an affidavit of loss and, if reasonably required by WorldSpace Delaware, indemnity bond in lieu thereof in accordance with this Article IV. Subject to the effect of applicable laws, following surrender of any such Certificate, there shall be issued and/or paid to the holder of the certificates representing shares of Delaware Common Stock delivered in exchange thereof, without interest, (A) at the time of such surrender, the dividends or other distributions with a record date at or after the Effective Time therefore payable with respect to such shares of Delaware Common Stock and not paid and (B) at the appropriate payment date, the dividends or other distributions payable with respect to such shares of Delaware Common Stock with a record date at or after the Effective Time but with a payment date subsequent to surrender.

Holders of unsurrendered Certificates shall be entitled to vote after the Effective Time at any meeting of WorldSpace Delaware stockholders the number of shares of Delaware Common Stock represented by such Certificates, regardless of whether such holders have exchanged their Certificates.

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Section 4.4 WorldSpace Maryland Options. At the Effective Time, all outstanding options or warrants to acquire Maryland Shares which have not been exercised shall become and represent an option or warrant to purchase shares of Class A Stock, or in the case of options held by Mr. Noah A. Samara and TelUS Corp., shares of Class B Stock, at a ratio of one Maryland Share subject to an option grant or warrant to one share of Delaware Common Stock (a “Substitute Option”) at an option exercise price per share of Delaware Common Stock equal to the exercise price per Maryland Share immediately prior to the Effective Time. After the Effective Time, except as provided in this Section, each Substitute Option shall be exercisable upon the same terms, conditions and restrictions as were applicable to the related option to acquire Maryland Shares immediately prior to the Effective Time. From and after the date of this Agreement, no additional options shall be granted and no warrants shall be issued by WorldSpace Maryland, except with the prior written approval of WorldSpace Delaware.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

Section 5.1 Representations and Warranties of WorldSpace Maryland. WorldSpace Maryland hereby represents and warrants to WorldSpace Delaware that:

(a) Organization and Standing. WorldSpace Maryland is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Maryland and has all requisite corporate power and authority to own its properties and assets and to carry on the business it presently conducts. WorldSpace Maryland is qualified to do business in each jurisdiction where the business it conducts or the property it owns or leases requires such qualification, except where the failure to be so qualified would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, properties, liabilities, financial condition or results of operations of WorldSpace Maryland, taken as a whole, or on the ability of WorldSpace Maryland to consummate the transactions contemplated by this Agreement or perform its obligations under this Agreement, to execute and deliver this Agreement and otherwise to consummate the Merger and the other transactions contemplated by this Agreement.

(b) Authorization of Transaction. This Agreement has been duly executed and delivered by WorldSpace Maryland and, assuming the due authorization, execution and delivery by WorldSpace Delaware, constitutes the valid and legally binding obligation of WorldSpace Maryland, enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization or other laws affecting creditors rights generally or the discretion of a court in awarding equitable remedies.

(c) Capitalization and Stock Ownership. WorldSpace Maryland’s authorized capital stock consists of 20,000,000 shares of common stock, par value $.01 per share, and 5,000,000 shares of Class A preferred stock, par value $.01 per share, of which of 9,255,789 shares of common stock are issued and outstanding as of the date of

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this Agreement. Of those shares, 1,795,000 shares are owned of record by Noah A. Samara and 3,000,000 shares are owned of record by TelUS Corp. All of the issued and outstanding Maryland Shares are duly authorized, validly issued, fully paid, nonassessable and free of all preemptive rights.

Section 5.2 Representations and Warranties of WorldSpace Delaware. WorldSpace Delaware hereby represents and warrants to WorldSpace Maryland as follows:

(a) Organization and Standing. WorldSpace Delaware is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own its properties and assets and to carry on the business it presently conducts. WorldSpace Delaware is qualified to do business in each jurisdiction where the business it conducts or the property it owns or leases requires such qualification, except where the failure to be so qualified would not reasonably be expected to have a material adverse effect on the business, properties, liabilities, financial condition or results of operations of WorldSpace Delaware or on the ability of WorldSpace Delaware to consummate the transactions contemplated by this Agreement or perform its obligations under this Agreement, to execute and deliver this Agreement and otherwise to consummate the Merger and the other transactions contemplated by this Agreement.

(b) Authorization of Transaction. This Agreement has been duly executed and delivered by WorldSpace Delaware and, assuming the due authorization, execution and delivery by WorldSpace Maryland, constitutes the valid and legally binding obligation of WorldSpace Delaware, enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization or other laws affecting creditors rights generally or the discretion of a court in awarding equitable remedies.

(c) Capitalization. The authorized capital stock of WorldSpace Delaware is 200,000,000 shares, consisting of (i) 100,000,000 shares of Class A Stock, par value $.01 per share, (ii) 75,000,000 shares of Class B Stock, par value $.01 per share and (iii) 25,000,000 shares of preferred stock, par value $.01 per share, of which 10 shares of Class B Stock are issued and outstanding as of the date of this Agreement. All of the issued and outstanding WorldSpace Delaware shares are duly authorized, validly issued, fully paid, non-assessable and free of all preemptive rights. All of the Delaware Common Stock when issued will be duly authorized, validly issued, fully paid, nonassessable and free of all preemptive rights.

ARTICLE VI

MISCELLANEOUS

Section 6.1 Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission and electronic mail (“e-mail”) transmission, so long as a receipt of such e-mail is requested and received) and shall be given,

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(i)

if to WorldSpace Delaware, to:

WorldSpace, Inc.

2400 N Street, N.W.

Washington, D.C. 20037

Attention : Donald J. Frickel

Facsimile No.: (202) 969-6560

E-mail: dfrickel@worldspace.com

with a copy to:

Coudert Brothers LLP

1114 Avenue of the Americas

New York, New York 10036

Attention: Jeffrey E. Cohen

Facsimile No.: (212) 626-4120

E-mail: cohenj@coudert.com

(ii)

if to WorldSpace Maryland, to

WorldSpace, Inc.

2400 N Street, N.W.

Washington, D.C. 20037

Attention: Donald J. Frickel

Facsimile No.: (202) 969-6560

E-mail: dfrickel@worldspace.com

with a copy to:

Coudert Brothers LLP

1114 Avenue of the Americas

New York, New York 10036

Attention: Jeffrey E. Cohen

Facsimile No.: (212) 626-4120

E-mail: cohenj@coudert.com

or to such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a business day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding business day in the place of receipt.

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Section 6.2 Expenses. Except as otherwise provided herein, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such costs or expenses.

Section 6.3 Waiver. No failure or delay by either party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 6.4 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of WorldSpace Delaware and WorldSpace Maryland and their respective successors and assigns.

Section 6.5 No Third Party Beneficiaries. Except as expressly set forth in this Agreement, this Agreement does not confer any rights, remedies, agreements, undertakings, obligations or liabilities on any person other than WorldSpace Delaware and WorldSpace Maryland and their respective successors and permitted assigns.

Section 6.6 Entire Agreement. This Agreement constitutes the entire agreement between WorldSpace Delaware and WorldSpace Maryland with respect to its subject matter and supersedes all other prior agreements and understandings, both oral and written, between WorldSpace Delaware and WorldSpace Maryland with respect to its subject matter.

Section 6.7 Headings. The headings and the table of contents in this Agreement are for convenience of reference only and do not affect the interpretation of this Agreement.

Section 6.8 Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without giving effect to principles of conflicts of law.

Section 6.9 Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received the counterpart hereof signed by the other party hereto.

Section 6.10 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

[Signature page follows]

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IN WITNESS WHEREOF, the undersigned have signed this Agreement as of the date first above written.


WORLDSPACE, INC.

By:		/s/
Name:
Title:

WORLDSPACE, INC.

By:		/s/
Name:
Title:

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EX-3.1 3 dex31.htm CERTIFICATE OF INCORPORATION OF THE COMPANY Certificate of Incorporation of the Company

EXHIBIT 3.1

CERTIFICATE OF INCORPORATION

WORLDSPACE, INC.

THE UNDERSIGNED, in order to form a corporation under and pursuant to the provisions of the General Corporation Law of the State of Delaware (the “GENERAL CORPORATION LAW”), does hereby certify as follows:

ARTICLE I

Name

The name of the corporation is WorldSpace, Inc. (hereinafter the “CORPORATION”).

ARTICLE II

Purpose

The Corporation is organized to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law.

ARTICLE III

Capital Stock

Total Number of Shares of Stock. The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 200,000,000 consisting of (i) 100,000,000 shares of Class A Common Stock (the “CLASS A COMMON STOCK”), with a par value of $.01 per share, (ii) 75,000,000 shares of Class B Common Stock (the “CLASS B COMMON STOCK”, and together with Class A Common Stock, the “COMMON STOCK”)), with a par value of $.01 per share and (iii) 25,000,000 shares of Preferred Stock, par value .01 per share (the “PREFERRED STOCK”). The number of authorized shares of each of Class A Common Stock and Class B Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative votes of the holders of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law, and no vote of the holders of the Class A Common Stock or Class B Common Stock voting separately as a class shall be required therefor.

Preferred Stock. The Board of Directors of the Corporation (the “BOARD”) is authorized, subject to any limitations prescribed by law, by a resolution or resolutions, to provide for the issuance of shares of Preferred Stock (the “PREFERRED STOCK”) in series, and to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences, and rights of the shares of each such series and any qualifications, limitations or restrictions thereof.

Voting Rights. Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided, however, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any certificate of designation of Preferred Stock relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon by law or pursuant to this Certificate of Incorporation or any resolution or resolutions (including any certificate of designation of Preferred Stock relating to any series of Preferred Stock).

Class Voting. Subject to limitations of applicable law, Class A Common Stock and Class B Common Stock shall vote as a single class on all matters to be voted on including, without limitation, any consolidation or merger of the Corporation into or with any other corporation or the sale or transfer of all or substantially all of its assets.

Automatic Conversion of the Class B Common Stock. All of the then issued Class B Common Stock shall become issued Class A Common Stock (and all of the then authorized but unissued Class B Common Stock shall become authorized but unissued Class A Common Stock) without any action on the part of either the Corporation or the stockholders upon the earlier of (i) July 1, 2016 or (ii) the Second Payment Date of the Royalty Payment owed by the WorldSpace Parties in respect of the final Royalty Calculation Year for which a Royalty Payment is owed or as otherwise permitted under the Royalty Agreement (as defined below). The terms “Second Payment Date”, “Royalty Payment”, “WorldSpace Parties” and “Royalty Calculation Year” have the meanings ascribed to such terms in the Royalty Agreement dated as of September 30, 2003 by and between Stonehouse Capital Ltd. and the WorldSpace Parties, as amended from time to time (the “Royalty Agreement”).

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Dividend Rights. Subject to the proviso at the end of this sentence, holders of Class A Common Stock and Class B Common Stock shall be entitled to receive ratably dividends payable in cash, in stock or otherwise, as and when declared by the Board of Directors out of assets legally available therefore, subject to any preferential rights of any outstanding Preferred Stock; provided, however, that the holders of the Class B Common Stock shall only be entitled to Distributions with respect to their Class B Common Stock if, and only to the extent that, the proposed Distribution complies with the terms of the Royalty Agreement governing Distributions to Current Shareholders. As used in this paragraph, the terms “Current Shareholders” and “Distributions” have the meanings ascribed to such terms in the Royalty Agreement.

Liquidation Rights. Subject to the proviso at the end of this sentence, in the event of any distribution of assets upon a liquidation, dissolution or winding-up of the affairs of the Corporation or otherwise, subject to those rights expressly granted to the holders of Preferred Stock, if any, and except as may be provided by the laws of the State of Delaware, holders of Class A Common Stock and Class B Common Stock are entitled to receive ratably and equally any assets available for distribution to holders thereof after the payment of all debts and other liabilities of the Corporation, provided, however that the holders of the Class B Common Stock shall only be entitled to Distributions with respect to their Class B Common Stock if, and only to the extent that, the proposed Distribution upon liquidation, dissolution or winding-up complies with the terms of the Royalty Agreement governing Distributions to Current Shareholders. As used in this paragraph, the terms “Current Shareholders” and “Distributions” have the meanings ascribed to such terms in the Royalty Agreement.

Preemptive Rights. No shares of the Class A Common Stock or the Class B Common Stock shall have preemptive rights to purchase additional shares.

Rights With Respect to Future Issuances and Sales. The Board shall be authorized to create and issue by one or more resolutions, whether or not in connection with the issuance and sale of any of the Corporation’s securities or properties, rights entitling the holders thereof to purchase securities issued by the Corporation or any other entity. The times at and the terms upon

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which such rights are to be issued are to be determined by the Board and set forth in contracts or other instruments which evidence such rights. The authority of the Board with respect to such rights shall include, without limitation, the determination of the initial purchase price, the times and circumstances under which such rights may be exercised, provisions denying such holders of a specified percentage of the Corporation’s outstanding capital stock the right to exercise such rights and provisions to permit the Corporation to redeem or exchange such rights.

ARTICLE IV

Registered Agent

The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, County of New Castle, Wilmington, Delaware 19801. The name of the registered agent of the Corporation at such address is The Corporation Trust Company.

ARTICLE V

Management of the Affairs of the Corporation

A. The business and affairs of the Corporation shall be managed by or under the direction of the Board. In addition to the powers and authority expressly conferred upon them by statute or by this Certificate of Incorporation or the Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.

B. The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide.

C. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.

D. Special meetings of stockholders of the Corporation may be called only by the Chairman of the Board, the Chief Executive Officer or by the Board acting pursuant to a

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resolution adopted by a majority of the Whole Board, and any power of stockholders to call a special meeting is specifically denied. Only such business shall be considered at a special meeting of stockholders as shall have been stated in the notice for such meeting. For purposes of this Certificate of Incorporation, the term “WHOLE BOARD” shall mean the total number of authorized directors of the Corporation whether or not there exist any vacancies in previously authorized directorships.

ARTICLE VI

Directors

A. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors shall be fixed from time to time exclusively by the Board pursuant to a resolution duly adopted by a majority of the Board. The directors, other than those who may be elected by the holders of any series of Preferred Stock under specified circumstances, shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, one class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 2005, another class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 2006, and another class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 2007, with each class to hold office until its successor is duly elected and qualified. At each succeeding annual meeting of stockholders, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election.

B. Subject to the rights of the holders of any series of Preferred Stock then outstanding and unless the Board otherwise determines, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled only by a majority vote of the directors then in office, whether or not less than a quorum, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been chosen expires. No reduction in the authorized number of directors shall have the effect of removing any director before such director’s term of office expires.

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C. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation.

D. Subject to the rights of the holders of any series of Preferred Stock then outstanding, unless otherwise restricted by statute, by the Certificate of Incorporation or the Bylaws of the Corporation, any director, or all of the directors, may be removed from the Board, but only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of all of the then outstanding shares of capital stock of the Corporation then entitled to vote in the election of directors, voting together as a single class.

ARTICLE VII

Bylaws

The Board is expressly empowered to adopt, amend or repeal any of the Bylaws of the Corporation. Any adoption, amendment or repeal of the Bylaws of the Corporation by the Board shall require the approval of a majority of the Whole Board. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the Corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least 66 2/3% of the voting power of the then outstanding shares of voting stock entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal all or any portion of the following portions of the Bylaws of the Corporation: Article II, Section 3.2, Section 3.3, Section 3.4, Section 3.14, Article VI or Article IX.

ARTICLE VIII

Limitation of Liability

No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of his or her fiduciary duty as director; provided, however, that nothing contained in this Article VIII shall eliminate or limit the liability of a director:

(a) for any breach of the director’s duty of loyalty to the Corporation or its stockholders;

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(b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

(d) for any transaction from which the director derived improper personal benefit.

If the General Corporation Law or any other statute of the State of Delaware hereafter is amended to authorize the further elimination or limitation of the liability of directors of the Corporation, then the liability of a director of the Corporation shall be limited to the fullest extent permitted by the statutes of the State of Delaware, as so amended, and such elimination or limitation of liability shall be in addition to, and not in lieu of, the limitation on the liability of a director provided by the foregoing provisions of this Article VIII

No amendment to or repeal of this Article VIII shall eliminate or limit the liability of any director of the Corporation for or with respect to any act or omission occurring prior to the date when such amendment or repeal becomes effective.

ARTICLE IX

Indemnification

The Corporation shall, to the maximum extent permitted from time to time under the laws of the State of Delaware, indemnify and upon request shall advance expenses to any person who is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was or has agreed to be a director or officer of the Corporation or while a director or officer is or was serving at the request of the Corporation as a director, officer, employer or agent of any corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against any and all expenses (including attorney’s fees and expenses), judgments, fines, penalties and amounts paid in settlement or incurred in connection with the investigation, preparation to defend or defense of such action,

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suit, proceeding or claim. Such rights arising under any bylaw, agreement, vote of directors or stockholders or otherwise shall inure to the benefit of the heirs and legal representatives of such person. Any repeal or modification of the foregoing provisions of this Article IX shall not adversely affect any right or protection of a director or officer of this Corporation existing at the time of such repeal or modification.

ARTICLE X

Amendments and Repeal

The Corporation reserves the right to amend or repeal any provision contained in this Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation; provided, however, that, notwithstanding any other provision of this Certificate of Incorporation, or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least 66 2/3% of the voting power of the then outstanding shares of voting stock entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal this Article X, Article V, Article VI, Article VII, Article VIII or Article IX.

ARTICLE XI

Incorporator

The name and address of the sole incorporator is as follows:


Name		Address
Rebecca E. Sendker		Coudert Brothers LLP
		1114 Avenue of the Americas
		New York, NY 10036

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I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law, do make this Certificate of Incorporation, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 20th day of December, 2004.


		/S/ REBECCA E. SENDKER
Name:		Rebecca E. Sendker

Title:		Incorporator

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EX-3.2 4 dex32.htm BY-LAWS OF THE COMPANY By-Laws of the Company

EXHIBIT 3.2

BY-LAWS

WORLDSPACE, INC.

(a Delaware corporation, hereinafter called the “CORPORATION”)

ARTICLE I

CORPORATE OFFICES

1.1 REGISTERED OFFICE

The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, County of Newcastle, Wilmington, Delaware 19801. The name of its registered agent is at such address is The Corporation Trust Company.

1.2 OTHER OFFICES

The Board of Directors of the Corporation (the “BOARD”) may at any time establish other offices at any place or places where the Corporation is qualified to do business.

ARTICLE II

MEETINGS OF STOCKHOLDERS

2.1 PLACE OF MEETINGS

Meetings of stockholders shall be held at any place, within or outside the State of Delaware, as designated by the Board. In the absence of any such designation, stockholders’ meetings shall be held at the registered office of the Corporation.

2.2 ANNUAL MEETING

The annual meeting of stockholders shall be held each year on a date and at a time designated by the Board. At the annual meeting, directors shall be elected and any other proper business may be transacted.

2.3 SPECIAL MEETING

Subject to the rights of the holders of any series of Preferred Stock then outstanding, special meetings of the stockholders may be called at any time only by the Board acting pursuant to a resolution duly adopted by a majority of the Whole Board (as defined below), the Chairman of the Board or the Chief Executive Officer. Only such business shall be considered at a special meeting of stockholders as shall have been stated in the notice for such meeting. The term “Whole Board” shall mean the total number of authorized directors of the Corporation whether or not there exist any vacancies in previously authorized directorships.

2.4 NOTICE OF STOCKHOLDERS’ MEETINGS; EXCEPTION TO REQUIREMENTS OF NOTICE

All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 of these Bylaws not less than ten (10) nor more than sixty (60) calendar days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting (as authorized by the Board in its sole discretion pursuant to Section 211(a) (2) of the Delaware General Corporation Law), and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Any previously scheduled meeting of stockholders may be postponed, and, unless the Certificate of Incorporation of the Corporation (the “CERTIFICATE”) provides otherwise, any special meeting of the stockholders may be cancelled by resolution duly adopted by a majority of the Board members then in office upon public notice given prior to the date previously scheduled for such meeting of stockholders.

Whenever notice is required to be given, under the Delaware General Corporation Law, the Certificate or these Bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Corporation is such as to require the filing of a

certificate with the Secretary of State of Delaware, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

Whenever notice is required to be given, under any provision of the Delaware General Corporation Law, the Certificate or these Bylaws, to any stockholder to whom (a) notice of two (2) consecutive annual meetings, or (b) all, and at least two (2) payments (if sent by first-class mail) of dividends or interest on securities during a twelve (12) month period, have been mailed addressed to such person at such person’s address as shown on the records of the Corporation and have been returned undeliverable, the giving of such notice to such person shall not be required. Any actions or meeting which shall be taken or held without notice to such person shall have the same force and effect as if such notice had been duly given. If any such person shall deliver to the Corporation a written notice setting forth such person’s then current address, the requirement that notice be given to such person shall be reinstated. In the event that the action taken by the Corporation is such as to require the filing of a certificate with the Secretary of State of Delaware, the certificate need not state that the Corporation did not give notice to persons not required to be given notice pursuant to Section 230(b) of the Delaware General Corporation Law.

The exception in subsection (a) of the above paragraph to the requirement that notice be given shall not be applicable to any notice returned as undeliverable if the notice was given by electronic transmission.

2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE

Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his, her or its address as it appears on the records of the Corporation and otherwise is given when delivered. An affidavit of the Secretary or an Assistant Secretary, the transfer agent or other agent of the Corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

2.6 QUORUM

The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by statute or the Certificate. If, however, such quorum is not present or represented at any meeting of the stockholders, then a majority of the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed. The stockholders present at a duly called meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

2.7 ADJOURNED MEETING; NOTICE

When a meeting is adjourned to another time or place, unless these Bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof, and the means of remote communications, in any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting (as authorized by the Board in its sole discretion pursuant to Section 211(a)(2) of the Delaware General Corporation Law), are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. The Chairman of the meeting shall have the power to adjourn any meeting of stockholders for any reason and the stockholders shall have the power to adjourn any meeting of stockholders in accordance with Section 2.6 of these Bylaws.

2.8 VOTING

The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of these Bylaws, subject to the provisions of Sections 217 and 218 of the Delaware General Corporation Law (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements).

Except as otherwise provided in the provisions of Section 213 of the Delaware General Corporation Law (relating to the fixing of a date for determination of stockholders of record), or as may be otherwise provided in the Certificate, each stockholder shall be entitled to one (1) vote for each share of capital stock held by such stockholder.

In all matters, other than the election of directors and except as otherwise required by law, the affirmative vote of the majority of shares present or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.

2.9 WAIVER OF NOTICE

Whenever notice is required to be given under any provision of the Delaware General Corporation Law, the Certificate or these Bylaws, a written waiver thereof, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice, or any waiver by electronic transmission, unless so required by the Certificate or these Bylaws.

2.10 NO STOCKHOLDER ACTION BY WRITTEN CONSENT

Upon the Corporation becoming subject to the Securities Exchange Act of 1934, as amended, and any successor thereto (the “EXCHANGE ACT”), any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders.

2.11 RECORD DATE FOR STOCKHOLDER NOTICE

In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which such date shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which such date shall not be more than sixty (60) nor less than ten (10) calendar days before the date of such meeting, nor more than sixty (60) days prior to any other action.

If the Board does not so fix a record date:

(a) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

(b) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.

2.12 PROXIES

Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him, her or it by a written proxy, signed by the stockholder and filed with the Secretary of the Corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A stockholder may authorize another person or persons to act for him, her or it as proxy in the manner(s) provided under Section 212(c) of the General Corporate Law of Delaware or as otherwise provided under Delaware law. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the Delaware General Corporation Law.

2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE; STOCK LEDGER

The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) calendar days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number and classes of shares registered in the name of each stockholder. Nothing contained in this Section shall require the Corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) for a period of at least ten (10) calendar days prior to the meeting during ordinary business hours at the principal place of business of the Corporation.

In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to the stockholders of the Corporation. The list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

2.14 NOMINATIONS AND PROPOSALS BY STOCKHOLDERS AT ANNUAL MEETING

Nominations of persons for election to the Board and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the Corporation’s notice with respect to such meeting, (b) by or at the direction of the Board, or (c) by any stockholder of record of the Corporation who was a stockholder of record at the time of the giving of the notice provided for in these Bylaws, who is entitled to vote at the meeting and who has complied with the notice procedures set forth in this Section 2.14.

For nominations or other proposals of business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of the preceding paragraph, (i) the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation (as provided in the third

paragraph below), (ii) such business must be a proper matter for stockholder action under the General Corporation Law of the State of Delaware, (iii) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has (1) provided the Corporation with a Solicitation Notice (as defined below), (2) such stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s voting shares required under applicable law to carry any such proposal, or, in the case of a nomination(s), have delivered a proxy statement and form of proxy to holders of a percentage of the Corporation’s voting shares reasonably believed by such stockholder or beneficial holder to be sufficient to elect the nominee(s) proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice, and (iv) if no Solicitation Notice relating thereto has been timely provided pursuant to this Section 2.14, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section.

To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation (a) not later than the close of business on the ninetieth (90th) calendar day, nor earlier than the close of business on the one hundred and twentieth (120th) calendar day, prior to the first anniversary of the preceding year’s annual meeting, or (b) not later than the close of business on the forty-fifth (45th) calendar day, nor earlier than the close of business on the seventy-fifth (75th) calendar day, prior to the first anniversary (the “ANNIVERSARY”) of the date on which the Corporation first mailed its proxy materials for the preceding year’s annual meeting, whichever period described in clause (a) or (b) of this sentence occurs first; provided, however, that if the date of the annual meeting is advanced more than thirty (30) calendar days prior to, or delayed by more than sixty (60) calendar days after, the anniversary of the preceding year’s annual meeting, and in respect of nominations to be brought before a special meeting, where permitted, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the one hundred and twentieth (120th) calendar day prior to such meeting and not later than the close of business on the later of (i) the ninetieth (90th) calendar day prior to such annual meeting, and (ii) the tenth (10th) calendar day following the day on which Public Announcement (as defined below) of the date of such meeting is first made. Such stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to nominate for

election or reelection as a director, all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominee(s) as directors pursuant to Regulation 14A under the Exchange Act and such nominee’s written consent to be named in the proxy statement as a nominee and to serve as a director if elected, as well as a written statement executed by such person acknowledging that as a director of the Corporation, such person will owe a fiduciary duty under the Delaware General Corporation Law exclusively to the Corporation and its stockholders, (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of such business, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made, and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (ii) the class and number of shares of the Corporation that are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of the Corporation’s voting shares required under applicable law to carry the proposal or, in the case of a nomination(s), a sufficient number of holders of the Corporation’s voting shares to elect such nominee(s) (an affirmative statement of such intent, a “SOLICITATION NOTICE”).

Notwithstanding anything in the first sentence of the third paragraph of this Section 2.14 to the contrary, in the event that the number of directors to be elected to the Board is increased and there is no Public Announcement naming all of the nominee(s) for director or specifying the size of the increased Board made by the Corporation at least fifty-five (55) calendar days prior to the Anniversary, a stockholder’s notice required by this Bylaw shall also be considered timely, but only with respect to nominee(s) for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) calendar day following the day on which such Public Announcement is first made by the Corporation.

Only such persons nominated in accordance with the procedures set forth in this Section 2.14 shall be eligible to serve as directors and only such business shall be conducted at an annual

meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section. The Chairman of the meeting shall have the power and the duty to determine whether a nomination or any business proposed to be brought before the meeting has been made in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposed business or nomination shall not be presented for stockholder action at the annual meeting and shall be disregarded.

Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice (as provided in Section 2.4 above) of meeting (a) by or at the direction of the Board, or (b) by any stockholder of record of the Corporation who is a stockholder of record at the time of giving of notice provided for in this paragraph, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.14. Nominations by stockholders of persons for election to the Board, where permitted, may be made at such a special meeting of stockholders if the stockholder’s notice required by the third paragraph of this Section 2.14 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the one hundred and twentieth (120th) calendar day prior to the special meeting and not later than the close of business on the later of (a) the ninetieth (90th) calendar day prior to such special meeting, and (ii) the tenth (10th) calendar day following the day on which Public Announcement is first made of the date of the special meeting and of the nominee(s) proposed by the Board to be elected at such meeting.

For purposes of this Section 2.14, “PUBLIC ANNOUNCEMENT” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press, Reuters, or a comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission (the “COMMISSION”) pursuant to Section 13, 14 or 15(d) of the Exchange Act. In no event shall the Public Announcement of an adjournment of stockholders meeting commence a new time period for the giving of stockholder’s notice as described above.

Notwithstanding the foregoing provisions of this Section 2.14, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to matters set forth in this Section 2.14. Nothing in this Section 2.14 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

2.15 ORGANIZATION

Meetings of stockholders shall be presided over by (a) the Chairman of the Board or, in the absence thereof, (b) such person as the Chairman of the Board shall appoint or, in the absence thereof or in the event that the Chairman of the Board shall fail to make such appointment, (c) such person as the Chairman of the executive committee of the Corporation shall appoint or, in the absence thereof or in the event that the Chairman of the executive committee of the Corporation shall fail to make such appointment, any officer of the Corporation elected by the Board. In the absence of the Secretary of the Corporation, the secretary of the meeting shall be such person as the Chairman of the meeting appoints.

The Board shall, in advance of any meeting of stockholders, appoint one (1) or more inspector(s), who may include individual(s) who serve the Corporation in other capacities, including without limitation as officers, employees or agents, to act at the meeting of stockholders and make a written report thereof. The Board may designate one (1) or more persons as alternate inspector(s) to replace any inspector, who fails to act. If no inspector or alternate has been appointed or is able to act at a meeting of stockholders, the Chairman of the meeting shall appoint one (1) or more inspector(s) to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath to faithfully execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspector(s) or alternate(s) shall have the duties prescribed pursuant to Section 231 of the General Corporate Laws of Delaware or other applicable law.

The Board shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations, if any, the Chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all acts as, in the judgment of such Chairman,

are necessary, appropriate or convenient for the proper conduct of the meeting, including without limitation establishing an agenda of business of the meeting, rules or regulations to maintain order, restrictions on entry to the meeting after the time fixed for commencement thereof and the fixing of the date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at a meeting (and shall announce such at the meeting).

2.16 NOTICE BY ELECTRONIC TRANSMISSION

Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the Delaware General Corporation Law, the Certificate or these Bylaws shall be effective if given by a form of electronic transmission previously consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (a) the Corporation is unable to deliver by electronic transmission two (2) consecutive notices given by the Corporation in accordance with such consent, and (b) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation, the transfer agent or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

Notice given pursuant to the above paragraph shall be deemed given (a) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice, (b) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice, (c) if by a posting on an electronic network together with a separate notice to the stockholder of such specific posting, upon the later of (i) such posting, and (ii) the giving of such separate notice, and (d) if by any other form of electronic transmission, when directed to the stockholder. An affidavit of the Secretary or Assistant Secretary, the transfer agent or other agent of the Corporation that the notice has been given by a form of electronic transmission shall in the absence of fraud, be prima facie evidence of the facts stated therein.

For purposes of these Bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained,

retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process. This Section 2.16 shall not apply to Section 164 (failure to pay for stock; remedies), Section 296 (adjudication of claims; appeal), Section 311 (revocation of voluntary dissolution), Section 312 (renewal, revival, extension and restoration of certificate of incorporation) or Section 324 (attachment of shares of stock) of the Delaware General Corporation Law.

ARTICLE III

DIRECTORS

3.1 POWERS

The business and affairs of the Corporation shall be managed by or under the direction of the Board. In addition to the power and authorities these Bylaws expressly confer upon them, the Board may exercise all such powers of the Corporation and do all such lawful acts and things as are not required by statute, the Certificate or these Bylaws to be exercised or done by the stockholders.

3.2 NUMBER OF DIRECTORS; TERM OF OFFICE

Subject to the rights of the holders of any Preferred Stock of the Corporation to elect additional directors under specified circumstances, the authorized number of directors of the Corporation shall be fixed from time to time exclusively by the Board pursuant to a resolution duly adopted by a majority of the Board members then in office.

No reduction of the authorized number of directors shall have the effect of removing any director before such director’s term of office expires.

3.3 ELECTION AND QUALIFICATION OF DIRECTORS

Except as provided in the Certificate or Section 3.4 of these Bylaws, directors shall be classified, with respect to the time for which they severally hold office, into three (3) classes, as nearly equal in number as practicable, one (1) class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 2005, another class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 2006, and another class to be

originally elected for a term expiring at the annual meeting of stockholders to be held in 2007, with each class to hold office until its successor is duly elected and qualified. At each succeeding annual meeting of stockholders, commencing with the first annual meeting (a) directors elected to succeed those directors whose terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified, and (b) if authorized by a resolution of the Board, directors may be elected to fill any vacancy on the Board, regardless of how such vacancy shall have been created (as set forth in Section 3.4 below).

Directors need not be stockholders unless so required by the Certificate or these Bylaws, wherein other qualifications for directors may be prescribed. Elections of directors at all meetings of the stockholders at which directors are to be elected shall be by ballot and, subject to the rights of the holders of any Preferred Stock of the Corporation to elect additional directors under specified circumstances, a plurality of the votes cast thereat shall elect directors. The ballot shall state the name of the stockholder or proxy voting or such other information as may be required under the procedure established by the Chairman of the meeting. If authorized by the Board, such requirement of a ballot shall be satisfied by a ballot submitted by electronic transmission provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic submission was authorized.

3.4 RESIGNATION AND VACANCIES

Any director may resign at any time upon written notice or by electronic transmission to the Corporation.

Subject to the rights of the holders of any series of Preferred Stock of the Corporation then outstanding and unless the Board otherwise determines, newly created directorships resulting from any increase in the authorized number of directors, or any vacancies on the Board resulting from the death, resignation, retirement, disqualification, removal from office or other cause, shall be filled only by a majority vote of the directors then in office, whether or not less than a quorum, or by a sole remaining director, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires.

3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE

The Board may hold meetings, both regular and special, either within or outside the State of Delaware.

Unless otherwise restricted by the Certificate or these Bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

3.6 FIRST MEETINGS

The first meeting of each Board, including newly elected directors, shall be held immediately after, and at the same location as, the annual meeting of stockholders, unless the Board shall fix another time and place and give notice thereof (or obtain waivers of notice thereof) in the manner required herein for special meetings of directors, and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, except as provided in this Section 3.6 and provided that a quorum shall be present.

3.7 REGULAR MEETINGS

Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board.

3.8 SPECIAL MEETINGS; NOTICE

Special meetings of the Board for any purpose(s) may be called at any time by the Chairman of the Board, the Chief Executive Officer, the President or a majority of the members of the Board then in office. The person(s) authorized to call special meetings of the Board may fix the place and time of the meetings.

The Secretary shall give notice of any special meeting to each director personally or by telephone, or sent by first-class mail, overnight mail, courier service or telegram, postage or charges prepaid, addressed to each director at that director’s address as it is shown on the records of the Corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) calendar days before the time of the holding of the meeting. If the notice is delivered by telegram, overnight mail or courier, it shall be deemed adequately delivered when the telegram is delivered to the telegraph company or the notice is delivered to the overnight mail or courier service company at least forty-eight (48) hours before such meeting. If by facsimile transmission, such notice shall be deemed adequately delivered when the notice is transmitted at least twelve (12) hours before such meeting. If by telephone or hand delivery the notice shall be given at least twelve (12) hours prior to the time set for the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the Corporation.

3.9 QUORUM

At all meetings of the Board, a majority of the Whole Board shall constitute a quorum for all purposes and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board, except as may be otherwise specifically provided by statute or by the Certificate. The directors present at a duly organized meeting may continue to transact business until adjournment notwithstanding the withdrawal of enough directors to leave less than quorum.

3.10 WAIVER OF NOTICE

Whenever notice is required to be given under any provisions of the Delaware General Corporation Law or the Certificate or these Bylaws, a written waiver thereof, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to

the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate or these Bylaws.

3.11 ADJOURNED MEETING; NOTICE

If a quorum is not present at any meeting of the Board, then a majority of the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Unless otherwise restricted by the Certificate or these Bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing(s) or electronic transmission(s) are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

3.13 FEES AND COMPENSATION OF DIRECTORS

Unless otherwise restricted by the Certificate or these Bylaws, the Board shall have the authority to fix the compensation of directors.

3.14 REMOVAL OF DIRECTORS

Subject to the rights of the holders of any series of Preferred Stock of the Corporation then outstanding, unless otherwise restricted by statute, the Certificate or these Bylaws, any director, or all of the directors, may be removed from the Board, but only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of all the then outstanding shares of capital stock of the Corporation then entitled to vote at the election of directors, voting together as a single class. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.

ARTICLE IV

COMMITTEES

4.1 COMMITTEES OF DIRECTORS

The Board may from time to time, by resolution passed by a majority of the Whole Board, designate one (1) or more committees of the Board, with such lawfully delegable powers and duties as it thereby confers, with each committee to consist of one (1) or more of the directors of the Corporation. The Board may designate one (1) or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member(s) thereof present at any meeting and not disqualified from voting, whether or not such member(s) constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.

4.2 COMMITTEE MINUTES

Each committee shall keep regular minutes of its meetings and report the same to the Board when required.

4.3 MEETINGS AND ACTION OF COMMITTEES

Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these Bylaws, Section 3.5 (place of meetings and meetings by telephone), Section 3.7 (regular meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of adjournment), and Section 3.12 (action without a meeting), with such changes in the context of those Bylaws as are necessary to substitute the committee and its members for the Board and its members; provided, however, that the time of regular and special meetings of committees may also be called by resolution of the Board. The Board may adopt rules for the government of any committee not inconsistent with the provisions of these Bylaws.

4.4 SUBCOMMITTEE

Unless otherwise provided in the Certificate of Incorporation, these By-laws or the resolution of the Board of Directors designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and to delegate to a subcommittee any or all of the powers and authority of the committee.

ARTICLE V

OFFICERS

5.1 OFFICERS

The officers of the Corporation shall be a President and a Secretary. The Corporation may also have, at the discretion of the Board, a Chairman of the Board, a Vice Chairman of the Board, a Chief Executive Officer, a Chief Financial Officer, a Treasurer, one or more Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Assistant Vice Presidents, Assistant Secretaries, and Assistant Treasurers, and any such other officers as may be appointed in accordance with the provisions of Section 5.3 of these Bylaws. Any number of offices may be held by the same person.

5.2 ELECTION OF OFFICERS

The officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 of these Bylaws, shall be chosen by the Board, which shall consider such subject at its first meeting after every annual meeting of stockholders, subject to the rights, if any, of an officer under any contract of employment. Each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. A failure to elect officers shall not dissolve or otherwise affect the Corporation.

5.3 SUBORDINATE OFFICERS

The Board may appoint, or empower the Chief Executive Officer or, in the absence of a Chief Executive Officer, the President, to appoint, such other officers as the business of the Corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these Bylaws or as the Board may from time to time determine.

5.4 REMOVAL AND RESIGNATION OF OFFICERS

Subject to the rights, if any, of an officer under contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board at any regular or special meeting of the Board.

Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in such notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.

5.5 VACANCIES IN OFFICES

Any vacancy occurring in any office of the Corporation shall be filled by the Board.

5.6 CHAIRMAN OF THE BOARD

The Chairman of the Board, if such an officer be elected, shall, if present, preside at meetings of the Board and exercise and perform such other powers and duties as may from time to time be assigned to him or her by the Board or as may be prescribed by these Bylaws. If there is no Chief Executive Officer or President, then the Chairman of the Board shall also be the Chief Executive Officer of the Corporation and as such shall also have the powers and duties prescribed in Section 5.7 of these Bylaws.

5.7 CHIEF EXECUTIVE OFFICER

Subject to such supervisory powers, if any, as the Board may give to the Chairman of the Board, the Chief Executive Officer, if any, shall, subject to the control of the Board, have general supervision, direction, and control of the business and affairs of the Corporation and shall report directly to the Board. All other officers, officials, employees and agents shall report directly or indirectly to the Chief Executive Officer. The Chief Executive Officer shall see that all orders

and resolutions of the Board are carried into effect. The Chief Executive Officer shall serve as chairperson of and preside at all meetings of the stockholders. In the absence of a Chairman of the Board, the Chief Executive Officer shall preside at all meetings of the Board.

5.8 PRESIDENT

In the absence or disability of the Chief Executive Officer, the President shall perform all the duties of the Chief Executive Officer. When acting as the Chief Executive Officer, the President shall have all the powers of, and be subject to all the restrictions upon, the Chief Executive Officer. The President shall have such other powers and perform such other duties as from time to time may be prescribed for him by the Board, these bylaws, the Chief Executive Officer or the Chairman of the Board.

5.9 EXECUTIVE VICE PRESIDENT, SENIOR VICE PRESIDENT AND VICE PRESIDENT

In the absence or disability of the President, the Executive Vice President, the Senior Vice President and Vice President(s), if any, in order of their rank as fixed by the Board or, if not ranked, a Vice President designated by the Board, shall perform all the duties of the President and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the President. The Executive Vice President, the Senior Vice President, and the Vice President(s) shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board, these Bylaws, the Chairman of the Board, the Chief Executive Officer or, in the absence of a Chief Executive Officer, the President.

5.10 SECRETARY

The Secretary shall keep or cause to be kept, at the principal executive office of the Corporation or such other place as the Board may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors’ meetings or committee meetings, the number of shares present or represented at stockholders’ meetings, and the proceedings thereof. The Secretary shall keep, or cause to be kept, at the principal executive office of the Corporation or at

the office of the Corporation’s transfer agent or registrar, as determined by resolution of the Board, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation. Such share register shall be the “stock ledger” for purposes of Section 2.13 of these Bylaws.

The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board, or committee of the Board, required to be given by law or by these Bylaws. He or she shall keep the seal of the Corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the Board or by these Bylaws.

5.11 CHIEF FINANCIAL OFFICER

The Chief Financial Officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital and retained earnings.

The Chief Financial Officer shall deposit all money and other valuables in the name and to the credit of the Corporation with such depositaries as may be designated by the Board or Chief Executive Officer. The Chief Financial Officer shall disburse the funds of the Corporation as may be ordered by the Board, shall render to the Board and Chief Executive Officer, or in the absence of a Chief Executive Officer the President, whenever they request, an account of all of his or her transactions as Chief Financial Officer and of the financial condition of the Corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board or these Bylaws. In lieu of any contrary resolution duly adopted by the Board, the Chief Financial Officer shall be the Treasurer of the Corporation.

5.12 ASSISTANT SECRETARY

The Assistant Secretary(ies), if any, in the order determined by the Board (or if there be no such determination, then in the order of their election) shall, in the absence of the Secretary or in the

event of his, her or their inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board may from time to time prescribe.

5.13 ASSISTANT TREASURER

The Assistant Treasurer(s), if any, in the order determined by the Board (or if there be no such determination, then in the order of their election), shall, in the absence of the Chief Financial Officer or in the event of his, her or their inability or refusal to act, perform the duties and exercise the powers of the Chief Financial Officer and shall perform such other duties and have such other powers as the Board may from time to time prescribe.

5.14 AUTHORITY AND DUTIES OF OFFICERS

In addition to the foregoing authority and duties, all officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be designated from time to time by the Board.

ARTICLE VI

INDEMNITY

6.1 RIGHT TO INDEMNIFICATION

Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (collectively, a “PROCEEDING”), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation (or any predecessor), or is or was serving at the request of the Corporation (or any predecessor) as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise (or any predecessor of such entities), including service with respect to an employee benefit plan maintained or sponsored by the Corporation (or any predecessor) (collectively, an “INDEMNITEE”), whether the basis of such Proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the

Corporation to the fullest extent authorized by the Delaware General Corporation Law as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorney’s fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the Indemnitee’s heirs, executors and administrators; provided, however, that, except as provided in Section 6.3 below with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such Indemnitee seeking indemnification in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the Board.

6.2 RIGHT TO ADVANCEMENT OF EXPENSES

In addition to the right to indemnification conferred in Section 6.1, an Indemnitee shall also have the right to be paid by the Corporation the expenses incurred in defending against any such Proceeding in advance of its final disposition (an “ADVANCEMENT OF EXPENSES”), such Advancement to be paid by the Corporation within twenty (20) calendar days after the receipt by the Corporation of a statement(s) from the Indemnitee requesting such Advancement of Expenses from time to time; provided, however, that if the Delaware General Corporation Law requires, the payment of an Advancement of Expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including without limitation service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking (an “UNDERTAKING”), by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified for such Expenses under this Section 6.2 or otherwise. The rights to indemnification and to the Advancement of Expenses conferred in Sections 6.1 and 6.2 shall be contract rights.

6.3 RIGHT OF INDEMNITEE TO BRING SUIT

To obtain indemnification or Advancement of Expenses under this Article VI, an Indemnitee shall submit to the Corporation a written request, including such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification or Advancement of Expenses. Upon such written request, a determination, if required by applicable law, with respect to the Indemnitee’s entitlement thereto shall be made as follows: (a) if requested by the Indemnitee, by Independent Counsel (as defined below); or (b) if no request is made by the Indemnitee for a determination by Independent Counsel, (i) by the Board by a majority vote of a quorum consisting of Disinterested Directors (as defined below), or (ii) if a quorum of the Board consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to the Indemnitee; or (c) if a quorum of Disinterested Directors so directs, by the stockholders of the Corporation. In the event the determination of entitlement to indemnification or Advancement of Expenses is to be made by Independent Counsel at the request of the Indemnitee, the Independent Counsel shall be selected by the Board, unless there shall have occurred within two (2) years prior to the date of the commencement of the action, suit or proceeding for which indemnification or Advancement of Expenses is claimed a Change of Control (as defined below), in which case the Independent Counsel shall be selected by the Indemnitee unless the Indemnitee shall request that such selection be made by the Board. If it is so determined that the Indemnitee is entitled to indemnification or Advancement of Expenses, payment to the Indemnitee shall be made within ten (10) calendar days after such determination.

If a claim under Section 6.1 or 6.2 is not paid in full by the Corporation within thirty (30) calendar days after a written claim has been received by the Corporation as set forth above, except in the case of a claim for an Advancement of Expenses, in which case the applicable period shall be twenty (20) calendar days, the Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the Indemnitee shall be entitled to be paid also the expense of prosecuting such claim. In (a) any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an Advancement of Expenses where the

required Undertaking, if any is required, has been tendered to the Corporation) it shall be a defense that, and (b) in any suit brought by the Corporation to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the Corporation shall be entitled to recover such Expenses upon a determination that, the Indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board, a committee of the Board, Independent Counsel or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in the General Corporate Law of Delaware, nor an actual determination by the Corporation (including its Board, a committee of the Board, Independent Counsel or its stockholders) that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such suit brought by the Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to enforce a right to indemnification or to an Advancement of Expenses hereunder, or brought by the Corporation to recover and Advancement of Expenses pursuant to the terms of an Undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such Advancement of Expenses, shall be on the Corporation.

6.4 NON-EXCLUSIVITY OF RIGHTS

If a determination shall have been made pursuant to this Article VI that the Indemnitee is entitled to indemnification or Advancement of Expenses, the Corporation shall be bound by such determination in any judicial proceeding commenced pursuant to Section 6.3 above. The Corporation shall be precluded from asserting in any judicial proceeding commenced pursuant to Section 6.3 above that the procedures and presumptions of these Bylaws are not valid, binding and enforceable and shall stipulate in such proceeding that the Corporation is bound by all the provisions of this Article VI.

The rights to indemnification and to the Advancement of Expenses conferred in this Article VI shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Certificate, these Bylaws, agreement, vote of stockholders or Disinterested

Directors or otherwise. No repeal or modification of this Article VI shall in any way diminish or adversely affect the rights of any director, officer, employee or agent of the Corporation hereunder in respect of any occurrence or matter arising prior to any such repeal or modification.

If any provision(s) of Article VI of these Bylaws shall be held to be invalid, illegal or unenforceable for any reasons whatsoever: (a) the validity, legality and enforceability of the remaining provisions of such Article shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Article VI shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

6.5 INSURANCE

The Corporation may maintain insurance to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise, against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.

6.6 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION

The Corporation may, to the extent authorized from time to time by the Board, grant rights to indemnification and to the Advancement of Expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article VI with respect to the indemnification and Advancement of Expenses of directors and officers of the Corporation.

6.7 DEFINITIONS

For the purposes of this Article VI:

(a) “CHANGE OF CONTROL” means:

(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “PERSON”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of either (A) the then outstanding shares of common stock of the Corporation (the

“OUTSTANDING CORPORATION COMMON STOCK”), or (B) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the “OUTSTANDING CORPORATION VOTING SECURITIES”); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (I) any acquisition directly from the Corporation or any acquisition from other stockholders where (aa) such acquisition was approved in advance by the Board, and (bb) such acquisition would not constitute a change of control under subsection (iii) of this definition; (II) any acquisition by the Corporation; (III) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation; or (IV) any acquisition by any corporation pursuant to a transaction which complies with subsections (A), (B) or (C) of subsection (iii) of this definition; or

(ii) Individuals who, as of the date hereof, constitute the Board (the “INCUMBENT BOARD”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies by or on behalf of a Person other than the Board; or

(iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation (a “BUSINESS COMBINATION”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business

Combination (including without limitation a corporation which as a result of such transaction owns the Corporation or all or substantially all of the Corporation’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Corporation or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, twenty percent (20%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the board of directors, providing for such Business Combination; or

(iv) Approval by the stockholders of a complete liquidation or dissolution of the Corporation.

(b) “DISINTERESTED DIRECTOR” means a director of the Corporation who is not and was not a party to the matter in respect of which indemnification or Advancement of Expenses is sought by the Indemnitee.

(c) “INDEPENDENT COUNSEL” means a law firm, a member of a law firm or an independent practitioner that is experienced in matters of corporation law and shall include any person who, under the applicable standards of professional conduct then prevailing, would not have a conflict of interest in representing either the Corporation or the Indemnitee in an action to determine the Indemnitee’s rights under this Article VI.

Any notice, request or other communication required or permitted to be given to the Corporation under this Article VI shall be in writing and either delivered in person or sent by telecopy, telex, telegram, overnight mail or courier service, or certified or registered mail, postage prepaid, return receipt requested, to the Secretary of the Corporation and shall be effective only upon receipt by the Secretary.

ARTICLE VII

RECORDS AND REPORTS

7.1 MAINTENANCE AND INSPECTION OF RECORDS

The Corporation shall, either at its principal executive office or at such place or places as designated by the Board, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these Bylaws, as may be amended to date, minute books, accounting books and other records.

Any such records maintained by the Corporation may be kept on, or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to the provisions of the Delaware General Corporation Law. When records are kept in such manner, a clearly legible paper form produced from or by means of the information storage device or method shall be admissible in evidence, and accepted for all other purposes, to the same extent as an original paper form accurately portrays the record.

Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Corporation’s stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in Delaware or at its principal place of business.

7.2 INSPECTION BY DIRECTORS

Any director shall have the right to examine the Corporation’s stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his or her position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the Corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.

7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS

Unless otherwise directed by the Board, the President, or any other person authorized by the President, is authorized to vote, represent, and exercise on behalf of the Corporation all rights incident to any and all shares of any other corporation(s) standing in the name of the Corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

ARTICLE VIII

GENERAL MATTERS

8.1 CHECKS

From time to time, the Board shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the Corporation, and only the persons so authorized shall sign or endorse those instruments.

8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS

The Board, except as otherwise provided in these Bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation. Such authority may be general or confined to specific instances.

Unless so authorized or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

8.3 STOCK CERTIFICATES; PARTLY PAID SHARES

The shares of the Corporation shall be represented by certificates, provided that the Board may provide by resolution that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the Corporation by the Chairman of the Board, or the President or Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

The Corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the Corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

8.4 SPECIAL DESIGNATION ON CERTIFICATES

If the Corporation is authorized to issue more than one (1) class of stock or more than one (1) series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the Delaware General Corporation Law, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

8.5 LOST CERTIFICATES

Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Corporation and cancelled at the same time. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require, or may require any transfer agent, if any, for the shares to require, the owner of the lost, stolen or destroyed certificate, or his, her or its legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

8.6 CONSTRUCTION; DEFINITIONS

Unless the context requires otherwise, the general provisions, rules of construction and definitions in the Delaware General Corporation Law shall govern the construction of these Bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

8.7 DIVIDENDS

The directors of the Corporation, subject to any restrictions contained in the Certificate, may declare and pay dividends upon the shares of its capital stock pursuant to the Delaware General Corporation Law. Dividends may be paid in cash, in property or in shares of the Corporation’s capital stock.

The directors of the Corporation may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the Corporation, and meeting contingencies.

8.8 FISCAL YEAR

The fiscal year of the Corporation shall be fixed by resolution of the Board and may be changed by resolution of the Board.

8.9 SEAL

The Corporation may have a corporate seal, which may be adopted or altered at the pleasure of the Board, and may use the same by causing it or a facsimile thereof, to be impressed or affixed or in any other manner reproduced.

8.10 TRANSFER OF STOCK

Upon surrender to the Corporation or the transfer agent of the Corporation, if any, of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer (as determined by legal counsel to the Corporation), it shall be the duty of the Corporation, as the Corporation may so instruct its transfer agent, if any, to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books.

8.11 REGISTERED STOCKHOLDERS

The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE IX

AMENDMENTS

The Bylaws of the Corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the Corporation may, in its Certificate, confer the power to adopt, amend or repeal bylaws upon the Board. The fact that such power has been so conferred upon the Board shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws. Notwithstanding the foregoing, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by the Certificate, the amendment or repeal of all or any portion of Article II, Section 3.2 (number of directors), Section 3.3 (election, qualification and term of office of directors), Section 3.4 (resignation and vacancies), Section 3.14 (removal of directors), Article VI or this Article IX by the stockholders of the Corporation shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of the then outstanding shares of voting stock entitled to vote generally in the election of directors, voting together as a single class.

EX-4.1 5 dex41.htm SECURITIES PURCHASE AGREEMENT DATED DECEMBER 30, 2004 Securities Purchase Agreement dated December 30, 2004

EXHIBIT 4.1

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (this “Agreement”) is dated as of December 30, 2004 by and among WorldSpace, Inc., a Maryland corporation (“WSI-Maryland”), WorldSpace, Inc., a Delaware corporation (“WSI-Delaware” and together with WSI-Maryland, the “WorldSpace Parties”) and the investors listed on the Schedule of Investors attached hereto (individually, an “Investor” and collectively, the “Investors”).

WHEREAS:

A. The WorldSpace Parties and each Investor is executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) of the United States Securities Act of 1933, as amended (the “Securities Act”).

B. WSI-Delaware has authorized a series of convertible notes of WSI-Delaware, in substantially the form attached hereto as Exhibit A (as amended or modified from time to time, collectively, the “Notes”), which Notes shall be convertible into shares of Common Stock (as defined below) in accordance with the terms of the Notes.

C. Each Investor wishes to purchase, and WSI-Delaware wishes to sell, upon the terms and conditions stated in this Agreement, the principal amount of Notes set forth opposite such Investor’s name in column (3) on the Schedule of Investors (the aggregate amount of which Notes for all Investors shall be $155,000,000) (as converted, collectively, the “Conversion Shares”).

D. On the Closing Date, the parties hereto will execute and deliver a Registration Rights Agreement, substantially in the form attached hereto as Exhibit B (as amended or modified from time to time, the “Registration Rights Agreement”), pursuant to which WSI-Delaware will agree to provide certain registration rights with respect to the Conversion Shares under the Securities Act and the rules and regulations promulgated thereunder, and applicable state securities laws.

E. The Notes and the Conversion Shares collectively are referred to herein as the “Securities”.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the WorldSpace Parties and each Investor hereby agree as follows:

ARTICLE I

Definitions

Section 1.1 Definitions. As used in this Agreement, the following terms shall have the following meanings:

“ACA” means the Australian Communications Authority.

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with such referenced Person and includes, without limitation, (a) any Person who is an officer, director or direct or indirect beneficial holder of at least ten percent (10%) of the then outstanding capital stock of such Person, and any of the Family Members of any such Person, (b) any Person of which such referenced Person and/or its Affiliates (as defined in clause (a) above), directly or indirectly, either beneficially own(s) at least ten percent (10%) of the then outstanding equity securities or constitute(s) at least a ten percent (10%) equity participant, (c) in the case of a referenced Person who is an individual, Family Members of such Person, and (d) in the case of any referenced Person that is an Investor, any Person for which that Investor or its investment adviser, general partner or other Person or entity serving in a similar capacity, or any of their respective Affiliates, serves as general partner and/or investment adviser or in a similar capacity, and all mutual funds, hedge funds, or other pooled investment vehicles or entities under the control or management of or under common control with such Investor or the general partner or investment adviser thereof or any Person serving in a similar capacity, or any Affiliate of any of them, or any Affiliates of any of the foregoing.

“Agreement” has the meaning set forth in the Preamble.

“Agreement of Merger” means the Agreement of Merger between WSI-Maryland and WSI-Delaware, a true, correct and complete copy of which is attached hereto as Exhibit C.

“Alcatel Payables” means the current payables outstanding owed to Alcatel Space pursuant to the Alcatel In-Orbit Delivery Contract, dated October 8, 1995, as amended, between Alcatel Space and WorldSpace Satellite Company, which amount shall not be in the excess of $39,300,000 and as the same may be reduced from time to time.

“Anti-Money Laundering/OFAC Laws has the meaning set forth in Section 3.33.

“ART” means the means the French Autorité de Régulation des Télécommunications.

“Audited Financials” has the meaning set forth in Section 3.10.

“Benefit Plan” has the meaning set forth in Section 3.25(a).

“Board” means the board of directors of the Company.

“Business” means the respective businesses of the Company and the Company’s Subsidiaries.

“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

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“Business Intellectual Property” means the Owned Intellectual Property and the Licensed Intellectual Property, and all Computer Software, Computer Hardware and Data.

“Business Trade Secrets” has the meaning set forth in Section 3.18(l).

“Bylaws” means (a) prior to the Merger, the by-laws of WSI-Maryland in effect on the date hereof and (b) following the Merger, the by-laws of WSI-Delaware .

“Certificate of Incorporation” means (a) prior to the Merger, the Certificate of Incorporation of WSI-Maryland in effect on the date hereof and (b) following the Merger, the Certificate of Incorporation of WSI-Delaware as filed with the Secretary of State of the State of Delaware on December 20, 2004.

“Claims” has the meaning set forth in Section 8.1(a).

“Class B Equivalents” has the meaning set forth in Section 7.3.

“Class B Shares” means the shares of Class B common stock, par value $0.01 per share, of WSI-Delaware.

“Closing” has the meaning set forth in Section 2.1(a).

“Closing Date” has the meaning set forth in Section 2.1(b).

“Code” means the Internal Revenue Code of 1986, as amended.

“Common Stock” means the shares of Class A Common Stock, par value $.01 per share, of WSI-Delaware.

“Common Stock Equivalents” means, collectively, Options and Convertible Securities.

“Communication Licenses” means all licenses, permits, orders or other authorizations issued by the FCC, the ACA, the ART, the ITU, and any equivalent authority in each other jurisdiction in which the Company or any of its Subsidiaries operates or as presently proposed to be operated.

“Company” means (a) prior to the Merger, WSI-Maryland and (b) following the Merger, WSI-Delaware.

“Computer Hardware” means any computer hardware, equipment and peripherals of any kind and of any platform, including desktop and laptop personal computers, handheld computerized devices, servers, mid-range and mainframe computers, process control and distributed control systems, and all network and other communications and telecommunications equipment.

“Computer Software” means any and all computer programs, including operating system and applications software, implementations of algorithms, and program

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interfaces, whether in source code or object code form (including, but not limited to, all of the foregoing that is installed on the Computer Hardware) and all documentation, including user manuals relating to the foregoing.

“Confidentiality Agreements” has the meaning set forth in Section 10.8.

“Contingent Obligations” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

“Contracts” has the meaning set forth in Section 3.21.

“Conversion Shares” has the meaning set forth in the Preamble.

“Convertible Securities” means any stock or securities (other than Options) convertible into or exercisable or exchangeable for shares of Common Stock.

“Data” means all information and data, whether in printed or electronic form and whether contained in a database or otherwise.

“Disabling Devices” means computer software viruses, time bombs, logic bombs, Trojan horses, trap doors, back doors, or other computer instructions, intentional devices or techniques that are designed to threaten, infect, assault, vandalize, defraud, disrupt, damage, disable, maliciously encumber, hack into, incapacitate, infiltrate or slow or shut down a computer system or any component of such computer system, including any such device affecting system security or compromising or disclosing user data.

“Dormant Subsidiary” means a Subsidiary which does not (i) own or hold any assets or property, (ii) engage in any business or activity and (iii) have any revenue.

“Due Diligence Materials” has the meaning set forth in Section 3.38(b).

“Effective Registration” means that the Common Stock is registered pursuant to Section 12 or Section 15 of the Exchange Act.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Escrow Agreement” means that certain Escrow Agreement dated September 30, 2003 among Stonehouse, WSI-Maryland, WIN, WorldSpace Satellite Company Ltd. and Tri-State Commercial Closings, Inc., a true, complete and accurate copy of which is attached hereto as Exhibit D.

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“Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

“Exchange Agreement” means the Exchange Agreement dated December 29, 2004 by and among WSI-Maryland, WSI-Delaware, WIN and Yenura, a true, correct and complete copy of which is attached hereto as Exhibit E.

“Family Member” with respect to a natural person means (a) a member of the specified person’s immediate family, whether by blood or adoption, which shall include his or her spouse, siblings, descendants, parents or spouses (or surviving spouses) of descendants, or (b) a trust, corporation, limited liability company, partnership or other entity, all of the beneficial interests in which shall be held directly or indirectly by such person or one or more persons described in clause (a).

“FCC” means the United States Federal Communications Commission.

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

“Financials” has the meaning set forth in Section 3.10.

“GAAP” means generally accepted accounting principles of the United States applied on a consistent basis.

“Governmental Authority” means any government, court, regulatory, self-regulatory, administrative agency or commission or other governmental agency, authority or instrumentality, domestic or foreign, of competent jurisdiction.

“Hazardous Substances” has the meaning set forth in Section 3.19(b).

“IDI/Yenura Purchase and Sale Agreement” means that certain Purchase and Sale Agreement, dated as of December 29, 2004, between Industrial Development Inc., as seller, and Yenura, as buyer, relating to certain debt obligations of WIN, a true, correct and complete copy of which is attached hereto as Exhibit F.

“Indebtedness” of any Person means, without duplication, (a) all indebtedness for borrowed money, (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services including, without limitation, “capital leases” in accordance with GAAP (other than trade payables entered into in the ordinary course of business), (c) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (f) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP, consistently applied for the periods covered thereby, is classified as a capital lease, (g) all indebtedness referred to in clauses (a) through (f)

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above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (h) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (g) above.

“Indemnified Parties” has the meaning set forth in Section 8.1.

“Indemnifying Party” has the meaning set forth in Section 8.2.

“Insolvent” means (a) the present fair saleable value of the Company’s assets is less than the amount required to pay the Company’s total Indebtedness, (b) the Company is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, (c) the Company intends to incur or believes that it will incur debts that would be beyond its ability to pay as such debts mature or (d) the Company has unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted.

“Insurance Policies” has the meaning set forth in Section 3.30.

“Intellectual Property” means all (a) foreign and domestic trademarks, service marks, brand names, certification marks, collective marks, d/b/a’s, Internet domain names, logos, symbols, trade dress, assumed names, fictitious names, trade names, and other indicia of origin, all applications and registrations for all of the foregoing, and all goodwill associated therewith and symbolized thereby, including, but not limited to, all extensions, modifications and renewals of same; (b) foreign and domestic inventions, discoveries and ideas, whether patentable or not, and all patents, registrations, and applications therefor, including, but not limited to, divisions, continuations, continuations-in-part and renewal applications, and including, but not limited to, renewals, extensions and reissues; (c) Trade Secrets; (d) foreign and domestic published and unpublished works of authorship, whether copyrightable or not, copyrights therein and thereto, and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof; and (e) all other intellectual property or proprietary rights and claims or causes of action arising out of or related to any infringement, misappropriation or other violation of any of the foregoing, including, but not limited to, rights to recover for past, present and future violations thereof.

“Interim Financials” has the meaning set forth in Section 3.10.

“Investment Company Act” means the Investment Company of 1940, as amended.

“Investor” has the meaning set forth in the Preamble.

“IRS” means the Internal Revenue Service.

“ITU” means the International Telecommunication Union.

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“Legal Requirement” means any constitution, act, statute, law, ordinance, treaty, rule, regulation or official interpretation of, or judgment, injunction, order, decision, decree, license, permit or authorization issued by, any Governmental Authority.

“Letter Agreement” has the meaning set forth in Section 7.14.

“Licensed Intellectual Property” means Intellectual Property that the Company and its Subsidiaries are licensed or otherwise permitted by other Persons to use.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, charge, security interest, easement, covenant, right of way, restriction, equity or encumbrance of any nature whatsoever in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“Losses” means any and all losses, claims, damages, liabilities, settlement costs and expenses, including, without limitation, costs of preparation and reasonable attorneys’ fees.

“Management Stockholders” means each of Noah A. Samara and any of his affiliates, including, without limitation, TelUS and Yenura .

“Material Adverse Effect” means any change in or effect on the Company or its business that, individually or in the aggregate, would have a material adverse effect on (a) the business, operations, properties (including intangible properties), condition (financial or otherwise), results of operations, assets, liabilities, regulatory status or prospects of the Company, individually, or of the Company and its Subsidiaries, taken as a whole or (b) on the ability of the Company or its Subsidiaries to perform their respective obligations hereunder, or under the other Transaction Documents or the agreements or instruments to be entered into or filed in connection therewith or herewith.

“Material Subsidiary” means (a) each of AsiaSpace Ltd, AfriSpace Ltd., WorldSpace India Private Ltd., WorldSpace (China) and, prior to the WIN Merger, WIN, (b) any “Significant Subsidiary” as such term is defined in Rule 1-02 of Regulation S-X of the Securities Act, or (c) any other Subsidiary, existing from time to time, with total assets exceeding 10% of the total assets of the Company and its Subsidiaries on a consolidated basis as of the end of the most recently completed fiscal quarter.

“Merger” means the merger of the WSI-Maryland into WSI-Delaware, pursuant to the Agreement of Merger.

“Notes” has the meaning set forth in the Preamble.

“OFAC” has the meaning set forth in Section 3.33.

“Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

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“Owned Intellectual Property” means Intellectual Property owned by the Company or its Subsidiaries.

“PATRIOT Act” has the meaning set forth in Section 3.33.

“Permitted Indebtedness” has the meaning defined in the Notes.

“Permitted Liens” means (a) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (b) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (c) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (d) Liens incurred in connection with any Permitted Indebtedness provided that the Notes are secured ratably with any such secured Permitted Indebtedness, (e) any Lien in favor of Stonehouse solely with respect to the Stonehouse Royalty Accounts granted pursuant to the Stonehouse Royalty Agreement (as defined below), and (f) Liens securing the Company’s obligations under the Notes.

“Person” means any individual, firm, corporation, partnership, limited liability company, trust, joint venture, Governmental Authority or other entity, and shall include any successor (by merger or otherwise) of such entity.

“PFIC” means a “passive foreign investment company” within the meaning of Section 1296 of the Code.

“Public Sale” means any sale of Securities to the public pursuant to a public offering registered under the Securities Act or to the public through a broker or market-maker pursuant to the provisions of Rule 144 (or any successor rule) adopted under the Securities Act.

“Purchase Price” has the meaning set forth in Section 2.1(c).

“Registered” as used in Section 3.18(f), means issued, registered, renewed or the subject of a pending application.

“Registration Rights Agreement” has the meaning set forth in the Preamble.

“Restructuring Documents” means, collectively, (a) the IDI/Yenura Purchase and Sale Agreement, (b) the Saifcom/Yenura Purchase and Sale Agreement, (c) the Exchange Agreement and (d) all exhibits, schedules and ancillary agreements contemplated by any of the foregoing.

“Returns” means returns, reports, information statements and other documentation (including any additional or supporting materials) filed or maintained, or required to be filed or maintained, in connection with the calculation, determination, assessment or collection of any tax and shall include amended returns required as a result of examination adjustments made by the IRS or other tax authority.

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“Rule 144” means collectively, the Rule 144 or Rule 144A promulgated under the Securities Act.

“Saifcom/Yenura Purchase and Sale Agreement” means that certain purchase and sale agreement between Saifcom Establishment, as seller, and Yenura, as buyer, dated December 29, 2004, relating to a debt obligation of WIN, a true, correct and complete copy of which is attached hereto as Exhibit G.

“SEC” means the United States Securities and Exchange Commission.

“Securities” has the meaning set forth in the Preamble.

“Securities Act” has the meaning set forth in the Preamble .

“Stonehouse” means Stonehouse Capital Ltd., a Cayman Islands corporation.

“Stonehouse Loan Agreement” means the Amended and Restated Stonehouse Loan Agreement and Guarantee dated April 21, 2000 by and among Stonehouse, WSI-Maryland, WIN and WorldSpace Satellite Company Ltd., a true, correct and complete copy of which is attached hereto as Exhibit H.

“Stonehouse Restructuring Agreement” means the Loan Restructuring Agreement dated September 30, 2003, by and among Stonehouse, WSI-Maryland, WIN and WorldSpace Satellite Company Ltd., as amended by the First Amendment, dated as of September 28, 2004, as further amended by the Second Amendment dated as of December 30, 2004, true, correct and complete copies of which are attached hereto as Exhibit I.

“Stonehouse Royalty Agreement” means the Royalty Agreement dated September 28, 2003 by and between Stonehouse, WSI-Maryland, WIN and WorldSpace Satellite Company Ltd., as amended by the First Amendment dated as of September 28, 2004, a true, correct and complete copy of which is attached hereto as Exhibit J.

“Subsidiary” means any entity in which a Person, directly or indirectly, owns capital stock or holds an equity or similar interest which ownership entitles the Person to elect a majority of the board of directors or similar governing body of such entity; provided, however, that a Subsidiary of the Company shall not include any Dormant Subsidiary.

“Suits” has the meaning set forth in Section 3.18(c).

“Tax” means any and all federal, state, local, foreign and other taxes, levies, fees, imposts, duties, governmental fees and charges of whatever kind (including any interest, penalties or additions to the tax imposed in connection therewith or with respect thereto), including, without limitation, taxes imposed on, or measured by, income, franchise, profits, gross income or gross receipts, and also ad valorem, value added, sales, use, service, real or personal property, capital stock, stock transfer, license, payroll, withholding, employment, social security, workers’ compensation, unemployment compensation, utility, severance, production, excise, stamp, occupation, premium, windfall profits, environmental, transfer and gains taxes and customs duties.

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“Trade Secrets” means confidential and proprietary information, trade secrets and know-how, including, but not limited to, processes, schematics, databases, formulae, drawings, prototypes, models, designs and customer lists.

“Transaction Documents” means this Agreement, the Notes, the Registration Rights Agreement and any other documents or agreements executed in connection with the transactions contemplated hereunder or thereunder.

“WIN” means WorldSpace International Network Inc., a British Virgin Islands company.

“WIN Merger” means the merger of WIN with and into WSI-Maryland, pursuant to the WIN Merger Agreement.

“WIN Merger Agreement” means the Agreement of Merger, dated December 30, 2004, between WIN and WSI-Maryland, a true, correct and complete copy of which is attached hereto as Exhibit K.

“WorldSpace Parties” has the meaning set forth in the Preamble.

“WSI-Delaware” has the meaning set forth in the Preamble.

“WSI-Maryland” has the meaning set forth in the Preamble.

“Yenura” means Yenura Pte. Ltd., a private company limited by shares organized under the laws of the Republic of Singapore.

ARTICLE II

Purchase and Sale of the Notes

Section 2.1 Purchase and Sale of the Notes.

(a) Subject to the satisfaction (or waiver) of the conditions set forth in Article V and Article VI below, the Company shall issue and sell to each Investor, and each Investor severally, but not jointly, agrees to purchase from the Company on the Closing Date, the principal amount of Notes as is set forth opposite such Investor’s name in column (3) on the Schedule of Investors (the “Closing”).

(b) Closing. The date and time of the Closing (the “Closing Date”) shall be 12:00 p.m., New York City time, on December 30, 2004 (or such later date as is mutually agreed to by the Company and each Investor) after notification of satisfaction (or waiver) of the conditions to the Closing set forth in Article V and Article VI below, at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022.

(c) Purchase Price. The aggregate purchase price for the Notes to be purchased by each Investor at the Closing (the “Purchase Price”) shall be the amount set forth opposite such Investor’s name in column (4) of the Schedule of Investors. Each Investor shall pay $1.00 for each $1.00 of principal amount of Notes to be purchased by such Investor at the Closing.

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Section 2.2 Form of Payment. On the Closing Date, (i) each Investor shall pay its Purchase Price to the Company for the Notes to be issued and sold to such Investor at the Closing, by wire transfer of immediately available funds in accordance with the Company’s written wire instructions provided by the Company at least two Business Days prior to the Closing Date, and (ii) the Company shall deliver to each Investor the Notes (in the principal amounts as such Investor shall request as set forth in the Schedule of Investors) which such Investor is then purchasing, duly executed on behalf of the Company and registered in the name of such Investor or its designee.

ARTICLE III

Representations and Warranties of the WorldSpace Parties

The WorldSpace Parties, jointly and severally, represent and warrant to each of the Investors as follows:

Section 3.1 Organization and Standing. The Company and each of its Subsidiaries are corporations, limited liability companies or limited partnerships duly organized and validly existing in good standing under the laws of the jurisdiction in which they are incorporated or formed, and have the requisite corporate, limited liability company or limited partnership power and authority, as applicable, to own their assets and properties and to carry on their business as presently being conducted and as presently proposed to be conducted. Each of the Company and its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect.

Section 3.2 Capitalization.

(a) As of the date hereof, (i) the authorized capital stock of WSI-Maryland consists of (1) 20,000,000 shares of common stock, par value $.01 per share, of which 9,255,789 shares are issued and outstanding and 6,526,242 shares are reserved for issuance pursuant to Company stock options and (2) 5,000,000 shares of Class A preferred stock, par value $.01 per share, of which as of the date hereof none are issued and outstanding or reserved for issuance and (ii) the authorized capital stock of WSI-Delaware consists of 200,000,000 shares of Common Stock, of which none are issued and outstanding or reserved for issuance.

(b) As of the Closing Date, but immediately prior to the Closing, after giving effect to (1) the transactions contemplated by the Restructuring Documents, (2) the WIN Merger and (3) the Merger, the authorized capital stock of the Company will consist of (i) 100,000,000 shares of Common Stock, of which 4,475,789 shares shall be issued and outstanding, 20,657,663 shares shall be reserved for issuance pursuant to Company stock options and the Company’s restricted stock plan, 18,343,423 shares shall be reserved for issuance pursuant to the conversion of the Notes and 430,000 shares shall be reserved for issuance

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pursuant to warrants exercisable for shares of Common Stock (ii) 75,000,000 shares of Class B Shares, of which 32,662,308 shares shall be issued and outstanding and 12,540,763 shares shall be reserved for issuance pursuant to Company stock options, and (iii) 25,000,000 shares of preferred stock, par value $.01 per share, of which as of such date none shall be issued and outstanding or reserved for issuance.

(c) Immediately prior to the Closing, a number of shares of Common Stock shall have been duly authorized and reserved for issuance which equals 120% of the maximum number of shares Common Stock issuable upon conversion of all of the Notes.

(d) The outstanding shares of capital stock of the WorldSpace Parties are duly authorized, validly issued, fully paid and non-assessable and are not subject to any preemptive or subscription rights. All capital stock of each of the WorldSpace Parties has been issued in compliance with all applicable federal and state securities laws.

(e) All of the Securities, when issued and delivered in accordance with the Transaction Documents, will be free and clear of any Liens, taxes and other charges and each of the Investors will have good title thereto.

(f) Except as set forth on Schedule 3.2(f), there are no outstanding warrants, options, rights, calls, other securities, agreements, subscriptions or other commitments, arrangements or undertakings pursuant to which the Company may become obligated to issue, deliver or sell, or cause to be issued, delivered or sold, any capital stock or other securities of the Company or to issue, grant, extend or enter into any such warrant, option, right, security, agreement, subscription or other commitment, arrangement or undertaking. There are no outstanding options, rights, calls, other securities, agreements, or other commitments, arrangements or undertakings pursuant to which the Company or its Subsidiaries are or may become obligated to redeem, repurchase or otherwise acquire or retire any capital stock or other securities of the Company or its Subsidiaries, respectively.

(g) Set forth on Schedule 3.2(g) is a true, correct and complete list of the record holders of shares of capital stock of the Company and each of its Material Subsidiaries as of the date hereof and as of the Closing Date after giving effect to (i) the transactions contemplated by the Restructuring Documents, (ii) the WIN Merger and (iii) the Merger. As of the date specified therein, such holders own of record all the outstanding capital stock of the Company, each of them so owning the number of shares set forth opposite such holder’s name on Schedule 3.2(g), and in the case of shares held by the Management Stockholders, free and clear of all Liens or any other restriction on the right to vote, sell or otherwise dispose of such capital stock, other than those arising under applicable securities laws. Except as set forth on Schedule 3.2(g), there are no bonds, debentures, notes or other indebtedness or securities of the Company having the right to vote (or convertible into, or exercisable or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote. Set forth on Schedule 3.2(g) is a true, correct and complete list (except as otherwise noted on such schedule) of the record holders of options and warrants exercisable for shares of capital stock of each of the WorldSpace Parties as of the date hereof and after giving effect to (i) the transactions contemplated by the Restructuring Documents, (ii) the WIN Merger and (iii) the Merger.

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(h) Other than the rights granted in the Registration Rights Agreement and except as set forth in Schedule 3.2(h), there are no outstanding contractual rights which permit the holder thereof to cause the Company to file a registration statement under the Securities Act or which permit the holder thereof to include securities of the Company or any of its Subsidiaries in a registration statement filed by the Company or any of its Subsidiaries under the Securities Act, and there are no outstanding agreements or other commitments which otherwise relate to the registration of any securities of the Company under the Securities Act.

(i) Assuming that the representations and warranties of the Investors set forth in Sections 4.2 and Section 4.3 are true and correct, the offer, sale and issuance of the Securities as contemplated by this Agreement are exempt from the registration requirements of the Securities Act, and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption. The Company is not required to make or obtain any filings, registrations, qualifications, notifications or consents or approvals of or with any Governmental Authority (including, without limitation, under the Securities Act, the Exchange Act and the Investment Company Act) in connection therewith except under state securities or “blue sky” laws, which, if required, have been made or obtained prior to the Closing.

(j) Other than with respect to distributions as set forth in the Certificate of Incorporation, all other rights, such as voting powers, designations, preferences, rights and qualifications, limitations or restrictions of the Class B Shares issued pursuant to the Agreement of Merger and the Restructuring Documents are identical to that of the Common Stock.

Section 3.3 Subsidiaries. A complete list of the Subsidiaries of the Company and their Subsidiaries (together with the capitalization of such entities) is set forth on Schedule 3.3. Neither the Company nor any of its Subsidiaries is a participant in any joint venture, partnership or similar arrangement other than as set forth on Schedule 3.3. The Company owns, directly or indirectly, 100% of each of its Subsidiaries, other than PT WorldSpace Indonesia in which the Company indirectly owns 75% of the outstanding common stock. Set forth on Schedule 3.3 is a true, correct and complete list of the record holders of shares of capital stock of each of the Company’s Subsidiaries as of the date hereof and after giving effect to the transactions contemplated by the Merger, the WIN Merger and the Restructuring Documents. Such holders own of record and beneficially all the outstanding capital stock of the Company’s Subsidiaries, each of them so owning the number of shares set forth opposite such holder’s name on Schedule 3.3, and in the case of shares held by the Company or any of its Subsidiaries, free and clear of all Liens or any other restriction on the right to vote, sell or otherwise dispose of such capital stock. Except as set forth on Schedule 3.3, there are no bonds, debentures, notes or other indebtedness or securities of the Company or its Subsidiaries having the right to vote (or convertible into, or exchangeable or exercisable for, securities having the right to vote) on any matters on which stockholders of the Subsidiaries of the Company or their respective Subsidiaries may vote. Schedule 3.3 sets forth all of the Company’s Dormant Subsidiaries.

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Section 3.4 Authority; Valid and Binding Agreements.

(a) Each of the Company and its Subsidiaries has all requisite corporate, limited liability company or limited partnership power and authority, as applicable, to (i) own, lease, operate and encumber its properties and assets, and to carry on its respective business as presently conducted and as presently proposed to be conducted, (ii) execute and deliver each of the Transaction Documents to which it is a party, (iii) issue and sell the Securities, (iv) issue the Conversion Shares upon conversion of the Notes and (v) consummate the other transactions contemplated hereby and thereby. The execution, delivery and performance by the Company of the Transaction Documents and the filing of all documents, certificates and instruments to be executed by the Company in connection therewith and the authorization, issuance (or reservation for issuance, as the case may be), sale and delivery of the Securities have been duly authorized by all requisite corporate action on the part of the Company, the Board and the Company’s stockholders. The Transaction Documents, when duly executed and delivered by the Company, will constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles whether in a proceeding in equity or at law.

(b) The Stonehouse Restructuring Agreement has been duly and validly authorized, has been duly and validly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles whether in a proceeding in equity or at law. The Stonehouse Royalty Agreement has been duly and validly authorized by the Company and has been duly and validly executed by the Company and upon release pursuant to the terms of the Escrow Agreement shall be duly and validly delivered by the Company and shall constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles whether in a proceeding in equity or at law. All representations and warranties made by the Company and its Subsidiaries in the Stonehouse Restructuring Agreement and the Stonehouse Royalty Agreement are true, correct and complete in all material respects thereof. As of the Closing Date, the Company and each of its Subsidiaries shall have performed all of its obligations required under the Stonehouse Restructuring Agreement (other than as contemplated by this Agreement) and the Stonehouse Royalty Agreement and shall not be in breach of, or in default in the performance or observance of, any material obligation, term, covenant or condition contained therein. Prior to the date hereof, each Investor has been provided with true, correct and complete copies of each of the Stonehouse Restructuring Agreement and the Stonehouse Royalty Agreement, and all exhibits and schedules thereto.

(c) The Restructuring Documents have been duly and validly authorized, have been duly and validly executed and delivered by the WorldSpace Parties and constitute the legal, valid and binding obligation of the WorldSpace Parties, enforceable against the WorldSpace Parties in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar

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laws affecting the enforcement of creditors’ rights generally and general equitable principles whether in a proceeding in equity or at law. All representations and warranties made by the WorldSpace Parties and their Subsidiaries in the Restructuring Documents are true, correct and complete in all material respects. As of the Closing Date, the WorldSpace Parties and each of their Subsidiaries shall have performed all of their obligations required under the Restructuring Documents. Prior to the date hereof, each Investor has been provided with a true, correct and complete copies of each of the Restructuring Documents.

Section 3.5 Stonehouse Restructuring Agreement. As of the Closing Date, each Condition Precedent (as defined in the Stonehouse Restructuring Agreement) to the effectiveness of the Restructuring (as defined in the Stonehouse Restructuring Agreement) under the Stonehouse Restructuring Agreement shall have been satisfied or waived other than the Condition Precedent contained in Section 3.01(c) of the Stonehouse Restructuring Agreement. Upon the Closing, the Condition Precedent contained in Section 3.01(c) of the Stonehouse Restructuring Agreement shall be satisfied and the Restructuring shall be effective with the result being that each of the Company and the Subsidiaries will be unconditionally and irrevocably released from all obligations and liabilities under the Stonehouse Loan Agreement and Stonehouse and all Indebtedness of the Company and the Subsidiaries outstanding under the Stonehouse Loan Agreement will be deemed to have been irrevocably discharged and satisfied.

Section 3.6 Valid Issuance. The Notes, when issued, sold and delivered in accordance with the terms of this Agreement, will be duly and validly issued, fully paid, and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under the Transaction Documents and under applicable state and federal securities laws, and will not have been issued in violation of, and will not be subject to, any preemptive or subscription rights and will not result in the antidilution provisions of any security of the Company becoming applicable. The Conversion Shares have been duly authorized and validly reserved for issuance and, upon issuance, will be duly and validly issued, fully paid and nonassessable, free of restrictions on transfer other than restrictions on transfer under the Transaction Documents and under applicable state and federal securities laws, and will not have been issued in violation of, and will not be subject to, any preemptive or subscription rights and will not result in the antidilution provisions of any security of the Company becoming applicable.

Section 3.7 No General Solicitation; Placement Agent’s Fees. Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Securities. Except as set forth in Schedule 3.7, no agent, broker, investment banker, Person or firm acting on behalf of the Company or any Affiliate of the Company or any stockholder (direct or indirect) of the Company or under the authority of the Company is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee directly or indirectly from any of the parties hereto in connection with any of the transactions contemplated hereby, other than UBS Investment Bank.

Section 3.8 Conflicts; Consents. The execution and delivery by the Company of the Transaction Documents and the consummation of the transactions contemplated hereby and thereby (including, without limitation, the issuance and sale of the Securities) and compliance with the terms hereof and thereof will not result in the creation or imposition of any

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Lien of any nature whatsoever upon any of the properties or assets of the Company or its Subsidiaries, or breach, conflict with, or result in any violation of or default (with or without notice or lapse of time or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of any benefit under and, in the case of clauses (i) and (iii), except as would not have a Material Adverse Effect, (i) any loan or credit agreement, note, bond, mortgage, indenture, lease, deed of trust, agreement, contract, commitment, license (including, without limitation, the Communication Licenses), franchise, permit, understanding, instrument (including without limitation, the Stonehouse Restructuring Agreement, the Stonehouse Royalty Agreement and the Restructuring Documents), or obligation or other arrangement to which the Company or any its Subsidiaries is a party or by which the Company, any of its Subsidiaries or any of their properties or assets may be bound or affected, (ii) any certificate of incorporation, certificate of formation, any certificate of designation or other constitutive, organizational or governing documents of the Company or any of its Subsidiaries, any capital stock of the Company or any of its Subsidiaries or bylaws of the Company or any of its Subsidiaries or (iii) any Legal Requirement applicable to the Company, any of its Subsidiaries or any of their respective properties or assets. No consent, approval, order, license, permit or authorization of, or notification, registration, declaration or filing with, any Governmental Authority or any other Person is required to be obtained or made by or with respect to the Company or any of its Subsidiaries in connection with the execution, delivery and performance by the Company of any of the Transaction Documents, the issuance and sale of the Securities, or the consummation of the transactions contemplated hereby or thereby except under state securities or “blue sky” laws, which if required, have been issued or obtained prior to the date hereof.

Section 3.9 Application of Takeover Protections; Rights Agreement. The Company and the Board have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Certificate of Incorporation or the laws of the jurisdiction of its formation or otherwise which is or could become applicable to any Investor as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Securities and any Investor’s ownership of the Securities. The Company has not adopted a stockholder rights plan relating to accumulations of beneficial ownership of capital stock (including Common Stock) or a change in control of the Company which will apply to any of the Investors.

Section 3.10 Financial Information. The Company has furnished to each Investor true, complete and correct copies of (i) the unaudited, consolidated balance sheets of the Company and related consolidated statements of operations, as at and for the nine months ended September 30, 2004 (the “Interim Financials”) and (ii) the audited, consolidated balance sheet, statement of operations and stockholders’ equity and cash flows as of and for the years ended December 31, 2003 and 2002 (the “Audited Financials”, and together with the Interim Financials, the “Financials”), which are attached hereto as Schedule 3.10(a). The Financials are in accordance with the books and records of the Company and have been prepared in conformity with GAAP and fairly present the consolidated financial condition, results of operations and cash flows of the Company at or for the respective periods then ended subject, in the case of the Interim Financials, to normal year-end adjustments. The forecasts and projections previously delivered to the Investors by the Company and attached hereto as Schedule 3.10(b) have been prepared in good faith and on the basis of assumptions that are fair and reasonable in light of current and reasonably foreseeable circumstances.

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Section 3.11 Solvency. The Company has not taken any steps to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so. After giving effect to the transactions contemplated by the Stonehouse Restructuring Agreement, the Restructuring Documents and the transactions contemplated hereby and the other Transaction Documents, the Company will not be Insolvent.

Section 3.12 Internal Accounting Controls. The Company and its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences, except, in each case, where the failure to maintain such systems of internal accounting controls would not have a Material Adverse Effect.

Section 3.13 Independent Accountants. Grant Thornton LLP, who have certified the Audited Financials, are independent public accountants within the meaning of the Securities Act.

Section 3.14 Undisclosed Liabilities. Except as set forth in Schedule 3.14 and the Audited Financials, neither the Company nor any of its Subsidiaries has or, as a result of the transactions contemplated in the Transaction Documents, will have, any liabilities or obligations of any nature (whether accrued, absolute, contingent, unasserted or otherwise and whether due or to become due) except for liabilities and obligations incurred in the ordinary course of business consistent with past practice which, individually or in the aggregate, do not exceed $500,000. The reserves, if any, established by the Company or the lack of reserves, if applicable, are reasonable based upon facts and circumstances known by the Company on the date hereof and there are no loss contingencies that are required to be accrued by Statement of Financial Accounting Standard No. 5 of the Financial Accounting Standards Board which are not provided for on the balance sheet of the Company and its Subsidiaries as of December 31, 2003, which is included in the Audited Financials.

Section 3.15 Taxes. Each of the Company and its Subsidiaries has filed or caused to be filed in a timely manner (within any applicable extension periods) and in the appropriate jurisdictions all material Returns required to be filed with a Governmental Authority responsible for the imposition of a Tax and such Returns are true, correct and complete in all material respects. Each of the Company and its Subsidiaries has paid all material Taxes and other assessments due from and payable by the Company and its Subsidiaries on or prior to the date hereof on a timely basis except as to those set forth in Schedule 3.15(a). The charges, accruals, and reserves for Taxes with respect to the Company and its Subsidiaries as reflected in

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the Financials are adequate to cover Tax liabilities of the Company and its Subsidiaries accruing throughout the date thereof. Except as set forth in Schedule 3.15(b), no known Liens have been filed and no claims are being asserted by or against the Company or any of its Subsidiaries with respect to any Taxes (other than Liens for Taxes not yet due and payable). Neither the Company nor any of its Subsidiaries has elected pursuant to the Code to be treated as an S corporation or a collapsible corporation pursuant to Section 1362(a) or Section 341(f) of the Code, or has made any other elections pursuant to the Code (other than elections that relate solely to entity classification, methods of accounting, depreciation, or amortization) that would have a material effect on the business, properties, prospects, or financial condition of the Company and its Subsidiaries, individually or in the aggregate. Except as set forth in schedule 3.15(a), each of the Company and its Subsidiaries has complied in all material respects with all applicable Legal Requirements relating to the payment and withholding of Taxes (including withholding and reporting requirements under Sections 1441 through 1464, 3401 through 3406, and 6041 and 6049 of the Code and similar provisions under any other applicable Legal Requirements) and, within the time and in the manner prescribed by law, has withheld from wages, fees and other payments and paid over to the proper governmental or regulatory authorities all amounts required. Except as set forth in Schedule 3.15(a), neither the Company nor any of its Subsidiaries has received notice of assessment or proposed assessment of any Taxes claimed to be owed by it or any other Person on its behalf. Except as set forth in Schedule 3.15(a), no Returns filed by or on behalf of the Company or any of its Subsidiaries with respect to Taxes are currently being audited or examined. Except as set forth in Schedule 3.15(a), neither the Company nor any of its Subsidiaries has received notice of any such audit or examination. Except as set forth in Schedule 3.15(a), no issue has been raised by any taxing authority with respect to the Company or any of its Subsidiaries in any audit or examination which, by application of similar principles, could reasonably be expected to result in a proposed material adjustment to the liability for Taxes for any period not so examined. No claim has ever been made, or, to the knowledge of the Company, is threatened or pending, by any authority in a jurisdiction where the Company or any of its Subsidiaries, respectively, does not file Returns that the Company or any of its Subsidiaries is or may be subject to taxation by that jurisdiction, and neither the Company nor any of its Subsidiaries has received any notice or request for information from any such authority. Neither the Company nor any of its Subsidiaries has been a member of an affiliated group (as defined in Section 1504(a) of the Code) or filed or been included in a combined, consolidated or unitary income tax return other than the affiliated group of which the Company is currently the common parent. Neither the Company nor any of its Subsidiaries is required to include in income any adjustment pursuant to Section 481(a) of the Code by reason of a voluntary change in accounting methods initiated by the Company or any of its Subsidiaries, and no Governmental Authority has proposed an adjustment or change in accounting method. All transactions or methods of accounting that could give rise to a substantial understatement of federal income tax as described in Section 6662(d)(2)(B)(i) of the Code have been adequately disclosed on the Company’s and its Subsidiaries’ federal income tax returns in accordance with Section 6662(d)(2)(B) of the Code. Neither the Company nor any of its Subsidiaries is a party to any Tax sharing or Tax indemnity agreement or any other agreement of a similar nature that remains in effect. Neither the Company nor any of its Subsidiaries has consented to any waiver of the statute of limitations for the assessment of any Taxes or has requested any extension of time for the payment of any Taxes. Neither the Company nor any of its Subsidiaries has ever held a material beneficial interest in any other Person, other than those

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listed in Schedule 3.15(c). Neither the Company nor any of its Subsidiaries has made an election to be taxed as an “S corporation” under Subchapter S of the Code or any comparable provision of local, state or foreign law. Neither the Company nor any of its Subsidiaries is obligated to make, nor as a result of any event connected with the transactions contemplated by this Agreement will become obligated to make, any payment that would not be deductible under Section 280G of the Code. Neither the Company nor any Subsidiary of the Company is a PFIC, and the Company does not anticipate that the Company or any additional foreign Subsidiary will become a PFIC in the foreseeable future.

Section 3.16 Assets Other than Real Property. Except as set forth in Schedule 3.16, each of the Company and its Subsidiaries has good and valid title to, or a valid leasehold interest in, as applicable, all of its properties and assets reflected in the Audited Financials or acquired after the date thereof, free and clear of all Liens except (i) Permitted Liens, (ii) statutory liens for the payment of current taxes that are not yet delinquent and which do not affect the properties or assets of the Company or any of its Subsidiaries in any material respect and (iii) such as have been disposed of in the ordinary course of business . All tangible personal property owned by the Company and its Subsidiaries has been maintained in good operating condition and repair, except (x) for ordinary wear and tear, and (y) where such failure would not have a Material Adverse Effect. All assets leased by the Company or any of its Subsidiaries are in the condition required by the terms of the lease applicable thereto during the term of such lease and upon the expiration thereof. Such assets, together with the assets listed on Schedule 3.17 and Schedule 3.18, constitute all of the material properties, interests, assets and rights held for use or used in connection with the business and operations of the Company and its Subsidiaries and constitute all those necessary to continue to operate the business of the Company and its Subsidiaries consistent with current and historical practice and as presently contemplated to be conducted. Except as indicated in the preceding sentence, this Section 3.16 does not relate to the real property or Intellectual Property of the Company or its Subsidiaries; such items are covered under Section 3.17 and Section 3.18, respectively.

Section 3.17 Real Property. Schedule 3.17 sets forth a complete list of all real property and interests in real property leased by the Company as of the date hereof. The Company does not and has not owned any real property at any time. The Company has good and valid leasehold interest in all real property and interests in real property shown on Schedule 3.17 to be leased by it free and clear of all Liens except where such Liens would not have a Material Adverse Effect. Except as set forth on Schedule 3.17, there exists no default, or any event which upon notice or the passage of time, or both, would give rise to any default, in the performance of the Company or by any lessor under any such lease, nor, to the knowledge of the Company, is the landlord of any such lease in default except where any such default would not have a Material Adverse Effect.

Section 3.18 Intellectual Property and Related Matters.

(a) Schedule 3.18(a) sets forth a true and complete list of all (i) Registered or otherwise material Owned Intellectual Property and (ii) Licensed Intellectual Property.

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(b) Except to the extent as would not have a Material Adverse Effect, all Owned Intellectual Property is valid, subsisting and enforceable, is not subject to any outstanding order, judgment or decree restricting its use or adversely affecting the Company’s or its Subsidiaries’ rights thereto. To the knowledge of the Company, all Licensed Intellectual Property is valid, subsisting and enforceable, and is not subject to any outstanding order, judgment or decree restricting its use or adversely affecting or reflecting the Company’s or its Subsidiaries’ rights thereto.

(c) To the knowledge of the Company, neither the Company nor any of its Subsidiaries is violating or has violated any Intellectual Property rights. Except as set forth in Schedule 3.18(c), there are no suits, actions, reissues, reexaminations, public protests, interferences, arbitrations, mediations, oppositions, cancellations, Internet domain name dispute resolutions or other proceedings (collectively, “Suits”) pending, decided, threatened or asserted concerning any claim or position that the Company or any of its indemnitees have violated any Intellectual Property rights.

(d) There are no Suits or claims pending, decided, threatened or asserted concerning the Owned Intellectual Property, and, to the knowledge of the Company, no valid basis for any such Suits or claims exists. Except as set forth on Schedule 3.18(d), to the knowledge of the Company, there are no Suits or claims pending, decided, threatened or asserted concerning the Licensed Intellectual Property or the right of the Company or any Subsidiary to use the Licensed Intellectual Property, and no valid basis for any such Suits or claims exists.

(e) The Company and its Subsidiaries own or otherwise hold valid rights to use all Business Intellectual Property used or contemplated to be used in the operation of the Business as currently conducted and as currently contemplated to be conducted in the future, except as such failure would not have a Material Adverse Effect. All such rights are free of all Liens and, except as set forth in Schedule 3.18(e), are fully assignable by the Company and its Subsidiaries to any Person, without payment, consent of any Person or other condition or restriction. The completion of the transactions contemplated by this Agreement will not alter or impair the ownership or right of the Company or any Subsidiary to use any of the Business Intellectual Property. The Business Intellectual Property constitutes all material Intellectual Property, Computer Software, Computer Hardware and Data that is used in, contemplated to be used in, or necessary for the conduct of the Business as currently conducted and as currently contemplated to be conducted in the future. To the knowledge of the Company, no Person is violating any Business Intellectual Property.

(f) The Company and its Subsidiaries have timely made all filings and payments with the appropriate foreign and domestic agencies required to maintain in subsistence all Registered Owned Intellectual Property, except where any failure to make such payments or filings would not have a Material Adverse Effect. All documentation necessary to confirm and effect the Company’s and its Subsidiaries’ ownership of the Owned Intellectual Property, if acquired from other Persons, has been recorded in the United States Patent and Trademark Office, the United States Copyright Office and other official offices.

(g) No Person other than the Company and its Subsidiaries has any ownership interest in, or a right to receive a royalty or similar payment with respect to, any of the

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Owned Intellectual Property. Except as set forth in Schedule 3.18(g), neither the Company nor any of its Subsidiaries has granted any options, licenses, assignments or agreements of any kind relating to (i) ownership of rights in Owned Intellectual Property; or (ii) the marketing or distribution of Owned Intellectual Property.

(h) Neither the Company nor any of its Subsidiaries has entered into any agreement to indemnify any other Person against any charge of infringement of any third party Intellectual Property, except for customary infringement indemnities agreed to in the ordinary course of business and included as part of the Company’s or its Subsidiaries’ contracts for the license or sale of products or services. Neither the Company nor any of its Subsidiaries has entered into any agreement granting any third party the right to bring infringement actions or otherwise to enforce rights with respect to the Intellectual Property of the Company or its Subsidiaries.

(i) All inventors, including current or former employees of the Company and its Subsidiaries, are appropriately named as inventors on any issued patent or pending patent application listed in Schedule 3.18(a) as being owned by the Company or its Subsidiaries, as applicable. Notwithstanding the foregoing, all such inventors have assigned their right, title and interest in such issued patents or patent applications to the Company or its Subsidiaries, as the case may be, or their predecessors in interest to such patents or patent applications, except where the failure to so assign would not have a Material Adverse Effect. All of the patents and pending patent applications listed in Schedule 3.18(a) as being owned by the Company or its Subsidiaries are currently in compliance with formal legal requirements (including payment of filing, examination and maintenance fees and proofs of working or use), and the Company is not aware of anything which would render any claim of such patents or pending patent applications invalid, unallowable, or unenforceable, and they are not subject to any maintenance fees or taxes or actions falling due within ninety days after the date of Closing. The Company is further not aware of any prior art material to the patentability of the inventions claimed in any patents and pending patent applications listed in Schedule 3.18(a) as being owned by the Company or its Subsidiaries that was, or has not been, disclosed to the U.S. Patent Office. For each patent, pending patent application, and disclosure listed in Schedule 3.18(a) as being owned by the Company or its Subsidiaries, each of the Company and its Subsidiaries has complied with any applicable contractual obligations, laws, rules, or regulations, regarding inventions conceived or reduced to practice under a grant or other support from an agency or entity of the U.S. government, in whole or in part, including without limitation any requirements to elect to retain title to any federally funded invention except where the failure to so comply would not have a Material Adverse Effect.

(j) Except as set forth on Schedule 3.18(j), each former and current employee, officer and consultant of the Company and its Subsidiaries has executed and delivered to the Company or a Subsidiary of the Company an agreement providing for the assignment to and ownership by the Company or a Subsidiary of the Company, as applicable, of all inventions and work product produced by such Person while in the employ of the Company or any of its Subsidiaries. Except as set forth on Schedule 3.18(j), no former or current employee, officer or consultant of the Company or any of its Subsidiaries has excluded works or inventions made prior to his or her employment with the Company or a Subsidiary of the Company from an assignment of inventions agreement entered into with the Company or any of its Subsidiaries.

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The Company is not aware that any employees of the Company or any of its Subsidiaries is obligated under any Contract, or subject to any judgment, decree or order of any court or administrative agency, that would conflict with the Business.

(k) The Company believes that it does not, and that it will not be necessary to, utilize any inventions of any of the Company’s or its Subsidiaries’ employees, officers or consultants (or people they currently intend to hire or engage) created prior to their employment by the Company or any of its Subsidiaries. The Company has no knowledge of any violation, or any claim of any violation, by any of the Company’s or its Subsidiaries’ employees, officers or consultants of any non-disclosure, non-competition, non-solicitation, assignment of inventions or similar agreements or obligations that such employee or consultant has with either the Company, any of its Subsidiaries or any third party, and the Company will use commercially reasonable efforts to prevent any such violation. The Company has not received any notice alleging that any such violation has occurred.

(l) The Company has taken all reasonable measures to protect the secrecy, confidentiality and value of all Trade Secrets used in the Business (collectively, “Business Trade Secrets”), including, but not limited to, entering into appropriate confidentiality agreements with all officers, directors, employees, and other Persons with access to the Business Trade Secrets. None of the Business Trade Secrets has, to the knowledge of the Company, been disclosed or has been authorized to be disclosed to any Person other than to employees or agents of the Company or its Subsidiaries for use in connection with the Business or pursuant to a confidentiality or non-disclosure agreement that reasonably protects the interests of the Company and its Subsidiaries in and to such matters. To the knowledge of the Company, no unauthorized disclosure of any Business Trade Secrets has been made.

(m) The Company and its Subsidiaries have a policy of requiring all employees, agents, consultants or contractors who have contributed to or participated in the creation, development, improvement or modification of Business Intellectual Property to assign all of their rights therein to the Company or its Subsidiaries, as applicable. Except as set forth in Schedule 3.18(m), to the knowledge of the Company, no Person (other than the Company or a Subsidiary of the Company) has any reasonable basis for claiming any right, title or interest in and to any such Business Intellectual Property.

(n) Schedule 3.18(n) sets forth a true and complete list of all (i) Computer Hardware that is used or held for use in the Business; and (ii) Computer Software that is used or held for use in the Business other than Computer Hardware and Computer Software used in the Company’s satellites.

(o) Other than those errors and defects inherent in Computer Hardware that are generally known within the information technology industry, the Computer Hardware that is used in or held for use in the Business is in good working condition (normal wear and tear excepted). There has not been any malfunction with respect to such Computer Hardware since January 1, 2002 that has not been remedied or replaced in all material respects.

(p) All Computer Software that is used in or held for use in the Business is in machine readable form and is in good working condition (normal wear and tear

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excepted). To the knowledge of the Company, such Computer Software (i) contains no Disabling Devices; and (ii) other than those errors and defects inherent in Computer Software that are generally known within the information technology industry, has not suffered from any material and recurring malfunctions since January 1, 2002 that has not been remedied in all material respects.

(q) Except as set forth on Schedule 3.18(q), there are no Suits or claims that are pending or have been decided, or that have been threatened or asserted by or against the Company or any of its Subsidiaries, concerning any Computer Software, Computer Hardware or Data that is used in or held for use in the Business, and, to the knowledge of the Company, there is no valid basis for any such Suits or claims.

(r) All Data that is used in or held for use in the Business does not infringe or violate the rights of any Person or otherwise violate any law or regulation.

Section 3.19 Compliance with Applicable Laws.

(a) Each of the Company and its Subsidiaries are in compliance with all applicable Legal Requirements, including, without limitation, laws, statutes, codes, regulations, standards, guidelines, guidance documents, and directives or consents (including consent decrees and administrative orders) at any time in effect relating to the environment, hazardous materials and occupational safety and health and to the status of the Company or its Subsidiaries as a contractor with any Governmental Authority, except for such instances of noncompliance as would not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth on Schedule 3.19(a), no investigation or review by any Governmental Authority with respect to the Company or its Subsidiaries is pending or, to the knowledge of the Company, threatened.

(b) There are no past or present events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance or continued compliance by the Company or its Subsidiaries with any laws or statutes, regulation, code, plan, order, guidance documents, directives or consents (including consent decrees and administrative orders), judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder, relating to pollution or protection of the environment or, to the knowledge of the Company, which may give rise to any common law or legal liability of the Company or its Subsidiaries including liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §§ 9601 et seq., as amended, or similar federal, state, county, municipal, or local laws, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, notice of violation, study or investigation against or affecting the Company or its Subsidiaries, based on or related to the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling, or the emission, discharge, release or threatened release into the environment of any pollutant, contaminant, chemical, or industrial, toxic or hazardous substance or waste (“Hazardous Substance”).

(c) There has been no release, discharge, deposit, disposal or contamination of or by a Hazardous Substance caused by the Company or any of its Subsidiaries or any person or entity lawfully acting by or through the Company or any of its Subsidiaries on,

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under or contiguous to any property owned or leased by the Company or any of its Subsidiaries, and to the knowledge of the Company, none of such properties has been used at any time as a landfill, storage, or waste disposal site.

(d) To the knowledge of the Company, no Hazardous Substance generated, manufactured, processed, used, treated, or stored by the Company, its Subsidiaries or any Person lawfully acting by or through the Company or its Subsidiaries has been disposed of or treated at any site or location, other than property leased or owned by the Company or its Subsidiaries, that was not authorized or licensed to receive such materials for disposal or treatment, or at any site or location for which the Company or any of its Subsidiaries has received a notice of potential liability or request for information, or at any site or location that has been placed or proposed to be placed on any cleanup list or is the subject of a claim, order or directive or consent (including consent decrees and administrative orders), request, settlement or other demand from any person or entity for removal, remedial, response, corrective action, abatement or cleanup.

Section 3.20 Communication Licenses. The Company and the Subsidiaries have filed with the FCC, the ACA, the ART and the ITU all reports, documents, instruments, information and applications required to be filed pursuant to the rules and regulations of the FCC, the ACA, the ART and the ITU, and have obtained all Communication Licenses which are required for the operation of the business of the Company and the Subsidiaries except where the failure to so file would not have a Material Adverse Effect. Except as would not have a Material Adverse Effect, such Communications Licenses are in full force and effect and, to the knowledge of the Company, there are no pending modification, amendment or revocation proceedings initiated by the FCC, the ACA, the ART and the ITU or any equivalent authority in any other jurisdiction in which the Company operates which, if determined against the Company, would have a Material Adverse Effect; to the knowledge of the Company, fees due and payable to domestic and foreign Governmental Authorities pursuant to the rules governing Communications Licenses held by the Company and its Subsidiaries, the nonpayment of which, with the giving of notice or the lapse of time or both would constitute grounds for revocation thereof, have been timely paid, except as would not have a Material Adverse Effect. Each of the Company and the Subsidiaries is in compliance with the terms of the Communications Licenses, as applicable, and there is no condition of which the Company or any of the Subsidiaries has received notice, nor, to the knowledge of the Company, is there any proceeding threatened, by any domestic or foreign governmental authority, which would cause the termination, suspension, cancellation or non-renewal of any of the Communications Licenses, or the imposition of a penalty or fine by any domestic or foreign Governmental Authority, except, in each case, as would not have a Material Adverse Effect; the Company and the Subsidiaries have all necessary consents, authorizations and approvals to utilize the Communication Licenses in the manner and for the purposes described in the Due Diligence Materials.

Section 3.21 Contracts. Schedule 3.21 contains a true, correct and complete list or description of all current written contracts, agreements, arrangements and other instruments (“Contracts”) to which the Company or any of its Subsidiaries is a party which: (a) relate to any Indebtedness of the Company or any of its Subsidiaries in excess of $250,000 individually, (b) relate to the employment or compensation of any director, officer or stockholder, or any employee, consultant, independent contractor or other agent of the Company or any of its

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Subsidiaries or any Affiliate of such Person, or, to the knowledge of the Company, any Affiliate of such Person, receiving total compensation in excess of $100,000 in any given year, (c) relate to the sale or other disposition of any assets, properties or rights (other than the sale of inventory) of the Company, or relating to the sale or other disposition of any Subsidiary’s material assets, properties or rights (other than the sale of inventory of such Subsidiary), (d) relate to the distribution of the products or services of the Company excess of $250,000 in any given year of the products or services of any Subsidiary of the Company, (e) which restrict the ability of the Company or its Subsidiaries to do business in any geographic area or grant to any Person exclusive or similar rights in any line of business or in any geographic area, provisions restricting or affecting the development, manufacture or distribution of such products or services, or provisions restricting the ability of the Company’s or its Subsidiaries’ ability to solicit employees of another Person or restrict another Person’s ability to solicit the Company’s or its Subsidiaries’ employees, (f) are with any stockholder or, to the knowledge of the Company, any Affiliate of any stockholder, (g) contain any warranty by the Company or its Subsidiaries to any other Person with respect to any product or service offered by the Company (other than those offered in the ordinary course of business consistent with past practice), (h) are with any Governmental Authority, (i) contain provisions providing for indemnification by the Company or its Subsidiaries with respect to infringements of proprietary rights (other than indemnification obligations arising from purchase or sale agreements entered into in the ordinary course of business), (j) relate to the Business Intellectual Property, including but not limited to Contracts granting the Company or its Subsidiaries rights to use the Business Intellectual Property, consulting agreements related to the development of Business Intellectual Property, trademark coexistence agreements, trademark consent agreements and nonassertion agreements, or (k) are otherwise material to the business, results of operations, financial condition or prospects of the Company or its Subsidiaries. All Contracts are valid, binding and in full force and effect as to the Company and its Subsidiaries, and there is no default, or any event which upon notice or the passage of time, or both, would give rise to any material default, in the performance of the Company or its Subsidiaries nor, to the knowledge of the Company, in the performance of any other party to any such Contracts except where such default would not have a Material Adverse Effect. The Company has not entered into or is not planning to enter into any side letters, contracts or other agreements with any of the Investors other than the Transaction Documents. Neither the Company nor any of its Subsidiaries is currently a party to any oral contract of the nature that would require disclosure under this Section 3.21 if such oral contract were in writing.

Section 3.22 Litigation. Except as set forth on Schedule 3.22, there are no suits, actions, claims, arbitrations or other legal, administrative or regulatory proceedings or investigations, whether at law or in equity, or before or by any Governmental Authority, pending or, to the knowledge of the Company, threatened by or against or affecting the Company, its Subsidiaries or any of their respective properties or assets or any of the Company’s or the Company’s Subsidiaries’ officers or directors. The foregoing includes, without limitation, suits, actions, claims, arbitrations, proceedings or investigations pending or threatened involving the prior employment of any of the Company’s or its Subsidiaries employees, their use in connection with the business of the Company or its Subsidiaries of any information or techniques allegedly proprietary to such former employers or their obligations under any agreements with prior employers. There is no outstanding judgment, order, injunction or decree of any Governmental Authority or arbitrator against the Company, its Subsidiaries, or to the knowledge of the Company, against any of their properties, assets or business.

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Section 3.23 Absence of Changes or Events. Since December 31, 2003, the business of the Company and its Subsidiaries has been conducted in the ordinary course consistent with past practice and there has not been any event, violation or other matter that could, individually or in the aggregate, have a Material Adverse Effect. Except as set forth on Schedule 3.23 and except as contemplated by the Restructuring Documents, the Stonehouse Restructuring Agreement, the Stonehouse Royalty Agreement and the Transaction Documents, since December 31, 2003, the business of the Company and its Subsidiaries has been conducted in the ordinary course consistent with past practice and there has not been:

(a) any obligation or liability (whether absolute, accrued, contingent or otherwise, and whether due or to become due) incurred by the Company or any of its Subsidiaries, in excess of $100,000 individually, other than obligations under customer contracts, current obligations and liabilities, in each case incurred in the ordinary course of business and consistent with past practice;

(b) any payment, discharge, satisfaction or settlement of any suit, action, claim, arbitration, proceeding or obligation of the Company or any of its Subsidiaries, except in the ordinary course of business and consistent with past practice;

(c) any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock of the Company or any of its Subsidiaries or any direct or indirect redemption, purchase or other acquisition of any such shares;

(d) any issuance or sale, or any contract entered into for the issuance or sale, of any shares of capital stock or securities convertible into or exercisable or exchangeable for shares of capital stock of the Company or any of its Subsidiaries;

(e) any sale, assignment, pledge, encumbrance, transfer or other disposition of any tangible asset of the Company or any of its Subsidiaries (other than sales or the licensing of its products to customers in the ordinary course of business consistent with past practice), or any sale, assignment, transfer or other disposition of any Intellectual Property (other than licensing of products of the Company or its Subsidiaries in the ordinary course of business and on a non-exclusive basis);

(f) any creation of any Lien on any property of the Company or any of its Subsidiaries except for Liens in existence on the date of this Agreement that are described on Schedules 3.15, 3.16, 3.17 or 3.18;

(g) any write-downs of the value of any asset of the Company or its Subsidiaries or any write-off as uncollectible of any accounts or notes receivable or any portion thereof except in the ordinary course of business and in a magnitude consistent with historical practice;

(h) any cancellation of any debts or claims or any material amendment, termination or waiver of any rights of the Company or its Subsidiaries;

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(i) any capital expenditure or commitment or addition to property, plant or equipment of the Company or its Subsidiaries in excess of $100,000 individually or $200,000 in the aggregate;

(j) any material increase in the compensation of employees of the Company or its Subsidiaries (including any increase pursuant to any written bonus, pension, profit sharing or other benefit or compensation plan, policy or arrangement or commitment), or (ii) any increase in any such compensation or bonus payable to any officer, stockholder, director, consultant or agent of the Company or any of its Subsidiaries having an annual salary or remuneration in excess of $100,000;

(k) any damage, destruction or loss (whether or not covered by insurance) affecting any asset or property of the Company or any of its Subsidiaries resulting in liability or Loss in excess of $100,000;

(l) any change in the independent public accountants of the Company or its Subsidiaries or any material change in the accounting methods or accounting practices followed by the Company or its Subsidiaries, as applicable, or any material change in depreciation or amortization policies or rates;

(m) any resignation or termination of any officer, key employee or group of employees of the Company or any of its Subsidiaries;

(n) any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder; or

(o) any agreement, whether in writing or otherwise, to take any of the actions specified in the foregoing items (a) through (n).

Section 3.24 Certain Employee Matters.

(a) Except as set forth on Schedule 3.24(a), the employment of each officer and employee of the Company is terminable at the will of the Company. The Company and its Subsidiaries have complied in all material respects with all applicable laws relating to wages, hours, equal opportunity, collective bargaining, workers’ compensation insurance and the payment of social security and other taxes. The Company is not aware that any officer, key employee or group of employees intends to terminate his, her or their employment with the Company or its Subsidiaries, as the case may be, nor does the Company have a present intention, or know of a present intention of its Subsidiaries, to terminate the employment of any officer, key employee or group of employees. There are no pending or, to the knowledge of the Company, threatened employment discrimination charges or complaints against or involving the Company or its Subsidiaries before any federal, state, or local board, department, commission or agency, or unfair labor practice charges or complaints, disputes or grievances affecting the Company or its Subsidiaries.

(b) Since the Company’s inception, neither the Company nor its Subsidiaries has experienced any labor disputes, union organization attempts or work stoppage due to labor disagreements. There are no unfair labor practice charges or complaints against the

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Company or its Subsidiaries pending, or to the knowledge of the Company, threatened before the National Labor Relations Board or any comparable state agency or authority. There are no written or oral contracts, commitments, agreements, understandings or other arrangements with any labor organization, nor work rules or practices agreed to with any labor organization or employee association, applicable to employees of the Company or any of its Subsidiaries, nor is the Company or its Subsidiaries a party to, or bound by, any collective bargaining or similar agreement; there is not, and since the Company’s inception there has not been, any representation of the employees of the Company or its Subsidiaries by any labor organization and, to the knowledge of the Company, there are no union organizing activities among the employees of the Company or its Subsidiaries, and to the knowledge of the Company, no question concerning representation has been raised or is threatened respecting the employees of the Company or its Subsidiaries.

Section 3.25 Benefit Plans.

(a) Schedule 3.25(a) contains a true, correct and complete list of each pension, retirement, savings, deferred compensation and profit-sharing plan and each stock option, stock appreciation, stock purchase, performance share, bonus or other incentive plan, severance plan, health, group insurance or other welfare plan, or other similar plan (whether written or otherwise) and any “employee benefit plan” within the meaning of Section 3(3) of ERISA, under which the Company has any current or future obligation or liability (including any potential, contingent or secondary liability under Title IV of ERISA) or under which any employee or former employee (or beneficiary of any employee or former employee) of the Company has or may have any current or future right to benefits (the term “plan” shall include any contract, agreement (including an employment or independent contractor agreement), policy or understanding, each such plan being hereinafter referred to in this Agreement individually as a “Benefit Plan”). The Company has delivered to each Investor true, correct and complete copies of (i) each Benefit Plan, including any amendments thereto, (ii) the summary plan description, if any, for each Benefit Plan, including any summaries of material modifications made since the most recent summary plan description, (iii) the latest annual report which has been filed with the IRS for each Benefit Plan required to file an annual report, (iv) the most recent IRS determination letter for each Benefit Plan that is a pension plan (as defined in ERISA) intended to be qualified under Section 401(a) of the Code, and (v) copies of any existing reports for the three most recent Benefit Plan years showing compliance with discrimination rules under Sections 401(a), 401(k), 401(m), 419, 419A, 505, 501(c)(9), 105(h), 125 or 129 of the Code applicable to such Benefit Plan. Each Benefit Plan intended to be tax qualified under Sections 401(a) and 501(a) of the Code (i) is and has been determined by the IRS to be tax qualified under Sections 401(a) and 501(a) of the Code and, since such determination, no amendment to or failure to amend any such Benefit Plan and no other event or circumstance has occurred that could reasonably be expected to adversely affect its tax qualified status, and (ii) has or will be submitted to the IRS for a determination that it continues to be tax qualified in accordance with GUST (as defined in Revenue Procedure 2001-55, 2001-49 I.R.B. 552 (Nov. 15, 2001)) before the end of the GUST remedial amendment period (as set forth in that same Revenue Procedure or subsequent guidance from the IRS). There have been no prohibited transactions within the meaning of Section 4975 of the Code or Section 406 of Title I of ERISA with respect to any Benefit Plan.

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(b) There are no actions, claims, audits, lawsuits or arbitrations pending, or, to the knowledge of the Company, threatened, with respect to any Benefit Plan or the assets of any Benefit Plan. Except as set forth in Schedule 3.25(b), each Benefit Plan has been administered in all material respects in accordance with its terms and with all applicable Legal Requirements (including, without limitation, the Code and ERISA). There are no applications pending with the IRS or the United States Department of Labor under any voluntary compliance program regarding any Benefit Plan. Each of the Company and its Subsidiaries has satisfied all funding, compliance and reporting requirements for all Benefit Plans. With respect to each Benefit Plan, if applicable, each of the Company and its Subsidiaries has paid all contributions in accordance with the terms of the applicable Benefit Plan (including employee salary reduction contributions) and all insurance premiums that have become due and any such expense accrued but not yet due has been properly reflected in the Financials.

(c) The consummation of the transactions contemplated by this Agreement will not (1) entitle any employee or independent contractor of the Company or its Subsidiaries to severance pay or termination benefits, (2) accelerate the time of payment or vesting, or increase the amount of compensation due to any current or former employee or independent contractor of the Company or its Subsidiaries, (3) obligate the Company or any of its Affiliates to pay or otherwise be liable for any compensation, vacation days, pension contribution or other benefits to any current or former employee, consultant, agent or independent contractor of the Company or its Subsidiaries for periods before the Closing Date, (4) require assets to be set aside or other forms of security to be provided with respect to any liability under a Benefit Plan, or (5) result in any “parachute payment” (within the meaning of Section 280G of the Code) under any Benefit Plan.

(d) No Benefit Plan is subject to the provisions of Section 412 of the Code or Part 3 of Subtitle B of Title I of ERISA. No Benefit Plan is subject to Title IV of ERISA and no Benefit Plan is a “multiemployer plan” (within the meaning of Section 3(37) of ERISA). Since inception, neither the Company, its Subsidiaries, nor any business or entity treated as a single employer with the Company or its Subsidiaries for purposes of Title IV of ERISA contributed to or was obliged to contribute to a pension plan that was at any time subject to Title IV of ERISA.

(e) No Benefit Plan has provided, been required to provide, provides or is required to provide, at any time in the past, present, or future, health, medical, dental, accident, disability, death or survivor benefits to or in respect of any Person beyond termination of employment, except to the extent required under any state insurance law or under Part 6 of Subtitle B of Title I of ERISA and under Section 4980B of the Code. No Benefit Plan covers any individual that is not an employee of the Company or its Subsidiaries, other than spouses and dependents of employees under health and child care policies listed in Schedule 3.25(a), true and complete copies of which have been made available to each Investor.

(f) Each officer of the Company is currently devoting all of such officer’s business time to the conduct of the business of the Company. The Company is not aware of any officer or key employee of the Company or any of its Subsidiaries planning to work less than full time at the Company or its Subsidiaries in the future.

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Section 3.26 Ranking of Notes. Except as set forth in Schedule 3.26,no Indebtedness of the Company or any of its Subsidiaries is secured or ranks senior to or pari passu with the Notes in right of payment, whether with respect of payment of redemptions, interest, damages or upon liquidation or dissolution or otherwise, other than Stonehouse Royalty Payments (as defined in the Notes). As of the Closing Date, the Company and each of its Subsidiaries shall have repaid or converted into equity all Indebtedness incurred by the Company and its Subsidiaries except for the Alcatel Payables and the Indebtedness set forth on Schedule 3.26 hereto, and the Company and the Subsidiaries shall have secured the release of all Liens in connection with such Indebtedness.

Section 3.27 Alcatel Payables. As of the date hereof, the amount of Alcatel Payables does not exceed $39,300,000.

Section 3.28 Transactions with Affiliates. Except as set forth on Schedule 3.28, no current or former employee, partner, director, officer or stockholder (direct or indirect) of the Company or its Subsidiaries, or any associate, or, to the knowledge of the Company, any Affiliate of any thereof, or any relative with a relationship no more remote than first cousin of any of the foregoing, is presently, or during the 12-month period ending on the date hereof has been, (i) a party to any transaction with the Company or its Subsidiaries (including any contract, agreement or other arrangement providing for the furnishing of services by, or rental of real or personal property from, or otherwise requiring payments to, any such director, officer or stockholder or such associate or affiliate or relative) or (ii) the direct or indirect owner of an interest in any corporation, firm, association or business organization which is a competitor, supplier or customer of the Company or its Subsidiaries (except for a passive investment (direct or indirect) in less than 5% of the common stock of a company whose securities are traded on or quoted through a national securities exchange or on the Nasdaq National Market), nor does any such Person receive income from any source other than the Company or its Subsidiaries which relates to the business of the Company or its Subsidiaries or should properly accrue to the Company or its Subsidiaries. Except as set forth on Schedule 3.28, no employee, officer, stockholder or director of the Company or any of its Subsidiaries or member of his or her immediate family is indebted to the Company or its Subsidiaries, as the case may be, nor is the Company or any of its Subsidiaries indebted (or committed to make loans or extend or guarantee credit) to any of them, other than (i) for payment of salary for services rendered, (ii) reimbursement for reasonable expenses incurred on behalf of the Company, and (iii) for other standard employee benefits made generally available to all employees or executives (including stock option agreements outstanding under any stock option plan approved by the Board).

Section 3.29 Investment Company. Neither the Company, nor any Person controlling the Company and its Subsidiaries, is an “investment company” required to be registered under the Investment Company Act.

Section 3.30 Insurance. Schedule 3.30 contains a true, correct and complete list of all material insurance policies (“Insurance Policies”) that are currently held by the Company and its Subsidiaries, true, correct and complete copies of which have been made available to the Investors or their representatives. All Insurance Policies are in the name of the Company or its Subsidiaries, outstanding and in full force and effect, and all premiums due with respect to such policies are currently paid. Neither the Company nor any of its Subsidiaries has received notice

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of cancellation or termination of any such policy, nor has it been denied or had revoked or rescinded any policy of insurance, nor has it borrowed against any such policies. There are and have been no claims in the last five years for which an insurance carrier has denied or threatened to deny coverage. The Company and its Subsidiaries carry, or are covered by, insurance with companies that the Company believes as of the date of hereof to be financially sound and reputable in such amounts with such deductibles and against such risks and Losses as are reasonable for the business and assets of the Company and its Subsidiaries.

Section 3.31 Books and Records. The books of account, ledgers, order books, records and documents of the Company and its Subsidiaries accurately and completely reflect all information relating to the respective businesses of the Company and its Subsidiaries, the nature, acquisition, maintenance, location and collection of each of their respective assets, and the nature of all transactions giving rise to material obligations or accounts receivable of the Company or its Subsidiaries, as the case may be, except where the failure to so reflect such information would not have a Material Adverse Effect. The minute books of the Company and its Subsidiaries contain accurate records of all meetings and accurately reflect all other actions taken by the stockholders, boards of directors and all committees of the boards of directors, and other governing Persons of the Company and its Subsidiaries, respectively.

Section 3.32 Foreign Corrupt Practices Act, etc. Neither the Company nor any of the Subsidiaries, nor to the knowledge of Company, any director, officer, agent or employee of the Company or any of the Subsidiaries has made, directly or indirectly, any payment or promise to pay, or gift or promise to give or authorized such a promise or gift, of any money or anything of value, directly or indirectly, to: (a) any foreign official (as such term is defined in the FCPA) for the purpose of influencing any official act or decision of such official or inducing him or her to use his or her influence to affect any act or decision of a Governmental Authority; or (b) any foreign political party or official thereof or candidate for foreign political office for the purpose of influencing any official act or decision of such party, official or candidate or inducing such party, official or candidate to use his, her or its influence to affect any act or decision of a foreign Governmental Authority, in the case of both (a) and (b) above in order to assist the Company or any of the Subsidiaries to obtain or retain business for, or direct business to the Company or any of the Subsidiaries, as applicable, and under circumstances which would subject the Company or any of the Subsidiaries to liability under the FCPA or any corresponding foreign laws. Neither the Company nor any of the Subsidiaries has made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment of funds or received or retained any funds in violation of any law, rule or regulation.

Section 3.33 Money Laundering. The Company and its Subsidiaries are in compliance with, and have not previously violated, the USA PATRIOT ACT of 2001 (the “PATRIOT Act”) and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, but not limited to, the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control (“OFAC”), including, but not limited, to (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V (collectively, the “Anti-Money Laundering/OFAC Laws”).

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Section 3.34 Business Practices. Neither the Company, its Subsidiaries, nor any Person acting on behalf of the Company or its Subsidiaries has paid or delivered, or promised to pay or deliver, directly or indirectly through any other Person, any monies or anything else of value to any government official or employee of any political party, for the purpose of illegally or improperly inducing or rewarding any action by the official favorable to the Company or its Subsidiaries.

Section 3.35 Approved Contractor. The Company has been designated as an approved contractor by the United States Department of Defense.

Section 3.36 Acknowledgment Regarding Investor’s Purchase of Securities. The Company acknowledges and agrees that each Investor is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that each Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby and any advice given by any Investor or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Investor’s purchase of the Securities. The Company further represents to each Investor that the Company’s decision to enter into the Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby and thereby by the Company and its representatives.

Section 3.37 Material Subsidiaries. No Subsidiaries other than the Material Subsidiaries (a) hold material Communication Licenses, (b) is a “Significant Subsidiary” as such term is defined in Rule 1-02 of Regulation S-X of the Securities Act or (c) hold total assets exceeding 10% of the total assets of the Company and its Subsidiaries on a consolidated basis as of the end of the most recently completed fiscal quarter.

Section 3.38 Disclosure.

(a) No statement made by the Company in this Agreement, any other Transaction Document or the exhibits and schedules attached hereto or in any certificate or schedule furnished or to be furnished by or on behalf of the Company to the Investors or any of their representatives in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading.

(b) The Company has provided the Investors with all the information reasonably available to it that any Investor has requested for deciding whether to purchase the Notes and all information that the Company believes is reasonably necessary to enable the Investors to make such decision. The due diligence materials previously provided by or on behalf of the Company to each Investor, which are listed on Schedule 3.38(b) (the “Due Diligence Materials”), do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading, except that with respect to assumptions, projections and expressions of opinion or predictions contained in the Due Diligence Materials, the Company represents only that such assumptions, projections,

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expressions of opinion and predictions were made in good faith and that the Company believes there is a reasonable basis therefor. The Company acknowledges and agrees that no Investor participated in the preparation of, or has any responsibility for, the content of any Due Diligence Materials, including, without limitation, (i) the Financial Model, (ii) the Funding Expenditure Plan, (iii) the Annual Operating Budget, (iv) and the Operating and Marketing Plan (each of the items listed in clauses (i) through (iv), as defined in the Stonehouse Restructuring Agreement).

Section 3.39 The Company acknowledges and agrees that each Investor has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Article IV.

ARTICLE IV

Representations and Warranties of the Investors

Each Investor hereby represents and warrants with respect to only itself that:

Section 4.1 Organization and Authority. Such Investor is duly organized and validly existing as a corporation, limited partnership or a limited liability company, as applicable, and in good standing under the laws of its respective jurisdiction of organization. Such Investor has all requisite power and authority to enter into the Transaction Documents and to consummate the transactions contemplated hereby and thereby. The execution and delivery by such Investor of the Transaction Documents to which it is a party and the consummation by such Investor of the transactions contemplated hereby and thereby has been duly authorized on the part of such Investor. The Transaction Documents to which such Investor is a party, when duly executed and delivered by such Investor, will constitute legal, valid and binding obligations of such Investor, enforceable against such Investor in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles whether in a proceeding in equity or at law.

Section 4.2 Securities Act. Such Investor (i) is acquiring the Notes and (ii) upon conversion of the Notes it will acquire the Conversion Shares then issuable, for its own account for investment only and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act; provided, however, that by making the representations herein, such Investor does not agree to hold any Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act.

Section 4.3 Qualified Institutional Investor. Such Investor is a “qualified institutional buyer” as such term is defined in Rule 144A under the Securities Act.

Section 4.4 Transfer or Resale. Such Investor understands that except as provided in the Registration Rights Agreement: (i) the Securities have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Investor

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shall have delivered to the Company an opinion of a counsel selected by the Investor, in a form reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) such Investor provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144; (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. Such Investor agrees that it shall comply with the restrictions on sale of the Securities as set forth in Section 3.1 of the Registration Rights Agreement.

Section 4.5 Legends. Such Investor understands that the certificates or other instruments representing the Notes and, until such time as the resale of the Conversion Shares have been registered under the Securities Act as contemplated by the Registration Rights Agreement, the stock certificates representing the Conversion Shares, except as set forth below, shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):

[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN] [THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF A COUNSEL SELECTED BY THE HOLDER, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Securities upon which it is stamped, unless

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otherwise required by state securities laws, (i) in connection with a sale, assignment or other transfer pursuant to a registration statement that is effective under the Securities Act, (ii) in connection with a sale, assignment or other transfer where such holder provides the Company with an opinion of a counsel selected by the Investor, in a form reasonably acceptable to the Company, to the effect that such sale, assignment or transfer of the Securities may be made without registration under the applicable requirements of the Securities Act and once sold, assigned or transferred, no further restrictive legend is required, or (iii) such holder provides the Company with reasonable assurance that the Securities can be sold, assigned or transferred pursuant to Rule 144(k) promulgated under the Securities Act.

Section 4.6 Experience. Such Investor is experienced in evaluating and investing in companies such as the Company. Such Investor has substantial experience in investing in and evaluating private placement transactions of securities in companies similar to the Company and is capable of evaluating the risks and merits of its investment in the Company and has the capacity to protect its own interests.

Section 4.7 Receipt of Information. Such Investor represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of this investment and the business, management and financial affairs of the Company and has availed itself of such opportunity to the extent that such Investor deemed necessary to make an informed investment decision. The foregoing, however, does not limit or modify the representations and warranties of the Company in Article III of this Agreement or the right of such Investor to rely thereon.

Section 4.8 Stonehouse Ranking. Each Investor acknowledges that the holders of Notes may not claim any rights to the Stonehouse Payments (as defined in the Notes) pursuant to the Stonehouse Royalty Agreement in the form attached hereto as Exhibit J, and to the extent that such Investor, as a holder of Notes, receives any Stonehouse Payments otherwise due to or required to be paid to Stonehouse under the Stonehouse Royalty Agreement in the form attached hereto as Exhibit J, such Investor, as a holder of Notes, agrees to turn over such payment to Stonehouse.

ARTICLE V

Conditions to the Investor’s Obligations at the Closing

The obligation of each Investor to purchase the Notes is subject to the satisfaction (or waiver by such Investor), as of the Closing Date, of the following conditions:

Section 5.1 Representations and Warranties; Covenants. The representations and warranties of the Company made in this Agreement that are qualified by materiality or Material Adverse Effect shall be true and correct in all respects as of the date of this Agreement (with respect to the Company as a Maryland corporation) and as of the Closing Date (with respect to the Company as a Delaware corporation after giving effect to the Merger) (other than representations and warranties that address matters only as of a certain date, which shall be true and correct as of such certain date), and the representations and warranties of the Company made in this Agreement that are not qualified by materiality or Material Adverse Effect shall be true

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and correct in all material respects as of the date of this Agreement and as of the Closing Date (other than representations and warranties that address matters only as of a certain date, which shall be true and correct as of such certain date). The Company shall have performed each of the covenants and agreements of the Company contained in the Transaction Documents required to be performed at or prior to the Closing.

Section 5.2 Compliance Certificate. The Chief Executive Officer of the Company shall deliver to each Investor at the Closing a certificate certifying that the conditions set forth Sections 5.1, 5.3, 5.5 and 5.6 have been satisfied.

Section 5.3 Consents and Approvals. The Company shall have obtained all consents, authorizations, approvals, orders, licenses, permits and qualifications from, or secured exemptions therefrom, and made all necessary filings, declarations and registrations with, any Governmental Authority (including any required consents from the FCC) or any other Person (if any) required to be obtained or made by or with respect to the Company in connection with the offer and sale of the Securities, the execution and delivery of each of the Transaction Documents or the consummation of the transactions contemplated hereby and thereby.

Section 5.4 Transaction Documents. The Company shall have entered into each of the Transaction Documents to which it is a party, and each of the Transaction Documents shall be in full force and effect with respect to the Company.

Section 5.5 WIN Merger. WIN and WSI-Maryland shall have consummated the WIN Merger and shall have complied with all applicable laws and regulations in consummating the WIN Merger, including the laws of the State of Maryland and the British Virgin Islands. The Company shall have provided each Investor with evidence reasonably satisfactory to such Investor with respect to consummation of the WIN Merger.

Section 5.6 Merger. The WorldSpace Parties shall have consummated the Merger and shall have complied with all applicable laws and regulations in consummating the Merger, including the laws of the State of Maryland and the State of Delaware. The Company shall have provided each Investor with a true, correct and complete copy of the Certificate of Merger with respect to the Merger as certified by the Secretaries of State of the States of Maryland and Delaware.

Section 5.7 New Loan. The Company shall have delivered a letter of acknowledgement from Stonehouse that upon Closing, the Condition Precedent contained in Section 3.01(c) of the Stonehouse Restructuring Agreement shall be satisfied and the Restructuring (as defined therein) shall be effective.

Section 5.8 No Legal Bar. No action or proceeding by or before any Governmental Authority shall be pending or threatened challenging or seeking to restrain or prohibit the transactions contemplated by the Transaction Documents. No Legal Requirement preventing the transactions contemplated by the Transaction Documents shall be in effect.

Section 5.9 Incumbency Certificate. The Company shall have delivered an incumbency certificate dated the Closing Date for the officers of the Company executing any of the Transaction Documents and any documents delivered in connection with the Transaction Documents and the Closing.

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Section 5.10 Secretary Certificate. The Company shall have delivered a certificate of the Secretary or an Assistant Secretary of the Company, dated as of the Closing Date, certifying as to the attached copies of the Certificate of Incorporation, Bylaws and resolutions adopted by the Board authorizing the execution and delivery by the Company of the Transaction Documents and the consummation by the Company of the transactions contemplated hereby and thereby, including the issuance and sale (or reservation for issuance, as the case may be) of the Securities.

Section 5.11 Certificate. The Company shall have delivered a copy of the Certificate of Incorporation, as filed with and certified by the Secretary of State of the State of Delaware.

Section 5.12 Good Standings. The Company shall have delivered (i) a certificate of the Secretary of State of the State of Delaware, dated within one day of the Closing Date, certifying that the Company and each of its Material Subsidiaries is in good standing in the State of Delaware, (ii) evidence reasonably satisfactory to such Investor that each Material Subsidiary is in good standing in its jurisdiction of formation, (iii) a certificate evidencing the Company’s qualification as a foreign corporation and good standing issued by the Secretary of State (or comparable office) of each jurisdiction in which the Company is so qualified, as of a date within five days of the Closing Date and (iv) evidence reasonably satisfactory to such Investor that each Material Subsidiary is qualified as a foreign corporation and is in good standing in each jurisdiction in which such Material Subsidiary is required to be so qualified.

Section 5.13 Legal Opinion. The Company shall have delivered an opinion dated the Closing Date of (x) Coudert Brothers LLP, counsel to the Company, in the form attached hereto as Exhibit L-1, and (y) the General Counsel to the Company, dated as of the Closing Date, in form attached hereto as Exhibit L-2 attached hereto.

Section 5.14 Pro Forma Capitalization Table. The Company shall have prepared and delivered to the Investors a true, correct and complete table reflecting the capitalization of the Company, which table shall be consistent in all material respects with Section 3.2(b) hereof and Schedule 3.2(g)(after giving effect to (i) the transactions contemplated by the Restructuring Documents and (ii) the Merger).

Section 5.15 No Indebtedness. The Company and each of its Subsidiaries shall have repaid or converted into equity all Indebtedness of the Company and its Subsidiaries except for the Alcatel Payables and the Indebtedness set forth on Schedule 5.15 hereto, and the Company shall have delivered to the Investors (a) UCC termination statements, (b) a copy of the executed Termination Agreement (the form of which is attached as Exhibit A to the Exchange Agreement), (c) a copy of each of the following agreements: the IDI Loan Agreement Note, the IDI Exchange Agreement Note, the Yenura Loan Agreement Note, the First Supplemental Yenura Loan Agreement Note and the Second Supplemental Yenura Loan Agreement Note (such terms in this clause (c) as defined in the Exchange Agreement), each marked “cancelled” or, alternatively, an indemnity agreement with respect thereto in customary form, (d) releases and (e) other evidence in form satisfactory to it of the discharge or conversion, as applicable, of such Indebtedness and the release of all Liens in connection with such Indebtedness.

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ARTICLE VI

Conditions of the Company’s Obligations

The obligation of the Company to issue and sell the Securities to each Investor is subject to the satisfaction (or waiver by the Company) as of the Closing Date of the following conditions:

Section 6.1 Representations and Warranties. The representations and warranties of such Investor made in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the applicable Closing Date with the same effect as if made at and as of the applicable Closing Date, except to the extent such representations and warranties expressly relate to an earlier time.

Section 6.2 Transaction Documents. Such Investor shall have entered into each of the Transaction Documents to which it is a party, and each such document shall be in full force and effect.

Section 6.3 WIN Merger. WIN and WSI-Maryland shall have consummated the WIN Merger.

Section 6.4 Merger. The WorldSpace Parties shall have consummated the Merger.

Section 6.5 No Legal Bar. No action or proceeding by or before any Governmental Authority shall be pending or threatened challenging or seeking to restrain or prohibit the transactions contemplated by the Transaction Documents. No Legal Requirement preventing the transactions contemplated by the Transaction Documents shall be in effect.

ARTICLE VII

Covenants

Section 7.1 Use of Proceeds. The Company will use the proceeds from the sale of the Securities for the repayment of the Alcatel Payables, working capital and other general corporate purposes and, except as set forth herein, shall not use the proceeds for (i) the repayment of any Indebtedness of the Company or any of its Subsidiaries or (ii) the redemption or repurchase of any of its equity securities.

Section 7.2 Publicity. Except as set forth in Schedule 7.1, prior to the effective date of the registration statement relating to the Company’s initial public offering (and except as may be required to be set forth in any registration statement filed or any prospectus delivered in connection with such offering), the Company shall consult with the Investors in issuing any press releases or otherwise making public statements or filings and other communications with respect to the transactions contemplated hereby, and none of the parties shall issue any such press release

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or otherwise make any such public statement, filing or other communication without the prior consent of the others (such consent not to be unreasonably withheld), except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other parties with prior notice of such public statement, filing or other communication. Notwithstanding the foregoing, the Company shall not (a) prior to the effective date of the registration statement relating to the Company’s initial public offering (and except as may be required to be set forth in any registration statement filed or any prospectus delivered in connection with such offering), publicly disclose the name of any Investor or include the name of any Investor, without the prior written consent of such Investor in any other press release or public statement or filing, except to the extent the Company has received a legal opinion that such disclosure is required by law, in which case the Company shall provide such Investor with prior notice of such disclosure or (b) disclose the name of any Investor or include the name of any Investor without the prior written consent of such Investor (which consent shall not be unreasonably withheld or delayed), to any third party or in any materials prepared for any third party.

Section 7.3 Additional Notes; Variable Securities; Dilutive Issuances. So long as any Investor beneficially owns any Securities, the Company will not issue any Notes other than to the Investors as contemplated hereby and the Company shall not issue any other securities that would cause a breach or default under the Notes. At any time after an Effective Registration and for long as any Notes remain outstanding, the Company shall not, in any manner: (i) issue or sell any Common Stock Equivalents (which, for purposes of this Section 7.3, shall also include any rights, warrants or options to subscribe for or purchase Class B Shares and any other stock or securities convertible into or exercisable or exchangeable for Class B Shares (collectively, the “Class B Equivalents”)) that allows the holder of any such Common Stock Equivalent to convert, exchange or exercise any such Common Stock Equivalent for a number of shares of Common Stock at a conversion, exchange or exercise price, as the case may be, which varies or may vary with the market price of the Common Stock (including such convertible instruments commonly known as “death spirals” or “toxic converts”), including by way of one or more reset(s) to any fixed price unless the conversion, exchange or exercise price of any such security cannot be less than the then applicable Market Price (as defined in the Notes); provided that the foregoing shall not limit (A) the Company from issuing a security convertible into shares of Common Stock that provides for a “net share settlement” of such security with respect to any amount owing on such security above par upon conversion of such security after a “provisional call” of such security by the Company or (B) any holder of any warrant or Option issued pursuant to the Company’s stock option plan to purchase shares of Common Stock issued by the Company from exercising any such warrant or Option issued pursuant to the Company’s stock option plan on a “cashless” basis and (ii) enter into or affect any Dilutive Issuance (as defined in the Notes) if the effect of such Dilutive Issuance is to cause the Company to be required to issue upon conversion of any Note any shares of Common Stock in excess of that number of shares of Common Stock which the Company may issue upon conversion of the Notes without breaching the Company’s obligations under the rules or regulations of the principal exchange or market in which the Common Stock is listed. The Company agrees that it will not lower the price at which any Common Stock Equivalents or Class B Equivalents outstanding on the Closing Date, after giving effect to (1) the transactions contemplated by the Restructuring Documents, (2) the WIN Merger and (3) the Merger, are exercisable or exchangeable for or convertible into Common Stock or Class B Shares.

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Section 7.4 Corporate Existence. So long as any Investor beneficially owns any Securities, the Company shall not be party to any Change of Control transaction (as defined in the Notes) unless the Company is in compliance with the applicable provisions governing Change of Control transactions set forth in the Notes.

Section 7.5 Voting Rights. If the Company has elected not to pay Cash Interest (as defined in the Notes) on the Notes on six consecutive Interest Dates (as defined in the Notes) and a Qualified IPO (as defined in the Notes) has not occurred, the holders of the Notes shall be entitled to elect additional directors to the Board as follows: (a) if the number of directors of the Board is six or less, the holders of the Notes shall be entitled to elect two additional directors to the Board; and (b) if the number of directors of the Board is greater than six, the holders of the Notes shall be entitled to elect the “Additional Number” of directors determined according to the following formula, which shall be rounded off to the nearest whole number:


Additional Number =		T x A
		B - A

For purposes of the foregoing formula:

T = the total number of directors before election

A = the total number of Conversion Shares assuming all of the Notes were converted

B = the total number of shares of Common Stock outstanding on a fully diluted basis.

Section 7.6 Pledge of Securities. The Company acknowledges and agrees that the Securities may be pledged by an Investor in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Investor effecting a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document, including, without limitation, Section 4.4 hereof; provided that an Investor and its pledgee shall be required to comply with the provisions of Section 4.4 hereof in order to effect a sale, transfer or assignment of Securities to such pledgee. The Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by an Investor.

Section 7.7 Capital Stock. Prior to a Qualified IPO, the Company shall not amend any voting powers, designations, preferences, rights and qualifications, limitations or restrictions of any capital stock of the Company without the prior written consent of the Investors.

Section 7.8 Class B Shares. Other than the Class B Shares issued pursuant to the Agreement of Merger and the Exchange Agreement, the Company will not issue any Class B Shares or Class B Equivalents without the consent of the Investors.

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Section 7.9 Stonehouse Restructuring Agreement, Stonehouse Royalty Agreement and Restructuring Documents. The Company and each of its Subsidiaries shall not be in breach of, or in default in the performance or observance of, any material obligation, term, covenant or condition contained in Stonehouse Restructuring Agreement, the Stonehouse Royalty Agreement and the Restructuring Documents.

Section 7.10 Disclosure of Material Information. From and after the occurrence of an Effective Registration, no Investor shall be in possession of any material, nonpublic information received from the Company, any of its Subsidiaries or any of its respective officers, directors, employees or agents, that is not disclosed in the filings made by the Company with the SEC in compliance with Regulation FD unless such Investor (i) has been provided with an opportunity to decline receipt of such information and (ii) has affirmatively agreed to receive such information as evidence by its execution of a confidentiality agreement with respect to such material, nonpublic information prior to its receipt of any such material, nonpublic information. For the purposes of this paragraph, material, nonpublic information shall not include any information (i) which the Company is contractually obligated to provide such Investor pursuant to such Investor’s rights under any Transaction Document or (ii) which such Investor obtains or is privy to because such Investor has representation (direct or indirect) on the Company’s Board of Directors, pursuant to Section 7.5 hereof or otherwise.

Section 7.11 Listing. Upon the occurrence of an Effective Registration, the Company shall promptly secure the listing of all of the Registrable Securities (as defined in the Registration Rights Agreement) upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed (subject to official notice of issuance) and shall maintain such listing of all Registrable Securities from time to time issuable under the terms of the Transaction Documents. The Company shall maintain the Common Stocks’ authorization for quotation on the principal exchange or market in which it is listed. Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the principal market in which it is listed. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 7.11.

Section 7.12 Insurance.

(a) The Company shall use its best efforts to obtain, as promptly as reasonably practicable after the date hereof, but in any event within 120 days after the date hereof, and shall at all times thereafter maintain, in orbit insurance for each of its AfriStar and AsiaStar satellites, with a minimum coverage equal to $120 million per satellite.

(b) The Company shall use its best efforts to obtain, as promptly as reasonably practicable after the date hereof, but in any event within 120 days after the date hereof, and shall at all times thereafter maintain, life insurance for Noah A. Samara, naming the Company as beneficiary, with a minimum coverage equal to $20,000,000.

(c) The requirement for the Company to maintain such insurance as specified in clauses (a) and (b) above shall terminate upon the earlier of (i) the consummation of a Qualified IPO and (ii) such time as the Notes are no longer outstanding pursuant to conversion or redemption.

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Section 7.13 Exercise of Remedies. In connection with any exercise of remedies following the occurrence, and during the continuation, of an event of default under the terms of the Notes, the holders of the Notes shall not unreasonably diminish or impair the rights of Stonehouse under the Stonehouse Royalty Agreement, including, but not limited to, the Company’s payment obligations thereunder; provided, however, that the foregoing shall not limit, abridge, or otherwise impair such holders’ right to receive all required Principal, Interest payments, Redemption Premiums and late charges under the Notes. In furtherance of the foregoing, in the event the Company files a petition for relief under the United States Bankruptcy Code, the holders of the Notes shall not oppose the entry of an order, on motion by any party, authorizing the Company to assume the Royalty Agreement as an executory contract.

Section 7.14 Letter Agreement from Noah A. Samara and Yenura. Noah A Samara and Yenura shall have entered into the letter agreement, dated as of December 30, 2004, in the form attached hereto as Exhibit M (the “Letter Agreement”).

Section 7.15 Debt Designation. The Company covenants and agrees that it shall not at any time and in any manner designate any Stonehouse Payment (as defined in the Notes) as Senior Indebtedness (as defined in the Notes); provided, however, that the foregoing shall not affect the provisions relating to the Stonehouse Payments set forth in Section 14(a) of the Notes and in clause (d) of the definition of Permitted Liens set forth in the Notes.

Section 7.16 Compliance With Laws. The Company and its Subsidiaries shall at all times be in compliance with the Foreign Corrupt Practices Act; the PATRIOT Act, and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations; and the laws, regulations and Executive Orders and sanctions programs administered by the OFAC, including, without limitation, the “Anti-Money Laundering/OFAC Laws”.

ARTICLE VIII

Indemnification

Section 8.1 Indemnification. Notwithstanding any termination of this Agreement, the Company agrees to indemnify, defend and hold harmless each Investor and its Affiliates and controlling persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and each of their respective officers, managers, members, partners, directors, stockholders, employees, representatives and agents (all such Persons and entities being collectively referred to as the “Indemnified Parties”) to the fullest extent permitted by applicable law from and against any and all Losses (including any diminution in value of the Securities), demands, actions, causes of action, assessments, damages, liabilities, costs or expenses, including, without limitation interest, penalties, fines, fees, deficiencies, claims of damage, court and arbitration costs and fees and disbursements of attorneys, accountants, consultants and other experts as and when incurred or sustained by any Indemnified Party (collectively, “Claims”) as a result of or arising from (a) any misrepresentation or breach of any representation or warranty made by the Company in any Transaction Documents, (b) any

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breach of any covenant, agreement or obligation of the Company contained in any Transaction Documents or (c) other than Claims resulting solely from the gross negligence or willful misconduct of such Indemnified Party or Claims solely brought against an Indemnified Party by any investor in such Indemnified Party, any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company) and arising out of or resulting from (i) the execution, delivery, performance or enforcement of any Transaction Documents and (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities. The rights accorded to Indemnified Parties under this Section 8.1 shall be in addition to any rights and remedies that any Indemnified Party may have at law or in equity, by separate agreement or otherwise.

Section 8.2 Conduct of Indemnification Proceedings. Promptly after receipt by an Indemnified Party of notice of any Claim or the commencement of any action or proceeding involving a Claim under this Article VIII, such Indemnified Party shall, if a claim in respect thereof is to be made against the Person from whom the indemnity is sought (the Indemnifying Party”) pursuant to Article VIII, (i) notify the Indemnifying Party in writing of the Claim or the commencement of such action or proceeding; provided, that the failure of any Indemnified Party to provide such notice shall not relieve the Indemnifying Party of its obligations under this Article VIII, except to the extent the Indemnifying Party is materially and actually prejudiced thereby and shall not relieve the Indemnifying Party from any liability which it may have to any Indemnified Party otherwise than under this Article VIII, and (ii) permit such Indemnifying Party to assume the defense of such claim with counsel reasonably satisfactory to the Indemnified Party; provided, however, that any Indemnified Party shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (A) the Indemnifying Party has agreed in writing to pay such fees and expenses, (B) the Indemnifying Party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such Indemnified Party within 15 days after receiving notice from such Indemnified Party that the Indemnified Party believes it has failed to do so, (C) in the reasonable judgment of any such Indemnified Party, based upon advice of counsel, a conflict of interest may exist between such Indemnified Party and the Indemnifying Party with respect to such claims (in which case, if the Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense of such claim on behalf of such Indemnified Party) or (D) such Indemnified Party is a defendant in an action or proceeding which is also brought against the Indemnifying Party and reasonably shall have concluded that there may be one or more legal defenses available to such Indemnified Party which are not available to the Indemnifying Party. No Indemnifying Party shall be liable for any settlement of any such claim or action effected without its written consent, which consent shall not be unreasonably withheld. In addition, without the consent of the Indemnified Party (which consent shall not be unreasonably withheld), no Indemnifying Party shall be permitted to consent to entry of any judgment with respect to, or to effect the settlement or compromise of any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Party is an actual or potential party to such action or claim), unless such settlement, compromise or judgment (1) includes an unconditional release of the Indemnified Party from all liability arising out of such action or claim, (2) does not include a

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statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any Indemnified Party, and (3) does not provide for any action on the part of any party other than the payment of money damages which is to be paid in full by the Indemnifying Party.

Section 8.3 Contribution. If the indemnification provided for in Section 8.1 from the Indemnifying Party for any reason is unavailable to (other than by reason of exceptions provided therein), or is insufficient to hold harmless, an Indemnified Party hereunder in respect of any Claim, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Claim in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party, on the one hand, and the Indemnified Party, on the other hand, in connection with the actions which resulted in such Claim, as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action. If, however, the foregoing allocation is not permitted by applicable law, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party in such proportion as is appropriate to reflect not only such relative faults but also the relative benefits of the Indemnifying Party and the Indemnified Party as well as any other relevant equitable considerations.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8.3 were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by a party as a result of any Claim referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth in Section 8.3, any legal or other fees, costs or expenses reasonably incurred by such party in connection with any investigation or proceeding. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

Section 8.4 Other Indemnification. The indemnity agreements contained herein shall be in addition to any other rights to indemnification or contribution which any Indemnified Party may have pursuant to law or contract.

Section 8.5 Indemnification Payments. The indemnification and contribution required by this Section 8 shall be made by periodic payments of the amount thereof during the course of any investigation or defense, as and when bills are received or any expense, loss, damage or liability is incurred; provided that if a final nonappealable determination is made that the party receiving such expense payments was not entitled to such payments pursuant to the provisions of this Article VIII, then the party receiving such expense payments shall return such expense payments to the party that made such payments.

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ARTICLE IX

Termination

Section 9.1 Termination. In the event that the Closing shall not have occurred on or before ten (10) Business Days from the date hereof due to the Company’s or any Investor’s failure to satisfy the conditions set forth in Article V and Article VI above (the party failing to satisfy the conditions set forth in Article V or Article VI, the “Failing Party”, and the party that has satisfied the conditions set forth in Article V or Article VI, the “Non-Failing Party”) (and the Non-Failing Party’s failure to waive such unsatisfied condition(s)), the Non-Failing Party or Parties shall have the option to terminate this Agreement with respect to such Failing Party at the close of business on such date without liability of any party to any other party; provided, however, this if this Agreement is terminated pursuant to this Article IX and the Company is the Failing Party and the Investor(s) are the Non-Failing Party or Parties, the Company shall remain obligated to reimburse the Investors for the expenses described in Section 10.1 below.

ARTICLE X

Miscellaneous

Section 10.1 Expenses. The Company shall pay or reimburse, on the Closing Date, for the fees and disbursements of Schulte Roth & Zabel LLP incurred in connection with the negotiation, execution and delivery of the Transaction Documents, in an amount not to exceed $245,000, which amount may be withheld by Highbridge International LLC from its Purchase Price at the Closing.

Section 10.2 Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR

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ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

Section 10.3 Notices. Any notices, consents, waivers or other communications required or permitted to be given hereunder must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile, (iii) three days after being sent by U.S. certified mail, return receipt requested, or (iv) one Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:


(a)		if to an Investor, to its address and facsimile number set forth on the Schedule of Investors, with copies to such Investor’s representatives as set forth on the Schedule of Investors,

		with a copy (for informational purposes only) to:

		Schulte Roth & Zabel LLP
		919 Third Avenue
		New York, New York 10022
		Telephone: (212) 756-2000
		Facsimile: (212) 593-5955
		Attention: Eleazer N. Klein, Esq.

(b)		if to the Company to:

		WorldSpace, Inc.
		2400 N Street, NW
		Washington, DC 20037
		Telephone: (202) 969-6000
		Facsimile: (202) 969-6001
		Attention: Donald Frickel, Esq.

		with a copy (for informational purposes only) to:

		Coudert Brothers LLP
		1114 Avenue of the Americas
		New York, New York 10036-7703
		Telephone: (212) 626-4400
		Facsimile: (212) 626-4120
		Attention: Jeffrey E. Cohen, Esq.

Each party shall provide five days’ prior written notice to the other party of any change in address or facsimile number. If a notice provided for hereunder is delivered via facsimile, such notice shall be valid only if an original hard copy is delivered within 24 hours of the time such facsimile is delivered. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically

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generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (iii) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

Section 10.4 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities.

Section 10.5 Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature.

Section 10.6 Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

Section 10.7 Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

Section 10.8 Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between the Investors, the Company, their respective Affiliates and Persons acting on their behalf with respect to the matters discussed herein, other than as set forth in the next sentence, including those certain confidentiality agreements (the “Confidentiality Agreements”), entered into in November and December 2004, between the Investors and the Company, and the Transaction Documents contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor any Investor makes any representation, warranty, covenant or undertaking with respect to such matters. Notwithstanding the foregoing, solely until the date of the Company’s filing of a registration statement with the SEC, the provisions of Section 1 of each of the Confidentiality Agreements shall remain in full force and effect. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the holders of at least a majority of the aggregate number of Registrable Securities (as defined in the Registration Rights Agreement) issued and issuable hereunder, and any amendment to this Agreement made in conformity with the provisions of this Section 10.8 shall be binding on all Investors and holders of Securities, as applicable. Notwithstanding the foregoing, any approval of an amendment or waiver that increases the

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Purchase Price to be paid by any Investor or that amends or waives any of the provisions under Article III, Article IV, Sections 7.2, 7.3, 7.10, Article V, Article VIII, Article IX and Article X shall not be effective as to such Investor without the prior written consent of such Investor. No provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. No such amendment shall be effective to the extent that it applies to less than all of the holders of the applicable Securities then outstanding. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration also is offered to all of the parties to the Transaction Documents or holders of Notes, as the case may be. The Company has not, directly or indirectly, made any agreements with any Investors relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents.

Section 10.9 Successors and Assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the holders of at least a majority of the aggregate number of Registrable Securities, including by merger or consolidation. An Investor may assign, in its sole discretion, any or all of its rights, interests and obligations under this Agreement to any of its Affiliates or to any transferee of Securities, other than a transferee who shall acquire such Securities in a Public Sale. Subject to the preceding, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns.

Section 10.10 No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

Section 10.11 Survival. The representations and warranties of the Company and the Investors contained in Article III and Article IV and the agreements and covenants set forth in Article VII, Article VIII, Article IX and Article X shall survive the Closing. Each Investor shall be responsible only for its own representations, warranties, agreements and covenants hereunder.

Section 10.12 Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

Section 10.13 No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

Section 10.14 Remedies. Each Investor and each holder of the Securities shall have all rights and remedies set forth in the Transaction Documents and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any Person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting

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a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company recognizes that in the event that it fails to perform, observe, or discharge any or all of its obligations under the Transaction Documents, any remedy at law may prove to be inadequate relief to the Investors. The Company therefore agrees that the Investors shall be entitled to seek temporary and permanent injunctive relief in any such case without the necessity of proving actual damages and without posting a bond or other security.

Section 10.15 Payment Set Aside. To the extent that the Company makes a payment or payments to the Investors hereunder or pursuant to any of the other Transaction Documents or the Investors enforce or exercise their rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

Section 10.16 Independent Nature of Investors’ Obligations and Rights. The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor or the breach of any representation or warranty of any other Investor under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Investor pursuant hereto or thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Investor confirms that it has independently participated in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Investor shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.


WORLDSPACE, INC., a Delaware Corporation

By:		/S/
		Name: Noah A. Samara
		Title: Chairman & CEO

IN WITNESS WHEREOF, the parties have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.


WORLDSPACE, INC., a Maryland Corporation

By:		/S/
		Name: Noah A. Samara
		Title: Chairman & CEO

IN WITNESS WHEREOF, the parties have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.


Investors:

HIGHBRIDGE INTERNATIONAL LLC

By: HIGHBRIDGE CAPITAL MANAGEMENT, LLC

By:		/S/
		Name: Adam J. Chill
		Title: Managing Director

IN WITNESS WHEREOF, the parties have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.


Investors:

AMPHORA LIMITED

By: AMARANTH ADVISORS L.L.C., Its Trading Advisor

By:		/s/
		Name: Karl J. Wachter
		Title: Authorized Signatory

IN WITNESS WHEREOF, the parties have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.


Investors:

OZ MASTER FUND, LTD.

By: OZ MANAGEMENT, L.L.C., Its Investment Manager

By:		/s/
		Name: Joel Frank
		Title: Chief Financial Officer

IN WITNESS WHEREOF, the parties have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.


Investors:

AG DOMESTIC CONVERTIBLES, L.P.

By: Angelo, Gordon & Co., L.P., Its Investment Manager

By:		/s/
		Name: Joseph Wekselblatt
		Title: CFO


Investors:

AG OFFSHORE CONVERTIBLES, LTD.

By: Angelo, Gordon & Co., L.P., Its Investment Manager

By:		/S/
		Name: Joseph Wekselblatt
		Title: CFO

IN WITNESS WHEREOF, the parties have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.


Investors:

CITADEL EQUITY FUND LTD.

By: CITADEL LIMITED PARTNERSHIP, Its Portfolio Manager

By: GLB PARTNERS, L.P., Its General Partner

By: CITADEL INVESTMENT GROUP, L.L.C., Its General Partner

By:		/S/
		Name: David Snyderman
		Title: Senior Managing Director

IN WITNESS WHEREOF, the parties have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.


Investors:

CITADEL CREDIT TRADING LTD.

By: CITADEL LIMITED PARTNERSHIP, Its Portfolio Manager

By: GLB PARTNERS, L.P., Its General Partner

By: CITADEL INVESTMENT GROUP, L.L.C., Its General Partner

By:		/S/
		Name: David Snyderman
		Title: Senior Managing Director

SCHEDULE OF INVESTORS


(1) Investor	(2) Address and Facsimile Number	(3) Aggregate Principal Amount of Notes		(4) Purchase Price		(6) Legal Representative’s Address and Facsimile Number

Highbridge International LLC	c/o Highbridge Capital Management, LLC 9 West 57^th Street, 27^th Floor New York, New York 10019 Attention: Ari J. Storch /Adam J. Chill Facsimile: (212) 751-0755 Telephone: (212) 287-4720 and Attention: Andrew Martin Facsimile: (212) 755-4250 Telephone: (212) 287-4700 Residence: Cayman Islands	$	55,000,000	$	55,000,000	Schulte Roth & Zabel LLP 919 Third Avenue New York, New York 10022 Attention: Eleazer Klein, Esq. Facsimile: (212) 593-5955 Telephone: (212) 756-2376

Amphora Limited	c/o Amaranth Advisors L.L.C. One American Lane Greenwich, CT 06831 Attention: General Counsel Facsimile: (203) 422-3540 Telephone: (203) 422-3340 Residence: Cayman Islands	$	55,000,000	$	55,000,000	Schulte Roth & Zabel LLP 919 Third Avenue New York, New York 10022 Attention: Eleazer Klein, Esq. Facsimile: (212) 593-5955 Telephone: (212) 756-2376

OZ Master Fund, Ltd.	c/o OZ Management, L.L.C. 9 West 57th Street, 39th Floor New York, New York 10019 Attention: Joel M. Frank Facsimile: (212) 790-0150 Telephone: (212) 790-0160 Residence: Cayman Islands	$	15,000,000	$	15,000,000

AG Offshore Convertibles, Ltd.	c/o Angelo, Gordon & Co., L.P. 245 Park Avenue - 26th Floor New York, New York 10167 Attention: Gary I. Wolf Facsimile: (212) 867-6449 Telephone: (212) 692-2058 Residence:	$	10,000,000	$	10,000,000	Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, New York 10019-6064 Attention: Doug Cifu, Esq. and Jon Yoder, Esq. Facsimile: (212) 492-0152 Telephone: (212) 373-3152

AG Domestic Convertibles, L.P.	c/o Angelo, Gordon & Co., L.P.		5,000,000		5,000,000	Paul, Weiss, Rifkind, Wharton &
AG Domestic Convertibles, L.P.	245 Park Avenue - 26th Floor New York, New York 10167 Attn: Gary I. Wolf Facsimile: (212) 867-6449 Telephone: (212) 692-2058 Residence:		5,000,000		5,000,000	Garrison LLP 1285 Avenue of the Americas New York, New York 10019-6064 Attention: Doug Cifu, Esq. and Jon Yoder, Esq. Facsimile: (212) 492-0152 Telephone: (212) 373-3152


Citadel Equity Fund Ltd.	c/o Citadel Limited Partnership 131 S. Dearborn Street Chicago, Illinois 60603 Attention: Ron Klipstein Facsimile: (312) 267-7497 Telephone: (312) 395-4332 Residence: Cayman Islands	$13,800,000	$13,800,000	Fried, Frank, Harris, Shriver & Jacobson LLP One New York Plaza New York, New York 10004 Attention: Robert Schwenkel, Esq. Facsimile: (212) 859-4000 Telephone: (212) 859-8000

Citadel Credit Trading Ltd.	c/o Citadel Limited Partnership 131 S. Dearborn Street Chicago, Illinois 60603 Attention: Ron Klipstein Facsimile: (312) 267-7497 Telephone: (312) 395-4332 Residence: Cayman Islands	$1,200,000	$1,200,000	Fried, Frank, Harris, Shriver & Jacobson LLP One New York Plaza New York, New York 10004 Attention: Robert Schwenkel, Esq. Facsimile: (212) 859-4000 Telephone: (212) 859-8000

EX-4.2 6 dex42.htm REGISTRATION RIGHTS AGREEMENT DATED DECEMBER 30, 2004 Registration Rights Agreement dated December 30, 2004

EXHIBIT 4.2

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is dated as of December 30, 2004 by and among WorldSpace, Inc., a Delaware corporation (the “Company”), and the investors listed on the Schedule of Investors attached hereto (individually, an “Investor” and collectively, the “Investors”).

WHEREAS:

A. On December 30, 2004, the Company and the Investors entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”), pursuant to which, on the date hereof, the Company is issuing, and the Investors are purchasing, convertible notes of the Company (the “Notes”).

B. The Notes are convertible into Common Shares (as defined below).

C. In order to induce the Investors to enter into the Securities Purchase Agreement, the Company has agreed to provide certain registration rights on the terms and subject to the conditions set forth herein.

1. DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings:

“Agents” has the meaning set forth in Section 5.1.

“Agreement” has the meaning set forth in the Preamble.

“Blackout Notice” has the meaning set forth in Section 2.10.

“Blackout Period” has the meaning set forth in Section 2.10.

“Blue Sky Filing” has the meaning set forth in Section 5.1.

“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

“Claims” has the meaning set forth in Section 5.1.

“Common Shares” means the shares of the Company’s Class A common stock, par value $0.01 per share, and any other securities of the Company which may be issued or issuable with respect to, in exchange for, or in substitution of, such shares of Class A common stock.

“Company” has the meaning set forth in the Preamble.

“Conversion Shares” means the Common Shares, or other equity securities issued or issuable upon conversion of the Notes.

“Demand Registration” means a registration required to be effected by the Company pursuant to Section 2.1.

“Demand Registration Effectiveness Deadline” has the meaning set forth in Section 2.1(a).

“Demand Registration Filing Deadline” has the meaning set forth in Section 2.1(a).

“Demand Registration Lock-Up Period” has the meaning set forth in Section 2.1(h).

“Demand Registration Statement” means a registration statement of the Company in respect of a Demand Registration pursuant to the provisions of Section 2.1 and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference (or deemed to be incorporated by reference) therein.

“Effectiveness Deadline” has the meaning set forth in Section 2.3(a).

“Effectiveness Failure” has the meaning set forth in Section 2.8(a).

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations thereunder, or any successor statute.

“Filing Deadline” has the meaning set forth in Section 2.3(a).

“Filing Failure” has the meaning set forth in Section 2.8(a).

“Holders” means the Investors and any other holder of Registrable Securities to whom the registration rights set forth in this Agreement have been assigned in accordance with the terms of this Agreement. For purposes of this Agreement, a Person will be deemed to be a Holder whenever such Person holds any Notes (or securities issued by the Company with respect to, in exchange for, or in substitution of the Notes) convertible into or exercisable or exchangeable for, Registrable Securities, whether or not such conversion, exercise or exchange has actually been effected and disregarding any legal restrictions upon the exercise of such rights, and Registrable Securities issuable upon conversion, exchange or exercise of any such security shall be deemed outstanding for the purposes of this Agreement.

“Holders’ Counsel” means one firm of counsel (per registration) to the Holders of Registrable Securities participating in such registration, which counsel shall be selected (i) in the case of a Demand Registration, by the Initiating Holders holding a majority of the Registrable Securities for which registration was requested in the Request, and (ii) in all other cases, by the Majority Holders of the Registration.

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“Incidental Registration” means a registration required to be effected by the Company pursuant to Section 2.2.

“Incidental Registration Statement” means a registration statement of the Company in respect of an Incidental Registration pursuant to the provisions of Section 2.2 and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference (or deemed to be incorporated by reference) therein.

“Initial Public Offering” means the first public offering of any class of securities of the Company pursuant to a registration statement filed with and declared effective by the SEC.

“Initiating Holders” means, with respect to a particular Demand Registration, the Holders who initiated the Request for such registration, which may only be a Lead Investor or if the Lead Investors cease to hold any Registrable Securities, any Holder or Holders of $40 million or more of aggregate principal amount of Notes or Conversion Shares issued upon conversion of such aggregate principal amount of Notes.

“Inspectors” has the meaning set forth in Section 4.1(g).

“Investors” has the meaning set forth in the Preamble.

“Lead Investors” means each of Highbridge International LLC, Amphora Limited and their respective Affiliates who are Holders.

“Lock-Up Agreement” has the meaning set forth in Section 3.1.

“Maintenance Failure” has the meaning set forth in Section 2.8(a).

“Majority Holders” means the Holders of at least a majority of the outstanding Registrable Securities.

“Majority Holders of the Registration” means, with respect to a particular registration, one or more Holders of Registrable Securities who would hold a majority of the Registrable Securities to be included in such registration.

“NASD” means the National Association of Securities Dealers, Inc.

“Non-Public Incidental Registration Notice” has the meaning set forth in Section 2.2(a).

“Non-Public Incidental Registration Notice Period” has the meaning set forth in Section 2.2(a).

“Non-Public IPO Registration Notice” has the meaning set forth in Section 2.4.

“Non-Public IPO Registration Notice Period” has the meaning set forth in Section 2.4.

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“Notes” has the meaning set forth in the Preamble.

“Person” shall mean any individual, firm, partnership, corporation, trust, joint venture, association, joint stock company, limited liability company, unincorporated organization or any other entity or organization, including a government or agency or political subdivision thereof, and shall include any successor (by merger or otherwise) of such entity.

“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, any preliminary prospectus and any prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), and any such Prospectus as amended or supplemented by any prospectus supplement, and all other amendments and supplements to such Prospectus, including post-effective amendments, and in each case including all material incorporated by reference (or deemed to be incorporated by reference) therein.

“Qualified Public Offering” means the first occurrence with respect to the Company of a firm commitment, fully underwritten Initial Public Offering in the United States of Common Shares that is (i) conducted by a nationally recognized investment banking firm, (ii) has an offering price per share of not less than $7.50, (iii) yields gross proceeds to the Company of not less than $100 million and (iv) after which the Common Shares are listed on either The New York Stock Exchange, Inc., or the Nasdaq National Market.

“Qualified Public Offering Lock-Up Period” has the meaning set forth in Section 3.1.

“Records” has the meaning set forth in Section 4.1(g).

“Registrable Securities” means (i) the Conversion Shares, and (ii) any other securities of the Company (or any successor or assign of the Company, whether by merger, consolidation, sale of assets or otherwise) which may be issued or issuable with respect to, in exchange for, or in substitution of, Registrable Securities referenced in clause (i) above by reason of any dividend or stock split, combination of shares, merger, consolidation, recapitalization, reclassification, reorganization, sale of assets or similar transaction. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (A) a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (B) such securities have been otherwise transferred, a new certificate or other evidence of ownership for them not bearing the legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of them shall not require registration under the Securities Act, (C) such securities shall have ceased to be outstanding, or (D) such securities shall be eligible for resale pursuant to Rule 144(k) of the Securities Act (or any successor provision thereof having similar effect).

“registration” refers to a registration effected by preparing and filing one or more Registration Statements (as defined below) in compliance with the Securities Act and pursuant to Rule 415 and the declaration or ordering of effectiveness of such Registration Statement(s) by the SEC.

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“Registration Default Payments” has the meaning set forth in Section 2.8(a).

“Registration Expenses” means any and all expenses incident to performance of or compliance with this Agreement by the Company and its Subsidiaries, including, without limitation (i) all SEC, stock exchange, NASD and other registration, listing and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws and compliance with the rules of any stock exchange (including fees and disbursements of counsel in connection with such compliance and the preparation of a blue sky memorandum and legal investment survey), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing, distributing, mailing and delivering any Registration Statement, any Prospectus, any underwriting agreements, transmittal letters, securities sales agreements, securities certificates and other documents relating to the performance of or compliance with this Agreement, (iv) the fees and disbursements of counsel for the Company, (v) the fees and disbursements of Holders’ Counsel, which amount shall be limited to $25,000 per registration, (vi) in connection with an Underwritten Offering only, the fees and disbursements of all independent public accountants (including the expenses of any audit and/or “cold comfort” letters) and the fees and expenses of other Persons, including experts, retained by the Company and (vii) in connection with an Underwritten Offering only, the expenses incurred in connection with making road show presentations and holding meetings with potential investors to facilitate the distribution and sale of Registrable Securities which are customarily borne by the issuer; provided, however, Registration Expenses shall not include discounts and commissions payable to underwriters, selling brokers, dealer managers or other similar Persons engaged in the distribution of any of the Registrable Securities; and provided further, that in any case where Registration Expenses are not to be borne by the Company, such expenses shall not include salaries of personnel of the Company or general overhead expenses of the Company, auditing fees, premiums or other expenses relating to liability insurance required by underwriters of the Company or other expenses for the preparation of financial statements or other data normally prepared by the Company in the ordinary course of its business or which the Company would have incurred in any event; and provided, further, that in the event the Company shall, in accordance with Section 2.2 or Section 2.4 hereof, not register any securities with respect to which it had given written notice of its intention to register to Holders, notwithstanding anything to the contrary in the foregoing, all of the costs incurred by the Holders in connection with such registration shall be deemed to be Registration Expenses.

“Registration Statement” means any registration statement of the Company which covers any Registrable Securities and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference (or deemed to be incorporated by reference) therein.

“Request” has the meaning set forth in Section 2.1(a).

“Required Shelf Registration” means a registration required to be effected by the Company pursuant to Section 2.3.

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“Required Shelf Registration Effectiveness Deadline” has the meaning set forth in Section 2.3(a).

“Required Shelf Registration Filing Deadline” has the meaning set forth in Section 2.3(a).

“Required Shelf Registration Statement” means a registration statement filed pursuant to a Required Shelf Registration.

“SEC” means the Securities and Exchange Commission, or any successor agency having jurisdiction to enforce the Securities Act.

“Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations thereunder, or any successor statute.

“Securities Purchase Agreement” has the meaning set forth in the Preamble.

“Selling Shareholder Amount” has the meaning set forth in Section 2.4.

“Shelf Registration” means a registration pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous or delayed basis.

“Underwriters” means the underwriters, if any, of the offering being registered under the Securities Act.

“Underwritten Offering” means a sale of securities of the Company to an Underwriter or Underwriters for reoffering to the public.

“Violation” has the meaning set forth in Section 5.1.

“Withdrawn Demand Registration” has the meaning set forth in Section 2.1(a).

“Withdrawn Request” has the meaning set forth in Section 2.1(a).

2. REGISTRATION UNDER THE SECURITIES ACT.

2.1 Demand Registration.

(a) Right to Demand Registration. (i) Subject to Section 2.1(c), at any time or from time to time, the Initiating Holders shall have the right to request in writing that the Company register all or part of such Holders’ Registrable Securities (a “Request”) (which Request shall specify the amount of Registrable Securities intended to be disposed of by such Holders and the intended method of disposition thereof) by filing with the SEC a Demand Registration Statement. As promptly as practicable, but no later than five (5) days after receipt of a Request, the Company shall give written notice of such requested registration to all Holders of Registrable Securities. Subject to Section 2.1(b), the Company shall include in a Demand Registration (x) the Registrable Securities intended to be disposed of by the Initiating Holders

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and (y) the Registrable Securities intended to be disposed of by any other Holder which shall have made a written request (which request shall specify the amount of Registrable Securities to be registered and the intended method of disposition thereof) to the Company for inclusion thereof in such registration within 20 calendar days after the receipt of such written notice from the Company. The Company shall, as expeditiously as possible following a Request, but in any event within 90 calendar days (the “Demand Registration Filing Deadline”), cause to be filed with the SEC a Demand Registration Statement providing for the registration under the Securities Act of the Registrable Securities which the Company has been so requested to register by all such Holders, to the extent necessary to permit the disposition of such Registrable Securities so to be registered in accordance with the intended methods of disposition thereof specified in such Request or further requests. The Company shall use its reasonable best efforts to have such Demand Registration Statement declared effective by the SEC as soon as practicable thereafter, but in any event within 180 calendar days following a Request (the “Demand Registration Effectiveness Deadline”) and to keep such Demand Registration Statement continuously effective for the period specified in Section 4.1(b).

(ii) A Request may be withdrawn prior to the filing of the Demand Registration Statement by the Majority Holders of the Registration (a “Withdrawn Request”) and a Demand Registration Statement may be withdrawn prior to the effectiveness thereof by the Majority Holders of the Registration (a “Withdrawn Demand Registration”), and such withdrawals shall be treated as a Demand Registration which shall have been effected pursuant to this Section 2.1, unless the Holders of Registrable Securities to be included in such Registration Statement reimburse the Company for its reasonable out-of-pocket Registration Expenses relating to the preparation and filing of such Demand Registration Statement (to the extent actually incurred); provided; however, that if a Withdrawn Request or Withdrawn Registration Statement is made (A) because of a Material Adverse Effect (as defined in the Securities Purchase Agreement), or (B) because the sole or lead managing Underwriter advises that the amount of Registrable Securities to be sold in such offering be reduced pursuant to Section 2.1(b) by more than 10% of the Registrable Securities to be included in such Registration Statement, or (C) because of a postponement of such registration pursuant to Section 2.10, then such withdrawal shall not be treated as a Demand Registration effected pursuant to this Section 2.1 (and shall not be counted toward the number of Demand Registrations), and the Company shall pay all Registration Expenses in connection therewith. Any Holder requesting inclusion in a Demand Registration may, at any time prior to the effective date of the Demand Registration Statement (and for any reason), revoke such request by delivering written notice to the Company revoking such requested inclusion.

(iii) The registration rights granted pursuant to the provisions of this Section 2.1 shall be in addition to the registration rights granted pursuant to the other provisions of Section 2 hereof.

(b) Priority in Demand Registrations. If a Demand Registration involves an Underwritten Offering, and the sole or lead managing Underwriter, as the case may be, of such Underwritten Offering shall advise the Company in writing (with a copy to each Holder requesting registration) on or before the date five days prior to the date then scheduled for such offering that, in its opinion, the amount of securities (including Registrable Securities) requested to be included in such Demand Registration exceeds the number which can be sold in such

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offering within a price range acceptable to the Majority Holders of the Registration (such writing to state the basis of such opinion and the approximate number of Registrable Securities which may be included in such offering), the Company shall include in such Demand Registration, to the extent of the number which the Company is so advised may be included in such offering, the Registrable Securities requested to be included in the Demand Registration by the Holders, allocated pro rata in proportion to the number of Registrable Securities requested to be included in such Demand Registration by each of them. In the event the Company shall not, by virtue of this Section 2.1(b), include in any Demand Registration all of the Registrable Securities of any Holder requesting to be included in such Demand Registration, such Holder may, upon written notice to the Company given within five days of the time such Holder first is notified of such matter, reduce the amount of Registrable Securities it desires to have included in such Demand Registration, whereupon only the Registrable Securities, if any, it desires to have included will be so included and the Holders not so reducing shall be entitled to a corresponding increase in the amount of Registrable Securities to be included in such Demand Registration.

(c) Limitations on Registrations. The rights of Holders of Registrable Securities to request Demand Registrations pursuant to Section 2.1(a) are subject to the following limitations:

(i) in no event shall the Company be required to effect a Demand Registration unless the reasonably anticipated aggregate offering price to the public of all Registrable Securities for which registration has been requested by Holders, together with any shares sold by the Company for its own account, will be at least $25,000,000;

(ii) in no event shall the Company be required to effect a Demand Registration until 180 calendar days after an Initial Public Offering;

(iii) in no event shall the Company be required to effect a Demand Registration prior to 91 calendar days after a prior Demand Registration Statement is declared effective by the SEC;

(iv) in no event shall the Company be required to effect a Demand Registration at any time during the period commencing with the filing of the Required Shelf Registration Statement with the SEC and ending with the earlier of (x) the effectiveness of the Required Shelf Registration Statement and (y) the Required Shelf Registration Effectiveness Deadline;

(v) in no event shall the Company be required to effect a Demand Registration at any time that the Required Shelf Registration is effective and, excluding any Blackout Period (as defined below), available for use by the Holders; and

(vi) in no event shall the Company be required to effect, in the aggregate, more than three Demand Registrations; provided, however, that such number shall be increased to the extent the Company does not include in what would otherwise be the final registration the number of Registrable Securities requested to be registered by the Holders by reason of Section 2.1(b).

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(d) Underwriting; Selection of Underwriters. Notwithstanding anything to the contrary contained in Section 2.1(a), if the Initiating Holders holding a majority of the Registrable Securities for which registration was requested in the Request so elect, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of a firm commitment Underwritten Offering; and such Initiating Holders may require that all Persons (including other Holders) participating in such registration sell their Registrable Securities to the Underwriters at the same price and on the same terms of underwriting applicable to the Initiating Holders. If any Demand Registration involves an Underwritten Offering, the sole or managing Underwriters and any additional investment bankers and managers to be used in connection with such registration shall be selected by the Initiating Holders holding a majority of the Registrable Securities for which registration was requested in the Request, subject to the approval of the Company for any underwriter that was not a manager or co-manager of any public offering by the Company or otherwise sufficiently familiar with the business of the Company (such approval not to be unreasonably withheld).

(e) Effective Registration Statement; Suspension. A Demand Registration Statement shall not be deemed to have become effective (and the related registration will not be deemed to have been effected) (i) unless it has been declared effective by the SEC and remains effective in compliance with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such Demand Registration Statement for the time period specified in Section 4.1(b), (ii) if the offering of any Registrable Securities pursuant to such Demand Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, or (iii) if, in the case of an Underwritten Offering, the conditions to closing specified in an underwriting agreement to which the Company is a party are not satisfied due to a breach or failure by the Company or are not otherwise waived.

(f) Other Registrations. During the period (i) beginning on the date of a Request and (ii) ending on the date that is 90 days after the date that a Demand Registration Statement filed pursuant to such Request has been declared effective by the SEC or, if the Holders shall withdraw such Request or such Demand Registration Statement, on the date of such Withdrawn Request or such Withdrawn Registration Statement, the Company shall not, without the consent of the Majority Holders of the Registration, file a registration statement pertaining to any other securities of the Company (other than a registration on Forms S-4 or S-8 or any successor form to such forms or Form S-3 for compensatory, bonus or other similar plans, dividend reinvestment plans and stock purchase plans).

(g) Registration Statement Form. Registrations under this Section 2.1 shall be on such appropriate registration form of the SEC (i) as shall be selected by the Initiating Holders holding a majority of the Registrable Securities for which registration was requested in the Request, and (ii) which shall be available for the sale of Registrable Securities in accordance with the intended method or methods of disposition specified in the requests for registration. The Company agrees to include in any such Registration Statement all information which any selling Holder, upon advice of counsel, shall reasonably request.

(h) Demand Registration Lock-Up. Each Holder of Registrable Securities agrees not to (i) sell, offer to sell, contract or agree to sell, hypothecate, hedge, pledge, grant any

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option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, any Registrable Securities or warrants or other rights to purchase Registrable Securities or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Registrable Securities, or warrants or other rights to purchase Registrable Securities, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise, during the time period reasonably requested by the sole or lead managing Underwriter, if any, or, if none, the Initiating Holders holding a majority of the Registrable Securities covered by the Demand Registration Statement, not to exceed thirty (30) days, beginning on the effective date of any Demand Registration Statement (except pursuant to such Demand Registration Statement) without the prior written consent of the sole or lead managing Underwriter, if any, or, if none, the Initiating Holders holding a majority of the Registrable Securities covered by the Demand Registration Statement (the “Demand Registration Lock-Up Period”); provided, however, that if (i) during the period that begins on the date that is fifteen (15) calendar days plus three (3) Business Days before the last day of the Demand Registration Lock-Up Period and ends on the last day of the Demand Registration Lock-Up Period, the Company issues an earnings release or material news or a material event relating to the Company occurs, or (ii) prior to the expiration of the Demand Registration Lock-Up Period, the Company announces that it will release earnings results during the sixteen (16) day period beginning on the last day of the Demand Registration Lock-Up Period, the restrictions imposed shall continue to apply until the expiration of the date that is fifteen (15) calendar days plus three (3) Business Days after the date on which the issuance of the earnings release or the material news or material event occurs. Notwithstanding the foregoing, this Agreement shall not restrict any Holder from transferring any Notes to any Person who agrees to be bound by the provisions hereof.

2.2 Incidental Registration.

(a) Right to Include Registrable Securities. (i) If the Company at any time or from time to time proposes or is required to register any of its securities under the Securities Act (other than (w) in connection with its Initial Public Offering, (x) in a registration on Form S-4 or S-8 or any successor form to such forms or Form S-3 for compensatory, bonus or other similar plans, dividend reinvestment plans and stock purchase plans, (y) other than pursuant to Section 2.1 or (z) at such times as a Required Shelf Registration Statement is effective) whether or not pursuant to registration rights granted to other holders of its securities and whether or not for sale for its own account, the Company shall deliver prompt written notice (which notice shall be given (i) in the event that the Company has publicly disclosed such proposed registration, at least thirty (30) calendar days prior to such proposed registration and (ii) in the event that the Company has not publicly disclosed such proposed registration (a “Non-Public Incidental Registration Notice”), no more than ten (10) Business Days prior to the filing of such proposed registration with the SEC (such period not in excess of ten (10) Business Days, the “Non-Public Incidental Registration Notice Period”)) to all Holders of Registrable Securities of its intention to undertake such registration, describing in reasonable detail the proposed registration and distribution (including the anticipated range of the proposed offering price, the class and number of securities proposed to be registered and the distribution arrangements) and of such Holders’ right to participate in such registration under this Section 2.2 as hereinafter provided. If the Holder elects to participate in such proposed registration, the Holder shall keep the contents of any Non-Public Incidental Registration Notice confidential prior to the filing of such proposed

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registration with the SEC and if the Holder has elected not to participate in such proposed registration, the Holder shall keep the contents of any Non-Public Incidental Registration Notice confidential during the Non-Public Incidental Registration Notice Period. Subject to the other provisions of this paragraph (a) and Section 2.2(b), upon the written request of any Holder made within twenty (20) calendar days, or in the case of a Non-Public Incidental Registration Notice, within five (5) Business Days, after the receipt of such written notice (which request shall specify the amount of Registrable Securities to be registered and the intended method of disposition thereof), the Company shall effect the registration under the Securities Act of all Registrable Securities requested by Holders to be so registered (an “Incidental Registration”), to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered, by inclusion of such Registrable Securities in the Registration Statement which covers the securities which the Company proposes to register and shall cause such Registration Statement to become and remain effective with respect to such Registrable Securities in accordance with the registration procedures set forth in Section 4. If an Incidental Registration involves an Underwritten Offering, immediately upon notification to the Company from the Underwriter of the price at which such securities are to be sold, the Company shall so advise each participating Holder. The Holders requesting inclusion in an Incidental Registration may, at any time prior to the effective date of the Incidental Registration Statement (and for any reason), revoke such request by delivering written notice to the Company revoking such requested inclusion.

(ii) If at any time after giving written notice of its intention to register any securities and prior to the effective date of the Incidental Registration Statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each Holder of Registrable Securities and, thereupon, (A) in the case of a determination not to register, the Company shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses incurred in connection therewith), without prejudice, however, to the rights of Holders to cause such registration to be effected as a registration under Section 2.1 or the Company’s obligation to effect a registration under Section 2.3, and (B) in the case of a determination to delay such registration, the Company shall be permitted to delay the registration of such Registrable Securities for the same period as the delay in registering such other securities; provided, however, that if such delay shall extend beyond 120 days from the date the Company received a request to include Registrable Securities in such Incidental Registration, then the Company shall again give all Holders the opportunity to participate therein and shall follow the notification procedures set forth in the preceding paragraph. There is no limitation on the number of such Incidental Registrations pursuant to this Section 2.2 which the Company is obligated to effect.

(iii) The registration rights granted pursuant to the provisions of this Section 2.2 shall be in addition to the registration rights granted pursuant to the other provisions of Section 2 hereof.

(b) Priority in Incidental Registration. If an Incidental Registration involves an Underwritten Offering (on a firm commitment basis), and the sole or the lead managing Underwriter, as the case may be, of such Underwritten Offering shall advise the Company in

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writing (with a copy to each Holder requesting registration) on or before the date five days prior to the date then scheduled for such offering that, in its opinion, the amount of securities (including Registrable Securities) requested to be included in such registration exceeds the amount which can be sold in such offering without materially interfering with the successful marketing of the securities being offered (such writing to state the basis of such opinion and the approximate number of such securities which may be included in such offering without such effect), the Company shall include in such registration, to the extent of the number which the Company is so advised may be included in such offering without such effect, (i) in the case of a registration initiated by the Company, (A) first, the securities that the Company proposes to register for its own account, (B) second, the Registrable Securities requested to be included in such registration by the Holders, allocated pro rata in proportion to the number of Registrable Securities requested to be included in such registration by each of them, and (C) third, other securities of the Company to be registered on behalf of any other Person, and (ii) in the case of a registration initiated by a Person other than the Company (other than pursuant to Section 2.1), (A) first, one-third of the Registrable Securities requested to be included in such registration by the Holders, allocated pro rata in proportion to the number of securities requested to be included in such registration by each of them, (B) second, one-third of the securities proposed to be registered by any Persons initiating such registration, allocated pro rata in proportion to the number of securities requested to be included in such registration by each of them, and (C) third, on a pari passu basis, any remaining Registrable Securities requested to be included in such registration by the Holders, and any remaining securities proposed to be registered by any Persons initiating such registration, allocated pro rata in proportion to the number of securities requested to be included in such registration by each of them; provided, however, that in the event the Company will not, by virtue of this Section 2.2(b), include in any such registration all of the Registrable Securities of any Holder requested to be included in such registration, such Holder may, upon written notice to the Company given within three days of the time such Holder first is notified of such matter, reduce the amount of Registrable Securities it desires to have included in such registration, whereupon only the Registrable Securities, if any, it desires to have included will be so included and the Holders not so reducing shall be entitled to a corresponding increase in the amount of Registrable Securities to be included in such registration.

2.3 Required Shelf Registration.

(a) Within 10 calendar days of the first anniversary of the Initial Public Offering (the “Required Shelf Registration Filing Deadline”, and together with the Demand Registration Filing Deadline, the “Filing Deadline”), the Company shall be required, without any request from the Holders, to file a Shelf Registration Statement (the “Required Shelf Registration”) on Form S-3 if the Company is a registrant entitled to use Form S-3, or otherwise on an available form acceptable to the Majority Holders, or any successor form thereto, for a public offering of the resale of all Registrable Securities held by all Holders. The Company shall use its reasonable best efforts to have such Required Shelf Registration Statement declared effective by the SEC as soon as practicable thereafter, but in any event within 90 calendar days following the filing of such Required Shelf Registration Statement, or if there is a full review of the Registration Statement by the SEC, 120 days following the filing of such Required Shelf Registration Statement (the “Required Shelf Registration Effectiveness Deadline”, and together with the Demand Registration Effectiveness Deadline, the “Effectiveness Deadline”) and to keep such Shelf Registration Statement continuously effective for the period specified in

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Section 2.3(b). The Required Shelf Registration Statement shall contain (except if otherwise directed by the Majority Holders) the “Plan of Distribution” section in substantially the form attached hereto as Exhibit A.

(b) The Company shall use its reasonable best efforts to keep the Required Shelf Registration continuously effective until the earlier of (x) such time as Holders are eligible to sell all of their Registrable Securities in a sale pursuant to Section 144(k) of the Securities Act (or any successor provision thereof having similar effect) and (y) the date that all of the Registrable Securities covered by such Required Shelf Registration Statement have been sold.

(c) The registration rights granted pursuant to the provisions of this Section 2.3 shall be in addition to the registration rights granted pursuant to the other provisions of this Section 2.

2.4 Initial Public Offering or Qualified Public Offering. In the event of an Initial Public Offering or a Qualified Public Offering, if it is proposed that one or more shareholders of the Company participate in such Initial Public Offering or Qualified Public Offering, as the case may be, by selling a number of Common Shares that would, based on the proposed offering price, likely result in aggregate gross proceeds to such shareholder or shareholders in excess of $5 million in the aggregate (such participating amount, the “Selling Shareholder Amount”), then the Holders may participate and sell a number of Common Shares in the Initial Public Offering or Qualified Public Offering, as the case may be, that would, based on the proposed offering price, likely result in aggregate gross proceeds to the Holders in an amount not in excess of the Selling Shareholder Amount less $5 million. The Holders shall participate in the Initial Public Offering or Qualified Public Offering, as the case may be, pro rata in proportion to the number of Registrable Securities requested by the Holders to be included in the Initial Public Offering or Qualified Public Offering, as the case may be. In the event that one or more shareholders of the Company choose to participate in an Initial Public Offering or Qualified Public Offering, the Company shall deliver prompt written notice (which notice shall be given (i) in the event that the Company has publicly disclosed such proposed Initial Public Offering or Qualified Public Offering, at least thirty (30) calendar days prior to such proposed Initial Public Offering or Qualified Public Offering and (ii) in the event that the Company has not publicly disclosed such proposed Initial Public Offering or Qualified Public Offering (a “Non-Public IPO Registration Notice”), no more than ten (10) Business Days prior to the filing of such proposed Initial Public Offering or Qualified Public Offering registration with the SEC (such period not in excess of ten (10) Business Days, the “Non-Public IPO Registration Notice Period”)) to all Holders of Registrable Securities of its intention to undertake such Initial Public Offering or Qualified Public Offering, describing in reasonable detail the proposed offering and distribution (including the anticipated range of the proposed offering price, the class and number of securities proposed to be registered and the distribution arrangements) and of such Holders’ right to participate in such registration under this Section 2.4 as herein provided. If the Holder elects to participate in such proposed Initial Public Offering or Qualified Public Offering, the Holder shall keep the contents of any Non-Public IPO Registration Notice confidential prior to the filing of such proposed Initial Public Offering or Qualified Public Offering with the SEC and if the Holder has elected not to participate in such proposed Initial Public Offering or Qualified Public Offering, the Holder shall keep the contents of any Non-Public IPO Registration Notice confidential during the Non-Public IPO Registration Notice Period. Subject to the other

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provisions of this paragraph, upon the written request of any Holder made within twenty (20) calendar days, or in the case of a Non-Public IPO Registration Notice, within five (5) Business Days, after the receipt of such written notice (which request shall specify the amount of Registrable Securities to be sold), the Company shall allow the Holders to participate in such offering. Immediately upon notification to the Company from the Underwriter of the price at which such securities are to be sold, the Company shall so advise each participating Holder. The Holders requesting to participate may, at any time prior to the effectiveness of the registration statement for the Initial Public Offering or Qualified Public Offering, as the case may be, (and for any reason), revoke such request by delivering written notice to the Company revoking such requested inclusion.

2.5 Registration of Other Securities. Whenever the Company shall effect a Demand Registration or a Required Shelf Registration, no securities other than the Registrable Securities shall be covered by such registration unless the Majority Holders of the Registration shall have consented in writing to the inclusion of such other securities.

2.6 Expenses. The Company shall pay all Registration Expenses in connection with any Registration Statement hereunder, whether or not such registration shall become effective and whether or not all Registrable Securities originally requested to be included in such registration are withdrawn or otherwise ultimately not included in such registration, except as otherwise provided with respect to a Withdrawn Request and a Withdrawn Demand Registration in Section 2.1(a). Each Holder shall pay all discounts and commissions payable to underwriters, selling brokers, managers or other similar Persons engaged in the distribution of such Holder’s Registrable Securities pursuant to any registration pursuant to this Section 2 pro rata in accordance with the number of Registrable Securities being sold in the registration by such Holder.

2.7 Underwritten Offerings.

(a) Underwriting Agreements. If requested by the sole or lead managing Underwriter for any Underwritten Offering effected pursuant to a Demand Registration or for the Required Shelf Registration, the Company shall enter into a customary underwriting agreement with the Underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to the Majority Holders of the registration.

(b) Holders of Registrable Securities to be Parties to Underwriting Agreement. The Holders of Registrable Securities to be distributed by Underwriters in an Underwritten Offering contemplated by Section 2 shall be parties to the underwriting agreement between the Company and such Underwriters and may, at such Holders’ option, require that any or all of the conditions precedent to the obligations of such Underwriters under such underwriting agreement be conditions precedent to the obligations of such Holders of Registrable Securities. No Holder shall be required to make any representations or warranties to, or agreements with, the Company or the Underwriters other than representations, warranties or agreements regarding such Holder, such Holder’s Registrable Securities and such Holder’s intended method of disposition.

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(c) Participation in Underwritten Registration. Notwithstanding anything herein to the contrary, no Person may participate in any Underwritten Offering hereunder unless such Person (i) agrees to sell its securities on the same terms and conditions provided in any underwritten arrangements approved by the Persons entitled hereunder to approve such arrangement and (ii) accurately completes and executes in a timely manner all questionnaires, powers of attorney, indemnities, custody agreements, underwriting agreements and other documents customary for such an offering and reasonably required under the terms of such underwriting arrangements.

(d) In no event shall the Company be required to effect more than three Underwritten Offerings (whether as Demand Registrations or for sales under the Required Shelf Registration).

2.8 Registration Default Penalties.

(a) If (i) a Demand Registration Statement or the Required Shelf Registration Statement covering all of the Registrable Securities required to be covered thereby and required to be filed by the Company pursuant to this Agreement is (A) not filed with the SEC on or before the respective Filing Deadline (a “Filing Failure”) or (B) not declared effective by the SEC on or before the respective Effectiveness Deadline (an “Effectiveness Failure”) or (ii) other than during an allowable Blackout Period hereunder on any day after the effective date of each such Registration Statement sales of all of the Registrable Securities required to be included on such Registration Statement cannot be made pursuant to such Registration Statement or otherwise (including, without limitation, because of a failure to keep such Registration Statement effective, to disclose such information as is necessary for sales to be made pursuant to such Registration Statement or to maintain the listing of the Common Shares) (a “Maintenance Failure”) then, as partial relief for the damages to any Holder by reason of any such delay in or reduction of its ability to sell the Conversion Shares (which remedy shall not be exclusive of any other remedies available at law or in equity), the Company shall pay to each Holder of Registrable Securities relating to such Registration Statement an amount in cash equal to (A) one percent (1.0%) of the aggregate Purchase Price (as such term is defined in the Securities Purchase Agreement) of such Investor’s Notes relating to the Registrable Securities included in such Registration Statement on each of the following dates: (i) the day of a Filing Failure; (ii) the day of an Effectiveness Failure; and (iii) the initial day of a Maintenance Failure, and (B) two percent (2.0%) of the aggregate Purchase Price of such Investor’s Notes relating to the Registrable Securities included in such Registration Statement on each of the following dates: (i) on every thirtieth day after the day of a Filing Failure and thereafter (pro rated for periods totaling less than thirty days) until such Filing Failure is cured; (ii) on every thirtieth day after the day of an Effectiveness Failure and thereafter (pro rated for periods totaling less than thirty days) until such Effectiveness Failure is cured; (iii) on every thirtieth day after the initial day of a Maintenance Failure and thereafter (pro rated for periods totaling less than thirty days) until such Maintenance Failure is cured. The payments to which a holder shall be entitled pursuant to this Section 2.1 are referred to herein as “Registration Default Payments.” Registration Default Payments shall be paid on the earlier of (I) the last day of the calendar month during which such Registration Default Payments are incurred and (II) the third Business Day after the event or failure giving rise to the Registration Default Payments is cured. In the event the Company fails to make Registration Default Payments in a timely manner, such Registration Default Payments shall bear interest at

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the rate of 1.5% per month (prorated for partial months) until paid in full. The postponements described in Section 2.10 shall not constitute Filing Failures or Effectiveness Failures, as applicable, for any Demand Registration. Registration Default Payments shall cease to accrue at such time as the Registrable Securities can be sold pursuant to Rule 144(k) of the Securities Act (or any successor provision thereof having similar effect); provided that the foregoing shall not affect the Company’s obligation to make Registration Default Payments for any period prior to such time.

2.9 Conversions; Exercises. Notwithstanding anything to the contrary herein, in order for any Registrable Securities that are issuable upon the exercise of conversion rights, options or warrants to be included in any registration pursuant to Section 2 hereof, the exercise of such conversion rights, options or warrants must be effected no later than immediately prior to the closing of any sales under the Registration Statement pursuant to which such Registrable Securities are to be sold or such earlier time as the Underwriter, if any, the Company or the Company’s transfer agent should reasonably determine is necessary so as not to delay the closing.

2.10 Postponements. The Company shall be entitled to postpone a Demand Registration and to require the Holders of Registrable Securities to discontinue the disposition of their securities covered by a Shelf Registration during any Blackout Period (as defined below) (i) if the Board of Directors of the Company determines in good faith that effecting such a registration or continuing such disposition at such time would not be advisable in light of pending or anticipated corporate developments, or (ii) if the Company is in possession of material, non-public information which the Board of Directors of the Company determines in good faith it is not in the best interests of the Company to disclose in a registration statement at such time; provided, however, that the Company may only delay a Demand Registration pursuant to this Section 2.10 by delivery of a Blackout Notice (as defined below) within 30 days of delivery of the request for such Demand Registration under Section 2.1 and may delay a Demand Registration and require the Holders of Registrable Securities to discontinue the disposition of their securities covered by a Shelf Registration only for two (2) periods of up to 30 days or one period of up to 45 days (or such earlier time as such transaction is consummated or no longer proposed or the material information has been made public) in any 12 month period (the “Blackout Period”). The Company shall promptly notify the Holders in writing (a “Blackout Notice”) of any decision to postpone a Demand Registration or to discontinue sales of Registrable Securities covered by a Shelf Registration pursuant to this Section 2.10 and shall include a general statement (which statement shall not include any material, non-public information) of the reason for such postponement, an approximation of the anticipated delay and an undertaking by the Company promptly to notify the Holders as soon as a Demand Registration may be effected or sales of Registrable Securities covered by a Shelf Registration may resume. In making any such determination to initiate or terminate a Blackout Period, the Company shall not be required to consult with or obtain the consent of any Holder, and any such determination shall be the Company’s sole responsibility. Each Holder shall treat all notices received from the Company pursuant to this Section 2.10 in the strictest confidence and shall not disseminate such information. If the Company shall postpone the filing of a Demand Registration Statement pursuant to a Blackout Period, the Majority Holders who were to participate therein shall have the right to withdraw the request for registration. Any such withdrawal shall be made by giving written notice to the Company within 30 days after receipt of

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the Blackout Notice. Such withdrawn registration request shall not be treated as a Demand Registration effected pursuant to Section 2.1 (and shall not be counted towards the number of Demand Registrations effected), and the Company shall pay all Registration Expenses in connection therewith.

2.11 Preparation, Investigation. In connection with the preparation and filing of each Registration Statement, the Company will give the Holders of Registrable Securities to be sold under such Registration Statement, the underwriters, if any, and their respective counsel and accountants, drafts and final copies of such Registration Statement, each Prospectus included therein or filed with the SEC and each amendment thereof or supplement thereto (subject to such Holder agreeing to keep confidential any confidential information including, if applicable, the existence of such draft Registration Statement until the filing thereof), at least four (4) Business Days prior to the filing thereof with the SEC, and will give each of them such access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of such Holders and such underwriters’ respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act.

2.12 Termination of Registration Rights. The rights and obligations under this Agreement, other than the rights and obligations under Sections 5, 6.1 and 6.3 through 6.19 hereunder, shall terminate with respect to a Holder of Registrable Securities upon the earlier of (x) when such Holder is eligible to sell all of its Registrable Securities in a sale pursuant to Rule 144(k) of the Securities Act (or any successor provision having similar effect) and (y) the date that all of the Registrable Securities shall have ceased to be Registrable Securities.

3. HOLDBACK ARRANGEMENTS.

3.1 Restrictions on Sale. The Company and each Holder of Registrable Securities agrees, if timely requested in writing by the sole or lead managing Underwriter in a Qualified Public Offering, not to (i) sell, offer to sell, contract or agree to sell, hypothecate, hedge, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, any Registrable Securities or warrants or other rights to purchase Registrable Securities, or file or cause to be declared effective a registration statement under the Securities Act relating to the offer and sale of any shares of Registrable Securities, or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Registrable Securities, or warrants or other rights to purchase Registrable Securities, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise (the agreements contained in clauses (i) and (ii) of this Section 3.1, collectively, the “Lock-Up Agreement”), during the time period reasonably requested by the sole or lead managing Underwriter not to exceed 180 days, beginning on the effective date of the Registration Statement for such Qualified Public Offering (except as part of such Underwritten Offering or pursuant to registrations on Forms S-4 or S-8) without the prior written consent of the sole or lead managing Underwriter (the “Qualified Public Offering Lock-Up Period”); provided, however, that if (i) during the period that begins on the date that is fifteen (15) calendar days plus three (3) Business Days before the last day of the Qualified Public Offering Lock-Up Period and ends on the last day of the Qualified Public Offering Lock-Up Period, the Company issues an earnings release or material news or a material event relating to the Company

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occurs, or (ii) prior to the expiration of the Qualified Public Offering Lock-Up Period, the Company announces that it will release earnings results during the sixteen (16) day period beginning on the last day of the Qualified Public Offering Lock-Up Period, the restrictions imposed shall continue to apply until the expiration of the date that is fifteen (15) calendar days plus three (3) Business Days after the date on which the issuance of the earnings release or the material news or material event occurs. Notwithstanding the foregoing, (i) the Lock-Up Agreement shall not restrict any Holder from transferring any Notes to any Person who agrees to be bound by the provisions hereof and (ii) the Holders of Registrable Securities shall not be obligated to enter into the Lock-Up Agreement unless (A) all officers and directors of the Company and all Persons holding at least five percent (5%) of the Company’s voting securities enter into substantially similar agreements, with the agreement of the Holder’s being on no more onerous terms than any other agreements entered into by any other Person, and (B) the Lock-Up Agreement is explicitly conditioned on the Holder receiving the benefits of any release or modification of such agreement for any other Person subject to such an agreement or similar agreement.

4. REGISTRATION PROCEDURES.

4.1 Obligations of the Company. Whenever the Company is required to effect the registration of Registrable Securities under the Securities Act pursuant to Section 2 of this Agreement, the Company shall, as expeditiously as practicable:

(a) Prepare and file with the SEC (promptly, and in any event within the specified time frames) the requisite Registration Statement to effect such registration, which Registration Statement shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith, and the Company shall use its reasonable best efforts to cause such Registration Statement to become effective as soon as practicable, but in any event, subject to Section 2.10, within the time frames specified herein; provided, however, that before filing a Registration Statement or Prospectus or any amendments or supplements thereto, or comparable statements under securities or blue sky laws of any jurisdiction, the Company shall (i) provide Holders’ Counsel with an adequate and appropriate opportunity to participate in the preparation of such Registration Statement and each Prospectus included therein (and each amendment or supplement thereto or comparable statement) to be filed with the SEC, which documents shall be subject to the review and comment of Holders’ Counsel, and (ii) not file any such Registration Statement or Prospectus (or amendment or supplement thereto or comparable statement) with the SEC to which Holder’s Counsel or any Majority Holders of the Registration shall have reasonably objected on the grounds that such filing does not comply in all material respects with the requirements of the Securities Act or of the rules or regulations thereunder.

(b) Prepare and file with the SEC such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary (i) to keep such Registration Statement effective, and (ii) to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such Registration Statement, in each case until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller(s) thereof set forth in such Registration Statement; provided, such period need not extend beyond the time

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periods provided herein, including as set forth in Section 2.12, and which periods, in any event, shall terminate when all Registrable Securities covered by such Registration Statement have been sold (but not before the expiration of the 90 day period referred to in Section 4(3) of the Securities Act and Rule 174 thereunder, if applicable).

(c) Furnish, without charge, to each selling Holder of such Registrable Securities and each Underwriter, if any, of the securities covered by such Registration Statement, such number of copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits), and the Prospectus included in such Registration Statement (including each preliminary Prospectus) in conformity with the requirements of the Securities Act, and other documents, as such selling Holder and Underwriter may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by such selling Holder (the Company hereby consenting to the use in accordance with applicable law of each such Registration Statement (or amendment or post-effective amendment thereto) and each such Prospectus (or preliminary prospectus or supplement thereto) by each such selling Holder of Registrable Securities and the Underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Registration Statement or Prospectus).

(d) Prior to any public offering of Registrable Securities, use its reasonable best efforts to register or qualify all Registrable Securities and other securities covered by such Registration Statement under such other securities or blue sky laws of such U.S. jurisdictions as any selling Holder of Registrable Securities covered by such Registration Statement or the sole or lead managing Underwriter, if any, may reasonably request to enable such selling Holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such selling Holder and to continue such registration or qualification in effect in each such jurisdiction for as long as such Registration Statement remains in effect (including through new filings or amendments or renewals), and do any and all other acts and things which may be necessary or advisable to enable any such selling Holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such selling Holder; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 4.1(d), (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to general service of process in any such jurisdiction.

(e) Use its reasonable best efforts to obtain all other approvals, consents, exemptions or authorizations from such U.S. governmental agencies or authorities as may be necessary to enable the selling Holders of such Registrable Securities to consummate the disposition of such Registrable Securities.

(f) Promptly notify Holders’ Counsel, each Holder of Registrable Securities covered by such Registration Statement and the sole or lead managing Underwriter, if any: (i) when the Registration Statement, any pre-effective amendment, the Prospectus or any prospectus supplement related thereto or post-effective amendment to the Registration Statement has been filed and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the SEC or any state securities or blue sky authority for amendments or supplements to the Registration Statement or the Prospectus related thereto or for additional information, (iii) of the issuance by the SEC of any

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stop order suspending the effectiveness of the Registration Statement or the initiation or threat of any proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation of any proceeding for such purpose, (v) of the existence of any fact of which the Company becomes aware or the happening of any event which results in (A) the Registration Statement containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make any statements therein not misleading, or (B) the Prospectus included in such Registration Statement containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make any statements therein, in the light of the circumstances under which they were made, not misleading, and (vi) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate or that there exists circumstances not yet disclosed to the public which make further sales under such Registration Statement inadvisable pending such disclosure and post-effective amendment; and, if the notification relates to an event described in any of the clauses (ii) through (vi) of this Section 4.1(f), the Company shall promptly, subject to Section 2.10, prepare a supplement or post-effective amendment to such Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that (1) such Registration Statement shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (2) as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (and shall furnish to each such Holder and each Underwriter, if any, a reasonable number of copies of such Prospectus so supplemented or amended); and if the notification relates to an event described in clause (iii) of this Section 4.1(f), the Company shall take all reasonable action required to prevent the entry of such stop order or to remove it if entered.

(g) Subject to receipt of acceptable confidentiality agreements, make available for inspection by any selling Holder of Registrable Securities, any sole or lead managing Underwriter participating in any disposition pursuant to such Registration Statement, Holders’ Counsel and any attorney, accountant or other agent retained by any such seller or any Underwriter (each, an “Inspector” and, collectively, the “Inspectors”), all financial and other records, pertinent corporate documents and properties of the Company and any subsidiaries thereof as may be in existence at such time (collectively, the “Records”) as shall be necessary, in the reasonable opinion of such Holders’ and such Underwriters’ respective counsel, to enable them to exercise their due diligence responsibility and to conduct a reasonable investigation within the meaning of the Securities Act, and cause the Company’s and any subsidiaries’ officers, directors and employees, and the independent public accountants of the Company, to supply all information reasonably requested by any such Inspectors in connection with such Registration Statement.

(h) Solely for an Underwritten Offering with anticipated gross proceeds of not less than $50 million or for other offerings for which a reasonable request is made by a Holder on the advice of counsel, obtain an opinion from the Company’s counsel and a “cold comfort” letter from the Company’s independent public accountants who have certified the Company’s

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financial statements included or incorporated by reference in such Registration Statement, in each case dated the effective date of such Registration Statement (and if such registration involves an Underwritten Offering, dated the date of the closing under the related underwriting agreement), in customary form and covering such matters as are customarily covered by such opinions and “cold comfort” letters delivered to underwriters in underwritten public offerings, which opinion and letter shall be reasonably satisfactory to the sole or lead managing Underwriter, if any, and to the Majority Holders of the Registration, and furnish to each Holder participating in the offering and to each Underwriter, if any, a copy of such opinion and letter addressed to such Holder (in the case of the opinion) and Underwriter (in the case of the opinion and the “cold comfort” letter).

(i) Solely for offerings with anticipated gross proceeds of not less than $50 million, cause senior representatives of the Company to participate in any “road show” or “road shows” reasonably requested by any underwriter of an underwritten or “best efforts” offering of any Registrable Securities (taking into account the needs of the Company’s businesses).

(j) Provide a CUSIP number for all Registrable Securities and provide and cause to be maintained a transfer agent and registrar for all such Registrable Securities covered by such Registration Statement not later than the effectiveness of such Registration Statement.

(k) Otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC and any other governmental agency or authority having jurisdiction over the offering, and make available to its security holders, as soon as reasonably practicable but no later than 90 days after the end of any 12-month period, an earnings statement (i) commencing at the end of any month in which Registrable Securities are sold to Underwriters in an Underwritten Offering and (ii) commencing with the first day of the Company’s calendar month next succeeding each sale of Registrable Securities after the effective date of a Registration Statement, which statement shall cover such 12-month periods, in a manner which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

(l) Use its reasonable best efforts to cause all such Registrable Securities to be listed (i) on each national securities exchange on which the Company’s securities are then listed or (ii) if securities of the Company are not at the time listed on any national securities exchange (or if the listing of Registrable Securities is not permitted under the rules of each national securities exchange on which the Company’s securities are then listed), on a national securities exchange designated by the Majority Holders of the Registration.

(m) Keep each selling Holder of Registrable Securities reasonably advised in writing as to the initiation and progress of any registration under Section 2 hereunder.

(n) Enter into and perform customary agreements (including, if applicable, an underwriting agreement in customary form) and provide officers’ certificates and, subject to Section 4.1(h), other customary closing documents.

(o) Cooperate with each selling Holder of Registrable Securities and each Underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD and make reasonably

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available its employees and personnel and otherwise provide reasonable assistance to the Underwriters (taking into account the needs of the Company’s businesses and the requirements of the marketing process) in the marketing of Registrable Securities in any Underwritten Offering.

(p) Furnish to each Holder participating in the offering and the sole or lead managing Underwriter, if any, without charge, (i) at least one manually-signed copy of the Registration Statement and any post-effective amendments thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those deemed to be incorporated by reference), (ii) upon the effectiveness of any Registration Statement, ten (10) copies of the prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such Holder may reasonably request) and (iii) such other documents, including copies of any preliminary or final prospectus, as such Holder may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by such Holder.

(q) Cooperate with the selling Holders of Registrable Securities and the sole or lead managing Underwriter, if any, to facilitate the timely preparation and delivery of certificates not bearing any restrictive legends representing the Registrable Securities to be sold, and cause such Registrable Securities to be issued in such denominations and registered in such names in accordance with the underwriting agreement prior to any sale of Registrable Securities to the Underwriters or, if not an Underwritten Offering, in accordance with the instructions of the selling Holders of Registrable Securities at least three Business Days prior to any sale of Registrable Securities.

(r) If requested by the sole or lead managing Underwriter or any selling Holder of Registrable Securities, promptly incorporate in a prospectus supplement or post-effective amendment such information concerning such Holder of Registrable Securities, the Underwriters or the intended method of distribution as the sole or lead managing Underwriter or the selling Holder of Registrable Securities reasonably requests to be included therein and as is appropriate in the reasonable judgment of the Company, including, without limitation, information with respect to the number of shares of the Registrable Securities being sold to the Underwriters, the purchase price being paid therefor by such Underwriters and with respect to any other terms of the Underwritten Offering of the Registrable Securities to be sold in such offering; make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after being notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; and supplement or make amendments to any Registration Statement if requested by the sole or lead managing Underwriter of such Registrable Securities.

(s) Subject to Section 2.10, submit to the SEC, within five (5) Business Days after the Company learns that no review of the Required Shelf Registration Statement will be made by the staff of the SEC or that the staff has no further comments on the Required Shelf Registration Statement, as the case may be, a request for acceleration of effectiveness of such Registration Statement to a time and date not later than 48 hours after the submission of such request.

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(t) Use its reasonable best efforts to take all other steps necessary to expedite or facilitate the registration and disposition of the Registrable Securities contemplated hereby.

4.2 Seller Information. As a condition to inclusion of the Holder’s Registrable Securities, the Company may require each selling Holder of Registrable Securities as to which any registration is being effected to furnish to the Company such information regarding such Holder, such Holder’s Registrable Securities and such Holder’s intended method of disposition or any other information requested by the SEC as the Company may from time to time reasonably request in writing; provided that such information shall be used only in connection with such registration. It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of a particular Holder that such Holder shall execute such documents in connection with such registration as the Company may reasonably request, including questionnaires, in a timely manner.

4.3 Notice to Discontinue. Each Holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4.1(f)(ii) through (vi), such Holder shall forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 4.1(f) and, if so directed by the Company, such Holder shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies, then in such Holder’s possession of the Prospectus covering such Registrable Securities which is current at the time of receipt of such notice. If the Company shall give any such notice, the Company shall extend the period during which such Registration Statement shall be maintained effective pursuant to this Agreement (including, without limitation, the period referred to in Section 4.1(b)) by the number of days during the period from and including the date of the giving of such notice pursuant to Section 4.1(f) to and including the date when the Holder shall have received the copies of the supplemented or amended prospectus contemplated by and meeting the requirements of Section 4.1(f).

5. INDEMNIFICATION; CONTRIBUTION.

5.1 Indemnification by the Company. The Company agrees to indemnify and hold harmless, to the fullest extent permitted by law, each Holder, its officers, directors, partners, members, shareholders, employees, affiliates and agents (collectively, “Agents”) and each Person who controls such Holder (within the meaning of the Securities Act) and its Agents with respect to each registration which has been effected pursuant to this Agreement, against any and all losses, claims, judgments, fines, penalties, charges, amounts paid in settlement, damages or liabilities, joint or several, actions or proceedings (whether commenced or threatened) in respect thereof, and expenses (as incurred or suffered and including, but not limited to, any and all expenses incurred in investigating, preparing or defending any litigation or proceeding, whether commenced or threatened, and the reasonable fees, disbursements and other charges of legal counsel) in respect thereof (collectively, “Claims”), insofar as such Claims arise out of or are based upon (i) any untrue or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (including any preliminary, final or summary prospectus and any amendment or supplement thereto) related to any such registration or in any filing prepared or executed by the Company (or based upon written information furnished by or on

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behalf of the Company expressly for use in such filing) in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any such Prospectus (including any preliminary, final or summary prospectus and any amendment or supplement thereto), in the light of the circumstances under which they were made) not misleading or (ii) any violation of this Agreement (the matters in the foregoing clauses (i) through (ii) being, collectively, “Violations”); provided, however, that the Company will not be liable in any such case to the extent that any such Claims arise out of or are based upon a Violation which occurs in reliance on any untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact so made in reliance upon and in conformity with written information furnished to the Company in an instrument duly executed by such Holder specifically stating that it was expressly for use therein. Notwithstanding the foregoing, the indemnification contained in this Section 5.1 shall not apply if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected in the final prospectus, as then amended or supplemented, if such final prospectus was timely made available by the Company pursuant to Section 4.1(c). The Company shall also indemnify any Underwriters in an Underwritten Offering of the Registrable Securities, their Agents and each Person who controls any such Underwriter (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Holders of Registrable Securities. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of any Person who may be entitled to indemnification pursuant to this Section 5 and shall survive the transfer of securities by such Holder or Underwriter and termination of this Agreement.

5.2 Indemnification by Holders. Each Holder, if Registrable Securities held by it are included in the securities as to which a registration is being effected, agrees to, severally and not jointly, indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors and officers, each other Person who participates as an Underwriter in the offering or sale of such securities and its Agents and each Person who controls the Company or any such Underwriter (within the meaning of the Securities Act) and its Agents against any and all Claims, insofar as such Claims arise out of or are based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (including any preliminary, final or summary prospectus and any amendment or supplement thereto) related to such registration, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of any such Prospectus (including any preliminary, final or summary prospectus and any amendment or supplement thereto), in the light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company in an instrument duly executed by such Holder specifically stating that it was expressly for use therein; provided, however, that the aggregate amount which any such Holder shall be required to pay pursuant to this Section 5.2 shall in no event be greater than the amount of the net proceeds received by such Holder upon the sale of the Registrable Securities pursuant to the Registration Statement giving rise to such Claims less all amounts previously paid by such Holder with respect to any such Claims. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party and shall survive the transfer of such securities by such Holder or Underwriter and termination of this Agreement.

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5.3 Conduct of Indemnification Proceedings. Promptly after receipt by an indemnified party of notice of any Claim or the commencement of any action or proceeding involving a Claim under this Section 5, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 5, (i) notify the indemnifying party in writing of the Claim or the commencement of such action or proceeding; provided, that the failure of any indemnified party to provide such notice shall not relieve the indemnifying party of its obligations under this Section 5, except to the extent the indemnifying party is materially and actually prejudiced thereby and shall not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than under this Section 5, and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however, that any indemnified party shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (A) the indemnifying party has agreed in writing to pay such fees and expenses, (B) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such indemnified party within 10 days after receiving notice from such indemnified party that the indemnified party believes it has failed to do so, (C) in the reasonable judgment of any such indemnified party, based upon advice of counsel, a conflict of interest may exist between such indemnified party and the indemnifying party with respect to such claims (in which case, if the indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such indemnified party) or (D) such indemnified party is a defendant in an action or proceeding which is also brought against the indemnifying party and reasonably shall have concluded that there may be one or more legal defenses available to such indemnified party which are not available to the indemnifying party. No indemnifying party shall be liable for any settlement of any such claim or action effected without its written consent, which consent shall not be unreasonably withheld. In addition, without the consent of the indemnified party (which consent shall not be unreasonably withheld), no indemnifying party shall be permitted to consent to entry of any judgment with respect to, or to effect the settlement or compromise of any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim), unless such settlement, compromise or judgment (1) includes an unconditional release of the indemnified party from all liability arising out of such action or claim, (2) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party, and (3) does not provide for any action on the part of any party other than the payment of money damages which is to be paid in full by the indemnifying party.

5.4 Contribution. If the indemnification provided for in Section 5.1 or 5.2 from the indemnifying party for any reason is unavailable to (other than by reason of exceptions provided therein), or is insufficient to hold harmless, an indemnified party hereunder in respect of any Claim, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Claim in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one

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hand, and the indemnified party, on the other hand, in connection with the actions which resulted in such Claim, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action. If, however, the foregoing allocation is not permitted by applicable law, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative faults but also the relative benefits of the indemnifying party and the indemnified party as well as any other relevant equitable considerations.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5.4 were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by a party as a result of any Claim referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth in Section 5.3, any legal or other fees, costs or expenses reasonably incurred by such party in connection with any investigation or proceeding. Notwithstanding anything in this Section 5.4 to the contrary, no indemnifying party (other than the Company) shall be required pursuant to this Section 5.4 to contribute any amount in excess of the net proceeds received by such indemnifying party from the sale of the Registrable Securities pursuant to the Registration Statement giving rise to such Claims, less all amounts previously paid by such indemnifying party with respect to such Claims. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

5.5 Other Indemnification. Indemnification similar to that specified in the preceding Sections 5.1 and 5.2 (with appropriate modifications) shall be given by the Company and each selling Holder of Registrable Securities with respect to any required registration or other qualification of securities under any Federal or state law or regulation of any governmental authority, other than the Securities Act. The indemnity agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract.

5.6 Indemnification Payments. The indemnification and contribution required by this Section 5 shall be made by periodic payments of the amount thereof during the course of any investigation or defense, as and when bills are received or any expense, loss, damage or liability is incurred; provided that if a final nonappealable determination is made that the party receiving such expense payments was not entitled to such payments pursuant to the provisions of this Section 5, then the party receiving such expense payments shall return such expense payments to the party that made such payments.

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6. GENERAL.

6.1 Adjustments Affecting Registrable Securities. The Company agrees that it shall not effect or permit to occur any combination or subdivision of shares which would adversely affect the ability of the Holder of any Registrable Securities to include such Registrable Securities in any registration contemplated by this Agreement or the marketability of such Registrable Securities in any such registration.

6.2 Registration Rights to Others. The Company has not previously entered into an agreement with respect to its securities granting any registration rights to any Person. If the Company shall at any time hereafter provide to any holder of any securities of the Company rights with respect to the registration of such securities under the Securities Act, (i) such rights shall not be in conflict with or adversely affect any of the rights provided in this Agreement to the Holders and (ii) if such rights are provided on terms or conditions more favorable to such holder than the terms and conditions provided in this Agreement, the Company shall provide (by way of amendment to this Agreement or otherwise) such more favorable terms or conditions to the Holders.

6.3 Availability of Information; Rule 144; Rule 144A; Other Exemptions. So long as the Company shall not have filed a registration statement pursuant to Section 12 of the Exchange Act or a registration statement pursuant to the requirements of the Securities Act, the Company shall, at any time and from time to time, upon the request of any Holder of Registrable Securities and upon the request of any Person designated by such Holder as a prospective purchaser of any Registrable Securities and subject to the receipt by the Company of confidentiality agreements as may reasonably be requested by the Company, furnish in writing to such Holder or such prospective purchaser, as the case may be, a statement as of a date not earlier than 12 months prior to the date of such request of the nature of the business of the Company and the products and services it offers and copies of the Company’s most recent balance sheet and profit and loss and retained earnings statements, together with similar financial statements for such part of the two preceding fiscal years as the Company shall have been in operation, all such financial statements to be audited to the extent audited statements are reasonable available, provided that, in any event the most recent financial statements so furnished shall include a balance sheet as of a date less than 16 months prior to the date of such request, statements of profit and loss and retained earnings for the 12 months preceding the date of such balance sheet, and, if such balance sheet is not as of a date less than 6 months prior to the date of such request, additional statements of profit and loss and retained earnings for the period from the date of such balance sheet to a date less than 6 months prior to the date of such request. If the Company shall have filed a registration statement pursuant to the requirements of Section 12 of the Exchange Act or a registration statement pursuant to the requirements of the Securities Act, the Company covenants that it shall timely file any reports required to be filed by it under the Securities Act or the Exchange Act (including, but not limited to, the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c) of Rule 144 under the Securities Act), and that it shall take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemption provided by Rule 144 under the Securities Act, as such rule may be amended from time to time. Upon the request of any Holder of Registrable Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements.

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6.4 Nominees for Beneficial Owners. In the event that any Registrable Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its election in writing delivered to the Company, be treated as the Holder of such Registrable Securities for purposes of any request or other action by any Holder or Holders of Registrable Securities pursuant to this Agreement or any determination of any number or percentage of shares of Registrable Securities held by any Holder or Holders of Registrable Securities contemplated by this Agreement. If the beneficial owner of any Registrable Securities so elects, the Company may require assurances reasonably satisfactory to it of such owner’s beneficial ownership of such Registrable Securities.

6.5 No Inconsistent Agreements. The Company will not hereafter enter into any agreement which is inconsistent with the rights granted to the Holders in this Agreement.

6.6 Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

If to the Company to:

WorldSpace, Inc.

2400 N Street, NW

Washington, DC 20037

Telephone: (202) 969-6000

Facsimile: (202) 969-6001

Attention: Donald J. Frickel, Esq.

with a copy (for informational purposes only) to:

Coudert Brothers LLP

1114 Avenue of the Americas

New York, New York 10036-7703

Telephone: (212) 626-4400

Facsimile: (212) 626-4120

Attention: Jeffrey E. Cohen, Esq.

If to an Investor, to its address and facsimile number set forth on the Schedule of Investors to this Agreement, with copies (for informational purposes only) to such Investor’s representatives as

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set forth on the Schedule of Investors, or to such other address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five days prior to the effectiveness of such change. If a notice provided for hereunder is delivered via facsimile, such notice shall be valid only if an original hard copy is delivered to a U.S. address provided by such Investor to which overnight delivery by standard courier can be made, within 24 hours of the time such facsimile is delivered. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

6.7 No Waiver. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

6.8 Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

6.9 Entire Agreement. This Agreement, the other Transaction Documents (as defined in the Securities Purchase Agreement) and the instruments referenced herein and therein constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set

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forth or referred to herein and therein. This Agreement, the other Transaction Documents and the instruments referenced herein and therein supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.

6.10 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors and permitted assigns (including any permitted transferee of Registrable Securities). Any Holder may assign its rights and obligations under this Agreement to any transferee of Registrable Securities; provided, however, if any such transferee shall take and hold Registrable Securities, such transferee shall promptly notify the Company and by taking and holding such Registrable Securities such permitted transferee shall automatically be entitled to receive the benefits of and be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement as if it were a party hereto (and shall, for all purposes, be deemed a Holder under this Agreement). Except as provided above or otherwise permitted by this Agreement, neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by any Holder or by the Company without the consent of the other parties hereto.

6.11 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

6.12 Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature.

6.13 Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

6.14 Consents. All consents and other determinations required to be made by the Investors pursuant to this Agreement shall be made, unless otherwise specified in this Agreement, by the Majority Holders.

6.15 No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.

6.16 No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

6.17 Amendments and Waivers. The provisions of this Agreement may not be amended, modified, supplemented or terminated, and waivers or consents to departures from the

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provisions hereof may not be given, (i) solely in connection with (A) the extension of the Demand Registration Lock-Up Period or the extension of the Qualified Public Offering Lock-Up Period, (B) any extension of the Required Shelf Registration Filing Deadline or (C) any modification to the rights or manner of the Holder’s participation in any Demand Registrations, without the written consent of the Company and Holders of at least seventy-five percent (75%) of the outstanding Registrable Securities and (ii) otherwise, without the written consent of the Company and the Majority Holders; provided, however, that no such amendment, modification, supplement, waiver or consent to departure shall reduce the aforesaid percentage of Registrable Securities without the written consent of all of the Holders of Registrable Securities; and provided further, that nothing herein shall prohibit any amendment, modification, supplement, termination, waiver or consent to departure the effect of which is limited only to those Holders who have agreed in writing to such amendment, modification, supplement, termination, waiver or consent to departure.

6.18 Remedies; Specific Performance. The parties hereto acknowledge that money damages would not be an adequate remedy at law if any party fails to perform in any material respect any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to seek to compel specific performance of the obligations of any other party under this Agreement, without the posting of any bond, in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. Except as otherwise provided by law, a delay or omission by a party hereto in exercising any right or remedy accruing upon any such breach shall not impair the right or remedy or constitute a waiver of or acquiescence in any such breach. No remedy shall be exclusive of any other remedy. All available remedies shall be cumulative.

6.19 Independent Nature of Investors’ Obligations and Rights. The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Investor pursuant hereto or thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Investor confirms that it has independently participated in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Investor shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose.

[Signature Page Follows]

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IN WITNESS WHEREOF, each Investor and the Company have caused this Registration Rights Agreement to be duly executed as of the date first written above.


COMPANY:

WORLDSPACE, INC.

By:	/S/
	Name:	Noah A. Samara
	Title:	Chairman and CEO

IN WITNESS WHEREOF, each Investor and the Company have caused this Registration Rights Agreement to be duly executed as of the date first written above.


INVESTORS:

HIGHBRIDGE INTERNATIONAL LLC

By: HIGHBRIDGE CAPITAL MANAGEMENT, LLC

By:		/S/
		Name: Adam J. Chill
		Title: Managing Director

IN WITNESS WHEREOF, each Investor and the Company have caused this Registration Rights Agreement to be duly executed as of the date first written above.


INVESTORS:

AMPHORA LIMITED

By:		AMARANTH ADVISORS L.L.C., Its Trading Advisor

By:		/S/
		Name: Karl J. Wachter
		Title: Authorized Signatory

IN WITNESS WHEREOF, each Investor and the Company have caused this Registration Rights Agreement to be duly executed as of the date first written above.


INVESTORS:

OZ MASTER FUND, LTD.

By:		OZ MANAGEMENT, L.L.C., Its Investment Manager

By:		/S/
		Name: Joel Frank
		Title: Chief Financial Officer

IN WITNESS WHEREOF, each Investor and the Company have caused this Registration Rights Agreement to be duly executed as of the date first written above.


INVESTORS:

AG DOMESTIC CONVERTIBLES, L.P.

By: Angelo, Gordon & Co., L.P., Its Investment Manager

By:		/S/
		Name: Joseph Wekselblatt
		Title: CFO

IN WITNESS WHEREOF, each Investor and the Company have caused this Registration Rights Agreement to be duly executed as of the date first written above.


INVESTORS:

AG OFFSHORE CONVERTIBLES, LTD.

By: Angelo, Gordon & Co., L.P., Its Investment Manager

By:		/S/
		Name: Joseph Wekselblatt
		Title: CFO

IN WITNESS WHEREOF, each Investor and the Company have caused this Registration Rights Agreement to be duly executed as of the date first written above.


INVESTORS:

CITADEL EQUITY FUND LTD.

By:		CITADEL LIMITED PARTNERSHIP, Its Portfolio Manager

By:		GLB PARTNERS, L.P., Its General Partner

By:		CITADEL INVESTMENT GROUP, L.L.C., Its General Partner

By:		/S/
		Name: David Snyderman
		Title: Senior Managing Director

IN WITNESS WHEREOF, each Investor and the Company have caused this Registration Rights Agreement to be duly executed as of the date first written above.


INVESTORS:

CITADEL CREDIT TRADING LTD.

By: CITADEL LIMITED PARTNERSHIP, Its Portfolio Manager

By: GLB PARTNERS, L.P., Its General Partner

By: CITADEL INVESTMENT GROUP, L.L.C., Its General Partner

By:		/S/
		Name: David Snyderman
		Title: Senior Managing Director

SCHEDULE OF INVESTORS


(1) Investor	(2) Address and Facsimile Number	(3) Legal Representative’s Address and Facsimile Number
Highbridge International LLC	c/o Highbridge Capital Management, LLC 9 West 57^th Street, 27^th Floor New York, New York 10019 Attention: Ari J. Storch / Adam J. Chill Facsimile: (212) 751-0755 Telephone: (212) 287-4720 and Attention: Andrew Martin Facsimile: (212) 755-4250 Telephone: (212) 287-4700 Residence: Cayman Islands	Schulte Roth & Zabel LLP 919 Third Avenue New York, New York 10022 Attention: Eleazer Klein, Esq. Facsimile: (212) 593-5955 Telephone: (212) 756-2376

Amphora Limited	c/o Amaranth Advisors L.L.C. One American Lane Greenwich, CT 06831 Attention: General Counsel Facsimile: (203) 422-3540 Telephone: (203) 422-3340 Residence: Cayman Islands	Schulte Roth & Zabel LLP 919 Third Avenue New York, New York 10022 Attention: Eleazer Klein, Esq. Facsimile: (212) 593-5955 Telephone: (212) 756-2376

OZ Master Fund, Ltd.	c/o OZ Management, L.L.C. 9 West 57th Street, 39th Floor New York, New York 10019 Attention: Joel M. Frank Facsimile: (212) 790-0150 Telephone: (212) 790-0160 Residence: Cayman Islands

AG Domestic Convertibles, L.P.	c/o Angelo, Gordon & Co., L.P. 245 Park Avenue New York, NY 10167 Attention: Gary I. Wolf Facsimile: 212-867-9328 Telephone: 212-992-2042 Residence: Delaware	Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, New York 10019-6064 Attention: Doug Cifu, Esq. and Jon Yoder, Esq. Facsimile: (212) 492-0152 Telephone: (212) 373-3152

AG Offshore Convertibles, Ltd.	c/o Angelo, Gordon & Co., L.P. 245 Park Avenue New York, NY 10167 Attention: Gary I. Wolf Facsimile: 212-867-9328 Telephone: 212-992-2042 Residence: British Virgin Islands	Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, New York 10019-6064 Attention: Doug Cifu, Esq. and Jon Yoder, Esq. Facsimile: (212) 492-0152 Telephone: (212) 373-3152


(1) Investor	(2) Address and Facsimile Number	(3) Legal Representative’s Address and Facsimile Number
Citadel Equity Fund Ltd.	c/o Citadel Limited Partnership 131 S. Dearborn St. Chicago, IL 60603 Attention: Ron Klipstein Facsimile: (312) 267-7497 Telephone: (312) 395-4332 Residence: Cayman Islands	Fried, Frank, Harris, Shriver & Jacobson LLP One New York Plaza New York, NY 10004 Attention: Robert Schwenkel, Esq. Facsimile: (212) 859-4000 Telephone: (212) 859-8000

Citadel Credit Trading Ltd.	c/o Citadel Limited Partnership 131 S. Dearborn St. Chicago, IL 60603 Attention: Ron Klipstein Facsimile: (312) 267-7497 Telephone: (312) 395-4332 Residence: Cayman Islands	Fried, Frank, Harris, Shriver & Jacobson LLP One New York Plaza New York, NY 10004 Attention: Robert Schwenkel, Esq. Facsimile: (212) 859-4000 Telephone: (212) 859-8000

EX-4.3 7 dex43.htm FORM OF NOTES ISSUED UNDER THE SECURITIES PURCHASE AGREEMENT Form of Notes issued under the Securities Purchase Agreement

EXHIBIT 4.3

[FORM OF CONVERTIBLE NOTE]

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL SELECTED BY THE HOLDER, AND IN A FORM REASONABLY ACCEPTABLE TO THE ISSUER, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 19(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

WORLDSPACE, INC.

CONVERTIBLE NOTE


Issuance Date: December 30, 2004		Principal: U.S. $

FOR VALUE RECEIVED, WorldSpace, Inc., a Delaware corporation (the “Company”), hereby promises to pay to the order of [NAME OF BUYER] or registered assigns (“Holder”) the amount set out above as the Principal (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at the Interest Rate (as defined below), from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon an Interest Date (as defined below), the Maturity Date, acceleration, conversion, redemption or otherwise (in each case, in accordance with the terms hereof). This Convertible Note (including all Convertible Notes issued in exchange, transfer or replacement hereof, this “Note”) is one of an issue of Convertible Notes issued pursuant to the Securities Purchase Agreement (as defined below) on the Closing Date (as defined below) (collectively, the “Notes” and such other Convertible Notes, the “Additional Notes”). Certain capitalized terms used herein are defined in Section 29.

(1) MATURITY. On the Maturity Date, the Holder shall surrender the Note to the Company and the Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges, if any. The “Maturity Date” shall be December 31, 2014.

(2) INTEREST; INTEREST RATE. Interest on this Note shall commence accruing on the Issuance Date and shall be computed on the basis of a 365-day year and actual days elapsed and shall be payable in arrears on the last day of each March, June, September and December (the period of such accruing interest being referred to as an “Interest Period”) during the period beginning on the Issuance Date and ending on, and including, the Maturity Date (each, an “Interest Date”) with the first Interest Date being March 31, 2005. Interest shall be payable on each Interest Date for the applicable Interest Period, to the record holder of this Note on the applicable Interest Date, entirely in cash (“Cash Interest”) or, at the option of the Company, entirely by increasing the amount of Principal outstanding under this Note (“Accreted Interest”); provided that the Interest which accrued during any period shall be payable as Accreted Interest if, and only if, the Company delivers written notice of such election (each, an “Interest Election Notice”) to each holder of the Notes at least twenty (20) Business Days prior to the applicable Interest Date (each, an “Interest Election Date”). Prior to the payment of Interest on an Interest Date, Interest on this Note shall accrue at the Interest Rate and be payable by way of inclusion of the Interest in the Conversion Amount in accordance with Section 3(b)(i). If an Event of Default occurs and such Event of Default is subsequently cured, the adjustment referred to in Section 29(xix)(6) shall cease to be effective as of the date of such cure; provided that the Interest as calculated at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default.

(3) CONVERSION OF NOTES. This Note shall be convertible into shares of Class A Common Stock, on the terms and conditions set forth in this Section 3.

(a) Conversion Right. Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Class A Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Class A Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Class A Common Stock, the Company shall round such fraction of a share of Class A Common Stock up to the nearest whole share. The Company shall pay any and all taxes (excluding any taxes on the income of the Holder) that may be payable with respect to the issuance and delivery of shares of Class A Common Stock upon conversion of any Conversion Amount.

(b) Conversion Rate. The number of shares of Class A Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion Rate”).

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(i) “Conversion Amount” means the sum of (A) the portion of the Principal to be converted, redeemed or otherwise with respect to which this determination is being made, (B) accrued and unpaid Interest with respect to such Principal and (C) accrued and unpaid Late Charges with respect to such Principal and Interest.

(ii) “Conversion Price” means, as of any Conversion Date (as defined below) or other date of determination the lesser of (x) the Pre-IPO Conversion Price and (y) the Post-IPO Conversion Price, each subject to adjustment as provided herein.

(iii) “Effectiveness Failure Pre-IPO Conversion Price” means in the event that a registration statement under the Securities Act relating to a Qualified IPO is not declared effective by the SEC prior to the one year anniversary of the Issuance Date, (x) if no adjustment has previously been made to the Pre-IPO Conversion Price as a result of the application of the provisions set forth in the definition of Filing Failure Pre-IPO Conversion Price, $8.21 (as adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction), or (y) otherwise, $7.86 (as adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction).

(iv) “Filing Failure Pre-IPO Conversion Price” means in the event that the Company fails to file a registration statement under the Securities Act with the SEC relating to a Qualified IPO prior to the six month anniversary of the Issuance Date, $8.21 (as adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction).

(v) “Initial Pre-IPO Conversion Price” means $8.45 (as adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction).

(vi) “Post-IPO Conversion Price” means, from and after an Effective Registration, the lesser of (x) the Pre-IPO Conversion Price then in effect and (y) the product of (A) 0.90 and (B) the public offering price of the Class A Common Stock pursuant to such registration statement.

(vii) “Pre-IPO Conversion Price” means the lowest of (x) the Initial Pre-IPO Conversion Price, (y) the Filing Failure Pre-IPO Conversion Price and (z) the Effectiveness Failure Pre-IPO Conversion Price.

(i) Optional Conversion. To convert any Conversion Amount into shares of Class A Common Stock on any date (a “Conversion Date”), the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the Company and (B) if required by Section 3(c)(iii), surrender this Note to a common carrier for delivery to the

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Company as soon as practicable on or following such date (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction). On or before 4:00 p.m., New York Time, on the first (1^st) Business Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the Holder and the Company’s transfer agent, if any (the “Transfer Agent”). On or before 4:00 p.m., New York Time, on the third Business Day following the date of receipt of a Conversion Notice (the “Share Delivery Date”), the Company shall (X) provided that the Transfer Agent, if any, is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, credit such aggregate number of shares of Class A Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program or if the foregoing is not applicable, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Class A Common Stock to which the Holder shall be entitled. If this Note is physically surrendered for conversion as required by Section 3(c)(iii) and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three (3) Business Days after receipt of this Note and at its own expense, issue and deliver to the holder a new Note (in accordance with Section 19(d)) representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Class A Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Class A Common Stock on the Conversion Date.

(ii) Company’s Failure to Timely Convert. If, at any time, the Company shall fail to issue a certificate to the Holder or, from and after an Effective Registration, credit the Holder’s balance account with DTC for the number of shares of Class A Common Stock to which the Holder is entitled upon conversion of any Conversion Amount on or prior to the date which is five Business Days after the Conversion Date (a “Conversion Failure”), then (A) the Company shall pay damages to the Holder for each date of such Conversion Failure in an amount equal to 1.5% of the product of (I) the sum of the number of shares of Class A Common Stock not issued to the Holder on or prior to the Share Delivery Date and to which the Holder is entitled, and (II) the Closing Sale Price of the Class A Common Stock on the Share Delivery Date and (B) the Holder, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have returned, as the case may be, any portion of this Note that has not been converted pursuant to such Conversion Notice; provided that the voiding of a Conversion Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to this Section 3(c)(ii) or otherwise. In lieu of the foregoing, if within three (3) Business Days after the Company’s receipt of the facsimile copy of a Conversion Notice the Company shall fail to issue and deliver a certificate to the Holder or credit the Holder’s balance account with DTC for the number of shares of Class A Common Stock to which the Holder is entitled upon the Holder’s conversion of any Conversion Amount, and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Class A

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Common Stock to deliver in satisfaction of a sale by the Holder of Class A Common Stock issuable upon such conversion that the Holder anticipated receiving from the Company (a “Buy-In”), then the Holder may elect to require the Company to, within three (3) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Class A Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such Class A Common Stock) shall terminate, or (ii) in the case of an Effective Registration, promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Class A Common Stock and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Class A Common Stock times (B) the Closing Bid Price on the Conversion Date.

(iii) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting physical surrender and reissue of this Note. The Holder and the Company shall maintain records showing the Principal, Interest and Late Charges converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion.

(iv) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of Notes for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of Notes electing to have Notes converted on such date a pro rata amount of each such holder’s portion of its Notes submitted for conversion based on the principal amount of Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Class A Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Class A Common Stock not in dispute and resolve such dispute in accordance with Section 24.

(d) Limitations on Conversions. From and after an Effective Registration and other than in connection with a Fundamental Transaction, the Company shall not effect any conversion of this Note, and the Holder of this Note shall not have the right to convert any portion of this Note pursuant to Section 3(a), to the extent that after giving effect to such conversion, the Holder (together with the Holder’s affiliates) would beneficially own in excess of 9.99% (the “Maximum Percentage”) of the number of shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of

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Class A Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any Additional Notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Section 3(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-KSB, Form 10-K, Form 10-QSB, Form 10-Q or Form 8-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within two (2) Business Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. By written notice to the Company, the Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not be effective until the sixty-first (61^st) day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder and not to any other holder of Notes. Notwithstanding anything in this Section 3(d) to the contrary, it is agreed and understood that the limitation on conversions contained in this Section 3(d) shall in no way limit any of the Company’s rights under Sections 8(a) and 8(c) of this Note.

(4) RIGHTS UPON EVENT OF DEFAULT.

(a) Event of Default. Each of the following events shall constitute an “Event of Default”:

(i) the failure of the applicable Registration Statement required to be filed pursuant to the Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is sixty (60) days after the applicable Effectiveness Deadline (as defined in the Registration Rights Agreement), if any, or, while the applicable Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of the applicable Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for sale of all of such holder’s Registrable Securities (as defined in the Registration Rights Agreement) in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of ten (10) consecutive days or for more than an aggregate of thirty (30) days in any 365-day period (other than days during an allowable Blackout Period (as defined in the Registration Rights Agreement));

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(ii) from and after the Effective Registration, the suspension from trading or failure of the Class A Common Stock to be listed on an Eligible Market for a period of five (5) consecutive days or for more than an aggregate of ten (10) days in any 365-day period; provided, however, that such suspension or failure shall not be deemed an Event of Default if it is a result of any action or actions taken by the SEC or the Eligible Market on which the Class A Common Stock is then listed, which action or actions were generally applicable and affected all issuers with a class of securities listed on such Eligible Market;

(iii) the Company’s (A) failure to cure a Conversion Failure by delivery of the required number of shares of Class A Common Stock within ten (10) Business Days after the applicable Conversion Date, or (B) notice, written or oral, to any holder of the Notes, including by way of public announcement or through any of its agents, at any time, of its intention not to comply with a request for conversion of any Notes into shares of Class A Common Stock that is tendered in accordance with the provisions of the Notes;

(iv) at any time following the twentieth (20^th) consecutive Business Day that the Holder’s Authorized Share Allocation is less than the number of shares of Class A Common Stock that the Holder would be entitled to receive upon a conversion of the full Conversion Amount of this Note (without regard to any limitations on conversion set forth in Section 3(d) or otherwise); provided, however, that such deficiency shall not be deemed to be an Event of Default to the extent, but only to the extent, that it was the result of an unscheduled closure of the applicable regulatory offices or governmental agencies necessary to increase the Holder’s Authorized Share Allocation;

(v) the Company’s failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under this Note (including, without limitation, the Company’s failure to pay any redemption payments or amounts hereunder) or any other Transaction Document (as defined in the Securities Purchase Agreement) except, in the case of a failure to pay Interest and Late Charges when and as due, in which case only if such failure continues for a period of at least three (3) Business Days;

(vi) any default under (after the expiration of all applicable grace periods), redemption of or acceleration prior to maturity of any Indebtedness of the Company or any of its Subsidiaries, which individually or in the aggregate is equal to or greater than $5,000,000 principal amount of Indebtedness (other than with respect to any Additional Notes);

(vii) the Company or any of its Material Subsidiaries, pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal, foreign or state law for the relief of debtors (collectively, “Bankruptcy Law”), (A) commences a

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voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a “Custodian”), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due;

(viii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that is not vacated, set aside or reversed within sixty (60) days that (A) is for relief against the Company or any of its Material Subsidiaries in an involuntary case, (B) appoints a Custodian of the Company or any of its Material Subsidiaries or (C) orders the liquidation of the Company or any of its Material Subsidiaries;

(ix) a final judgment or judgments for the payment of money aggregating in excess of $1,000,000 are rendered against the Company or any of its Subsidiaries and which judgments are not, within sixty (60) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay; provided, however, that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $1,000,000 amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity within sixty (60) days of the issuance of such judgment;

(x) the Company breaches any representation, warranty, covenant or agreement in any Transaction Document that would have a Material Adverse Effect (as defined in the Securities Purchase Agreement), or the Company breaches any of the representations or warranties set forth in Sections 3.32, 3.33, 3.34 or 3.35 of the Securities Purchase Agreement or the covenant set forth in Section 7.16 of the Securities Purchase Agreement, except, in the case of a breach of a covenant (other than Section 7.16 of the Securities Purchase Agreement) which is curable, only if such breach continues for a period of at least ten (10) consecutive Business Days;

(xi) any breach of any representation, warranty, covenant or agreement set forth in the Letter Agreement (as defined in the Securities Purchase Agreement);

(xii) any breach or failure in any respect to comply with Section 14 of this Note; or

(xiii) any Event of Default (as defined in the Additional Notes) occurs with respect to any Additional Notes.

(b) Redemption Right. Promptly after the occurrence of an Event of Default with respect to this Note or any Additional Note, the Company shall deliver written notice thereof via facsimile and overnight courier (an “Event of Default Notice”) to the Holder. At any time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder

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becoming aware of an Event of Default, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (the “Event of Default Redemption Notice”) to the Company, which Event of Default Redemption Notice shall indicate the portion of this Note the Holder is electing to redeem. Each portion of this Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount to be redeemed and (y) the Redemption Premium and (ii) from and after an Effective Registration, the product of (A) the Conversion Rate with respect to such Conversion Amount in effect at such time as the Holder delivers an Event of Default Redemption Notice and (B) the Closing Sale Price of the Class A Common Stock on the date immediately preceding such Event of Default (the “Event of Default Redemption Price”). Redemptions required by this Section 4(b) shall be made in accordance with the provisions of Section 12.

(c) Exercise of Remedies. In connection with any exercise of remedies following the occurrence, and during the continuation, of an Event of Default, the Holder agrees that the Stonehouse Royalty Agreement (as defined in the Securities Purchase Agreement) in the form attached as Exhibit J to the Securities Purchase Agreement, and the obligations of the Company thereunder to make the Stonehouse Payments shall follow the assets of the Company and shall not be diminished or otherwise impaired by any affirmative action or actions of the Holder including the exercise of any remedies; provided, however, that the foregoing shall not limit, abridge, or otherwise impair the Holder’s right to receive all required Principal, Interest, redemption payments and Late Charges under this Note. In furtherance of the foregoing, in the event the Company files a petition for relief under the United States Bankruptcy Code, the Holders shall not oppose the entry of an order, on motion by any party, authorizing the Company to assume the Stonehouse Royalty Agreement in the form attached as Exhibit J to the Securities Purchase Agreement as an executory contract

(5) RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

(a) Assumption. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of this Section 5(a) pursuant to written agreements in form and substance reasonably satisfactory to the Required Holders and approved by the Required Holders prior to such Fundamental Transaction, including agreements to deliver to each holder of Notes in exchange for such Notes a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including, without limitation, having a principal amount and interest rate equal to the principal amounts and the interest rates of the Notes held by such holder and having similar ranking to the Notes, and satisfactory to the Required Holders (the “Successor Note”) and (ii) from and after an Effective Registration, the Successor Entity (including its Parent Entity) is a publicly traded corporation whose common stock or equivalent equity security is quoted on or listed for trading on an Eligible Market. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the

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Company under this Note with the same effect as if such Successor Entity had been named as the Company herein, until such time as the Successor Note is delivered. Upon consummation of the Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon conversion or redemption of this Note at any time after the consummation of the Fundamental Transaction, in lieu of the shares of Class A Common Stock (or other securities, cash, assets or other property) purchasable upon the conversion or redemption of the Notes prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Note been converted immediately prior to such Fundamental Transaction, as adjusted in accordance with the provisions of this Note. The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion or redemption of this Note.

(b) Redemption Right. No sooner than fifteen (15) days nor later than ten (10) days prior to the consummation of a Change of Control (but from and after an Effective Registration, not prior to the public announcement of such Change of Control), the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a “Change of Control Notice”). At any time during the period (the “Change of Control Measuring Period”) beginning after the Holder’s receipt of a Change of Control Notice and ending on the date of the consummation of such Change of Control (or, in the event a Change of Control Notice is not delivered at least ten (10) days prior to a Change of Control, at any time on or after the date which is ten (10) days prior to a Change of Control and ending ten (10) days after the consummation of such Change of Control), the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (“Change of Control Redemption Notice”) to the Company, which Change of Control Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section 5 shall be redeemed by the Company at a price (the “Change of Control Redemption Price”) equal to the greatest of (i) the sum of (A) the product of (x) the Conversion Amount being redeemed and (y) the quotient determined by dividing (I) the Closing Sale Price of the Class A Common Stock immediately following the public announcement of such proposed Change of Control by (II) the Conversion Price and (B) the Present Value of Interest, or (ii) the sum of (A) the value of the consideration, assuming that the entire Conversion Amount being redeemed were converted into shares of Class A Common Stock at the then prevailing Conversion Rate, issuable per share of Common Stock in such Change of Control for the entire Conversion Amount being redeemed and (B) the Present Value of Interest (if any) and (iii) the sum of (A) the Conversion Amount being redeemed and (B) the Present Value of Interest (if any). Redemptions required by this Section 5 shall be made in accordance with the provisions of Section 12 and shall have priority to payments to stockholders in connection with a Change of Control. In addition to the foregoing, at the time of the consummation of any such Change of Control, the Company shall pay to the Holder an amount in cash equal to the Present Value of Interest (if any) for any Conversion Amount converted pursuant to the provisions of Section 3 hereof during the Change of Control Measuring Period. Notwithstanding anything to the contrary in this Section 5, until the Change of Control Redemption Price (together with any interest thereon) is paid in full, the Conversion Amount submitted for redemption under this Section 5(b) (together with any interest thereon) may be converted, in whole or in part, by the Holder into shares of Class A Common Stock pursuant to Section 3.

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(6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.

(a) Purchase Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Class A Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

(b) Other Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Note, (i) in the event that the Class A Common Stock remains outstanding after any such Corporate Event, in addition to the shares of Class A Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Class A Common Stock had such shares of Class A Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note) or (ii) in the event that the Class A Common Stock is no longer outstanding after any such Corporate Event, in lieu of the shares of Class A Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Class A Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Required Holders. The provisions of this Section shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of this Note. Notwithstanding this Section (6)(b), in no event shall the Company be obligated to distribute any Purchase Rights pursuant to this Section (6)(b) if and to the extent that it has distributed such Purchase Rights to the Holder pursuant to Section (6)(a).

(7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

(a) Adjustment of Conversion Price upon Issuance of Common Stock. If and whenever on or after the Subscription Date and prior to the consummation of a Qualified IPO, the Company issues or sells, or in accordance with this Section 7(a) is deemed to have

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issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding shares of Common Stock issued or sold or deemed to have been issued or sold by the Company with respect to Options to acquire up to 6,000,000 shares of Common Stock that may be awarded by the Company solely to employees, officers and directors for services provided to the Company) for a consideration per share (the “New Issuance Price”) less than a price (the “Pre-Qualified IPO Applicable Price”) equal to the Conversion Price in effect immediately prior to such issue or sale (the foregoing issuance, a “Pre-Qualified IPO Dilutive Issuance”), then immediately after such Pre-Qualified IPO Dilutive Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price. If and whenever on or after the consummation of a Qualified IPO, the Company issues or sells, or in accordance with this Section 7(a) is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding shares of Common Stock issued or sold or deemed to have been issued or sold by the Company in each case solely in connection with any Excluded Security) for a consideration per share less than a price (the “Post-Qualified IPO Applicable Price”) equal to the Market Price then in effect (the foregoing issuance, a “Post-Qualified IPO Dilutive Issuance”), then immediately after such Post-Qualified IPO Dilutive Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the product of (i) the Conversion Price in effect immediately prior to such issuance or sale and (ii) the quotient determined by dividing (A) the sum of (1) the product derived by multiplying the Post-Qualified IPO Applicable Price and the number of shares of Common Stock Deemed Outstanding immediately prior to such Post-Qualified IPO Dilutive Issuance plus (2) the consideration, if any, received by the Company upon such Post-Qualified IPO Dilutive Issuance, by (B) the product derived by multiplying (1) the Post-Qualified IPO Applicable Price by (2) the number of shares of Common Stock Deemed Outstanding immediately after such Post-Qualified IPO Dilutive Issuance. For purposes of determining the adjusted Conversion Price under this Section 7(a), the following shall be applicable:

(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange or exercise of any Convertible Securities issuable upon exercise of such Option is less than the Pre-Qualified IPO Applicable Price or the Post-Qualified IPO Applicable Price, as the case may be, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 7(a)(i), the “lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange or exercise of any Convertible Securities issuable upon exercise of such Option shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock (A) upon granting or sale of the Option, (B) upon exercise of the Option and (C) upon conversion or exchange or exercise of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issuance of such share of Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion or exchange or exercise of such Convertible Securities.

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(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon such conversion or exchange or exercise thereof is less than the Pre-Qualified IPO Applicable Price or the Post-Qualified IPO Applicable Price, as the case may be, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance of sale of such Convertible Securities for such price per share. For the purposes of this Section 7(a)(ii), the “price per share for which one share of Common Stock is issuable upon such conversion or exchange or exercise” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock (A) upon the issuance or sale of the Convertible Security and (B) upon the conversion or exchange or exercise of such Convertible Security. No further adjustment of the Conversion Price shall be made upon the actual issuance of such share of Common Stock upon conversion or exchange or exercise of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other provisions of this Section 7(a), no further adjustment of the Conversion Price shall be made by reason of such issue or sale.

(iii) Change in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exchange or exercise of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exchangeable or exercisable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be made (x) pursuant to this Section (7)(a)(iii) if an adjustment of the Conversion Price has been or is to be made pursuant to other provisions of this Section 7(a) in connection therewith or (y) if such adjustment would result in an increase of the Conversion Price then in effect.

(iv) Calculation of Consideration Received. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $.01. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Company therefor. If any

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Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Closing Sale Price of such securities on the date of receipt. If any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the Required Holders. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Business Days after the tenth (10^th) day following the Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Required Holders. The determination of such appraiser shall be deemed binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.

(v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

(b) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. If the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time on or after the Subscription Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased.

(c) Other Events. If any event occurs of the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s Board of Directors will make an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder under this Note; provided that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 7.

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(8) COMPANY’S RIGHT OF REDEMPTION.

(a) Mandatory Redemption. If at any time from and after the later of (x) the eighteenth month anniversary of the Issuance Date and (y) the one year anniversary of the consummation of a Qualified IPO (such later date being the “Mandatory Redemption Eligibility Date”), (i) the Weighted Average Price of the shares of Class A Common Stock exceeds 150% of the public offering price per share of Class A Common Stock in the Qualified IPO for each of twenty (20) consecutive Trading Days following the Mandatory Redemption Eligibility Date (such twenty (20) consecutive Trading Day period being the “Mandatory Redemption Measuring Period”) and (ii) the Equity Conditions shall have been satisfied or waived in writing by the Holder from and including the Mandatory Redemption Notice Date (as defined below) through and including the Mandatory Redemption Date (as defined below), the Company shall have the right to redeem all or any portion of the Conversion Amount then remaining under this Note, as designated in the Mandatory Redemption Notice, as of the Mandatory Redemption Date (a “Mandatory Redemption”). The portion of this Note subject to redemption pursuant to this Section 8(a) shall be redeemed by the Company at a price equal to the sum of (x) the Conversion Amount being redeemed and (y) the Present Value of Interest applicable to such Conversion Amount (the “Mandatory Redemption Price”) on the date which is thirty (30) days after its delivery of a Mandatory Redemption Notice (the “Mandatory Redemption Date”). The Company may exercise its right to require redemption under this Section 8(a) by delivering within not more than two (2) Trading Days following the end of such Mandatory Redemption Measuring Period a written notice thereof by facsimile and overnight courier to all, but not less than all, of the holders of Notes and the Transfer Agent (the “Mandatory Redemption Notice” and the date all of the holders received such notice is referred to as the “Mandatory Redemption Notice Date”). The Company may deliver no more than two Mandatory Redemption Notices hereunder and each such Mandatory Redemption Notice shall be irrevocable. The Mandatory Redemption Notice shall state the aggregate Conversion Amount of the Notes which the Company has elected to be subject to Mandatory Redemption from all of the holders of the Notes pursuant to this Section 8(a) (and analogous provisions under the Additional Notes) and the Present Value of Interest to be paid to such Holders on the Mandatory Redemption Date. All Conversion Amounts converted by the Holder after the Mandatory Redemption Notice Date shall reduce the Conversion Amount of this Note required to be redeemed on the Mandatory Redemption Date and the Holder shall be entitled to receive from the Company, on the applicable Conversion Date, an amount in cash equal to the Present Value of Interest of any such Conversion Amount. Redemptions made pursuant to this Section 8(a) shall be made in accordance with Section 12.

(b) Pro Rata Redemption Requirement. If the Company elects to cause a redemption of all or any portion of the Conversion Amount of this Note pursuant to Section 8(a), then it must simultaneously take the same action with respect to the Additional Notes.

(c) Additional Mandatory Redemption. If at any time from and after the third anniversary of the Issuance Date (the “Additional Mandatory Redemption Eligibility Date”), the Equity Conditions shall have been satisfied or waived in writing by the Holder from and including the Additional Mandatory Redemption Notice Date (as defined below) through and including the Additional Mandatory Redemption Date (as defined below), the Company shall have the right to redeem all or any portion of the Conversion Amount then remaining under

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this Note, as designated in the Additional Mandatory Redemption Notice, as of the Additional Mandatory Redemption Date (an “Additional Mandatory Redemption”). The portion of this Note subject to redemption pursuant to this Section 8(c) shall be redeemed by the Company at a price equal to the Conversion Amount being redeemed (the “Additional Mandatory Redemption Price”) on the date which is thirty (30) days after its delivery of a Additional Mandatory Redemption Notice (the “Additional Mandatory Redemption Date”). The Company may exercise its right to require redemption under this Section 8(c) by delivering a written notice thereof by facsimile and overnight courier to all, but not less than all, of the holders of Notes and the Transfer Agent (the “Additional Mandatory Redemption Notice” and the date all of the holders received such notice is referred to as the “Additional Mandatory Redemption Notice Date”). The Company may deliver no more than two Additional Mandatory Redemption Notices hereunder and each such Additional Mandatory Redemption Notice shall be irrevocable. The Additional Mandatory Redemption Notice shall state the aggregate Conversion Amount of the Notes which the Company has elected to be subject to Additional Mandatory Redemption from all of the holders of the Notes pursuant to this Section 8(c) (and analogous provisions under the Additional Notes). All Conversion Amounts converted by the Holder after the Additional Mandatory Redemption Notice Date shall reduce the Conversion Amount of this Note required to be redeemed on the Additional Mandatory Redemption Date. Redemptions made pursuant to this Section 8(c) shall be made in accordance with Section 12.

(d) Pro Rata Redemption Requirement. If the Company elects to cause a redemption of all or any portion of the Conversion Amount of this Note pursuant to Section 8(c), then it must simultaneously take the same action with respect to the Additional Notes.

(9) HOLDER’S RIGHT OF OPTIONAL REDEMPTION. The Holder shall have the right, in its sole discretion to require that the Company redeem all or any portion of this Note (a “Holder Optional Redemption”) on the third anniversary of the Issuance Date by delivering written notice thereof (a “Holder Optional Redemption Notice”) to the Company at any time prior to and including the date which is twenty (20) days prior to the third anniversary of the Issuance Date. The Holder Optional Redemption Notice shall indicate the Conversion Amount the Holder is electing to have redeemed. The portion of this Note subject to redemption pursuant to this Section 9 shall be redeemed by the Company in cash at a price equal to the Conversion Amount being redeemed (the “Holder Optional Redemption Price” and, collectively with the Event of Default Redemption Price, the Change of Control Redemption Price, the Mandatory Redemption Price and the Additional Mandatory Redemption Price, the “Redemption Prices” and, each a “Redemption Price”). Within one Business Day of receipt of a Holder Optional Redemption Notice, the Company shall inform in writing all holders of Additional Notes that a Holder Optional Redemption Notice has been received by the Company. Redemptions required by this Section 9 shall be made in accordance with the provisions of Section 12. The Holder may deliver one Holder Optional Redemption Notice hereunder which shall be irrevocable.

(10) NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or

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performance of any of the terms of this Note, and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note.

(11) RESERVATION OF AUTHORIZED SHARES.

(a) Reservation. The Company shall initially reserve out of its authorized and unissued shares of Class A Common Stock a number of shares of Class A Common Stock for each of the Notes equal to 120% of the Conversion Rate with respect to the Conversion Amount of each such Note as of the Issuance Date. So long as any of the Notes are outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized and unissued shares of Class A Common Stock, solely for the purpose of effecting the conversion of the Notes, 120% of the number of shares of Class A Common Stock as shall from time to time be necessary to effect the conversion of all of the Notes then outstanding; provided that at no time shall the number of shares of Class A Common Stock so reserved be less than the number of shares required to be reserved by the previous sentence (without regard to any limitations on conversions) (the “Required Reserve Amount”). The initial number of shares of Class A Common Stock reserved for conversions of the Notes and each increase in the number of shares so reserved shall be allocated pro rata among the holders of the Notes based on the principal amount of the Notes held by each holder at the Closing (as defined in the Securities Purchase Agreement) or increase in the number of reserved shares, as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s Notes, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Class A Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata based on the principal amount of the Notes then held by such holders.

(b) Insufficient Authorized Shares. If at any time while any of the Notes remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Class A Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at least a number of shares of Class A Common Stock equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Class A Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than seventy-five (75) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Class A Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Class A Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal.

(12) HOLDER’S REDEMPTIONS.

(a) Mechanics. The Company shall deliver the applicable Event of Default Redemption Price or Holder Optional Redemption Price to the Holder within five

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Business Days after the Company’s receipt of the Holder’s Event of Default Redemption Notice or the Holder Optional Redemption Notice, as the case may be. If the Holder has submitted a Change of Control Redemption Notice in accordance with Section 5(b), the Company shall deliver the applicable Change of Control Redemption Price to the Holder concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of such Change of Control and within five (5) Business Days after the Company’s receipt of such notice otherwise. The Company shall deliver the Mandatory Redemption Price to the Holder on or before the Mandatory Redemption Date. In the event of a redemption of less than all of the Conversion Amount of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 19(d)) representing the outstanding Principal which has not been redeemed. In the event that the Company does not pay the applicable Redemption Price to the Holder within the time period required, at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption Price (together with any Late Charges thereon) has not been paid. Upon the Company’s receipt of such notice, (x) the Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 19(d)) to the Holder representing such Conversion Amount and (z) the Conversion Price of this Note or such new Notes shall be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the Redemption Notice is voided and (B) the lowest Closing Bid Price of the Class A Common Stock during the period beginning on and including the date on which the Redemption Notice is delivered to the Company and ending on and including the date on which the Redemption Notice is voided. The Holder’s delivery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect the Company’s obligations to make any payments of Late Charges which have accrued prior to the date of such notice with respect to the Conversion Amount subject to such notice.

(b) Redemption by Other Holders. Upon the Company’s receipt of notice from any of the holders of the Additional Notes for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 4(b) or Section 5(b) (each, an “Other Redemption Notice”), the Company shall immediately forward to the Holder by facsimile a copy of such notice. If the Company receives a Redemption Notice and one or more Other Redemption Notices, during the seven (7) Business Day period beginning on and including the date which is three (3) Business Days prior to the Company’s receipt of the Holder’s Redemption Notice and ending on and including the date which is three (3) Business Days after the Company’s receipt of the Holder’s Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice and such Other Redemption Notices received during such seven (7) Business Day period, then the Company shall redeem a pro rata amount from each holder of the Notes (including the Holder) based on the principal amount of the Notes submitted for redemption pursuant to such Redemption Notice and such Other Redemption Notices received by the Company during such seven Business Day period.

(13) VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law, including, but not limited to, the General Corporation Law of the State of Delaware, and as expressly provided in this Note, Section 7.5 of the Securities Purchase Agreement, or any other Transaction Documents.

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(14) RANK; ADDITIONAL INDEBTEDNESS; LIENS.

(a) Rank. All payments due under this Note (a) shall rank pari passu with all Additional Notes and (b) prior to the consummation of a Qualified IPO, shall not be subordinate to any Indebtedness. All payments due under this Note shall be senior to all other Indebtedness of the Company and its Subsidiaries other than (x) Permitted Pari Passu Indebtedness and (y) the Stonehouse Payments (and as to the Stonehouse Payments, this provision shall to continue to be applicable following consummation of a Qualified IPO).

(b) Incurrence of Indebtedness. So long as this Note is outstanding and prior to the consummation of a Qualified IPO, the Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness, other than (i) the Indebtedness evidenced by this Note and the Additional Notes and (ii) Permitted Indebtedness.

(c) Existence of Liens. So long as this Note is outstanding and prior to the consummation of a Qualified IPO, the Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens.

(d) Restricted Payments. The Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Permitted Indebtedness, whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness if at the time such payment is due or is otherwise made or, after giving effect to such payment, an event constituting, or that with the passage of time and without being cured would constitute, an Event of Default has occurred and is continuing.

(e) Stonehouse Payments. Notwithstanding the foregoing, the Holder agrees not to claim any rights to the Stonehouse Payments pursuant to the Stonehouse Royalty Agreement in the form attached as Exhibit J to the Securities Purchase Agreement, and to the extent that such Holder receives any Stonehouse Payments otherwise due to or required to be paid to Stonehouse under the Stonehouse Royalty Agreement in the form attached as Exhibit J to the Securities Purchase Agreement, the Holder agrees to turn over such payment to Stonehouse.

(15) SUBORDINATION TO SENIOR INDEBTEDNESS.

(a) Subordination. From and after the consummation of a Qualified IPO, the Indebtedness represented by this Note and the payment of any Principal, Interest, Late Charges, redemption amount, liquidated damages, fees, expenses or any other amounts in respect of this Note shall be expressly made subordinate and junior and subject in right of payment to the prior payment in full of all Senior Indebtedness of the Company incurred thereafter.

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(b) Payment upon Dissolution, Etc. In the event of any bankruptcy, insolvency, reorganization, receivership, composition, assignment for benefit of creditors or other similar proceeding initiated by or against the Company or any dissolution or winding up or total or partial liquidation or reorganization in bankruptcy of the Company (each, a “Proceeding”), all principal and interest due upon any Senior Indebtedness shall first be paid in full before the Holder shall be entitled to receive or, if received, to retain any payment or distribution on account of this Note and, during the continuance of any such Proceeding, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holder would be entitled with respect to any Subordinated Indebtedness but for the provisions of this Section 15 shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holder who shall have received such payment or distribution, directly to the holders of the Senior Indebtedness (pro rata to each such holder on the basis of the respective amounts of such Senior Indebtedness held by such holder) or their representatives to the extent necessary to pay all such Senior Indebtedness in full after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Holder or any holders of the Notes; provided, however, that notwithstanding anything to the contrary, in any event the Holder shall be entitled to receive and retain any and all Junior Securities (as defined below).

(c) Certain Rights. Nothing contained in this Section 15 or elsewhere in this Note or any other Transaction Document, is intended to or shall impair, as among the Company, its creditors including the holders of Senior Indebtedness and the Holder, the right, which is absolute and unconditional, of the Holder to convert this Note in accordance herewith.

(d) Rights of Holders Unimpaired. The provisions of this Section 15 are and are intended solely for the purposes of defining the relative rights of the Holder and the holders of Senior Indebtedness and nothing in this Section 15 shall impair, as between the Company and the Holder, the obligation of the Company, which is unconditional and absolute, to pay to the Holder the Principal hereof (and premium, if any), accrued Interest hereon and all other Subordinated Indebtedness payable hereunder, all in accordance with the terms of this Note.

(e) Junior Securities. As used herein, “Junior Securities” means debt or equity securities of the Company as reorganized or readjusted, or debt or equity securities of the Company or any other Person provided for by a plan of reorganization or readjustment authorized by an order or decree of a court of competent jurisdiction in a Proceeding under any applicable law, so long as in the case of debt securities, such Junior Securities are subordinated in right of payment to all Senior Indebtedness and to whatever is issued to the holders of the Senior Indebtedness on account of the Senior Indebtedness, to the same extent as, or to a greater extent than, the Subordinated Indebtedness is so subordinated as provided for herein.

(16) PARTICIPATION. The Holder, as the holder of this Note, shall be entitled to receive such dividends paid and distributions made to the holders of Common Stock

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to the same extent as if the Holder had converted this Note into shares of Class A Common Stock (without regard to any limitations on conversion herein or elsewhere) and had held such shares of Class A Common Stock on the record date for such dividends and distributions. Payments under the preceding sentence shall be made concurrently with the dividend or distribution to the holders of Common Stock.

(17) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote at a meeting duly called for such purpose, or the written consent without a meeting, of the Required Holders shall be required for any change, amendment, alteration or waiver to this Note or the Additional Notes; provided, however, that no such change, amendment, alteration or amendment, as applied to any of the Notes held by any particular holder of Notes, shall, without the written consent of that particular holder, (i) reduce the Interest Rate, extend the time for payment of Interest or change the manner or rate of accrual of Interest on the Notes, including, without limitation, modifying the definition contained in Section 29(xix), (ii) reduce the amount of Principal, or extend the Maturity Date, of the Notes, (iii) make any change that impairs or adversely affects the conversion rights of the Notes (including, without limitation, the provisions contained in Sections 7 and 11 hereof), (iv) reduce any of the Redemption Prices, or amend or modify in any manner adverse to the holders of the Notes the Company’s obligation to make such payments, whether through an amendment or waiver of provisions in the covenants, definitions or otherwise; (v) modify the provisions with respect to the right of the holders of the Notes to cause the Company to redeem the Notes pursuant to Sections 4(b), 5(b) and 9 herein and the analogous provisions of the Additional Notes (including, without limitation, modifying Section 4(a) hereof or any of the definitions contained in Section 29(iv) and (xvi)); (vi) make any Interest or Principal on the Notes payable other than as set forth herein and in the Additional Notes; (vii) impair the right of any holder of Notes to receive payment of Principal or Interest or other payments due under the Notes, if any, on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such holder; (viii) change the ranking of this Note or any Additional Notes in a manner adverse to the holder thereof; or (ix) modify any of the provisions of, or impair the right of any holder of Notes under, Section 6, this Section 17, Section 18, Section 20 and Section 25(b) hereof or the analogous provisions of the Additional Notes. Notwithstanding anything in this Note to the contrary, the provisions of Sections 4(c), 14(a) (solely as such Section relates to the Stonehouse Payments) and 14(e) of this Note, any related definitions used in any such section and this sentence shall not be amended, altered, changed or waived without the prior written consent of Stonehouse, which is a third party beneficiary of such provisions. Neither the Company nor any of its Subsidiaries will, directly or indirectly, pay or cause to be paid any consideration, whether by way of Interest, fees or otherwise, to any holder for or as inducement to any consent, waiver or amendment of any of the terms or provisions of the Notes unless such consideration is offered to be paid or is paid to all holders. So long as any Notes remain outstanding, at no time shall the Company or any of its Subsidiaries, directly or indirectly, purchase or offer to purchase any of the outstanding Notes or exchange or offer to exchange for any consideration (including, without limitation, for cash, securities, property or otherwise) any outstanding Notes unless the Company or such Subsidiary, as applicable, purchases, offers to purchase, exchanges or offers to exchange the outstanding Notes of all of the holders for the same consideration (on a pro rata basis in accordance with each holder’s percentage ownership of then outstanding Notes) and on identical terms.

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(18) TRANSFER. Subject to Section 3.1 of the Registration Rights Agreement, this Note and any shares of Class A Common Stock issued upon the conversion of this Note may be offered, sold, assigned or transferred by the Holder provided that (i) such shares of Class A Common Stock or shares of Class A Common Stock issuable upon the conversion of the Note are registered for resale under the Securities Act, (ii) in connection with a sale, assignment or other transfer, the Holder provides the Company with an opinion of counsel selected by the Holder in form reasonably acceptable to the Company to the effect that such sale, assignment or transfer of the shares of Class A Common Stock or the shares of Class A Common Stock issuable upon the conversion of the Note may be made without registration under the applicable requirements of the Securities Act, or (iii) the Holder provides the Company with reasonable assurance that the shares of Class A Common Stock or the shares of Class A Common Stock issuable upon the conversion of the Note can be sold, assigned or transferred pursuant to Rule 144.

(19) REISSUANCE OF THIS NOTE.

(a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 19(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Note (in accordance with Section 19(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note.

(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 19(d)) representing the outstanding Principal.

(c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 19(d) and in principal amounts of at least $100,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

(d) Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 19(a) or Section 19(c), the Principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal

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remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued Interest and Late Charges on the Principal and Interest of this Note, from the Issuance Date.

(20) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

(21) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements.

(22) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and the initial holders of this Note and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.

(23) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

(24) DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Closing Bid Price, the Closing Sale Price or the Weighted Average Price or the arithmetic calculation of the Conversion Rate or the Redemption Price, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within one (1) Business Day of receipt, or deemed receipt, of the Conversion Notice or Redemption Notice or other event giving

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rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation within one (1) Business Day of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within one Business Day submit via facsimile (a) the disputed determination of the Closing Bid Price, the Closing Sale Price or the Weighted Average Price to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Rate or the Redemption Price to the Company’s independent, outside accountant. The Company, at the Company’s expense, shall cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than five (5) Business Days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

(25) NOTICES; PAYMENTS.

(a) Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least twenty (20) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.

(b) Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the initial holders of this Note, shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of Interest due on such date. Any amount of Principal or other amounts due under the Transaction Documents, other than Interest, which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of fifteen percent (15%) per annum from the date such amount was due until the same is paid in full (“Late Charge”).

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(26) CANCELLATION. After all Principal, accrued Interest and other amounts at any time owed on this Note have been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.

(27) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement.

(28) GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.

(29) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:

(i) “Approved Stock Plan” means any employee benefit plan which has been approved by the Board of Directors of the Company, pursuant to which the Company’s securities may be issued to any employee, officer or director for services provided to the Company.

(ii) “Bloomberg” means Bloomberg Financial Markets.

(iii) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

(iv) “Change of Control” means any Fundamental Transaction other than (A) a Fundamental Transaction in which holders of the Company’s voting power immediately prior to the Fundamental Transaction continue after the Fundamental Transaction to hold publicly traded securities and, directly or indirectly, the voting power of the surviving entity or entities necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities, or (B) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company.

(v) “Class A Common Stock” means the shares of the Company’s Class A common stock, par value $0.01 per share, and any other securities of the Company which may be issued or issuable with respect to, in exchange for, or in substitution of, such shares of Class A common stock (including without limitation, by way of recapitalization, reclassification, reorganization, merger or otherwise).

(vi) “Closing Bid Price” and “Closing Sale Price” mean, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market

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begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotations Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 24. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

(vii) “Closing Date” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially issued Notes pursuant to the terms of the Securities Purchase Agreement.

(viii) “Common Stock” means, collectively, the Class A Common Stock and the Company’s Class B common stock, par value $.01 per share.

(ix) “Common Stock Deemed Outstanding” means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii) hereof regardless of whether the Options or Convertible Securities are actually exercisable at such time, but excluding any Common Stock owned or held by or for the account of the Company or issuable upon conversion of the Notes.

(x) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto

(xi) “Convertible Securities” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for Common Stock.

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(xii) “Effective Registration” means that the Class A Common Stock is registered pursuant to Section 12 or Section 15 of the Exchange Act.

(xiii) “Eligible Market” means The New York Stock Exchange, Inc, the American Stock Exchange, the Nasdaq National Market or The Nasdaq SmallCap Market.

(xiv) “Equity Conditions” means that each of the following conditions is satisfied: (a) on each day during the period beginning thirty (30) Trading Days prior to the beginning of the applicable Mandatory Redemption Measuring Period and ending on and including the Redemption Date, either (1) a Registration Statement filed pursuant to the Registration Rights Agreement shall be effective and available for the resale of all remaining Registrable Securities in accordance with the terms of the Registration Rights Agreement and there shall not have been any Blackout Periods (as defined in the Registration Rights Agreement) or (2) all shares of Class A Common Stock issuable upon conversion of the Notes shall be eligible for sale without restriction pursuant to Rule 144(k) and any applicable state securities laws and without the need for registration under any applicable federal or state securities laws; (b) on each day during the Mandatory Redemption Measuring Period through the Redemption Date, the Class A Common Stock is designated for quotation on the New York Stock Exchange or Nasdaq National Market and shall not have been suspended from trading on such exchange or market (other than suspensions of not more than one (1) day and occurring prior to the applicable date of determination due to business announcements by the Company or suspensions resulting from any action or actions taken by such exchange or market which are generally applicable to and affect all issuers with a class of securities listed on such exchange or market) nor shall delisting or suspension by such exchange or market been threatened or pending either (1) in writing by such exchange or market or (2) by falling below the minimum listing maintenance requirements of such exchange or market; (c) on each day during the Mandatory Redemption Measuring Period through the Redemption Date, there shall not have occurred either (1) the public announcement of a pending, proposed or intended Fundamental Transaction which has not been abandoned, terminated or consummated or (2) an Event of Default or an event that with the passage of time or giving of notice would constitute an Event of Default; and (d) the Company otherwise shall have been in material compliance with and shall not have materially breached any provision, covenant, representation or warranty of any Transaction Document.

(xv) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(xvi) “Excluded Securities” means any Common Stock issued or issuable: (a) in connection with any Approved Stock Plan; (b) upon conversion of the Notes; (c) pursuant to a bona fide firm commitment underwritten public offering with a nationally recognized underwriter which generates gross proceeds to the Company of at least $75,000,000 (other than an “at-the-market offering” as defined in Rule 415(a)(4) under the Securities Act (unless such offering is executed on an “agency” basis pursuant to which an underwriter makes unsolicited sales of Class A Common Stock solely through the principal security exchange or trading market of the Class A Common Stock, in which case such equity sales would be permitted) and “equity lines”); and (d) upon conversion of any Options or Convertible Securities set forth on Schedule 3.2(f) to the Securities Purchase Agreement and which are outstanding as

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of the Closing (as defined in the Securities Purchase Agreement), provided that the terms of such Options or Convertible Securities are not amended, modified or changed on or after the Closing Date.

(xvii) “Fundamental Transaction” means that the Company shall, directly or indirectly, in one or more related transactions, (a) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, or (b) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (c) be the subject of a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (d) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock purchase agreement or other business combination), or (e) reorganize, recapitalize or reclassify its Common Stock, or (f) if at any time prior to a Qualified IPO, Noah Samara shall cease to be the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of unencumbered shares of Common Stock not subject to any Lien in an amount equal to not less than 50% of the outstanding shares of Common Stock.

(xviii) “GAAP” means United States generally accepted accounting principles, consistently applied.

(xix) “Indebtedness” of any Person means, without duplication (a) all indebtedness for borrowed money, (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services including, without limitation, “capital leases” in accordance with U.S. generally accepted accounting principals (other than trade payables entered into in the ordinary course of business), (c) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (f) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, (g) all indebtedness referred to in clauses (a) through (f) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (h) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (g) above.

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(xx) “Interest Rate” means five percent (5%) per annum, subject to increase as provided below and elsewhere in this Note:

(1) In the event that the Company incurs any Permitted Pari Passu Indebtedness prior to the consummation of a Qualified IPO, a rate per annum equal to the greatest of (x) 5%, (y) 10% if the Company issues any Common Stock or securities convertible into or exchangeable or exercisable for Common Stock in connection with, or relating to, the incurrence of such Permitted Pari Passu Indebtedness and (z) the rate of interest payable on any such Permitted Pari Passu Indebtedness;

(2) In the event that the Company has not consummated a Qualified IPO prior to the second anniversary of the Issuance Date, then from and after the second anniversary of the Issuance Date, a rate per annum equal to the greater of (x) the Interest Rate otherwise then in effect and (y) 10%;

(3) In the event that the Company fails to file a registration statement with the SEC relating to a Qualified IPO prior to the six month anniversary of the Issuance Date, then only to the extent that the Interest Rate has not been previously increased pursuant to clause (1) of this definition, a rate per annum equal to the Interest Rate otherwise then in effect plus one percent (1%);

(4) In the event that a registration statement relating to a Qualified IPO is not declared effective by the SEC prior to the one year anniversary of the Issuance Date, then only to the extent that the Interest Rate has not been previously increased pursuant to clause (1) of this definition, a rate equal to the Interest Rate otherwise then in effect plus one percent (1%);

(5) In the case of calculating any Accreted Interest, the Interest Rate otherwise then in effect plus two percent (2%); and

(6) From and after the occurrence of an Event of Default, the greater of (x) the Interest Rate otherwise then in effect and (y) fifteen percent (15%).

(xxi) “Market Price” means, for any security as of any date, the arithmetic average of the Weighted Average Price for the Class A Common Stock for the preceding ten (10) Trading Days.

(xxii) “Material Subsidiary” means (a) such Subsidiaries identified as Material Subsidiaries in Schedule 3.3 of the Securities Purchase Agreement or (b) any “Significant Subsidiary,” existing from time to time, as such term is defined in Rule 1-02 of Regulation S-X of the Securities Act,.

(xxiii) “Options” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities

(xxiv) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

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(xxv) “Permitted Indebtedness” means (A) Permitted Pari Passu Indebtedness and (B) Subordinated Indebtedness.

(xxvi) “Permitted Liens” means (a) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (b) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (c) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (d) any Lien in favor of Stonehouse solely with respect to the Stonehouse Royalty Accounts granted pursuant to the Stonehouse Royalty Agreement in the form attached as Exhibit J to the Securities Purchase Agreement only to the extent of Stonehouse Payments required to be deposited by the Company in the Stonehouse Royalty Accounts pursuant to the Stonehouse Royalty Agreement, (e) Liens incurred in connection with any Permitted Indebtedness provided that the Notes are secured ratably with any such secured Permitted Indebtedness, and (f) Liens securing the Company’s obligations under the Notes.

(xxvii) “Permitted Pari Passu Basket” means an amount equal to (i) $175,000,000 minus (ii) the Principal then outstanding under the Notes.

(xxviii) “Permitted Pari Passu Indebtedness” means the principal of (and premium, if any), interest on, and all fees and other amounts (including, without limitation, any reasonable out-of-pocket costs, enforcement expenses (including reasonable out-of-pocket legal fees and disbursements), collateral protection expenses and other reimbursement or indemnity obligations relating thereto) payable by the Company under or in connection with any Indebtedness that is not Subordinated Indebtedness; provided, however, that (1) the aggregate amount of such Permitted Pari Passu Indebtedness (taking into account the maximum amounts which may be advanced, including pursuant to any letters of credit, under the loan documents evidencing such Permitted Pari Passu Indebtedness) does not as of the date on which such Permitted Pari Passu Indebtedness is incurred exceed the Permitted Pari Passu Indebtedness Amount, (2) such Permitted Pari Passu Indebtedness affirmatively provides that it will at no time, respective of base rate used, bear a rate of interest per annum (including commitment and similar per annum fees) in excess of the market rate per annum at the time of issuance for securities of issuers with substantially the same credit rating as the Company and (3) such Permitted Pari Passu Indebtedness is not owed to Yenura Pte. Ltd. or any Person affiliated with Yenura Pte. Ltd.

(xxix) “Permitted Pari Passu Indebtedness Amount” means either (i) the Permitted Pari Passu Basket or (ii) in the event that the amount of the Alcatel Payables (as defined in the Securities Purchase Agreement) is greater than the amount of the Pari Passu Basket, the amount of the Alcatel Payables.

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(xxx) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

(xxxi) “Present Value of Interest” means the aggregate net present value of the remaining scheduled payments of interest, if any, that, but for the redemption or conversion of this Note, would have accrued under this Note during the period from the applicable conversion or redemption date, as the case may be, through the third anniversary of the Issuance Date, calculated at 102% of the yield to maturity of United States Treasury notes with a one-year maturity, as published in the Wall Street Journal (eastern edition) on the date which is three (3) Business Days before any applicable conversion or redemption date.

(xxxii) “Principal Market” means the principal stock exchange or trading market for the Class A Common Stock, if any.

(xxxiii) “Qualified IPO” means the Company’s sale of its shares of Class A Common Stock in a firm commitment, fully underwritten public offering conducted in the United States through a nationally recognized investment banking firm and pursuant to a registration statement under the Securities Act, the public offering price of which was not less than $7.50 per share, the gross proceeds of which to the Company (before underwriting discounts, commissions and fees) exceeds $100,000,000 and after which the shares of Class A Common Stock are listed either on The New York Stock Exchange, Inc. or admitted for trading on the Nasdaq National Market.

(xxxiv) “Redemption Premium” means (a) in the case of the Events of Default described in Section 4(a)(i) - (vi) and (ix) - (xiii), 125% or (b) in the case of the Events of Default described in Section 4(a)(vii) - (viii), 100%.

(xxxv) “Registration Rights Agreement” means that certain registration rights agreement dated as of the Closing Date by and among the Company and the initial holders of the Notes relating to, among other things, the registration of the resale of the Common Stock issuable upon conversion of the Notes.

(xxxvi) “Required Holders” means the holders of Notes representing at least a majority of the aggregate principal amount of the Notes then outstanding.

(xxxvii) “Rule 144(k)” means Rule 144(k) promulgated under the Securities Act and any successor provision thereto.

(xxxviii) “SEC” means the United States Securities and Exchange Commission.

(xxxix) “Securities Act” means the Securities Act of 1933, as amended.

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(xl) “Securities Purchase Agreement” means that certain securities purchase agreement dated as of the Subscription Date by and among the Company and the initial holders of the Notes pursuant to which the Company issued the Notes.

(xli) “Senior Indebtedness” means Indebtedness incurred by the Company after the consummation of a Qualified IPO that is made expressly senior in right of payment to the Indebtedness evidenced by this Note.

(xlii) “Stonehouse” means Stonehouse Capital Ltd., a Cayman Islands company.

(xliii) “Stonehouse Payments” means the Stonehouse Royalty Payments and the Stonehouse Scale Down Fees.

(xliv) “Stonehouse Royalty Accounts” means those bank accounts established pursuant to which funds are deposited in accordance with Section 2.01 of the Stonehouse Royalty Agreement, in the form attached as Exhibit J to the Securities Purchase Agreement.

(xlv) “Stonehouse Royalty Payments” means any accrued but unpaid Royalty Payments (as defined in, and calculated pursuant to, the Stonehouse Royalty Agreement in the form attached as Exhibit J to the Securities Purchase Agreement).

(xlvi) “Stonehouse Scale Down Fees” means any accrued but unpaid Scale Down Fee (as defined in and calculated pursuant to the Stonehouse Royalty Agreement in the form attached as Exhibit J to the Securities Purchase Agreement).

(xlvii) “Subordinated Indebtedness” means Indebtedness incurred by the Company that is made expressly subordinate in right of payment to the Indebtedness evidenced by this Note, as reflected in a written agreement acceptable to the Holder and approved by the Holder in writing, and which Indebtedness does not provide at any time for (1) the payment, prepayment, repayment, repurchase or defeasance, directly or indirectly, of any principal or premium, if any, thereon until at least 91 days after the Maturity Date or later and (2) total interest and fees at a rate in excess of 10 percent (10%) per annum.

(xlviii) “Subscription Date” means December 30, 2004.

(xlix) “Subsidiary” means any entity in which the Company, directly or indirectly, owns capital stock or holds an equity or similar interest.

(l) “Successor Entity” means the Person, which may be the Company, formed by, resulting from or surviving any Fundamental Transaction or the Person with which such Fundamental Transaction shall have been made, provided that from and after an Effective Registration, if such Person is not a publicly traded entity whose common stock or equivalent equity security is quoted or listed for trading on an Eligible Market, Successor Entity shall mean such Person’s Parent Entity.

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(li) “Trading Day” means any day on which the Class A Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Class A Common Stock, then on the principal securities exchange or securities market on which the Class A Common Stock is then traded; provided that “Trading Day” shall not include any day on which the Class A Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Class A Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York Time).

(lii) “Transaction Documents” means this Note, the Securities Purchase Agreement, the Registration Rights Agreement and any other documents or agreements executed in connection with the transactions contemplated hereunder or thereunder.

(liii) “Weighted Average Price” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30:01 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official close of trading) as reported by Bloomberg through its “Volume at Price” functions, or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York Time (or such other time as such market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York Time (or such other time as such market publicly announces is the official close of trading) as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotations Bureau, Inc.). If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 24. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance Date set out above.


WORLDSPACE, INC.

By:
Name:
Title:

EX-10.1 8 dex101.htm EXCHANGE AGREEMENT DATED DECEMBER 29, 2004 Exchange Agreement dated December 29, 2004

EXHIBIT 10.1

Execution Copy

EXCHANGE AGREEMENT

Among

WORLDSPACE, INC.

(a Delaware Corporation),

WORLDSPACE, INC.

(a Maryland Corporation),

WORLDSPACE INTERNATIONAL NETWORK INC.

and

YENURA PTE. LTD.

Relating to

Certain Debt Obligations

WorldSpace, Inc. (Maryland)

and

Worldspace International Network Inc.

December 29, 2004

TABLE OF CONTENTS


ARTICLE I DEFINITIONS			3
	1.01.	Definitions.	3

ARTICLE II ISSUANCE OF SHARES IN EXCHANGE FOR OBLIGATIONS			5
	2.01.	Issuance of Shares.	5
	2.02.	Cancellation of Obligations.	5
	2.03.	Acknowledgment and Standstill.	5

ARTICLE III THE CLOSING			5
	3.01.	Time and Place of Closing.	5
	3.02.	Closing.	6

ARTICLE IV REPRESENTATIONS AND WARRANTIES			6
	4.01.	Representations and Warranties.	6
	4.02.	Representations and Warranties by WorldSpace Parties.	6
	4.03.	Representations and Warranties by Yenura.	7
	4.04.	Survival of Representation and Warranties.	8
	4.05.	Mutual Indemnity.	9
	4.06.	Conditions of Indemnification.	9
	4.07.	Assistance.	10
	4.08.	Survival.	10
	4.09.	Exclusive Remedy.	10

ARTICLE V CONDITIONS TO CLOSING			10
	5.01.	Yenura’s Conditions Precedent to Closing.	10
	5.02.	WSI-Delaware’s Conditions Precedent to Closing.	11

ARTICLE VI TERMINATION			11
	6.01.	Termination.	11
	6.02.	Effect of Termination.	12

ARTICLE VII FURTHER ASSURANCES			12
	7.01.	Further Assurances of WSI-Delaware.	12
	7.02.	Further Assurances of Yenura.	12

ARTICLE VIII MISCELLANEOUS			12
	8.01.	Expenses of the Parties.	12
	8.02.	Confidentiality.	13
	8.03.	Financial Advisors and Brokers.	13
	8.04.	Notices to Parties.	13
	8.05.	Applicable Law.	14
	8.06.	Arbitration.	14
	8.07.	Assignment.	14
	8.08.	Integration.	14


8.09.	Headings.	14
8.10.	Pronouns and Plurals.	15
8.11.	Successors and Assigns.	15
8.12.	Severability.	15
8.13.	Waiver.	15
8.14.	Counterparts.	15

SCHEDULE 1

EXHIBIT A

EXCHANGE AGREEMENT

THIS EXCHANGE AGREEMENT (this “Agreement”) is made as of December 29, 2004 by and among WORLDSPACE, INC., a corporation organized under the laws of the State of Delaware (“WSI-Delaware”), WORLDSPACE, INC., a corporation organized under the laws of the State of Maryland (“WSI-Maryland”), WORLDSPACE INTERNATIONAL NETWORK INC., a corporation organized under the International Business Companies Act of the British Virgin Islands (“WIN”) and YENURA PTE. LTD., a private company limited by shares organized under the laws of the Republic of Singapore (“Yenura”). WSI-Delaware, WSI-Maryland, WIN and Yenura are referred to collectively herein as the “Parties”.

WHEREAS, Yenura holds certain debt obligations of WIN (collectively, the “WIN Obligations”), consisting of all of Yenura’s right, title and interest in and to the following:

(a) the Loan Agreement, dated as of October 29, 1998 (the “IDI Loan Agreement”), by and between WIN, Industrial Development Inc., a corporation organized under the International Business Companies Act of the British Virgin Islands (“IDI”), and Salah Idris (“Idris”), the sole shareholder of IDI, memorializing a loan from IDI to WIN in the principal amount of Ten Million U.S. Dollars (U.S.$10,000,000), and the Promissory Note, dated October 29, 1998 (the “IDI Loan Agreement Note”), issued by WIN to IDI in connection with the IDI Loan Agreement, in the principal amount of Ten Million U.S. Dollars (U.S.$10,000,000), Yenura having succeeded to the rights and obligations of IDI and Idris under the IDI Loan Agreement and the IDI Loan Agreement Note pursuant to the Purchase and Sale Agreement, dated as of December 29, 2004, by and between IDI and Yenura (the “IDI-Yenura Purchase and Sale Agreement”);

(b) the Exchange Agreement, dated as of November 20, 1998 (the “IDI Exchange Agreement”), by and between WIN, IDI and Idris, pursuant to which IDI sold and transferred to WIN 4,674,826 Class B Ordinary Shares of WIN in exchange for a convertible promissory note (the “IDI Exchange Agreement Note”) issued by WIN to IDI in the principal amount of Fifty Six Million Ninety Seven Thousand Nine Hundred Twelve U.S. Dollars (U.S.$56,097,912), and the IDI Exchange Agreement Note, Yenura having succeeded to the rights and obligations of IDI and Idris under the IDI Exchange Agreement and the IDI Exchange Agreement Note pursuant to the IDI-Yenura Purchase and Sale Agreement;

(c) the letter agreement, dated February 28, 2000 (the “Saifcom Loan Agreement”), between WIN, and Saifcom Establishment (“Saifcom”), a company organized under the laws of Liechtenstein, memorializing a loan from Saifcom to WIN in the principal amount of Ten Million U.S. Dollars (U.S.$10,000,000), Yenura having succeeded to the rights and obligations of Saifcom under the Saifcom Loan Agreement pursuant to the Purchase and Sale Agreement, dated as of December 29, 2004, by and between Saifcom and Yenura (the “Saifcom-Yenura Purchase and Sale Agreement”);

WHEREAS, Yenura holds certain debt obligations of WSI-Maryland (collectively, the “WSI-Maryland Obligations”), consisting of all of Yenura’s right, title and interest in and to the following:

(a) the Loan Agreement and Guarantee, dated as of September 21, 2002 (the “Yenura Loan Agreement”), by and among. WSI-Maryland (as Borrower), WIN (as Guarantor), WorldSpace Satellite Company Ltd. (“Satellite Company”), a company organized under the International Business Companies Act of the British Virgin Islands (as Guarantor) and Yenura (as Lender), memorializing loans from Yenura to WSI-Maryland in the aggregate principal amount of Fifty Two Million Nine Hundred Twenty Five Thousand U.S. Dollars (US$52,925,000), and the Senior Convertible Note, dated September 21, 2002 (the “Yenura Loan Agreement Note”), issued by WSI-Maryland to Yenura in connection with the Yenura Loan Agreement, in the principal amount of Fifty Two Million Nine Hundred Twenty Five Thousand U.S. Dollars (US$52,925,000);

(b) the First Supplemental Loan Agreement and Guarantee, dated June 23, 2003 (the “First Supplemental Yenura Loan Agreement”), by and among WSI-Maryland (as Borrower), WIN (as Guarantor), Satellite Company (as Guarantor) and Yenura (as Lender), memorializing loans from Yenura to WSI-Maryland in the aggregate principal amount of Twenty Four Million Seven Hundred Fifty Thousand U.S. Dollars (US$24,750,000), and the Senior Convertible Note, dated June 16, 2003 (the “First Supplemental Yenura Loan Agreement Note”), issued by WSI-Maryland to Yenura in connection with the First Supplemental Yenura Loan Agreement, in the principal amount of Twenty Four Million Seven Hundred Fifty Thousand U.S. Dollars (US$24,750,000); and

(c) the Second Supplemental Loan Agreement and Guarantee, dated December 29, 2004 (the “Second Supplemental Yenura Loan Agreement”), by and among WSI-Maryland (as Borrower), WIN (as Guarantor), Satellite Company (as Guarantor) and Yenura (as Lender), memorializing loans from Yenura to WSI-Maryland in the aggregate principal amount of Forty-Four Million Three Hundred Forty-Three Thousand Two Hundred Forty-Two U.S. Dollars (US$44,343,242), and the Senior Convertible Note, dated December 29, 2004 (the “Second Supplemental Yenura Loan Agreement Note”), issued by WSI-Maryland to Yenura in connection with the Second Supplemental Yenura Loan Agreement, in the principal amount of Forty-Four Million Three Hundred Forty-Three Thousand Two Hundred Forty-Two U.S. Dollars (US$44,343,242);

WHEREAS, it is contemplated that WIN will merge with and into WSI-Maryland (the “WIN/WSI-Maryland Merger”) before the Closing (as defined herein);

WHEREAS, it is contemplated that, following the WIN/WSI-Maryland Merger and before the Closing, WSI-Maryland will merge with and into WSI-Delaware (the “WSI-Maryland/WSI-Delaware Merger” and, collectively with the WIN/WSI-Maryland Merger, the “Mergers”);

WHEREAS, as a consequence of the Mergers, WSI-Delaware will assume the WIN Obligations and the WSI-Maryland Obligations by operation of law;

WHEREAS, subject to the terms and conditions of this Agreement, WSI-Delaware has agreed to issue to Yenura, and Yenura has agreed to accept, additional Class B Common Stock in exchange for the cancellation and discharge of the WIN Obligations and the WSI-Maryland Obligations.

NOW, THEREFORE, in consideration of the mutual covenants set forth in this Agreement, the Parties agree as follows:

ARTICLE I

DEFINITIONS

1.01. Definitions. For purposes of this Agreement, the following terms shall have the respective meanings set forth below:

“Claim” has the meaning set forth in Section 4.06(b).

“Closing” has the meaning set forth in Section 3.01.

“Closing Date” has the meaning set forth in Section 3.01.

“First Supplemental Yenura Loan Agreement” has the meaning set forth in the Recitals.

“First Supplemental Yenura Loan Agreement Note” has the meaning set forth in the Recitals.

“Governmental Action” means any authorization, consent, approval, waiver, exception, variance, order, license, exemption, publication, filing, notice to, or declaration of or with, any Governmental Authority and any passage of time required in connection therewith.

“Governmental Authority” means any national, state, regional municipal, or other governmental authority, agency, board, body, instrumentality or court.

“IDI” has the meaning set forth in the Recitals.

“IDI Exchange Agreement” has the meaning set forth in the Recitals.

“IDI Exchange Agreement Note” has the meaning set forth in the Recitals.

“IDI Loan Agreement” has the meaning set forth in the Recitals.

“IDI Loan Agreement Note” has the meaning set forth in the Recitals.

“IDI-Yenura Purchase and Sale Agreement” has the meaning set forth in the Recitals.

“Idris” has the meaning set forth in the Recitals.

“Loss” has the meaning set forth in Section 4.05(a).

“Mergers” has the meaning set forth in the Recitals.

“Obligations” means, collectively, the WIN Obligations and the WSI-Maryland Obligations.

“Person” means any individual, partnership, corporation, trust, unincorporated association or joint venture or any other entity other than a Governmental Authority.

“Saifcom” has the meaning set forth in the Recitals.

“Saifcom Loan Agreement” has the meaning set forth in the Recitals.

“Saifcom-Yenura Purchase and Sale Agreement” has the meaning set forth in the Recitals.

“Satellite Company” has the meaning set forth in the Recitals.

“Second Supplemental Yenura Loan Agreement” has the meaning set forth in the Recitals.

“Second Supplemental Yenura Loan Agreement Note” has the meaning set forth in the Recitals.

“Securities Act” has the meaning set forth in Section 4.03(d).

“Stonehouse Loan Restructuring Agreement” means the Loan Restructuring Agreement, dated as of September 30, 2003, among Stonehouse Capital Ltd., a corporation organized under the laws of the Cayman Islands, WSI-Maryland, WIN and the Satellite Company, as from time to time amended, supplemented or otherwise modified.

“Termination Agreement” means the Termination and Release Agreement to be entered into by Yenura, WSI-Delaware and Satellite Company, substantially in the form of Exhibit A.

“Third-Party Action” means any authorization, consent, approval, waiver, exception, license, notice to or declaration of or with any Person and the passage of time in connection therewith.

“WIN” has the meaning set forth in the Preamble.

“WIN Obligations” has the meaning set forth in the Recitals.

“WIN/WSI-Maryland Merger” has the meaning set forth in the Recitals.

“WorldSpace Indemnitee” has the meaning set forth in Section 4.05(a).

“WorldSpace Party” means WIN, WSI-Maryland or WSI-Delaware.

“WSI-Delaware” has the meaning set forth in the Preamble.

“WSI-Delaware Stock” has the meaning set forth in Section 2.01.

“WSI-Maryland” has the meaning set forth in the Preamble.

“WSI-Maryland Obligations” has the meaning set forth in the Recitals.

“WSI-Maryland/WSI-Delaware Merger” has the meaning set forth in the Recitals.

“Yenura” has the meaning set forth in the Preamble.

“Yenura Indemnitee” has the meaning set forth in Section 4.05(b).

“Yenura Loan Agreement” has the meaning set forth in the Recitals.

“Yenura Loan Agreement Note” has the meaning set forth in the Recitals.

ARTICLE II

ISSUANCE OF SHARES IN EXCHANGE FOR OBLIGATIONS

2.01. Issuance of Shares. On the Closing Date, subject to the terms and conditions of this Agreement, WSI-Delaware shall issue and transfer to Yenura Twenty-Seven Million Eight Hundred Eighty-Two Thousand Three Hundred Eight (27,882,308) fully paid and non-assessable shares of its Class B Common Stock, par value one cent (US$0.01) per share, of WSI-Delaware (the “WSI-Delaware Stock”).

2.02. Cancellation of Obligations. On the Closing Date, in consideration of the issuance of the WSI-Delaware Stock to Yenura and subject to the terms and conditions of this Agreement, Yenura shall cancel, release and discharge all of the Obligations (whether or not accrued and whenever scheduled to be due and payable).

2.03. Acknowledgment and Standstill. The Parties acknowledge the transactions contemplated by this Agreement and the disposition of the Obligations in the manner set forth herein, and agree not to take any action to fulfill, enforce or dispose of the Obligations in any other manner while this Agreement remains in effect.

ARTICLE III

THE CLOSING

3.01. Time and Place of Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Coudert Brothers LLP, 1114 Avenue of the Americas, New York, New York 10036, or at such other place as the Parties may agree, within three business days after the satisfaction (or waiver) of all of the conditions precedent set forth in Article V or on such other date as the Parties may agree (the “Closing Date”).

3.02. Closing.

(a) At the Closing, WSI-Delaware shall cause a certificate representing the WSI-Delaware Stock to be registered in the name of Yenura and delivered to Yenura.

(b) At the Closing, Yenura, WSI-Delaware and Satellite Company shall execute and deliver the Termination Agreement, to evidence and effect the cancellation and discharge of the Obligations and the release of WSI-Delaware and Satellite Company from all liability thereunder.

(c) At the Closing, Yenura shall deliver to WSI-Delaware the IDI Loan Agreement Note, the IDI Exchange Agreement Note, the Yenura Loan Agreement Note, the First Supplemental Yenura Loan Agreement Note and the Second Supplemental Yenura Loan Agreement Note, each marked “cancelled.”

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

4.01. Representations and Warranties. The respective representations and warranties of the Parties shall be limited to those set forth in this Agreement, or in any amendment, schedule, exhibit, document, or certificate delivered pursuant to this Agreement.

4.02. Representations and Warranties by WorldSpace Parties. The WorldSpace Parties jointly and severally represent and warrant to Yenura as follows:

(a) Organization and Authorization. Each WorldSpace Party is a corporation duly organized and validly existing under the laws of the jurisdiction of its organization. Each WorldSpace Party has the requisite power and authority to execute, deliver and perform this Agreement. The execution, delivery and performance of this Agreement have been duly authorized by all requisite action (corporate or otherwise) on the part of each WorldSpace Party. This Agreement has been duly and validly executed and delivered by each WorldSpace Party. Assuming the due authorization, execution and delivery of this Agreement by Yenura, this Agreement constitutes the valid and binding obligation of each WorldSpace Party, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws of general application relating to or affecting creditors’ rights and to general principles of equity.

(b) Non-contravention. The execution, delivery and performance by each WorldSpace Party of this Agreement and the consummation by each WorldSpace Party of the transactions contemplated hereby do not and will not violate the organizational documents of such WorldSpace Party, constitute a default under any material loan agreement, mortgage, deed of trust, indenture, lease, license, other agreement or contract or, to the knowledge of such WorldSpace Party, any law, rule, regulation, order, decree, judgment, existing administrative interpretation thereof or award to which such WorldSpace Party is a party or by which such WorldSpace Party is bound. There is no action, suit, proceeding, at law or in equity, by any

person or entity, or any arbitration or any administrative or other proceeding or investigation by or before any court or governmental or other instrumentality, agency, authority or body or any arbitrator, pending or, to the knowledge of any WorldSpace Party, threatened, against the consummation of the transactions contemplated hereby, and there is no valid basis for any such action, suit, proceeding, arbitration or investigation.

(c) Consents. The execution, delivery and performance by each WorldSpace Party of this Agreement and the consummation by each WorldSpace Party of the transactions contemplated hereby do not and will not require any Governmental Action or Third-Party Action.

(d) WSI-Delaware Stock. The WSI-Delaware Stock has been duly authorized by WSI-Delaware, and upon issuance to Yenura as contemplated hereby, the WSI-Delaware Stock will be validly issued, fully paid and non-assessable.

4.03. Representations and Warranties by Yenura. Yenura represents and warrants to the WorldSpace Parties as follows:

(a) Organization and Authorization. Yenura is a private company limited by shares duly organized and validly existing under the laws of the Republic of Singapore. Yenura has the requisite power and authority to execute, deliver and perform this Agreement. The execution, delivery and performance of this Agreement have been duly authorized by all requisite action (corporate or otherwise) on the part of Yenura. This Agreement has been duly and validly executed and delivered by Yenura. Assuming the due authorization, execution and delivery of this Agreement by the WorldSpace Parties, this Agreement constitutes the valid and binding obligation of Yenura, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws of general application relating to or affecting creditors’ rights and to general principles of equity.

(b) Non-contravention. The execution, delivery and performance by Yenura of this Agreement and the consummation by Yenura of the transactions contemplated hereby do not and will not violate the organizational documents of Yenura, constitute a default under any material loan agreement, mortgage, deed of trust, indenture, lease, license, other agreement or contract or, to the knowledge of Yenura, any law, rule, regulation, order, decree, judgment, existing administrative interpretation thereof or award to which Yenura is a party or by which Yenura is bound. There is no action, suit, proceeding, at law or in equity, by any person or entity, or any arbitration or any administrative or other proceeding or investigation by or before any court or governmental or other instrumentality, agency, authority or body or any arbitrator, pending or, to the knowledge of Yenura, threatened, against the consummation of the transactions contemplated hereby, and there is no valid basis for any such action, suit, proceeding, arbitration or investigation.

(c) Consents. The execution, delivery and performance by Yenura of this Agreement and the consummation by Yenura of the transactions contemplated hereby do not and will not require any Governmental Action or Third-Party Action.

(d) Title to Obligations. Yenura is the lawful owner of, and has valid marketable title to, the Obligations, free and clear of any claims, liens, equities or encumbrances (other than the transfer restrictions set forth in the Obligations).

(e) Amount of Obligations. The outstanding principal balance of each of the Obligations and the accrued and unpaid interest thereon, in each case as of the date hereof, are as set forth in Schedule 1.

(f) No Registration, etc. Yenura confirms that:

(i) Yenura understands that the WSI-Delaware Stock has not been will not be, registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and that the WSI-Delaware Stock is being issued to Yenura in a transaction that is exempt from the registration requirements of the Securities Act.

(ii) Yenura acknowledges that (a) no WorldSpace Party or any person acting on behalf of any WorldSpace Party, has made any representation to Yenura with respect to the WSI-Delaware Stock and (b) any information Yenura desires concerning the WSI-Delaware Stock, the WorldSpace Parties or any other matter relevant to Yenura’s decision to purchase the WSI-Delaware Stock is or has been made available to Yenura.

(iii) Yenura, through Mr. Samara, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the WSI-Delaware Stock.

(iv) Yenura is an Accredited Investor as defined in Regulation D under the Securities Act.

(v) Yenura is acquiring the WSI-Delaware Stock for its own account and not with a view to any distribution of the WSI-Delaware Stock, subject, nevertheless, to the understanding that the disposition of its property will at all times be and remain within its control.

(vi) Yenura understands that the WSI-Delaware Stock will bear a legend substantially to the following effect:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH, OR PURSUANT TO AN EXEMPTION FROM, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.

4.04. Survival of Representation and Warranties. The respective representations and warranties of the Parties contained in this Agreement will survive the consummation of the transactions contemplated by this Agreement until the expiration of the statute of limitations applicable to such matters.

4.05. Mutual Indemnity. Yenura shall indemnify and hold harmless each WorldSpace Party and each of its affiliates, shareholders, directors, officers, employees, attorneys, accountants and agents (each, a “WorldSpace Indemnitee”) from and against any and all judgments, damages, losses, liabilities, costs and expenses (including, without limitation, reasonable counsel fees and disbursements incurred in responding to, investigating or defending a claim, in litigation or otherwise) (a “Loss”) suffered or incurred by a WorldSpace Indemnitee, resulting from or arising out of the inaccuracy of any representation or warranty made by Yenura herein or the failure by Yenura to perform any covenant, agreement or other obligation contained in this Agreement.

(b) The WorldSpace Parties, jointly and severally, shall indemnify and hold harmless Yenura and its affiliates, shareholders, directors, officers, employees, attorneys, accountants and agents (each a “Yenura Indemnitee”) from and against any Loss suffered or incurred by a Yenura Indemnitee, resulting from or arising out of the inaccuracy of any representation or warranty made by any WorldSpace Party herein or the failure by any WorldSpace Party to perform any covenant, agreement, or other obligation contained in this Agreement.

4.06. Conditions of Indemnification. For purposes of this Section 4.06 and Section 4.07, (i) in the case of any claim for indemnification pursuant to Section 4.05(a), the term “Indemnitor” will refer to Yenura and the term “Indemnitee” will refer to the WorldSpace Indemnitee making such claim for indemnification, and (ii) in the case of any claim for indemnification pursuant to Section 4.05(b), the term “Indemnitor” will refer to the WorldSpace Parties, jointly and severally, and the term “Indemnitee” will refer to the Yenura Indemnitee making such claim for indemnification.

(b) The obligations and liabilities of an Indemnitee and the person obligated to provide such indemnification hereunder (the “Indemnitor”) under this Article 4 with respect to claims for a Loss or potential Loss resulting from the assertion of liability by a third party (a “Claim”) will be subject to the following terms and conditions:

(i) The Indemnitee will give the Indemnitor notice of any such Claim promptly after the Indemnitee learns of the existence of or receives written notice thereof (and in no event more than fifteen (15) days after the Indemnitee receives such written notice), and the Indemnitor will have the option to undertake the defense thereof with counsel of its own choosing by giving written notice thereof to the Indemnitee within thirty (30) days after receiving such notice. All cost and expense of such defense (including, without limitation, reasonable fees and disbursements of counsel incurred in litigation or otherwise), and any settlement or compromise resulting from the defense of any Claim by the Indemnitor, will be paid for by the Indemnitor; provided, however, that the Indemnitor will not settle or compromise any such Claim unless the Indemnitee is fully released and discharged therefrom as a result thereof. The Indemnitee will be entitled to participate in the defense of such Claim with counsel of its choice, at its own expense; provided, however, that the Indemnitee will not, without the written consent of the Indemnitor, compromise or settle any such Claim unless the Indemnitee waives its right to indemnity therefor hereunder.

(ii) In the event that the Indemnitor, within a reasonable time after receipt of notice of any such Claim, but in no event more than thirty (30) days after receipt of such notice, fails to defend or take other appropriate action, the Indemnitee will (upon further notice to the Indemnitor) have the right to undertake the defense, compromise or settlement of such Claim; provided, however, that the Indemnitee will not, without the written consent of the Indemnitor, compromise or settle any such Claim unless the Indemnitee waives its right to indemnity therefor hereunder.

(iii) The Indemnitee’s failure to meet any condition or perform any obligation set forth in this Section 4.06 will in no way limit or negate any obligations or liabilities of the Indemnitor unless the Indemnitor is actually prejudiced by such failure and, in such event, the Indemnitor’s obligations or liabilities will be limited only to the extent of such prejudice.

4.07. Assistance. In the event so requested by the Indemnitor, the Indemnitee will use its reasonable efforts to make available all information and assistance reasonably required in the defense by the Indemnitor of a Claim or a Loss.

4.08. Survival. The obligations to indemnify and hold harmless pursuant to this Article 4 will survive the consummation of the transactions contemplated by this Agreement.

4.09. Exclusive Remedy. Except for remedies that cannot be waived as a matter of law, this Article 4 will be the exclusive remedy for breach of the representations and warranties contained in this Agreement or in any document or instrument executed and delivered pursuant hereto.

ARTICLE V

CONDITIONS TO CLOSING

5.01. Yenura’s Conditions Precedent to Closing. The obligations of Yenura to effect the transactions contemplated by this Agreement are subject to the performance by the WorldSpace Parties of their obligations under this Agreement, and to the fulfillment, to the reasonable satisfaction of Yenura, of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of the WorldSpace Parties contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date.

(b) Counsel Opinion. Yenura shall have received an opinion letter, in form and substance satisfactory to Yenura, of Coudert Brothers LLP, acting as counsel for WSI-Delaware, dated the Closing Date.

(d) Stonehouse Loan Restructuring. The Restructuring (as defined in the Stonehouse Loan Restructuring Agreement) shall have occurred (or shall occur contemporaneously with the Closing).

(e) Senior Convertible Note Financing. WSI-Delaware shall have consummated (or shall consummate contemporaneously with the Closing) a senior convertible note financing that qualifies as a “New Loan” under the Stonehouse Loan Restructuring Agreement.

5.02. WSI-Delaware’s Conditions Precedent to Closing. The obligations of WSI-Delaware to effect the transaction contemplated by this Agreement are subject to the performance by Yenura of its obligations under this Agreement, and to the fulfillment, to the reasonable satisfaction of WSI-Delaware of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of Yenura contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date.

(b) Counsel Opinion. WSI-Delaware shall have received an opinion letter, in form and substance satisfactory to WSI-Delaware, of Citi-Legal LLC, acting as counsel for Yenura, dated the Closing Date.

(d) Stonehouse Loan Restructuring. The Restructuring (as defined in the Stonehouse Loan Restructuring Agreement) shall have occurred (or shall occur contemporaneously with the Closing).

ARTICLE VI

TERMINATION

6.01. Termination. This Agreement may be terminated at any time as follows:

(a) By mutual action of Yenura and the WorldSpace Parties; or

(b) By Yenura:

(1)

if the conditions set forth in Section 5.01 shall not have been fulfilled in any material respect on or before February 15, 2005; or

(2)

if any court of competent jurisdiction or other Governmental Authority shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transaction contemplated by this Agreement.

(1)

if the conditions set forth in Section 5.02 shall not have been fulfilled in any material respect on or before Feburary 15, 2005; or

(2)

6.02. Effect of Termination. In the event of the termination of this Agreement, this Agreement shall thereafter become void and have no effect, and no Party shall have any liability to the other Party or its shareholders or directors, officers or employees in respect thereof, except that nothing herein will relieve any Party from liability for any breach of this Agreement prior to such termination.

ARTICLE VII

FURTHER ASSURANCES

7.01. Further Assurances of WSI-Delaware. WSI-Delaware shall execute and deliver or cause to be executed and delivered such further instruments and take or cause to be taken such further actions as Yenura may reasonably deem necessary or desirable to confirm the transactions contemplated by this Agreement to be performed by WSI-Delaware.

7.02. Further Assurances of Yenura. Yenura shall execute and deliver or cause to be executed and delivered such further instruments and take or cause to be taken such further actions as WSI-Delaware may reasonably deem necessary or desirable to confirm the transactions contemplated by this Agreement to be performed by Yenura.

ARTICLE VIII

MISCELLANEOUS

8.01. Expenses of the Parties. Each Party shall be responsible for and pay all of its own expenses (including, but not limited to, legal fees and expenses) and other costs incurred in connection with the negotiation and consummation of the transactions contemplated by this Agreement.

8.02. Confidentiality. The Parties, and their affiliates, employees, officers, directors, and representatives, shall maintain in strict confidence the facts, terms, conditions and information related, this Agreement and the transactions contemplated hereby and shall not disclose any of the same to third parties without prior consent by any other Party, except as follows: (a) each Party may provide confidential information to its directors and officers, providing that it informs them of the confidential nature of such material; (b) each Party may provide confidential information to its representatives (employees of the Party and its affiliates and its outside representatives such as auditors and attorneys) who have a need to receive such materials to perform their duties, provided that such Party shall inform all such representatives of the confidential nature of the material; and (c) should a Party or its representatives, in the reasonable opinion of its counsel, be required by applicable law or regulation to disclose any confidential information, it may do so.

8.03. Financial Advisors and Brokers. Each of the Parties shall indemnify and hold the other Parties harmless against any and all claims, losses, liabilities or expenses which may be asserted against any other Party as a result of such first mentioned Party’s dealings, arrangements or agreements with any investment banker, financial advisor, brother or finder, in connection with the transaction contemplated by this Agreement.

8.04. Notices to Parties. Except as may be otherwise provided in this Agreement, all notices and other communications pursuant to this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered to the Party to whom the same is directed or when received, if mailed, postage prepaid, return receipt requested, or if sent by telecopier or courier, addressed as follows:

to Yenura:

Yenura Pte. Ltd.

c/o CitiLegal LLC

7 Temasek Boulevard

#21-02 Suntec Tower One

Singapore 038987

Telecopy: (65) 338-6277

to WSI-Delaware:

WorldSpace, Inc. (a Maryland corporation)

c/o WorldSpace Corp.

2400 N Street, N.W.

Washington, D.C. 20037

U.S.A.

Attention: General Counsel

Telecopy: 1 (202) 969-6560

to WSI-Maryland:

WorldSpace, Inc. (a Delaware corporation)

c/o WorldSpace Corp.

2400 N Street, N.W.

Washington, D.C. 20037

U.S.A.

Attention: General Counsel

Telecopy: 1 (202) 969-6560

to WIN:

WorldSpace International Network Inc.

c/o WorldSpace Corp.

2400 N Street, N.W.

Washington, D.C. 20037

U.S.A.

Attention: General Counsel

Telecopy: 1 (202) 969-6560

Any Party may change its address for notices by a notice given in the manner set forth above.

8.05. Applicable Law. This Agreement shall be interpreted in accordance with, and governed by, the law of the state of New York, without regard to any choice of law or conflict of law provisions thereof.

8.06. Arbitration. Any dispute or controversy arising out of or related to this Agreement or the performance or the breach thereof shall be finally settled by arbitration pursuant to the Rules of Conciliation and Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with the said Rules, and judgment on the award may be entered by any court having jurisdiction. The arbitration will be held in Geneva, Switzerland and will be conducted in the English language.

8.07. Assignment. No Party may assign any of its rights or delegate any of its duties under this Agreement without the prior written consent of each other Party, which consent may be withheld at the discretion of such Party.

8.08. Integration. This Agreement contains all representations concerning the subject matter hereof and constitutes the entire agreement among the Parties pertaining to the subject matter hereof, supersedes all prior agreements and understandings, whether oral or written, which the Parties may have in connection herewith and may not be amended or modified except by written agreement of the Parties.

8.09. Headings. The headings to the various Articles and Sections of this Agreement are included for convenience of reference only and shall not be determinative in construing the meaning, effect or application of any Article, Section or provision hereof.

8.10. Pronouns and Plurals. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

8.11. Successors and Assigns. This Agreement, and all of the obligations and rights herein established, shall extend to and be binding upon and shall inure to the benefit of the respective legal successors and permitted assigns of the Parties.

8.12. Severability. If any provision of this Agreement is determined by a court of competent jurisdiction to be void or unenforceable in whole or in part, such determination shall not affect or impair the enforceability or validity of the remaining provisions of this Agreement.

8.13. Waiver. Any Party may, at its option, waive in writing any or all of the conditions set forth in this Agreement to which its obligations are subject. Failure of any Party at any time or from time to time to enforce any of the terms of this Agreement shall not be construed to be a waiver of such term or of such Party’s right to thereafter enforce each and every provision hereof. No waiver of any term or condition of this Agreement shall be effective unless made in a writing signed by the Party against whom any such waiver is sought to be enforced.

8.14. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same agreement.

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first above written.


WORLDSPACE, INC.,
a Delaware corporation

By:		/S/
		Name: SRIDHAR GANESAN
		Title: CFO

WORLDSPACE, INC.,
a Maryland corporation

By:		/S/
		Name: SRIDHAR GANESAN
		Title: CFO

WORLDSPACE INTERNATIONAL NETWORK INC.

By:		/S/
		Name: Donald J. Frickel
		Title: Assistant Secretary

YENURA PTE. LTD.

By:		/S/
		Name: Noah A. Samara
		Title: Managing Director

SCHEDULE 1

OBLIGATIONS


Obligation	Original Principal Amount		Current Principal Amount		Accrued and Unpaid Interest
IDI Loan Agreement Note	U.S.$	10,000,000	U.S.$	10,000,000	U.S.$	3,139,857
IDI Exchange Agreement Note	U.S.$	56,097,912	U.S.$	56,097,912	U.S.$	34,282,057
Saifcom Loan Agreement	U.S.$	10,000,000	U.S.$	7,000,000	U.S.$	1,551,667
Yenura Loan Agreement Note	U.S.$	52,925,000	U.S.$	52,925,000	U.S.$	16,527,717
First Supplemental Yenura Loan Agreement Note	U.S.$	24,750,000	U.S.$	24,750,000	U.S.$	4,899,861
Second Supplemental Yenura Loan Agreement Note	U.S.$	44,343,242	U.S.$	44,343,242	U.S.$	0

EX-10.2 9 dex102.htm LOAN RESTRUCTURING AGREEMENT DATED SEPTEMBER 30, 2003 Loan Restructuring Agreement dated September 30, 2003

Exhibit 10.2

LOAN RESTRUCTURING AGREEMENT

among

STONEHOUSE CAPITAL LTD.

WORLDSPACE, INC.

WORLDSPACE INTERNATIONAL NETWORK INC.

and

WORLDSPACE SATELLITE COMPANY LTD.

Dated as of September 30, 2003

TABLE OF CONTENTS


		Page
ARTICLE 1	DEFINITIONS AND INTERPRETATION	2

Section 1.01	General Definitions	2

Section 1.02	Interpretation	4

ARTICLE 2	RESTRUCTURING	4

Section 2.01	Release of Obligations	4

Section 2.02	Outside Date	5

Section 2.03	Standstill	5

ARTICLE 3	CONDITIONS PRECEDENT	5

Section 3.01	Conditions Precedent	5

ARTICLE 4	REPRESENTATIONS	8

Section 4.01	Representations	8

Section 4.02	Representations of Stonehouse	10

Section 4.03	Termination of Representations	11

ARTICLE 5	COVENANTS	11

Section 5.01	Affirmative Covenants	11

ARTICLE 6	MISCELLANEOUS	11

Section 6.01	Saving of Rights	11

Section 6.02	Notices	12

Section 6.03	[Intentionally deleted.]	13

Section 6.04	[Intentionally deleted.]	13

Section 6.05	Applicable Law and Dispute Resolution	13

Section 6.06	Successors and Assigns	13

Section 6.07	Amendments, Waivers and Consents	13

Section 6.08	Joint and Several Liability	13

Section 6.09	Severability	13

Section 6.10	Counterparts	14

Section 6.11	Further Assurances	14

Section 6.12	Entire Agreement	14

TABLE OF CONTENTS

EXHIBITS



Exhibit A		Form of Original Agreement Release

Exhibit B		Form of Release

Exhibit C		Form of Escrow Agreement

Exhibit D		Form of Royalty Agreement

Exhibit E		New Loan Parameters

Exhibit F		Organizational Chart

Exhibit G		Required Consents

Exhibit H		List of Assets

Exhibit I		List of Certain Entities

Exhibit J		List of Subordinate Loans and Related Information

Exhibit K		List of Persons Entitled to Receive Distributions

Exhibit L		Dispute Resolution Procedures

Exhibit M		Form of Legal Opinion

Exhibit N		List of Certain Shareholder(s)

Loan Restructuring Agreement

LOAN RESTRUCTURING AGREEMENT (this “Agreement”), dated as of September 30, 2003 (the “Execution Date”), among:

(1) STONEHOUSE CAPITAL LTD., a corporation organized and existing under the laws of the Cayman Islands (“Stonehouse”);

(2) WORLDSPACE, INC., a corporation organized and existing under the laws of the State of Maryland, the United States of America (“WSI”);

(3) WORLDSPACE INTERNATIONAL NETWORK INC., a company organized and existing under the International Business Companies Act of the British Virgin Islands (“WIN”); and

(4) WORLDSPACE SATELLITE COMPANY LTD., a company organized and existing under the International Business Companies Act of the British Virgin Islands (“WSC”).

RECITALS

A. The WorldSpace Parties and Stonehouse are parties to that certain Amended and Restated Loan Agreement and Guarantee, dated as of April 21, 2000, by and among Stonehouse, WorldSpace, WIN and Satellite Company (the “Loan Agreement”).

B. The obligations of WSI, WIN and WSC under the Loan Agreement are secured by three Security Agreements, each dated as of April 21, 2000, between Stonehouse and respectively, WSI, WIN, and WSC (each referred to herein as a “Security Agreement” and collectively as the “Security Agreements”).

C. The WorldSpace Parties have requested that Stonehouse enter into this Agreement in order to enable the WorldSpace Parties to obtain capital investment to finance the commercial expansion of their business and thereby enhance the prospective return to Stonehouse on its investment in the WorldSpace Enterprise.

NOW, THEREFORE, in consideration of the foregoing and the agreements set forth herein, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE 1

Definitions and Interpretation

Section 1.01 General Definitions. Wherever used in this Agreement, the following terms have the meanings opposite them:


“Agreement”		has the meaning ascribed thereto in the Preamble hereof;

“Annual Operating Budget”		the annual operating budget (allocated on a monthly basis, for the twelve months immediately following the date of the Restructuring) which is attached as Exhibit E to the Royalty Agreement;

“Charter Documents”		in respect of any company, corporation, partnership, governmental agency, or other enterprise, its founding act, charter, articles of incorporation and by-laws, memorandum and articles of association, statute or such other constitutional instrument and any amendments thereto;

“Condition Precedent”		has the meaning ascribed thereto in Section 3.01 hereof;

“Designated Releases”		has the meaning ascribed thereto in Section 3.01(a) hereof;

“Distributions”		has the meaning ascribed thereto in the Royalty Agreement;

“Dollars”		the lawful currency of the United States of America, also represented herein with the “$” sign;

“Economic Ownership Interest”		the percentage ownership interest in an entity (which interest must include the right to receive a proportionate share of dividends, profits and similar amounts distributed by such entity) held by a Person or Persons, directly or indirectly on a fully diluted basis;

“Escrow Agent”		has the meaning ascribed thereto in Section 3.01(a) hereof;

“Escrow Agreement”		has the meaning ascribed thereto in Section 3.01(a) hereof;

“Execution Date”		has the meaning ascribed thereto in the Preamble hereof;

“Financial Model”		the financial model (based on mutually agreed assumptions and showing mutually agreed debt coverage and equity return forecasts) which is attached as Exhibit D to the Royalty Agreement;

“Fiscal Year”		the accounting year of each of the WorldSpace Parties commencing each year on January 1 and ending on the following December 31, or such other period as the WorldSpace Parties, with Stonehouse’s consent, from time to time designate as their accounting year;


“Funding Expenditure Plan”		the mutually agreed plan for the use of the New Loan (including, inter alia, a disbursement schedule therefor) which is attached as Exhibit B to the Royalty Agreement;

“Loan Agreement”		has the meaning ascribed thereto in the Recitals hereof;

“New Investor”		has the meaning ascribed thereto in Section 3.01(c) hereof;

“New Loan”		has the meaning ascribed thereto in Section 3.01(c) hereof;

“New Loan Documentation”		has the meaning ascribed thereto in Section 3.01(c) hereof;

“New Loan Parameters”		has the meaning ascribed thereto in Section 3.01(c) hereof;

“Operating and Marketing Plan”		the operating and marketing plan which is attached as Exhibit F to the Royalty Agreement;

“Original Agreement Release”		has the meaning ascribed thereto in Section 2.01 hereof;

“Original Agreements”		has the meaning ascribed thereto in Section 2.01 hereof;

“Outside Date”		has the meaning ascribed thereto in Section 2.02 hereof;

“Person”		any natural person, corporation, company, partnership, firm, voluntary association, joint venture, trust, unincorporated organization, authority or any other entity whether acting in an individual, fiduciary or other capacity;

“Releases”		has the meaning ascribed thereto in Section 3.01(a) hereof;

“Restructuring”		has the meaning ascribed thereto in Section 3.01 hereof;

“Royalty Agreement”		has the meaning ascribed thereto in Section 3.01(b) hereof;

“Security Agreements”		has the meaning ascribed thereto in the Recitals hereof;

“Shareholders”		has the meaning ascribed thereto in Section 3.01(a) hereof;

“Stonehouse”		has the meaning ascribed thereto in the Preamble hereof;

“Subordination Agreement”		has the meaning ascribed thereto in Section 3.01(k);

“Subordinate Lenders”		has the meaning ascribed thereto in Section 3.01(k);

“Subordinate Loans”		has the meaning ascribed thereto in Section 3.01(k);

“Transaction Documents”		has the meaning ascribed thereto in Section 3.01(j) hereof;


“U.S. GAAP”		generally accepted accounting principles in the United States, consistently applied;

“WorldSpace Enterprise”		the assets and other resources involved in the broadcast of satellite audio and multimedia content and any investments or other assets owned, whether directly or indirectly, by WSI;

“WorldSpace Parties”		WSI, WIN and WSC, or any of them individually as the context may require;

“WIN”		has the meaning ascribed thereto in the Preamble hereof;

“WSC”		has the meaning ascribed thereto in the Preamble hereof; and

“WSI”		has the meaning ascribed thereto in the Preamble hereof.

Section 1.02 Interpretation. In this Agreement, unless the context otherwise requires:

(a) headings are for convenience only and do not affect the interpretation of this Agreement;

(b) words importing the singular include the plural and vice versa;

(c) a reference to an Exhibit, Article, party, Schedule or Section is a reference to that Article or Section of, or that Exhibit, party or Schedule to, this Agreement;

(d) a reference to a document includes an amendment or supplement to, or replacement or novation of, that document but disregarding any amendment, supplement, replacement or novation made in breach of this Agreement;

(e) a reference to a party to any document includes that party’s successors and permitted assigns; and

(f) “including” and “include” shall be deemed to mean “including, without limitation” and “include, without limitation.”

ARTICLE 2

Restructuring

Section 2.01 Release of Obligations.

Upon (but not before) the satisfaction (or waiver by Stonehouse in its sole and absolute discretion) of each of the Conditions Precedent, Stonehouse shall cancel, release and discharge, by the execution and delivery of a mutual release in the form attached hereto as Exhibit A (the “Original Agreement Release”) (a) all obligations and liabilities (whether or not accrued and

whenever scheduled to be due and payable) of the WorldSpace Parties arising under the Loan Agreement, and (b) all of its liens and security interests under the Security Agreements (the Security Agreements and the Loan Agreement collectively referred to herein as the “Original Agreements”). Pursuant to the Original Agreement Release, the WorldSpace Parties shall cancel, release and discharge all obligations and liabilities (whether or not accrued) of Stonehouse arising under or in connection with the Loan Agreement or any of the other Original Agreements. The Original Agreement Release shall be fully executed, and delivered to the Escrow Agent, no later than the Execution Date. Until its release from escrow, the Original Agreement Release shall be held by the Escrow Agent pursuant to the Escrow Agreement. For the avoidance of doubt, the Original Agreement Release shall not become effective unless and until the Restructuring has occurred and the Original Agreement Release is released from escrow.

Section 2.02 Outside Date.

If the Restructuring does not occur by the one-year anniversary of the Execution Date or by such later date as may be agreed by Stonehouse and WSI in writing (the one-year anniversary of the Execution Date or such later date agreed by Stonehouse and WSI referred to herein as the “Outside Date”), then this Agreement will terminate, and each of the Original Agreements will remain in full force and effect and unmodified hereby (including, without limitation, with respect to the accrual of interest without interruption), as if this Agreement had never been entered into.

Section 2.03 Standstill.

At no time prior to the Outside Date shall Stonehouse, WSI, WIN, WSC, or the owners, shareholders, officers or directors of any of the foregoing initiate any legal proceedings against each other arising out of or in any way related to any of the WorldSpace Parties (or any of their affiliates), the WorldSpace Enterprise, Stonehouse (or any of its affiliates), or to any of the Original Agreements, with respect to any act, omission or claim taken or arising prior to the Outside Date, it being the intention of the aforesaid parties that there be a standstill arrangement among them until the aforesaid date in order for the WorldSpace Parties to seek new investors; provided, however, that none of the foregoing is intended to, nor shall, preclude any party hereto from enforcing its rights under this Agreement. Additionally, and notwithstanding any of the foregoing, in the event that any of the WorldSpace Parties (a) initiates voluntary bankruptcy, insolvency or similar proceedings during such standstill period, or (b) has any involuntary bankruptcy or similar proceedings initiated against it during such standstill period, or (c) takes any action to reorganize or other action which could adversely impact Stonehouse’s current investment during such standstill period, then Stonehouse shall be entitled to take any steps it deems appropriate to protect its investment, and in the case of clause (b), the WorldSpace Parties shall be entitled to take any steps they deem appropriate to protect their interest.

ARTICLE 3

Conditions Precedent

Section 3.01 Conditions Precedent. The execution and delivery of the Release (including its release from escrow) by Stonehouse (referred to herein as the “Restructuring”)

shall be expressly conditioned upon the fulfillment, in form and substance reasonably satisfactory to Stonehouse, of each of the following (each referred to herein as a “Condition Precedent”), or waiver thereof by Stonehouse in its sole and absolute discretion; it being acknowledged that certain of the conditions precedent below may be satisfied simultaneously with (rather than prior to) the occurrence of the Restructuring so long as such satisfaction is accomplished pursuant to closing logistics acceptable to Stonehouse.

(a) Stonehouse and each of the related individuals and entities specified in the form of release attached hereto as Exhibit B (the “Releases”) shall have received Releases, each released from escrow, unconditional and in full force and effect, and fully executed by each of the WorldSpace Parties and their respective shareholders (the “Shareholders”). All of the Releases shall be fully executed, and delivered to the Escrow Agent, no later than the Execution Date. Until their release from escrow, the Releases shall be held by Tri-State Commercial Closings, Inc. or such replacement escrow agent as may be agreed between Stonehouse and the WorldSpace Parties (Tri-State Commercial Closings, Inc. or such replacement escrow agent, as applicable, referred to herein as the “Escrow Agent”) pursuant to an escrow agreement in the form attached hereto as Exhibit C (the “Escrow Agreement”); notwithstanding the foregoing, provided that the WorldSpace Parties have used their best reasonable efforts to obtain Releases from all of the Shareholders, if the WorldSpace Parties are unable to obtain a Release from that (or those, as applicable) individual Shareholder(s) specified on Exhibit N (the “Designated Releases”), the WorldSpace Parties may, by written notice to Stonehouse not less than 15 nor more than 30 days prior to the date of the Restructuring, substitute for the Designated Releases an unsecured indemnity, in form and substance satisfactory to Stonehouse, jointly and severally from Noah Samara and Salah Idris and in favor of Stonehouse and its designees.

(b) A royalty agreement in the form attached hereto as Exhibit D (the “Royalty Agreement”) shall have been fully executed and delivered, be released from escrow, unconditional and in full force and effect. The Royalty Agreement shall be fully executed, and delivered to the Escrow Agent, no later than the Execution Date. Until its release from escrow, the Royalty Agreement shall be held by the Escrow Agent pursuant to the Escrow Agreement.

(c) After the Execution Date, WSI (and/or one or more direct or indirect subsidiaries one hundred percent (100%) of whose revenues are included in WorldSpace EBITDA, as defined in the Royalty Agreement) shall have received total cumulative investment proceeds of at least fifty million Dollars (US$50,000,000) (whether debt, equity or other form of investment or a combination thereof) (the “New Loan”) from one or more parties who, prior to the Execution Date, are not (nor were at any time previously) shareholders of WSI or any of its affiliates or subsidiaries and are not affiliates, family members or other relatives of any such shareholders, through one or more transactions including a private placement, a privately negotiated transaction and/or a public offering, all on terms substantially meeting the parameters described in Exhibit E attached hereto (the “New Loan Parameters”). The parties hereby acknowledge that one such parameter shall be that the investor or lender providing the New Loan (together with any successor or assignee thereof, the “New Investor”) agrees, pursuant to documentation which is in form and substance satisfactory to Stonehouse, that the Royalty Agreement and payment obligations thereunder shall follow the assets of the WorldSpace Parties and not be diminished or otherwise impaired upon the New Investor’s exercise of remedies under its loan agreement (or, if applicable, other similar agreement) and related documentation

(collectively, the “New Loan Documentation”) to foreclose on and/or sell assets following a default by any of the WorldSpace Parties.

(d) WSI shall have paid the success fee of Stonehouse’s investment bankers, Houlihan, Lokey, Howard and Zukin, not to exceed one million two hundred fifty thousand Dollars ($1,250,000), plus expenses.

(e) [Intentionally deleted.]

(f) [Intentionally deleted.]

(g) [Intentionally deleted.]

(h) [Intentionally deleted.]

(i) The factual information contained in the Financial Model, the Funding Expenditure Plan, the Annual Operating Budget, and the Operating and Marketing Plan shall continue to be true, correct, and complete, and applicable, in all material respects as of the date of the Restructuring; the projections and forecasts contained in the Financial Model, the Funding Expenditure Plan, the Annual Operating Budget, and the Operating and Marketing Plan shall continue to represent the reasonable business judgment of the WorldSpace Parties and to be based on assumptions which are fair and reasonable as of the date of the Restructuring; and updated copies of all of the foregoing, showing all changes from the prior versions, shall have been delivered to Stonehouse, together with satisfactory evidence of the New Investor’s approval thereof.

(j) Stonehouse shall have received satisfactory evidence of each WorldSpace Party’s authority to enter into this Agreement and each of the other documents contemplated hereby (including the Royalty Agreement, the Releases, the Escrow Agreement, the Original Agreement Release, and the New Loan Documentation) (this Agreement and such other documents referred to herein as the “Transaction Documents”) to be entered into by it.

(k) Stonehouse shall have received a subordination and standstill agreement, in form and substance satisfactory to Stonehouse (referred to herein as a “Subordination Agreement”), from the makers or providers of any loan or other debt (other than the New Loan and the loan under the Loan Agreement) which is existing (or with respect to which any contingent or other obligations or liabilities shall exist) as of the date of the Restructuring (the aforesaid makers or providers referred to herein collectively as the “Subordinate Lenders”; and the aforesaid loans or other debt referred to herein collectively as the “Subordinate Loans”), and Stonehouse also shall have received copies of all documentation entered into in connection with, or otherwise evidencing, the Subordinate Loans.

(l) Stonehouse shall have received an updated organizational chart certified by WSI listing all subsidiaries and other affiliates of WSI which is consistent with Exhibit F.

(m) The evidence offered by the WorldSpace Parties to Stonehouse prior to the Execution Date as to the anticipated tax consequences of the transactions contemplated hereunder (including those in connection with any “forgiveness of debt”) shall have been

provided to Stonehouse, without any changes that reasonably cause Stonehouse to be dissatisfied therewith.

(n) No misrepresentation or (unless cured) breach or other default hereunder by any of the WorldSpace Parties shall have occurred.

(o) Stonehouse shall have received a legal opinion, in the form attached hereto as Exhibit M, from counsel to the WorldSpace Parties.

ARTICLE 4

Representations

Section 4.01 Representations. Each of the WorldSpace Parties represents, warrants, and covenants, jointly and severally, to Stonehouse that as of the Execution Date and as of the date of the Restructuring:

(a) Such WorldSpace Party is a legal entity duly organized and validly existing under the laws of the jurisdiction in which it is organized, and has the power and authority to carry on its business and to own its properties and assets and to execute, deliver and perform this Agreement and each of the other Transaction Documents;

(b) This Agreement has been duly and validly authorized, executed and delivered by it and constitutes its valid and legally binding obligation, enforceable in accordance with its terms (except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the rights of creditors generally and by general principles of equity);

(c) The execution, delivery and performance by it of this Agreement and each of the other Transaction Documents does not conflict with or result in a breach of any of the terms, conditions or provisions of, or constitute a default or require any consent under, any indenture, mortgage, agreement or other instrument or arrangement to which such WorldSpace Party is a party or by which it is bound, or any judgment, decree or order of any law, statute, rule or regulation applicable to it, or violate any of the terms or provisions of its Charter Documents;

(d) Except as disclosed and attached hereto as Exhibit G, it is not required to obtain any material consent, authorization, registration, filing, agreement, notarization, certificate, license, approval, permit, authority or exemption in connection with the execution, delivery, performance, validity or enforceability of this Agreement, the other Transaction Documents;

(e) All Charter Documents, financial reports and other documents required to be delivered to Stonehouse pursuant to the terms of the Transaction Documents prior to (and including) the date of the Restructuring are true, complete and accurate copies thereof;

(f) There are no outstanding liens on any of its assets, and no contracts or arrangements, conditional or unconditional, exist for the creation by it of any lien (other than existing liens in favor of Stonehouse, liens to secure all or part of the New Loan, and liens

arising by operation of law); provided, however, that if a lien arises after the Execution Date and prior to (and including) the date of the Restructuring (other than a lien in favor of Stonehouse, a lien to secure all or part of the New Loan or a lien arising by operation of law), beginning on the date such lien arises the WorldSpace Parties shall have thirty (30) days (or if shorter, until five (5) days before the date of the Restructuring) to remove such lien (and cure any adverse effects which may have arisen therefrom);

(g) Such WorldSpace Party is not in violation of any applicable statute, regulation or other law applicable to it; provided, however, that if such a violation occurs after the Execution Date and prior to (and including) the date of the Restructuring, beginning on the date such violation occurs the WorldSpace Parties shall have thirty (30) days (or if shorter, until five (5) days before the date of the Restructuring) to cure such violation (and any adverse effects which may have arisen therefrom);

(h) Such WorldSpace Party is not engaged in or threatened by any litigation, arbitration, investigation, administrative proceedings or other similar types of action; provided, however, that if any such action referenced in this subparagraph (h) occurs after the Execution Date and prior to (and including) the date of the Restructuring, beginning on the date such action occurs the WorldSpace Parties shall have thirty (30) days (or if shorter, until five (5) days before the date of the Restructuring) to have such action terminated (and cure any adverse effects which may have arisen therefrom);

(i) All material authorizations, licenses and permits required for the operation of the WorldSpace Enterprise have been obtained, and are current, valid and in full force and effect; provided, however, that if any such authorizations, licenses or permits become invalid after the Execution Date and prior to (and including) the date of the Restructuring, beginning on the date such authorizations, licenses or permits become invalid the WorldSpace Parties shall have thirty (30) days (or if shorter, until five (5) days before the date of the Restructuring) to have such authorizations, licenses or permits restored (and cure any adverse effects which may have arisen therefrom);

(j) The Financial Model, the Funding Expenditure Plan, the Annual Operating Budget and the Operating and Marketing Plan, which are subject to the assumptions and qualifications set forth therein, have been prepared by the WorldSpace Parties in good faith and do not contain any statement of present or historical fact that is not true and correct in all material respects;

(k) All tax returns and reports required by law to be filed by such WorldSpace Party have been duly filed, and taxes, obligations, fees and other governmental charges upon it, or its properties, or its income or assets, which are due and payable or to be withheld, have been paid or withheld, other than those presently payable without penalty or interest and those subject to contest diligently pursued and conducted in good faith by appropriate proceedings so long as it has set aside adequate reserves with respect thereto in accordance with U.S. GAAP; provided, however, that if the WorldSpace Parties inadvertently breach the terms of this subparagraph (k) after the Execution Date and prior to (and including) the date of the Restructuring, beginning on the date of such breach the WorldSpace Parties shall have thirty (30) days (or if shorter, until five

(5) days before the date of the Restructuring) to cure such breach (and any adverse effects which may have arisen therefrom);

(l) All assets material to the WorldSpace Enterprise (including intangible assets, such as licenses, material contracts, and leases of property containing operational assets) including all material assets owned by each of the WorldSpace Parties, as well as the identification of the owner of each such asset, are included on the list set forth as Exhibit H, and Exhibit H is true and complete in all material respects, and each of the WorldSpace Parties agrees that, until (and including) the date of the Restructuring, it shall immediately notify Stonehouse if there is any material change after the date hereof to any of the information described on Exhibit H;

(m) Exhibit I is an accurate and complete list of entities whose earnings are included in WSI’s consolidated income statement, as well as any other entities in which WSI has any Economic Ownership Interest as of the Execution Date, including the percentage ownership interest of WSI in each listed entity, and each of the WorldSpace Parties agrees that, until (and including) the date of the Restructuring, it shall immediately notify Stonehouse if there is any material change after the Execution Date to any of the information described on Exhibit I;

(n) Exhibit J is an accurate and complete list of the Subordinate Lenders and the Subordinate Loans (together with the documentation entered into in connection with, or otherwise evidencing, the same), existing as of the Execution Date, and each of the WorldSpace Parties agrees that, until (and including) the date of the Restructuring, it shall immediately notify Stonehouse if there is any change after the Execution Date to any of the information described on Exhibit J; and

(o) Exhibit K is an accurate and complete list of each of the Persons who, on or after the date of the Restructuring, may be entitled to receive Distributions (as defined in the Royalty Agreement) (together with the documentation entered into in connection with, or otherwise evidencing, the rights to receive such Distributions), and each of the WorldSpace Parties agrees that, until (and including) the date of the Restructuring, it shall immediately notify Stonehouse if there is any change after the date hereof to any of the information described on Exhibit K, and each of the WorldSpace Parties also agrees that if, prior to (and including) the date of the Restructuring, any Person who has not previously executed and delivered a Subordination Agreement becomes entitled to receive (or to potentially receive) Distributions (other than with respect to dividends which, pursuant to the terms of the Royalty Agreement, may be distributed to shareholders of WSI), such Person shall immediately execute and deliver a Subordination Agreement.

Section 4.02 Representations of Stonehouse. Stonehouse represents and warrants that, as of the Execution Date and as of the date of the Restructuring:

(a) It is a legal entity duly organized and validly existing under the laws of the jurisdiction in which it is organized, and has the power and authority to execute, deliver and perform this Agreement and the Original Agreement Release; and

(b) This Agreement and (as of the date of the Restructuring) the Original Agreement Release has been duly and validly authorized, executed and delivered by it and constitutes its valid and legally binding obligation, enforceable in accordance with its terms (except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the rights of creditors generally and by general principles of equity).

Section 4.03 Termination of Representations. The representations, warranties and covenants set forth in Sections 4.01 and 4.02 shall terminate upon and shall not survive the occurrence of the Restructuring.

ARTICLE 5

Covenants

Section 5.01 Affirmative Covenants. Unless Stonehouse otherwise agrees, prior to (and including) the date of the Restructuring the WorldSpace Parties shall:

(a) As soon as available but in any event within one hundred twenty (120) days after the end of each Fiscal Year, deliver to Stonehouse a copy of the WorldSpace Parties’ audited consolidated financial statement as of the end of such Fiscal Year, prepared in accordance with U.S. GAAP; and

(b) Use the proceeds comprising the New Loan only in accordance with (or substantially in accordance with) the Funding Expenditure Plan.

ARTICLE 6

Miscellaneous

Section 6.01 Saving of Rights.

(a) The rights and remedies of Stonehouse in relation to any misrepresentation or breach of warranty on the part of any of the WorldSpace Parties shall not be prejudiced by any investigation by or on behalf of Stonehouse into the affairs of any of the WorldSpace Parties, by the execution or the performance of this Agreement or by any other act or thing which may be done by or on behalf of Stonehouse in connection with this Agreement and which might, apart from this Section, prejudice such rights or remedies.

(b) No course of dealing or waiver by Stonehouse in connection with any condition or payment to be made under this Agreement shall impair any right, power or remedy of Stonehouse with respect to any other condition or payments, or be construed to be a waiver thereof; nor shall the action of Stonehouse with respect to any condition or payment affect or impair any right, power or remedy of Stonehouse with respect to any other condition or payment.

(c) No course of dealing and no failure or delay by Stonehouse in exercising, in whole or in part, any power, remedy, discretion, authority or other right under this Agreement or any other agreement shall waive or impair, or be construed to be a waiver of or an acquiescence in, such or any other power, remedy, discretion, authority or right under this Agreement, or in any manner preclude its additional or future exercise; nor shall the action of Stonehouse with respect to any default, or any acquiescence by it therein, affect or impair any right, power or remedy of Stonehouse with respect to any other default.

Section 6.02 Notices. Any and all notices or other communications or deliveries required or permitted to be given pursuant to any of the provisions of this Agreement will be deemed to have been duly given for all purposes if sent both (a) by telefax and (b) by certified or registered mail, return receipt requested and postage prepaid, by hand delivery, or by an internationally recognized overnight courier, in any case to the telefax number and the address of such party listed below or to such other telefax number or address as any party may specify by notice given to the other party in accordance with this Section 6.02.

For the WorldSpace Parties:

Noah A. Samara

Chairman and Chief Executive Officer

WorldSpace International Network Inc.

2400 N Street, N.W.

Washington, D.C. 20037

Telefax: 202-969-6004

with a copy to:

Donald J. Frickel, Esq.

WorldSpace International Network Inc.

2400 N Street, N.W.

Washington, D.C. 20037

Telefax: 202-969-6560

For Stonehouse:

Stonehouse Capital Ltd.

c/o Al-Murjan Organization

PO Box 52558

Jeddah 21573

Saudi Arabia

Attention: Cherif Sedky

Telefax: 011-9662-694-3466

with a copy to:

Jeffrey H. Goodman, Esq.

Fulbright & Jaworski L.L.P.

801 Pennsylvania Avenue, N.W.

Washington, D.C. 20004-2623

Telefax: 202-662-4643

The date of giving of any such notice will be: (a) in the case of delivery by hand or courier, the date of delivery at the appropriate address specified in or pursuant to this Section 6.02, provided that the notice has also been sent by telefax to the appropriate telefax number specified in or pursuant to this Section 6.02; or (b) in the case of delivery by mail, five (5) days following the posting of the mail addressed to the appropriate address specified in or pursuant to this Section 6.02, if posted in the same country as the country of the address, and twelve (12) days following the posting of the mail addressed to the appropriate address specified in or pursuant to this Section 6.02, if posted in a different country than the country of the address, provided that the notice has also been sent by telefax to the appropriate telefax number specified in or pursuant to this Section 6.02.

Section 6.03 [Intentionally deleted.]

Section 6.04 [Intentionally deleted.]

Section 6.05 Applicable Law and Dispute Resolution. This Agreement shall be deemed to be a contract made under, and shall be governed by, and shall be construed and interpreted in accordance with, the laws of the State of New York, United States of America, without regard to the conflict of laws provisions thereof (other than Section 5-1401 and 5-1402 of the General Obligations Laws of the State of New York). The parties hereto agree to submit any dispute based on any matter arising out of or relating to this Agreement or the transactions contemplated hereby to arbitration in accordance with the terms set forth on Exhibit L attached hereto.

Section 6.06 Successors and Assigns. This Agreement binds and benefits the respective successors and assigns of the parties; provided, however, that none of the WorldSpace Parties may assign or delegate any of their respective rights or obligations under this Agreement without the prior consent of Stonehouse.

Section 6.07 Amendments, Waivers and Consents. No failure or delay by any party at any time to enforce one or more of the terms, conditions or obligations of this Agreement will constitute a waiver of such terms, conditions or obligations or will preclude such party from requiring performance by the other party at any time. No waiver of the provisions hereof, or any consent given hereunder, will be effective unless in writing and signed by the party to be charged with such waiver or consent. No waiver will be deemed a continuing waiver or waiver in respect of any subsequent breach or default, either of similar or different nature, unless expressly so stated in writing. This Agreement may only be amended by a written instrument signed by all of the parties hereto.

Section 6.08 Joint and Several Liability. Each of the WorldSpace Parties hereby agrees that it shall be jointly and severally liable for the obligations of each of the WorldSpace Parties hereunder.

Section 6.09 Severability. All the provisions of this Agreement will be considered as separate terms and conditions. In the event any of the provisions hereof is determined to be

invalid, prohibited or unenforceable by a court or other body of competent jurisdiction, this Agreement will be construed as if such invalid, prohibited or unenforceable provision has been more narrowly drawn so as not to be invalid, prohibited or unenforceable, unless such construction would be unreasonable. Notwithstanding the foregoing sentence, in the event that any provision contained in this Agreement should be determined to be invalid, prohibited or unenforceable, the validity, legality and enforceability of the remaining provisions contained in this Agreement will not in any way be affected or impaired thereby, unless such construction would be unreasonable.

Section 6.10 Counterparts. This Agreement may be executed in several counterparts, each of which is an original, but all of which together constitute one and the same agreement.

Section 6.11 Further Assurances. The WorldSpace Parties will, at their cost, execute and deliver promptly such additional documents, assignments, certificates and instruments as Stonehouse may reasonably request in order to effectuate the provisions of, and the transactions provided for in, this Agreement. Stonehouse will, at the cost of the WorldSpace Parties, execute and delivery promptly such additional documents, assignments, certificates and instruments as any for the WorldSpace Parties may reasonably request in order to effectuate the provisions of, and the transactions provided for in, this Agreement (including, without limitation, the release of the liens pursuant to the Security Agreements).

Section 6.12 Entire Agreement. Subject to Section 2.02 hereof, this Agreement supersedes any prior agreement (including that certain Term Sheet executed by the parties hereto and dated as of March 1, 2003), understanding, representation or warranty between the parties as to the subject matter of this Agreement, which prior agreements, understandings, representations and warranties shall be of no continuing effect except to the extent otherwise provided herein.

* * *

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed in their respective names as of the date first above written.


WORLDSPACE, INC.

By:		/S/ NOAH A. SAMARA
		Noah A. Samara
		Chairman and Chief Executive Officer

WORLDSPACE INTERNATIONAL NETWORK INC.

By:		/S/ NOAH A. SAMARA
		Noah A. Samara
		Chairman and Chief Executive Officer

WORLDSPACE SATELLITE COMPANY LTD.

By:		/S/ NOAH A. SAMARA
		Noah A. Samara
		Chairman and Chief Executive Officer

STONEHOUSE CAPITAL LTD.

By:		/S/ ABDULRAHMAN BIN MAHFOUZ
		Abdulrahman Bin Mahfouz

By:		/S/ SULTAN BIN MAHFOUZ
		Sultan Bin Mahfouz

FIRST AMENDMENT

LOAN RESTRUCTURING AGREEMENT

AND

ROYALTY AGREEMENT

AMONG

STONEHOUSE CAPITAL LTD.

WORLDSPACE, INC.

WORLDSPACE INTERNATIONAL NETWORK INC.

AND

WORLDSPACE SATELLITE COMPANY, LTD.

Dated September 28, 2004

This First Amendment (“First Amendment”) made as of this 28th day of September, 2004 by and among Stonehouse Capital Ltd. (“Stonehouse”), WorldSpace, Inc. (“WSI”), WorldSpace International Network Inc. (“WIN”) and WorldSpace Satellite Company Ltd. (“WSC”) (WSI, WIN, and WSC collectively referred to herein as the “WorldSpace Parties”).

WITNESSETH:

WHEREAS, Stonehouse and the WorldSpace Parties did enter into that certain Loan Restructuring Agreement dated as of September 30, 2003 (the “Loan Restructuring Agreement”) in order to enable the WorldSpace Parties to obtain capital investment to finance the commercial expansion of their business; and

WHEREAS, Stonehouse and the WorldSpace Parties did enter into that certain Royalty Agreement dated as of September 30, 2003 (the “Royalty Agreement”) in order to establish certain rights of Stonehouse to receive royalty payments from the WorldSpace Parties; and

WHEREAS, Stonehouse, the WorldSpace Parties and Tri-State Commercial Closings, Inc. (the “Escrow Agent”) did enter into that certain Escrow Agreement dated as of September 30, 2003 (the “Escrow Agreement”) (the Loan Restructuring Agreement, the Royalty Agreement and the Escrow Agreement collectively referred to herein as the “Agreements”) in order to establish the terms by which certain documents be held in escrow; and

WHEREAS, Stonehouse and each of the WorldSpace Parties desire to amend the Loan Restructuring Agreement and the Royalty Agreement and to provide the Escrow Agent with notification of such amendments in accordance with the provisions set forth below.

NOW THEREFORE, in consideration of the mutual promises and covenants herein contained, the receipt and sufficiency of which are hereby acknowledged, Stonehouse and the WorldSpace Parties hereby agree to amend the Loan Restructuring Agreement and the Royalty Agreement and to provide the Escrow Agent with notification of such amendments as follows:

1.	Replace Section 2.02 of the Loan Restructuring Agreement with:

“If the Restructuring does not occur by March 31, 2005 or by such later date as may be agreed by Stonehouse and WSI in writing (the March 31, 2005 date or such later date agreed by Stonehouse and WSI referred to herein as the “Outside Date”), then this Agreement will terminate, and each of the Original Agreements will remain in full force and effect and unmodified hereby (including, without

limitation, with respect to the accrual of interest without interruption), as if this Agreement had never been entered into.”

2.	Replace Section 1.2(b) of Exhibit B to the Loan Restructuring Agreement with:

“(b) this Release will be null and void if the date of the closing of the Debt Restructuring Transaction does not occur on or before December 31, 2005.”

3.	Replace Section 5.05 of the Royalty Agreement with:

“This Agreement will automatically terminate if the Effective Date has not occurred on or before March 31, 2005.”

4.	The forms of the Loan Restructuring Agreement, the Royalty Agreement and the Escrow Agreement attached to the Agreements as exhibits, where applicable, shall be considered to be revised to reflect the terms contained in this First Amendment.

5.	Stonehouse and WSI agree to provide the Escrow Agent with a written notice (which notice shall be countersigned by the Escrow Agent), notifying the Escrow Agent of the change to the “Outside Date” as effected by this Amendment.

6.	This First Amendment may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

7.	Except as otherwise hereby modified, all other terms, provisions and conditions of the Agreements shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have caused this First Amendment to be signed in their respective names as of the date first above written.


STONEHOUSE CAPITAL LIMITED

By:		/s/ ABDULRAHMAN BIN MAHFOUZ
Name:		Abdulrahman Bin Mahfouz

By:		/s/ SULTAN BIN MAHFOUZ
Name:		Sultan Bin Mahfouz


WORLDSPACE, INC.

By:		/s/ NOAH A. SAMARA
Name:		Noah A. Samara
Title:		Chairman and Chief Executive Officer

WORLDSPACE INTERNATIONAL NETWORK INC.

By:		/s/ NOAH A. SAMARA
Name:		Noah A. Samara
Title:		Chairman and Chief Executive Officer

WORLDSPACE SATELLITE COMPANY, LTD.

By:		/s/ NOAH A. SAMARA
Name:		Noah A. Samara
Title:		Chairman and Chief Executive Officer

SECOND AMENDMENT

LOAN RESTRUCTURING AGREEMENT

AND

ROYALTY AGREEMENT

AMONG

STONEHOUSE CAPITAL LTD.

(a corporation organized and existing under the laws of the Cayman Islands)

WORLDSPACE, INC.

(a corporation organized and existing under the laws of the State of Maryland)

WORLDSPACE INTERNATIONAL NETWORK INC.

(a company organized and existing under the International Business Companies Act

of the British Virgin Islands)

WORLDSPACE SATELLITE COMPANY, LTD.

(a company organized and existing under the International Business Companies Act

of the British Virgin Islands)

AND

WORLDSPACE, INC.

(a corporation organized and existing under the laws of the State of Delaware)

Dated as of December 30, 2004

This Second Amendment (“Second Amendment”) made as of this 30^th day of December, 2004 by and among:

(i) Stonehouse Capital Ltd., a corporation organized and existing under the laws of the Cayman Islands (“Stonehouse”);

(ii) WorldSpace, Inc., a corporation organized and existing under the laws of the State of Maryland (“WSI-MD”);

(iii) WorldSpace International Network Inc., a company organized and existing under the International Business Companies Act of the British Virgin Islands (“WIN”);

(iv) WorldSpace Satellite Company Ltd., a company organized and existing under the International Business Companies Act of the British Virgin Islands (“WSC”); and

(v) WorldSpace, Inc., a corporation organized and existing under the laws of the State of Delaware (“WSI-DE”) (WSI-MD, WIN, WSC and WSI-DE collectively referred to herein as the “WorldSpace Parties”).

WITNESSETH:

WHEREAS, Stonehouse and the WorldSpace Parties (other than WSI-DE) did enter into that certain Loan Restructuring Agreement dated as of September 30, 2003, as amended by that certain First Amendment to Loan Restructuring Agreement and Royalty Agreement dated September 28, 2004 (the “Loan Restructuring Agreement”) in order to enable the WorldSpace Parties (other than WSI-DE) to obtain capital investment to finance the commercial expansion of their business;

WHEREAS, Stonehouse and the WorldSpace Parties (other than WSI-DE) did enter into that certain Royalty Agreement dated as of September 30, 2003, as amended by that certain First Amendment to Loan Restructuring Agreement and Royalty Agreement dated September 28, 2004 (the “Royalty Agreement”) in order to establish certain rights of Stonehouse to receive royalty payments from the WorldSpace Parties (other than WSI-DE) (the Loan Restructuring Agreement and the Royalty Agreement collectively referred to herein as the “Agreements”);

WHEREAS, prior to the date hereof, WSI-MD owned WIN, which in turn owned WSC;

WHEREAS, as of even date herewith, WIN will be merged with and into WSI-MD and WSI-MD will immediately thereafter be merged with and into WSI-DE (the “WSI Mergers”);

WHEREAS, upon the WSI Mergers, WSI-DE will assume all of the rights, obligations and liabilities of WIN and WSI-MD in and under the Agreements by operation of law;

WHEREAS, Stonehouse and each of the WorldSpace Parties desire to amend the Loan Restructuring Agreement and the Royalty Agreement in accordance with the provisions set forth below.

1. Add the following term and its corresponding definition to the Royalty Agreement:


“WSI-DE”		means WorldSpace Inc., a corporation organized and existing under the laws of the State of Delaware as of the Effective Date.

2. Add the following text to become a new Section 4.03(c) to the Royalty Agreement:

(c) Distributions to those shareholders listed on Exhibit H shall not be subject to the restrictions on Distributions provided in this Section 4.03 (which Section 4.03 provides, in part, that such Distributions are expressly subordinate to the actual payment of the Royalty Payment); provided, however, that for the sake of clarity it is agreed that for purposes of calculating the Proceeds Portion in a Scale-Down Transaction, the amount of the Distributions used as a basis for such determination shall be calculated by reference to all Current Shareholders, whether or not they have been exempted from the restrictions under this Section 4.03. It is further contemplated that such shareholders listed on Exhibit H shall receive Class A common shares in WSI-DE which are not restricted as to the payment of Distributions and all other Current Shareholders will receive Class B common shares in WSI-DE and the certificates representing such Class B shares shall include a legend referencing the applicable restrictions under this Agreement.

3. Add the attached Addendum A as a new Exhibit H to the Royalty Agreement.

4. The forms of the Loan Restructuring Agreement and the Royalty Agreement (attached as exhibits to the Royalty Agreement and the Loan Restructuring Agreement, respectively) shall be considered to be revised to reflect the terms contained in this Second Amendment.

5. In executing this Second Amendment, the WorldSpace Parties acknowledge and affirm that, upon the WSI Mergers (i) all obligations and liabilities of WSI-MD and WIN (including, but not limited to, such parties’ obligations and liabilities under the Loan Restructuring Agreement and the Royalty Agreement) will be assumed by WSI-DE and (ii) WSC will become a subsidiary of WSI-DE.

6. This Second Amendment may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

7. Except as otherwise hereby modified, all other terms, provisions and conditions of the Agreements shall remain in full force and effect.

8. This Second Amendment shall be governed by and construed in accordance with the laws of the State of New York, without regard to any choice of law or conflict of law provisions thereof.

IN WITNESS WHEREOF, the parties have caused this Second Amendment to be signed in their respective names as of the date first above written.

(Signature page follows)


STONEHOUSE CAPITAL LTD.

By:		/s/

Name:

WORLDSPACE, INC., a corporation organized and existing under the laws of the State of Maryland

By:		/s/
Name:		Noah A. Samara
Title:		Chairman and Chief Executive Officer

WORLDSPACE INTERNATIONAL NETWORK INC.

By:		/s/
Name:		Noah A. Samara
Title:		Chairman and Chief Executive Officer

WORLDSPACE SATELLITE COMPANY, LTD.

By:		/s/
Name:		Noah A. Samara
Title:		Chairman and Chief Executive Officer

WORLDSPACE, INC., a corporation organized and existing under the laws of the State of Delaware

By:		/s/
Name:
Title:

EX-10.3 10 dex103.htm ROYALTY AGREEMENT DATED SEPTEMBER 30, 2003 Royalty Agreement dated September 30, 2003

Exhibit 10.3

ROYALTY AGREEMENT

among

STONEHOUSE CAPITAL LTD.

WORLDSPACE, INC.

WORLDSPACE INTERNATIONAL NETWORK INC.

AND

WORLDSPACE SATELLITE COMPANY LTD.

Dated as of September 30, 2003

TABLE OF CONTENTS


		Page
ARTICLE I	DEFINITIONS AND INTERPRETATION	1

Section 1.01	General Definitions	1

Section 1.02	Interpretation	6

ARTICLE II	PAYMENTS	7

Section 2.01	Royalty Payments	7

Section 2.02	Scale-Down Fee	8

Section 2.03	Equalization Payment	8

Section 2.04	Effectiveness	8

ARTICLE III	REPRESENTATIONS	9

Section 3.01	Representations of the WorldSpace Parties	9

Section 3.02	Representations of Stonehouse	9

ARTICLE IV	COVENANTS	10

Section 4.01	Reporting	10

Section 4.02	Audit	10

Section 4.03	Distributions	10

Section 4.04	Sale of Assets	11

Section 4.05	Funding Expenditure Plan	11

Section 4.06	Confidentiality	11

Section 4.07	Subordination	12

ARTICLE V	MISCELLANEOUS	12

Section 5.01	Saving of Rights	12

Section 5.02	Notices	13

Section 5.03	Overdue Payments	14

Section 5.04	Payment Location	14

Section 5.05	Termination	14

Section 5.06	Applicable Law and Dispute Resolution	14

Section 5.07	Successors and Assigns	14

Section 5.08	Waivers and Consents; Amendments	14

Section 5.09	Joint and Several Liability	15

Section 5.10	Severability	15

Section 5.11	Counterparts	15

Section 5.12	Further Assurances	15

TABLE OF CONTENTS


Section 5.13	Entire Agreement	15
Section 5.14	Additional Exhibits	15
Section 5.15	Tax Disclosure	16

EXHIBITS



Exhibit A		Form of Control Agreement

Exhibit B		Funding Expenditure Plan

Exhibit C		Dispute Resolution Procedures

Exhibit D		Financial Model

Exhibit E		Annual Operating Budget

Exhibit F		Operating and Marketing Plan

Exhibit G		Restructuring Agreement

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ROYALTY AGREEMENT

THIS ROYALTY AGREEMENT (this “Agreement”) dated as of September 30, 2003 (the “Execution Date”), is by and between (1) Stonehouse Capital Ltd., a Cayman Islands corporation (“Stonehouse”), and (2) WorldSpace, Inc., a Maryland corporation (“WSI”), WorldSpace International Network Inc., a company organized under the International Business Companies Act of the British Virgin Islands (“WIN”), WorldSpace Satellite Company Ltd., a company organized under the International Business Companies Act of the British Virgin Islands (“WSC”). WSI, WIN and WSC are collectively referred to as the “WorldSpace Parties.”

RECITALS

A. The parties are parties to a Restructuring Agreement of even date herewith, a copy of which is attached hereto as Exhibit G (the “Restructuring Agreement”) pursuant to which Stonehouse is releasing and discharging the obligations of the WorldSpace Parties under that certain Amended and Restated Loan Agreement and Guarantee dated as of April 21, 2000, simultaneously with the execution and delivery of this Agreement.

B. The Restructuring Agreement provides for the execution and delivery of this Agreement.

ARTICLE I

DEFINITIONS AND INTERPRETATION

Section 1.01 General Definitions. Wherever used in this Agreement, the following terms have the meanings opposite them:


“Affiliate”		with respect to any entity, any entity that controls, is controlled by, or is under common control with the entity in question. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities or otherwise;

“Agreement”		has the meaning ascribed thereto in the Preamble hereof;

“Annual Operating Budget”		has the meaning ascribed thereto in Section 5.14(b) hereof;

“Code”		has the meaning ascribed thereto in Section 2.01(b) hereof;

“Current Shareholders”		the parties who, at any time prior to the Effective Date, were shareholders of WSI or any of its Affiliates or


		subsidiaries or who are Affiliates, family members or other relatives of any parties who were shareholders of WSI or any of its Affiliates or subsidiaries on or prior to the Effective Date; provided, that “Current Shareholders” does not include any of the WorldSpace Parties or any direct or indirect wholly-owned subsidiaries thereof;

“Distribution Calculation Year”		has the meaning ascribed thereto in Section 4.03(a) hereof;

“Distribution Payment Year”		has the meaning ascribed thereto in Section 4.03(a) hereof;

“Distributions”		dividends or similar distributions, return of capital, payments with respect to loans by or to, or other payments (other than reasonable salaries or similar compensation for services) made by any of the WorldSpace Parties to any Current Shareholders or any successors, transferees or assignees thereof (whether made in respect of shares or loans acquired or made by any Current Shareholders prior or subsequent to the Effective Date) or any other payments of any kind by any of the WorldSpace Parties with respect to Subordinate Loans; provided, that “Distributions” will not include any dividends, similar distributions or return of capital paid in respect of any shares acquired by any Current Shareholders in a Qualifying Public Offering pursuant to the prospectus used in such Qualifying Public Offering or acquired by any Current Shareholders in the open market at any time after the Qualifying Public Offering, unless such shares were acquired pursuant to options, warrants or similar rights awarded to any Current Shareholders prior to such Qualifying Public Offering or unless such shares were acquired, directly or indirectly, in substitution or exchange for shares held by any of the Current Shareholders prior to such Qualifying Public Offering;

“Dollars”		the lawful currency of the United States of America, also represented herein with the “$” sign;

“Effective Date”		the date of the Restructuring (as defined in the Restructuring Agreement);

“EBITDA”		earnings before interest, taxes, depreciation and amortization (including, without limitation, the amortization of goodwill and other intangibles) and before any extraordinary losses or writedowns of assets, and without reduction for loss carryovers from prior periods;

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“Eliminated WorldSpace Party”		has the meaning ascribed thereto in Section 2.02(a) hereof;

“Excess Funds”		with respect to any Royalty Calculation Year, those funds which have been earned by WSI in such Royalty Calculation Year and, as of the last day of such Royalty Calculation Year, have not been spent by WSI, minus the amount of the Royalty Payment which will be owed to Stonehouse with respect to such Royalty Calculation Year (and to be paid by the Second Payment Date following such Royalty Calculation Year), it being acknowledged and agreed that the determination of the amount of Excess Funds applicable to a Royalty Calculation Year will be made from the consolidated audited financial statements of WSI no later than one hundred twenty (120) calendar days following the end of such Royalty Calculation Year;

“Execution Date”		has the meaning ascribed thereto in the Preamble hereof;

“Financial Model”		has the meaning ascribed thereto in Section 5.14(a) hereof;

“First Payment Date”		for any Royalty Calculation Year, the date that is sixty (60) calendar days after the end of such Royalty Calculation Year;

“Interim Payment”		for any Royalty Calculation Year, an amount equal to eighty percent (80%) of the Royalty Payment for such Royalty Calculation Year, as estimated in good faith by WSI on the basis of the best information reasonably available thirty (30) calendar days after the end of such Royalty Calculation Year;

“LIBOR”		British Bankers’ Association interbank offered rate for deposits in the loan currency;

“New Investment”		all of the investment (whether debt, equity or other form of investment, or a combination thereof) made in WSI (and/or one or more direct or indirect subsidiaries one hundred percent (100%) of whose revenues are included in WorldSpace EBITDA as of the Effective Date) subsequent to the Execution Date to and including the Effective Date, from any party or parties who, prior to the Execution Date, are not shareholders of WSI or any of its Affiliates or subsidiaries and are not Affiliates, family members or other relatives of any such shareholders;

“New Loan Documentation”		has the meaning ascribed thereto in the Restructuring Agreement;

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“Operating and Marketing Plan”		has the meaning ascribed thereto in Section 5.14(c) hereof;

“Permitted Investments”		investments with maturities of six (6) months or less from the date of acquisition which are:

		(i) Dollar denominated securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); or

		(ii) time deposits and certificates of deposit of any commercial bank having capital and surplus in excess of five hundred million Dollars ($500,000,000) or its equivalent and having a rating on its commercial paper of at least A-1 or the equivalent thereof by Standard & Poor’s Corporation or at least P-1 or the equivalent thereof by Moody’s Investors Service, Inc.;

“Person”		any natural person, corporation, company, partnership, firm, voluntary association, joint venture, trust, unincorporated organization, authority or any other entity whether acting in an individual, fiduciary or other capacity;

“Proceeds Portion”		in any Scale-Down Transaction, the portion of the proceeds (whether cash or property) of the sale or liquidation constituting such Scale-Down Transaction that is to be included in any Distributions;

“Qualifying Public Offering”		a firm commitment underwritten public offering of common stock, pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission, which results in (i) gross proceeds (before underwriting discounts and commissions) to WSI of at least $50,000,000 from purchasers thereunder which are not Affiliates of WSI, and (ii) an aggregate valuation of all the outstanding shares of WSI’s common stock on a fully-diluted basis immediately prior to consummation of the offering of at least $100,000,000;

“Reference Date”		December 31, 2002;

“Restructuring Agreement”		has the meaning ascribed thereto in the Recitals hereof;

“Royalty Calculation Year”		each calendar year during the Term;

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“Royalty Payment”		for any Royalty Calculation Year, an amount equal to ten percent (10%) of WorldSpace EBITDA for such Royalty Calculation Year;

“Royalty Reserve Account”		has the meaning ascribed thereto in Section 2.01(b) hereof;

“Royalty Reserve Annual Account”		has the meaning ascribed thereto in Section 2.01(b) hereof;

“Scale-Down Fee”		has the meaning ascribed thereto in Section 2.02(a) hereof;

“Scale-Down Transaction”		has the meaning ascribed thereto in Section 2.02(a) hereof;

“Second Payment Date”		for any Royalty Calculation Year, the date that is one hundred eighty (180) calendar days after the end of such Royalty Calculation Year;

“Stonehouse”		has the meaning ascribed thereto in the Preamble hereof;

“Subordinate Loans”		has the meaning ascribed thereto in the Restructuring Agreement;

“Subordination Agreement”		has the meaning ascribed thereto in the Restructuring Agreement;

“Term”		January 1, 2003 to December 31, 2015, inclusive;

“Transaction Documents”		has the meaning ascribed thereto in the Restructuring Agreement;

“U.S. GAAP”		generally accepted accounting principles in the United States;

“WIN”		has the meaning ascribed thereto in the Preamble hereof;

“WorldSpace Enterprise”		has the meaning ascribed thereto in the Restructuring Agreement;

“WorldSpace Parties”		has the meaning ascribed thereto in the Preamble hereof;

“WorldSpace EBITDA”		the amount of EBITDA shown on WSI’s audited consolidated income statement for each year, prepared in accordance with U.S. GAAP, consistently applied, adjusted so that:

		(a) WorldSpace EBITDA includes, with respect to any entities in which WSI has an ownership interest, directly or indirectly, of greater than fifty percent (50%) but less than one hundred percent (100%), only WSI’s pro rata portion of the EBITDA of such entities;

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		(b) WorldSpace EBITDA includes, with respect to any entities in which WSI has an ownership interest, directly or indirectly, of fifty percent (50%) or less, only amounts actually distributed to WSI in cash or property as dividends or similar distributions, return of capital, payments with respect to loans, or other payments (other than reasonable compensation for services); and

		(c) WorldSpace EBITDA does not include, with respect to any WorldSpace Party that becomes an Eliminated WorldSpace Party, the EBITDA of such WorldSpace Party for any period after the date of the Scale-Down Transaction in connection with which such WorldSpace Party became an Eliminated WorldSpace Party;

“WSC”		has the meaning ascribed thereto in the Preamble hereof; and

“WSI”		has the meaning ascribed thereto in the Preamble hereof.

Section 1.02 Interpretation. Unless otherwise indicated in this Agreement:

(a) headings are for convenience only and do not affect the interpretation of this Agreement;

(b) words importing the singular include the plural and vice versa;

(c) a reference to an Exhibit, Article, party, Schedule or Section is a reference to that Article or Section of, or that Exhibit, party or Schedule to, this Agreement;

(e) a reference to a party to any document includes that party’s successors and permitted assigns; and

(f) “including” and “include” shall be deemed to mean “including, without limitation” and “include, without limitation.”

For the avoidance of any doubt, in the event of any sale or transfer of assets to any party, including, without limitation, sales of less than all or substantially all of the assets of the WorldSpace Parties and sales of ownership interests in any entities, U.S. GAAP will govern whether and the extent to which the sale proceeds are taken into account in calculating WorldSpace EBITDA in the accounting period of such sale or transfer.

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ARTICLE II

PAYMENTS

Section 2.01 Royalty Payments. (a) WSI will pay to Stonehouse the Royalty Payment for each Royalty Calculation Year, as follows: (i) the Interim Payment will be due and payable to Stonehouse not later than the First Payment Date for such Royalty Calculation Year; and (ii) the full amount of the Royalty Payment, less the amount of the Interim Payment previously paid to Stonehouse, will be due and payable to Stonehouse on the Second Payment Date for such Royalty Calculation Year.

(b) WSI will establish and maintain a segregated reserve account (the “Royalty Reserve Account”) with a subaccount for each Royalty Calculation Year (each such subaccount a “Royalty Reserve Annual Account”). Within forty-five (45) days after the beginning of each quarter during each Royalty Calculation Year, WSI will deposit into the Royalty Reserve Annual Account for such Royalty Calculation Year an amount equal to twenty-five percent (25%) of the Royalty Payment for such Royalty Calculation Year, as estimated in good faith by WSI on the basis of the best information then reasonably available; provided, that WSI will use its good faith and reasonable efforts to obtain, and provide to Stonehouse, information of detail and scope sufficient to make a meaningful estimate. If the estimated Royalty Payment for a Royalty Calculation Year changes from one quarter to the next, then the amount that WSI will deposit into the Royalty Reserve Annual Account during the quarter in which such estimate is changed will be adjusted to make up for the shortage (in the case of an increase in the estimate) or excess (in the case of a decrease in the estimate) in the amount or amounts deposited in such Royalty Reserve Annual Account in prior quarters of such Royalty Calculation Year. The amounts deposited in the Royalty Reserve Annual Account for any Royalty Calculation Year, together with the amount of any interest thereon, shall be applied toward the payment of WSI’s obligations under Section 2.01(a) due on the First Payment Date and/or the Second Payment Date for such Royalty Calculation Year, and (subject to the next sentence) the amounts contained in the Royalty Reserve Account or the Royalty Reserve Annual Account shall not be used for any other purpose without the prior written consent of Stonehouse (which consent shall be in the sole and absolute discretion of Stonehouse). Any balance remaining in the Royalty Reserve Annual Account for any Royalty Calculation Year after the Royalty Payment for such Royalty Calculation Year has been paid in full may be removed from the Royalty Reserve Account and applied as WSI determines to be appropriate, provided that, until the Term has ended, such application is in full compliance with all of the applicable terms and conditions of this Agreement (including, without limitation, Section 4.03 hereof). The Royalty Reserve Account and the Royalty Reserve Annual Account each constitute “Deposit Accounts” within the meaning of the Uniform Commercial Code as may be in effect in New York from time to time (the “Code”). Each Deposit Account is subject to the “control” (as set forth in the Code) of Stonehouse for the Term, as such “control” has been agreed to by the WorldSpace Parties, Stonehouse, and the bank with which the Royalty Reserve Account and the Royalty Reserve Annual Account are maintained, in an authenticated record in the form attached hereto as Exhibit A. Except to the extent Stonehouse may otherwise agree, funds in the Royalty Reserve Annual Account may only be invested in Permitted Investments.

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Section 2.02 Scale-Down Fee. (a) If, during the Term, there is a transaction by an entity within the WorldSpace Enterprise that results in a sale of all or substantially all of the WorldSpace Parties’ assets (as they are reflected on the consolidated balance sheet of WSI at the Reference Date) or there is a liquidation of any of the WorldSpace Parties, and as a result of such transaction or liquidation subsequent Royalty Payments pursuant to Section 2.01 (or any other payments contemplated hereunder) are likely to be substantially reduced in the aggregate or terminated (a “Scale-Down Transaction”), then Stonehouse will be entitled, at its option, to receive a fee (the “Scale-Down Fee”) in lieu of future payments hereunder with respect to each of the WorldSpace Parties all or substantially all of the assets of which are being sold or which are being liquidated in such Scale-Down Transaction (each such WorldSpace Party with respect to which Stonehouse makes such an election is referred to herein as an “Eliminated WorldSpace Party”).

(b) In the event that Stonehouse elects to receive a Scale-Down Fee with respect to a Scale-Down Transaction, then WSI will pay to Stonehouse a Scale-Down Fee equal to sixty (60%) percent of the Proceeds Portion in such Scale-Down Transaction; provided, however, that such percentage will be reduced by ten (10%) percent thereof (i.e., from sixty percent (60%) to fifty-four percent (54%), then from fifty-four percent (54%) to forty-eight percent (48%), etc.) for each $50 million in payments actually made to Stonehouse theretofore under Section 2.01 and this Section 2.02. The receipt by Stonehouse of the Scale-Down Fee will not affect Stonehouse’s right to receive a Royalty Payment for the Royalty Calculation Year in which the Scale-Down Transaction occurs, and such Royalty Payment will be based upon a calculation of WorldSpace EBITDA that takes such Scale-Down Transaction into account in accordance with the definition of “WorldSpace EBITDA” in Section 1.01.

Section 2.03 Equalization Payment. Upon a sale or liquidation of the WorldSpace Enterprise at any time during the Term (whether by virtue of (a) sale of WorldSpace Parties and/or their Affiliates or (b) a sale of all or substantially all of the WSI assets, or (c) a bankruptcy or liquidation of WorldSpace Parties and/or their Affiliates or (d) a foreclosure on the WSI assets or the WorldSpace Parties by a WSI creditor), then to the extent that the total cumulative amount of Distributions received (including any Distributions received or to be received with respect to such sale or liquidation event) by Noah Samara (or any of his Affiliates or family members or other related parties) exceeds the cumulative amounts received (including amounts received or to be received with respect to such sale or liquidation event by Stonehouse under Sections 2.01 and 2.02 above), then Noah Samara will immediately pay Stonehouse a cash payment equal to one-half of such excess amount.

Section 2.04 Effectiveness. Notwithstanding any other provision of this Agreement, none of the WorldSpace Parties will have any obligation pursuant to Sections 2.01 or 2.02 or Article IV, and Noah Samara will have no obligation pursuant to Section 2.03, and Stonehouse will have no rights under any of those provisions, unless and until the Effective Date occurs. Immediately upon the occurrence of the Effective Date, the WorldSpace Parties will make any and all payments and deposits that would have theretofore been required under Sections 2.01 and 2.02 and Article IV but for this Section 2.04.

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ARTICLE III

REPRESENTATIONS

Section 3.01 Representations of the WorldSpace Parties. Each of the WorldSpace Parties represents, warrants, and covenants, jointly and severally, to Stonehouse that as of the date of this Agreement and as of the Effective Date:

(c) Each of the representations and warranties made by the WorldSpace Parties (or any of them) in the Restructuring Agreement is incorporated herein by reference, without regard to Section 4.03 of the Restructuring Agreement, and is true and correct as of the Execution Date and as of the Effective Date; and

(d) All Charter Documents, financial reports and other documents required to be delivered to Stonehouse pursuant to the terms of the Transaction Documents are true, complete and accurate copies thereof.

Section 3.02 Representations of Stonehouse. Stonehouse represents, warrants, and covenants to the WorldSpace Parties that as of the date of this Agreement and as of the Effective Date:

(a) It is a legal entity duly organized and validly existing under the laws of the jurisdiction in which it is organized, and has the power and authority to carry on its business and to own its properties and assets and to execute, deliver and perform this Agreement;

(b) This Agreement has been duly and validly authorized, executed and delivered by it and constitutes its valid and legally binding obligation; and

(c) Each of the representations and warranties made by Stonehouse in Section 4.02 of the Restructuring Agreement is incorporated herein by reference, without regard to Section 4.03 of the Restructuring Agreement, and is true and correct as of the Execution Date and as of the Effective Date.

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ARTICLE IV

COVENANTS

Section 4.01 Reporting. (a) On or prior to the First Payment Date for each Royalty Calculation Year, WSI will use its good faith and reasonable efforts to obtain, and provide to Stonehouse, information of detail and scope sufficient to make a meaningful estimate of the Royalty Payment for such Royalty Calculation Year.

(b) Not later than one hundred twenty (120) days after the end of each Royalty Calculation Year, WSI will deliver to Stonehouse a copy of its audited consolidated financial statement as of the end of such fiscal year and for the year then ending, prepared in accordance with U.S. GAAP, consistently applied.

Section 4.02 Audit. Stonehouse will have the right to audit the books and accounts of the WorldSpace Parties at any time during the Term, but not more frequently than once per year, upon reasonable advance notice in order to determine or confirm any calculation of WorldSpace EBITDA (or for purposes related thereto), and the WorldSpace Parties agree to fully cooperate with Stonehouse in connection therewith.

Section 4.03 Distributions. (a) The WorldSpace Parties agree that Distributions may be paid only (i) with Excess Funds available at the end of a given Royalty Calculation Year (such given Royalty Calculation Year referred to herein as the “Distribution Calculation Year”, and the Royalty Calculation Year following the Distribution Calculation Year referred to herein as the “Distribution Payment Year”), (ii) on or after the Second Payment Date of the applicable Distribution Payment Year, and (iii) after the Royalty Payment due and payable on such Second Payment Date has been paid in full to Stonehouse.

(b) Additionally, in no event shall any Distribution be paid unless on the date of such payment, each of the following requirements has been satisfied:

i) no breach in any material respect of a representation or warranty in the New Loan Documentation (or in any respect if a materiality standard is not provided for such representation or warranty in the New Loan Documentation), default (or event which, with the giving of notice or the passage of time, would become a default) under this Agreement or under any New Loan Documentation, has occurred and is continuing;

ii) all reserves required under any Transaction Document or New Loan Documentation are in place and at the required levels;

iii) the WorldSpace Parties are current on all expenses and other amounts owed to any Person, and the contemplated payment of the Distribution will not result in any reasonably foreseeable or likely shortfall in funds available to meet future expenses and other amounts which will become due to any Person during the subsequent twelve-month period;

iv) the payment of the Distribution is made only from earnings from the applicable Distribution Calculation Year; and

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v) the payment of the Distribution is in all respects permitted under applicable law.

Section 4.04 Sale of Assets. (a) For a period of three (3) years from the Effective Date, none of the WorldSpace Parties will voluntarily sell all or substantially all of its assets, or voluntarily liquidate, without the prior written consent of Stonehouse, which consent will not be unreasonably withheld.

(b) The WorldSpace Parties will not sell any of their ownership position in any of the entities listed in Exhibit I to the Restructuring Agreement (which exhibit is incorporated herein by reference) or any of their assets listed in Exhibit H of the Restructuring Agreement (which exhibit is incorporated herein by reference) for less than fair value. For purposes of this Section 4.04(b), fair value may be conclusively established by an opinion of an internationally recognized investment banking firm engaged by WSI; provided, that in the absence of such an opinion other evidence may be used to establish fair value; and provided further, that any sale of assets by any WorldSpace Parties to an unaffiliated third party in the ordinary course of business will be presumed to be for fair value absent clear evidence to the contrary. Notwithstanding the foregoing, this Section 4.04(b) will not restrict the WorldSpace Parties from placing assets into wholly or partially owned direct or indirect subsidiaries or from entering into joint venture or financing arrangements; provided, that none of the WorldSpace Parties will sell or transfer assets to affiliates or joint ventures in which the collective ownership interests of the WorldSpace Parties is less than one hundred percent (100%) unless such sale or transfer is made for fair value (which may include, without limitation, an equity interest in the transferee) and is consistent with Section 4.04(c) hereof; and provided further, that if any of the WorldSpace Parties makes such a sale or transfer of assets to any affiliate or joint venture in which the collective ownership interests of the WorldSpace Parties is less than one hundred percent (100%), then the WorldSpace Parties will be required hereby to dedicate the consideration received in exchange for such sale or transfer to the ongoing business of the WorldSpace Enterprise which may include, without limitation, holding any equity interest in the transferee that may be part of such consideration;

(c) Notwithstanding anything which may be contained to the contrary in this Section 4.04, in Section 2.02 or elsewhere, no sale or transfer of assets of the WorldSpace Enterprise is intended to be permitted hereunder to the extent such sale or transfer would be reasonably likely, as assessed at or immediately prior to the time of such sale of transfer, to materially diminish the overall return to Stonehouse (whether through Royalty Payments, Scale-Down Fees or other fees, or any combination of the same) under this Royalty Agreement during the Term.

Section 4.05 Funding Expenditure Plan. WSI will apply the proceeds of the New Investment substantially in accordance with the Funding Expenditure Plan set forth as Exhibit B.

Section 4.06 Confidentiality. All information disclosed to any party pursuant to this Agreement will be kept confidential by such party, and will not be used by such party other than in connection with this Agreement, except to the extent such information was known by such party prior to the time it was provided to the party hereunder or is or has become lawfully obtainable from other sources, or to the extent such duty as to confidentiality and non-use is

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waived by the parties in writing, or except as may be required by order of any court or governmental agency. This Section 4.06 shall not apply to disclosures of information obtained hereunder by any party hereto made to such party’s legal counsel, to such party’s consultants, or to any other such Persons whose services such party may require throughout the Term. The foregoing obligation of confidentiality and non-use will survive any termination of this Agreement.

Each of the WorldSpace Parties agrees that it shall immediately notify Stonehouse if there is any change after the date hereof to any of the information described on Exhibit K to the Restructuring Agreement, and each of the WorldSpace Parties also agrees that if any Person who has not previously executed and delivered a Subordination Agreement becomes entitled to receive (or to potentially receive) Distributions (other than with respect to dividends which, pursuant to the terms hereof, may be distributed to shareholders of WSI), such Person shall immediately execute and deliver a Subordination Agreement.

Section 4.07 Subordination. Each of the WorldSpace Parties agrees that it shall immediately notify Stonehouse if there is any change after the date hereof to any of the information described on Exhibit K to the Restructuring Agreement (which exhibit is incorporated herein by reference), and each of the WorldSpace Parties also agrees that if any Person who has not previously executed and delivered a Subordination Agreement becomes entitled to receive (or to potentially receive) Distributions (other than with respect to dividends which, pursuant to the terms hereof, may be distributed to shareholders of WSI), such Person shall immediately execute and deliver a Subordination Agreement.

ARTICLE V

MISCELLANEOUS

Section 5.01 Saving of Rights.

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Agreement, or in any manner preclude its additional or future exercise; nor shall the action of Stonehouse with respect to any default, or any acquiescence by it therein, affect or impair any right, power or remedy of Stonehouse with respect to any other default.

Section 5.02 Notices. Any and all notices or other communications or deliveries required or permitted to be given pursuant to any of the provisions of this Agreement will be deemed to have been duly given for all purposes if sent both (a) by telefax and (b) by certified or registered mail, return receipt requested and postage prepaid, by hand delivery, or by an internationally recognized overnight courier, in any case to the telefax number and the address of such party listed below or to such other telefax number or address as any party may specify by notice given to the other party in accordance with this Section 5.02.

Notices to Stonehouse will be sent to:

Stonehouse Capital Ltd.

c/o Al-Murjan Organization

PO Box 52558

Jeddah 21573

Saudi Arabia

Attention: Cherif Sedky

Telefax: 011-9662-694-3466

with a copy to:

Jeffrey H. Goodman, Esq.

Fulbright & Jaworski L.L.P.

801 Pennsylvania Avenue, N.W.

Washington, D.C. 20004-2623

Telefax: 202-662-4643

Notices to the WorldSpace Parties will be sent to:

Noah A. Samara

Chairman and Chief Executive Officer

WorldSpace International Network Inc.

2400 N Street, N.W.

Washington, D.C. 20037

Telefax: 202-969-6004

with a copy to:

Donald J. Frickel, Esq.

WorldSpace International Network Inc.

2400 N Street, N.W.

Washington, D.C. 20037

Telefax: 202-969-6560

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The date of giving of any such notice will be: (a) in the case of delivery by hand or courier, the date of delivery at the appropriate address specified in or pursuant to this Section 5.02, provided that the notice has also been sent by telefax to the appropriate telefax number specified in or pursuant to this Section 5.02; or (b) in the case of delivery by mail, five (5) days following the posting of the mail addressed to the appropriate address specified in or pursuant to this Section 5.02, if posted in the same country as the country of the address, and twelve (12) days following the posting of the mail addressed to the appropriate address specified in or pursuant to this Section 5.02, if posted in a different country than the country of the address, provided that the notice has also been sent by telefax to the appropriate telefax number specified in or pursuant to this Section 5.02.

Section 5.03 Overdue Payments. All overdue amounts payable pursuant to the terms of this Agreement shall accrue interest from the date on which payment of the relevant amount became due until the date of actual payment at a rate of LIBOR plus five percent (5%) per annum.

Section 5.04 Payment Location. All payments to Stonehouse pursuant to this Agreement shall be made by wire transfer to Account Number at (ABA Number ), or to such other account, or in accordance with such other instruction, as Stonehouse may notify the WorldSpace Parties from time to time.

Section 5.05 Termination. This Agreement will automatically terminate if the Effective Date has not occurred on or before September , 2004.

Section 5.06 Applicable Law and Dispute Resolution. This Agreement shall be deemed to be a contract made under, and shall be governed by, and shall be construed and interpreted in accordance with, the laws of the State of New York, United States of America, without regard to the conflict of laws provisions thereof (other than Section 5-1401 and 5-1402 of the General Obligations Laws of the State of New York). The parties hereto agree to submit any dispute based on any matter arising out of or relating to this Agreement or the transactions contemplated hereby to arbitration in accordance with the terms set forth on Exhibit C attached hereto.

Section 5.07 Successors and Assigns. This Agreement binds and benefits the respective successors and assigns of the parties; provided, however, that none of the WorldSpace Parties may assign or delegate any of their respective rights or obligations under this Agreement without the prior consent of Stonehouse.

Section 5.08 Waivers and Consents; Amendments. No failure or delay by any party at any time to enforce one or more of the terms, conditions or obligations of this Agreement will constitute a waiver of such terms, conditions or obligations or will preclude such party from requiring performance by the other party at any time. No waiver of the provisions hereof, or any consent given hereunder, will be effective unless in writing and signed by the party to be charged with such waiver or consent. No waiver will be deemed a continuing waiver or waiver in respect of any subsequent breach or default, either of similar or different nature, unless expressly so stated in writing. This Agreement may only be amended by a written instrument signed by all of the parties hereto.

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Section 5.09 Joint and Several Liability. Each of the WorldSpace Parties hereby agrees that it shall be jointly and severally liable for the obligations of each of the WorldSpace Parties hereunder.

Section 5.10 Severability. All the provisions of this Agreement will be considered as separate terms and conditions. In the event any of the provisions hereof is determined to be invalid, prohibited or unenforceable by a court or other body of competent jurisdiction, this Agreement will be construed as if such invalid, prohibited or unenforceable provision has been more narrowly drawn so as not to be invalid, prohibited or unenforceable, unless such construction would be unreasonable. Notwithstanding the foregoing sentence, in the event that any provision contained in this Agreement should be determined to be invalid, prohibited or unenforceable, the validity, legality and enforceability of the remaining provisions contained in this Agreement will not in any way be affected or impaired thereby, unless such construction would be unreasonable.

Section 5.11 Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original but all of which, taken together, will constitute one and the same instrument.

Section 5.12 Further Assurances. The WorldSpace Parties, at their expense, will execute and deliver promptly such additional documents, assignments, certificates and instruments as Stonehouse may reasonably request in order to effectuate the provisions of, and the transactions provided for in, this Agreement. Stonehouse, at the expense of the WorldSpace Parties, will execute and deliver promptly such additional documents, assignments, certificates and instruments as any of the WorldSpace Parties may reasonably request in order to effectuate the provisions of, and the transactions provided for in, this Agreement.

Section 5.13 Entire Agreement. This Agreement contains the entire understanding of the parties hereto with respect to the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between or among the parties with respect to such subject matter hereof (including, upon the Effective Date, the Restructuring Agreement; provided, however, that the foregoing is not intended to diminish the continuing validity and effectiveness of any definitions or other terms that are defined or otherwise incorporated herein by cross-reference to the Restructuring Agreement in Sections 1.01, 3.01(c), 3.02, 4.04(b), and 4.07).

Section 5.14 Additional Exhibits. The parties hereto acknowledge and agree to the following:

(a) the financial model of the WorldSpace Enterprise (based on mutually agreed assumptions and showing mutually agreed debt coverage and equity return forecasts), current as of the Execution Date, is attached hereto as Exhibit D (the “Financial Model”);

(b) the annual operating budget of the WorldSpace Enterprise (allocated on a monthly basis, for the twelve months immediately following the date of the Restructuring), current as of the Execution Date, is attached hereto as Exhibit E (the “Annual Operating Budget”);

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(c) the operating and marketing plan of the WorldSpace Enterprise, current as of the Execution Date, is attached hereto as Exhibit F (the “Operating and Marketing Plan”); and

(d) until (and including) the Effective Date, the WorldSpace Parties shall promptly notify Stonehouse in writing of any changes occurring after the Execution Date with respect to the Financial Model, the Annual Operating Budget, the Operating and Marketing Plan and/or the Funding Expenditure Plan.

Section 5.15 Tax Disclosure. Notwithstanding anything herein to the contrary, but only to the extent permitted under applicable securities laws, each party to the transactions contemplated by this Agreement (and each employee, representative and other agent thereof) is authorized to disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of such transactions and all materials of any kind (including opinions or other tax analyses) insofar as they relate to the tax treatment and tax structure of such transactions; provided, that this authorization does not extend to disclosure of any other information, including without limitation (a) the identity of any party to such transactions (or any affiliate thereof), (b) the existence or status of any negotiations or (c) any financial, business, legal or personal information of or regarding any party (or any of its affiliates) to the extent not related to the tax treatment or tax structure of such transactions.

* * *

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The parties hereto have duly executed this Agreement as of September 30, 2003.


WORLDSPACE, INC.

By:		/s/ NOAH A. SAMARA
		Noah A. Samara
		Chairman and Chief Executive Officer

WORLDSPACE INTERNATIONAL NETWORK INC.

By:		/s/ NOAH A. SAMARA
		Noah A. Samara
		Chairman and Chief Executive Officer

WORLDSPACE SATELLITE COMPANY LTD.

By:		/s/ NOAH A. SAMARA
		Noah A. Samara
		Chairman and Chief Executive Officer

STONEHOUSE CAPITAL LTD.

By:		/s/ ABDULRAHMAN BIN MAHFOUZ
		Abdulrahman Bin Mahfouz

By:		/s/ SULTAN BIN MAHFOUZ
		Sultan Bin Mahfouz

The undersigned, Noah A. Samara, agrees to Section 2.03 of the foregoing Agreement.

/s/ NOAH A. SAMARA

Noah A. Samara

- 17 -

FIRST AMENDMENT

LOAN RESTRUCTURING AGREEMENT

AND

ROYALTY AGREEMENT

AMONG

STONEHOUSE CAPITAL LTD.

WORLDSPACE, INC.

WORLDSPACE INTERNATIONAL NETWORK INC.

AND

WORLDSPACE SATELLITE COMPANY, LTD.

Dated September 28, 2004

WITNESSETH:

1.	Replace Section 2.02 of the Loan Restructuring Agreement with:

limitation, with respect to the accrual of interest without interruption), as if this Agreement had never been entered into.”

2.	Replace Section 1.2(b) of Exhibit B to the Loan Restructuring Agreement with:

“(b) this Release will be null and void if the date of the closing of the Debt Restructuring Transaction does not occur on or before December 31, 2005.”

3.	Replace Section 5.05 of the Royalty Agreement with:

“This Agreement will automatically terminate if the Effective Date has not occurred on or before March 31, 2005.”

4.	The forms of the Loan Restructuring Agreement, the Royalty Agreement and the Escrow Agreement attached to the Agreements as exhibits, where applicable, shall be considered to be revised to reflect the terms contained in this First Amendment.

5.	Stonehouse and WSI agree to provide the Escrow Agent with a written notice (which notice shall be countersigned by the Escrow Agent), notifying the Escrow Agent of the change to the “Outside Date” as effected by this Amendment.

6.	This First Amendment may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

7.	Except as otherwise hereby modified, all other terms, provisions and conditions of the Agreements shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have caused this First Amendment to be signed in their respective names as of the date first above written.


STONEHOUSE CAPITAL LIMITED

By:		/s/ ABDULRAHMAN BIN MAHFOUZ
Name:		Abdulrahman Bin Mahfouz

By:		/s/ SULTAN BIN MAHFOUZ
Name:		Sultan Bin Mahfouz


WORLDSPACE, INC.

By:		/s/ NOAH A. SAMARA
Name:		Noah A. Samara
Title:		Chairman and Chief Executive Officer

WORLDSPACE INTERNATIONAL NETWORK INC.

By:		/s/ NOAH A. SAMARA
Name:		Noah A. Samara
Title:		Chairman and Chief Executive Officer

WORLDSPACE SATELLITE COMPANY, LTD.

By:		/s/ NOAH A. SAMARA
Name:		Noah A. Samara
Title:		Chairman and Chief Executive Officer

SECOND AMENDMENT

LOAN RESTRUCTURING AGREEMENT

AND

ROYALTY AGREEMENT

AMONG

STONEHOUSE CAPITAL LTD.

(a corporation organized and existing under the laws of the Cayman Islands)

WORLDSPACE, INC.

(a corporation organized and existing under the laws of the State of Maryland)

WORLDSPACE INTERNATIONAL NETWORK INC.

(a company organized and existing under the International Business Companies Act

of the British Virgin Islands)

WORLDSPACE SATELLITE COMPANY, LTD.

(a company organized and existing under the International Business Companies Act

of the British Virgin Islands)

AND

WORLDSPACE, INC.

(a corporation organized and existing under the laws of the State of Delaware)

Dated as of December 30, 2004

This Second Amendment (“Second Amendment”) made as of this 30^th day of December, 2004 by and among:

(i) Stonehouse Capital Ltd., a corporation organized and existing under the laws of the Cayman Islands (“Stonehouse”);

(ii) WorldSpace, Inc., a corporation organized and existing under the laws of the State of Maryland (“WSI-MD”);

(iii) WorldSpace International Network Inc., a company organized and existing under the International Business Companies Act of the British Virgin Islands (“WIN”);

(iv) WorldSpace Satellite Company Ltd., a company organized and existing under the International Business Companies Act of the British Virgin Islands (“WSC”); and

WITNESSETH:

WHEREAS, prior to the date hereof, WSI-MD owned WIN, which in turn owned WSC;

WHEREAS, as of even date herewith, WIN will be merged with and into WSI-MD and WSI-MD will immediately thereafter be merged with and into WSI-DE (the “WSI Mergers”);

WHEREAS, upon the WSI Mergers, WSI-DE will assume all of the rights, obligations and liabilities of WIN and WSI-MD in and under the Agreements by operation of law;

WHEREAS, Stonehouse and each of the WorldSpace Parties desire to amend the Loan Restructuring Agreement and the Royalty Agreement in accordance with the provisions set forth below.

1. Add the following term and its corresponding definition to the Royalty Agreement:


“WSI-DE”		means WorldSpace Inc., a corporation organized and existing under the laws of the State of Delaware as of the Effective Date.

2. Add the following text to become a new Section 4.03(c) to the Royalty Agreement:

3. Add the attached Addendum A as a new Exhibit H to the Royalty Agreement.

6. This Second Amendment may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

7. Except as otherwise hereby modified, all other terms, provisions and conditions of the Agreements shall remain in full force and effect.

8. This Second Amendment shall be governed by and construed in accordance with the laws of the State of New York, without regard to any choice of law or conflict of law provisions thereof.

IN WITNESS WHEREOF, the parties have caused this Second Amendment to be signed in their respective names as of the date first above written.

(Signature page follows)


STONEHOUSE CAPITAL LTD.

By:		/s/

Name:

WORLDSPACE, INC., a corporation organized and existing under the laws of the State of Maryland

By:		/s/
Name:		Noah A. Samara
Title:		Chairman and Chief Executive Officer

WORLDSPACE INTERNATIONAL NETWORK INC.

By:		/s/
Name:		Noah A. Samara
Title:		Chairman and Chief Executive Officer

WORLDSPACE SATELLITE COMPANY, LTD.

By:		/s/
Name:		Noah A. Samara
Title:		Chairman and Chief Executive Officer

WORLDSPACE, INC., a corporation organized and existing under the laws of the State of Delaware

By:		/s/
Name:
Title:

EX-10.5 11 dex105.htm MEMORANDUM OF AGREEMENT ON SETTLEMENT DATED AS OF FEBRUARY 25, 2005 Memorandum of Agreement on Settlement dated as of February 25, 2005

Exhibit 10.5

Pages where confidential treatment has been requested are stamped “Confidential Treatment Requested.” The redacted materials have been separately filed with the SEC; the appropriate section has been marked at the appropriate place with a “*.”

MEMORANDUM OF AGREEMENT

ON SETTLEMENT

THIS MEMORANDUM OF AGREEMENT ON SETTLEMENT (this “MOA”) is entered into as of this 25^th day of February, 2005 by and between WorldSpace, Inc., a company organized under the laws of the State of Delaware, USA, with its principal place of business at 2400 N Street, NW, Washington, DC 20037, USA, WorldSpace Satellite Company Ltd., a company organized under the laws of the British Virgin Islands, with its principal place of business at Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, the British Virgin Islands, here WSI and WSC shall act jointly and severally as one Party [fax number+12029696560] and Alcatel Space (“Alcatel”), a company organized under the laws of the Republic of France, having its registered office at 12, rue de la Baume 75008 Paris – FRANCE [fax number +33155661021].

WorldSpace, Inc. and WorldSpace Satellite Company Ltd. are collectively referred to herein as “WorldSpace.”

WorldSpace and Alcatel are collectively referred to herein as the “Parties” and individually as a “Party.”

PREAMBLE

WorldSpace and Alcatel entered into and executed (i) the Amended and Restated IOD Contract dated October 8, 1995 and several amendments thereto (the “IOD Contract”); (ii) the WorldStar DAVB End-to-End System Contract dated November 9, 1995 and several amendments thereto (the “End-to-End Contract”) and (iii) the WorldStar On-Station Operations Services Contract dated June 26, 1996 and several amendments thereto (the “OSOS Contract”).

The IOD Contract, End-to-End Contract and OSOS Contract are collectively referred to herein as “the Contracts”.

WorldSpace owes certain amounts to Alcatel with respect to the Contracts (the “Outstanding Payable”), and the Parties desire to settle the Outstanding Payable and to terminate the Contracts.

ASTRIUM is a French space company presently responsible for storing F3 satellite and F4 platform equipment pursuant to a subcontract entered into between Alcatel and Astrium.

WorldSpace is planning an Initial Public Offering (“IPO”) of its common stock, as described in Exhibit 1 attached hereto.

The Parties are entering into this MOA intending to be bound hereby, it being understood, however, that certain provisions hereof shall not become effective and binding on the Parties until the Effective Date (as defined in Article 6).

MEMORANDUM OF AGREEMENT ON SETTLEMENT - page 1/13

NOW, THEREFORE, in consideration of the above and of the mutual covenants and obligations hereinafter set forth, the Parties hereby agree as follows:

Article 1 – MOA Documents

This MOA consists of this writing dated the day and year first written above. In addition, the following shall constitute exhibits to this MOA, pursuant to the procedure below:

•

Exhibit 1 : Description of Initial Public Offering terms and conditions

•

Exhibit 2 : F3 and F4 certificates of final acceptance

•

Exhibit 3 : F3 and F4 storage and maintenance contracts

•

Exhibit 4 : F3 Certificate of Title

•

Exhibit 5 : F4 Certificate of Title

Article 2 – Debt Settlement

For the purpose of the debt settlement provisions of this MOA, the Parties have agreed to reduce the amounts outstanding owed in all respects by WorldSpace to Alcatel through 31 March 2005, from US$ twenty-six (26) million to US$ nineteen (19) million (the “Settlement Amount”). WorldSpace shall pay such Settlement Amount to Alcatel in accordance with Article 3 hereafter.

WorldSpace further agrees that, in the event “*” requests payment from Alcatel with respect to a claim for price adjustments pursuant to the “*” between Alcatel and “*” (the “*” Claim”), the Parties shall jointly enter into negotiations with “*” and use commercially reasonable efforts to eliminate or reduce the amount claimed. The Parties further agree that WorldSpace will be liable for payment of such portion of the “*” Claim equal to the lesser of the total amount thereof as finally determined and US$ two (2.0) million, if and when it becomes due, and acknowledge that such payment would be in addition to the Settlement Amount. Notwithstanding the above, Alcatel has indicated to WorldSpace that, to its knowledge and belief, Alcatel has had no communication from “*” in the last two years suggesting that “*” has an intention to pursue such claim.

Article 3 – Payment Agreement

The Parties agree to the following payment arrangements in full settlement of the Settlement Amount:

3.1

WorldSpace has paid Alcatel in 2005 the amount of US$ one (1.0) million (credited by Alcatel on January 6, 2005).

3.2

WorldSpace shall pay, by wire transfer, an additional cash amount of US$ nine (9.0) million on the Effective Date.

MEMORANDUM OF AGREEMENT ON SETTLEMENT - page 2/13

Confidential Treatment Requested. The redacted material has been separately filed with the Commission.

3.3

WorldSpace shall pay, by wire transfer, an additional cash amount of US$ two (2.0) million on the earlier to occur of: (i) the date that is 15 days after the closing of the IPO, and (ii) August 31, 2005. Should such payment not be made as specified in the foregoing sentence, Alcatel shall then be entitled to call, without any prior notice, the irrevocable standby letter of credit (the “L/C”) in accordance with the provisions set forth in Article 3.6.

3.4

Except as provided below in this Article 3.4, the balance of US$7.0 million shall be paid by WorldSpace by the issuance of shares of its common stock to Alcatel at the closing of the IPO, with the number of shares to be determined by dividing US$ seven (7.0) million by the IPO price. Delivery of the shares to Alcatel shall take place at the closing of the IPO. At the closing of the IPO, WorldSpace shall enter into a customary registration rights agreement with Alcatel which agreement shall be in form and substance satisfactory to Alcatel, in order to provide Alcatel with “piggyback registration rights” with respect to such shares at the expense of WorldSpace (other than underwriters’ discounts and commissions, which shall be borne by Alcatel). WorldSpace represents and warrants that it is not, nor shall it become, a party to any other registration rights agreement the terms of which would preclude WorldSpace from providing “piggyback registration rights” hereunder to Alcatel. Alcatel acknowledges that the shares to be received by it hereunder will not have been registered under the U.S. Securities Act of 1933 and may not be reoffered or sold unless such shares have been so registered or are reoffered and sold in a transaction exempt from such registration. WorldSpace shall take whatever action is necessary or required to ensure that the shares received by Alcatel are listed in the same manner as the shares sold in the IPO. WorldSpace represents and warrants that the shares will be duly authorized and when issued to Alcatel hereunder will be validly issued, fully paid and non-assessable, will be issued in compliance with all applicable federal and state securities laws and will be free and clear of all other liens.

Should there not be a closing of an IPO by December 31, 2005, the amount of US$ seven (7.0) million in cash shall become due and payable on January 31, 2006, from WorldSpace to Alcatel.

MEMORANDUM OF AGREEMENT ON SETTLEMENT - page 3/13

3.5

All cash payments to be made by WorldSpace to Alcatel shall be made by WorldSpace to the following bank account :

ABN AMRO BANK

NEW YORK branch

500 Park Avenue

NY 10022 USA

SWIFT Code : ABN AUS 33

Account number : 456060386441

Any payments payable by WorldSpace shall be deemed to have been made when Alcatel’s bank account has been credited of the same.

3.6

In order to secure the payment due under Article 3.3, WorldSpace shall cause the issuance of a letter of credit (the “L/C”) on the Effective Date. The terms and conditions of the L/C shall be satisfactory to Alcatel in all respects in accordance with the following provisions :

Standby letter of credit : irrevocable and unconditional

ii)

L/C coming into force : no later than the Effective Date

iii)

Applicant: WorldSpace

iv)

Beneficiary : Alcatel

Issuing Bank : first class bank acceptable to Alcatel

vi)

L/C Amount : US$ two (2) million

vii)

Call : If WorldSpace does not honour the payment set forth in Article 3.3 at the date set forth in such Article

viii)

Payment : at sight against presentation of written statement by Alcatel that WorldSpace has defaulted in making the payment set forth in Article 3.3 and a copy of this MOA certified by a representative of Alcatel

ix)

Subject to The Uniform Customs and Practice for Documentary Credits (1993 Revision) ICC Publication No. 500

Governing law : State of New York, USA

xi)

Maturity : September 30, 2005

Article 4 – Title and Risk; Contracts Termination

4.1

Title and acceptance – F3

Transfer of title to the satellite built by Alcatel under contract to WorldSpace and known as F3 (hereinafter “F3”) shall pass to WorldSpace upon the last to occur of satisfaction of the following cumulative conditions :

Payment of the amount set forth in Article 3.2 by the date specified therein; and

ii)

Delivery to Alcatel of an L/C issued complying with the provisions of Article 3.6 by the date specified therein; and

iii)

The effectiveness of a storage and maintenance contract for F3 with Alcatel or Astrium ; the Alcatel contract is attached as Exhibit 3; and

iv)

Execution and delivery by WorldSpace of the F3 Final acceptance certificate in the form attached as Exhibit 2.

MEMORANDUM OF AGREEMENT ON SETTLEMENT - page 4/13

Once all these conditions are met, Alcatel shall execute and deliver to WorldSpace a Certificate of Title in the form attached as Exhibit 4.

The amounts due from WorldSpace, and the relevant due dates, under this MOA shall not be affected by whether and/or when WorldSpace finally accepts F3.

4.2

Title and acceptance – F4

Transfer of title to certain satellite components held by Alcatel under contract to WorldSpace and known as the F4 equipment shall pass to WorldSpace upon satisfaction of the following cumulative conditions :

WorldSpace has fully and timely performed its obligations set forth in Articles 3.1 to 3.4 and 3.6; and

ii)

The effectiveness of a contract between WorldSpace and Alcatel and/or Astrium for storage and maintenance of F4 equipment in their respective possession; the Alcatel contract is attached as Exhibit 3; and

iii)

The filing of a complete application by Astrium and/or Alcatel (as applicable), on behalf of WorldSpace, for the issuance of active job processing (“perfectionnement actif suspension”) with respect to F4 equipment to be stored by it and/or them; and

iv)

Execution and delivery by WorldSpace of the F4 Final acceptance certificate in the form attached as Exhibit 2.

Once all these conditions are met, Alcatel shall execute and deliver to WorldSpace a Certificate of Title in the form attached as Exhibit 5.

The amounts due from WorldSpace, and the relevant due dates, under this MOA shall not be affected by whether and/or when WorldSpace finally accepts F4.

Unless otherwise agreed between the Parties, should WorldSpace not perform its payment obligations as set forth in Article 3.4, then Alcatel, as the owner of F4, shall be entitled to dispose of such equipment subject to reasonable prior notice to WorldSpace. Should Alcatel sell F4 for an amount exceeding US$ seven (7) million, then Alcatel shall refund WorldSpace with the difference between US$ seven (7) million and the sale price.

4.3

reserved

4.4

Transfer of Risk

Transfer of risk to F3 shall pass to WorldSpace upon transfer of title and WorldSpace shall be responsible for entering into a storage and maintenance agreement either with Astrium or Alcatel and for

MEMORANDUM OF AGREEMENT ON SETTLEMENT - page 5/13

subscribing an insurance policy that will cover damage to and risk of loss of F3.

Transfer of risk to F4 shall pass to WorldSpace upon transfer of title and WorldSpace shall be responsible for entering into storage and maintenance agreements with Alcatel and/or Astrium and for subscribing an insurance policy that will cover damage to and risk of loss of F4.

4.5

Termination of Contracts

Except as otherwise provided in Article 6.3, on the Effective Date, the Contracts will be terminated and neither Party shall have any liability or obligation of any kind, (including without limitation any liability or obligation that is, under the terms of the contracts, a surviving liability obligation) under law or otherwise, toward the other Party under the Contracts.

The two major subcontracts under the IOD Contract, namely the Launch Services Agreement (between Alcatel and Arianespace), as amended and the Spacecraft Subcontract (between Alcatel and Astrium SAS), as amended will be terminated by Alcatel.

4.6

Limit of Liability

IN NO EVENT SHALL EITHER PARTY, ITS AFFILIATES, SUBCONTRACTORS, OFFICERS, EMPLOYEES OR AGENTS, BE LIABLE, IN CONTRACT, IN TORT, OR OTHERWISE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY NATURE ARISING WITH RESPECT TO THIS MOA AT ANY TIME FROM ANY CAUSE WHATSOEVER, INCLUDING SPECIFICALLY BUT WITHOUT LIMITATION, LOSS OF PROFITS OR REVENUE, LOSS OF FULL OR PARTIAL USE OF ANY EQUIPMENT, LOSSES BY REASON OF OPERATION OF ANY DELIVERABLE ITEM AT LESS THAN CAPACITY, DELAYS, COST OF REPLACEMENTS, COST OF CAPITAL, LOSS OF GOODWILL, CLAIMS OF CUSTOMERS, OR OTHER SUCH DAMAGES.

Article 5 – Taxes

The Settlement Amount is exclusive of any custom duties, VAT, import taxes, sales taxes or charges, levied in the country of delivery. These taxes, if applicable, will be paid by Worldspace in compliance with regulations in force at that time. Such taxes shall be in addition to the other payments due to Alcatel hereunder.

Alcatel and Astrium issued an active job processing (“perfectionnement actif suspension”) in order to receive satellite components and equipment in suspension of any taxes and duties.

In order to maintain this suspension and to address VAT issues, Alcatel or Astrium will issue, at the request of WorldSpace, within the framework of the activities to be performed under the storage and maintenance contract to

MEMORANDUM OF AGREEMENT ON SETTLEMENT - page 6/13

be concluded with WorldSpace, in the name and for the account of WorldSpace, an active job processing (“perfectionnement actif suspension” ) for the delivery of F3 or F4 satellite, components and equipment. WorldSpace will reimburse Alcatel’s or Astrium’s documented and reasonable expenses incurred in connection with such active job processing.

For the purpose of maintenance, the F3 and F4 will be delivered to the premises of Alcatel or Astrium pursuant to the applicable storage and maintenance contract.

Article 6 – Effective Date and Related Matters

6.1

As of the date hereof, only Articles 2 and 6 through 12 are binding on the Parties.

6.2

On or prior to the seventh business day from the date hereof, Alcatel may elect in its sole discretion, by written notice thereof to WorldSpace, to declare the effectiveness, as of the later of the third business day following delivery of such notice or March 4, 2005 (the “Effective Date”), of the following provisions of this MOA: Articles 1, 3, 4 and 5. In the event Alcatel fails to give such notice to WorldSpace on or prior to the seventh business date from the date hereof, this MOA shall be terminated and neither Party shall have any further obligation to the other hereunder except pursuant to Article 7.

6.3

Should the payment described in Article 3.2 not be made on the Effective Date, then (i) the Settlement Amount shall be equal to the US$26 million amount specified in Article 2, plus accrued interest calculated in accordance with the Contracts, and the provisions of Articles 1, 3, 4 and 5 shall no longer be effective and binding on the Parties, (ii) Alcatel shall be entitled to invoice WorldSpace immediately for such amount, shall be entitled to be paid under the terms of the Contracts, and (iii) shall be entitled to pursue all remedies permitted under the Contracts and under law, with WorldSpace being deemed to have waived any notice periods relating to default, breach, or non payment under any of the Contracts.

6.4

In the event that all or any portion of the Settlement Amount paid by WorldSpace to Alcatel pursuant to this MOA ( the “Invalidated Portion” ) is subsequently invalidated, set aside or required to be repaid or turned over to a trustee, receiver, debtor-in-possession, Unsecured Creditor’s Committee or any other person or entity for any reason whatsoever including, without limitation, under any insolvency, bankruptcy, common law, equitable doctrine or any state or federal insolvency proceeding or case, including, without limitation, a case under Chapter 7 or 11 of Title 11 of the United States Code (an “Insolvency Event”), any and all claims under the Contracts (“Contract

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Claims”), less any portion of the Settlement Amount paid by WorldSpace to Alcatel not repaid or turned over by Alcatel to any trustee, receiver, debtor-in-possession, Unsecured Creditors’ Committee or any other party, shall be automatically reinstated, without any reduction and this MOA shall be deemed null, void, invalid and unenforceable. In the case of any Insolvency Event, Alcatel shall be entitled to file any and all Contract Claims, and shall have all rights and remedies in connection with Contract Claims as if this MOA had not been entered into.

Notwithstanding any of the foregoing to the contrary, in the event the Invalidated Portion is US$ seven (7) million or less, the maximum amount which Alcatel may claim with respect to any Contract Claim shall be limited to the amount of the Invalidated Portion plus any interest and expenses otherwise available under applicable law, provided however that the foregoing limitations shall not apply in the event that following the occurrence of an Insolvency Event WorldSpace or any successor or assignee thereof, including without limitation any Unsecured Creditor’s Committee or Chapter 7 trustee, shall file a counterclaim or claim of set-off, recoupment or subordination against Alcatel with respect to any of the Contracts.

Article 7 – Confidentiality

7.1

Neither Party shall mention or disclose any information relating to this MOA without the prior written consent of the other, except (i) to its attorneys, accountants or financial advisors, (ii) as may be required by applicable law or any rule, regulation or agreement applicable to the listing of the securities of either Party on a stock exchange or similar body or (iii) in connection with any judicial arbitral or other proceeding instituted by any Party with respect to this MOA. In the event that it is required by applicable law that a copy of this MOA be filed with the United States Securities and Exchange Commission ( “SEC” ) or similar regulatory body in any jurisdiction outside the United States, the Parties agree that they will request the SEC or such regulatory body grant confidential status to any portion or portions of this MOA that either Party requests be so treated.

7.2

At least five (5) businesses days prior to (i) the filing of any registration statement or prospectus with the SEC or similar regulatory body in any jurisdiction outside the United States for the offering of any of its securities to members of the public, or any amendment to such registration statement or (ii) the distribution of any private placement memorandum or similar document under which its securities are offered for sale, WorldSpace shall provide Alcatel with a draft copy of the portion or portions of such registration statement, prospectus, private placement memorandum or similar document which refer to Alcatel, and will discuss

MEMORANDUM OF AGREEMENT ON SETTLEMENT - page 8/13

in good faith any of Alcatel’s comments thereto. Alcatel shall have no liability to WorldSpace with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, prospectus, private placement memorandum or similar document ( unless such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with information not otherwise known to WorldSpace and furnished in writing to WorldSpace by Alcatel specifically for use therein ).

Article 8 – Applicable Law

This MOA and performance under it shall be governed by, and construed and enforced in accordance with, the laws in force in the State of New York, without regard to conflict of laws provisions thereof, except Section 5-1401 of the General Obligations Law of the State of New York.

All disputes arising out of or in connection with this MOA shall be finally settled under the rules of arbitration of the ICC (International Chamber of Commerce) by one or more arbitrators appointed in accordance with the said rules in Paris, France. Such arbitration shall be conducted in the English language.

Article 9 – Notices

Any notice or communication given by either Party hereto to the other shall be in writing and personally delivered, or mailed by registered or certified mail, return receipt requested, postage prepaid, or delivered by a recognized courier service (such as Federal Express or DHL), or sent by facsimile transmission, to the address or facsimile number for each Party first set forth above. Any such notice shall be deemed given when actually delivered (which, in the case of a facsimile transmission, shall occur upon receipt of the answerback) or upon refusal by a Party to accept delivery. Any Party may change its address for purposes of notice by delivering notice to the other Party in accordance with this Article.

Article 10 – Representations and Warranties

WorldSpace hereby represents and warrants to Alcatel that :

it is duly authorised to enter into this MOA;

ii)

this MOA does not conflict with its organizational documents or any other agreement or obligations whatsoever of WorldSpace;

iii)

the obligations undertaken by WorldSpace under this Agreement are valid, legally binding and enforceable;

iv)

there is no litigation, arbitration or other proceeding pending, or to its knowledge threatened, against it which may affect in a material manner its ability to fulfil any of its obligations under this MOA;

MEMORANDUM OF AGREEMENT ON SETTLEMENT - page 9/13

no meeting has been convened for its liquidation or winding-up, no such step is intended by it and, so far as it is aware, no petition, application or the like is outstanding for its liquidation or winding-up; and

vi)

it (a) has not entered into the transaction contemplated by this MOA with the actual intent to hinder, delay, or defraud any creditor and (b) has received reasonably equivalent value in exchange for its obligations under this MOA. After giving effect to the transactions contemplated by this MOA, the fair saleable value of its assets exceeds and will, immediately following the Effective Date, exceed its total liabilities, including the maximum amount of its known contingent liabilities on its debts as such debts become absolute and matured. Its assets do not and, immediately following the Effective Date, will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. It does not intend to, and does not believe that it will, incur debt and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such debt and liabilities as they mature (taking into account the timing and amounts of cash to be received by it and the amounts to be payable on or in respect of its obligations).

Alcatel hereby represents and warrants that :

vii)

it is duly authorised to enter into this MOA;

viii)

this MOA does not conflict with its organizational documents or any other agreement or obligations whatsoever of Alcatel;

ix)

the obligations undertaken by Alcatel under this MOA are valid, legally binding and enforceable; and

xi)

Article 11 – Severability

In the event any one or more of the provisions of this MOA shall, for any reason, be held to be invalid or unenforceable, the remaining provisions of this Agreement shall be unimpaired and the invalid or unenforceable provision shall be replaced by a mutually acceptable provision which, being valid and enforceable, comes closest to the intention of the Parties underlying the invalid or unenforceable provision or otherwise shall be deemed to be deleted from the Agreement.

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Article 12. Miscellaneous

12.1

Joint and Several Liability

WorldSpace, Inc. and WorldSpace Satellite Company shall be jointly and severally liable for all obligations of WorldSpace hereunder.

12.2

Headings

Section headings contained in this MOA are inserted for convenience of reference only, shall not be deemed to be a part of this MOA for any purpose and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof.

12.2

Further Assurances

Each Party shall take, or shall cause to be taken, such further actions to execute, deliver and file, or cause to be executed, delivered and filed, such further documents and instruments, and to use best efforts to obtain such consents, as may be necessary or as may be requested to effectuate fully the purposes and terms of this MOA, whether before, at or after the date first set forth hereinabove.

12.3

Amendment; Waiver

No amendment, modification or discharge of this MOA, and no waiver hereunder, shall be valid or binding unless set forth in writing and duly executed by the Party against whom enforcement of the amendment, modification, discharge or waiver is sought.

12.4

Enforcement of Provisions

No delay or failure at any time on the part of any Party in exercising any right, power or privilege under this MOA, or in enforcing any provisions of this MOA, shall (i) impair any such right, power or privilege, (ii) be construed as a waiver of such provision, (iii) be construed as a waiver of any default or as an acquiescence therein or (iv) affect the right of such Party thereafter to enforce each and every provision of this MOA in accordance with its terms.

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12.5

Entire Agreement

This MOA constitutes the entire agreement among the Parties with respect to the subject matter hereof, and supersedes all prior oral or written agreements, commitments or understandings with respect to such matters. This MOA (together with the Exhibits hereto) shall be binding upon and shall inure to the benefit of the Parties and their respective heirs, devisees, executors, administrators, legal representatives, successors and assigns. This MOA shall not inure to the benefit of any third party.

12.6

Non assignment

This MOA shall not be assignable by any or either Party without the prior written consent of the other Party or Parties.

12.7

Expenses

Each Party shall pay its own expenses incident to the negotiations and preparation of this MOA and with respect to the transactions contemplated hereby, including all legal and accounting fees and disbursements.

12.8

Counterparts; Facsimile Execution

This MOA may be executed in one or more counterparts, and by the different Parties in separate counterparts, each of which when so executed and delivered shall constitute a single, binding instrument. To facilitate execution, this MOA may be executed through the use of facsimile transmission, and a counterpart of this MOA that contains the facsimile signature of a Party shall constitute an executed counterpart of this MOA.

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IN WITNESS WHEREOF, this MOA has been executed by a duly authorized representative of each Party as of the date first above written.


WorldSpace, Inc.	WorldSpace Satellite Company Ltd.	Alcatel Space

By: /s/ Noah A. Samara	By: /s/ Noah A. Samara	By: /s/ Laurent [Mourre]

Name: Noah A. Samara	Name: Noah A. Samara	Name: Laurent [Mourre]

Title: Chairman & CEO	Title: President	Title: VP Business Development

Date: February 25, 2005	Date: February 25, 2005	Date: February 25, 2005

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EX-10.6 12 dex106.htm STRATEGIC COOPERATION AGREEMENT Strategic Cooperation Agreement

Exhibit 10.6

STRATEGIC COOPERATION AGREEMENT BETWEEN ANALOG DEVICES, INC. AND WORLDSPACE, INC. FOR THE DEVELOPMENT AND MARKETING OF WORLDSPACE-READY ANALOG DSP PLATFORMS

This Strategic Cooperation Agreement (“Agreement”) is made this 5^th day of November 2003 (the “Effective Date”), by and between Analog Devices, Inc., (“Analog”), a Delaware corporation with its principal offices at One Technology Way, Norwood, Massachusetts 02062-9106, and WorldSpace, Inc. (“WorldSpace”), a Maryland corporation with its principal offices at 2400 N Street, NW, Washington, D.C., 20037, referred to collectively below as the Parties.

RECITALS

WHEREAS, WorldSpace is a digital direct radio satellite communication company providing free-to-air and subscription audio, data and multimedia services; and

WHEREAS, WorldSpace has licensed the manufacture of fixed/portable satellite receivers which incorporate specially designed STARMAN^™ chipsets capable of decoding the WorldSpace satellite digital signals; and

WHEREAS, WorldSpace has specified a new generation of mobile receivers intended to enable the seamless reception of the WorldSpace satellite digital signals combined with their terrestrially retransmitted replicas, based on an enhanced waveform format, and

WHEREAS, WorldSpace intends to offer a subscription-based hybrid satellite/terrestrial service to mobile receivers in selected markets within the coverage of its satellites and with the adequate complement of terrestrial retransmitters;

WHEREAS, WorldSpace desires to encourage companies interested in implementing the mobile receiver solution for the development and marketing of products enabled to receive mobile services,

WHEREAS, Analog is a global leader in the design, development and manufacture of Digital Signal Processor’s (DSP), RF IC’s, Mixed-Signal processing technology and related technology used in various signal processing and other technology applications around the world;

WHEREAS, Analog designs, develops, manufactures, markets, sells, and licenses certain proprietary integrated circuits, software, hardware, electronic reference designs, and related technology;


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WHEREAS, Analog desires to implement the WorldSpace Mobile Receiver solution on their DSP chip-based platforms,

WHEREAS, the Parties have collaborated in the design and development of a mobile receiver solution based on the WorldSpace hybrid satellite/terrestrial architecture, utilizing Analog’s commercially available Blackfin DSP Processor and standard electronic components, and targeted at OEM Equipment suppliers and associated vendors, under the terms of a non-binding Memorandum of Understanding dated November 26, 2002; and

WHEREAS, the Parties intend to establish a strategic cooperation agreement for the development, marketing and distribution of DSP-based mobile receiver solutions to potential customers such as receiver and other consumer electronics product manufacturers.

In consideration of the foregoing, the Parties set forth herein the principles that underlie such definitive agreement:

1. DEFINITIONS

For the purpose of this Agreement, the following terms when used with a capital initial letter shall have the respective meanings set forth below.

1.1 “WorldSpace System” shall mean a satellite-based digital audio, data, messaging and/or video broadcasting system using time division multiplex (“TDM”) downlink and PSK modulation, comprising 3 satellites with 3 beams per satellite, 2 TDM carriers with opposite circular polarization per beam, 96 primary rate channels with 16 Kbps per carrier, equivalent to a maximum of 1728 broadcast channels, which uses source coding schemes as specified in the WorldSpace Format and/or the WorldSpace Mobile Format.

1.2 “WorldSpace Format” shall mean the TDM bit stream structure as defined in WorldSpace DAVB Digital Format Requirements document WST-PMO-DDS-002-000000 Issue 8 (or the actual release).

1.3 “WorldSpace Mobile Format” shall mean the WorldSpace DAVB Digital Format as enhanced to improve satellite reception in a mobile environment, augmented by specifications of the terrestrial retransmission component, and including an Over-Air Authorization Channel, attached hereto, and made part hereof as Appendix 1.

1.4 “WorldSpace Mobile Receiver” shall mean a device, accepting one program bit stream, either from a WorldSpace satellite or from the terrestrial retransmission system, or from a


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suitable combination of both, according to the WorldSpace Mobile Format and that provides access to the digital broadcast channel data bits.

1.5 “Platform” shall mean the WorldSpace-Ready Analog DSP Platform consisting of an Analog DSP chip, manufactured by Analog or its Subcontractor(s) and associated components, configured and programmed to process information or data according to the WorldSpace Mobile Format and that:

Demodulates and decodes the selected satellite TDM stream to recover the prime rate channels;

ii)

Decodes the Over the Air Authorization Channel signal for selective enabling or disabling of received signals;

iii)

Demodulates and decodes satellite signals terrestrially retransmitted over Multi-Carrier Modulated waveforms;

iv)

Performs suitable combining of received satellite and terrestrial signals to provide seamless reception of audio, data and video signals; and

Provides other outputs needed to support the features mutually agreed to with selected Consumer Electronics Products manufacturers.

1.6 “WorldSpace Intellectual Property Rights” shall mean the patents and patent applications, anywhere in the world, and all continuations, continuations-in-part, divisions, reissues, reexaminations, substitutions, additions and extensions thereof, and all supplementary protection certificates, relating to the WorldSpace Format, WorldSpace Mobile Format, the WorldSpace System and the WorldSpace Receiver technology that WorldSpace owns. WorldSpace Intellectual Property Rights are set forth in Appendix 2.

1.7 “FhG Intellectual Property Rights” shall mean the patents and patent applications, anywhere in the world, and all continuations, continuations-in-part, divisions, reissues, reexaminations, substitutions, additions and extensions thereof, and all supplementary protection certificates, that are owned by Fraunhofer Gesellschaft zur Förderung der Angewandten Forschung e.V. (“FhG”), and used in the WorldSpace Format, WorldSpace Mobile Format and the WorldSpace Receiver technology. FhG Intellectual Property Rights are set forth in Appendix 3.

1.8 “Analog Intellectual Property Rights” shall mean the patents and patent applications, anywhere in the world, and all continuations, continuations-in-part, divisions, reissues, reexaminations, substitutions, additions and extensions thereof, and all supplementary protection certificates, that are owned by Analog, and shall also mean all software and technical data developed specifically to enable operation of the Platform. Current Analog Intellectual Property Rights are set forth in Appendix 4.


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1.9 For avoidance of doubt, the Platform is to be created from a combination of Intellectual Property Rights from WorldSpace, Analog and FhG, which will be owned by Analog in accordance with Section 1.8 with underlying perpetual licenses from WorldSpace and FhG to Analog to the extent necessary for implementation of the Platform. Each such party shall be free to transfer its own Intellectual Property Rights to third parties for the purpose of implementing WorldSpace System reception and not in conflict with this Agreement.

1.10 “Customer” shall mean those who (i) wish to purchase and license the Platform from Analog or its designated distributors and (ii) are licensed by WorldSpace or its designate to manufacture and distribute WorldSpace Mobile Receivers.

1.11 “Work” shall mean the acts necessary and appropriate to develop and license the Platform.

1.12 “Intellectual Property Rights” shall mean patents, trademarks, service marks, mask works, copyrights, and applications for any of the foregoing, know how, confidential information, trade secrets and any other similar rights throughout the world.

1.13 “Platform Documentation” shall mean the documentation of the design of the Platform, a bill of materials, data book and any related documentation to which the parties shall from time to time deem appropriate to include as support material for the Platform.

1.14 “Licensee Party” shall mean, with reference to either Party’s Intellectual Property or Marks, the Party that is licensing such Intellectual Property or Marks from the Licensing Party hereunder.

1.15 “Licensing Party” shall mean, with reference to any Intellectual Property or Marks, the Party that owns such Intellectual Property or Marks and that is licensing them to the Licensee Party hereunder.

1.16 “Marks” shall mean the trademarks and service marks of either Party and such other marks as said Party may adopt from time to time.

2. TERMS OF COOPERATION AGREEMENT

2.1 WorldSpace hereby agrees to grant to Analog a worldwide, non-exclusive, non-transferable, royalty-free, indivisible license under the WorldSpace Intellectual Property Rights, and a non-exclusive, non-transferable, royalty-free, indivisible sublicense under the FhG Intellectual Property Rights for which WorldSpace has acquired an exclusive license, to (i) use, copy and incorporate the WorldSpace Intellectual Property and the FhG Intellectual Property into the Platform, (ii) make, have made, use offer to sell, transfer or dispose of the WorldSpace


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Intellectual Property and the FhG Intellectual Property solely as incorporated in the Platform to customers and potential customers (“Customers”), and (iii) use, internally, any WorldSpace Information, for the purpose of designing, using, making, having made and supporting the Platform.

2.2 WorldSpace shall provide to Analog all the information on the WorldSpace Intellectual Property Rights and information to the extent available to WorldSpace on the FhG Intellectual Property Rights relevant and necessary in the performance of the Work and perform the necessary tests to evaluate the Platform for proper implementation of the WorldSpace Mobile reception functions in accordance with the WorldSpace Mobile Format specifications.

2.3 Analog agrees to use its best commercial efforts to design and test the Platform, which shall meet the technical specifications and specific provisions set forth in the WorldSpace Mobile Format attached hereto and made a part hereof as Appendix 1 and according to the Work. The Parties will mutually agree on features to incorporate into the Platform that would prevent unauthorized or fraudulent duplication of a WorldSpace Mobile Receiver(s) and/or its individually unique addressability functionality.

2.4 The Parties acknowledge that a Technical Support Services and/or a license agreement (whichever may be appropriate under the circumstances) is required between FhG and Analog for necessary technical information, know how and support for development of the Platform. This Agreement shall be contingent upon and subject to Analog entering into such license agreement with FhG, to which WorldSpace hereby consents. This contingency shall be satisfied by December 15, 2003 unless extended by mutual agreement. Further, Analog agrees to supply all personnel, materials, facilities and other resources, including Subcontractors, necessary to perform the Work in accordance with the requirements of this Agreement.

2.5 The Parties agree that the Platform shall be the exclusive property of Analog, subject to any underlying ownership rights of WorldSpace and FhG in each of their Intellectual Property Rights and the licenses granted in Section 2.1. Both Parties also agree that the Platform shall be made available in suitable format to licensees of WorldSpace Mobile Receiver manufacturing pursuant to an Analog Customer Platform Licensing Agreement, and that such Platform could be tailored by agreement of the parties to meet specific requirements of individual licensees. Terms of the Customer Platform Licensing Agreement are made a part hereof as Appendix 5.

2.6 The Parties agree to identify for Customers any known licenses from third party vendors that may be required to decode audio, data and video formats (such as MP3 Pro or AAC+) as specified in the WorldSpace Mobile Format Specifications. Notwithstanding the foregoing, Customers shall be responsible for obtaining any licenses necessary to utilize the Platform.

2.7 Analog agrees to assist WorldSpace demonstrating the Platform with WorldSpace Mobile services to Customers.


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2.8 The Parties agree to market the Platform to receiver and other consumer electronics equipment-manufacturing Customers. Both Parties also agree to share available market data related to such Customers.

2.9 Analog agrees to promote the Platform for WorldSpace Mobile products in a reasonable number of marketing campaigns, catalogues, trade shows, etc. as deemed appropriate by Analog which Analog uses to promote the suite of applications planned by Analog using DSP devices.

2.10 The Parties agree that WorldSpace shall assume responsibility for collecting any royalties towards Intellectual Property applicable to the WorldSpace Mobile Receiver implementation from WorldSpace Mobile Receiver licensees.

2.11 The Parties shall schedule meetings on a regular basis to review the progress of this cooperative Work being performed under this Agreement, including design validation reviews and certification reviews as well as sales and marketing planning.

2.12 Trademarks

2.12.1 During the term of this Agreement, the Licensing Party grants to the Licensee Party the non-exclusive, non-transferable right to use the Licensing Party’s Marks (the “Licensor Marks”), solely in connection with the advertising and promotional materials for the Platform and subject to the restrictions and guidelines contained herein.

2.12.2 Each Licensee Party’s right to use and reproduce one or more of the Licensor Marks shall be subject to adherence to the Licensing Party’s guidelines with respect to the size, place, and manner of use of the Licensor Marks, including without limitation advertisements, sales literature, user documentation, and promotional materials (“Promotional Materials”). Licensee Party shall use the Licensor Marks only in a manner that complies in all material respects with the Licensing Party’s trademark policies and guidelines in effect from time to time.

2.12.3 The Licensing Party shall submit or make available online to Licensee Party representations of the Licensor Marks together with guidelines for their use, and Licensee Party shall submit to the Licensing Party layouts of the intended use of such Marks in connection with the Platform and all related Promotional Materials. Licensee Party shall not disseminate any such material without the Licensing Party’s prior written approval.

2.12.4 Any goodwill associated with the use by Licensee Party of any of the Licensor Marks shall inure to the benefit solely of the Licensing Party. Licensee Party shall not contest the validity of any of the Licensor Marks or the Licensing Party’s exclusive ownership thereof.


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Licensee Party shall not adopt, use, or register, any of the Licensor Marks, or any word or mark confusingly similar to them in any jurisdiction.

2.12.5 Notwithstanding anything in this Agreement to the contrary, no licenses are granted, and no act or acts hereunder shall be construed as or result in conveying any license to either Party or to any third party, expressly or by implication, estoppel or otherwise excepting the license herein expressly granted under this Section 2.

3. GENERAL PROVISIONS

3.1 Subcontracts

3.1.1 In the performance of Work, it may be necessary for Analog to enter into subcontracts for the design, development or testing of all or part of the Platform. Analog shall have the right to select any such Subcontractor, after consultation with WorldSpace. In the event that Analog has a necessity to terminate or substitute a Subcontractor, Analog shall consult with WorldSpace and shall replace such Subcontractor with an entity with substantially equal or greater qualifications and capabilities which is reasonably acceptable to WorldSpace. Nothing in this Agreement shall be construed as creating any contractual relationship between WorldSpace and any Subcontractor.

3.1.2 WorldSpace shall have reasonable access to the Work performed under this Agreement wherever the Work is being performed, provided such access does not unreasonably interfere with such Work and subject to customary confidentiality, access and security requirements. Analog shall, at WorldSpace’s request, deliver as Analog Information (as the term “Information” is defined in Section 3.3 hereof) copies of design and test data and other data, which data and other data is generated under this Agreement necessary for WorldSpace to be able to monitor the progress of the Work being performed by Analog.

3.2 Representations, Warranties, and Disclaimers

3.2.1 WorldSpace represents and warrants that it has all right, title, and interest in and to the WorldSpace Intellectual Property Rights purported to be licensed by it to Analog and all power and authority necessary to grant the licenses to such intellectual property that are granted by WorldSpace to Analog hereunder.

3.2.2 Each Party represents and warrants that neither it nor any of its affiliates has the right or power to direct any third party to assert against the other Party any cause of action based upon the other Party’s purported infringement of any intellectual property owned or enforceable by such third party.


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3.2.3 Nothing contained in this Agreement shall be construed as a warranty or representation that the manufacture, sale, lease, use, or other distribution of the Platform by either party or any component or products derived thereof will be free from infringement of patents, trademarks, copyrights, mask work rights, or other intellectual property or other rights of third parties, except to the extent as provided herein, or that a Customer will be able to manufacture or to sell or otherwise transfer any component or product based upon the rights it receives hereunder. Except to the extent, and only to the extent, expressly stated herein, neither Party makes any warranty as to the accuracy, sufficiency, or suitability of any Information or any Intellectual Property hereunder. Each Party assumes the risk of defects or inaccuracies in the Intellectual Property and Information, if any, supplied by the other Party. Neither Party shall be under any obligation by this Agreement to obtain any patent or, once having obtained a patent, to maintain that patent in force.

3.2.4 Except for the breach of Confidentiality and Nondisclosure requirements of this Agreement as provided in Section 3.3, neither Party will be liable to the other Party (nor to any third party claiming rights derived from the other Party’s rights under this Agreement) for incidental, consequential, special, punitive, or exemplary damages of any kind, including lost profits, loss of business, or other economic damage, and further including injury to property, as a result of breach of any warranty or other term of this Agreement, regardless of whether the Party liable or allegedly liable was advised, had reason to know, or in fact knew of the possibility thereof.

3.3 Confidentiality and Nondisclosure of Proprietary Information

3.3.1 During the performance of this Agreement, one Party (“the Disclosing Party”) may exchange information which may be of a proprietary or confidential nature to the other Party (“the Receiving Party”), such as information concerning inventions, techniques, processes, devices, discoveries and improvements, or regarding administrative, marketing, financial or manufacturing activities (“Information”). All such Information, in any form, including without limitation, oral, written graphic, demonstrative, machine recognizable or sample form, shall be considered proprietary and confidential Information of the Disclosing Party shall be retained in confidence and shall not be disclosed or caused or permitted to be disclosed directly or indirectly to any third party without the prior written approval of the Disclosing Party, and shall not be used by the Receiving Party for any reason other than the performance of its duties under this Agreement. The Receiving Party further agrees that any material or data generated by the Receiving Party, based in whole or in part on Information disclosed by the Disclosing Party, shall also be retained in confidence.

3.3.2 The obligation of the Receiving Party to retain Information in confidence shall not apply to:

Information which is now in or hereafter enters the public domain beyond the control of the Receiving Party and without its violation of this Agreement;


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ii)

Information rightfully known to the Receiving Party prior to the time of disclosure by the Disclosing Party, or independently developed by the Receiving Party personnel without use of Information disclosed by the Disclosing Party; or

iii)

Information disclosed in good faith to the Receiving Party by a third party legally entitled to disclose the same; and

iv)

Information which the Receiving Party discloses under operation of law, rule or legal process;

provided, however, that the burden shall be on the Receiving Party to prove the applicability of one or more of the foregoing exceptions by documentary evidence should the Disclosing Party question the applicability of such exceptions; as to exception (iv), the Receiving Party provides the Disclosing Party with prompt written notice of any request or legal proceeding through which the Receiving Party may be required to disclose such Information under operation of law, rule or legal process.

3.3.3 The Receiving Party agrees to transmit the Information and/or material or data generated by the Receiving Party based in whole or in part on such Information, only to those directors, officers, employees, agents or other representatives who need access to the Information and/or material or data generated by the Receiving Party based in whole or in part on such Information, for the purpose of performing its duties pursuant to this Agreement, and who are informed by the Receiving Party of the confidential nature of the Information and/or material or data generated by the Receiving Party based in whole or in part on such Information, and who agree to be bound by the terms of this Agreement.

3.3.4 The Receiving Party agrees that all Information disclosed to the Receiving Party hereunder by the Disclosing Party shall be and remains the property of the Disclosing Party. Any tangible form of Information including, but not limited to, documents, papers, computer diskettes and electronically transmitted Information shall be destroyed by the Receiving Party or returned, together with all copies thereof, to the Disclosing Party promptly upon the Disclosing Party’s request. If such tangible form of Information is destroyed, a certification of such destruction executed by a duly authorized officer of the Receiving Party shall be delivered to the Disclosing Party.

3.3.5 The Receiving Party agrees not to use the Information provided by the Disclosing Party except as specifically provided in this Agreement.


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3.3.6 The Receiving Party’s obligations under this Agreement shall survive the termination of its business relationship, if any, with the Disclosing Party regardless of the manner of such termination, and shall be binding upon its successors and assigns. The obligation of the Receiving Party under this Section 3.3 of this Agreement shall remain in effect for three (3) years from the date of this Agreement or indefinitely for trade secret or source code information, unless sooner terminated by written notice given by the Disclosing Party to the Receiving Party.

3.3.7 The Receiving Party acknowledges that the information provided and all documentation thereto is commercially valuable, which reflect the effort of skilled development experts and the investment of considerable time and money. The Receiving Party accordingly agrees to protect the confidence of the Information and prevent its unauthorized dissemination and use, using the same degree of care that the Receiving Party uses to protect its own like information. The Receiving Party agrees that money damages would not be a sufficient remedy for any breach of this Agreement by the Receiving Party or any director, officer, employee, agent or other representative of the Receiving Party, and that in addition to any other rights or remedies which it may have, the Disclosing Party shall be entitled to seek equitable relief, including injunction and specific performance, as a remedy for such breach, and the Receiving Party further agrees to use its best efforts to cause any director, officer, employee, agent or other representative of the Receiving Party to waive, any requirement for the securing or posting of any bond in connection with such remedy.

3.3.8 Unless otherwise precluded by the Disclosing Party, either Party shall be entitled to make copies of any documents containing Information under the terms and conditions of this Section 3.3.

3.4 Assignment

3.4.1 WorldSpace may freely assign, with thirty (30) days prior written notice, this Agreement to any other company, person, firm or entity; provided, however, that all of the terms and conditions of this Agreement shall be binding upon such assignee and provided further that Analog shall consent to such assignment, which consent shall not be unreasonably withheld. Upon the assignment of this Agreement by WorldSpace, Analog shall expressly release WorldSpace from any liability under this Agreement, except for any continuing obligations of WorldSpace to protect Analog’s Information. WorldSpace shall promptly inform Analog in writing of any such assignment.

3.4.2 Neither this Agreement nor the license granted herein shall be assignable or transferable by Analog without WorldSpace’s prior written consent, which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, in the event Analog sells its entire business related to DSP chip development, manufacturing and sales, WorldSpace shall not unreasonably withhold its consent, provided vital business interests of WorldSpace are not harmed, if Analog requires the assignment of this Agreement to the successor of such business,


Confidential		Page 10 of 17

provided that, after WorldSpace has given its consent, the assignee shall have assumed in writing all of the obligations of Analog under this Agreement. Such assignment shall not affect the liability of Analog to WorldSpace to perform all obligations that may have accrued on or prior to the date of such assignment. After such assignment, Analog shall no longer be licensed under WorldSpace’s or FhG’s Intellectual Property Rights.

3.5 Settlement of Disputes

3.5.1 Amicable Resolution.

The Parties shall endeavor to resolve amicably any dispute arising out of the performance of this Agreement within thirty (30) calendar days of receipt of notice of such dispute. If the Parties are unable to resolve the dispute within a thirty (30) calendar day period, then they may refer the dispute to an independent third party who will, within a further thirty (30) calendar days, review the dispute and recommend a resolution thereto. If the Parties cannot mutually agree on said third party or either Party disagrees with the recommendation of said third party, then Section 3.5.2 shall apply.

3.5.2 Formal Arbitration:

3.5.2.1 All disputes arising in connection with this Agreement not resolved pursuant to the provisions of Section 3.5.1 shall be finally settled under the American Arbitration Association Rules by one or more arbitrators appointed in accordance with the said Rules. In the event of any conflict between the AAA Rules and this Agreement, the provisions of this Agreement shall govern.

3.5.2.2 The arbitration proceedings shall take place in NYC and the language of such proceedings, including arguments and briefs, shall be English.

3.5.2.3 This Section 3.5 shall not apply to Section 3.3.7 of this Agreement, wherein the Parties hereto have agreed that monetary damages may not suffice for a breach of Information.

3.6 Term and Termination of Agreement

3.6.1 This Agreement shall be effective as of its Effective Date and shall continue in full force and effect for a five-year period ending on the fifth anniversary of the Effective Date (the “Initial Term”) unless earlier terminated pursuant to Sections 3.6.1 or 3.6.2 below. The term of this Agreement, unless terminated, shall automatically renew for an additional one year term at the end of the Initial Term and any successive renewal term unless either Party, no less than sixty (60) days prior to the end of the Initial Term or such renewal term, gives written notice to the other Party that such Party has elected not to permit the Agreement to continue in effect beyond the end of the Initial Term or then current renewal term, as applicable.


Confidential		Page 11 of 17

3.6.2 In the event a Party hereto substantially fails to comply with any of its obligations under this Agreement and does not remedy the failure of performance within ninety (90) days after it has been notified in writing thereof, the other Party may, by written notice, terminate this Agreement at the end of said period, without prejudice to any damages or legal redress to which it may be entitled.

3.6.3 Should either Party hereto become insolvent or be subjected to bankruptcy or winding up proceedings, the other Party may, by written notice, terminate this Agreement immediately if said proceedings have not been withdrawn within 90 days.

3.6.4 Upon termination or expiration of the licenses granted hereunder for any reason, each Party shall immediately discontinue any and all use of Information and the Intellectual Property of the other Party, except such Information and Intellectual Property necessary for either Party to support existing customers, and within ten (10) days shall certify in writing to the other Party that all copies of Information and the Intellectual Property in any form, have either been returned to the applicable Party that owns such technology or is destroyed in accordance with the applicable Party’s instructions. The provisions of Sections 2.5, 3.2, 3.3, 3.5, 3.6.4, 3.10, 3.15, 3.17, and 3.19, and any payment obligations due and owing at the time shall survive termination or expiration of this Agreement.

3.7 Notices

All notices, summons and communications related to this Agreement and sent by either Party hereto to the other shall be written in English and shall be given in writing by letter, telex or facsimile directed,

in respect of WorldSpace to:

WorldSpace, Inc.

2400 N St. N.W

Washington, D.C. 20037

United States of America

Attention: General Counsel

Telephone: +1.202.969.6160

Facsimile: +1.202.969.6560

And, in respect of Analog to:

Analog Devices, Inc.

One Technology Way

Norwood, Massachusetts 02062


Confidential		Page 12 of 17

Attention: Corporate Counsel

Telephone:

Facsimile:

or such other addresses as may have been previously specified (in the manner set forth above) in writing by either Party to the other.

3.8 Amendment

3.8.1 Except as otherwise specifically provided herein, this Agreement shall not be modified except by a written agreement signed by duly authorized representatives of the Parties. No oral agreement or conversation with any officer, agent or employee of WorldSpace or Analog, either before or after execution of this Agreement, shall affect or modify any of the terms or obligations contained in this Agreement. No purchase order, acknowledgment, quotation, or other similar document issued by either Party with respect to the subject matter of this Agreement, nor any directive of WorldSpace, shall be deemed to be a part of this Agreement or to modify this Agreement in any respect relating to the Work hereunder, unless executed in conformance with this Section 3.8.

3.8.2 The Parties shall issue all requests for clarification of the Agreement, or any other requests, to the other Party in writing. Responses to such requests shall be made in writing to the requesting party within ten (10) days. The failure of the responding party to respond to the request within ten (10) days, however, does not relieve the requesting party from complying with the requirements of this Agreement, and the Work shall be conducted in accordance therewith.

3.9 Non-Waiver

If at any time a Party shall elect not to assert its rights under any provision of this Agreement, such action or lack of action in that respect shall not be construed as a waiver of its rights under said provision or of any other provision of this Agreement.

3.10 Governing Law

This Agreement shall be subject to, governed by and construed in accordance with the laws of the State of New York without giving effect to its conflicts of law provisions.

3.11 Binding Effect

This Agreement shall be binding upon, and shall inure to the benefit of the Parties hereto and to their assigns in accordance with the provisions of Section 3.4 hereof.


Confidential		Page 13 of 17

3.12 Severability

Should any part or provision of this Agreement be held unenforceable or in conflict with the law of any Jurisdiction, the validity of the remaining parts or provisions shall not be affected by this holding. Such unenforceable part or provision shall then be replaced upon mutual written consent between the Parties hereto, by other enforceable part or provision which, in its effect, corresponds or comes closest to the effect of such unenforceable part or provision.

3.13 Entire Agreement

This Agreement including its Appendices embodies the entire understanding of the Parties and cancels and supersedes any prior representations, warranties, or agreement between the Parties relating hereto, and this Agreement is executed and delivered upon the basis of this understanding.

3.14 Force Majeure

3.14.1 Neither Party shall be liable to the other for any failure of, or delay in, its performance hereunder due to causes beyond its reasonable control including, but not limited to, acts of God, catastrophic phenomena, a total constructive loss of any of WorldSpace’s satellites, fire, flood, earthquake, epidemics, revolution, reasonable control, acts of government (including, but not limited to, any law, rule, order, regulation or direction of the United States government or of any other government having jurisdiction over the Parties, whether foreign or domestic, or of any department, agency or commission thereof), labor dispute or other unforeseeable reasons beyond either Party’s reasonable control, national emergencies, insurrections, riots, acts of war (whether declared or not), quarantine restrictions, embargoes, strikes, lockouts or work stoppages (collectively, “Force Majeure”).

3.14.2 In order for a Party to make a claim of Force Majeure hereunder, it must give the other Party written notice within thirty (30) days of the commencement of the Force Majeure, detailing the Force Majeure cause, the date the Force Majeure commenced and the anticipated length of the Force Majeure. In the event (i) the notice provides that the Force Majeure will last for more than thirty (30) days or (ii) the Force Majeure in fact lasts for more than thirty (30) days, the Party not claiming the Force Majeure shall have the right to terminate this Agreement by written notice to the Party claiming Force Majeure within thirty (30) days of the notice from the other Party indicating that the Force Majeure will last for more than thirty (30) days or after the thirtieth (30th) day of the Force Majeure, as applicable.

3.15 Attorney’s Fees

In the event a dispute arises regarding this Agreement, the prevailing Party shall be entitled to reasonable attorney’s fees and costs incurred.


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3.16 Additional Actions and Documents

Each of the Parties hereto hereby agrees to take or cause to be taken such further actions, to execute, deliver, and file, such further documents and instruments, and to use its best efforts to obtain such consents or approvals as may be necessary or as may be reasonably requested in order fully to effectuate the purposes of this Agreement.

3.17 Limitation on Benefits of this Agreement

It is the explicit intention of the Parties hereto that no person or entity other than the Parties hereto is or shall be entitled to bring any action to enforce any provision of this Agreement against either of the Parties hereto, and that the covenants, undertakings, and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, the Parties hereto and their respective successors and assigns as permitted hereunder.

3.18 Captions

The captions contained in this Agreement are inserted for convenience of reference only and shall not in any way define or affect the meaning, construction, or scope of the provisions captioned.

3.19 Governing Language

The official language of this Agreement is the English language and all notices, reports, orders, instructions, literature, records and other written materials pertaining to this Agreement shall be maintained and delivered in the English language.

3.20 Execution

To facilitate execution, this Agreement may be executed in counterparts; and it shall not be necessary that the signatures of each Party appear on each counterpart; but it shall be sufficient that the signature of each Party appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement.

3.21 Independent Contractor

Each party is an independent contractor and not an agent, employee or subcontractor of the other party. Neither party has any authority, either express or implied, to assume or create any obligations, responsibility or liability on behalf of the other party or to bind the other party in any manner whatsoever.


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3.22 Authority

The Parties represent that they each are duly authorized to execute and deliver this Agreement.

3.23 Publicity

Each Party to the present Agreement warrants that all Information exchanged between the Parties in connection with the Agreement hereunder shall not be disclosed by either Analog or WorldSpace nor by any of their representatives, independent consultants, officers, employees, agents, contractors, subcontractors or assignees, in any form whatsoever, including articles, films, brochures, advertisements and photographs, or authorize other persons to disclose said information, or to deliver speeches about the Work hereunder without prior written approval of the other Party, which approval shall not be unreasonably withheld.

IN WITNESS WHEREOF, each of the Parties hereto has caused this Strategic Cooperation Agreement for the Development and Marketing of WorldSpace-Ready Analog DSP Platforms to be duly executed on its behalf, as of the day and year first hereinabove written.


WorldSpace, Inc.		Analog Devices, Inc.

By		By
Signature /s/ ANDY RAS-WORK		Signature /s/ MIKHAEL HAIDAR
Andy Ras-Work		Mikhael Haidar
Chief Operating Officer		General Manager,
		Software and Systems
		Technology Division
Dated Nov. 5, 2003		Dated Nov. 5, 2003


Confidential		Page 16 of 17

EX-10.7 13 dex107.htm STANDARD PRODUCTION, MARKETING AND LICENSE AGREEMENT Standard Production, Marketing and License Agreement

Exhibit 10.7

STANDARD PRODUCTION, MARKETING

AND LICENSE AGREEMENT

FOR

CHINA WORLDSPACE PC CARD

AND

CHINA WORLDSPACE RECEIVER

This Standard Production, Marketing and License Agreement for China WorldSpace PC Card and China WorldSpace Receiver (this “Agreement”) is made by and between:

WorldSpace International Network Inc., a corporation organized under the laws of the British Virgin Islands, having its principal office at Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, British Virgin Islands (“WORLDSPACE”); and

Xi’an Tongshi Technology Limited, a corporation organized under the laws of the People’s Republic of China, having its principal office at No.89 XingQing Road, Xi’an, Shanxi Province, P. R. China, (“TONGSHI”) (each, a “Party” and collectively, the “Parties”).

WHEREAS, WORLDSPACE is a digital broadcaster of audio and multimedia programs directly from satellites and the decoding of the WORLDSPACE satellite digital signals requires specially designed satellite receivers and specially designed PC cards, which function as satellite receivers when used in conjunction with antennas, both of which are referred to by WORLDSPACE using its trademark “WORLDSPACE” (“WORLDSPACE Receivers” and “WORLDSPACE PC Cards”) and both of which incorporate specially designed chipsets that WORLDSPACE refers to using its trademark “STARMAN” (“STARMAN Chipsets”); and

WHEREAS, TONGSHI is a TongShi and seller of PC cards and certain consumer electronics products; and

WHEREAS, WORLDSPACE has selected TONGSHI to produce, market and sell its China WORLDSPACE PC Cards and China WORLDSPACE Receivers pursuant to a license under certain intellectual property rights owned by WORLDSPACE and pursuant to a sublicense under certain intellectual property rights owned by Fraunhofer Gesellschaft zur Förderung der Angewandten Forschung e.V. (“FhG”) and granted to WORLDSPACE either directly or pursuant to an agreement between Thomson Consumer Electronics Sales GmbH (“TCE”) and WORLDSPACE; and

WHEREAS, TONGSHI is interested in producing, marketing and selling China WORLDSPACE PC Cards and China WORLDSPACE Receivers and desires to obtain, and WORLDSPACE is willing to grant, a non-exclusive license and sublicense that will allow TONGSHI to manufacture consumer grade PC cards and satellite receivers utilizing WORLDSPACE’s intellectual property and to market the same under TONGSHI’s brand names and WORLDSPACE’s trademarks and logo.

NOW, THEREFORE, the Parties have agreed as follows:

1. DEFINITIONS

For purposes of this Agreement, the following capitalized terms will have the following meanings.

1.1 “WORLDSPACE System” means a satellite-based digital audio, visual imaging and/or data broadcasting system using time division multiplex (“TDM”) downlink and PSK modulation, comprising 3 satellites with 3 beams per satellite, 2 TDM carriers with opposite circular polarization per beam, 96 primary rate channels with 16 Kbps per carrier, equivalent to a maximum of 1728 broadcast channels, which uses ISO MPEG 1/2 Audio Layer 3 (IS 11172-3, IS 13818-3) and MPEG 2.5 Layer 3 as the source coding scheme and as specified in the WORLDSPACE Format.

1.2 “WORLDSPACE Format” means the TDM bitstream structure as defined in WORLDSPACE DAVB Digital Format Requirements document WST-PMO-DDS-002-000000 Edition 08 Revision B dated March 26, 1998.

1.3 “China WORLDSPACE Receiver” means a satellite receiver designed to contain a STARMAN Chipset and designed to receive certain broadcasts from AsiaStar in accordance with the WORLDSPACE Format and

which meets or exceeds the Technical Specifications attached as Appendix 2 and which functions in accordance with the Chinese Broadcast Format attached as Appendix 9.

1.4 “International WORLDSPACE Receiver” means a satellite receiver designed to contain a STARMAN Chipset and designed to receive all broadcasts from AfriStar, AsiaStar and/or AmeriStar in accordance with the WORLDSPACE Format and which meets or exceeds the Technical Specifications attached as Appendix 2.

1.5 “China WORLDSPACE PC Card” means a card designed to contain a STARMAN Chipset and designed for use with a personal computer, which, when used in conjunction with an antenna, functions as a China WORLDSPACE Receiver.

1.6 “International WORLDSPACE PC Card” means a card designed to contain a STARMAN Chipset and designed for use with a personal computer, which, when used in conjunction with an antenna, functions as an International WORLDSPACE Receiver.

1.7 “STARMAN Chipset” means a chipset, manufactured under license from WORLDSPACE and having the characteristics set forth in Appendix 3, that can process data according to the WORLDSPACE Format. A list of TongShis qualified and licensed to manufacture STARMAN Chipsets as of the effective date of this Agreement is set forth in Appendix 4, as periodically updated.

1.8 “FhG Patent Rights” means the patents and patent applications anywhere in the world, and all continuations, continuations-in-part, divisions, reissues, reexaminations, substitutions, additions and extensions thereof, and all supplementary protection certificates, relating to ISO MPEG 1/2 Audio Layer 3 and MPEG 2.5 Layer 3 technology used in the WORLDSPACE Format that FhG owns or will own during the Term. FhG Patent Rights as of the effective date of this Agreement are set forth in Appendix 5, as periodically updated.

1.9 “WORLDSPACE Patent Rights” means the patents and patent applications anywhere in the world, and all continuations, continuations-in-part, divisions, reissues, reexaminations, substitutions, additions and extensions thereof, and all supplementary protection certificates, relating to the WORLDSPACE System and to the International WORLDSPACE Receiver, the China WORLDSPACE Receiver, the International WORLDSPACE PC Card and the China WORLDSPACE PC Card technology that WORLDSPACE owns or will own during the Term. WORLDSPACE Patent Rights as of the effective date of this Agreement are set forth in Appendix 6, as periodically updated.

1.10 “WORLDSPACE Information” means all information and knowledge relating to the WORLDSPACE System, the WORLDSPACE Format, the International WORLDSPACE Receiver, the China WORLDSPACE Receiver, the International WORLDSPACE PC Card, the China WORLDSPACE PC Card, the International WORLDSPACE PC Card and the China WORLDSPACE PC Card the STARMAN Chipset, the WORLDSPACE Patent Rights and the FhG Patent Rights that is not generally known, including, and whether or not patentable, all trade secrets, know-how, data, designs, specifications, material lists, drawings, algorithms, formulas, patterns, compilations, programs, samples, devices, protocols, methods, techniques, processes, procedures and results of experimentation and testing, including the information contained in the documents set forth in Appendix 10.

1.11 “Development Patent Rights” means the patents and patent applications anywhere in the world, and all continuations, continuations-in-part, divisions, reissues, reexaminations, substitutions, additions and extensions thereof, and all supplementary protection certificates, relating to the design and development by TONGSHI of the China WORLDSPACE PC Card and the China WORLDSPACE Receiver under Article 2.1.1, excluding FhG Patent Rights, WORLDSPACE Patent Rights, and any patents, patent applications or similar rights possessed or obtained by TONGSHI prior to the execution of this Agreement.

1.12 “Development Information” means all information and knowledge relating to the design and development by TONGSHI of the China WORLDSPACE PC Card and the China WORLDSPACE Receiver under Article 2.1.1 that is not generally known, including, and whether or not patentable, all trade secrets, know-how, data, designs, specifications, material lists, drawings, algorithms, formulas, patterns, compilations, programs, samples, devices, protocols, methods, techniques, processes, procedures and results of experimentation and testing, excluding the WORLDSPACE Information and any similar information and knowledge possessed or obtained by TONGSHI prior to the execution of this Agreement.

1.13 “WORLDSPACE Marks” means WORLDSPACE’s logo and trademarks as shown in Appendix 7.

1.14 “AfriStar” means the WORLDSPACE satellite launched on October 28, 1998 that provides service to the geographic regions within the WORLDSPACE Service Area where reception of the signal from AfriStar may be achieved using an International WORLDSPACE Receiver. A contour map indicating generally the geographic reach of the AfriStar broadcast beams is attached to Appendix 1.

1.15 “AsiaStar” means the WORLDSPACE satellite launched on March 21, 2000 that provides service to the geographic regions within the WORLDSPACE Service Area where reception of the signal from AsiaStar may be achieved using an International WORLDSPACE Receiver. A contour map indicating generally the geographic reach of the AsiaStar broadcast beams is attached to Appendix 1.

1.16 “AmeriStar” means the WORLDSPACE satellite currently scheduled for launch in 2001 that will provide service to the geographic regions within the WORLDSPACE Service Area where reception of the signal from AmeriStar may be achieved using an International WORLDSPACE Receiver. A contour map indicating generally the geographic reach of the AmeriStar broadcast beams is attached to Appendix 1.

1.17 “WORLDSPACE Service Area” means the geographic regions where reception of the signal from AfriStar, AsiaStar and/or AmeriStar may be achieved using an International WORLDSPACE Receiver.

1.18 “Affiliate” means a corporation, partnership or other entity controlled by, controlling or under common ownership or control with a Party.

1.19 “Term” means the term of this Agreement as set forth in Article 8.1.

2. CHINA WORLDSPACE PC CARD AND CHINA WORLDSPACE RECEIVER PRODUCTION

2.1 Production of China WORLDSPACE PC Cards and China WORLDSPACE Receivers.

2.1.1 Mass Production. TONGSHI shall mass-produce China WORLDSPACE PC Cards and China WORLDSPACE Receivers in quantities sufficient to meet consumer demand. TONGSHI shall use its best efforts to produce China WORLDSPACE PC Cards and China WORLDSPACE Receivers that are of high quality and fulfill the customers’ needs. TONGSHI shall use its best efforts to mass-produce China WORLDSPACE Receivers at an ex factory price for the WORLDSPACE functionality not to exceed Fifty U.S. Dollars (US$50). Except as otherwise provided herein, TONGSHI shall supply all personnel, materials, facilities and other resources necessary to produce China WORLDSPACE PC Cards and China WORLDSPACE Receivers.

2.1.2 Subcontracts. TONGSHI and its Affiliates may subcontract the performance of all or part of the production of China WORLDSPACE PC Cards and China WORLDSPACE Receivers. Any failure by a subcontractor to meet its obligations shall not relieve TONGSHI of any of its obligations hereunder.

2.1.3 Access to Production. WORLDSPACE shall have reasonable access to the facilities of TONGSHI used for the production of China WORLDSPACE PC Cards and China WORLDSPACE Receivers. TONGSHI shall, at WORLDSPACE’s request, deliver by confidential means to WORLDSPACE copies of designs and data generated in the course of producing China WORLDSPACE PC Cards and China WORLDSPACE Receivers. The Parties will schedule meetings from time to time to review the progress of the production.

2.2 Transfer of WORLDSPACE Information and Technical Assistance.

2.2.1 WORLDSPACE Information Transfer. Upon receipt by WORLDSPACE of the license fee paid by TONGSHI pursuant to Article 4.1.3 hereinafter, WORLDSPACE shall furnish TONGSHI, at TONGSHI’s request, with such WORLDSPACE Information as is reasonably necessary for the production and marketing of China WORLDSPACE PC Cards and China WORLDSPACE Receivers by TONGSHI.

2.2.2 Technical Assistance. WORLDSPACE shall provide TONGSHI with such technical assistance as TONGSHI may reasonably request regarding the development and production of China WORLDSPACE PC Cards and China WORLDSPACE Receivers, including the dispatch of engineers and other support staff. TONGSHI shall pay WORLDSPACE for all such technical assistance and for any design

and engineering services at standard commercial rates and shall pay WORLDSPACE for all of its out of pocket costs associated with providing such technical assistance. All technical assistance will be conducted at such times and at such locations as may be mutually convenient to WORLDSPACE and TONGSHI.

2.3 Approval of China WORLDSPACE PC Cards and China WORLDSPACE Receivers.

2.3.1 Type Approval. Prior to commencing commercial mass production of any China WORLDSPACE PC Cards and China WORLDSPACE Receivers, TONGSHI will submit to WORLDSPACE for its inspection: (i) a prototype of each PC card or receiver that TONGSHI proposes to manufacture, so that WORLDSPACE may confirm that such prototype PC card or receiver performs in accordance with the WORLDSPACE Format and the Technical Specifications; and (ii) the preliminary design specifications for such PC cards or receivers, including all circuit diagrams, blueprints (or equivalents thereof), component specifications (if WORLDSPACE requests) and overall specifications of such prototype PC card or receiver. If such prototype PC card or receiver successfully passes WORLDSPACE’s test, it will be deemed an approved “China WORLDSPACE PC Card” or “China WORLDSPACE Receiver,” as the case may be, under this Agreement. After a PC card or receiver has been qualified as a China WORLDSPACE PC Card or China WORLDSPACE Receiver, as the case may be, no changes may be made to the China WORLDSPACE PC Card or China WORLDSPACE Receiver except for those which are cosmetic in nature or which do not materially affect the function or quality of the China WORLDSPACE PC Card or China WORLDSPACE Receiver unless the PC card or receiver is resubmitted to WORLDSPACE for testing and WORLDSPACE confirms that this modified PC card or receiver continues to qualify as a China WORLDSPACE PC Card or China WORLDSPACE Receiver. All testing will be performed at WORLDSPACE’s then current testing rates. As of the Effective date of this Agreement, WORLDSPACE’s standard rates are as set forth in Appendix 8, but WORLDSPACE reserves the right to make reasonable changes to its rates with prior notification to TONGSHI. The testing fees for the first prototype PC card and the first prototype receiver to be tested are included in the license fee paid by TONGSHI to WORLDSPACE pursuant to Article 4.1.3 hereinafter.

2.3.2 Requests for Testing. All requests for testing will be accompanied by payment in full of WORLDSPACE’s testing fee, a prototype of the applicable PC card or receiver and all test data and schematics pertaining thereto. WORLDSPACE will endeavor in good faith to test, or have its authorized agent test, all prototype PC cards or receivers submitted for testing within thirty (30) days from the date WORLDSPACE or such authorized agent has received such prototype and all test data and schematics pertaining thereto. Delays in testing will not entitle TONGSHI to cancel a testing order or to claim damages, provided that WORLDSPACE immediately notifies TONGSHI of such delays and presents a plan to complete such testing as soon as possible.

3. PC CARD AND RECEIVER MARKETING

3.1 Marketing the China WORLDSPACE PC Cards and China WORLDSPACE Receivers.

3.1.1 Marketing. TONGSHI agrees to use its best efforts to market and sell China WORLDSPACE PC Cards and China WORLDSPACE Receivers only within China in quantities sufficient to meet the consumer demand for China WORLDSPACE PC Cards and China WORLDSPACE Receivers produced by TONGSHI.

3.1.2 Marketing Strategy. TONGSHI shall market, advertise and promote the China WORLDSPACE PC Cards and China WORLDSPACE Receivers and the WORLDSPACE Marks throughout China in order to effectively create consumer demand for its China WORLDSPACE PC Cards and China WORLDSPACE Receivers.

4. INTELLECTUAL PROPERTY LICENSES

4.1 WORLDSPACE Information License, FhG Patent Rights Sublicense, WORLDSPACE Patent Rights License, Development Rights and WORLDSPACE Marks License.

4.1.1 License and Sublicense Grant. WORLDSPACE hereby grants to TONGSHI and its Affiliates a non-exclusive, non-transferable, revocable, indivisible license under the WORLDSPACE Information, the WORLDSPACE Patent Rights and the WORLDSPACE Marks and a non-exclusive, non-transferable, revocable, indivisible sublicense under the FhG Patent Rights, to produce, market and sell, and/or have produced, marketed and sold, China WORLDSPACE PC Cards and China WORLDSPACE Receivers. TONGSHI shall have no right to sublicense to any third party without WORLDSPACE’s prior written approval.

4.1.2 Licensed and Sublicensed Territory. Pursuant to Article 4.1.1, TONGSHI and its Affiliates may produce, and/or have produced, China WORLDSPACE PC Cards and China WORLDSPACE Receivers anywhere in the world for sale only in China; provided that TONGSHI will not use or authorize any public use, direct or indirect, of the WORLDSPACE Marks outside the WORLDSPACE Service Area and will not knowingly sell any products covered by this Agreement to persons who intend or are likely to resell them outside the WORLDSPACE Service Area. TONGSHI shall not sell any International WORLDSPACE PC Card or any International WORLDSPACE Receiver within China at any time.

4.1.3 Testing Fee and License Fee. TONGSHI shall pay to WORLDSPACE within ten (10) business days of executing this Agreement a testing fee for China WorldSpace PC Card and China WorldSpace receiver of Twenty Thousand U.S. Dollars (U.S.$20,000.00) net of any applicable withholding taxes and bank charges. In consideration of the licenses and sublicense granted by WORLDSPACE under Article 4.1.1, TONGSHI shall pay license fee to WORLDSPACE according to the Cooperation Agreement between both Parties.

4.1.4 Development Rights. WORLDSPACE and TONGSHI will share equally in the ownership and the benefits of all Development Information and Development Patent Rights. To that end, all right, title and interest in and to such Development Information and Development Patent Rights will be obtained in the names of and on behalf of both WORLDSPACE and TONGSHI. Each Party will have the right to use Development Information and Development Patent Rights for its own benefit; however, any license of such Development Information and Development Patent Rights to third parties will be subject to the prior written approval of the other Party, which approval will not be unreasonably withheld. Any such license to a third party will be granted on the basis of reasonable compensation therefor and pursuant to other reasonable terms and conditions; provided, however, that the Parties may agree to impose restrictions or prohibitions regarding the granting of such rights to specific third parties. Any royalties, revenue or other consideration received as compensation from such third party will be shared equally by WORLDSPACE and TONGSHI. If either Party sells or otherwise disposes of products or services that use or incorporate the Development Information and Development Patent Rights, then such Party will compensate the other Party in an amount to be mutually agreed upon. The Parties will cooperate in and equally share the costs of securing, maintaining and enforcing the Development Patent Rights.

4.2 Use of the WORLDSPACE Marks.

4.2.1 Proper Use. TONGSHI will mark all China WORLDSPACE PC Cards and all China WORLDSPACE Receivers with the WORLDSPACE Marks and will use the WORLDSPACE Marks in all packaging, instruction manuals, catalogs and printed advertising concerning the China WORLDSPACE PC Cards and China WORLDSPACE Receivers. The WORLDSPACE Marks will be affixed to the China WORLDSPACE PC Cards and China WORLDSPACE Receivers, and will be used in any packaging, instruction manuals, catalogs, advertising and promotional material, and may be used in such other media as the Parties agree upon, in such a manner as to allow a person with normal vision to recognize the WORLDSPACE Marks, and as a general guideline will be at least as prominent in location and size as any other logo or mark of similarly licensed technology in similar products or similar advertising. TONGSHI will cause notice of WORLDSPACE’s ownership of the WORLDSPACE Marks to be used on each China WORLDSPACE PC Card and on each China WORLDSPACE Receiver and used in any instruction manuals, catalogs, advertising and promotional material, and such other media as the Parties agree upon, and as a general guideline such use will be in such a manner and at least as frequently as TONGSHI uses said proprietary notice or equivalent with respect to any other logo or mark of similarly licensed technology in similar products or similar advertising. The following notice (or such other notice as WORLDSPACE may hereafter reasonably require) is an example of an appropriate notice:

WORLDSPACE is a trademark of WorldSpace Corporation.

4.2.2 Benefit of Use. TONGSHI’s use of the WORLDSPACE Marks will inure to the benefit of WORLDSPACE and TONGSHI will not at any time acquire any rights in such WORLDSPACE Marks or any trademarks or trade dress similar thereto by virtue of any use it may make of any such WORLDSPACE Marks.

4.2.3 Good Will. All of the good will now or to be associated with the WORLDSPACE Marks belongs exclusively to WORLDSPACE and all good will associated with the WORLDSPACE Marks pursuant to TONGSHI’s use thereof will inure exclusively to WORLDSPACE’s benefit.

4.2.4 Non-Use of Similar Trademarks. Neither TONGSHI nor any of its Affiliates or related companies, agents, employees or business associates shall have any right to the WORLDSPACE name (whether or not in combination with any WORLDSPACE logo) and any translations, adaptations, modifications, similar names or transliterations of the WORLDSPACE name into any language (the “WORLDSPACE Name”), and including without limitation any trade names using the WORLDSPACE Name, as well as any domain names, internet addresses, applications for trademarks in other classifications, etc., in any Chinese language (including minority languages), in any form of alphabet or ideographic writing system, in any jurisdiction in the world, except as may be explicitly agreed in writing by a responsible official of WORLDSPACE.

4.2.5 Quality of China WORLDSPACE PC Cards and China WORLDSPACE Receivers.

4.2.5.1 Quality Control. TONGSHI agrees that the overall quality of the China WORLDSPACE PC Cards and China WORLDSPACE Receivers is essential to TONGSHI’s performance hereunder. WORLDSPACE will have the right to exercise reasonable quality control procedures and to approve the quality of the China WORLDSPACE PC Cards and China WORLDSPACE Receivers that TONGSHI markets under the WORLDSPACE Marks to ensure the protection of the WORLDSPACE Marks and the good will pertaining thereto. Such quality approvals will be based on WORLDSPACE’s confirmation that the China WORLDSPACE PC Cards and China WORLDSPACE Receivers produced by TONGSHI are in conformity with the WORLDSPACE Format and Technical Specifications and with the appearance and design specifications determined under this Article.

4.2.5.2 Design Review. TONGSHI agrees prior to finalization of the overall design for each China WORLDSPACE PC Card and each China WORLDSPACE Receiver model that it shall furnish to WORLDSPACE, free of cost, for WORLDSPACE’s prior written approval and comment as to quality and appearance for purposes of Article 4.2.5.1, with the following: (i) TONGSHI’s testing procedures to be undertaken for the China WORLDSPACE PC Card or China WORLDSPACE Receiver and all applicable performance standards and quality review procedures to be applied and (ii) sketches, drawings, mock-ups, photographs, or equivalents thereof of the exterior of the China WORLDSPACE PC Card or China WORLDSPACE Receiver showing detail including but not limited to the placement of all WORLDSPACE Marks and other trademarks, text, notices, symbols, designs and markings.

4.2.5.3 Evaluation Sample Review. Prior to production, TONGSHI will furnish WORLDSPACE, free of cost, for its comment as to quality and appearance for purposes of Article 4.2.5.1, an evaluation sample of the final production prototype of each China WORLDSPACE PC Card and each China WORLDSPACE Receiver model and the final performance and test results with respect thereto, and no China WORLDSPACE PC Card or China WORLDSPACE Receiver will be sold by TONGSHI without WORLDSPACE’s prior written approval.

4.2.5.4 Review of Materials. Prior to TONGSHI’s distribution, shipment or publication, whichever is applicable, of any packaging, instruction manuals, catalogs or printed advertising that TONGSHI intends to use in connection with the China WORLDSPACE PC Cards or China WORLDSPACE Receivers or the WORLDSPACE Marks, the Parties will meet to establish mutually acceptable guidelines for proper use of the WORLDSPACE Marks on such materials. Such guidelines will include the right of WORLDSPACE to receive from TONGSHI, upon reasonable request and free of cost, samples of such materials for examination and comment as to quality and appearance.

4.2.5.5 Initial Production Samples. After drawings, plans, diagrams, sketches, components, methods of testing or assembly, specifications and samples have been approved pursuant to Articles 4.2.5.1 and 4.2.5.2 of this Agreement, TONGSHI will not depart therefrom in any material respect without WORLDSPACE’s prior written consent. TONGSHI will also furnish to WORLDSPACE, free of cost, two (2) samples of each China WORLDSPACE PC Card and of each China WORLDSPACE Receiver from the initial production run.

4.2.5.6 Representative Production Samples. After TONGSHI has commenced shipment, distribution or sale of the China WORLDSPACE PC Cards and China WORLDSPACE Receivers, upon

WORLDSPACE’s written request, TONGSHI will provide annually to WORLDSPACE, free of cost, one (1) additional representative random production sample of each China WORLDSPACE PC Card and of each China WORLDSPACE Receiver then available and being offered for sale or distribution by TONGSHI, together with all packaging material and literature used in connection therewith.

4.2.5.7 No Use Upon Termination. Upon the termination or expiration of this Agreement for any reason, TONGSHI will discontinue, except as otherwise provided in Article 9 below, the use of the WORLDSPACE Marks, and will not use or register any mark or logo confusingly similar to the WORLDSPACE Marks.

5. CONFIDENTIALITY AND NONDISCLOSURE

OF PROPRIETARY INFORMATION

5.1 Non-Disclosure and Non-Use. During the performance of this Agreement, one Party (“the Disclosing Party”) may exchange information which may be of a proprietary or confidential nature to the other Party (“the Receiving Party”), such as information concerning inventions, techniques, processes, devices, discoveries and improvements, or regarding administrative, marketing, financial or manufacturing activities, and in the case of WORLDSPACE, such as WORLDSPACE Information (collectively, “Information”). All such Information, in any form, including without limitation, oral, written graphic, demonstrative, machine recognizable or sample form, will be considered proprietary and confidential Information of the Disclosing Party, will be retained in confidence and will not be disclosed or caused or permitted to be disclosed directly or indirectly to any third party without the prior written approval of the Disclosing Party, and will not be used by the Receiving Party for any reason other than the performance of its duties under this Agreement. The Receiving Party further agrees that any material or data generated by the Receiving Party, based in whole or in part on Information disclosed by the Disclosing Party, will also be retained in confidence. TONGSHI agrees to undertake such actions before administrative agencies or courts which are or may be necessary to assure the fullest protection of the confidentiality of the Information, to enforce this Article, or to enforce any agreement relating to confidentiality between TONGSHI and any other person required by this Article. The confidentiality obligations of this Article 5 shall survive the termination of this Agreement (including any extension of this Agreement) for any reason.

5.2 Exceptions. The obligation of the Receiving Party to retain Information in confidence will not apply to:

(i) Information which is now in or hereafter enters the public domain beyond the control of the Receiving Party and without its violation of this Agreement;

(ii) Information rightfully known to the Receiving Party prior to the time of disclosure by the Disclosing Party, or independently developed by the Receiving Party personnel without access to Information disclosed by the Disclosing Party;

(iii) Information disclosed in good faith to the Receiving Party by a third party legally entitled to disclose the same; or

(iv) Information which the Receiving Party discloses under operation of law, rule or legal process;

provided, however, that the burden will be on the Receiving Party to prove the applicability of one or more of the foregoing exceptions by documentary evidence should the Disclosing Party question the applicability of such exceptions; as to exception (iv), the Receiving Party will provide the Disclosing Party with prompt written notice of any request or legal proceeding through which the Receiving Party may be required to disclose such Information under operation of law, rule or legal process.

5.3 Labeling of Information. Information in tangible form is now and will at all times be labeled by the Disclosing Party as “Confidential” or “Proprietary.” If Information is disclosed orally or by demonstration, it must be specifically designated by the Disclosing Party as confidential information at the time of such initial disclosure and contained in an itemized written listing to be sent to the Receiving Party by the Disclosing Party within thirty (30) days following such initial disclosure. If information is generally understood to be confidential in accordance with customary practices, the failure to designate such information in writing as confidential following such disclosure shall not defeat its being considered as confidential.

5.4 Disclosure on Need to Know Basis. The Receiving Party agrees to transmit the Information, and/or material or data generated by the Receiving Party based in whole or in part on such Information, only to those directors, officers, employees, agents or other representatives who need access to the Information and/or material or data generated by the Receiving Party based in whole or in part on such Information, for the purpose of performing their duties pursuant to this Agreement, and who are informed by the Receiving Party of the confidential nature of the Information and/or material or data generated by the Receiving Party based in whole or in part on such Information, and who agree to be bound by the terms of this Agreement. The Receiving Party further agrees to be responsible for any breach of this Agreement by the Receiving Party or any director, officer, employee or other representative of the Receiving Party.

5.5 Property of Disclosing Party. The Receiving Party agrees that all Information disclosed to the Receiving Party hereunder will be and remains the property of the Disclosing Party. Any tangible form of Information including, but not limited to, documents, papers, computer diskettes and electronically transmitted Information will be destroyed by the Receiving Party or returned, together with all copies thereof, to the Disclosing Party promptly upon the Disclosing Party’s request. If such tangible form of Information is destroyed, a certification of such destruction executed by a duly authorized officer of the Receiving Party will be delivered to the Disclosing Party.

5.6 Non-Competition. The Receiving Party agrees not to use the Information provided by the Disclosing Party to engage, represent in any way or be connected with, as officer, director, partner, employee, sales representative, proprietor, stockholder or otherwise of any business or activity that would compete with the business of the Disclosing Party.

5.7 Survival Upon Termination. The Receiving Party’s obligations under this Agreement will survive the termination of its business relationship, if any, with the Disclosing Party regardless of the manner of such termination, and will be binding upon its successors and assigns. The obligation of the Receiving Party under this Agreement will terminate three (3) years from the date of termination of this Agreement unless such obligation is sooner terminated by written notice given by the Disclosing Party to the Receiving Party.

5.8 Remedies for Breach. The Receiving Party acknowledges that the Information provided and all documentation relating thereto are commercially valuable, and reflect the effort of skilled development experts and the investment of considerable time and money. The Receiving Party accordingly agrees to protect the confidence of the Information and prevent its unauthorized dissemination and use, using the same degree of care that the Receiving Party uses to protect its own like information. The Receiving Party agrees that money damages would not be sufficient remedy for any breach of this Agreement by the Receiving Party or any director, officer, employee, agent or other representative of the Receiving Party, and that in addition to any other rights or remedies which it may have, the Disclosing Party will be entitled to equitable relief, in personam relief or similar relief as may be available in non-common law countries, and administrative relief from the appropriate division of the State Administration for Industry of Commerce, State Intellectual Property Office or other appropriate organization, as a remedy for such breach.

5.9 Copies. Either Party will be entitled to make copies of any documents containing Information under the terms and conditions set forth in this Article 5.

5.10 Confidentiality of Agreement. Neither Party will disclose the contents of this Agreement without the prior written consent of the other Party.

6. REPRESENTATIONS AND WARRANTIES

6.1 Authority. Each Party represents and warrants that it has the necessary corporate authority, and has taken the necessary steps, to enter into and fulfill its obligations under this Agreement.

6.2 WORLDSPACE Rights. WORLDSPACE represents and warrants that it owns and will own all right, title and interest in and to WORLDSPACE Information, WORLDSPACE Patent Rights and WORLDSPACE Marks, and has a license to the FhG Patent Rights; it has the right to grant the rights granted under this Agreement; the granting of such rights does not require the consent of any third party; and there are and will be no agreements inconsistent with the provisions of this Agreement.

6.3 Nonreliance. TONGSHI will not rely solely upon technical information provided by WORLDSPACE, but will independently test, analyze and evaluate China WORLDSPACE PC Cards and China WORLDSPACE Receivers before manufacturing and marketing them.

6.4 Limitations.

6.4.1 Except as expressly provided for herein, WORLDSPACE makes no representations, extends no warranties or indemnifications of any kind, expressed or implied, nor assumes any responsibilities whatsoever with respect to the manufacture, use, sale or other disposition by TONGSHI of products incorporating or made by the use of intellectual property licensed under this Agreement.

6.4.2 This is an agreement between merchants only and for the benefit of merchants only.

7. INDEMNIFICATION

TONGSHI will defend, indemnify and hold harmless WORLDSPACE, TCE and/or FhG from and against any and all suits, actions, claims, judgments, debts, obligations or rights of action of any nature or description arising from product liability laws with respect to China WORLDSPACE PC Cards and China WORLDSPACE Receivers produced by TONGSHI, and all reasonable costs, including attorneys’ fees, incurred by WORLDSPACE with respect thereto. This indemnity provision will impose no obligation upon TONGSHI to the extent that the risk indemnified against hereunder arises solely from the negligent acts or omissions of WORLDSPACE or is otherwise attributable to WORLDSPACE under product liability laws, in which event WORLDSPACE will defend, indemnify and hold harmless TONGSHI from and against any and all suits, actions, claims, judgments, debts, obligations or rights of action of any nature or description arising from product liability laws with respect to China WORLDSPACE PC Cards and China WORLDSPACE Receivers produced by TONGSHI, and all reasonable costs incurred by TONGSHI with respect thereto.

8. TERM AND TERMINATION

8.1 Term. This Agreement will be effective as of the Effective date of this Agreement and, unless terminated sooner pursuant to this Article 9, will continue in effect for an initial term of five (5) years, and will automatically be renewed for successive one-year terms unless ninety (90) days’ prior written notice is given by either Party to the other Party; provided, however, that in any event this Agreement will terminate earlier upon the date that the last of the AfriStar, AsiaStar or AmeriStar satellites ceases commercial operations (the “Term”).

8.2 Termination for Cause. If a Party substantially fails to comply with any of its obligations under this Agreement, and does not remedy the failure of performance within sixty (60) days after it has been notified thereof, the other Party may terminate this Agreement at the end of such period, without prejudice to any damages or additional remedies that may be available at law or in equity.

8.3 Bankruptcy. Should either Party become bankrupt or be subjected to bankruptcy or winding up proceedings, the other Party may terminate this Agreement immediately by notifying the other.

8.4 Revocation or Nullity Action. If TONGSHI files any action against any of the FhG Patent Rights or against any of the WORLDSPACE Patent Rights, or any action challenging the validity of the WORLDSPACE Information, or otherwise disputes the validity of any of the foregoing, including the filing of a revocation or nullity action, WORLDSPACE may terminate this Agreement.

8.5 Termination of Sublicense. The sublicense granted hereunder will expire upon termination of the Patent License Agreement between TCE and WORLDSPACE. In such case, WORLDSPACE will immediately notify TONGSHI, and WORLDSPACE will use its best efforts to negotiate a sublicense agreement for TONGSHI.

8.6 Assignment. Either Party may terminate this Agreement if the other attempts to assign it in violation of Article 10.

8.7 Force Majeure. Either Party may terminate this Agreement for Force Majeure in accordance with Article 12.7.

9. POST-TERMINATION

9.1 Cessation of Use. Following any expiration or termination of this Agreement, TONGSHI will (i)

stop using the WORLDSPACE Marks, (ii) stop using any of the WORLDSPACE Information, and (iii) immediately provide WORLDSPACE with all documents (including copies) in TONGSHI’s possession containing any WORLDSPACE Information; provided that TONGSHI may continue to exercise its rights hereunder to the extent reasonably necessary to fulfill any binding commitments existing as of the date of expiration or termination, or to otherwise liquidate TONGSHI’s inventory of China WORLDSPACE PC Cards and China WORLDSPACE Receivers on hand as of the date of expiration or termination.

9.2 Accrued Liability. Following any expiration or termination of this Agreement, neither Party will have any further rights or obligations hereunder except that: (i) such expiration or termination will not relieve either Party of any liability accrued prior to such expiration or termination; and (ii) such expiration or termination will not affect the continued operation or enforcement of any provision of this Agreement which by its express terms or by reasonable implication is to survive any expiration or termination.

10. ASSIGNMENT

Neither Party will assign this Agreement without the other Party’s prior consent, which will not be unreasonably withheld, except that either Party may freely assign this Agreement to any of its Affiliates.

11. SETTLEMENT OF DISPUTES

11.1 Amicable Resolution. The Parties will endeavor to resolve amicably any dispute arising out of this Agreement within thirty (30) days of receipt of notice of such dispute. If the Parties are unable to resolve such dispute within thirty (30) days, then they may refer the dispute to an independent third party who will, within a further thirty (30) days, review the dispute and recommend a resolution thereto. If the Parties cannot agree on such third party, or either Party disagrees with such third party’s recommendation, then Article 11.2 will apply.

11.2 Formal Arbitration.

11.2.1 All disputes arising in connection with this Agreement not resolved pursuant to Article 11.1 will be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce (ICC) by one or more arbitrators appointed in accordance with such Rules. If there is any conflict between the ICC Rules and this Agreement, the provisions of this Agreement will govern.

11.2.2 The arbitration proceedings will take place in Singapore and will be governed by the laws of New York.

11.2.3 Nothing in this Article 11 will preclude either Party from seeking equitable relief from a court for the other Party’s breach of its obligations set forth in Article 5.

11.2.4 Pending a decision by the arbitrators as referred to in this Article 11, each Party will, unless the other otherwise directs, fulfill all of its obligations hereunder.

12. GENERAL PROVISIONS

12.1 Required Permits and Licenses. TONGSHI will obtain and pay for any permits and the like relating to the production, marketing and sale of China WORLDSPACE PC Cards and China WORLDSPACE Receivers; provided that WORLDSPACE will cooperate as necessary in such efforts. The Parties will comply with all applicable export compliance laws.

12.2 Notices. All communications hereunder will be given in English by letter, facsimile or E-mail directed,

in respect of WORLDSPACE to:

WorldSpace International Network Inc.

2400 N Street, N.W.

Washington, D.C. 20037

United States of America


Attention:		Donald J. Frickel, General Counsel
Telephone:		+1-202-969-6000
Facsimile:		+1-202-969-6001
E-mail:		dfrickel@worldspace.com

and in respect of TONGSHI to:

Xi’an Tongshi Technology Limited


Attention:		Cao Jun, General Manager
Telephone:		86 029 2667810
Facsimile:		86 029 2668053
E-mail:		tongshi@xacol.com

or such other addresses as either Party may have previously specified in the manner set forth above.

12.3 Amendment. Except as otherwise specifically provided herein, this Agreement may be modified only by the Parties’ duly authorized representatives in a writing stating that the modification is an “Amendment to the Standard Production, Marketing and License Agreement for China PC Card and China WorldSpace Receiver.”

12.4 Non-Waiver. If at any time a Party elects not to assert its rights under any provision of this Agreement, it will not be construed as a waiver of any of its rights hereunder.

12.5 Severability. Should any part of this Agreement be held unenforceable in any jurisdiction, the validity of the remaining parts will not be affected.

12.6 Entire Agreement. This Agreement embodies the Parties’ entire understanding related to the subject matter hereof and supersedes any prior agreements or understandings between the Parties relating hereto, except that information that has been disclosed pursuant to any confidentiality agreement that the Parties may previously have entered into will henceforth be treated as though disclosed under this Agreement.

12.7 Force Majeure.

12.7.1 Neither Party will be liable to the other for any failure of, or delay in, its performance hereunder due to causes beyond its reasonable control, including acts of God, catastrophic phenomena such as fire, flood, and earthquake.

12.7.2 For a Party to claim Force Majeure hereunder, it must notify the other Party within five (5) days of the commencement of the Force Majeure, detailing the cause of the Force Majeure, the date the Force Majeure began, and the anticipated length of the Force Majeure. If: (i) the notice provides that the Force Majeure will last for more than sixty (60) days; and (ii) the Force Majeure in fact lasts for more than sixty (60) days, the Party not claiming the Force Majeure may terminate this Agreement by written notice to the other Party.

12.8 Captions. The captions contained in this Agreement are inserted for convenience of reference only and will not in any way affect the interpretation of the provisions captioned.

12.9 Governing Language. The official languages of this Agreement are the English and Chinese languages and all notices, reports, orders, instructions, literature, records and other written materials pertaining to this Agreement will be maintained and delivered in the English and Chinese languages.

12.10 Execution. This Agreement may be executed in two signed counterparts, each of which will constitute an original.

12.11 Press Releases. Neither Party will issue a press release or make any statement to the press related to the subject matter hereof without the other Party’s prior consent.

12.12 Effective Date. The Effective Date of this Agreement shall be the date on which all necessary approvals have been obtained.

THE PARTIES, INTENDING TO BE LEGALLY BOUND, have executed this Agreement as of the date written below.


WORLDSPACE INTERNATIONAL NETWORK INC.		XI’AN TONGSHI TECHNOLOGY LIMITED

By:	/s/ MIKE MA	By:	/s/ JUN CAO

Date:	Aug. 18, 2001	Date:	Aug. 18, 2001

AMENDMENT

TO THE

STANDARD PRODUCTION, MARKETING

AND LICENSE AGREEMENT

FOR

CHINA WORLDSPACE PC CARD

AND

CHINA WORLDSPACE RECEIVER

This Amendment to the Standard Production, Marketing and License Agreement for China WorldSpace PC Card and China WorldSpace Receiver (this “Amendment”) is made by and between:

WHEREAS, TONGSHI would like WORLDSPACE to disclose to it the details of the WORLDSPACE encryption scheme so that TONGSHI can insure that each and every China WORLDSPACE PC Card and each and every China WORLDSPACE Receiver that it produces will have a unique identification and can be used to receive WORLDSPACE subscription audio and/or multimedia services in China; and

WHEREAS, WORLDSPACE wants to insure that TONGSHI maintains the proprietary and confidential nature of WORLDSPACE’s encryption scheme and that TONGSHI produces each and every China WORLDSPACE PC Card and each and every China WORLDSPACE Receiver with a unique identification, with a STARMAN Chipset or with any hardware or software required to enable decryption of the encryption scheme used by WORLDSPACE for subscription audio and/or multimedia services in China.

NOW, THEREFORE, the Parties have agreed to amend the Standard Production, Marketing and License Agreement for China WorldSpace PC Card and China WorldSpace Receiver dated August 18, 2001 as follows:

Article 2.1.1 shall be amended to read as follows:

“2.1.1 Mass Production. TONGSHI shall mass-produce China WORLDSPACE PC Cards and China WORLDSPACE Receivers in quantities sufficient to meet consumer demand. TONGSHI shall use its best efforts to produce China WORLDSPACE PC Cards and China WORLDSPACE Receivers that are of high quality and fulfill the customers’ needs. TONGSHI shall use its best efforts to mass-produce China WORLDSPACE Receivers at an ex factory price for the WORLDSPACE functionality not to exceed Fifty U.S. Dollars (US$50). TONGSHI shall manufacture each and every China WORLDSPACE PC Card and each and every China WORLDSPACE Receiver with a unique identification, with a STARMAN Chipset and with any hardware and/or software required to enable decryption of the encryption scheme used by WORLDSPACE for subscription audio and/or multimedia services in China. Except as otherwise provided herein, TONGSHI shall supply all personnel, materials, facilities and other resources necessary to produce China WORLDSPACE PC Cards and China WORLDSPACE Receivers.”

Article 8.2 shall be amended to read as follows:

“8.2 Termination for Cause. If a Party substantially fails to comply with any of its obligations under this Agreement, and does not remedy the failure of performance within thirty (30) days after it has been notified thereof, the other Party may terminate this Agreement at the end of such period, without prejudice to any damages or additional remedies that may be available at law or in equity. Failure by TONGSHI to manufacture a China WORLDSPACE PC Card or a China WORLDSPACE Receiver in accordance with this Agreement shall constitute cause for termination.”

A new Article 8.3 shall be added to read as follows:

“8.3 Cause for Immediate Termination. Failure by TONGSHI to manufacture each and every China WORLDSPACE PC Card and each and every China WORLDSPACE Receiver with a unique identification, with a STARMAN Chipset or with any hardware or software required to enable decryption of the encryption scheme used by WORLDSPACE for subscription audio and/or multimedia services shall constitute cause for immediate termination of this Agreement without notice.”

THE PARTIES, INTENDING TO BE LEGALLY BOUND, have executed this Amendment as of the date last written below.


WORLDSPACE INTERNATIONAL NETWORK INC.		XI’AN TONGSHI TECHNOLOGY LIMITED

By:	/s/	By:	/s/

Date:		Date:

EX-10.8 14 dex108.htm SUPPLY AGREEMENT AND STANDARD WORLDSPACE RECEIVER DEVELOPMENT Supply Agreement and Standard WorldSpace Receiver Development

Exhibit 10.8

STANDARD WORLDSPACE RECEIVER

DEVELOPMENT, PRODUCTION, MARKETING

AND LICENSE AGREEMENT

This Standard WorldSpace Receiver Development, Production, Marketing and License Agreement (this “Agreement”) is made this 1^st day of December, 2000 (the “Effective Date”), by and between:

WorldSpace India Private Limited, a corporation organized under the laws of India, having its principal office at Shankarnarayana Towers, 9^th Floor, 25/2 M. G. Road, Bangalore – 560 001, India (“WORLDSPACE”); and

BPL Limited, a Company incorporated under the Companies Act, 1956 having its Registered Office at BPL Works, Palakkad—678007, Kerala and marketing office at BPL Towers, 13 Kasturba Road, Bangalore—560 001, India (“BPL”) (each, a “Party” and collectively, the “Parties”).

RECITALS

WHEREAS, WORLDSPACE is a digital broadcaster of audio and multimedia programs directly from satellites and the decoding of the WORLDSPACE satellite digital signals requires specially designed satellite receivers that WORLDSPACE refers to using its trademark “WORLDSPACE” (“WORLDSPACE Receivers”) which incorporate specially designed chipsets that WORLDSPACE refers to using its trademark “STARMAN” (“STARMAN Chipsets”); and

WHEREAS, BPL is a developer, manufacturer and distributor of certain consumer electronics products; and

WHEREAS, WORLDSPACE has selected BPL to produce, market, distribute and sell its WORLDSPACE Receivers pursuant to a license under certain intellectual property rights owned by WORLDSPACE and pursuant to a sublicense under certain intellectual property rights owned by Fraunhofer Gesellschaft zur Förderung der Angewandten Forschung e.V. (“FhG”) and granted to WORLDSPACE either directly or pursuant to an agreement between Thomson Consumer Electronics Sales GmbH (“TCE”) and WORLDSPACE; and

WHEREAS, BPL is interested in producing, marketing, distributing and selling WORLDSPACE Receivers and desires to obtain, and WORLDSPACE is willing to grant, a non-exclusive license and sublicense that will allow BPL to manufacture a consumer grade satellite receiver utilizing WORLDSPACE’s intellectual property and to market the same under BPL’s brand names and WORLDSPACE’s trademarks and logo.

NOW, THEREFORE, the Parties have agreed as follows:

1. DEFINITIONS

For purposes of this Agreement, the following capitalized terms will have the following meanings:

1.1 “WORLDSPACE System” means a satellite-based digital audio, visual imaging and/or data broadcasting system using time division multiplex (“TDM”) downlink and

PSK modulation, comprising 3 satellites with 3 beams per satellite, 2 TDM carriers with opposite circular polarization per beam, 96 primary rate channels with 16 Kbps per carrier, equivalent to a maximum of 1728 broadcast channels, which uses ISO MPEG 1/2 Audio Layer 3 (IS 11172-3, IS 13818-3) and MPEG 2.5 Layer 3 as the source coding scheme and as specified in the WORLDSPACE Format.

1.2 “WORLDSPACE Format” means the TDM bitstream structure as defined in WORLDSPACE DAVB Digital Format Requirements document WST-PMO-DDS-002-000000 Edition 08 Revision B dated March 26, 1998.

1.3 “WORLDSPACE Receiver” means a satellite receiver containing a STARMAN Chipset and designed to receive broadcasts from AfriStar, AsiaStar and/or AmeriStar in accordance with the WORLDSPACE Format and which meets or exceeds the Technical Specifications attached as Appendix 2.

1.4 “STARMAN Chipset” means a chipset, manufactured under license from WORLDSPACE and having the characteristics set forth in Appendix 3, that can process data according to the WORLDSPACE Format. A list of manufacturers qualified and licensed to manufacture STARMAN Chipsets as of the Effective Date is set forth in Appendix 4, as periodically updated.

1.5 “FhG Patent Rights” means the patents and patent applications anywhere in the world, and all continuations, continuations-in-part, divisions, reissues, reexaminations, substitutions, additions and extensions thereof, and all supplementary protection certificates, relating to ISO MPEG 1/2 Audio Layer 3 and MPEG 2.5 Layer 3 technology used in the WORLDSPACE Format that FhG owns or will own during the Term. FhG Patent Rights as of the Effective Date are set forth in Appendix 5, as periodically updated.

1.6 “WORLDSPACE Patent Rights” means the patents and patent applications anywhere in the world, and all continuations, continuations-in-part, divisions, reissues, reexaminations, substitutions, additions and extensions thereof, and all supplementary protection certificates, relating to the WORLDSPACE System and to the WORLDSPACE Receiver technology that WORLDSPACE owns or will own during the Term. WORLDSPACE Patent Rights as of the Effective Date are set forth in Appendix 6, as periodically updated.

1.7 “WORLDSPACE Information” means all information and knowledge relating to the WORLDSPACE System, the WORLDSPACE Format, the WORLDSPACE Receiver, the STARMAN Chipset, the WORLDSPACE Patent Rights and the FhG Patent Rights that is not generally known, including, and whether or not patentable, all trade secrets, know-how, data, designs, specifications, material lists, drawings, algorithms, formulas, patterns, compilations, programs, samples, devices, protocols, methods, techniques, processes, procedures and results of experimentation and testing.

1.8 “Development Patent Rights” means the patents and patent applications anywhere in the world, and all continuations, continuations-in-part, divisions, reissues, reexaminations, substitutions, additions and extensions thereof, and all supplementary protection certificates, relating to the design and development by BPL of the WORLDSPACE Receiver under Article 2.1.1, excluding FhG Patent Rights, WORLDSPACE Patent Rights, and any patents, patent applications or similar rights possessed or obtained by BPL prior to the execution of this Agreement.

1.9 “Development Information” means all information and knowledge relating to the design and development by BPL of the WORLDSPACE Receiver under Article 2.1.1 that is not generally known, including, and whether or not patentable, all trade secrets, know-how, data, designs, specifications, material lists, drawings, algorithms, formulas, patterns, compilations, programs, samples, devices, protocols, methods, techniques, processes, procedures and results of experimentation and testing, excluding the WORLDSPACE Information and any similar information and knowledge possessed or obtained by BPL prior to the execution of this Agreement.

1.10 “WORLDSPACE Marks” means WORLDSPACE’s logo and trademarks as set forth in Appendix 7.

1.11 “BPL Marks” means BPL’s logo and trademarks as set forth in Appendix 10.

1.12 “AfriStar” means the WORLDSPACE satellite launched on October 28, 1998 that provides service within the AfriStar Service Area. A contour map indicating generally the geographic reach of the AfriStar broadcast beams is attached to Appendix 1.

1.13 “AsiaStar” means the WORLDSPACE satellite launched on March 21, 2000 that provides service within the AsiaStar Service Area. A contour map indicating generally the geographic reach of the AsiaStar broadcast beams is attached to Appendix 1.

1.14 “AmeriStar” means the WORLDSPACE satellite currently scheduled for launch in 2001 that will provide service within the AmeriStar Service Area. A contour map indicating generally the geographic reach of the AmeriStar broadcast beams is attached to Appendix 1.

1.15 “AfriStar Service Area” means the geographic regions within the WORLDSPACE Service Area where reception of the signal from AfriStar may be achieved using a WORLDSPACE Receiver.

1.16 “AsiaStar Service Area” means the geographic regions within the WORLDSPACE Service Area where reception of the signal from AsiaStar may be achieved using a WORLDSPACE Receiver.

1.17 “AmeriStar Service Area” means the geographic regions within the WORLDSPACE Service Area where reception of the signal from AmeriStar may be achieved using a WORLDSPACE Receiver.

1.18 “WORLDSPACE Service Area” means the geographic regions where reception of the signal from AfriStar, AsiaStar and/or AmeriStar may be achieved using a WORLDSPACE Receiver.

1.19 “Work” means the whole of BPL’s performance under this Agreement, including the development, production, marketing and sales of the WORLDSPACE Receivers. Where the context so permits or requires, “Work” includes any part or parts of the Work.

1.20 “Affiliate” means a corporation, partnership or other entity controlled by, controlling or under common ownership or control with a Party.

1.21 “Term” means the term of this Agreement as set forth in Article 9.1.

1.22 Forms of the word “include” mean “including, without limitation;” references to Articles and Appendices refer to Articles and Appendices of this Agreement; and references to “hereunder,” “herein,” “hereof,” and the like, refer to this Agreement, including all Appendices hereof.

2. RECEIVER DEVELOPMENT AND PRODUCTION

2.1 Development of WORLDSPACE Receivers.

2.1.1 Performance and Timing. BPL will develop and deliver the WORLDSPACE Receivers in accordance with the Work Schedule set forth in Appendix 8. Time is of the essence with respect to the delivery of the WORLDSPACE Receivers.

2.1.2 Subcontracts. BPL and its Affiliates may subcontract the performance of all or part of the Work. Any failure by a subcontractor to meet its obligations will not relieve BPL of any of its obligations hereunder.

2.1.3 Access to Work. WORLDSPACE will have reasonable access to the Work. BPL will, at WORLDSPACE’s request, deliver to WORLDSPACE by confidential means copies of designs and data generated in the course of performing the Work. The Parties will schedule regular meetings to review the progress of the Work.

2.2 Transfer of WORLDSPACE Information and Technical Assistance.

2.2.1 WORLDSPACE Information Transfer. WORLDSPACE will furnish BPL, at BPL’s request, with such complete WORLDSPACE Information as is necessary for the production and marketing of WORLDSPACE Receivers by BPL.

2.2.2 Technical Assistance. WORLDSPACE will provide BPL, at its cost, such technical assistance as BPL may reasonably request regarding the development and production of WORLDSPACE Receivers, including the dispatch of engineers and other support staff. All technical assistance will be conducted at such times and at such locations as may be mutually convenient to WORLDSPACE and BPL.

2.3 Production of WORLDSPACE Receivers.

2.3.1 Mass Production. BPL shall mass produce WORLDSPACE Receivers in a quantity of no less than 100,000 units during the 12-month period following commencement of production by BPL. BPL shall use its best efforts to produce WORLDSPACE Receivers that are of high quality and fulfill the customers’ needs. Both Parties shall work to reduce the ex factory price of BPL-manufactured WORLDSPACE Receivers to an amount not to exceed the Indian Rupee equivalent of Fifty U.S. Dollars (US$50). WORLDSPACE shall cooperate with BPL in BPL’s production of WORLDSPACE Receivers. Prior to September 30 of each year beginning in 2002, the Parties shall meet and mutually agree upon the quantities of WORLDSPACE Receivers to be mass produced by BPL during the following year. If, during the following year, BPL fails to produce the quantities of WORLDSPACE Receivers agreed upon, then WORLDSPACE shall have the right, upon written

notice to BPL, to terminate this Agreement pursuant to Article 9.2 below without any further obligation or liability to WORLDSPACE.

2.4 Approval of WORLDSPACE Receivers.

2.4.1 Type Approval. Prior to commencing commercial mass production of any WORLDSPACE Receivers, BPL will submit to WORLDSPACE for its inspection: (i) a prototype of each receiver that BPL proposes to manufacture, so that WORLDSPACE may confirm that such prototype receiver performs in accordance with the WORLDSPACE Format and the Technical Specifications; and (ii) the preliminary design specifications for such receivers, including all circuit diagrams, blueprints (or equivalents thereof), component specifications (if WORLDSPACE requests) and overall specifications of such prototype receiver. If such prototype receiver successfully passes WORLDSPACE’s test, it will be deemed a “WORLDSPACE Receiver” under this Agreement. After a receiver has been qualified as a WORLDSPACE Receiver, no changes may be made to the WORLDSPACE Receiver except for those which are cosmetic in nature or which do not materially affect the function or quality of the WORLDSPACE Receiver unless the receiver is resubmitted to WORLDSPACE for testing and WORLDSPACE confirms that this modified receiver continues to qualify as a WORLDSPACE Receiver. All testing will be performed at WORLDSPACE’s then current testing rates. As of the Effective Date, WORLDSPACE’s standard rates are as set forth in Appendix 9, but WORLDSPACE reserves the right to make reasonable changes to its rates with prior notification to BPL.

2.4.2 Requests for Testing. All requests for testing will be accompanied by payment in full of WORLDSPACE’s testing fee, a prototype of the applicable receiver and all test data and schematics pertaining thereto. WORLDSPACE will endeavor in good faith to test, or have its authorized agent test, all prototype receivers submitted for testing within thirty (30) days from the date WORLDSPACE or such authorized agent has received such prototype and all test data and schematics pertaining thereto. Delays in testing will not entitle BPL to cancel a testing order or to claim damages, provided that WORLDSPACE immediately notifies BPL of such delays and presents a plan to complete such testing as soon as possible.

3. RECEIVER MARKETING

3.1 Marketing the WORLDSPACE Receivers.

3.1.1 Marketing. BPL agrees to use its best efforts to market, distribute and sell WORLDSPACE Receivers within the WORLDSPACE Service Area in quantities sufficient to meet the minimum quantities specified in Article 2.3.1. BPL and WORLDSPACE shall meet on a monthly basis to review the marketing and distribution activities of BPL. If, in the reasonable judgment of WORLDSPACE, BPL does not effectively market, distribute and sell the WORLDSPACE Receivers, WORLDSPACE will so notify BPL in writing. BPL shall have 30 days to demonstrate to WORLDSPACE’s reasonable satisfaction that BPL shall perform its obligations pursuant to this Agreement. If BPL fails to market, distribute and sell the WORLDSPACE Receivers so as to satisfy this Agreement, WORLDSPACE shall have the right, upon written notice to BPL, to terminate this Agreement pursuant to Article 9.2 below without any further obligation or liability to WORLDSPACE.

3.1.2 Marketing Strategy. BPL will market, advertise and promote the WORLDSPACE Receivers and the WORLDSPACE Marks throughout the WORLDSPACE Service Area in order to effectively create consumer demand for BPL-manufactured WORLDSPACE Receivers. WORLDSPACE will advertise and promote the WORLDSPACE Service and the WORLDSPACE Marks throughout the WORLDSPACE Service Area. BPL will develop an effective marketing and distribution strategy for BPL-manufactured WORLDSPACE Receivers in cooperation with WORLDSPACE.

4. INTELLECTUAL PROPERTY LICENSES

4.1 WORLDSPACE Information License, FhG Patent Rights Sublicense, WORLDSPACE Patent Rights License and WORLDSPACE Marks License.

4.1.1 License and Sublicense Grant. WORLDSPACE hereby grants to BPL and its Affiliates a non-exclusive, non-transferable, revocable, indivisible license under the WORLDSPACE Information, the WORLDSPACE Patent Rights and the WORLDSPACE Marks and a non-exclusive, non-transferable, revocable, indivisible sublicense under the FhG Patent Rights, to perform, and have performed, the Work. BPL will have no right to sublicense to any third party without WORLDSPACE’s prior approval.

4.1.2 Licensed and Sublicensed Territory. Pursuant to Article 4.1.1, BPL and its Affiliates may design, develop and/or manufacture, and have designed, developed, and/or manufactured, WORLDSPACE Receivers anywhere in the world for sale only in the WORLDSPACE Service Area except for China; provided that BPL will not use or authorize any public use, direct or indirect, of the WORLDSPACE Marks outside the WORLDSPACE Service Area and will not knowingly sell any products covered by this Agreement to persons who intend or are likely to resell them outside the WORLDSPACE Service Area.

4.1.3 Royalty. In consideration of the licenses and sublicense granted by WORLDSPACE under Article 4.1.1, BPL will pay to WORLDSPACE within sixty (60) days after June 30 and December 31 of each calendar year of the Term a royalty of Three and One Half U.S. Dollars (U.S. $3.50) net (except for any required tax withholdings), payable in its equivalent in Indian Rupees at the exchange rate on such due date as established by the Reserve Bank of India, for each single WORLDSPACE Receiver that BPL sells during the previous two calendar quarters. If BPL sells a WORLDSPACE Receiver, directly or indirectly, to itself or to any Affiliate, the royalty will be calculated and due as though such product had been sold to a third party.

4.2 Development Rights.

WORLDSPACE and BPL will share equally in the ownership and the benefits of all Development Information and Development Patent Rights. To that end, all right, title and interest in and to such Development Information and Development Patent Rights will be obtained in the names of and on behalf of both WORLDSPACE and BPL. Each Party will have the right to use Development Information and Development Patent Rights for its own benefit; however, any license of such

Development Information and Development Patent Rights to third parties will be subject to the prior written approval of the other Party, which approval will not be unreasonably withheld. Any such license to a third party will be granted on the basis of reasonable compensation therefor and pursuant to other reasonable terms and conditions; provided, however, that the Parties may agree to impose restrictions or prohibitions regarding the granting of such rights to specific third parties. Any royalties, revenue or other consideration received as compensation from such third party will be shared equally by WORLDSPACE and BPL. If either Party sells or otherwise disposes of products or services that use or incorporate the Development Information and Development Patent Rights, then such Party will compensate the other Party in an amount to be mutually agreed upon. The Parties will cooperate in and equally share the costs of securing, maintaining and enforcing the Development Patent Rights.

4.3 Use of the Marks.

4.3.1 Proper Use. BPL will mark all WORLDSPACE Receivers with the BPL Marks and the WORLDSPACE Marks and will use the BPL Marks and the WORLDSPACE Marks in all packaging, instruction manuals, catalogs and printed advertising concerning the WORLDSPACE Receivers. The WORLDSPACE Marks will be affixed to the WORLDSPACE Receivers, and will be used in any packaging, instruction manuals, catalogs, advertising and promotional material, and may be used in such other media as the Parties agree upon, in such a manner as to allow a person with normal vision to recognize the WORLDSPACE Marks, and as a general guideline will be at least as prominent in location and size as any other logo or mark of similarly licensed technology in similar products or similar advertising. BPL will cause notice of WORLDSPACE’s ownership of the WORLDSPACE Marks to be used on each WORLDSPACE Receiver and used in any instruction manuals, catalogs, advertising and promotional material, and such other media as the Parties agree upon, and as a general guideline such use will be in such a manner and at least as frequently as BPL uses said proprietary notice or equivalent with respect to any other logo or mark of similarly licensed technology in similar products or similar advertising. The following notice (or such other notice as WORLDSPACE may hereafter reasonably require) is an example of an appropriate notice:

WORLDSPACE is a trademark of WorldSpace International Network Inc.

4.3.2 Benefit of Use. BPL’s use of the WORLDSPACE Marks will inure to the benefit of WORLDSPACE and BPL will not at any time acquire any rights in such WORLDSPACE Marks or any trademarks or trade dress similar thereto by virtue of any use it may make of any such WORLDSPACE Marks. Similarly, the use of BPL marks on the Receivers does not confer any rights in WORLDSPACE.

4.3.3 Good Will. All of the good will now or to be associated with the WORLDSPACE Marks belongs exclusively to WORLDSPACE and all good will associated with the WORLDSPACE Marks pursuant to BPL’s use thereof will inure exclusively to WORLDSPACE’s benefit. All of the good will now or to be associated with the BPL Marks belongs exclusively to BPL and all good will associated with the BPL Marks pursuant to WORLDSPACE’s use thereof will inure exclusively to BPL’s benefit.

4.3.4 Non-Use of Similar Trademarks. BPL will not adopt or use any name or trademark confusingly similar to any of the WORLDSPACE Marks. WORLDSPACE

will not adopt or use any name or trademark confusingly similar to any of the BPL Marks.

4.4 Quality of WORLDSPACE Receivers.

4.4.1 Quality Control. BPL agrees that the overall quality of the WORLDSPACE Receivers is essential to BPL’s performance hereunder. WORLDSPACE will have the right to exercise reasonable quality control procedures and to approve the quality of the WORLDSPACE Receivers that BPL markets under the WORLDSPACE Marks to ensure the protection of the WORLDSPACE Marks and the good will pertaining thereto. Such quality approvals will be based on WORLDSPACE’s confirmation that the BPL-manufactured WORLDSPACE Receivers are in conformity with the WORLDSPACE Format and Technical Specifications, and with the appearance and design specifications determined under Article 4.3.

4.4.2 Design Review. BPL agrees prior to finalization of the overall design for each WORLDSPACE Receiver model that it shall furnish to WORLDSPACE, free of cost, for WORLDSPACE’s prior written approval and comment as to quality and appearance for purposes of Article 4.4.1, with the following: (i) testing procedures to be undertaken for the WORLDSPACE Receiver and all applicable performance standards and quality review procedures to be applied and (ii) sketches, drawings, mock-ups, photographs, or equivalents thereof of the exterior of the WORLDSPACE Receiver showing detail including but not limited to the placement of all WORLDSPACE Marks and other trademarks, text, notices, symbols, designs and markings.

4.4.3 Evaluation Sample Review. Prior to manufacture, BPL will furnish WORLDSPACE, free of cost, for its comment as to quality and appearance for purposes of Article 4.4.1, an evaluation sample of the final production prototype (milestone 4) of each WORLDSPACE Receiver model and the final performance and test results with respect thereto, and no WORLDSPACE Receiver will be distributed by BPL without WORLDSPACE’s prior written approval.

4.4.4 Review of Materials. Prior to BPL’s distribution, shipment or publication, whichever is applicable, of any packaging, instruction manuals, catalogs or printed advertising that BPL intends to use in connection with the WORLDSPACE Receivers or the WORLDSPACE Marks, the Parties will meet to establish mutually acceptable guidelines for proper use of the WORLDSPACE Marks on such materials. Such guidelines will include the right of WORLDSPACE to receive from BPL, upon reasonable request and free of cost, samples of such materials for examination and comment as to quality and appearance.

4.4.5 Initial Production Samples. After drawings, plans, diagrams, sketches, components, methods of testing or assembly, specifications and samples have been approved pursuant to Articles 4.4.2 and 4.4.3 of this Agreement, BPL will not depart therefrom in any material respect without WORLDSPACE’s prior written consent. BPL will also furnish to WORLDSPACE, free of cost, two (2) samples of each WORLDSPACE Receiver from the initial production run.

4.4.6 Representative Production Samples. After BPL has commenced shipment, distribution or sale of the WORLDSPACE Receivers, upon WORLDSPACE’s written request, BPL will provide annually to WORLDSPACE, free of cost, one (1) additional representative random production sample of each WORLDSPACE Receiver

then available and being offered for sale or distribution by BPL, together with all packaging material and literature used in connection therewith.

4.4.7 Reports. After BPL has commenced shipment, distribution or sale of the WORLDSPACE Receivers, upon WORLDSPACE’s reasonable written request, BPL also agrees to provide WORLDSPACE, free of cost, a report of all returns of, repairs made or authorized, and comments or complaints made by others regarding the WORLDSPACE Receivers and known to BPL, to the extent BPL is able to acquire such information through its normal business practices.

4.4.8 No Use Upon Termination. Upon the termination or expiration of this Agreement for any reason, BPL will discontinue, except as otherwise provided in Article 10 below, the use of the WORLDSPACE Marks, and will not use or register any mark confusingly similar to the WORLDSPACE Marks.

5. ROYALTY STATEMENTS AND PAYMENTS

5.1 Royalty Statements. BPL will submit to WORLDSPACE within sixty (60) days after June 30 and December 31 of each calendar year of the Term in which BPL sells WORLDSPACE Receivers, a royalty statement in writing, certified by BPL to be accurate, setting forth all WORLDSPACE Receivers that BPL has sold and/or distributed during the preceding two calendar quarters. Such statements will include:

(i) the identity of BPL’s purchasers for such WORLDSPACE Receivers;

(ii) the quantity and description (including model name or other product identification) of such WORLDSPACE Receivers, after deducting the number of returns, if any;

(iii) the total quantity and description of all such WORLDSPACE Receivers, both in total and by individual country;

(iv) the amount of royalty due WORLDSPACE for the two preceding calendar quarters.

Such statements will be furnished to WORLDSPACE whether or not any WORLDSPACE Receivers have been sold or distributed during the two calendar quarters for which such a statement is due, and whether or not royalties for that period have been waived. At the request of WORLDSPACE, BPL will provide such further information reasonably requested by WORLDSPACE to enable it to verify royalties that may be owing.

5.2 Royalty Payments. The royalty statement submitted pursuant to Article 5.1 will be accompanied with the royalty payments due to WORLDSPACE pursuant to Article 4.1.3. All royalties under this Agreement will be paid in Indian Rupees payable to WORLDSPACE by certified check or wire transfer in immediately available funds, and free of any bank charges imposed on BPL, however subject to any applicable deductions for withholding taxes. Overdue payments will bear interest at the rate of five percent (5%).

5.3 Statement Errors. Upon submission of proper documentation of an error in a previous royalty statement prior to a request by WORLDSPACE for an audit pursuant to Article 5.4, BPL may adjust the royalty statements in either Party’s favor when a reason for any such adjustment becomes known to BPL, but not later than three (3) years from the date of the royalty statement in question. BPL will deduct/add any overpayment/underpayment of royalty for the preceding two calendar quarters from/to the royalty due for the subsequent two calendar quarters.

5.4 Auditing of Royalty Statements and Payments. For five (5) years from the date each royalty payment comes due hereunder, BPL will keep accurate and reasonably

detailed records of the WORLDSPACE Receivers that BPL has sold hereunder, and, for three (3) years after the end of the two calendar quarters for which the record was made, allow an independent certified public accountant that WORLDSPACE selects and that is reasonably acceptable to BPL to examine and copy such records and related materials for the sole purpose of verifying royalties hereunder; provided, however, that such auditor will have agreed in advance in writing to maintain in confidence and not to disclose to WORLDSPACE or any third party any proprietary information obtained during the course of such audit. No more than one such audit will be performed per calendar year, unless BPL has underpaid royalties due as provided in the following sentence. If an independent public accountant determines that at any time BPL has underpaid more than three percent (3%) of the owed hereunder, BPL, in addition to any other remedy provided to WORLDSPACE by law or by this Agreement, will reimburse WORLDSPACE’s full costs and expenses associated with such audit, and pay WORLDSPACE an amount equal to the underreported royalties, with interest thereon calculated pursuant to Article 5.2 from the date each royalty accrued to the date of payment. If an error of three percent (3%) or less is revealed, WORLDSPACE will bear the costs and expenses associated with such audit. If the result of such audit is that an error is detected, the amount overpaid or underpaid, as the case may be, will be credited against or paid together with the next payment of royalties pursuant to Article 5.2.

6. CONFIDENTIALITY AND NONDISCLOSURE

OF PROPRIETARY INFORMATION

6.1 Non-Disclosure and Non-Use. During the performance of this Agreement, one Party (“the Disclosing Party”) may exchange information which may be of a proprietary or confidential nature to the other Party (“the Receiving Party”), such as information concerning inventions, techniques, processes, devices, discoveries and improvements, or regarding administrative, marketing, financial or manufacturing activities, and in the case of WORLDSPACE, such as WORLDSPACE Information (collectively, “Information”). All such Information, in any form, including without limitation, oral, written graphic, demonstrative, machine recognizable or sample form, will be considered proprietary and confidential Information of the Disclosing Party will be retained in confidence and will not be disclosed or caused or permitted to be disclosed directly or indirectly to any third party without the prior written approval of the Disclosing Party, and will not be used by the Receiving Party for any reason other than the performance of its duties under this Agreement. The Receiving Party further agrees that any material or data generated by the Receiving Party, based in whole or in part on Information disclosed by the Disclosing Party, will also be retained in confidence.

6.2 Exceptions. The obligation of the Receiving Party to retain Information in confidence will not apply to:

(i) Information which is now in or hereafter enters the public domain beyond the control of the Receiving Party and without its violation of this Agreement;

(iii) Information disclosed in good faith to the Receiving Party by a third party legally entitled to disclose the same; or

(iv) Information which the Receiving Party discloses under operation of law, rule or legal process;

6.3 Labeling of Information. Information in tangible form is now and will at all times be labeled by the Disclosing Party as “Confidential” or “Proprietary.” If Information is disclosed orally or by demonstration, it must be specifically designated by the Disclosing Party as confidential information at the time of such initial disclosure and contained in an itemized written listing to be sent to the Receiving Party by the Disclosing Party within thirty (30) days following such initial disclosure.

6.4 Disclosure on Need to Know Basis. The Receiving Party agrees to transmit the Information, and/or material or data generated by the Receiving Party based in whole or in part on such Information, only to those directors, officers, employees, agents or other representatives who need access to the Information and/or material or data generated by the Receiving Party based in whole or in part on such Information, for the purpose of performing their duties pursuant to this Agreement, and who are informed by the Receiving Party of the confidential nature of the Information and/or material or data generated by the Receiving Party based in whole or in part on such Information, and who agree to be bound by the terms of this Agreement. The Receiving Party further agrees to be responsible for any breach of this Agreement by the Receiving Party or any director, officer, employee or other representative of the Receiving Party.

6.5 Property of Disclosing Party. The Receiving Party agrees that all Information disclosed to the Receiving Party hereunder will be and remains the property of the Disclosing Party. Any tangible form of Information including, but not limited to, documents, papers, computer diskettes and electronically transmitted Information will be destroyed by the Receiving Party or returned, together with all copies thereof, to the Disclosing Party promptly upon the Disclosing Party’s request. If such tangible form of Information is destroyed, a certification of such destruction executed by a duly authorized officer of the Receiving Party will be delivered to the Disclosing Party.

6.6 Non-Competition. The Receiving Party agrees not to use the Information provided by the Disclosing Party to engage, represent in any way or be connected with, as officer, director, partner, employee, sales representative, proprietor, stockholder or otherwise of any business or activity that would compete with the business of the Disclosing Party.

6.7 Survival Upon Termination. The Receiving Party’s obligations under this Agreement will survive the termination of its business relationship, if any, with the Disclosing Party regardless of the manner of such termination, and will be binding upon its successors and assigns. The obligation of the Receiving Party under this Agreement will terminate three (3) years from the date of termination of this Agreement unless such obligation is sooner terminated by written notice given by the Disclosing Party to the Receiving Party.

6.8 Remedies for Breach. The Receiving Party acknowledges that the Information provided and all documentation thereto are commercially valuable, and reflect the effort of skilled development experts and the investment of considerable time and

money. The Receiving Party accordingly agrees to protect the confidence of the Information and prevent its unauthorized dissemination and use, using the same degree of care that the Receiving Party uses to protect its own like information. The Receiving Party agrees that money damages would not be sufficient remedy for any breach of this Agreement by the Receiving Party or any director, officer, employee, agent or other representative of the Receiving Party, and that in addition to any other rights or remedies which it may have, the Disclosing Party will be entitled to equitable relief, including injunction and specific performance, as a remedy for such breach, and the Receiving Party further agrees to use its best efforts to cause any director, officer, employee, agent or other representative of the Receiving Party to waive any requirement for the securing or posting of any bond in connection with such remedy.

6.9 Copies. Either Party will be entitled to make copies of any documents containing Information under the terms and conditions set forth in this Article 6.

6.10 Confidentiality of Agreement. Neither Party will disclose the contents of this Agreement without the prior written consent of the other Party.

7. REPRESENTATIONS AND WARRANTIES

7.1 Authority. Each Party represents and warrants that it has the necessary corporate authority, and has taken the necessary steps, to enter into and fulfill its obligations under this Agreement.

7.2 WORLDSPACE Rights. WORLDSPACE represents and warrants that it owns and will own all right, title and interest in and to WORLDSPACE Information, WORLDSPACE Patent Rights and WORLDSPACE Marks, and has a license to the FhG Patent Rights; it has the right to grant the rights granted under this Agreement; the granting of such rights does not require the consent of any third party; and there are and will be no agreements inconsistent with the provisions of this Agreement.

7.3 No Knowledge of Infringement. As of the Effective Date, WORLDSPACE represents and warrants that it is unaware of any third party patent or other intellectual property right that would be infringed by the use of the WORLDSPACE Information, the WORLDSPACE Patent Rights and WORLDSPACE Marks, or the FhG Patent Rights, as contemplated by this Agreement. If BPL is charged with infringement of a third party’s patent, trademark, copyright or other intellectual property rights as a result of the development, manufacture and/or marketing of the WORLDSPACE Receiver within the WORLDSPACE Service Area, and if such alleged infringement arises from an aspect or function of the WORLDSPACE Receiver that was required pursuant to the Technical Specifications, WORLDSPACE will, at no expense to BPL, do one or more of the following: (i) defend BPL against such charge or claim; (ii) procure for BPL the right to continue such development, manufacture and/or marketing; or (iii) modify the design of the WORLDSPACE Receiver so that it no longer infringes, provided that such modification can be done without substantially impairing its functionality or performance. BPL will promptly notify WORLDSPACE in writing of any claim of infringement and will provide WORLDSPACE with the authority, information and assistance necessary to defend or settle such claim; provided, however, that BPL will have the right to participate in such defense and to approve any proposed settlement in advance. BPL will have the right to take over from WORLDSPACE the defense of a claim at any time, provided that BPL releases WORLDSPACE in writing from any further obligation of defense or indemnification in connection with such claim. WORLDSPACE shall bear all costs and all consequences of defending such a claim and of

any final judgement imposed; provided, however, that WORLDSPACE’s financial obligation under this Article 7.3 shall be limited to the total amount of royalties paid by BPL to WORLDSPACE under Article 4.1.3.

7.4 Statutory Clearances and Approvals. WORLDSPACE warrants that it shall obtain or has obtained the requisite statutory licenses, clearance and approvals in respect of its ensuring uninterrupted broadcast through the Receivers and shall continue to keep in force its right to provide service.

7.5 BPL Efforts. BPL will use its best efforts to perform the Work hereunder in a timely and professional manner by qualified personnel of BPL, BPL’s Affiliates, subcontractors or agents.

7.6 Nonreliance. BPL will not rely solely upon technical information provided by WORLDSPACE, but will independently test, analyze and evaluate WORLDSPACE Receivers before manufacturing and marketing them.

7.7 Limitations.

7.7.1 Except as expressly provided for herein, WORLDSPACE makes no representations, extends no warranties or indemnifications of any kind, expressed or implied, nor assumes any responsibilities whatsoever with respect to the manufacture, use, sale or other disposition by BPL of products incorporating or made by the use of intellectual property licensed under this Agreement.

7.7.2 WORLDSPACE makes no representations or warranties as to the commercial utility of any WORLDSPACE Information, FhG Patent Rights or WORLDSPACE Patent Rights.

7.7.3 THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE 7 ARE EXCLUSIVE OF ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY RESPECTING THE RESULTS TO BE OBTAINED FROM USE OF THE FhG PATENT RIGHTS, WORLDSPACE INFORMATION, WORLDSPACE PATENT RIGHTS OR THE WORLDSPACE SYSTEM. NEITHER PARTY WILL BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY NATURE, WHETHER BASED IN CONTRACT, IN TORT OR OTHERWISE, THAT MAY ARISE IN CONNECTION WITH THIS AGREEMENT.

8. INDEMNIFICATION

BPL will defend, indemnify and hold harmless WORLDSPACE, TCE and/or FhG from and against any and all suits, actions, claims, judgments, debts, obligations or rights of action of any nature or description arising from product liability laws applicable in India, namely, Monopolies and Restrictive Trade Practices Act, 1969 and Consumer Protection Act, 1986 with respect to BPL-manufactured WORLDSPACE Receivers, and all reasonable costs, including attorneys’ fees, incurred by WORLDSPACE with respect thereto. Further, it is agreed by and between BPL and WORLDSPACE that the aforesaid indemnity shall not under any circumstances include or extend to the inability of WORLDSPACE to broadcast through the Receivers for any reason whatsoever. This indemnity provision will impose no obligation upon BPL to the extent that the risk indemnified against hereunder arises solely from the negligent acts or omissions of WORLDSPACE or is otherwise attributable to

WORLDSPACE under product liability laws, in which event WORLDSPACE will defend, indemnify and hold harmless BPL from and against any and all suits, actions, claims, judgments, debts, obligations or rights of action of any nature or description arising from product liability laws with respect to BPL-manufactured WORLDSPACE Receivers, and all reasonable costs, including attorneys’ fees, incurred by BPL with respect thereto.

9. TERM AND TERMINATION

9.1 Term. This Agreement will be effective as of the Effective Date and, unless terminated sooner pursuant to this Article 9, will continue in effect for an initial term of five (5) years, and will automatically be renewed for successive one-year terms unless ninety (90) days’ prior written notice is given by either Party to the other Party.

9.2 Termination for Cause. If a Party substantially fails to comply with any of its obligations under this Agreement, and does not remedy the failure of performance within sixty (60) days after it has been notified thereof, the other Party may terminate this Agreement at the end of such period, without prejudice to any damages or additional remedies that may be available at law or in equity. Any such termination will not affect any payments that have previously come due hereunder, or the furnishing of royalty statements as provided in Article 5.1. The failure of BPL to comply with Article 2.3.1 shall constitute cause under this Article 9.2 for WORLDSPACE to terminate this Agreement.

9.3 Insolvency. Should either Party become insolvent or be subjected to bankruptcy or winding up proceedings, the other Party may terminate this Agreement immediately by notifying the other.

9.4 Revocation or Nullity Action. If BPL files any action against any of the FhG Patent Rights or against any of the WORLDSPACE Patent Rights, or any action challenging the validity of the WORLDSPACE Information, or otherwise disputes the validity of any of the foregoing, including the filing of a revocation or nullity action, WORLDSPACE may terminate this Agreement.

9.5 Termination of Sublicense. WORLDSPACE shall keep in force and effect the Patent License Agreement between TCE and WORLDSPACE for the term of this Agreement and the sublicense granted hereunder shall not be terminated unless WORLDSPACE obtains a license agreement in favor of BPL for the reminder of the term under this Agreement.

9.6 Assignment. Either Party may terminate this Agreement if the other attempts to assign it in violation of Article 11.

9.7 Force Majeure. Either Party may terminate this Agreement for Force Majeure in accordance with Article 13.9.

9.8 Availability of Service. Notwithstanding the termination of this Agreement, WORLDSPACE shall provide the WORLDSPACE Service for a minimum period of twelve (12) years from the Effective Date.

10. POST-TERMINATION

10.1 Cessation of Use. Following any expiration or termination of this Agreement, BPL will (i) stop using the WORLDSPACE Marks, (ii) stop using any of the WORLDSPACE Information, and (iii) immediately provide WORLDSPACE with all documents (including copies) in BPL’s possession containing any WORLDSPACE Information; provided that BPL may continue to exercise its rights hereunder to the extent reasonably necessary to fulfill any binding commitments existing as of the date of expiration or termination, or to otherwise liquidate BPL’s inventory of WORLDSPACE Receivers on hand as of the date of expiration or termination, subject in all cases to BPL’s obligation to abide by the quality standards imposed by this Agreement, and to pay royalties as provided herein.

10.2 Accrued Liability. Following any expiration or termination of this Agreement, neither Party will have any further rights or obligations hereunder except that: (i) such expiration or termination will not relieve either Party of any liability accrued prior to such expiration or termination; and (ii) such expiration or termination will not affect the continued operation or enforcement of any provision of this Agreement which by its express terms or by reasonable implication is to survive any expiration or termination.

11. ASSIGNMENT

12. SETTLEMENT OF DISPUTES

12.1 Amicable Resolution. The Parties will endeavor to resolve amicably any dispute arising out of this Agreement within thirty (30) days of receipt of notice of such dispute. If the Parties are unable to resolve such dispute within thirty (30) days, then they may refer the dispute to an independent third party who will, within a further thirty (30) days, review the dispute and recommend a resolution thereto. If the Parties cannot agree on such third party, or either Party disagrees with such third party’s recommendation, then Article 12.2 will apply.

12.2 Formal Arbitration.

12.2.1 All disputes arising in connection with this Agreement not resolved pursuant to Article 12.1 will be finally settled under the Arbitration and Conciliation Act of 1996 by one or more arbitrators appointed in accordance with such Act. If there is any conflict between the Act and this Agreement, the provisions of this Agreement will govern.

12.2.2 The arbitration proceedings will take place in Bangalore and will be in English.

12.2.3 Nothing in this Article 12 will preclude either Party from seeking equitable relief from a court for the other Party’s breach of its obligations set forth in Article 6.

12.2.4 Pending a decision by the arbitrators as referred to in this Article 12, each Party will, unless the other otherwise directs, fulfill all of its obligations hereunder, including, to the extent reasonably practical, the obligation to take steps

necessary during the arbitration proceedings to ensure that the Work will be delivered within the time stipulated or within such extended time as may be allowed.

13. GENERAL PROVISIONS

13.1 Required Permits and Licenses. BPL will obtain and pay for any permits and the like relating to the sale of the WORLDSPACE Receivers; provided that WORLDSPACE will cooperate as necessary in such efforts. The Parties will comply with all applicable export compliance laws.

13.2 Notices. All communications hereunder will be given in English by letter, facsimile or E-mail directed,

in respect of WORLDSPACE to:

WorldSpace India Private Limited

Shankarnarayana Towers, 9^th Floor

25/2, M. G. Road

Bangalore – 560 001

India


Attention:		D. Venugopal – Vice President, Operations
Telephone:		+91-80-532 1955-59
Facsimile:		+91-80-509 5457/559 5182
E-mail:		dvenugopal@worldspace.com

and in respect of BPL to:

BPL Limited

BPL Towers

13, Kasturba Road

Bangalore – 560 001

India


Attention:		L.H. Bhatia – Director, Sales
Telephone:		+91-80-227 0071
Facsimile:		+91-80-221 3929
E-mail:		lh.bhatia@bplmail.com

or such other addresses as either Party may have previously specified in the manner set forth above.

13.3 Amendment. Except as otherwise specifically provided herein, this Agreement may be modified only by the Parties’ duly authorized representatives in a writing stating that the modification is an “Amendment to the Standard WorldSpace Receiver Development, Production, Marketing and License Agreement.”

13.4 Non-Waiver. If at any time a Party elects not to assert its rights under any provision of this Agreement, it will not be construed as a waiver of any of its rights hereunder.

13.5 Governing Law. This Agreement will be governed by the laws of India, without giving effect to its conflicts of law provisions.

13.6 Governmental Approvals. This Agreement will not be effective until it has received any necessary governmental or other administrative approvals. If any such necessary approval has not been obtained within ninety (90) days following the Effective Date, this Agreement will be void, as if it had never been signed.

13.7 Severability. Should any part of this Agreement be held unenforceable in any jurisdiction, the validity of the remaining parts will not be affected.

13.8 Entire Agreement. This Agreement embodies the Parties’ entire understanding related to the subject matter hereof and supersedes any prior agreements or understandings between the Parties relating hereto, except that information that has been disclosed pursuant to the Confidentiality Agreement that the Parties previously entered into will henceforth be treated as though disclosed under this Agreement.

13.9 Force Majeure.

13.9.1 Neither Party will be liable to the other for any failure of, or delay in, its performance hereunder due to causes beyond its reasonable control, including acts of God, war, labor disputes, government intervention and catastrophic phenomena such as fire, flood, and earthquake.

13.9.2 For a Party to claim Force Majeure hereunder, it must notify the other Party within five (5) days of the commencement of the Force Majeure, detailing the cause of the Force Majeure, the date the Force Majeure began, and the anticipated length of the Force Majeure. If: (i) the notice provides that the Force Majeure will last for more than sixty (60) days; and (ii) the Force Majeure in fact lasts for more than sixty (60) days, the Party not claiming the Force Majeure may terminate this Agreement by written notice to the other Party.

13.10 Attorney’s Fees. If a dispute arises regarding this Agreement, the prevailing Party will be entitled to reasonable attorney’s fees and costs incurred.

13.11 Captions. The captions contained in this Agreement are inserted for convenience of reference only and will not in any way affect the interpretation of the provisions captioned.

13.12 Governing Language. The official language of this Agreement is the English language and all notices, reports, orders, instructions, literature, records and other written materials pertaining to this Agreement will be maintained and delivered in the English language.

13.13 Execution. This Agreement may be executed in two signed counterparts, each of which will constitute an original.

13.14 Press Releases. Neither Party will issue a press release or make any statement to the press related to the subject matter hereof without the other Party’s prior consent.

THE PARTIES, INTENDING TO BE LEGALLY BOUND, have executed this Agreement as of the date first written above.


WORLDSPACE INDIA PRIVATE LIMITED		BPL LIMITED

By:	/s/ MATHEWKUTTY SEBASTIAN	By:	/s/ L.H. BHATIA
	Mathewkutty Sebastian		L.H. Bhatia
	Director		Director

Date:		Date:

EX-23.2 15 dex232.htm CONSENT OF GRANT THORNTON LLP Consent of Grant Thornton LLP

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our reports dated March 31, 2005, accompanying the financial statements and schedules of WorldSpace, Inc. contained in the Registration Statement and Prospectus. We consent to the use of the aforementioned reports in the Registration Statement and Prospectus, and to the use of our name as it appears under the caption “Experts.”

/S/ GRANT THORNTON LLP

Vienna, Virginia

April 13, 2005

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