XM Radio 1999 Annual Report Download - page 42

40 XM RADiO
approximately 8.6 million shares of AMSC’s common stock. Additionally, the Company issued an aggregate
$250.0 million of Series A subordinated convertible notes (see note 4(e)) to several new investors and used
$75.0 million of the proceeds it received from the issuance of these notes to redeem certain outstanding loan
obligations owed to WSI. As a result of these transactions, as of July 7, 1999, AMSC owned all of the issued
and outstanding stock of the Company. Concurrent with AMSC’s acquisition of the remaining interest in the
Company, the Company recognized goodwill and intangibles of $51,624,000, which has been allocated as
follows:
(in thousands)
FCC license .......................................................... $ 25,024
Goodwill ............................................................... 13,738
Programming agreements ..................................... 8,000
Receiver agreements ............................................ 4,600
Other intangibles................................................... 262
.......................................................................... $ 51,624
(d) Notes to Related Party
On January 15, 1999, the Company issued a convertible note maturing on September 30, 2006 to AMSC for
$21,419,000. This note carried an interest rate of LIBOR plus five percent per annum and was convertible at a
price of $16.35 per share. On July 7, 1999 the Company amended the convertible note agreement with AMSC
to change the maturity date to December 31, 2004, modified the conversion provisions to Class B common
stock at a price of $16.35 per share and the conversion of the accrued interest in Class B common stock at a
price of $9.52 per share.
Following the WorldSpace Transaction, the Company issued a convertible note maturing December 31, 2004 to
AMSC for $81,676,000 in exchange for the $54,536,000 subordinated convertible notes payable, $6,889,000
in demand notes, $20,251,000 in accrued interest and all of WSI’s outstanding options to acquire the
Company’s common stock. This note bore interest at LIBOR plus five percent per annum. The note was
convertible at AMSC’s option at $8.65 per Class B common share. The Company took a one-time $5,520,000
charge to interest due to the beneficial conversion feature of the new AMSC note.
These notes, along with $3,870,000 of accrued interest were converted into 11,182,926 shares of Class B
common stock upon the initial public offering.
(e) Issuance of Series A Subordinated Convertible Notes of the Company to New Investors
At the closing of the WorldSpace Transaction, the Company issued an aggregate $250.0 million of Series A
subordinated convertible notes to six new investors – General Motors Corporation, $50.0 million; Clear Channel
Investments, Inc., $75.0 million; DIRECTV Enterprises, Inc., $50.0 million; and Columbia Capital, Telcom
Ventures, L.L.C. and Madison Dearborn Partners, $75.0 million. The Series A subordinated convertible notes
issued by the Company are convertible into shares of the Company’s Series A convertible preferred stock (in the
case of notes held by General Motors Corporation and DIRECTV) or Class A common stock (in the case of notes
held by the other investors) at the election of the holders or upon the occurrence of certain events, including an
initial public offering of a prescribed size. The conversion price is $9.52 aggregate principal amount of notes for
each share of the Company’s stock. These notes, along with $6,849,000 of accrued interest, were converted
into 16,179,755 shares of Class A common stock and 10,786,504 shares of Series A preferred stock upon the
initial public offering.
(5) Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, short-term investments, receivables, accounts payable,