SIRIUS SATELLITE RADIO TO GO NATIONAL ONE MONTH EARLY

Decision to accelerate national debut came after company made “significant progress in many of the success-defining areas we targeted,” Clayton said. Contrary to phased regional rollout discussed at CES, company said it now would pursue state-by-state introduction of service starting in April, reaching total of 18 states by May 1. States are Ariz., Ark., Colo., Ia., Ida., Kan., La., Minn., Mo., Mont., Neb., Nev., N.D., S.D., Okla., Utah. Additional states in Midwest and South will follow, as will states in big population areas in East and West.

Clayton said brief experience since Feb. 14 showed satellite radio was “shaping up to be one of the most successful consumer electronics products ever introduced to the buying public.” He said company wouldn’t discuss actual number of subscriber activations until release of first- quarter results when Sirius would have more data from which to draw conclusions. But he said fact that activations thus far had numbered in “the hundreds” was in line with expectations, while magnitude of consumer satisfaction and fact that Sirius satellites, terrestrial repeaters and receivers had performed “robustly” had exceeded expectations.

Sirius receivers are available in more than 200 storefronts at present, total that’s expected to reach 3,500 by national availability July 1 and again to 4,000-4,500 by year-end, Exec. Vp-Sales & Mktg. Guy Johnson told analysts. He estimated 15,000 Sirius receivers were in “pipeline” now, and expected 40,000-50,000 to be available by end of June. Clayton didn’t deny that accelerated national launch schedule would tax receiver makers’ ability to bring product to market in volumes needed, but said receiver partners had expressed confidence they would meet challenge. Clayton said spot shortages of Clarion and Kenwood receivers had been reported since Feb. 14 but supplies of Jensen radios had been more plentiful.

In its other big announcement, Sirius said it achieved “favorable renegotiation” of covenants in its $150 million Lehman Bros. loan agreement, including elimination of requirements that it achieve 200,000 activated subscriptions and minimum cash flow of $4,425,000 by Dec. 31. New covenant requirements kick in at close of 2003’s first quarter at “materially lower thresholds” than stipulated under old agreement. Moreover, covenants no longer are tied to specific numbers of subscriber activations but to subscription revenue, with requirement that Sirius increase revenue from subscribers each quarter thereafter through loan’s maturity date of Dec. 31, 2005. For quarter ending March 31, 2003, minimum revenue target is $2.3 million, which CFO John Scelfo told analysts was consistent with subscriber base of 100,000.

Scelfo told us abandonment of 200,000 target by Dec. 2002 meant Sirius no longer had that benchmark “hanging over our heads” and impeding company’s ability to lure investors. Other covenants, as disclosed in 10-K report filed Wed. with SEC, require that Sirius maintain and improve cash flow results each successive quarter through maturity of loan and not allow cumulative capital expenditures to exceed $100 million for as long as loan is outstanding. However, cap on capital expenditures doesn’t include costs of constructing, launching and insuring replacement satellites or installing terrestrial repeaters, 10-K said.

In return for relaxing of covenants, Sirius must repay portion of loan sooner than under old agreement. It now owes $15 million in 2002 and $25 million in 2003, while old agreement didn’t require first payment until first quarter 2003. However, Sirius has 90 day grace periods for 2002 payments due June 30, Sept. 30 and Dec. 31 and for 2003 payments due March 31 and June 30, 10-K said. Under new terms, Sirius also agreed to cut exercise price of stock under 2.1 million Lehman warrants to $15 per share from $29.

Meanwhile, Clayton, who was appointed Sirius pres.-CEO last Nov., is drawing annual base salary of $600,000 plus options for 750,000 shares at $5.25 per share, SEC filing said. Option will be doubled to 1.5 million shares at $5.25 on first anniversary Nov. 26, 2002, filing said. Clayton also is eligible for bonuses of 50%, 75% or 100% of base salary for performance targets to be defined by Sirius board as “threshold,” “desired” or “outstanding.” Company also agreed to reimburse Clayton for “reasonable costs” of one- bedroom apartment in metropolitan N.Y.C., and to repay him costs of round-trip coach-class air fare between N.Y.C. and his home in Rochester, N.Y. Employment agreement expires Dec. 31, 2004. Agreement with Johnson pays him annual base salary of $400,000 and other bonuses and stock options, plus reimbursement up to $6,000 for N.Y.C. apartment and for costs of 2 round-trip coach tickets per month between N.Y.C. and his home in British Columbia.