XM Radio 1999 Annual Report Download - page 50

48 XM RADiO
leases as of December 31, 1999 are:
Operating Capital
leases leases
(in thousands)
Year ending December 31:
2000 ..................................................................... $ 755 $ 172
2001 ..................................................................... 2,113 172
2002 ..................................................................... 2,180 86
2003 ..................................................................... 2,248 —
2004 ..................................................................... 2,281 —
Thereafter .............................................................. 14,354 —
Total................................................................ $ 23,931 $ 430
Less amount representing interest ........................... (52)
Present value of net minimum lease payments... 378
Less current maturities............................................ (139)
Long-term obligations....................................... $ 239
Rent expense for 1997, 1998 and 1999 was $0, $231,000 and $649,000, respectively.
In January 2000, the Company established a $3,400,000 letter of credit as a security deposit for one of its
leases for office space.
(l) Prior Litigation
On January 12, 1999, Sirius Radio, the other holder of an FCC satellite radio license, commenced an action against
the Company in the United States District Court for the Southern District of New York, alleging that the Company was
infringing or would infringe three patents assigned to Sirius Radio. In its complaint, Sirius Radio sought money
damages to the extent the Company manufactured, used or sold any product or method claimed in their patents and
injunctive relief. On February 16, 2000, this suit was resolved in accordance with the terms of a joint development
agreement between the Company and Sirius Radio and both companies agreed to cross-license their respective
property (see note 12(i)). However, if this agreement is terminated before the value of the license has been
determined due to the Company’s failure to perform a material covenant or obligation, then this suit could be refiled.
(13) Secondary Offering and Sale of Series B Convertible Redeemable Preferred Stock
On January 31, 2000, the Company closed on a secondary offering of its Class A common stock and newly
designated Series B convertible redeemable preferred stock. The Company sold 4,000,000 shares of its Class
A common stock for $32.00 per share, which yielded net proceeds of approximately $121,000,000. The
Company concurrently sold 2,000,000 shares of its Series B convertible redeemable preferred stock for $50.00
per share, which yielded net proceeds of approximately $96,300,000. The Series B convertible redeemable
preferred stock provides for 8.25% cumulative dividends that may be paid in Class A common stock or cash.
The Series B convertible redeemable preferred stock is convertible into Class A common stock at a conversion
price of $40.00 per share and is redeemable in Class A common stock on February 3, 2003.
On February 9, 2000, the underwriters exercised a portion of the over-allotment option for 370,000 shares of
Class A common stock, which yielded net proceeds of approximately $11,233,000.
(14) Private Units Offering
On March 15, 2000 the Company closed a private placement of 325,000 units, each unit consisting of $1,000
principal amount of 14% senior secured notes due 2010 of its subsidiary XM Satellite Radio Inc. and one warrant