Preferred Stock Investment Agreement - CD Radio Inc.
CD RADIO INC.
PREFERRED STOCK INVESTMENT AGREEMENT
PREFERRED STOCK INVESTMENT AGREEMENT ("AGREEMENT") dated as of
October 23, 1996 between CD Radio Inc., a Delaware corporation ("CDRD"), and
each entity listed as an investor on Schedule I attached to this Agreement
(each individually an "INVESTOR" and collectively the "INVESTORS").
W I T N E S S E T H:
WHEREAS, CDRD desires to sell and issue to the Investors, and
the Investors wish to purchase from CDRD, up to an aggregate of 2,500,000
shares of CDRD's 5% Delayed Convertible Preferred Stock having the rights,
designations and preferences set forth in the Certificate of Designations of
CDRD (the "CERTIFICATE OF DESIGNATIONS") in the identical form and substance of
Exhibit 1 attached to this Agreement (the "PREFERRED SHARES"), on the terms and
conditions set forth in this Agreement;
WHEREAS, CDRD initially desires to sell to the Investors up to
1,250,000 of the Preferred Shares ("FIRST CLOSING SHARES") in the event that
it, or its subsidiary, receives notice with respect to the authority to provide
satellite digital audio radio services ("SATELLITE DARS LICENSE") that either:
(i) the Federal Communications Commission ("FCC") has issued an order stating
that CDRD has been chosen to receive a Satellite DARS License by virtue of its
having been designated a pioneer and will not need to participate in
competitive bidding for such license (the "PIONEER'S PREFERENCE ORDER"); or
(ii) it is the winning bidder for a Satellite DARS License at the conclusion of
an auction for Satellite DARS Licenses (a "WINNING BID"), all on the terms and
conditions set forth in this Agreement;
WHEREAS, CDRD will have the option to sell to the Investors a
number of Preferred Shares equal to the number of First Closing Shares ("SECOND
CLOSING SHARES") after the First Closing Shares have been sold, subject to the
terms and conditions set forth in this Agreement;
WHEREAS, the Preferred Shares will be convertible into shares
of common stock, par value $.001, of CDRD ("COMMON SHARES") and the Investors
will have registration rights with respect to such Common Shares issuable upon
conversion, and the Preferred Shares will be subject to certain rights of
redemption of CDRD;
NOW, THEREFORE, in consideration of the foregoing premises and
the covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
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ARTICLE I
PURCHASE AND SALE OF PREFERRED SHARES
Section 1.1 Purchase and Sale of Preferred Shares. Upon
the following terms and conditions, CDRD shall issue and sell to each Investor
severally, and each Investor severally shall purchase from CDRD, the number of
First Closing Shares and Second Closing Shares indicated next to such
Investor's name on Schedule I attached hereto.
Section 1.2 Purchase Price. The purchase price for the
Preferred Shares (the "PURCHASE PRICE") shall be $25 per share; provided,
however, that if any Warrants (as defined below) are issued pursuant to Section
3.2, the Purchase Price shall be allocated between the Preferred Shares and the
Warrants such that the Warrants (or fraction thereof) issuable to Investors for
each Preferred Share shall be deemed to have a purchase price of $0.05.
Section 1.3 The First Closing. (a) The closing of the
purchase and sale of the First Closing Shares (the "FIRST CLOSING"), shall take
place at the offices of the Investors' counsel:
(i) at 10:00 am., local time on the latest of:
(A) the earlier of the date: (1) five
business days after the Investors receive
notice from CDRD that the FCC has adopted the
Pioneer's Preference Order or (2) on which
the funds placed in the Escrow Account (as
defined below) are released in accordance
with the terms and conditions of the Escrow
Agreement (as defined below) in connection
with a Winning Bid; and
(B) the date on which the last to be
fulfilled or waived of the conditions set
forth in Article IV hereof and applicable to
the First Closing shall be fulfilled or
waived in accordance herewith; or
(ii) at such other time and place and/or on such
other date as all of the Investors and CDRD may agree.
The date on which the First Closing occurs is referred to herein as the "FIRST
CLOSING DATE."
(b) On the First Closing Date, CDRD shall deliver
to each Investor certificates (with the number of and denomination of such
certificates designated by such Investor) representing the First Closing Shares
and, if Warrants are then issuable pursuant to Section 3.2, such Warrants,
purchased by such Investor under this Agreement registered in the name of such
Investor (or its nominee) or deposit such First Closing Shares and Warrants, if
any, into accounts designated by such Investor, and such Investor shall
deliver, or cause to be delivered, to CDRD the Purchase Price for the number of
First Closing Shares and, if Warrants are then issuable pursuant to Section
3.2, such Warrants, purchased by such Investor under this
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Agreement, by wire transfer in immediately available funds, to such account as
CDRD designates in writing to the Investors not later than 2 business days
prior to the First Closing Date; provided that if the FCC shall not have
adopted the Pioneer's Preference Order, such Purchase Price shall be paid into
an escrow account ("ESCROW ACCOUNT") not later than the later of (x) 5 business
days prior to the announced date, as specified in a written notice from CDRD to
the Investors delivered not later than 2 business days prior to the date such
payment is to be made, of the FCC auction of Satellite DARS Licenses and (y)
the date on which the last to be fulfilled or waived of the conditions set
forth in Section 4.2(a), (b), (c), (d), (f)(i), (g) and (j)(i) through (vii)
hereof and applicable to the First Closing Date shall be fulfilled or waived in
accordance herewith in each case (the "ESCROW DATE"), pursuant to the terms of
that certain Escrow Agreement between CDRD and the escrow agent named therein
("ESCROW AGENT") substantially in the form of Exhibit 2 ("ESCROW AGREEMENT");
provided further that if the Purchase Price is required to be paid into the
Escrow Account as specified in the immediately preceding proviso, CDRD shall
deliver to the Investors copies of all documents and certificates required to
be delivered to the Escrow Agent at least 2 business days prior to release of
funds held in escrow as a condition to release of funds held in escrow in
accordance with the Escrow Agreement. The Escrow Account shall be maintained
at a financial institution reasonably acceptable to the Investors and shall be
an interest bearing account, and the Escrow Agent shall be reasonably
acceptable to the Investors.
(c) On the First Closing Date, CDRD shall pay the
following fees:
(i) the fees of the Escrow Agent; and
(ii) a funding fee to each Investor in the
amount of 2% of the aggregate amount of the
Purchase Price paid or payable by such
Investor for the First Closing Shares and
Warrants, if any, which funding fee shall be
paid directly or from amounts held under the
Escrow Agreement in accordance with the terms
and conditions of the Escrow Agreement.
Section 1.4 The Second Closing. (a) The closing of the
purchase and sale of the Second Closing Shares (the "SECOND CLOSING"), shall
take place at the offices of the Investors' counsel, at 10:00 am., local time
on:
(i) the latest of:
(A) ten days after written notice from CDRD
electing to sell the Second Closing Shares to
Investors ("SECOND CLOSING NOTICE"), which
Second Closing Notice shall be delivered to
the Investors not earlier than the First
Closing Date and not later than fifteen days
after the First Closing Date; and
(B) the date on which the last to be
fulfilled or waived of the conditions set
forth in Article IV hereof and applicable to
the Second Closing shall be fulfilled or
waived in accordance herewith,
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provided such date is not later than 35 days
after the First Closing Date; or
(ii) such other time and place and/or on such other
date as the Investors and CDRD may agree.
The date on which the Second Closing occurs is referred to herein as the
"SECOND CLOSING DATE."
(b) On the Second Closing Date, if any, CDRD
shall deliver to each Investor certificates (with the number of and
denomination of such certificates designated by such Investor) representing the
Second Closing Shares and, if Warrants are then issuable pursuant to Section
3.2, such Warrants, purchased by such Investor under this Agreement registered
in the name of such Investor (or its nominee) or deposit such Second Closing
Shares and Warrants, if any, into accounts designated by such Investor, and
such Investor shall deliver to CDRD the Purchase Price for the number of Second
Closing Shares and Warrants, if any, purchased by such Investor under this
Agreement by wire transfer in immediately available funds to such account as
CDRD designates in writing to the Investors not later than two business days
prior to the Second Closing Date.
Section 1.5 Covenant to Register.
(a) For purposes of this Agreement, unless the
context otherwise requires, the following definitions shall apply:
(i) The terms "REGISTER," "REGISTERED," and
"REGISTRATION" refer to a registration under the Securities Act of 1933, as
amended (the "ACT"), effected by preparing and filing a registration statement
or similar document in compliance with the Act, and the declaration or ordering
of effectiveness of such registration statement, document or amendment thereto.
(ii) The term "REGISTRABLE SECURITIES" means
the securities issuable upon conversion of the Preferred Shares sold to
Investors by CDRD (other than Preferred Shares issuable upon exercise of the
Libra Warrant (as defined in Section 7.1)), or otherwise issuable pursuant to
the Certificate of Designations, and any securities of CDRD or securities of
any successor corporation issued as, or issuable upon the conversion or
exercise of any warrant, right or other security that is issued as a dividend
or other distribution with respect to, or in exchange for, or in replacement
of, the Preferred Shares sold to Investors by CDRD, which are held by a holder
of Registrable Securities and which (i) have not been resold pursuant to an
effective registration statement or pursuant to Rule 144 under the Act or (ii)
are ineligible for resale pursuant to Rule 144(k) under the Act. For purposes
of this Agreement, securities will be considered ineligible for resale pursuant
to Rule 144(k) under the Act unless CDRD's transfer agent has accepted an
instruction from CDRD specifying that such securities are eligible for sale
pursuant to Rule 144(k).
(iii) The term "HOLDER OF REGISTRABLE
SECURITIES" means any Investor, and any subsequent holder of Preferred Shares
or Registrable Securities that purchases
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in the aggregate, including purchases by funds or entities affiliated with such
holder or managed by the same manager or advised by the same advisor as such
holder, at least the lesser of (1) 10,000 of the Preferred Shares (or
Underlying Shares (as defined below) issued upon the conversion of at least
10,000 Preferred Shares) sold to Investors by CDRD, (2) an amount equal to all
of the Preferred Shares sold to an Investor by CDRD (or Underlying Shares
issued upon conversion of all such Preferred Shares), and (3) all Preferred
Shares (or Underlying Shares issued upon conversion of all such Preferred
Shares) then held by an Investor.
(b) (i) CDRD shall, as expeditiously as possible
following the First Closing, file a "shelf" registration statement with the SEC
pursuant to Rule 415 of the Act on Form S-3, or if Form S-3 is not then
available, another appropriate form, covering all the Registrable Securities
(the "INITIAL REGISTRATION"), and shall use its best efforts to cause such
"shelf" registration statement to become effective by the later of (A) the 90th
calendar day after the First Closing Date and (B) February 15, 1997 (the
"INITIAL REGISTRATION DEADLINE"). CDRD shall provide holders of Registrable
Securities reasonable opportunity to review any such registration statement or
amendment or supplement thereto prior to the filing thereof, but in no event
shall such period exceed seven days, and CDRD shall not file any such
registration statement, amendment or supplement to which any holder of
Registrable Securities shall reasonably have objected. If the Registrable
Securities are registered initially on a form other than Form S-3, CDRD shall
use its best efforts to register the Registrable Securities on Form S-3 as soon
as use of such form is permissible.
(ii) Subject to Section 1.5(b)(iii) below,
CDRD may suspend the effectiveness of the registration statement or the use of
any prospectus used in connection with any such registration effected pursuant
to this Subsection (b) only in the event, and for such period of time as, CDRD
concludes in its reasonable judgment is required by applicable securities laws
or the rules and regulations of the Securities and Exchange Commission ("SEC").
CDRD will use its best efforts to cause such suspension to terminate at the
earliest possible date; provided that CDRD shall be permitted to maintain such
suspension if, and only for so long as, the Board of Directors of CDRD shall,
in good faith, determine that the failure to maintain such suspension is
reasonably likely to be seriously detrimental (excluding detriment resulting
from the price of the Common Stock or conversion of the Preferred Shares) to
CDRD or would interfere with a material transaction CDRD is then contemplating.
(iii) If (A) the registration statement
covering all Registrable Securities is not effective by the later of (1) the
90th calendar day after the First Closing Date and (2) February 15, 1997, (B)
at any time after the later of (1) the 90th calendar day after the First
Closing Date and (2) February 15, 1997, (x) CDRD fails to have a sufficient
number of shares of Common Shares authorized or reserved to permit conversion
of all of the then-outstanding Preferred Shares, (y) CDRD fails, for any
reason, to honor any request for conversion of Preferred Shares except as
permitted by the terms and conditions of Section 4 of the Certificate of
Designations, or (z) the Common Shares fail to continue to be listed on the
NASDAQ Small Capitalization Market, the NASDAQ National Market, the New York
Stock Exchange or the American Stock Exchange, or (C) at any time after the
registration statement has been declared effective, the SEC suspends the
effectiveness of the registration statement or CDRD suspends the
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use of the prospectus used in connection with such registration statement for
more than 60 cumulative days (the "CUMULATIVE SUSPENSION") in the aggregate in
any twelve-month period (taking into account all such suspensions) then CDRD
shall (in addition to any other remedies available to such holders at law or
equity, including pursuant to the provisions of Section 7.2(a)) pay to each (in
the case of (B) above) holder of Preferred Shares and (in the case of (A) or
(C) above) holder of Registrable Securities (other than, in the case of (A)
above, any holder all of whose shares of Registrable Securities were included
in a registration statement declared effective by the date therein specified) a
cash payment (the "REGISTRATION PAYMENT AMOUNT") in an amount per share equal
to 3% of the Liquidation Preference (as defined in the Certificate of
Designations) for all Preferred Shares or the equivalent in securities issued
or issuable upon conversion (the "UNDERLYING SHARES") then held by such holder
for each cumulative 30-day period thereafter until such registration statement
is effective or such failure is rectified, or during which the effectiveness of
the registration statement or use of the prospectus shall be suspended (taking
into account all such suspensions); provided, however, that if (A) the
registration statement with respect to the Qualifying Offering (as defined in
the Certificate of Designations) is not declared effective on or before the
fifth business day following the expected effective date specified in the
Effective Date Notice (as defined in the Certificate of Designations), and (B)
the Lock-up Request (as defined in the Certificate of Designations) requests
that the Lock-up is to become effective prior to the effective date of the
registration statement, then the number of days comprising the Cumulative
Suspension Days shall be reduced by one day for each day that holders of
Registrable Securities are subject to the Lock-up (as defined in the
Certificate of Designations). Such cash payments shall accrue at the rate of
1/30th of Registration Payment Amount per day during which such event occurs.
Any cash payment required to be made pursuant to this subsection (iii) shall be
due and payable within 10 days of the end of any month in which any such event
occurs.
(c) Whenever required under this Section to
effect the registration of any Registrable Securities, including without
limitation, the Initial Registration, CDRD shall, as expeditiously as
reasonably possible:
(i) Prepare and file with the SEC a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration to become effective as provided in
Section 1.5(b)(i), and upon the request of any holder of Registrable Securities
keep such registration statement effective for so long as any holder of
Registrable Securities desires to dispose of the securities covered by such
registration statement, or, if earlier, until such Registrable Securities may
be sold under Rule 144(k) (provided that CDRD's transfer agent has accepted an
instruction from CDRD to such effect).
(ii) Prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement and notify the holders of
Registrable Securities of the filing and effectiveness of such registration
statement and any amendments or supplements; provided that CDRD shall not be
obligated to file more than two
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such supplements in any 30-day period to the extent they relate solely to a
transfer by a holder of Registrable Securities.
(iii) Furnish to each holder of Registrable
Securities such numbers of copies of a current prospectus conforming with the
requirements of the Act, copies of the registration statement, any amendment or
supplement thereto and any documents incorporated by reference therein and such
other documents as such holder of Registrable Securities may reasonably require
in order to facilitate the disposition of Registrable Securities owned by such
holder of Registrable Securities; provided that CDRD shall not be obligated to
furnish more than two such supplements in any 30-day period to the extent they
relate solely to a transfer by a holder of Registrable Securities.
(iv) Use its best efforts to register and
qualify the securities covered by such registration statement under such other
securities or "Blue Sky" laws of such jurisdictions as shall be reasonably
requested by the holder of Registrable Securities, provided that CDRD shall not
be required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
(v) Notify each holder of Registrable
Securities immediately of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing, and use its best efforts, subject
to Section 1.5(b)(ii), promptly to update and/or correct such prospectus.
(vi) In connection with an underwritten
offering, furnish, at the request of any holder of Registrable Securities, (1)
an opinion of counsel of CDRD, dated the closing date of such offering, in form
and substance reasonably satisfactory to such holder and its counsel and
covering, without limitation, such matters as the due authorization and
issuance of the securities being registered and compliance with securities laws
by CDRD in connection with the authorization, issuance and registration
thereof, and (2) a letter or letters of CDRD's independent public accountants
in form and substance reasonably satisfactory to the holder, such holder's lead
underwriter and their respective counsel, in each case, covering such matters
as would customarily be covered in an underwritten public offering.
(vii) Use its best efforts to list the
Registrable Securities covered by such registration statement with any
securities exchange or market on which the Common Shares are then listed.
(viii) Make available for inspection by the
holder of Registrable Securities, upon request, all SEC Documents (as defined
below) filed subsequent to the First Closing and require CDRD's officers,
directors and employees to supply all information reasonably requested by any
holder of Registrable Securities in connection with such registration
statement.
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(ix) Subject to any Lock-up in effect,
permit any offering to be underwritten by an underwriter of recognized national
standing that is (A) selected by holders of a majority in interest of Preferred
Shares and Registrable Securities the holders of which have requested to be
included in a registration of CDRD securities and (B) reasonably acceptable to
CDRD, and enter into such agreements with such underwriter (including
agreements to indemnify) and cause delivery of such legal opinions and letters
of independent public accountants as is customary in underwritten public
offerings in accordance with clause (vi), in each case, at CDRD's expense;
provided that any such request may not be made prior to the earlier of (Y)
completion of the Qualifying Offering and (Z) October 16, 1997.
(d) Each holder of Registrable Securities will
furnish to CDRD in connection with any registration under this Section such
information regarding itself, the Registrable Securities and other securities
of CDRD held by it, and the intended method of disposition of such securities
as shall be reasonably required to effect the registration of the Registrable
Securities held by such holder of Registrable Securities. Each Investor shall
provide such data promptly upon request made by CDRD after the First Closing.
The intended method of disposition (Plan of Distribution) of such securities as
so provided by any Investor shall be included without alteration in the
registration statement covering the Registrable Securities and shall not be
changed without the written consent of such Investor.
(e) (i) CDRD shall indemnify, defend and hold
harmless each holder of Registrable Securities that is included in a
registration statement pursuant to the provisions of Subsection (b) (each, a
"SELLING SHAREHOLDER") and each of its officers, directors, employees, agents,
partners or controlling persons (within the meaning of the Act) (each, a
"HOLDER INDEMNIFIED PARTY") from and against, and shall reimburse such Holder
Indemnified Party with respect to, any and all claims, suits, demands, causes
of action, losses, damages, liabilities, costs or expenses ("LIABILITIES") to
which such Holder Indemnified Party may become subject under the Act or
otherwise, arising from or relating to (A) any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any preliminary, final or summary prospectus contained therein or any amendment
or supplement thereto, or (B) the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading; provided, however, that CDRD shall not be liable with respect to
any Selling Shareholder in any such case to the extent that any such liability
arises out of or is based upon an untrue statement or omission so made in such
registration statement, preliminary, final or summary prospectus or amendment
or supplement thereto in reliance upon and in strict conformity with written
information furnished in an instrument duly executed by such Selling
Shareholder specifically for use in the registration statement; provided
further, that CDRD shall not be liable with respect to any Selling Shareholder
in any such case to the extent that any such Liability arises out of or is
based upon an untrue statement or omission made in any preliminary prospectus
if (A) such Selling Shareholder under an obligation to send or deliver a copy
of the prospectus with or prior to the delivery of written confirmation of the
sale of Registrable Securities to the person asserting such Liability who
purchased such Registrable Securities that are the subject thereof from such
Selling Shareholder failed to do so and (B) the prospectus would have
completely corrected such untrue statement or omission and if, having
previously
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been furnished by or on behalf of CDRD with copies of the prospectus so
correcting such untrue statement or omission, and if having been obligated to
deliver such prospectus such Selling Shareholder thereafter failed to deliver
such prospectus prior to or concurrently with the sale of Registrable
Securities to the person asserting such Liability who purchased such
Registrable Securities that are the subject thereof from such Selling
Shareholder; and provided further, that CDRD shall not be liable with respect
to any Selling Shareholder in any such case to the extent that any Liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission in the prospectus, if such untrue statement or
alleged untrue statement, omission or alleged omission is completely corrected
in an amendment or supplement to the prospectus and if, having previously been
furnished by or on behalf of CDRD with copies of the prospectuses so amended or
supplemented, having been advised by or on behalf of CDRD of such correction,
and having been obligated to deliver such prospectuses, such Selling
Shareholder thereafter failed to deliver such prospectus as so amended or
supplemented, prior to or concurrently with the sale of Registrable Securities
to the person asserting such Liability who purchased such Registrable
Securities that are the subject thereof from such Selling Shareholder.
(ii) In the event of any registration under
the Act of Registrable Securities pursuant to Subsection (b), each holder of
such Registrable Securities hereby severally agrees to indemnify, defend and
hold harmless CDRD, and its officers, directors, employees, agents, partners or
controlling persons (within the meaning of the Act) (each, a "CDRD INDEMNIFIED
PARTY") from and against, and shall reimburse such CDRD Indemnified Party with
respect to, any and all Liabilities to which such CDRD Indemnified Party may
become subject under the Act or otherwise, arising from or relating to (A) any
untrue statement or alleged untrue statement of any material fact contained in
such registration statement, any preliminary, final or summary prospectus
contained therein or any amendment or supplement thereto, or (B) the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, that such
holders will be liable in any such case to the extent, and only to the extent,
that any such liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in such
registration statement, preliminary, final or summary prospectus or amendment
or supplement thereto in reliance upon and in strict conformity with written
information furnished in an instrument duly executed by such holder
specifically for use in the preparation thereof; provided further that in no
case shall any such holder be liable in any such case in an amount in excess of
the net proceeds received by such holder upon the sale of Registrable
Securities pursuant to such registration statement, prospectus or amendment or
supplement thereto.
(iii) (A) Promptly after receipt by any
Holder Indemnified Party of notice of the commencement of any action, such
Holder Indemnified Party shall, if a claim in respect thereof is to be made
against CDRD hereunder, notify CDRD in writing thereof but the omission so to
notify CDRD shall not relieve CDRD from any Liability that it may have to the
Holder Indemnified Party other than under this section and shall only relieve
it from any Liability that it may have to the Holder Indemnified Party under
this section if and to the extent CDRD is actually prejudiced by such omission.
In case any such action shall be brought against any Holder Indemnified Party
and such Holder Indemnified Party shall notify CDRD of the
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commencement thereof, CDRD shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with counsel
reasonably satisfactory to such Holder Indemnified Party, and, after notice
from CDRD to the Holder Indemnified Party of its election so to assume and
undertake the defense thereof CDRD shall not be liable to the Holder
Indemnified Party under this section for any legal expenses subsequently
incurred by the Holder Indemnified Party in connection with the defense thereof
other than reasonable costs of investigation and of liaison with counsel so
selected; provided, however, that if the defendants in any such action include
both CDRD and such Holder Indemnified Party and the Holder Indemnified Party
shall have reasonably concluded that there may be reasonable defenses available
to it that are different from or additional to those available to CDRD or if
the interests of the Holder Indemnified Party reasonably may be deemed to
conflict with the interests of CDRD, the Holder Indemnified Party shall have
the right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the reasonable
expenses and fees of such separate counsel and other reasonable expenses
related to such participation to be reimbursed by CDRD as incurred. In
clarification of the foregoing, CDRD shall pay the reasonable expenses and fees
of one separate counsel whose selection is approved by the largest group of
similarly situated Holder Indemnified Parties as measured by the aggregate par
value or principal amount of such Registrable Securities owned by such group.
Any Holder Indemnified Party who chooses not to be represented by the foregoing
separate counsel shall be entitled, at its own expense, to be represented by
counsel of its own selection.
(B) Promptly after receipt by any CDRD
Indemnified Party of notice of the commencement of any action, such CDRD
Indemnified Party shall, if a claim in respect thereof is to be made against
any holder of Registrable Securities hereunder, notify such holder of
Registrable Securities in writing thereof but the omission so to notify such
holder of Registrable Securities shall not relieve such holder of Registrable
Securities from any Liability that it may have to the CDRD Indemnified Party
other than under this section and shall only relieve it from any Liability that
it may have to the CDRD Indemnified Party under this section if and to the
extent such holder of Registrable Securities is actually prejudiced by such
omission. In case any such action shall be brought against any CDRD
Indemnified Party and such CDRD Indemnified Party shall notify such holder of
Registrable Securities of the commencement thereof, such holder of Registrable
Securities shall be entitled to participate in and, to the extent it shall
wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such CDRD Indemnified Party, and, after notice from such holder
of Registrable Securities to the CDRD Indemnified Party of its election so to
assume and undertake the defense such holder of Registrable Securities shall
not be liable to the CDRD Indemnified Party under this section for any legal
expenses subsequently incurred by the CDRD Indemnified Party in connection with
the defense thereof other than reasonable costs of investigation and of liaison
with counsel so selected; provided, however, that if the defendants in any such
action include both the holders of Registrable Securities and such CDRD
Indemnified Party and the CDRD Indemnified Party shall have reasonably
concluded that there may be reasonable defenses available to it that are
different from or additional to those available to the holders of Registrable
Securities or if the interests of the CDRD Indemnified Party reasonably may be
deemed to conflict with the interests of the holders of Registrable Securities,
the CDRD Indemnified Party together with all other defendant CDRD Indemnified
Parties shall have the right to select one separate counsel and to
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assume such legal defenses and otherwise to participate in the defense of such
action, with the reasonable expenses and fees of such separate counsel and
other reasonable expenses related to such participation to be reimbursed by
such holders of Registrable Securities as incurred.
(f) (i) With respect to the inclusion of
Registrable Securities in a registration statement pursuant to Subsection (b),
all fees, costs and expenses of and incidental to such registration, inclusion
and public offering shall be borne by CDRD; provided, however, that any
securityholders participating in such registration shall bear their pro-rata
share of the underwriting discounts and commissions, if any, incurred by them
in connection with such registration.
(ii) The fees, costs and expenses of
registration to be borne by CDRD as provided in this Subsection (f) shall
include, without limitation, all registration, filing and NASD fees, listing
fees, printing expenses, fees and disbursements of counsel and accountants for
CDRD, and all legal fees and disbursements and other expenses of complying with
state securities or Blue Sky laws of any jurisdiction or jurisdictions in which
securities to be offered are to be registered and qualified. Subject to
appropriate agreements as to confidentiality, CDRD shall make available to
counsel for the holders of Registrable Securities its documents and personnel
for due diligence purposes. Except as otherwise provided herein, fees and
disbursements of counsel and accountants for the selling securityholders shall
be borne by the respective selling securityholders.
(g) From and after the date of this Agreement,
CDRD shall not, nor shall it agree to allow the holders of any securities of
CDRD to, include any of their respective securities in any registration
statement filed by CDRD pursuant to Subsection (b) unless such inclusion will
not reduce the amount of the Registrable Securities included therein or in any
underwriting thereunder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of CDRD. CDRD
hereby makes the following representations and warranties to each of the
Investors:
(a) Organization and Qualification. CDRD and
each of its subsidiaries is a corporation duly incorporated and existing in
good standing under the laws of the state of its jurisdiction of incorporation
and has the requisite corporate power to own its properties and to carry on its
business as now being and contemplated to be conducted. CDRD does not have any
subsidiaries other than Satellite CD Radio, Inc., which is wholly-owned by
CDRD. CDRD and each of its subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary other than those in which the failure so to qualify
would not have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any
adverse effect
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on (i) the business, operations, properties, prospects or financial condition
of the entity with respect to which such term is used and which is material to
such entity and other entities controlling or controlled by such entity taken
as a whole, or (ii) the ability of CDRD to perform its obligations hereunder or
under any of the Certificate of Designations, the Escrow Agreement and the
Warrants, if any (collectively, the "OPERATIVE AGREEMENTS).
(b) Authorization; Enforcement. (i) CDRD has
the requisite corporate power and authority to enter into and perform this
Agreement and the other Operative Agreements, to issue the Preferred Shares in
accordance with the terms of this Agreement, and to file the Certificate of
Designations, (ii) the execution and delivery of this Agreement and the other
Operative Agreements by CDRD and the consummation by it of the transactions
contemplated hereby and thereby , including the issuance of the Preferred
Shares and the filing of the Certificate of Designations, have been duly
authorized by all necessary corporate action, and no further consent or
authorization of CDRD or its Board of Directors or stockholders is required,
(iii) this Agreement has been, and, to the extent required to be executed and
delivered pursuant to the terms of this Agreement, the other Operating
Agreements have been or will be, duly executed and delivered by CDRD, and (iv)
this Agreement constitutes and, to the extent required to be executed and
delivered pursuant to the terms of this Agreement, the other Operating
Agreements constitute or will constitute, a valid and binding obligation of
CDRD enforceable against CDRD in accordance with their respective terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized capital stock
of CDRD consists of no less than 50,000,000 Common Shares and no less than
10,000,000 shares of preferred stock; as of October 11, 1996, there are
10,184,748 Common Shares issued and outstanding (CDRD has also given an
instruction to the transfer agent for the Common Shares for the issuance of an
additional 50,643 Common Shares), all of which are listed on the NASDAQ Small
Capitalization Market, and no shares of preferred stock issued and outstanding.
All of the outstanding Common Shares have been validly issued and are fully
paid and non-assessable. No Common Shares are entitled to preemptive rights.
As of October 11, 1996, except as set forth on Schedule 2.1(c) attached to this
Agreement, no Common Shares are entitled to registration rights and there are
no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of CDRD, or contracts,
commitments, understandings or arrangements by which CDRD is or may become
bound to issue additional shares of capital stock of CDRD or options, warrants,
scrip, rights to subscribe to, or commitments to purchase or acquire, any
shares, or securities or rights convertible into shares, of capital stock of
CDRD. CDRD has furnished or made available to the Investors true and correct
copies of CDRD's by-laws as in effect on the date of this Agreement (the
"BY-LAWS") and certificate of incorporation as in effect on the date of this
Agreement (the "CERTIFICATE OF INCORPORATION").
(d) Issuance of Preferred Shares. The issuance
of the Preferred Shares has been duly authorized and, when paid for and issued
in accordance with the terms hereof, the
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Preferred Shares shall be validly issued, fully paid and non-assessable, free
and clear of any liens, claims or encumbrances, and entitled to the rights and
preferences set forth in the Certificate of Designations. The Common Shares
issuable upon conversion of the Preferred Shares or exercise of the Warrants,
if any, are duly authorized and reserved for issuance and, upon issuance in
accordance with the Certificate of Designations or Warrants, as applicable,
will be listed on the NASDAQ Small Capitalization Market, the NASDAQ National
Market, the New York Stock Exchange or the American Stock Exchange, and will be
validly issued, fully paid and non-assessable, free and clear of all liens,
claims, encumbrances and preemptive rights, and the holders shall be entitled
to all rights and preferences accorded to a holder of Common Shares.
(e) No Conflicts. The execution, delivery and
performance of this Agreement by CDRD and the consummation by CDRD of the
transactions contemplated hereby do not and will not (i) result in a violation
of the Certificate of Designations, the Certificate of Incorporation or the
By-Laws or the charter or bylaws of any subsidiary of CDRD, or (ii) conflict
with, or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in or create
a lien under, any agreement, indenture or instrument to which CDRD or any of
its subsidiaries is a party, or result in a violation of any Federal, state,
local or foreign law, rule, regulation, order, judgment or decree (including
Federal and state securities laws and regulations) applicable to CDRD or any of
its subsidiaries or by which any property or asset of CDRD or any of its
subsidiaries is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect);
provided that, for purposes of such representation as to Federal, state, local
or foreign law, rule or regulation, no representation is made herein with
respect to any of the same applicable solely to the Investors and not to CDRD.
CDRD is not required under any Federal, state or local law, rule or regulation
to obtain any consent, authorization or order of, or make any filing (except
for informational filings necessary to maintain the continuing accuracy of
CDRD's application before the FCC), or registration (other than SEC
registrations required pursuant to this Agreement or any approvals that may be
required by the FCC in connection with the conversion of the Preferred Shares
or the exercise of the Warrants) with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Preferred Shares, the Warrants, if any, and the
Common Shares in accordance with the terms of this Agreement, provided that,
for purposes of the representation made in this sentence, CDRD is assuming and
relying upon the accuracy of the relevant representations and agreements of the
Investors herein.
(f) SEC Documents; Financial Statements. The
Common Shares of CDRD are registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and CDRD has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act, including material filed pursuant to Section 13(a) or 15(d), in
addition to one or more registration statements and amendments thereto
heretofore filed by CDRD with the SEC (all of the foregoing including filings
incorporated by reference therein being referred to herein as the "SEC
DOCUMENTS"). CDRD has delivered or made available to the Investors true
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and complete copies of all SEC Documents (including, without limitation, proxy
information and solicitation materials and registration statements) filed with
the SEC since December 31, 1995 and all annual SEC Documents filed with the SEC
since December 31, 1994. CDRD has not provided to the Investor any information
that, according to applicable law, rule or regulation, is required to have been
disclosed publicly by CDRD but that has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder and other Federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of CDRD included in the SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect to such requirements. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of CDRD and its subsidiaries as of the dates thereof and
their consolidated results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) No Material Adverse Change. Since June 30,
1996, the date through which the most recent quarterly report of CDRD on Form
10-Q has been prepared and filed with the SEC, a copy of which is included in
the SEC Documents, no Material Adverse Effect has occurred or exists with
respect to CDRD or its subsidiaries, except as otherwise disclosed or reflected
in other SEC Documents prepared through or as of a date subsequent to June 30,
1996. Notwithstanding the foregoing, no event described in Section 4.2(j)(i)
through (vii) has occurred and is continuing.
(h) Legal Proceedings. There are no actions,
suits, proceedings, arbitrations or investigations by any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or any state, county, city or other political subdivision
pending or, to the knowledge of CDRD, threatened against, relating to or
affecting CDRD or any of its subsidiaries which could reasonably be expected,
individually or in the aggregate with other such actions or proceedings, to
have a Material Adverse Effect; provided that except as otherwise provided in
this Agreement, it is expressly recognized that CDRD is involved in proceedings
with the FCC related to obtaining a Satellite DARS License, and the results of
such proceedings, whether favorable or not, shall be deemed to not have a
Material Adverse Effect for purposes of this Section 2.1(h).
(i) Compliance With Laws and Orders. The
business of CDRD and its subsidiaries is not being conducted in violation of
any law, ordinance or regulations of any governmental entity, or any order of
any governmental or regulatory authority except for
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violations which either singly or in the aggregate do not and will not have a
Material Adverse Effect.
(j) No Undisclosed Liabilities. CDRD and its
subsidiaries have no liabilities or obligations not disclosed in the SEC
Documents, other than those incurred in the ordinary course of CDRD's or its
subsidiaries' respective businesses since June 30, 1996, or which, individually
or in the aggregate, do not or would not have a Material Adverse Effect on CDRD
or its subsidiaries.
(k) No Undisclosed Events or Circumstances. No
event or circumstance has occurred or exists with respect to CDRD or its
subsidiaries or their respective businesses, properties, prospects, operations
or financial condition, that, under applicable law, rule or regulation,
requires public disclosure or announcement by CDRD but that has not been so
publicly announced or disclosed.
(l) No General Solicitation. Neither CDRD, nor
any of its affiliates, or, to its knowledge, any person acting on its or their
behalf (including Libra Investments, Inc. (the "PLACEMENT AGENT")), has engaged
in any form of general solicitation or general advertising (within the meaning
of Regulation D under the Act) in connection with the offer or sale of the
Preferred Shares and Warrants, if any.
(m) No Integrated Offering. Neither CDRD, nor
any of its affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would require
registration of the Preferred Shares under the Act.
(n) Brokers. CDRD has taken no action that would
give rise to any claim by any person for brokerage commissions, finder's fees
or similar payments by any or all of the Investors relating to this Agreement
or the transactions contemplated hereby, except for amounts owing to the
Placement Agent and Batchelder & Partners ("B&P"), which amounts shall be paid
by CDRD.
(o) Intellectual Property. CDRD does not know of
any patents, copyrights or trademarks ("INTELLECTUAL PROPERTY") that CDRD
(and/or its wholly-owned subsidiaries) does not own or have a license to use or
that it (and/or they) will be unable to acquire on reasonable terms, that are
necessary to conduct the business of CDRD and its subsidiaries as it is now
being conducted or as proposed to be conducted. To the best of CDRD's
knowledge, except as described in the SEC Documents, such Intellectual Property
is (or will be) valid and enforceable and the use of such Intellectual Property
by CDRD and/or its subsidiaries does not (or will not) infringe upon or
conflict with any rights of any third party and neither CDRD nor any of its
subsidiaries has received notice of any such infringement or conflict, and
neither CDRD nor any of its subsidiaries has any knowledge of any infringement
of its respective Intellectual Property by any third party.
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(p) FCC Representations. CDRD and its
subsidiaries do not and, after consummation of the transactions contemplated by
this Agreement, will not violate, or otherwise fail to comply with, any FCC
rules or regulations that could prevent CDRD or such subsidiaries from
obtaining a Pioneer's Preference Order or otherwise becoming the owner of a
Satellite DARS License. No holder of Preferred Shares is required or will be
required to obtain any approval, consent, authorization or order of, or make
any filing or registration with, the FCC in order to acquire Preferred Shares
or to exercise any of its rights under this Agreement or the Preferred Shares
or Warrants (if any), except in connection with a conversion of Preferred
Shares or exercise of any Warrants resulting in such holder, or a group of
persons who have an agreement or understanding to act in concert of which such
holder is a member, holding 50% or more of the voting securities of CDRD (such
approval being referred to in this Agreement as "ACQUISITION OF CONTROL
APPROVAL").
Section 2.2 Representations and Warranties of the
Investors. Each of the Investors, severally and not jointly, hereby makes the
following representations and warranties to CDRD:
(a) Authorization; Enforcement. (i) Such
Investor has the requisite power and authority to enter into and perform this
Agreement and to purchase the Preferred Shares and Warrants, if any, being sold
to it hereunder, (ii) the execution and delivery of this Agreement by such
Investor and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate, partnership or limited
liability company action, and (iii) this Agreement constitutes a valid and
binding obligation of such Investor enforceable against such Investor in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies or by other equitable principles of general application.
(b) No Conflicts. The execution, delivery and
performance of this Agreement and the consummation by such Investor of the
transactions contemplated hereby do not and will not (i) result in a violation
of such Investor's organizational documents, or (ii) conflict with any
agreement, indenture or instrument to which such Investor is a party, or (iii)
result in a violation of any law, rule or regulation, or any order, judgment or
decree of any court or governmental agency applicable to such Investor. Such
Investor is not required to obtain any consent or authorization of any
governmental agency in order for it to perform its obligations under this
Agreement.
(c) Investment Representation. Such Investor is
purchasing the Preferred Shares for its own account and not with a view to
distribution in violation of any securities laws. Such Investor has no present
intention to sell the Preferred Shares and such Investor has no present
arrangement (whether or not legally binding) to sell the Preferred Shares to or
through any person or entity; provided, however, that by making the
representations herein, such Investor does not agree to hold the Preferred
Shares for any minimum or other specific term and reserves the right to dispose
of the Preferred Shares at any time in accordance with Federal and state
securities laws applicable to such disposition.
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(d) Accredited Investor. Such Investor is an
"accredited investor" as defined in Rule 501 promulgated under the Act. Such
Investor has such knowledge and experience in financial and business matters in
general and investments in particular, so that such Investor is able to
evaluate the merits and risks of an investment in the Preferred Shares and to
protect its own interests in connection with such investment. In addition (but
without limiting the effect of CDRD's representations and warranties contained
herein), such Investor has received such information as it considers necessary
or appropriate for deciding whether to purchase the Preferred Shares pursuant
hereto. Such Investor acknowledges that no representation or warranty is made
by the Placement Agent or any persons representing the Placement Agent with
respect to CDRD or the sale of the Preferred Shares.
(e) Rule 144. Such Investor understands that
there is no public trading market for the Preferred Shares, that none is
expected to develop, and that the Preferred Shares must be held indefinitely
unless such Preferred Shares are converted into Common Shares or registered
under the Act or an exemption from registration is available. Such Investor
has been advised or is aware of the provisions of Rule 144 promulgated under
the Act.
(f) Brokers. Such Investor has taken no action
that would give rise to any claim by any person for brokerage commissions,
finder's fees or similar payments by CDRD relating to this Agreement or the
transactions contemplated hereby, except for amounts owing to the Placement
Agent and B&P, which amounts shall be paid by CDRD.
(g) Reliance by CDRD. Such Investor understands
that the Preferred Shares are being offered and sold in reliance on a
transactional exemption from the registration requirements of Federal and state
securities laws and that CDRD is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
such Investor set forth herein in order to determine the applicability of such
exemptions and the suitability of such Investor to acquire the Preferred
Shares.
ARTICLE III
COVENANTS
Section 3.1 Registration and Listing. (a) Until the
later of (i) three (3) years after all Preferred Shares have been exchanged
into Common Shares and (ii) if any Warrants have been issued pursuant to
Section 3.2, four (4) years after all Warrants have been exercised, CDRD will
cause the Common Shares to continue to be registered under Sections 12(b) or
12(g) of the Exchange Act, to comply in all respects with its reporting and
filing obligations under the Exchange Act and to not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or
suspend CDRD's reporting and filing obligations under said act. Until the
later of (i) three (3) years after all Preferred Shares have been exchanged
into Common Shares and (ii) if any Warrants have been issued pursuant to
Section 3.2, four (4) years after all Warrants have been exercised, CDRD will
take all action within its power to continue the listing or trading of the
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Common Shares on the NASDAQ Small Capitalization Market, the NASDAQ National
Market, the New York Stock Exchange or the American Stock Exchange, and comply
in all respects with CDRD's reporting, filing and other obligations under the
bylaws or rules of the NASD and NASDAQ and any exchange where the Common Shares
are traded. CDRD will not become a NASDAQ National Market or New York Stock
Exchange or American Stock Exchange listed company unless CDRD has first
obtained requisite shareholder approval concerning the issuance of Common
Shares upon conversion of the Preferred Shares in accordance with any
obligations of CDRD under any applicable agreements with the NASD or NASDAQ.
(b) CDRD shall notify the SEC and NASD,
in accordance with their requirements, of the transactions contemplated by this
Agreement, and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal
and valid issuance of the Preferred Shares and Common Shares issuable upon
conversion thereof to any Investor or subsequent holder.
Section 3.2 Warrants. In the event CDRD or its
subsidiary obtains the right to purchase a Satellite DARS License (by grant of
the Pioneer's Preference Order from the FCC or by submission of a Winning Bid)
and the purchase price payable by CDRD for such license exceeds $225,000,000,
CDRD promptly shall issue to the Investors warrants in the form of Exhibit 3
(the "WARRANTS") to purchase a number of Common Shares, at an exercise price of
$10 per share, in an amount equal to 8,333.33 multiplied by the quotient of (i)
the number of First Closing Shares divided by (ii) 40,000, for each $50,000,000
increment (or portion thereof) by which such purchase price exceeds
$225,000,000. The Warrants shall be allocated among the Investors pro rata
based on the number of Preferred Shares specified on Schedule I for each
Investor.
Section 3.3 Increase in Authorized Shares. CDRD shall
cause its number of authorized Common Shares to be increased to at least
100,000,000 on or before the later of (a) February 15, 1997 and (b) the 90th
calendar day after the First Closing Date. CDRD shall at all times reserve and
keep out of its authorized but unissued Common Shares, solely for the purpose
of effecting the conversion of the Preferred Shares and exercise of the
Warrants, if any, at least such number ("MINIMUM RESERVE NUMBER") that is the
greater of (x) 10,000,000 Common Shares (subject to appropriate adjustment for
stock splits, stock dividends and similar events) and (y) 1.5 times the number
of its Common Shares as shall from time to time be sufficient to effect the
conversion of all outstanding Preferred Shares and exercise of all outstanding
Warrants, if any. If (i) the number of authorized Common Shares is not so
increased by such date, or (ii) the number of Common Shares is not so reserved
at any time, then CDRD shall, in addition to any other remedies available to
such holders at law or equity, pay each holder of Preferred Shares a cash
payment in an amount per share equal to (1) the Securities Deficiency
Percentage (as defined herein) multiplied by (2) 3% of the Liquidation
Preference for all Preferred Shares (or the equivalent in Underlying Shares)
then held by such holder for each 30-day period thereafter until such number of
Common Shares authorized is so increased or so reserved; provided that such
cash payment shall not apply to the extent CDRD is required to make cash
payments pursuant to Section 1.5(b)(iii)(x). Such cash payment shall be
pro-rated as to a period of less than 30 days. Any cash payment required to be
made pursuant to this subsection 3.3 shall be due
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and payable within 10 days of the end of any month in which such event occurs.
In the event there is a Deficiency (as defined in the Certificate of
Designations), CDRD shall comply with its obligations pursuant to Section 4(i)
of the Certificate of Designations to purchase Preferred Shares as and to the
extent required by the Certificate of Designations. For purposes of this
Section 3.3, the "SECURITIES DEFICIENCY PERCENTAGE" shall be equal to (1) the
Minimum Reserve Number minus the number of shares of Common Stock authorized
and reserved by CDRD at the time of determination divided by (2) the Minimum
Reserve Number.
Section 3.4 Replacement Certificates. The certificate(s)
representing the Preferred Shares held by any Investor (or then holder) may be
exchanged by such Investor (or such holder) at any time and from time to time
for certificates with different denominations representing an equal aggregate
number of Preferred Shares, as requested by such Investor (or such holder) upon
surrendering the same. No service charge will be made for such registration of
transfer or exchange.
Section 3.5 Receipt of FCC Order. If the First Closing
occurs, CDRD or its wholly-owned subsidiary shall immediately take such actions
as required and when required, and otherwise use its best efforts, to acquire
the Satellite DARS License on the terms and conditions set forth in the
Pioneer's Preference Order or the Winning Bid, as applicable.
Section 3.6 Limitation on Conversion Rights.
Notwithstanding anything to the contrary contained in this Agreement, at any
time prior to the giving of a Redemption Notice (as defined in the Certificate
of Designations), no Preferred Share may be converted by an Investor to the
extent that, following conversion of such Preferred Share such Investor and its
affiliates (within the meaning of the Exchange Act) shall be the beneficial
owners (as defined in Rule 13d-3 under the Exchange Act) of more than the
percentage of the Common Shares indicated by the Investor by marking the
applicable box below the name of such Investor on the signature pages of this
Agreement; provided that each Investor shall have the right to waive this
restriction upon 61 days prior notice to CDRD (or such lesser number of days
prior notice as shall be indicated by such Investor on its signature page
hereto). A transferee of Preferred Shares shall not be bound by this provision
unless it expressly agrees to be so bound.
Section 3.7 Transfer of License and Subsidiary. In the
event that CDRD or its subsidiary obtains a Satellite DARS License, neither
CDRD nor any of its subsidiaries shall, prior to a Qualifying Offering (as such
term is defined in the Certificate of Designations), transfer or assign such
Satellite DARS License or any interest therein or the subsidiary (or any
interest therein) of CDRD that holds such license, or any material assets used
in connection with the employment of such license, to any third party.
Section 3.8 Additional Financings. Prior to a Qualifying
Offering (as such term is defined in the Certificate of Designations), CDRD
shall not undertake to conduct any debt or equity financing that is not either
pari passu or junior, in seniority, structure and maturity, to the Preferred
Shares. Prior to a final determination of whether the Pioneer's Preference
Order will be granted to CDRD, in addition to the limitations imposed by the
prior sentence, CDRD shall
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not issue or commit to issue any securities or evidences of indebtedness, other
than any issuance of Common Shares or the sale of the Preferred Shares pursuant
to this Agreement.
Section 3.9 Wire Transfers. All payments required to be
made by CDRD under this Agreement or the Certificate of Designations, shall,
upon the written request of any such payee, be made by wire transfer to the
account designated by such payee.
Section 3.10 Like Treatment of Holders. Neither CDRD nor
any of its affiliates shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any holder
of Registrable Securities or holder of Preferred Shares for or as an inducement
to any consent, waiver or amendment of any terms or provisions of the
Registrable Securities or Preferred Shares, this Agreement or the Escrow
Agreement (if any), unless such consideration is offered to be paid or agreed
to be paid to all holders of Registrable Securities and holders of Preferred
Shares which so consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or agreement. Neither
CDRD nor any of its affiliates shall, directly or indirectly, redeem or
repurchase any Registrable Securities or Preferred Shares unless such offer of
redemption or repurchase is made pro rata to all holders of Registrable
Securities and holders of Preferred Shares on identical terms.
Section 3.11 FCC Approval. CDRD shall, with the
reasonable cooperation of the holders of the Preferred Shares, promptly and
expeditiously after the First Closing apply for, and use its best efforts to
obtain, any and all approvals, consents, authorizations or orders of, or make
any filings or registrations with, the FCC (other than Acquisition of Control
Approval) necessary to permit the conversion of all Preferred Shares in
accordance with the Certificate of Designations and the exercise of all
Warrants (if any) (the "FCC APPROVAL"). If the FCC Approval is not obtained by
the later of (1) the 90th calendar day after the First Closing Date and (2)
February 15, 1997, CDRD shall, in addition to any other remedies available to
such holders at law or equity (including pursuant to the provisions of Section
7.2(a)), pay each holder of Preferred Shares a cash payment in an amount per
share equal to 3% of the Liquidation Preference for all Preferred Shares (or
the equivalent in Underlying Shares) then held by such holder for each 30-day
period thereafter until such FCC Approval is obtained. Such cash payment shall
be pro-rated as to a period of less than 30 days. Any cash payment required to
be made pursuant to this subsection 3.3 shall be due and payable within 10 days
of the end of any month in which such event occurs. If the FCC Approval is not
obtained by a date that is 270 days after the Initial Registration Deadline,
then CDRD shall comply with its obligations as and to the extent required by
Section 4(a) of the Certificate of Designations.
Section 3.12 Release of Escrowed Property to Investors.
If any of the events itemized in Section 3(b)(i) or (ii) of the Escrow Agreement
occur, then CDRD shall execute and deliver the certificate required by Section
4(b)(ii) of the Escrow Agreement.
Section 3.13 Additional Satellite DARS Licenses. If (a)
the Second Closing has occurred, and (b) at any time within the earlier of
twelve months after the Second Closing or the closing of a Qualified Offering,
(i) more than two licenses (including the license awarded to CDRD) have been
awarded by the FCC that permit the recipients thereof to provide Satellite
20
<PAGE> 21
DARS services, and (ii) more than two recipients of such licenses (including
CDRD) commence or announce an intention to commence Satellite DARS services
using their license, then CDRD shall comply with its obligations as and to the
extent required by Section 4(l) of the Certificate of Designations.
ARTICLE IV
CONDITIONS
Section 4.1 Conditions Precedent to the Obligation of
CDRD to Sell the Preferred Shares. The obligation under this Agreement of CDRD
to issue and/or sell the First Closing Shares or the Second Closing Shares to
the Investors is subject to the satisfaction, at or before the First Closing
Date or the Second Closing Date, as applicable, of each of the conditions set
forth below; provided that CDRD shall be under no obligation to issue and/or
sell the Second Closing Shares unless and until it shall have given the Second
Closing Notice. These conditions are for CDRD's sole benefit and may be waived
by CDRD in whole or in part at any time in its sole discretion.
(a) Accuracy of the Investors' Representations
and Warranties. The representations and warranties of each Investor shall be
true and correct in all material respects as of the date when made and as of
the First Closing Date or the Second Closing Date, as applicable, as though
made at that time (except for representations and warranties that speak as of a
particular date).
(b) Performance by the Investors. Each Investor
shall have performed all agreements and satisfied all conditions required to be
performed or satisfied by such Investor at or prior to the First Closing.
(c) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
Section 4.2 Conditions Precedent to the Obligation of the
Investors to Purchase the Preferred Shares. The obligation under this
Agreement of each Investor to acquire and pay for the First Closing Shares or
the Second Closing Shares is subject to the satisfaction, at or before the
First Closing Date or the Second Closing Date, as applicable, of each of the
conditions set forth below. These conditions are for the Investors' sole
benefit and may be waived by any Investor in whole or in part at any time in
its sole discretion with respect to such Investor's obligation to acquire and
pay for the First Closing Shares or the Second Closing Shares, as applicable.
(a) Accuracy of CDRD's Representations and
Warranties. The representations and warranties of CDRD shall be true and
correct in all material respects as of the date when made and (except with
respect to the representations and warranties made in the
21
<PAGE> 22
first sentence of Section 2.1(g) and in Section 2.1(j)) as of the Escrow Date,
First Closing Date or Second Closing Date, as applicable, as though made at
that time (except for representations and warranties that speak as of a
particular date).
(b) Performance by CDRD. CDRD shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by CDRD at or prior to such date including, without limitation,
delivering all certificates required by Section 1.3(b) or Section 1.4(b), as
applicable.
(c) NASDAQ. From the date of this Agreement to
the Escrow Date, the First Closing Date or Second Closing Date, as applicable,
trading in CDRD's Common Shares shall not have been suspended by the SEC or the
NASDAQ Small Capitalization Market, and trading in securities generally as
reported by NASDAQ shall not have been suspended or limited, and the Common
Shares shall not have been delisted from any exchange or market on which they
are listed on the date of this Agreement.
(d) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(e) Opinion of Counsel. At the First Closing
Date or the Second Closing Date, as applicable, the Investors shall have
received an opinion of counsel to CDRD substantially to the effect of Section
2.1(a) through (e) (subject to reasonable qualifications, including reasonable
knowledge qualifications), and such other opinions, certificates and documents
as the Investors or their counsel shall reasonably require incident to the
First Closing or the Second Closing, as applicable.
(f) Escrow Agreement. If the FCC does not adopt
the Pioneer's Preference Order, (i) CDRD and the Escrow Agent shall have
executed and delivered the Escrow Agreement in the form and substance of
Exhibit 2, and (ii) the conditions contained in such agreement for the release
of funds to CDRD shall have been satisfied or waived in accordance with such
agreement.
(g) Officer's Certificate. At the Escrow Date,
the First Closing Date or the Second Closing, as applicable, CDRD shall have
delivered to the Investors a certificate in form and substance reasonably
satisfactory to the Investors, executed by an executive officer of CDRD,
certifying as to satisfaction of conditions of the Escrow Date, the First
Closing or the Second Closing, as applicable, incumbency of signing officers,
the charter, by-laws and the authorizing resolutions of CDRD.
(h) Certificate of Designations. The Certificate
of Designations shall have been filed and become effective with the Secretary
of State of the State of Delaware and the Investors shall have received copies
of the filed Certificate of Designations.
22
<PAGE> 23
(i) Warrants. If the purchase price for the
Satellite DARS License to be purchased by CDRD has been finally established and
such price exceeds $225,000,000, the Warrants shall have been delivered by CDRD
to the Investors.
(j) Lack of Adverse Changes. None of the
following events shall have occurred: (i) the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of CDRD or any of
its subsidiaries or of all or any substantial part of any of their respective
property and assets, (ii) CDRD or any of its subsidiaries shall have become
generally unable to pay its debts as they become due, (iii) CDRD or any of its
subsidiaries shall have made a general assignment for the benefit of its
creditors, (iv) CDRD or any of its subsidiaries shall have commenced a
voluntary case or had an involuntary case commenced against CDRD or any of its
subsidiaries under the Federal Bankruptcy Code or similar law or regulation,
(v) CDRD or any of its subsidiaries shall have filed a petition seeking to take
advantage of any law providing for the relief or debtors, (vi) CDRD or any of
its subsidiaries or any of their respective management shall have become
subject to any criminal proceedings or investigations or any enforcement or
disciplinary proceedings or investigations initiated by any governmental
authority having jurisdiction over CDRD or any of its subsidiaries or such
person, respectively, (vii) any announcement shall have been made by the FCC
that, or to the effect that, CDRD will not receive a Satellite DARS License, or
(viii) taking into account any cash or binding commitments for financing
(either of which may only be raised through financings that are either junior
to or pari passu with the Preferred Shares in seniority, structure and maturity
("PERMITTED FINANCINGS")) and any deferred payment terms available to CDRD in
connection with its acquisition of a Satellite DARS License ("DEFERRED PAYMENT
TERMS"), CDRD shall have insufficient liquidity to satisfy all of its scheduled
principal and interest obligations, including, without limitation, obligations
under any Permitted Financings or Deferred Payment Terms, as such obligations
become due during the 13 full months immediately following what would otherwise
be the First Closing Date.
(k) Second Closing Notice. With respect to the
Second Closing, Investors shall have received the Second Closing Notice not
more than fifteen days after the First Closing Date.
(l) Election. With respect to the Second
Closing, if (i) the FCC shall have granted the Pioneer's Preference Order or
CDRD or its subsidiary shall have submitted a Winning Bid to acquire a
Satellite DARS License and (ii) the FCC shall have awarded more than two
Satellite DARS Licenses or not have announced that it will award no more than
two such licenses, then the Investors shall have approved the Second Closing by
a vote of Investors holding not less than 67% of the First Closing Shares. The
Investors' right of approval pursuant to this section shall not arise solely by
virtue of a decision of the FCC to open the portions of the spectrums from 2305
Mhz to 2320 Mhz and 2345 Mhz to 2360 Mhz previously allocated to Satellite DARS
for auction to winning bidders regardless of proposed use unless, prior to the
Second Closing, a license has been awarded by the FCC which permits the use of
such spectrum for Satellite DARS services and the recipient thereof has
commenced, or announced an intention to commence, use of such license for
Satellite DARS services.
23
<PAGE> 24
ARTICLE V
LEGEND AND SHARES
Each certificate representing the Preferred Shares shall be
stamped or otherwise imprinted with a legend substantially in the following
form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
CDRD agrees to reissue certificates representing the Preferred
Shares without the legend set forth above at such time as (i) the holder
thereof is permitted to dispose of such Preferred Shares pursuant to Rule
144(k) under the Act, (ii) such Preferred Shares are sold to a purchaser or
purchasers who (in the opinion of counsel to the seller or such purchaser, in
form and substance reasonably satisfactory to CDRD and its counsel) are able to
dispose of such shares publicly without registration under the Act, or (iii)
such Preferred Shares are registered under the Act. CDRD agrees to issue any
Common Shares issuable upon conversion of Preferred Shares if any, without any
legend that indicates a restriction on transferability at such times as (i) the
holder thereof is permitted to dispose of such Common Shares pursuant to Rule
144(k) under the Act, (ii) such Common Shares are sold to a purchaser or
purchasers who (in the opinion of counsel to the seller or such purchaser, in
form and substance reasonably satisfactory to CDRD and its counsel) are able to
dispose of such shares publicly without registration under the Act, or (iii)
such Common Shares are registered under the Act; provided in the case of clause
(iii), that the holder of such Common Shares or the recipient upon such
conversion represents to CDRD that such holder will only sell such shares, if
at all, pursuant to the plan of distribution described in an effective
registration statement.
ARTICLE VI
TERMINATION
Section 6.1 Termination by Mutual Consent. This
Agreement may be terminated at any time prior to the First Closing by the
mutual written consent of CDRD and all of the Investors.
Section 6.2 Automatic Termination. This Agreement shall
terminate without further action of the parties if the First Closing has not
occurred prior to (i) March 31, 1997 if CDRD has not submitted the Winning Bid
by such date or (ii) April 10, 1997 if CDRD has
24
<PAGE> 25
submitted the Winning Bid or the Pioneer's Preference Order has been adopted,
in each case, prior to March 31, 1997.
Section 6.3 Termination on Failure of Conditions. This
Agreement shall terminate upon notice given to CDRD from a majority in interest
of the Investors (i) not earlier than 5 business days after the conclusion of
an auction for Satellite DARs Licenses if CDRD has failed to meet the
conditions enumerated in Section 1.3(b)(y), (ii) not earlier than 30 calendar
days after a Pioneer's Preference Order has been adopted if CDRD has failed to
meet the conditions enumerated in Section 1.3(a)(i), or (iii) at any time upon
the occurrence and during the continuance for a period of 30 calendar days of
any of the events set forth in Section 4.2(j)(i) through (vii).
ARTICLE VII
MISCELLANEOUS
Section 7.1 Stamp Taxes; Placement Agent Fee. CDRD shall
pay all stamp and other taxes and duties levied in connection with the issuance
of the Preferred Shares and Warrants, if any, pursuant to this Agreement and
the Common Shares issued upon conversion of such Preferred Shares or exercise
of such Warrants. On the First Closing Date and the Second Closing Date, if
any, CDRD shall pay the fee of the Placement Agent in connection with the
transactions contemplated by this Agreement, consisting of (A) a cash payment
of 7.5% of the aggregate gross proceeds received by CDRD from the sale of (1)
the First Closing Shares on the First Closing Date, and (2) the Second Closing
Shares on the Second Closing Date, if any, and (B) a warrant (the "LIBRA
WARRANT") to purchase, at the same purchase price as the purchase price to the
Investors, Preferred Shares in an amount equal to 9% of the cumulative amount
of Preferred Shares issued and sold at (1) the First Closing on the First
Closing Date, and (2) the Second Closing on the Second Closing Date, if any.
Section 7.2 Specific Enforcement, Consent to
Jurisdiction.
(a) CDRD and the Investors acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions of this Agreement, this remedy being in addition to any other remedy
to which any of them may be entitled by law or equity.
(b) CDRD (i) hereby irrevocably submits to the
jurisdiction of the United States District Court, the New York State courts and
other courts of the United States sitting in New York County, New York for the
purposes of any suit, action or proceeding arising out of or relating to this
Agreement and (ii) hereby waives, and agrees not to assert in any such suit
action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in
an inconvenient forum or that the venue
25
<PAGE> 26
of the suit, action or proceeding is improper. CDRD consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing in this paragraph shall affect or limit
any right to serve process in any other manner permitted by law.
Section 7.3 Entire Agreement; Amendment; Additional
Investors. This Agreement, together with the agreements and documents executed
in connection with this Agreement and with such agreements and documents,
contains the entire understanding of the parties with respect to the matters
covered by this Agreement and by such agreements and documents and, except as
specifically set forth in this Agreement or in such agreements and documents,
neither CDRD nor any Investor makes any representation, warranty, covenant or
undertaking with respect to such matters. Except as otherwise provided herein,
no provision of this Agreement may be waived or amended other than by a written
instrument signed by the party against whom enforcement of any such amendment
or waiver is sought. Upon delivery of any such counterpart and acceptance
thereof by CDRD, such additional investor shall be an Investor (such term as
used in this Agreement to include such additional investor) and shall be as
fully a party to this Agreement as if such additional investor were an original
signatory of this Agreement, and no consent of any other Investor shall be
required for such addition.
Section 7.4 Notices. Any notice or other communication
required or permitted to be given under this Agreement shall be in writing and
shall be effective (a) upon hand delivery or delivery by telex (with correct
answer back received), telecopy or facsimile at the address or number
designated below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
to CDRD: CD Radio Inc.
Sixth Floor
1001 22nd Street, N.W.
Washington, D.C. 20037
Fax: (202) 296-6265
Attn: David Margolese
with copies to: Bogle & Gates
2 Union Square
601 Main Street
Seattle, Washington 98101
Fax: (206) 621-2660
Attn: Christopher J. Barry
26
<PAGE> 27
to the Investors: To each Investor at the address
and/or fax number set forth on
Schedule I of this Agreement.
with copies to: Libra Investments, Inc.
11766 Wilshire Boulevard
Suite 870
Los Angeles, California 90025
Fax: (310) 312-5666
Attn: General Counsel
and: Milbank, Tweed, Hadley & McCloy
601 S. Figueroa Street, 30th Floor
Los Angeles, California 90017
Fax: (213) 629-5063
Attn: Eric H. Schunk
Any party to this Agreement may from time to time change its address for
notices by giving at least 10 days' written notice of such changed address to
the other parties to this Agreement.
Section 7.5 Indemnity. In addition to the indemnities
provided in Section 1.5, each party shall indemnify each other party against
any loss, cost or damages (including reasonable attorney's fees) incurred as a
result of such parties' breach of any representation, warranty, covenant or
agreement in this Agreement; provided that in no case shall any Investor be
liable in an amount in excess of the Purchase Price paid by such Investor.
Section 7.6 Waivers. No waiver by any party of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver
of any other provision, condition or requirement of this Agreement, nor shall
any delay or omission of any party to exercise any right under this Agreement
in any manner impair the exercise of any such right accruing to it after such
waiver.
Section 7.7 Headings. The headings in this Agreement are
for convenience only, do not constitute a part of this Agreement and shall not
be deemed to limit or affect any of the provisions of this Agreement.
Section 7.8 Successors and Assigns. Except as otherwise
provided in this Agreement, this Agreement shall be binding upon and inure to
the benefit of the parties to this Agreement and their successors and assigns.
The parties to this Agreement may amend this Agreement without notice to or the
consent of any third party. CDRD may not assign this Agreement or any rights
or obligations under this Agreement without the prior written consent of all
Investors (which consent may be withheld for any reason in such Investor's sole
discretion). Any Investor may assign this Agreement or any rights or
obligations under this Agreement in whole or in part without the consent of
CDRD or any other Investor in connection with any sale or transfer of all or
any part of the Preferred Shares or Warrants, if any, or Underlying Shares
27
<PAGE> 28
held by such Investor; provided that an assignee that is not a holder of
Registrable Securities (as defined in Section 1.5(a)(iii)) will not receive the
rights of a holder of Registrable Securities set forth in Section 1.5.
Section 7.9 No Third Party Beneficiaries. This Agreement
is intended for the benefit of the parties to this Agreement and their
respective permitted successors and assigns and is not for the benefit of, nor
may any provision of this Agreement be enforced by, any other person.
Section 7.10 Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York without regard to such state's principles of conflict of
laws.
Section 7.11 Survival. The representations and warranties
and the agreements and covenants of CDRD and each Investor contained in this
Agreement shall survive the First Closing and the Second Closing.
Section 7.12 Execution. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement, it being understood that all parties need not sign the same
counterpart.
Section 7.13 Publicity. CDRD agrees that it will not
disclose, and will not include in any public or other announcement, the name of
any Investor without its consent, unless and until such disclosure is required
by law or applicable regulation, and then only to the extent of such
requirement.
Section 7.14 Agents. The parties acknowledge and agree
that the Investors are not agents, affiliates or partners of each other, that
all representations, warranties, covenants and agreements of the Investors
under this Agreement are several and not joint, that no Investor shall have any
responsibility or liability for the representations, warrants, agreements, acts
or omissions of any other Investor, and that any rights granted to "Investors"
under this Agreement shall be enforceable by each Investor under this
Agreement.
Section 7.15 Severability; Interpretation. If any
provision of this Agreement is held to be illegal, invalid or unenforceable
under any present or future law, and if the rights or obligations of any party
under this Agreement will not be materially and adversely affected thereby, (a)
such provision will be fully severable, (b) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, and (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance from this Agreement.
28
<PAGE> 29
IN WITNESS WHEREOF, the parties to this Agreement have caused
this Agreement to be duly executed by their respective authorized officers as
of the date of this Agreement.
CDRD:
CD RADIO INC.
By:
-------------------------------
Name:
Its:
29
<PAGE> 30
INVESTORS:
THE VALUE REALIZATION FUND, L.P.
By:
-----------------------------------------
Its General Partner
By:
----------------------------
Name:
-----------------------------
Its:
----------------------------
Investor's address:
c/o Canyon Partners
9665 Wilshire Boulevard, Suite 200
Beverly Hills, CA 90212
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
30
<PAGE> 31
GRS PARTNERS II
By:
-----------------------------------------
Its General Partner
By:
----------------------------
Name:
-----------------------------
Its:
----------------------------
Investor's address:
c/o Canyon Partners
9665 Wilshire Boulevard, Suite 200
Beverly Hills, CA 90212
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
31
<PAGE> 32
THE CANYON VALUE REALIZATION FUND,
(CAYMAN) LTD.
By:
-----------------------------------------
Its General Partner
By:
----------------------------
Name:
-----------------------------
Its:
----------------------------
Investor's address:
c/o Canyon Partners
9665 Wilshire Boulevard, Suite 200
Beverly Hills, CA 90212
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
32
<PAGE> 33
CERBERUS PARTNERS, L.P.
By:
-----------------------------------------
Name: Stephen Feinberg
Title: General Partner
Cerberus Associates, L.P.
General Partner
Cerberus Partners, L.P.
TAX ID# 13-3690298
Investor's address:
950 Third Avenue, 20th Floor
New York, NY 10022
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
CERBERUS INTERNATIONAL, LTD
By:
-----------------------------------------
Name: Stephen Feinberg
Title: Managing Member,
Partridge Hill L.L.C.
Investment Advisor to
Cerberus International
Investor's address:
950 Third Avenue, 20th Floor
New York, NY 10022
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
33
<PAGE> 34
THE COPERNICUS FUND, LP
By:
-----------------------------------------
Its General Partner
By:
----------------------------
Name:
-----------------------------
Its:
----------------------------
Investor's address:
c/o DDJ Capital Management
141 Linden Street, Suite S-4
Wellesley, MA 02181
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
34
<PAGE> 35
THE GALILEO FUND, LP
By:
-----------------------------------------
Its General Partner
By:
----------------------------
Name:
-----------------------------
Its:
----------------------------
Investor's address:
c/o DDJ Capital Management
141 Linden Street, Suite S-4
Wellesley, MA 02181
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
35
<PAGE> 36
DICKSTEIN & CO. L.P.
By:
-----------------------------------------
Its General Partner
By:
----------------------------
Name:
-----------------------------
Its:
----------------------------
Investor's address:
c/o Dickstein Partners, L.P.
9 West 57th Street, Suite 4630
New York, NY 10019
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
36
<PAGE> 37
DICKSTEIN INTERNATIONAL LIMITED
By:
-----------------------------------------
Its General Partner
By:
----------------------------
Name:
-----------------------------
Its:
----------------------------
Investor's address:
c/o Dickstein Partners, L.P.
9 West 57th Street, Suite 4630
New York, NY 10019
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
37
<PAGE> 38
GLOBAL BERMUDA LIMITED PARTNERSHIP
By:
-----------------------------------------
Its General Partner
By:
----------------------------
Name:
-----------------------------
Its:
----------------------------
Investor's address:
c/o EBF & Associates
601 Lakeshore Parkway
Minnetonka, MN 55305
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
38
<PAGE> 39
LAKESHORE INTERNATIONAL, LIMITED
By:
-----------------------------------------
Its General Partner
By:
----------------------------
Name:
-----------------------------
Its:
----------------------------
Investor's address:
c/o EBF & Associates
601 Lakeshore Parkway
Minnetonka, MN 55305
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
39
<PAGE> 40
ELLIOTT ASSOCIATES, L.P.
By:
-----------------------------------------
Its General Partner
By:
----------------------------
Name:
-----------------------------
Its:
----------------------------
Investor's address:
712 Fifth Avenue
36th Floor
New York, New York 10019
Fax: (212) 974-2092
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
40
<PAGE> 41
WESTGATE INTERNATIONAL, L.P.
By:
-----------------------------------------
Its General Partner
By:
----------------------------
Name:
-----------------------------
Its:
----------------------------
Investor's address:
c/o Midland Bank Trust Corporation
(Cayman) Limited
P.O. Box 1109
Mary Street
Grand Cayman
Cayman Islands
with a copy to:
c/o Stonington Management Corporation
712 Fifth Avenue
36th Floor
New York, New York 10019
Fax: (212) 974-2092
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
41
<PAGE> 42
EVEREST CAPITAL INTERNATIONAL, LTD.
By:
-----------------------------------------
Its General Partner
By:
----------------------------
Name:
-----------------------------
Its:
----------------------------
Investor's address:
c/o Everest Capital
20 Parliament Street
Corner House
Hamilton, Bermuda HM12
Fax: (441) 292-2285
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
42
<PAGE> 43
EVEREST CAPITAL FUND, L.P.
By:
-----------------------------------------
Its General Partner
By:
----------------------------
Name:
-----------------------------
Its:
----------------------------
Investor's address:
c/o Everest Capital
20 Parliament Street
Corner House
Hamilton, Bermuda HM12
Fax: (441) 292-2285
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
43
<PAGE> 44
THE JAY GOLDMAN MASTER LIMITED
PARTNERSHIP
By:
-----------------------------------------
Its General Partner
By:
----------------------------
Name:
-----------------------------
Its:
----------------------------
Investor's address:
c/o Jay Goldman & Company
745 Fifth Avenue, Room 1103
New York, NY 10051
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
44
<PAGE> 45
GRACE BROTHERS, LTD.
By:
-----------------------------------------
Its General Partner
By:
----------------------------
Name:
-----------------------------
Its:
----------------------------
Investor's address:
1560 Sherman Avenue
Evanston, IL 60201
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
45
<PAGE> 46
MAINSTAY VP SERIES FUND, INC., ON BEHALF OF
ITS HIGH YIELD CORPORATE BOND FUND
PORTFOLIO
By: Mackay-Shields Financial Corporation
Its Investment Advisor
By:
----------------------------
Name:
-----------------------------
Its:
----------------------------
Investor's address:
c/o Mackay-Shields Financial Corp.
9 West 57th Street
New York, New York 10019
Attn: Linda Grillo
Fax: (212) 758-4737
with a copy to:
Claude A. Baum, Esq.
Dechert Price & Rhoads
477 Madison Avenue
New York, New York 10022-5891
Fax: (212) 308-2041
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
Mainstay VP Series Fund, Inc., on
behalf of its High Yield Corporate
Bond Fund Portfolio, hereby
explicitly reduces the number of
days of prior written notice
required pursuant to Section 3.6 of
this Agreement for waiver of the
restriction referenced therein from
61 days to 2 days.
46
<PAGE> 47
THE MAINSTAY FUNDS, ON BEHALF OF ITS HIGH
YIELD CORPORATE BOND FUND SERIES
By: Mackay-Shields Financial Corporation
Its Investment Advisor
By:
----------------------------
Name:
----------------------------
Its:
----------------------------
Investor's address:
c/o Mackay-Shields Financial Corp.
9 West 57th Street
New York, New York 10019
Attn: Linda Grillo
Fax: (212) 758-4737
with a copy to:
Claude A. Baum, Esq.
Dechert Price & Rhoads
477 Madison Avenue
New York, New York 10022-5891
Fax: (212) 308-2041
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
The Mainstay Funds, on behalf of its
High Yield Corporate Bond Fund series,
hereby explicitly reduces the number
of days of prior written notice
required pursuant to Section 3.6 of
this Agreement for waiver of the
restriction referenced therein from
61 days to 2 days.
47
<PAGE> 48
THE RAVICH REVOCABLE TRUST OF 1989
By:
---------------------------------
Its Trustee
Investor's address:
c/o Libra Investments, Inc.
11766 Wilshire Boulevard
Suite 870
Los Angeles, California 90025
Fax: (310) 312-5666
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
48
<PAGE> 49
SCOGGIN CAPITAL MANAGEMENT
By:
-----------------------------------------
Its General Partner
By:
----------------------------
Name:
-----------------------------
Its:
----------------------------
Investor's address:
660 Madison Avenue, 20th Floor
New York, NY 10021
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
49
<PAGE> 50
SCOGGIN INTERNATIONAL FUND, LTD.
By:
-----------------------------------------
Its General Partner
By:
----------------------------------
Name:
--------------------------------
Its:
---------------------------------
Investor's address:
c/o Scoggin Capital Management, L.P.
660 Madison Avenue, 20th Floor
New York, NY 10021
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
50
<PAGE> 51
TCW SHARED OPPORTUNITY FUND II
By:
-----------------------------------------
Its General Partner
By:
----------------------------------
Name:
--------------------------------
Its:
---------------------------------
Investor's address:
c/o Trust Company of the West
11100 Santa Monica Boulevard,
Suite 2050
Los Angeles, CA 90025
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation
shall be applicable.
51
<PAGE> 52
LIBERTYVIEW PLUS FUND
By
--------------------------------
Its General Partner
By:
----------------------
Name:
--------------------
Its:
---------------------
Investor's address:
c/o LibertyView Capital Mgmt., Inc.
101 Hudson Street
Suite 3700
Jersey City, NJ 07302
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation shall be
applicable.
52
<PAGE> 53
LIBERTYVIEW LLC FUND
By
--------------------------------
Its Managing Partner
By:
----------------------
Name:
--------------------
Its:
---------------------
Investor's address:
c/o LibertyView Capital Mgmt., Inc.
101 Hudson Street
Suite 3700
Jersey City, NJ 07302
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation shall be
applicable.
53
<PAGE> 54
PARESCO, INC.
By
--------------------------------
Name:
--------------------
Its:
---------------------
Investor's address:
c/o LibertyView Capital Mgmt., Inc.
101 Hudson Street
Suite 3700
Jersey City, NJ 07302
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation shall be
applicable.
54
<PAGE> 55
NAVESINK INVESTMENT FUND, LDC
By
--------------------------------
Name:
--------------------
Its:
---------------------
Investor's address:
c/o Rumson Capital LLC
Galleria Building, 3rd Floor
2 Bridge Avenue
Red Bank, NJ 087701-1106
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation shall be
applicable.
55
<PAGE> 56
STONEHILL OFFSHORE PARTNERS LIMITED
By Stonehill Advisors LLC, as Agent
By
---------------------------------
Name: John Motulsky
A Managing Member
Investor's address:
110 East 59th Street
30th Floor
New York, NY 10002
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation shall be
applicable.
STONEHILL INVESTMENT CORP., for and on
behalf of Stonehill Partners, L.P.,
GRS Partners III, and Aurora Limited
Partnership
By
------------------------------------------
Name: John Motulsky
Its: Vice President
Investor's address:
110 East 59th Street
30th Floor
New York, NY 10002
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation shall be
applicable.
56
<PAGE> 57
HERTA AND PAUL AMIR FAMILY TRUST
By
------------------------------------------
Its Trustee
Investor's address:
c/o Amir Development Company
8730 Wilshire Boulevard
Beverly Hills, CA
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation shall be
applicable.
THE WOLENS FAMILY TRUST
By
------------------------------------------
Its Trustee
Investor's address:
c/o Amir Development Company
8730 Wilshire Boulevard
Beverly Hills, CA
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation shall be
applicable.
57
<PAGE> 58
LONGVIEW PARTNERS
By
--------------------------------
Its General Partner
By:
----------------------
Name:
--------------------
Its:
---------------------
Investor's address:
c/o Cumberland Associates
1114 Avenue of the Americas
New York, NY 10036
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation shall be
applicable.
58
<PAGE> 59
CUMBERLAND PARTNERS
By
--------------------------------
Its General Partner
By:
----------------------
Name:
--------------------
Its:
---------------------
Investor's address:
1114 Avenue of the Americas
New York, NY 10036
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation shall be
applicable.
59
<PAGE> 60
JMG CAPITAL PARTNERS, L.P.
By
--------------------------------
Its General Partner
By:
----------------------
Name:
--------------------
Its:
---------------------
Investor's address:
1999 Avenue of the Stars
Suite 1950
Los Angeles, CA 90067
For purposes of Section 3.6 of this
Agreement, the following percentage
limitation shall be applicable:
[ ] 4.99% [ ] 9.99%
[ ] no limitation
If no box is marked, no limitation shall be
applicable.
60
<PAGE> 61
Schedule I
<TABLE>
<CAPTION>
Investor* First Closing Second Closing
-------- ------------- --------------
Shares Shares
------ ------
<S> <C> <C>
CANYON PARTNERS
The Value Realization Fund, L.P. 7,500 7,500
GRS Partners II 1,500 1,500
The Canyon Value Realization Fund, (Cayman) Ltd. 11,000 11,000
TOTALS ------ ------
20,000 20,000
CERBERUS PARTNERS
Cerberus Partners. L.P. 10,000 10,000
Cerberus International, Ltd 10,000 10,000
------ ------
20,000 20,000
DDJ CAPITAL MANAGEMENT
The Copernicus Fund, LP 15,000 15,000
The Galileo Fund, LP 45,000 45,000
------ ------
TOTALS 60,000 60,000
DICKSTEIN PARTNERS
Dickstein & Co. L.P. 8,500 8,500
Dickstein International Limited 1,500 1,500
----- -----
TOTALS 10,000 10,000
EBF & ASSOCIATES
Global Bermuda Limited Partnership 20,000 20,000
Lakeshore International, Limited 10,000 10,000
------ ------
TOTALS 30,000 30,000
ELLIOTT ASSOCIATES, L.P.
Elliott Associates, L.P. 40,000 40,000
Westgate International, L.P. 20,000 20,000
------ ------
TOTALS 60,000 60,000
</TABLE>
61
<PAGE> 62
<TABLE>
<CAPTION>
Investor* First Closing Second Closing
-------- ------------- --------------
Shares Shares
------ ------
<S> <C> <C>
</TABLE>
* The term Investor includes each entity for which share amounts are listed
opposite such entity's name.
<TABLE>
<CAPTION>
Investor First Closing Second Closing
-------- ------------- --------------
Shares Shares
------ ------
<S> <C> <C>
EVEREST CAPITAL
Everest Capital International, Ltd. 140,000 140,000
Everest Capital Fund, L.P. 60,000 60,000
------- -------
TOTALS 200,000 200,000
THE JAY GOLDMAN MASTER LIMITED PARTNERSHIP 10,000 10,000
GRACE BROTHERS, LTD. 100,000 100,000
MACKAY-SHIELDS
Mainstay VP Series Fund, Inc. 28,000 28,000
The Mainstay Funds 432,000 432,000
------- -------
TOTALS 460,000 460,000
THE RAVICH REVOCABLE TRUST OF 1989 43,400 43,400
SCOGGIN CAPITAL MANAGEMENT, L.P.
Scoggin Capital Management 6,000 6,000
Scoggin International Fund, Ltd. 600 600
----- -----
TOTALS 6,600 6,600
TRUST COMPANY OF THE WEST
TCW Shared Opportunity Fund II 40,000 40,000
LIBERTY VIEW CAPITAL MANAGEMENT, INC.
Liberty View Plus Fund 12,000 12,000
Liberty View LLC Fund 4,000 4,000
Paresco, Inc. 24,000 24,000
------ ------
TOTALS 40,000 40,000
</TABLE>
62
<PAGE> 63
<TABLE>
<CAPTION>
Investor First Closing Second Closing
-------- ------------- --------------
Shares Shares
------ ------
<S> <C> <C>
NAVESINK INVESTMENT FUND, LDC 30,000 30,000
STONEHILL INVESTMENT CORP., AS AGENT 45,000 45,000
HERTA AND PAUL AMIR FAMILY TRUST 4,800 4,800
The Wolens Family Trust 200 200
CUMBERLAND ASSOCIATES
LongView Partners 10,000 10,000
Cumberland Partners 50,000 50,000
------ ------
TOTALS 60,000 60,000
JMG CAPITAL PARTNERS, L.P. 10,000 10,000
--------- ---------
1,250,000 1,250,000
========= =========
</TABLE>
63
<PAGE> 64
CERTIFICATE OF DESIGNATIONS
OF
5% DELAYED CONVERTIBLE PREFERRED STOCK
RESOLVED that there shall be a series of shares of the
Preferred Stock of CD Radio Inc. (the "CORPORATION"), designated "5% Delayed
Convertible Preferred Stock"; that the number of shares of such series shall be
8,000,000 and that the rights and preferences of such series (the "5%
PREFERRED") and the limitations or restrictions thereon, shall be as follows:
1. Dividends.
(a) The holders of the 5% Preferred shall be entitled to
receive out of any assets legally available therefor cumulative dividends at the
rate of $1.25 per share per annum, payable semi-annually on April 15 and October
15 of each year, when and as declared by the Board of Directors, in preference
and priority to any payment of any dividend on the Common Stock or any other
class or series of stock of the Corporation. Such dividends shall accrue on any
given share from the date of original issuance of the 5% Preferred and shall
accrue from day to day whether or not earned or declared, based on the actual
days elapsed and a 360-day year of 12 30-day months. If at any time dividends on
the outstanding 5% Preferred at the rate set forth above shall not have been
paid or declared and set apart for payment with respect to all preceding
periods, the amount of the deficiency shall be fully paid or declared and set
apart for payment, but without interest, before any distribution, whether by way
of dividend or otherwise, shall be declared or paid upon or set apart for the
shares of any other class or series of stock of the Corporation.
(b) Any dividend payable on the outstanding 5% Preferred may
be paid, at the option of the Corporation, either (i) in cash or (ii) by adding
the amount of such dividend to the Liquidation Preference (as defined below);
provided, however, that if the Corporation shall fail to pay any dividend when
due, the amount of such dividend shall be added to the Liquidation Preference
for such shares of 5% Preferred.
2. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
the holders of the 5% Preferred shall be entitled to receive, prior and in
preference to any distribution of any assets of the Corporation to the holders
of any other class or series of shares, the amount of $25 per share plus any
accrued but unpaid dividends (the "LIQUIDATION PREFERENCE").
<PAGE> 65
3. Redemption; Forced Conversion; Lock-up.
(a) The 5% Preferred may be redeemed in whole but not in part
by the Corporation at any time (such date being referred to herein as the
"REDEMPTION DATE"), beginning on the later to occur of (i) December 15, 1997 and
(ii) the date that is 10 months after the date of original issuance of the 5%
Preferred, plus, in each case, one day for each day during which (x) a
registration statement has not been declared effective with respect to the
Common Stock issuable upon conversion of the 5% Preferred by the later of (A)
the 90th calendar day after the date of original issuance of the 5% Preferred
and (B) February 15, 1997 (the "INITIAL REGISTRATION DEADLINE"), or (y) any such
registration statement is suspended or the related prospectus is not current,
complete and otherwise usable, at a redemption price (the "REDEMPTION PRICE")
equal to (A) the Liquidation Preference plus (B) any accrued but unpaid cash
payments due with respect to the 5% Preferred in accordance with Sections
1.5(b), 3.3 and 3.11 of the Preferred Stock Investment Agreement dated as of
October 23, 1996, among the Corporation and the Investors named therein (the
"INVESTMENT AGREEMENT")("CASH PAYMENTS"); provided, that the Corporation may not
exercise such right of redemption unless (i) the average closing price of the
Common Stock as reported in the Wall Street Journal for the 20 consecutive
trading days prior to the Redemption Notice (as defined below) shall equal or
exceed $18 per share (subject to adjustment for stock dividends, stock splits
and reverse stock splits), and (ii) the shares of Common Stock issuable upon
conversion of the 5% Preferred are registered for resale by an effective
registration statement under the Securities Act of 1933, as amended (the "ACT"),
in compliance with the Investment Agreement, and such registration statement
remains in effect continuously without suspension and the prospectus remains
current, complete and otherwise usable from the date of the Redemption Notice
(as defined below) to and including the Redemption Date.
(b) At least 30 days but not more than 60 days prior to the
Redemption Date, irrevocable written notice (the "REDEMPTION NOTICE") shall be
mailed, first class postage prepaid, by the Corporation to each holder of record
of the 5% Preferred, at the address last shown on the records of the Corporation
for such holder, notifying such holder of the redemption that is to be effected,
specifying the Redemption Date, the Redemption Price, and the place at which
payment may be obtained and calling upon each such holder to surrender to the
Corporation, in the manner and at the place designated, a certificate or
certificates representing all the shares of 5% Preferred held by such holder.
Subject to the provisions of the following subsection (c), on or after the
Redemption Date, each holder of 5% Preferred shall surrender to the Corporation
the certificate or certificates representing all the shares of 5% Preferred
owned by such holder as of the Redemption Date, in the manner and at the place
designated in the Redemption Notice, and thereupon the Redemption Price of such
shares shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled.
(c) If at the Redemption Date the registration condition
specified in clause (ii) of subsection (a) shall not be satisfied, then no
shares shall be redeemed and the Redemption Notice shall be deemed to be
withdrawn. In such event, any notice of conversion given by a holder of 5%
Preferred after the Redemption Notice was given shall be deemed to be withdrawn,
and any certificates for 5% Preferred which have been surrendered for conversion
or redemption
- 2 -
<PAGE> 66
shall be returned to the persons surrendering the same; provided, however, that
if a holder shall have received shares of Common Stock upon conversion of 5%
Preferred after the Redemption Notice was given but before the Redemption Date,
such holder may elect either to retain such Common Stock or tender such shares
of Common Stock to the Corporation for the Redemption Price.
(d) From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all rights of the
holders of shares that have been redeemed (except the right to receive the
Redemption Price without interest upon surrender of the certificate or
certificates representing such shares) shall cease with respect to such shares,
and such shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever.
(e) (i) If the Corporation sells Common Stock for net cash
proceeds to the Corporation in an amount not less than $100 million in a
registered underwritten public offering (other than stock issuable pursuant to a
registration statement on Form S-8 or S-4) prior to October 15, 1997 (a
"QUALIFYING OFFERING"), the Corporation may, upon consummation of the Qualifying
Offering, redeem the 5% Preferred in whole (but not in part) for an amount per
share in cash equal to (A) the sum of the Liquidation Preference plus any Cash
Payments due (B) divided by 72.125%. The Corporation shall give notice of such
redemption pursuant to this subsection (e) in the same manner as set forth for
Redemption Notices generally except that such notice must be given at the time
of the earlier of the initial filing or the public announcement of a proposed
filing with the Securities and Exchange Commission of the registration statement
with respect to the Qualifying Offering.
(ii) If the Corporation does not give notice of
redemption of the 5% Preferred pursuant to clause (i) of this subsection (e),
the Corporation and its underwriters may, by written notice from the Corporation
and its lead underwriter to each holder of 5% Preferred (a "LOCK-UP REQUEST"),
mailed on or after the time of the earlier of the initial filing or the public
announcement of a proposed filing with the Securities and Exchange Commission of
the registration statement with respect to the Qualifying Offering, first class
postage prepaid, at the address last shown on the records of the Corporation for
such holder, request that such holder of 5% Preferred agree, and cause any
transferee of such 5% Preferred to agree, to not offer, sell or transfer any
shares of the Common Stock into which the same may be converted during the
180-day period beginning on a date specified in the Lock-up Request, which date
may be as early as five (5) business days prior to the expected effective date
(but no later than the effective date) with respect to the registration
statement for the Qualifying Offering (the "LOCK-UP"); provided that the
Corporation shall specify the expected effective date by notice to the holders
given not later than two (2) business days prior to the beginning of the Lock-up
period (the "EFFECTIVE DATE NOTICE"). If the Corporation so requests a Lock-up,
each holder of 5% Preferred shall have the right, regardless of whether the
Corporation revokes or attempts to revoke the Lock-up Request, to require the
Corporation, upon consummation of the Qualifying Offering, to purchase its 5%
Preferred for a cash amount equal to (A) the sum of the Liquidation Preference
plus any Cash Payments due (B) divided by an amount equal to 1 minus the
Applicable Percentage; provided, that the Applicable Percentage for purposes of
this subsection (ii) shall be the Applicable Percentage in effect under Section
4(d)(ii) determined by reference to the date of consummation
- 3 -
<PAGE> 67
of the Qualifying Offering or, if such consummation occurs prior to February 15,
1997, 12.125%. In order for any holder of 5% Preferred to exercise such right,
such holder must give notice of such fact to the Corporation not later than 15
days after the Corporation has given the Lock-up Request. If any holder of 5%
Preferred shall fail for any reason to timely exercise such right, such holder,
by acceptance of shares of the 5% Preferred, shall be deemed to have agreed to
(1) be bound by the Lock-up Request and shall comply with and be bound by the
Lock-up and (2) sign a lock-up agreement in customary form if requested to do so
by the lead underwriter of the Qualifying Offering. Notwithstanding the
foregoing, if the Corporation requests in the Lock-up Request that the Lockup
become effective prior to the effective date of the registration statement with
respect to the Qualifying Offering then such Lock-up shall terminate if such
registration statement is not declared effective by the Securities and Exchange
Commission on or before the fifth business day following the expected effective
date specified in the Effective Date Notice and may be reinstated only by the
giving of a new Effective Date Notice within 30 calendar days of such
termination. After such 30-day period, a new Lock-up Request shall be required
in order to effect a new Lock-up.
(f) The Corporation may, upon at least 30 days but not more
than 60 days prior notice to the holders of 5% Preferred given in the same
manner specified for Redemption Notices generally, require the holders of all
and not less than all of outstanding shares of 5% Preferred to convert such
shares into (x) Common Stock at the then applicable Conversion Price (as defined
in Section 4(d)) and (y) all Cash Payments due on the Optional Conversion Date
(as defined below), effective on a date (the "OPTIONAL CONVERSION DATE")
specified in such notice that is three years or more after the date of original
issuance of the 5% Preferred; provided that that no such conversion shall occur
if the Corporation has commenced voluntary bankruptcy, become subject to
involuntary bankruptcy, had a receiver, liquidator, trustee or other officer
having similar power over the Corporation appointed over all or a substantial
part of its property, has ceased operations or shall be in default for money
borrowed (or the deferred purchase price of property and assets) in excess of
$50,000,000 and, in each case, such situation shall not have been remedied.
Within 3 business days after the Optional Conversion Date, written notice shall
be mailed, first class postage prepaid, by the Corporation to each holder of
record of the 5% Preferred, at the address last shown on the records of the
Corporation for such holder, notifying such holder of the optional conversion
that has been effected, specifying the then applicable Liquidation Preference,
Cash Payments and Conversion Price (and the method of calculation thereof) and
the place at which such holder shall surrender the certificate or certificates
representing the Preferred Shares so converted, and calling upon each such
holder to surrender to the Corporation, in the manner and at the place
designated, a certificate or certificates representing all the shares of 5%
Preferred held by such holder. Each holder of 5% Preferred shall surrender to
the Corporation the certificate or certificates representing all the shares of
5% Preferred owned by such holder as of the Optional Conversion Date, in the
manner and at the place designated in such notice, and thereupon the Corporation
shall issue and deliver to or upon the order of such holder a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled and shall pay to each such holder, in immediately available funds,
an amount equal to all Cash Payments due on the Optional Conversion Date with
respect to such holder's shares of 5% Preferred.
- 4 -
<PAGE> 68
(g) If at any time a Reorganization (as defined in Section
4(k)) shall occur or be proposed, each holder of 5% Preferred shall have the
right to require the Corporation, effective upon consummation of such
Reorganization, to purchase its 5% Preferred for a cash amount equal to (A) the
sum of the Liquidation Preference plus any Cash Payments due (B) divided by
72.125%. In order for any holder of 5% Preferred to exercise such right, such
holder must give notice of such fact to the Corporation not later than the later
to occur of (i) 30 days after receipt of notice of the Reorganization and (ii)
the consummation of the Reorganization. The Corporation shall provide notice to
holders of 5% Preferred given in the same manner as specified for Redemption
Notices generally, at least 30 days prior to the anticipated date of the
consummation of a Reorganization, which notice shall reasonably set forth the
rights of holders of 5% Preferred under this Section 3(g) and Section 4(k).
4. Conversion. The holders of the 5% Preferred shall have
optional conversion rights as follows:
(a) Accrual of Conversion Rights. Commencing on the earlier to
occur of (i) February 16, 1997 and (ii) the announcement or commencement of a
tender offer for shares of Common Stock, the 5% Preferred shares shall become
convertible; provided that the Corporation shall not be obligated to honor any
request for conversion of shares of the 5% Preferred at any time to the extent
that approval of the Federal Communications Commission ("FCC APPROVAL") of the
issuance of shares of Common Stock upon such conversion is or would be required
and has not been obtained; provided further that if FCC Approval (other than
approval in connection with a conversion of shares of the 5% Preferred resulting
in a holder of shares of the 5% Preferred, or a group of persons who have an
agreement or understanding to act in concert of which such holder is a member,
holding 50% or more of the voting securities of the Corporation) is not obtained
by a date that is 270 days after the Initial Registration Deadline, then, at any
time thereafter at the request of any holder of shares of the 5% Preferred, the
Corporation shall promptly purchase from such holder, at a purchase price per
share equal to (A) the sum of the Liquidation Preference plus any Cash Payments
divided by (B) 72.125%, the shares of 5% Preferred held by such holder.
(b) Right to Convert. At and after the time it has become
convertible, each share of 5% Preferred shall be convertible, at the option of
the holder thereof, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (i) the Liquidation Preference plus
any Cash Payments due on the date the notice of conversion is given, by (ii) the
Conversion Price determined as hereinafter provided in effect on said date.
(c) Mechanics of Conversion. To convert shares of 5% Preferred
into shares of Common Stock, the holder shall give written notice to the
Corporation (which notice may be given by facsimile transmission) that such
holder elects to convert the same and shall state therein the number of shares
to be converted and the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. Promptly
thereafter the holder shall surrender the certificate or certificates
representing the shares to be converted, duly endorsed, at the office of the
Corporation or of any transfer agent for such shares, or at such other place
designated by the Corporation; provided that the Corporation shall at all times
maintain an office or agency in New York City for such purposes. The Corporation
shall,
- 5 -
<PAGE> 69
immediately upon receipt of such notice, issue and deliver to or upon the order
of such holder, against delivery of the certificates representing the shares
that have been converted, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled (in the number(s) and
denomination(s) designated by such holder), and the Corporation shall deliver to
such holder a certificate or certificates for the number of shares of 5%
Preferred that such holder has not elected to convert (in the number(s) and
denomination(s) designated by such holder). The Corporation shall effect such
issuance and shall transmit the certificates by messenger or overnight delivery
service to reach the address designated by such holder within two business days
after the receipt of such notice. For all purposes of this Certificate of
Designations, such conversion shall be deemed to have been made immediately
prior to the close of business on the date such notice of conversion is given.
The person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock at the close of business on such date.
(d) Determination of Conversion Price.
(i) At any date up to and including November 15,
1997, the "CONVERSION PRICE" shall be, as applicable, either (x) the
weighted-average (based upon the number of shares sold) of the actual selling
price (but not less than the lower of (A) the price of shares sold in the
Qualifying Offering if shares are so sold on the date of such trade and (B) the
low trading price on the date of such trade as reported on the principal market
for the Common Stock), at which the holder shall have sold shares of Common
Stock received or receivable upon conversion of the 5% Preferred, reduced by any
trading commissions or underwriting spreads paid by such holder, as certified to
the Corporation by such holder, multiplied by an amount equal to 1 minus the
Applicable Percentage set forth below, or (y) the average of the daily means
between the low trading price of the Common Stock and the closing price of the
Common Stock for the 3 consecutive trading days immediately preceding the date
of conversion, multiplied by an amount equal to 1 minus the Applicable
Percentage set forth below; provided, however, that clause (x) shall only apply
to the extent shares of Common Stock are actually so sold and the holder
converting 5% Preferred shall have given notice to the Corporation of such sale
not more than 24 hours after such sale; provided further that, failure to give
such notice within such time shall result in determination of the Conversion
Price in accordance with clause (y).
- 6 -
<PAGE> 70
(ii) The "APPLICABLE PERCENTAGE" shall be as follows:
<TABLE>
<CAPTION>
Conversion after the
following date: Applicable Percentage:
--------------- ----------------------
<S> <C> <C>
2/15/97 12.125%
3/15/97 14.250%
4/15/97 14.375%
5/15/97 18.125%
6/15/97 19.875%
7/15/97 21.625%
8/15/97 23.250%
9/15/97 24.875%
10/15/97 25.000%
11/15/97 27.875%
</TABLE>
(iii) At any date after November 15, 1997, the Conversion Price
shall be 72.125% of the least of (x) the average of the daily means between the
low trading price of the Common Stock and the closing price of the Common Stock
for all the trading days between October 15, 1997 and November 15, 1997
(inclusive) for such trading days, (y) the average of the daily means between
the low trading price of the Common Stock and the closing price of the Common
Stock during the 3 consecutive trading days immediately preceding the date of
conversion and (z) the weighted-average (based upon the number of shares sold)
of the actual selling price (but not less than the low trading price on the date
of such trade as reported on the principal market for the Common Stock), at
which the holder shall have sold shares of Common Stock received or receivable
upon conversion of the 5% Preferred, reduced by any trading commissions or
underwriting spreads paid by such holder, as certified to the Corporation by
such holder; provided, however, that clause (z) shall only apply to the extent
shares of Common Stock are actually sold and the holder converting 5% Preferred
shall have given notice to the Corporation of such sale not more than 24 hours
after such sale; provided, further that, clause (z) shall be unavailable if such
holder shall fail to give such notice within such time.
(iv) The "LOW TRADING PRICE" and the "CLOSING PRICE", respectively,
of the Common Stock on any day shall be (A) the lowest reported sale price and
the reported closing price (last sale price), regular way, of the Common Stock
on the principal stock exchange on which the Common Stock is listed, or (B) if
the Common Stock is not listed on a stock exchange, the lowest reported sale
price and the reported closing price of the Common Stock on the principal
automated securities price quotation system on which sale prices of the Common
Stock are reported, or (C) if the Common Stock is not listed on a stock exchange
and sale prices of the Common Stock are not reported on an automated quotation
system, the final bid price and the mean of the final bid and asked prices for
the Common Stock as reported by National Quotation Bureau Incorporated if at
least two securities dealers have inserted both bid and asked quotations for the
Common Stock on at least five of the ten preceding trading days. If none of the
foregoing provisions are applicable, the phrase "MEANS BETWEEN THE LOW TRADING
PRICE OF THE COMMON STOCK AND THE CLOSING PRICE OF THE COMMON STOCK" on a day
will be the fair market
- 7 -
<PAGE> 71
value of the Common Stock on that day as determined by a member firm of the New
York Stock Exchange, Inc., selected in good faith by the Board of Directors of
the Corporation. The term "TRADING DAY" means (x) if the Common Stock is listed
on at least one stock exchange, a day on which there is trading on the principal
stock exchange on which the Common Stock is listed, (y) if the Common Stock is
not listed on a stock exchange but sale prices of the Common Stock are reported
on an automated quotation system, a day on which trading is reported on the
principal automated quotation system on which sales of the Common Stock are
reported, or (z) if the foregoing provisions are inapplicable, a day on which
quotations are reported by National Quotation Bureau Incorporated.
(v) In the event that during any period of consecutive
trading days provided for above, the Corporation shall declare or pay any
dividend on the Common Stock payable in Common Stock or in rights to acquire
Common Stock, or shall effect a stock split or reverse stock split, or a
combination, consolidation or reclassification of the Common Stock, then the
Conversion Price shall be proportionately decreased or increased, as
appropriate, to give effect to such event.
(e) Distributions. In the event the Corporation shall at any
time or from time to time make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation or other property
(other than cash paid out of current earnings) or any of its subsidiaries other
than additional shares of Common Stock, then in each such event, in addition to
the number of shares of Common Stock receivable upon conversion, provision shall
be made so that the holders of 5% Preferred shall receive, upon the conversion
thereof, the securities of the Corporation that they would have received had
they been the owners on the date of such event of the number of shares of Common
Stock issuable to them upon conversion.
(f) Certificates as to Adjustments. Upon the occurrence of any
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and cause independent public
accountants selected by the Corporation to verify such computation and prepare
and furnish to each holder of 5% Preferred a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of 5% Preferred, furnish or cause to be
furnished to such holder a like certificate prepared by the Corporation setting
forth (i) such adjustments and readjustments, and (ii) the number of other
securities and the amount, if any, of other property that at the time would be
received upon the conversion of 5% Preferred with respect to each share of
Common Stock received upon such conversion.
(g) Notice of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, any security or right convertible into or
entitling the holder thereof to receive additional shares of Common Stock, or
any right to subscribe for, purchase or otherwise acquire any shares of stock of
any class or any other securities or property, or to receive or exercise any
other right, the Corporation shall mail
- 8 -
<PAGE> 72
to each holder of 5% Preferred at least 10 days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution, security or right and the amount
and character of such dividend, distribution, security or right.
(h) Issue Taxes. The Corporation shall pay any and all issue
and other taxes, excluding any income, franchise or similar taxes, that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of shares of 5% Preferred pursuant hereto; provided, however, that
the Corporation shall not be obligated to pay any transfer taxes resulting from
any transfer requested by any holder in connection with any such conversion.
(i) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the 5% Preferred, at least such number of its shares
of Common Stock that is the greater of (a) 10,000,000 and (b) 1.5 times the
number as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the 5% Preferred at the Conversion Price calculated using
the method set forth in Section 4(d)(i)(y) or Section 4(d)(iii)(x) or (y), as
applicable, and the Applicable Percentage, in each case as adjusted for all
subdivisions or combinations of the Common Stock or payments of dividends on the
Common Stock made in shares of Common Stock, and if at any time the number of
authorized but unissued and reserved shares of Common Stock shall not be greater
than or equal to such larger amount, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued and reserved shares of Common Stock to such number of
shares as shall be sufficient for such purpose, including, without limitation,
engaging in best efforts to obtain the requisite stockholder approval. In the
event that the Corporation shall at any time fail to authorize or reserve the
number of shares of Common Stock sufficient to effect the conversion of all
outstanding shares of the 5% Preferred at the Conversion Price calculated using
the method set forth in Section 4(d)(i)(y) or Section 4(d)(iii)(x) or (y), as
applicable, and the Applicable Percentage, then at any time thereafter at the
request of any holder of shares of the 5% Preferred, the Corporation shall
promptly purchase from such holder, at a purchase price equal to (A) the sum of
the Liquidation Preference plus any Cash Payments due divided by (B) 72.125%,
the number of shares of the 5% Preferred equal to such holder's pro-rata share
of the "DEFICIENCY." The "DEFICIENCY" shall be equal to the number of shares of
the 5% Preferred that would not be able to be converted for shares of Common
Stock, due to an insufficient amount of Common Stock available, if all the then
outstanding shares of the 5% Preferred were submitted for conversion.
(j) Fractional Shares. No fractional shares shall be issued
upon the conversion of any share or shares of 5% Preferred. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of 5% Preferred by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of a fraction of a share of Common Stock, the Corporation
shall, in lieu of issuing any fractional share, pay the holder otherwise
entitled to such fraction a sum in cash equal to the fair market value of such
fraction on the date of conversion (as determined in good faith by the Board of
Directors of the Corporation).
- 9 -
<PAGE> 73
(k) Reorganization or Merger. In case of any reorganization or
any reclassification of the Common Stock or other capital stock of the
Corporation or any consolidation or merger of the Corporation with or into any
other corporation or corporations or a sale of all or substantially all of the
assets of the Corporation to any other person (a "REORGANIZATION"), in which any
of the holders of 5% Preferred does not elect to require the Corporation to
redeem the 5% Preferred as provided in Section 3(g), then, as part of such
Reorganization, provision shall be made so that each share of 5% Preferred shall
thereafter be convertible into the number of shares of stock or other securities
or property (including cash) to which a holder of the number of shares of Common
Stock deliverable upon conversion of such share of 5% Preferred not so redeemed
would have been entitled upon the record date of (or date of, if no record date
is fixed) such event and, in any case, appropriate adjustment (as determined by
the Board of Directors) shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
holders of the 5% Preferred, to the end that the provisions set forth herein
shall thereafter be applicable, as nearly as equivalent as is practicable, in
relation to any shares of stock or the securities or property (including cash)
thereafter deliverable upon the conversion of the shares of 5% Preferred.
(l) Additional Satellite DARS Licenses. If (a) the Corporation
has issued shares of 5% Preferred in the second closing under the Investment
Agreement ("SECOND CLOSING") and (b) at any time within the earlier of the
closing of a Qualified Offering and twelve months after the Second Closing, (i)
more than two licenses (including the license awarded to the Corporation) have
been awarded by the Federal Communications Commission that permit the recipients
thereof to provide satellite digital audio radio services ("SATELLITE DARS"),
and (ii) more than two recipients of such licenses (including the Corporation)
commence or announce an intention to commence Satellite DARS using their license
and (iii) the holders of more than one-third of the then outstanding shares of
5% Preferred shall so request in writing, then, on the first business day
following 60 calendar days after receipt of such request, the Corporation shall
promptly purchase one-half of the shares of 5% Preferred held by each such
requesting holder as of such date at a purchase price per share equal to (A) the
sum of the Liquidation Preference plus any Cash Payments then due and unpaid
divided by (B) an amount equal to 1 minus the Applicable Percentage.
5. Other Provisions. For all purposes of this Certificate of
Designations, the term "DATE OF ORIGINAL ISSUANCE OF THE 5% PREFERRED" shall
mean the day on which any shares of the 5% Preferred are first issued by the
Corporation pursuant to the terms of the Investment Agreement, and the terms
"TRADING PRICE", "LAST TRADE PRICE", "CLOSING PRICE" and "TRADING DAYS" shall
have the meanings given them in Section 4(d)(iv) hereof. Any provision herein
that conflicts with or violates any applicable usury law shall be seemed
modified to the extent necessary to avoid such conflict or violation.
6. Restrictions and Limitations. The Corporation shall not undertake the
following actions without the consent of the holders of a majority of the 5%
Preferred: (A) modify its Certificate of Incorporation or Bylaws so as to amend
or change any of the rights, preferences or privileges of the 5% Preferred; (B)
purchase or otherwise acquire for value any Common Stock or other equity
security of the Corporation or any non-wholly-owned subsidiary thereof not held
by the Corporation or any wholly-owned subsidiary while there exists any
arrearage in the
- 10 -
<PAGE> 74
payment of cumulative dividends hereunder or any Cash Payments due or the
Liquidation Preference exceeds $25; or (C) prior to a Qualifying Offering: (i)
authorize or issue any other preferred equity security senior to the 5%
Preferred (in security, structure or maturity); (ii) declare or pay any
dividends or make any distribution except to the holders of the 5% Preferred; or
(iii) effect any Reorganization. The Corporation shall not, in connection with a
repurchase of any shares of 5% Preferred, undertake any of the following actions
without the consent of all of the holders of the 5% Preferred: (1) reduce the
amount of 5% Preferred whose holders must consent to an amendment or waiver, (2)
reduce the rate of, or change the time for payment of, dividends on the 5%
Preferred or alter the Liquidation Preference, or (3) alter the conversion
provisions with respect to the 5% Preferred.
7. Voting Rights. Except as provided herein or as provided for by law,
the 5% Preferred shall have no voting rights.
8. Notices. Any notice required by the provisions of this Certificate
of Designations to be given to the holders of shares of 5% Preferred shall be
deemed given five (5) days after deposit in the United States mail, postage
prepaid, or one day after deposit with a nationally-recognized overnight
courier, in either case addressed to each holder of record at its address
appearing on the books of the Corporation. The Corporation shall distribute to
the holders of shares of the 5% Preferred, copies of all notices, materials,
annual and quarterly reports, proxy statements, information statements and any
other documents distributed generally to the holders of shares of Common Stock,
at such times and by such method as such documents are distributed to such
holders.
9. Attorneys' Fees. Any holder of 5% Preferred shall be entitled to
recover from the Corporation the reasonable attorneys, fees and expenses
incurred by such holder in connection with enforcement by such holder of any
obligation of the Corporation hereunder.
- 11 -
<PAGE> 75
THIS ESCROW AGREEMENT is made this 20th
---------------------------------------
Date
day of March , 1997 between/among
--------------------------------------------
Month
CD Radio Inc. (the " Party A " herein),
------------------------------------------ -----------------------
Party "A" Party " A "
" "
----------------------------------------------------------------------------
Party "B"
(the " " herein) and CITIBANK, N.A.
-------------------------------------------
Party "B"
(the "Escrow Agent" herein).
The above-named parties appoint said Escrow Agent with the duties and
responsibilities and upon the terms and conditions provided in Schedule A
annexed hereto and made apart hereof.
ARTICLE FIRST: The above-named parties agree that the following provisions shall
control with respect to the rights, duties, liabilities, privileges and
immunities of the Escrow Agent:
a) The Escrow Agent shall neither be responsible for or under, nor chargeable
with knowledge of, the terms and conditions of any other agreement,
instrument or document executed between/among the parties hereto, except
as may be specifically provided in Schedule A annexed hereto. This
Agreement sets forth all of the obligations of the Escrow Agent, and no
additional obligations shall be implied from the terms of this Agreement
or any other agreement, instrument or document.
b) The Escrow Agent may act in reliance upon any instructions, notice,
certification, demand, consent, authorization, receipt, power of attorney
or other writing delivered to it by any other party without being required
to determine the authenticity or validity thereof or the correctness of
any fact stated herein, the propriety or validity of the service thereof,
or the jurisdiction of the court issuing any judgment or order. The
Escrow Agent may act in reliance upon any signature believed by it to be
genuine, and may assume that such person has been properly authorized to
do so.
c) Each of the parties, jointly and severally, agrees to reimburse the Escrow
Agent on demand for, and to indemnify and hold the Escrow Agent harmless
against and with respect to, any and all loss, liability, damage or
expense (including, but without limitation, attorneys' fees, costs and
disbursements) that the Escrow Agent may suffer or incur in connection
with this Agreement and its performance hereunder or in connection
herewith, except to the extent such loss, liability, damage or expense
arises from its willful misconduct or gross negligence as adjudicated by a
court of competent jurisdiction. The Escrow Agent shall have the further
right at any time and from time to time to charge, and reimburse itself
from, the property held in escrow hereunder.
d) The Escrow Agent may consult with legal counsel of its selection in the
event of any dispute or question as to the meaning or construction of any
of the provisions hereof or its duties hereunder, and it shall incur no
liability and shall be fully protected in acting in accordance with the
opinion and instructions of such counsel. Each of the parties, jointly
and severally, agrees to reimburse the Escrow Agent on demand for such
legal fees, disbursements and expenses and in addition, the Escrow Agent
shall have the right to reimburse itself for such fees, disbursements and
expenses from the property held in escrow hereunder.
e) The Escrow Agent shall be under no duty to give the property held in
escrow by it hereunder any greater degree of care than it gives its own
similar property.
f) The Escrow Agent shall invest the property held in escrow in such a manner
as directed in Schedule A annexed hereto but which shall include deposits
in Citibank even though Citibank may receive a benefit or profit
therefrom.
THE PARTIES TO THIS AGREEMENT ACKNOWLEDGE THAT NON-DEPOSIT INVESTMENT
PRODUCTS ARE NOT OBLIGATION OF, OR GUARANTEED, BY CITIBANK/CITICORP NOR
ANY OF ITS AFFILIATES; ARE NOT FDIC INSURED; AND ARE SUBJECT TO
INVESTMENTS RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED. ONLY DEPOSITS IN THE UNITED STATES ARE SUBJECT TO FDIC
INSURANCE.
g) In the event of any disagreement between/among any of the parties to this
agreement, or between /among them or either or any of them and any other
person, resulting in adverse claims or demands being made in connection
with the subject matter of the Escrow, or in the event that the Escrow
Agent, in good faith, be in doubt as to what action it should take
hereunder, the Escrow Agent may, at its option, refuse to comply with any
claims or demands on it, or refuse to take any other action hereunder, so
long as such disagreement continues or such doubt exists, and in any such
event, the Escrow Agent shall not become liable in any way or to any
person for its failure or refusal to act, and the Escrow Agent shall be
entitled to continue so to refrain from acting until (i) the rights of all
parties shall have been fully and finally adjudicated by a court of
competent jurisdiction, or (ii) all differences shall have been adjusted
and all doubt resolved by agreement among all of the interested persons,
and the Escrow Agent shall have been notified thereof in writing signed by
all such persons. The rights of the Escrow Agent under this paragraph are
cumulative of all other rights which it may have by law or otherwise.
Page 2 Escrow Agreement - Preferred Custody Services
<PAGE> 76
h) The Escrow Agent is authorized, for any securities at any time held
hereunder, to register such securities in the name of its nominee(s) or
the nominees of any securities depository, and such nominee(s) may sign
the name of any of the parties hereto to whom or to which such securities
belong and guarantee such signature in order to transfer securities or
certify ownership thereof to tax or other governmental authorities.
i) Notice to the parties shall be given as provided in Schedule A annexed
hereto.
ARTICLE SECOND: The Escrow Agent shall make payments of income earned on the
escrowed property as provided in Schedule A annexed hereto. Each such payee
shall provide to the Escrow Agent an appropriate W-9 form for tax identification
number certification or a W-8 form for non-resident alien certification. The
Escrow Agent shall be responsible only for income reporting to the Internal
Revenue Service with respect to income earned on the escrowed property.
ARTICLE THIRD: The Escrow Agent may, in its sole discretion, resign and
terminate its position hereunder at any time following 60 days written notice to
the parties to the Escrow Agreement herein. Any such resignation shall
terminate all obligations and duties of the Escrow Agent hereunder. On the
effective date of such resignation, the Escrow Agent shall deliver this Escrow
Agreement together with any and all related instruments or documents to any
successor Escrow Agent agreeable to the parties, subject to this Escrow
Agreement herein. If a successor Escrow Agent has not been appointed prior to
the expiration of 60 days following the date of the notice of such resignation,
the then acting Escrow Agent may petition any court of competent jurisdiction
for the appointment of a successor Escrow Agent, or other appropriate relief.
Any such resulting appointment shall be binding upon all parties to this
Agreement.
ARTICLE FOURTH: The Escrow Agent shall receive the fees provided in Schedule B
annexed hereto. In the event that such fees are not paid to the Escrow Agent
within 60 days of presentment to the party responsible for such fees as set
forth in said Schedule B, then the Escrow Agent may pay itself such fees from
the property held in escrow hereunder.
ARTICLE FIFTH: Any modification of this Agreement or any additional obligations
assumed by an party hereto shall be binding only if evidenced by a writing
signed by each of the parties hereto.
ARTICLE SIXTH: This Agreement may be executed in one or more counterparts, each
of which counterparts shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same Agreement.
In witness whereof, the parties have executed this Agreement as of the date
first above written.
CITIBANK, N.A.
as Escrow Agent
By: /s/ John P. Howard
-----------------------------------
Title: Vice President
---------------------------------
PARTY A
By: /s/ David Margolese CD RADIO INC.
-----------------------------------
Title: Chairman & CEO
---------------------------------
PARTY B
By:
----------------------------------
Title:
---------------------------------
Escrow Agreement - Preferred Custody Services Page 3
<PAGE> 77
IN WITNESS WHEREOF, the authorized representatives of the parties hereto
have set their hands or their names and seals, the day and year first above
written.
ENGELHARD/ICC
By: [SIG]
-----------------------------------
Name:
---------------------------------
Title: PRESIDENT - COO
--------------------------------
CARRIER ASIA PACIFIC OPERATIONS PTE. LTD.
By: [SIG]
-----------------------------------
Name:
---------------------------------
Title: PRESIDENT
---------------------------------
<PAGE> 78
SCHEDULE A TO ESCROW AGREEMENT BETWEEN
CITIBANK, N.A., AS ESCROW AGENT, AND CD RADIO INC., AS PARTY A
1. Preferred Stock Investment Agreement. CD Radio Inc.
("PARTY A") has entered into a Preferred Stock Investment Agreement (the
"INVESTMENT AGREEMENT") dated as of October 23, 1996, as amended, with the
Investors identified therein (including their successors and assigns, the
"INVESTORS"), pursuant to which Party A has agreed to sell and issue to the
Investors an aggregate of up to 8,000,000 shares of Party A's 5% Delayed
Convertible Preferred Stock (the "PREFERRED SHARES") and, under certain
circumstances, warrants to purchase shares of Party A's common stock (the
"WARRANTS"). Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Investment Agreement.
2. Deposit with Escrow Agent. Upon the Escrow Date,
each Investor severally will deliver or cause to be delivered to the Escrow
Agent payment to the escrow account identified on the cover page hereof (the
"ESCROW ACCOUNT"), in the amount set forth next to such Investor's name in
column 1 on Exhibit C hereto (together with any income and interest that
accrues thereon, the "ESCROWED PROPERTY"). Such monies will be wire
transferred directly from the Investors to the Escrow Account.
3. Conditions for Release. The Escrowed Property shall
remain in the Escrow Account pursuant to the terms hereof until:
(a) at the close of the final bid submission round of the
Satellite DARS License auction conducted by the FCC, if (1) Party A is the
winning bidder for one of the Satellite DARS Licenses and the Bid Financing
Condition (as defined below) is met and (2) each of the conditions set forth in
Article IV of the Investment Agreement and applicable to the First Closing
shall be fulfilled or waived in accordance with the Investment Agreement;
provided, that it shall be a condition of release of the Escrowed Property from
the Escrow Account (the "BID FINANCING CONDITION"), that Party A have at that
time additional cash and/or binding commitments for financing (from the
proceeds from the sale of the Second Closing Shares and/or any other binding
commitments that are either pari passu or junior in seniority, structure and
maturity to the Preferred Shares) for an amount sufficient, together with the
Escrowed Property to be released to Party A, to enable Party A to fully and
timely make the payments required to purchase the Satellite DARS License; or
(b) the earliest of (i) five Business Days after the
conclusion of the Satellite DARS License auction if Party A has not submitted a
Winning Bid or if the Bid Financing Condition, if applicable, is not met, (ii)
the date Party A indicates, or takes any action indicating, that it will not,
or Party A otherwise loses its right to, acquire the Satellite DARS License on
the terms prescribed in the auction thereof, (iii) May 1, 1997 (or May 12,
1997, if Party A has submitted a Winning Bid) or (iv) any other termination of
the Investment Agreement.
4. Release of Escrowed Property. The Escrow Agent shall
only release the Escrowed Property as specified below:
(a) if the Escrow Agent receives from Party A a copy of a
certificate of the chief executive, operating or financial officer of Party A
in the form of Exhibit A hereto issued to the Investors (the "CERTIFICATE")
stating that the conditions contained in paragraph (a) of Section 3 above have
been satisfied, then the Escrow Agent shall release and transfer to each
Investor, the amount set forth next to such Investor's name in column 2 of
Exhibit C hereto and the remainder of the Escrowed Property to an account
designated by Party A to the Escrow Agent in writing, on the second business
day following the Escrow Agent's receipt of such Certificate; or
<PAGE> 79
(b) if (i) May 1, 1997 (or May 12, 1997 if Party A has
submitted a Winning Bid) shall have occurred without a release of Escrowed
Property pursuant to Section 4(a) or (ii) the Escrow Agent receives from a
majority in interest (as reflected on Exhibit C) of the Investors and from
Party A a certificate in the form of Exhibit D that indicates that any of the
events itemized in Section 3(b)(i), (ii) or (iv) above have occurred, then the
Escrow Agent shall release and transfer the Escrowed Property to the Investors
in such amounts as are stipulated on the attached Exhibit C, together with each
Investor's pro rata share of the income and interest thereon.
5. Interest Bearing Account. The Escrow Agent shall
hold the Escrowed Property in an interest bearing account. Any interest earned
on the Escrowed Property shall be paid to the party or parties entitled to the
Escrowed Property.
6. Third Party Beneficiary. Each of the Investors shall
be a third party beneficiary of, and entitled to enforce, this Agreement.
- 2 -
<PAGE> 80
EXHIBIT A TO SCHEDULE A
[Date]
The Value Realization Fund, L.P.
GRS Partners II
The Canyon Value Realization Fund, (Cayman) Ltd.
Cerberus Partners, L.P.
The Copernicus Fund, LP
The Galileo Fund, LP
Dickstein & Co. L.P.
Dickstein International Limited
Global Bermuda Limited Partnership
Lakeshore International, Limited
Elliott Associates, L.P.
Westgate International, L.P.
Everest Capital International, Ltd.
Everest Capital Fund, L.P.
The Jay Goldman Master Limited Partnership
Grace Brothers, Ltd.
MainStay VP Series Fund, Inc., on behalf of its High Yield Corporate Bond
Portfolio
The MainStay Funds, on behalf of its High Yield Corporate Bond Fund Series
The Brown & Williamson Master Retirement Trust
Police Officers Pension System of the City of Houston
Highbridge Capital Corporation
The MainStay Funds, on behalf of its Strategic Income Fund Series
The Ravich Revocable Trust of 1989
Scoggin Capital Management
Scoggin International Fund, Ltd.
TCW Shared Opportunity Fund II
LibertyView Plus Fund
LibertyView LLC Fund
Paresco, Inc.
Navesink Investment Fund, LDC
Stonehill Offshore Partners Limited
Stonehill Investment Corp., for and on behalf of Stonehill Partners L.P., GRS
Partners III and Aurora Limited Partnership
Herta and Paul Amir Family Trust
The Wolens Family Trust
LongView Partners
Cumberland Partners
JMG Capital Partners, L.P.
The James P. Argyropoulos Trust Dated 8/8/91
Banco Santander Trust and Banking Corp. (Bahamas) Ltd.
CC Investments, Ltd.
Continental Casualty Company
Greenlight Capital, L.P.
Greenlight Capital Offshore, Ltd.
Lloyd I. Miller Trust A-4 Dated 9/19/80, Amended and Restated 9/20/83
Milfam II, L.P.
A-1
<PAGE> 81
Milner Trust
Post Balanced Fund, L.P.
UBS Securities LLC
Citibank, N.A., Escrow Agent
153 East 53rd Street
New York, NY 10043
Re: Certificate Regarding Escrow Agreement Between
Citibank, NA and CD Radio Inc., dated
March 20, 1997 (the "Escrow Agreement")
Ladies and Gentlemen:
We are writing pursuant to paragraph 4(a) of Schedule A to the
above-referenced Escrow Agreement. All capitalized terms not defined herein
shall have the same meaning as defined in the Escrow Agreement.
The following conditions for release of the Escrowed Property have
been met: (i) at the close of the final bid submission round of the Satellite
DARS License auction conducted by the FCC, CD Radio Inc. was the winning bidder
for one of the Satellite DARS Licenses and the Bid Financing Condition has been
met as shown on Annex A or waived in a writing executed by each Investor and
(ii) each of the conditions set forth in Article IV of the Investment Agreement
and applicable to the First Closing have been fulfilled or waived in accordance
with the Investment Agreement.
Citibank, N.A., as escrow agent, is therefore authorized to release to
each Investor on [insert date calculated based on Section 1.3(b) of the
Investment Agreement], the amounts set forth next to such Investor's name in
column 2 of Exhibit C to the Escrow Agreement and the remainder of the Escrowed
Property [less the Remaining Deferred Payments Amount], plus all interest
earned thereon, to CD Radio Inc. as provided in paragraphs 4(a) and 5 of
Schedule A to the Escrow Agreement.
Yours very truly,
By:
----------------------------
Name:
Title: Chief [Executive]
[Operating] [Financial]
Officer
A-2
<PAGE> 82
ANNEX A
ANNEX A TO EXHIBIT A TO SCHEDULE A TO ESCROW AGREEMENT
DETERMINATION OF BID FINANCING CONDITION
<TABLE>
<S> <C> <C>
1. Purchase price payable for Satellite DARS License . . . . . . . . . . . . . . . $___________
2. Net proceeds from First Closing and Second Closing:
(a)
$___________
(i) Gross proceeds from First Closing and Second Closing (if any) .
(ii) Less: Financing fees, deal expenses and 2% funding fee on First
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . $___________
(iii) Net Proceeds from sale of Preferred Shares (a(i)-a(ii)) . . . . $___________
(b) Gross proceeds from all other financings for which CDRD has
binding commitments:
(i) (A) From such financings that are pari passu to the
Preferred Shares . . . . . . . . . . . . . . . . . . . $___________
(B) From such financings that are junior to the Preferred
Shares . . . . . . . . . . . . . . . . . . . . . . . . $___________
(C) Total gross proceeds from all other such financings
((b)(i)(A) + (b)(i)(B)) . . . . . . . . . . . . . . . . $___________
(ii) Less: Financing fees, funding fees and deal expenses for all
other such financings . . . . . . . . . . . . . . . . . . . . . $___________
(iii) Net proceeds from all other such financings ((b)(i)(C) - $___________
(b)(ii)) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) Total net proceeds from all financings and commitments for
financings ((a)(iii) plus (b)(iii) . . . . . . . . . . . . . . $___________
(d) Total additional cash currently held by CDRD . . . . . . . . . $___________
(e) Total funds available for payment of purchase price ((c) plus
(d)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $___________
</TABLE>
IF LINE 2(e) IS GREATER THAN OR EQUAL TO LINE 1, THE BID FINANCING CONDITION IS
MET.
A-3
<PAGE> 83
EXHIBIT B TO SCHEDULE A
[Intentionally Omitted]
B-1
<PAGE> 84
EXHIBIT C TO SCHEDULE A
<TABLE>
<CAPTION>
Column 1
Payment Column 2
Investor* Amount** 2% Amount
-------- -------- ---------
<S> <C> <C>
CANYON PARTNERS
The Value Realization Fund, L.P. $187,500 $3,750
GRS Partners II 37,500 750
The Canyon Value Realization Fund, 275,000 5,500
(Cayman) Ltd.
CERBERUS PARTNERS
Cerberus Partners. L.P. 500,000 10,000
DDJ CAPITAL MANAGEMENT
The Copernicus Fund, LP 375,000 7,500
The Galileo Fund, LP 1,125,000 22,500
DICKSTEIN PARTNERS
Dickstein & Co., L.P. 212,500 4,250
Dickstein International Limited 37,500 750
EBF & ASSOCIATES
Global Bermuda Limited Partnership 500,000 10,000
Lakeshore International, Limited 250,000 5,000
ELLIOTT ASSOCIATES, L.P.
Elliott Associates, L.P. 3,000,000 60,000
Westgate International, L.P. 2,000,000 40,000
EVEREST CAPITAL
Everest Capital International, Ltd. 18,175,000 363,500
Everest Capital Fund, L.P. 6,825,000 136,500
THE JAY GOLDMAN MASTER LIMITED PARTNERSHIP 250,000 5,000
GRACE BROTHERS, LTD. 6,000,000 120,000
MACKAY-SHIELDS
MainStay VP Series Fund, Inc., on behalf 1,400,000 28,000
of its High Yield Corporate Bond
Portfolio
The MainStay Funds, on behalf of its High 12,450,000 249,000
Yield Corporate Bond Fund Series
The Brown & Williamson Master 250,000 5,000
Retirement Trust
Police Officers Pension System of the City 225,000 4,500
of Houston
Highbridge Capital Corporation 150,000 3,000
The MainStay Funds, on behalf of its 25,000 500
Strategic Income Fund Series
THE RAVICH REVOCABLE TRUST OF 1989 1,085,000 21,700
</TABLE>
C-1
<PAGE> 85
<TABLE>
<CAPTION>
Column 1
Payment Column 2
Investor* Amount** 2% Amount
-------- -------- ---------
<S> <C> <C>
SCOGGIN CAPITAL MANAGEMENT, L.P.
Scoggin Capital Management 150,000 3,000
Scoggin International Fund, Ltd. 15,000 300
TRUST COMPANY OF THE WEST
TCW Shared Opportunity Fund II 1,000,000 20,000
LIBERTYVIEW CAPITAL MGMT., INC.
LibertyView Plus Fund 300,000 6,000
LibertyView LLC Fund 100,000 2,000
Paresco, Inc. 600,000 12,000
NAVESINK INVESTMENT FUND, LDC 750,000 15,000
STONEHILL INVESTMENT CORP.
Stonehill Offshore Partners Limited 290,625 5,812.50
Stonehill Partners, L.P. 1,096,875 21,937.50
GRS Partners III 187,500 3,750
Aurora Limited Partnership 300,000 6,000
AMIR DEVELOPMENT TRUST
Herta and Paul Amir Family Trust 245,000 4,900
The Wolens Family Trust 12,500 250
CUMBERLAND ASSOCIATES
LongView Partners 250,000 5,000
Cumberland Partners 1,750,000 35,000
JMG CAPITAL PARTNERS, L.P. 250,000 5,000
JAMES P. ARGYROPOULOS
The James P. Argyropoulos Trust Dated 150,000 3,000
8-8-91
BANCO SANTANDER
Banco Santander Trust and Banking Corp. 2,500,000 50,000
(Bahamas) Ltd.
CC INVESTMENTS, LTD. 1,500,000 30,000
CONTINENTAL CASUALTY COMPANY 15,000,000 300,000
GREENLIGHT CAPITAL
Greenlight Capital, L.P. 562,500 11,250
Greenlight Capital Offshore, Ltd. 187,500 3,750
LLOYD MILLER
Lloyd I. Miller Trust A-4 Dated 9-19-80,
Amended and Restated 9-20-83 75,000 1,500
Milfam II, L.P. 75,000 1,500
</TABLE>
C-2
<PAGE> 86
<TABLE>
<CAPTION>
Column 1
Payment Column 2
Investor* Amount** 2% Amount
-------- -------- ---------
<S> <C> <C>
MILNER TRUST 125,000 2,500
POST BALANCED FUND, L.P. 1,000,000 20,000
UBS SECURITIES LLC 2,500,000 50,000
============== ============
$86,307,500 $1,726,150
</TABLE>
-----------------------
* The term Investor includes each entity for which
share amounts are listed opposite such entity's name.
** Investors shall also receive their pro-rata share
(based on the above-stated Payment Amounts) of the
interest earned thereon pursuant to Section 4(b) of
Schedule A to the Escrow Agreement.
C-3
<PAGE> 87
EXHIBIT D TO SCHEDULE A
Citibank, N.A., Escrow Agent
153 East 53rd Street
New York, NY 10043
Re: Certificate Regarding Escrow Agreement Between
Citibank, NA and CD Radio Inc., dated March 20, 1997
(the "Escrow Agreement")
Ladies and Gentlemen:
All capitalized terms not defined herein shall have the same meaning
as defined in the Escrow Agreement. Pursuant to paragraph 4(b) of Schedule A to
the above-referenced Escrow Agreement, the undersigned hereby certify to you as
follows:
[Five Business Days have passed since the conclusion of the Satellite
DARS License auction and Party A was not a winning bidder or the Bid Financing
Condition, if applicable, has not been met][Party A has indicated, or has taken
action indicating, that it will not, or Party A otherwise has lost its right
to, acquire the Satellite DARS License on the terms prescribed in the auction
thereof] [The Investment Agreement has terminated in accordance with its
terms].
Citibank, N.A., as escrow agent, is therefore authorized to release to
Investors the Escrowed Property, plus all interest earned thereon, as provided
in paragraph 4(b) of Schedule A to the Escrow Agreement.
Yours very truly,
CD Radio, Inc.
Accepted and Approved:*
INVESTORS:
Dated: March , 1997 THE VALUE REALIZATION FUND, L.P.
--- By: Canpartners Investments III, L.P.
By: Canyon Capital Management, L.P.
By: Canpartners Incorporated
By:
----------------------------
Its
D-1
<PAGE> 88
<TABLE>
<S> <C>
Dated: March ___, 1997 GRS Partners II
By:
-------------------------------------------------------
Its Account Manager
Dated: March ___, 1997 The Canyon Value Realization Fund, (Cayman) Ltd.
By:
-------------------------------------------------------
Its Account Manager
Dated: March ___, 1997 Cerberus Partners, L.P.
By:
-------------------------------------------------------
General Partner Cerberus Associates, L.P.
General Partner Cerberus Partners, L.P.
Dated: March ___, 1997 The Copernicus Fund, LP
By: DDJ Copernicus, LLC
By:
-----------------------------------------------
Its Member
Dated: March ___, 1997 The Galileo Fund, LP
By: DDJ Galileo, LLC
By:
-----------------------------------------------
Its Member
Dated: March ___, 1997 Dickstein & Co., L.P.
By: Dickstein Partners, L.P.
By: Dickstein Partners, Inc.
By:
-----------------------------------------------
Its
</TABLE>
D-2
<PAGE> 89
<TABLE>
<S> <C>
Dated: March ___, 1997 Dickstein International Limited
By: Dickstein Partners, Inc.
By:
-----------------------------------------------
Its
Dated: March ___, 1997 Global Bermuda Limited Partnership
By: Global Capital Management, Inc.
By:
-----------------------------------------------
Its Authorized Signatory
Dated: March ___, 1997 Lakeshore International, Limited
By: Global Capital Management, Inc.
By:
-----------------------------------------------
Its Authorized Signatory
Dated: March ___, 1997 Elliott Associates, L.P.
By:
-----------------------------------------------
Its General Partner
Dated: March ___, 1997 Westgate International, L.P.
By: Martley International, Inc. as Attorney-in-fact
By:
-------------------------------------
Its
Dated: March ___, 1997 Everest Capital International, Ltd.
By: Everest Capital, Ltd., Investment Manager
By:
-------------------------------------
Its
</TABLE>
D-3
<PAGE> 90
<TABLE>
<S> <C>
Dated: March ___, 1997 Everest Capital Fund, L.P.
By: Everest Capital, Ltd., General Partner
By:
-------------------------------------
Its
Dated: March ___, 1997 The Jay Goldman Master Limited Partnership
By:
-------------------------------------------------------
Its General Partner
Dated: March ___, 1997 Grace Brothers, Ltd.
By:
-------------------------------------------------------
Its General Partner
Dated: March ___, 1997 MainStay VP Series Fund, Inc., on behalf of its High Yield
Corporate Bond Portfolio
By: Mackay-Shields Financial Corporation
Its Investment Advisor
By:
-------------------------------------------------------
Name:
Its:
Dated: March ___, 1997 The MainStay Funds, on behalf of Its High Yield Corporate Bond Fund Series
By: Mackay-Shields Financial Corporation
Its Investment Advisor
By:
-------------------------------------------------------
Name: Jeffrey Platt
Its: Director
</TABLE>
D-4
<PAGE> 91
<TABLE>
<S> <C>
Dated: March ___, 1997 The Brown & Williamson Master Retirement Trust
By: Mackay-Shields Financial Corporation
Its Investment Advisor
By:
-------------------------------------------------------
Name: Jeffrey Platt
Its: Director
Dated: March ___, 1997 Police Officers Pension System of the City of Houston
By: Mackay-Shields Financial Corporation
Its Investment Advisor
By:
-------------------------------------------------------
Name: Jeffrey Platt
Its: Director
Dated: March ___, 1997 Highbridge Capital Corporation
By: Mackay-Shields Financial Corporation
Its Investment Advisor
By:
-------------------------------------------------------
Name: Jeffrey Platt
Its: Director
Dated: March ___, 1997 The MainStay Funds, on behalf of its Strategic Income Fund Series
By: Mackay-Shields Financial Corporation
Its Investment Advisor
By:
-------------------------------------------------------
Name: Jeffrey Platt
Its: Director
</TABLE>
D-5
<PAGE> 92
<TABLE>
<S> <C>
Dated: March ___, 1997 The Ravich Revocable Trust of 1989
By:
-------------------------------------------------------
Its Trustee
Dated: March ___, 1997 Scoggin Capital Management
By:
-------------------------------------------------------
Its General Partner
By:
-------------------------------------------------------
Its
By:
-------------------------------------------------------
Its
Dated: March ___, 1997 Scoggin International Fund, Ltd.
By:
-------------------------------------------------------
Its General Partner
Dated: March ___, 1997 TCW Shared Opportunity Fund II
By: TCW Investment Management Company, its
Investment Adviser
By:
-------------------------------------
Its
By:
-------------------------------------
Its
Dated: March ___, 1997 LibertyView Plus Fund
By:
-------------------------------------------------------
Its
</TABLE>
D-6
<PAGE> 93
<TABLE>
<S> <C>
Dated: March ___, 1997 LibertyView LLC Fund
By: Liberty View Capital Management, Inc.
By:
-------------------------------------------------------
Its
Dated: March ___, 1997 Paresco, Inc.
By:
-------------------------------------------------------
Its
Dated: March ___, 1997 Navesink Investment Fund, LDC
By:
-------------------------------------------------------
Its
Dated: March ___, 1997 Stonehill Offshore Partners Limited
By: Stonehill Advisors LLC, as Agent
By:
-------------------------------------
Its:
Dated: March ___, 1997 Stonehill Investment Corp., for and on behalf of
Stonehill Partners, L.P., GRS Partners III and Aurora
Limited Partnership
By:
-------------------------------------------------------
Its:
Dated: March ___, 1997 Herta and Paul Amir Family Trust
By:
-------------------------------------------------------
Its Trustee
Dated: March ___, 1997 The Wolens Family Trust
By:
-------------------------------------------------------
Its Trustee
</TABLE>
D-7
<PAGE> 94
<TABLE>
<S> <C>
Dated: March ___, 1997 LongView Partners
By:
-------------------------------------------------------
Its General Partner
By:
-------------------------------------------------------
Its General Partner
Dated: March ___, 1997 Cumberland Partners
By:
-------------------------------------------------------
Its General Partner
By:
-------------------------------------------------------
Its
Dated: March ___, 1997 JMG Capital Partners, L.P.
By: JMG Capital Management, Inc.
By:
-------------------------------------------------------
Its General Partner
Dated: March ___, 1997 The James P. Argyropoulos Trust
Dated 8/8/91
By:
-------------------------------------------------------
Its Trustee
Dated: March ___, 1997 Banco Santander Trust and Banking Corp. (Bahamas) Ltd.
By:
-------------------------------------------------------
Its Attorney-in-fact
Dated: March ___, 1997 CC Investments, Ltd.
By:
-------------------------------------------------------
</TABLE>
D-8
<PAGE> 95
<TABLE>
<S> <C>
Its Director
Dated: March ___, 1997 Continental Casualty Company
By:
------------------------------------------------------
Its Group Vice President and Deputy Gaming Counsel
Dated: March ___, 1997 Greenlight Capital, L.P.
By:
-------------------------------------------------------
Its General Partner
Dated: March ___, 1997 Greenlight Capital Offshore, Ltd.
By:
-------------------------------------------------------
Its Investment Advisor
Dated: March ___, 1997 Lloyd I. Miller Trust A-4 Dated 9/19/80, Amended and Restated 9/20/83
By:
-------------------------------------------------------
Its
Dated: March ___, 1997 Milfam II, L.P.
By:
-------------------------------------------------------
Its
Dated: March ___, 1997 Milner Trust
By:
-------------------------------------------------------
Its Trustee
Dated: March ___, 1997 Post Balanced Fund, L.P.
By:
-------------------------------------------------------
Its General Partner
</TABLE>
D-9
<PAGE> 96
<TABLE>
<S> <C>
Dated: March ___, 1997 UBS Securities LLC
By:
-------------------------------------------------------
Its Managing Director
</TABLE>
D-10
<PAGE> 97
SCHEDULE B TO ESCROW AGREEMENT BETWEEN
CITIBANK, N.A., AS ESCROW AGENT, AND
CD RADIO INC., AS PARTY A
Escrow Agent Fees. The initial fees of the Escrow Agent for
acting as Escrow Agent hereunder shall be payable by Party A in the amount of
$2,000.00 on the date hereof. Upon the Escrow Date, an additional fee shall be
due and payable by Party A according to the following schedule:
<TABLE>
<CAPTION>
Total of Escrowed Property Additional Fee
-------------------------- --------------
<S> <C>
Less than or equal to $40,000,000.00 $8,000.00
$40,000,000.01 to $60,000,000.00 $10,000.00
$60,000,000.01 to $80,000,000.00 $12,000.00
$80,000,000.01 to $100,000,000.00 $14,000.00
$100,000,000.01 or greater $18,000.00
</TABLE>
E-1
<PAGE> 98
EXHIBIT 3
Warrant No. __
WARRANT
to Purchase Common Stock of
CD RADIO INC.,
a Delaware corporation
THIS IS TO CERTIFY THAT:
[INSERT NAME OF INVESTOR]
----------
or registered assigns (the "Holder") is entitled to purchase from CD RADIO
INC., a Delaware corporation (the "Issuer"), at any time during the Exercise
Period (as defined below), a number of Stock Units (as defined below) equal to
[INSERT NUMBER], at a purchase price of $10.00 per Stock Unit (adjusted as
provided below), all on the terms and conditions provided in this warrant
(this "Warrant").
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE PROPOSED TRANSACTION
DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR
STATE SECURITIES LAWS, OR UNLESS THE PROPOSED TRANSACTION IS
REGISTERED OR QUALIFIED AS REQUIRED.
THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS.
<PAGE> 99
SECTION 1. CERTAIN DEFINITIONS. As used in this Warrant,
unless the context otherwise requires:
"Additional Shares of Nonpreferred Stock" means all shares of
Nonpreferred Stock issued or issuable by the Issuer after the date of this
Warrant, other than the Warrant Stock.
"Affiliate" means, with respect to a specified Person, any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person. For purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person,
whether through the ownership of voting securities or by agreement or
otherwise.
"Appraised Value" means the fair market value of all
outstanding Common Stock (on a fully diluted basis including any fractional
shares and assuming the exercise in full of all then-outstanding Warrants and
all other options, warrants or other rights to purchase shares of Common Stock
that are then currently exercisable at exercise prices less than the Current
Market Price), as determined by the Board of Directors in good faith. "Fair
market value" is defined for this purpose as the price in a single transaction
determined on a going-concern basis that would be agreed upon by the most
likely hypothetical buyer for 100% of the equity capital of the Issuer (on a
fully diluted basis including any fractional shares and assuming the exercise
in full of all then-outstanding Warrants and all other options, warrants or
other rights to purchase shares of Common Stock that are then currently
exercisable at exercise prices less than the Current Market Price).
"Board of Directors" means either the board of directors of the
Issuer or any duly authorized committee of that board.
"Business Day" means any day that is not a Saturday or a Sunday
or a public holiday or a day on which banks are required or permitted to close
under the laws of the State of New York.
"Common Stock" means the Issuer's authorized common stock as
constituted on the date of original issuance of this Warrant, and any other
stock into which such Common Stock may be changed after such date.
"Convertible Securities" means evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for Additional Shares of Nonpreferred Stock, either immediately or upon the
arrival of a specified date or the happening of a specified event.
"Current Market Price" per share of Common Stock for the
purposes of any provision of this Warrant at the date herein specified, shall
be deemed to be the price determined pursuant to the first applicable of the
following methods:
(i) If the Common Stock is traded on a national
securities exchange or is traded in the over-the-counter market, the Current
Market Price per share of Common Stock shall be deemed to be the average of
the daily market prices for five (5) consecutive Business Days commencing five
(5) Business Days before such date. The market price for each such Business
Day shall be, (a) if the Common Stock is traded on a national securities
exchange or the NASDAQ National Market, its last reported sale price on the
preceding Business Day on such national securities exchange or the NASDAQ
National Market or, if there was no sale on that day, the last reported sale
price on such national securities exchange or the NASDAQ National Market on
the next preceding Business Day on which there was a
2
<PAGE> 100
sale, all as made available over the Consolidated Last Sale Reporting System
of the CTA Plan (the "CLSRS") or, if the Common Stock is not then eligible for
reporting over the CLSRS, its last reported sale price on the preceding
Business Day on such national securities exchange or the NASDAQ National
Market or, if there was no sale on that day, on the next preceding Business
Day on which there was a sale on such exchange or (b) if the principal market
for the Common Stock is the over-the-counter market, but the Common Stock is
not then eligible for reporting over the CLSRS, but the Common Stock is quoted
on the National Association of Securities Dealers Automated Quotations System
("NASDAQ"), the last sale price reported on NASDAQ on the preceding Business
Day or, if the Common Stock is an issue for which last sale prices are not
reported on NASDAQ, the closing bid quotation on such day, but, in each of the
next preceding two cases, if the relevant NASDAQ price or quotation did not
exist on such day, then the price or quotation on the next preceding Business
Day in which there was such a price or quotation.
(ii) If the Current Market Price per share of Common Stock
cannot be ascertained by any of the methods set forth in paragraph (i)
immediately above, the Current Market Price per share of outstanding Common
Stock shall be deemed to be the price equal to the quotient determined by
dividing the Appraised Value by the number of shares (including any fractional
shares) of Common Stock on a fully-diluted basis as determined in accordance
with GAAP.
"Current Warrant Price" per share of Common Stock, for the
purpose of any provision of this Warrant at the date herein specified, means
the amount equal to the quotient resulting from dividing the Exercise Price in
effect on such date by the number of shares (including any fractional share)
of Common Stock comprising a Stock Unit on such date.
"Effective Date" means the date this Warrant was issued by the
Issuer.
"Election Notice" has the meaning ascribed to such term in
Section 2 of this Warrant.
"Exercise Period" shall mean the period commencing on the
Effective Date and expiring upon the date that is five years after the
Effective Date.
"Exercise Price" means the purchase price per Stock Unit as set
forth on the first page of this Warrant on the date of original issue of this
Warrant and thereafter shall mean such dollar amount as shall result from the
adjustments specified in Section 4, if any.
"Expiration Date" means the final date of the Exercise Period.
"GAAP" means generally accepted accounting principles,
consistently applied, as in effect at the time of application to the
provisions hereof.
"Holder" has the meaning ascribed to such term in the first
paragraph of this Warrant.
"Holder Indemnified Party" has the meaning ascribed to such
term in Section 10.6 of this Warrant.
"Investment Agreement" means that certain Preferred Stock
Investment Agreement dated as of October 23, 1996, by and among the Issuer and
the Investors named therein.
"Issuer" has the meaning ascribed to such term in the first
paragraph of this Warrant.
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"Issuer's Business Office" has the meaning ascribed to such
term in Section 2 of this Warrant.
"Liabilities" has the meaning ascribed to such term in Section
10.6 of this Warrant.
"Nonpreferred Stock" shall mean the Common Stock and shall also
include stock of the Issuer of any other class which is not preferred as to
dividends or assets over any other class of stock of the Issuer and which is
not subject to redemption.
"Person" means a corporation, an association, a trust, a
partnership, a joint venture, a limited liability company, an organization, a
business, an individual, a government or political subdivision thereof, a
governmental body or any other legal entity.
"Restricted Certificate" shall mean a Warrant bearing the
restrictive legend set forth in Section 10.1.
"Restricted Securities" shall mean Restricted Stock and
Restricted Warrants.
"Restricted Stock" shall mean Warrant Stock with respect to a
Restricted Warrant or otherwise evidenced by a Restricted Certificate.
"Restricted Warrant" shall mean a Warrant evidenced by a
Restricted Certificate.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time.
"SEC" means the Securities and Exchange Commission and any
successor agency.
"Seller" means a holder of Restricted Securities for which the
Issuer shall be required to file a registration statement or which shall be
registered under the Securities Act at the request of such holder pursuant to
any of the provisions of Section 10. Neither the Issuer nor any of its
Affiliates shall be deemed a "Seller" for any purposes of this Warrant.
"Stock Unit" shall constitute one share of Common Stock, as
such Common Stock was constituted on the date of original issue of this
Warrant and thereafter shall constitute such number of shares (including any
fractional shares) of Common Stock as shall result from the adjustments
specified in Section 4, if any.
"Warrants" shall mean this Warrant and all additional or new
warrants issued upon transfer, division or combination of, or in substitution
for this Warrant or any such additional or new warrant. All Warrants shall at
all times be identical as to terms and conditions and date, except as to the
number of Stock Units for which they may be exercised.
"Warrant Stock" means the shares of Common Stock purchasable by
the holder of a Warrant upon the exercise of such Warrant.
SECTION 2. EXERCISE OF WARRANT. The Holder may, at any time
during the Exercise Period, exercise this Warrant in whole at any time or in
part from time to time for the number of Stock Units which such Holder is then
entitled to purchase under this Warrant; provided that the Issuer shall not be
obligated to honor any request for exercise of this Warrant at any time to the
extent that approval of
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the Federal Communications Commission ("FCC") of the issuance of shares of
Warrant Stock upon such exercise is or would be required and has not been
obtained.
The Issuer shall promptly and expeditiously after the Effective
Date apply for, and uses its best efforts to obtain, any and all approvals,
consents, authorizations or orders of, or make any filings or registrations
with, the FCC necessary to permit the exercise of this Warrant and all
warrants issued to the Investors (as defined in the Investment Agreement) in
accordance with the terms hereof and thereof (the "FCC Approval"). If the FCC
Approval is not obtained by a date that is 270 days after the Initial
Registration Deadline, then, at any time thereafter at the request of the
holder of this Warrant (as defined in the Investment Agreement), the Issuer
shall promptly purchase this Warrant from such holder, at a purchase price
equal to (A) the number of Stock Units that would otherwise be then issuable
upon exercise in full of this Warrant multiplied by (B) (i) the Current Market
Price multiplied by the number of shares of Common Stock that comprise a Stock
Unit minus (ii) the Exercise Price.
The Holder may exercise this Warrant, in whole or in part, by
either of the following methods:
(a) The Holder may deliver to the Issuer at its office
maintained pursuant to Section 15 ("Issuer's Business Office") for such
purpose (i) a written notice of such Holder's election to exercise this
Warrant (an "Election Notice"), which notice shall specify the number of Stock
Units to be purchased, (ii) this Warrant and (iii) a sum equal to the Exercise
Price therefor in immediately available funds; or
(b) The Holder may also exercise this Warrant, in whole or in
part, in a "cashless" or "net-issue" exercise by delivering to the Issuer's
Business Office (i) this Warrant and (ii) an Election Notice, which Election
Notice shall specify the number of Stock Units to be delivered to such Holder
("Deliverable Units") and the number of Stock Units with respect to which this
Warrant is being surrendered in payment of the aggregate Exercise Price for
the Deliverable Units ("Surrendered Units"); provided that the Exercise Price
multiplied by the number of Deliverable Units shall not exceed the value of
the Surrendered Units; provided further that the sum of number of Deliverable
Units and the number of Surrendered Units so specified shall not exceed the
aggregate Stock Units represented by this Warrant. For purposes of this
provision, each Stock Unit as to which this Warrant is surrendered will be
attributed a value equal to the product of (x) the Current Market Price per
share of Common Stock minus the Current Warrant Price per share of Common
Stock, multiplied by (y) the number of shares of Common Stock then comprising
a Stock Unit.
An Election Notice may be in the form of the subscription set
out at the end of this Warrant. Upon delivery thereof, the Issuer shall as
promptly as practicable, and in any event within two (2) Business Days
thereafter, cause to be executed and delivered to such Holder a certificate or
certificates representing the aggregate number of fully-paid and nonassessable
shares of Common Stock issuable upon such exercise.
The stock certificate or certificates for Warrant Stock so
delivered shall be in such denominations as may be specified in the Election
Notice and shall be registered in the name of such Holder or such other name
or names as shall be designated in the Election Notice. Such certificate or
certificates shall be deemed to have been issued and such Holder or any other
Person so designated to be named therein shall be deemed to have become a
holder of record of such shares, and shall have rights including, to the
extent permitted by law, the right to vote such shares or to consent or to
receive notice as a stockholder, as of the time the Election Notice is
delivered to the Issuer in accordance with this Section 2(b). If this Warrant
shall have been exercised only in part, the Issuer shall, at the time of
delivery of said certificate or certificates, deliver to such Holder a new
Warrant dated the date of the
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Election Notice, evidencing the rights of such Holder to purchase Stock Units
in an amount equal to the total number of Stock Units represented by this
Warrant minus the total number of Deliverable Units and Surrendered Units
received upon exercise of this Warrant through the date of such exercise in
part, which new Warrant shall in all other respects be identical to this
Warrant, or, at the request of such Holder, appropriate notation may be made
on this Warrant and this Warrant shall be returned to such Holder.
Except as otherwise provided in Section 8, the Issuer shall pay
all expenses, transfer taxes and other charges payable in connection with the
preparation, issuance and delivery of stock certificates under this Section 2,
except that, if such stock certificates shall be registered in a name or names
other than the name of the Holder, funds sufficient to pay all stock transfer
taxes which shall be payable upon the issuance of such stock certificate or
certificates shall be paid by the Holder at the time of delivering the
Exercise Notice.
All shares of Common Stock issuable upon the exercise of this
Warrant shall be validly issued, fully paid and nonassessable, and free from
all liens and other encumbrances thereon, other than liens or other
encumbrances created by the Holder.
Except as provided in Section 7, the Issuer will not close its
books against the transfer of this Warrant or of any share of Warrant Stock in
any manner that interferes with the timely exercise of this Warrant.
If any fractional interest in a share of Common Stock would be
deliverable upon exercise of this Warrant, the Issuer shall, at its option,
either issue fractional shares of Common Stock or pay in cash an amount equal
to the Current Market Price of such fractional interest.
SECTION 3. TRANSFER, DIVISION AND COMBINATION. Subject to
Section 10, this Warrant and all rights hereunder are transferable, in whole
or in part, on the books of the Issuer to be maintained for such purpose, upon
surrender of this Warrant at the Issuer's Business Office, together with a
written assignment of this Warrant duly executed by the Holder or its agent or
attorney and payment of funds sufficient to pay any stock transfer taxes
payable upon the making of such transfer. Upon such surrender and payment the
Issuer shall, subject to Section 10, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and this Warrant shall promptly be
canceled. If and when this Warrant is assigned in blank (in case the
restrictions on transferability in Section 10 shall have been terminated), the
Issuer may (but shall not be obliged to) treat the bearer hereof as the
absolute owner of this Warrant for all purposes and the Issuer shall not be
affected by any notice to the contrary. This Warrant, if properly assigned in
compliance with this Section 3 and Section 10, may be exercised by an assignee
for the purchase of shares of Common Stock without having a new Warrant
issued.
This Warrant may, subject to Section 10, be divided or combined
with other Warrants upon presentation at the Issuer's Business Office of the
Issuer, together with a written notice specifying the names and denominations
in which new Warrants are to be issued, signed by the Holder or its agent or
attorney. Subject to compliance with the preceding paragraph and with Section
10, as to any transfer which may be involved in such division or combination,
the Issuer shall execute and deliver a new Warrant or Warrants in exchange for
the Warrant or Warrants to be divided or combined in accordance with such
notice.
The Issuer shall pay all expenses, taxes (except as provided in
Section 8) and other charges incurred by the Issuer in the performance of its
obligations in connection with the preparation, issue and delivery of Warrants
under this Section 3.
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The Issuer agrees to maintain at the Issuer's Business Office
books for the registration and transfer of the Warrants.
SECTION 4. ADJUSTMENT OF STOCK UNIT OR EXERCISE PRICE. The
number of shares of Common Stock comprising a Stock Unit, and the Exercise
Price per Stock Unit, shall be subject to adjustment from time to time as set
forth in this Section 4 and in Section 5. The Issuer shall not take any
action with respect to its Nonpreferred Stock of any class requiring an
adjustment pursuant to any of the following Subsections 4.1, 4.2 or 4.7
without at the same time taking like action with respect to its Nonpreferred
Stock of each other class; and the Issuer shall not create any class of
Nonpreferred Stock which carries any rights to dividends.
4.1. Stock Dividends, Subdivisions and Combinations. If at any
time or from time to time the Issuer shall:
(a) take a record of the holders of its Nonpreferred Stock for
the purpose of entitling them to receive a dividend payable in, or other
distribution of, Nonpreferred Stock; or
(b) subdivide its outstanding shares of Nonpreferred Stock
into a larger number of shares of Nonpreferred Stock; or
(c) combine its outstanding shares of Nonpreferred Stock into
a smaller number of shares of Nonpreferred Stock;
then the number of shares of Common Stock comprising a Stock Unit immediately
after the happening of any such event shall be adjusted so as to consist of
the number of shares of Common Stock which a record holder of the number of
shares of Common Stock comprising a Stock Unit immediately prior to the
happening of such event would own or be entitled to receive immediately after
the happening of such event.
4.2. Certain Other Dividends and Distributions. If at any time
or from time to time the Issuer shall take a record of the holders of its
Nonpreferred Stock for the purpose of entitling them to receive any dividend
or other distribution of:
(a) cash (other than a cash distribution made as a dividend
and payable out of earnings or earned surplus legally available for the
payment of dividends under the laws of the jurisdiction of incorporation of
the Issuer, to the extent, but only to the extent, that the aggregate of all
such dividends paid or declared after the date hereof, does not exceed the
consolidated net income of the Issuer earned subsequent to the date hereof
determined in accordance with GAAP), or
(b) any evidence of its indebtedness (other than Convertible
Securities), any shares of its stock (other than Additional Shares of
Nonpreferred Stock) or any other securities or property of any nature
whatsoever (other than cash and other than Convertible Securities or
Additional Shares of Nonpreferred Stock), or
(c) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness (other than Convertible Securities), any
shares of its stock (other than Additional Shares of Nonpreferred Stock) or
any other securities or property of any nature whatsoever (other than cash
that, if distributed, would give rise to an adjustment under Section 4.2(a))
and other than Convertible Securities or Additional Shares of Nonpreferred
Stock),
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then the number of shares of Common Stock thereafter comprising a Stock Unit
shall be adjusted to that number determined by multiplying the number of
shares of Common Stock comprising a Stock Unit immediately prior to such
adjustment by a fraction (i) the numerator of which shall be the Current
Market Price per share of Common Stock at the date of taking such record, and
(ii) the denominator of which shall be such Current Market Price per share of
Common Stock at the date of taking such record minus the portion applicable to
one share of Nonpreferred Stock of any such cash so distributable and of the
fair value of any and all such evidences of indebtedness, shares of stock,
other securities or property, or warrants or other subscription or purchase
rights, so distributable. Such fair value shall be determined in good faith
by the Board of Directors. A reclassification of the Nonpreferred Stock into
shares of Nonpreferred Stock and shares of any other class of stock shall be
deemed a distribution by the Issuer to the holders of its Nonpreferred Stock
of such shares of such other class of stock within the meaning of this
Subsection 4.2 and, if the outstanding shares of Nonpreferred Stock shall be
changed into a larger or smaller number of shares of Nonpreferred Stock as a
part of such reclassification, shall be deemed a subdivision or combination,
as the case may be, of the outstanding shares of Nonpreferred Stock within the
meaning of Subsection 4.1.
4.3. Issuance of Additional Shares of Nonpreferred Stock. If
at any time or from time to time the Issuer shall (except as provided below)
issue, whether in connection with the merger of a corporation into the Issuer
or otherwise, any Additional Shares of Nonpreferred Stock for a consideration
per share less than the Current Market Price per share of such stock, then the
number of shares of Common Stock thereafter comprising a Stock Unit shall be
adjusted to be that number determined by multiplying the number of shares of
Common Stock comprising a Stock Unit immediately prior to such adjustment by a
fraction (a) the numerator of which shall be the sum of (i) the number of such
Additional Shares of Nonpreferred Stock so issued and (ii) the number of
shares of Nonpreferred Stock outstanding immediately prior to such issuance,
and (b) the denominator of which shall be the sum of (i) the number of such
Additional Shares of Nonpreferred Stock that the aggregate consideration for
the total number of such shares of Additional Shares of Nonpreferred Stock
would purchase at the Current Market Price per share of Common Stock and (ii)
the number of shares of Nonpreferred Stock outstanding immediately prior to
such issuance. For purposes of this Subsection 4.3, the date as of which the
Current Market Price per share of Common Stock shall be computed shall be the
earlier of (i) the date on which the Issuer shall enter into a firm contract
for the issuance of such Additional Shares of Nonpreferred Stock, or (ii) the
date of actual issuance of such Additional Shares of Nonpreferred Stock. For
the purpose of calculations pursuant to this Section 4.3, Nonpreferred Stock
issuable upon conversion of the Preferred Shares (as defined in the Investment
Agreement) or upon exercise or conversion of Convertible Securities, warrants,
options or other rights outstanding at the time of such calculation (computed
based on an assumed exercise or conversion as of the date as to which number
of outstanding shares of Nonpreferred Stock is so calculated) for which an
adjustment was required to be made, or it has been determined that no
adjustment was required to be made, pursuant to Subsection 4.4 or 4.5, shall
be deemed to be outstanding at the time of such calculation. The provisions
of this Subsection 4.3 shall not apply to any issuance of Additional Shares of
Nonpreferred Stock for which an adjustment is provided under Subsection 4.1.
No adjustment of the number of shares of Common Stock comprising a Stock Unit
shall be made under this Subsection 4.3 upon the issuance of any Additional
Shares of Nonpreferred Stock that are issued pursuant to the exercise of any
options, warrants or other subscription or purchase rights or pursuant to the
exercise of any conversion or exchange rights in any Convertible Securities,
if any such adjustment shall previously have been made (or it was determined
that no adjustment was to be made at the time of issuance) upon the issuance
of such options, warrants or other rights or upon the issuance of such
Convertible Securities (or upon the issuance of any option, warrant or other
right therefor) pursuant to Subsection 4.4 or 4.5. Notwithstanding the
foregoing, no adjustment shall be required pursuant to this Subsection 4.3,
(1) upon the issuance or conversion of the Preferred Shares (as such term is
defined in the Investment Agreement), (2) in connection with the issuance of
Additional Shares of Nonpreferred Stock upon the exercise or
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conversion, in accordance with the terms thereof, of any warrants, options or
other rights to subscribe for or purchase such shares, or any Convertible
Securities, which were outstanding on October 11, 1996, or (3) in connection
with the issuance of no more than 2,000,000 (subject to appropriate adjustment
for stock splits, stock dividends and similar events) Additional Shares of
Nonpreferred Stock (in addition to those permitted in (2) immediately above)
in accordance with and pursuant to any employee benefit plan to which
employees, directors and/or consultants of the Issuer are entitled to
participate, which plan shall have been approved by the stockholders of the
Issuer.
4.4. Issuance of Warrants, Options or Other Rights. If at any
time or from time to time the Issuer shall take a record of the holders of its
Nonpreferred Stock for the purpose of entitling them to receive a distribution
of, or shall otherwise issue, any warrants, options or other rights to
subscribe for or purchase any Additional Shares of Nonpreferred Stock or any
Convertible Securities and the consideration per share for which additional
shares of Nonpreferred Stock may at any time thereafter be issuable pursuant
to such warrants, options or other rights or pursuant to the terms of such
Convertible Securities shall be less than the Current Market Price per share
of Common Stock, then the number of shares of Common Stock thereafter
comprising a Stock Unit shall be adjusted as provided in Subsection 4.3 on the
basis that (i) the maximum number of Additional Shares of Nonpreferred Stock
issuable pursuant to all such warrants, options or other rights or necessary
to effect the conversion or exchange of all such Convertible Securities shall
be deemed to have been issued as of the date specified in the next following
sentence of this Subsection 4.4, (ii) the aggregate consideration for such
maximum number of Additional Shares of Nonpreferred Stock shall be deemed to
be the minimum consideration received and receivable by the Issuer for the
issuance of such Additional Shares of Nonpreferred Stock pursuant to such
warrants, options or other rights or pursuant to the terms of such Convertible
Securities and (iii) the consideration per share received by the Issuer for
such Additional Shares of Nonpreferred Stock shall be that number determined
by dividing (a) the aggregate consideration for such maximum number of
Additional Shares of Nonpreferred Stock (determined as set forth in clause
(ii) of this sentence) by (b) the maximum number of Additional Shares of
Nonpreferred Stock issuable pursuant to all such warrants, options or other
rights or necessary to effect the conversion or exchange of all such
Convertible Securities (determined as set forth in clause (i) of this
sentence). For purposes of this Subsection 4.4, the computation date for
clause (i) above and as of which the Current Market Price per share of Common
Stock shall be computed shall be the earliest of (x) the date on which the
Issuer shall take a record of the holders of its Nonpreferred Stock for the
purpose of entitling them to receive any such warrants, options or other
rights, (y) the date on which the Issuer shall enter into a firm contract for
the issuance of such warrants, options or other rights (or, if such contract
specifies that the price will be determined as of a later date, then such
later date shall be used for purposes of this Subsection 4.5), and (z) the
date of actual issuance of such warrants, options or other rights.
Notwithstanding the foregoing, no adjustment shall be required pursuant to
this Subsection 4.4, (1) upon the issuance or conversion of the Preferred
Shares (as such term is defined in the Investment Agreement), (2) in
connection with the issuance of Additional Shares of Nonpreferred Stock upon
the exercise or conversion, in accordance with the terms thereof, of any
warrants, options or other rights to subscribe for or purchase such shares, or
any Convertible Securities, which were outstanding on October 11, 1996 and
described on Schedule 2.1(c) of the Investment Agreement, or (3) in connection
with the issuance of no more than 2,000,000 (subject to appropriate
adjustments for stock splits, stock dividends and similar events) Additional
Shares of Nonpreferred Stock (in addition to those permitted in (2)
immediately above) in accordance with and pursuant to any employee benefit
plan to which employees, directors and/or consultants of the Issuer are
entitled to participate, which plan shall have been approved by the
stockholders of the Issuer.
4.5. Issuance of Convertible Securities. (i) If at any time or
from time to time the Issuer shall take a record of the holders of its
Nonpreferred Stock for the purpose of entitling them to receive a distribution
of, or shall otherwise issue, any Convertible Securities and the consideration
per
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share for which Additional Shares of Nonpreferred Stock may at any time
thereafter be issuable pursuant to the terms of such Convertible Securities
shall be less than the Current Market Price per share of Common Stock, then
the number of shares of Common Stock thereafter comprising a Stock Unit shall
be adjusted as provided in Subsection 4.3 on the basis that (1) the maximum
number of Additional Shares of Nonpreferred Stock necessary to effect the
conversion or exchange of all such Convertible Securities shall be deemed to
have been issued as of the computation date specified in clause (ii) of this
Subsection 4.5, (2) the aggregate consideration for such maximum number of
Additional Shares of Nonpreferred Stock shall be deemed to be the minimum
consideration received and receivable by the Issuer for the issuance of such
Additional Shares of Nonpreferred Stock pursuant to the terms of such
Convertible Securities and (3) the consideration per share received by the
Issuer for such Additional Shares of Nonpreferred Stock shall be that number
determined by dividing (a) the aggregate consideration for such maximum number
of Additional Shares of Nonpreferred Stock (determined as set forth in clause
(2) of this sentence) by (b) the maximum number of Additional Shares of
Nonpreferred Stock necessary to effect the conversion or exchange of all such
Convertible Securities (determined as set forth in clause (1) of this
sentence).
(ii) For purposes of this Subsection 4.5, the computation date
for Section 4.5(i) (1) above and as of which the Current Market Price per
share of Common Stock shall be computed shall be the earliest of (x) the date
on which the Issuer shall take a record of the holders of its Nonpreferred
Stock for the purpose of entitling them to receive any such Convertible
securities, (y) the date on which the Issuer shall enter into a firm contract
for the issuance of such Convertible Securities (or, if such contract
specifies that the price will be determined as of a later date, then such
later date shall be used for purposes of this Subsection 4.5), and (z) the
date of actual issuance of such Convertible Securities; provided that with
respect to any Convertible Security for which the maximum number of Additional
Shares of Nonpreferred Stock necessary to effect the conversion of all such
Convertible Securities is not determinable at the time of issuance of such
Convertible Security, the computation date shall be the earlier of (a) the
actual date of conversion and (b) the date of exercise of this Warrant
assuming such Convertible Securities are converted on such date on the terms
thereof. No adjustment of the number of shares of Common Stock comprising a
Stock Unit shall be made under this Subsection 4.5 upon the issuance of any
Convertible Securities which are issued pursuant to the exercise of any
warrants or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such warrants
or other rights pursuant to Subsection 4.4. Subject to Section 4.6(f), the
adjustments made in this Section 4 shall remain in effect regardless of
whether any Convertible Securities are converted or any warrants, options or
other rights to purchase Additional Shares of Nonpreferred Stock or
Convertible Securities are ever exercised.
4.6. Other Provisions Applicable to Adjustments Under this
Section. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock comprising a Stock Unit
provided for above in this Section 4:
(a) Treasury Stock. The sale or other disposition of any
issued shares of Nonpreferred Stock owned or held by or for the account of the
Issuer shall be deemed an issuance thereof for purposes of this Section 4.
(b) Computation of Consideration. To the extent that any
Additional Shares of Nonpreferred Stock or any Convertible Securities or any
warrants, options or other rights to subscribe for or purchase any Additional
Shares of Nonpreferred Stock or any Convertible Securities shall be issued for
cash consideration, the consideration received by the Issuer therefor shall be
deemed to be the amount of cash received by the Issuer therefor, or, if such
Additional Shares of Nonpreferred Stock or Convertible Securities are offered
by the Issuer for subscription, the subscription price, or, if such Additional
Shares
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of Nonpreferred Stock or Convertible Securities are sold to underwriters or
dealers for public offering without a subscription offering, the initial
public offering price, in any such case excluding any amounts paid or
receivable for accrued interest or accrued dividends and without deduction of
any compensation, discounts or expenses paid or incurred by the Issuer for and
in the underwriting of, or otherwise in connection with, the issue thereof.
To the extent that such issuance shall be for a consideration other than
solely for cash, then, except as herein otherwise expressly provided, the
amount of such consideration shall be deemed to be the fair value of such
consideration at the time of such issuance as determined in good faith by the
Board of Directors of the Issuer. The consideration for any Additional Shares
of Nonpreferred Stock issuable pursuant to any warrants, options or other
rights to subscribe for or purchase the same shall be the consideration
received or receivable by the Issuer for issuing such warrants, options or
other rights, plus the additional consideration payable to the Issuer upon the
exercise of such warrants, options or other rights. The consideration for any
Additional Shares of Nonpreferred Stock issuable pursuant to the terms of any
Convertible Securities shall be the consideration received or receivable by
the Issuer for issuing any warrants, options or other rights to subscribe for
or purchase such Convertible Securities, plus the consideration paid or
payable to the Issuer in respect of the subscription for or purchase of such
Convertible Securities, plus the additional consideration, if any, payable to
the Issuer upon the exercise of the right of conversion or exchange in such
Convertible Securities. In case of the issuance at any time of any Additional
Shares of Nonpreferred Stock or Convertible Securities in payment or
satisfaction of any dividend upon any class of stock other than Nonpreferred
Stock, the Issuer shall be deemed to have received for such Additional Shares
of Nonpreferred Stock or Convertible Securities a consideration equal to the
amount of such dividend so paid or satisfied.
(c) When Adjustments to Be Made. The adjustments required by
the preceding Subsections of this Section 4 shall be made whenever and as
often as any specified event requiring an adjustment shall occur, except that
no adjustment shall be made except pursuant to Subsection 4.1 if it would
decrease the number of shares of Common Stock comprising a Stock Unit
immediately prior to such adjustment. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on
the date of its occurrence.
(d) Fractional Interests. In computing adjustments under this
Section, fractional interests in Nonpreferred Stock shall be taken into
account to the nearest one-thousandth of a share.
(e) When Adjustments Not Required. (i) If the Issuer shall
take a record of the holders of its Nonpreferred Stock for the purpose of
entitling them to receive a dividend or distribution or subscription or
purchase rights and shall, thereafter and before the distribution thereof to
stockholders, legally abandon its plan to pay or deliver such dividend,
distribution, subscription or purchase rights, then thereafter no adjustment
shall be required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded and annulled.
(ii) No adjustment shall be made for any warrant, option or
right granted or adjustment made to any other warrant, option or right which
grant or adjustment is triggered solely by an adjustment or exercise of this
Warrant.
(iii) No adjustment in the number of shares of Common Stock
comprising a Stock Unit or the Exercise Price shall be required by this
Section 4 if such adjustment either by itself or with other adjustments
required by this Section 4 and not previously made would require an increase
or decrease of less than 1% in such number or price. Any adjustment
representing a change of less than such minimum amount that is so postponed
shall be carried forward and made when such adjustment, together with other
adjustments required by this Section 4 and not previously made, would result
in an adjustment of 1% or greater of such amount or price.
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(f) When Readjustments Made. The number of shares of Common
Stock comprising a Stock Unit that may be purchased upon exercise of this
Warrant shall be readjusted to reflect the expiration of any warrants, options
or other rights, except where no adjustment of the number of shares of Common
Stock comprising a Stock Unit had previously been made with respect to such
expired warrant, option or right.
4.7. Merger, Consolidation or Disposition of Assets. In the
event the Issuer (1) shall consolidate with or merge into any other Person and
shall not be the continuing or surviving Person of such consolidation or
merger, or (2) shall permit any other Person to consolidate with or merge into
the Issuer and the Issuer shall be the continuing or surviving Person but, in
connection with such consolidation or merger, the Nonpreferred Stock shall be
changed into or exchanged for other securities of any other Person or cash or
any other property, or (3) shall transfer all or substantially all of its
properties or assets to any other Person, or (4) shall effect a capital
reorganization or reclassification of the Nonpreferred Stock, then, and in
each such event, proper provision shall be made so that, upon the basis and
the terms and in the manner provided in this Subsection 4.7, the Holder shall
have the right, at the Holder's option, to receive either (i) a reduction of
the Exercise Price equal to the amount applicable to the number of shares of
Common Stock then comprising a Stock Unit of any such cash and of the fair
value of any and all such shares of stock or of other securities or property
to be received by or distributed to the holders of Nonpreferred Stock of the
Company, or (ii), upon the conversion of all or any part of this Warrant at
any time after the consummation of such consolidation, merger, transfer,
reorganization or reclassification, in lieu of the Common Stock issuable upon
such conversion prior to such consummation, the other securities, cash and
property to which such Holder would have been entitled upon such consummation
if such Holder had converted the Warrant immediately prior to such
consummation, subject to adjustments (subsequent to such action) as nearly
equivalent as possible to the adjustments provided for in this Section 4;
provided that option (i) shall be available upon the occurrence of any such
event only if the holders of Nonpreferred Stock prior to such event continue
to hold Nonpreferred Stock upon the occurrence of such event. Such fair value
and such adjustments shall be determined in good faith by the Board of
Directors of the Company. Anything contained in this Warrant to the contrary
notwithstanding, the Issuer will not effect any of the transactions described
in clauses (1) through (4) above unless, prior to the consummation of such
transaction, each other Person (other than the Issuer) that may be required to
deliver any securities, cash or property upon the conversion of the Warrant
shall assume, by written instrument delivered to the Holder, the obligation to
deliver to the Holder such Common Stock, securities, cash or property as the
Holder may be entitled to receive upon such conversion.
The foregoing provisions of this Subsection 4.7 shall similarly
apply to successive mergers, consolidations or dispositions. In addition to
any other requirements under this Subsection 4.7, the Issuer shall give notice
to the Holder of this Warrant of any merger, consolidation or disposition at
least thirty (30) days before the occurrence of such merger, consolidation or
disposition.
4.8. Other Action Affecting Nonpreferred Stock. In case at any
time or from time to time the Issuer shall take any action affecting its
Nonpreferred Stock, other than an action described in any of the foregoing
Subsections 4.1 to 4.8, inclusive, then, unless in the opinion of the Holder
such action will not have a materially adverse effect upon the rights of the
Holder, the number of shares of Common Stock comprising a Stock Unit shall be
adjusted in such manner and at such time as the Issuer and the holders of
warrants exercisable for a majority of the Stock Units then issuable upon the
exercise of all warrants issued to the Investors (as defined in the Investment
Agreement) may in good faith agree to be equitable in the circumstances. If
the Issuer and such holders cannot agree upon a manner of adjustment, such
adjustment will be made in the manner determined by the Board of Directors in
good faith.
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SECTION 5. NOTICE TO WARRANT HOLDERS.
5.1. Notice of Adjustment of Stock Unit or Exercise Price.
Whenever the number of shares of Common Stock comprising a Stock Unit, or the
price at which a Stock Unit may be purchased upon exercise of the Warrants,
shall be adjusted pursuant to Section 4, the Issuer shall obtain a certificate
signed by Coopers and Lybrand, another "Big Six" accounting firm or
independent accountants selected by the Issuer and acceptable to the holders
of warrants exercisable for a majority of the Stock Units then issuable upon
the exercise of all warrants issued to the Investors (as defined in the
Investment Agreement), setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was
calculated (including a statement of the fair value, as determined by the
Board of Directors of the Issuer or by appraisal (if applicable), of any
evidences of indebtedness, shares of stock, other securities or property or
warrants or other subscription or purchase rights referred to in Section 4.2,
Section 4.6(b) or Section 4.7) and specifying the number of shares of Common
Stock comprising a Stock Unit and (if such adjustment was made pursuant to
Section 4.7) describing the number and kind of any other shares of stock
comprising a Stock Unit, and any change in the purchase price or prices
thereof, after giving effect to such adjustment or change. The Issuer shall
promptly, and in any case within 10 Business Days after the making of such
adjustment, cause a signed copy of such certificate to be delivered to each
holder of a Warrant in accordance with Section 16. The Issuer shall keep at
the Issuer's Business Office copies of all such certificates and cause the
same to be available for inspection at said office during normal business
hours by the Holder or any prospective purchaser of a Warrant designated by
the Holder.
5.2. Notice of Certain Corporate Action. If the Issuer shall
propose (a) to pay any dividend payable in stock of any class to the holders
of its Nonpreferred Stock or to make any other distribution to the holders of
its Nonpreferred Stock (other than a cash dividend for which no adjustment is
required under Section 4.2), or (b) to offer to the holders of its
Nonpreferred Stock rights to subscribe for or to purchase any Additional
Shares of Nonpreferred Stock or shares of stock of any class or any other
securities, rights or options, or (c) to effect any reclassification of its
Nonpreferred Stock (other than a reclassification involving only the
subdivision, or combination, of outstanding shares of Nonpreferred Stock), or
(d) to effect any capital reorganization, or (e) to effect any consolidation,
merger, sale, transfer or other disposition of all or substantially all of its
property, assets or business, or (f) to effect the liquidation, dissolution or
winding up of the Issuer, then in each such case, the Issuer shall deliver to
each holder of a Warrant, in accordance with Section 16, a notice of such
proposed action, which shall specify the date on which a record is to be taken
for the purposes of such stock dividend, distribution or rights, or the date
on which such reclassification, reorganization, consolidation, merger, sale,
transfer, disposition, liquidation, dissolution or winding up is to take place
and the date of participation therein by the holders of Nonpreferred Stock, if
any such date is to be fixed, and shall also set forth such facts with respect
thereto as shall be reasonably necessary to indicate the effect of such action
on the Common Stock and the number and kind of any other shares of stock which
will comprise a Stock Unit, and the purchase price or prices thereof, after
giving effect to any adjustment which will be required as a result of such
action. Such notice shall be so delivered in the case of any action covered
by clause (a) or (b) above at least ten (10) days prior to the record date for
determining holders of the Nonpreferred Stock for purposes of such action, and
in the case of any other such action, at least thirty (30) days prior to the
date of the taking of such proposed action or the date of participation
therein by the holders of Nonpreferred Stock, whichever shall be the earlier.
5.3. Notice of Expiration Date. The Issuer shall deliver to
each holder of a Warrant notice of the Expiration Date. Such notice may be
delivered by the Issuer not less than thirty (30) days but not more than sixty
(60) days prior to the then existing Expiration Date. Failure to timely
deliver such notice shall extend the Expiration Date to a date that is the
later of (i) the Expiration Date or (ii) the date occurring thirty days after
the date such notice is delivered.
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SECTION 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK. The
Issuer shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
exercise of this Warrant and all warrants issued to the Investors (as defined
in the Investment Agreement) and the conversion of the Preferred Shares (as
defined in the Investment Agreement), at least such number that is the greater
of (x) 10,000,000 shares of Common Stock (subject to appropriate adjustment
for stock splits, stock dividends and similar events) and (y) 1.5 times the
number of its shares of Common Stock as shall from time to time be sufficient
to effect the exercise of all outstanding Warrants and all warrants issued to
the Investors (as defined in the Investment Agreement) and the conversion of
the Preferred Shares (as defined in the Investment Agreement). All shares of
Common Stock which shall be issued upon exercise of this Warrant or upon such
conversion, as the case may be, shall be duly and validly issued and
fully-paid and nonassessable.
Before taking any action that would cause an adjustment
reducing the Current Warrant Price per share of Common Stock below the then
par value, if any, of the shares of Common Stock issuable upon exercise of the
Warrants, the Issuer shall take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Issuer may validly and legally
issue fully-paid and nonassessable shares of ordinary Common Stock at such
adjusted Current Warrant Price.
Before taking any action that would result in an adjustment in
the number of shares of Common Stock comprising a Stock Unit or in the Current
Warrant Price per share of Common Stock, the Issuer shall obtain all such
authorizations or exemptions thereof, or consents thereto, as may be necessary
from any public regulatory body or bodies having jurisdiction thereof.
SECTION 7. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS.
In the case of all dividends or other distributions by the Issuer to the
holders of its Nonpreferred Stock with respect to which any provision of
Section 4 refers to the taking of a record of such holders, the Issuer will in
each such case take such a record as of the close of business on a Business
Day. The Issuer will not at any time, except upon dissolution, liquidation or
winding up, close its stock transfer books or Warrant transfer books so as to
result in preventing or delaying the exercise or transfer of any Warrant.
SECTION 8. TRANSFER TAXES. The Issuer will pay any and all
transfer taxes that may be payable in respect of the issuance or delivery of
shares of Common Stock on exercise of this Warrant. The Issuer shall not,
however, be required to pay any tax that may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a
name other than that in which this warrant is registered, and no such issue or
delivery shall be made unless and until the Person requesting such issue has
paid to the Issuer the amount of any such tax, or has established, to the
satisfaction of the Issuer, that such tax has been paid.
SECTION 9. NO VOTING RIGHTS. Except as expressly provided in
this Warrant, this Warrant shall not entitle the holder hereof to any voting
rights or other rights as a stockholder of the Issuer.
SECTION 10. RESTRICTIONS ON EXERCISE AND TRANSFERABILITY. The
Restricted Securities shall not be transferable except upon the conditions
specified in this Section 10; provided that, notwithstanding any other
provisions of this Section 10, the Holder (and each other person mentioned
below in this clause) shall have the right to transfer any Restricted
Securities to any Affiliate of such Holder, in each case free of the
restrictions on transfer imposed by this Section 10 other than the requirement
as to the legending of the certificates for such Restricted Securities
specified in Section 10.1. Each such transferee shall be subject to the same
transfer restrictions imposed on the Warrant holder by this Agreement. The
Warrant Stock has not been registered under the Securities Act or registered
or qualified under the securities laws of any state, and this Warrant may not
be exercised unless the exercise
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of the Warrant does not require registration or qualification under state or
federal securities laws or unless the transaction is registered or qualified
as required. No holder of this Warrant that did not purchase this Warrant
directly from the Issuer shall be permitted to exercise this Warrant unless
such holder shall provide, if requested by the Issuer, an opinion of counsel
to such holder (in form and substance satisfactory to the Issuer and its
counsel) to the effect that such exercise may be accomplished without such
registration or qualification or that such registration or qualification has
occurred.
10.1. Restrictive Legend. Unless and until otherwise
permitted by this Section 10, each certificate for Warrants issued under this
Agreement, each certificate for any Warrants issued to any subsequent
transferee of any such certificate, each certificate for any Warrant Stock
issued upon exercise of any Warrant and each certificate for any Warrant Stock
issued to any subsequent transferee of any such certificate, shall be stamped
or otherwise imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION
UNDER FEDERAL OR STATE SECURITIES LAWS, OR UNLESS THE PROPOSED TRANSACTION IS
REGISTERED OR QUALIFIED AS REQUIRED.
In addition, each certificate for Warrants issued under this
Agreement and each certificate for any Warrants issued to any subsequent
transferee of any such certificate shall be stamped or otherwise imprinted
with a legend in substantially the following form:
THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS.
In addition, each certificate for Warrants issued to any
subsequent transferee of any such certificate shall be stamped or otherwise
imprinted with a legend in substantially the following form:
THIS WARRANT MAY NOT BE EXERCISED UNLESS SUCH TRANSACTION DOES
NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR STATE SECURITIES
LAWS, OR UNLESS SUCH TRANSACTION IS REGISTERED OR QUALIFIED AS REQUIRED.
The Issuer agrees to issue any shares of Common Stock issuable
upon exercise of Warrants without any legend that indicates a restriction on
transferability at such times as (i) the holder thereof is permitted to
dispose of such shares of Common Stock pursuant to Rule 144(k) under the
Securities Act, (ii) such shares of Common Stock are sold to a purchaser or
purchasers who in the opinion of counsel to the seller or such purchaser, in
form and substance reasonably satisfactory to the Issuer and its counsel) are
able to dispose of such shares publicly without registration under the
Securities Act, or (iii) such shares of Common Stock are registered under the
Securities Act; provided in the case of (iii), that the holder of such shares
of Common Stock or the recipient upon such conversion or exercise represents
to the Issuer that such holder will only sell such shares, if at all, pursuant
to the plan of distribution described in an effective registration statement.
10.2. Proposed Transfers. No transfer of any Restricted
Securities, other than a transfer covered by the proviso contained in the
introductory paragraph to this Section 10, may be made unless the proposed
transfer does not require registration under the Securities Act, or unless the
proposed transfer
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is registered as required. The Issuer may require an opinion of counsel of
such transferring holder (which counsel shall be reasonably satisfactory to
the Issuer) to the effect that such proposed transfer may be effected without
registration under the Securities Act. Each certificate evidencing the
Restricted Securities thus to be transferred (and each certificate evidencing
any untransferred balance of the Restricted Securities evidenced by such
Restricted Certificate) shall bear the restrictive legend set forth in
Subsection 10.1, unless in the opinion of the Issuer or the opinion of such
counsel, if requested, pursuant to Rule 144(k) of the Securities Act, such
legend is not required in order to ensure compliance with the Securities Act.
10.3. Demand Registration. Subject to the limitations
contained in Section 10.7, at any time after the earlier of the date that is
(i) six months after the Qualifying Offering (as defined in the Investment
Agreement) or (ii) October 16, 1997 if the Qualifying Offering has not
occurred by such date, the Issuer shall be requested by holders of warrants
exercisable for a majority of the Stock Units then issuable upon the exercise
of all warrants issued to the Investors (as defined in the Investment
Agreement) to effect the registration of any of its Restricted Securities
under the Securities Act, the Issuer shall promptly give written notice of
such proposed registration to all holders of outstanding Restricted Securities
and thereupon shall, as expeditiously as possible, use its best efforts to
effect the registration under the Securities Act by filing pursuant to Rule
415 of the Securities Act a "shelf" registration statement on Form S-3 (or, if
the staff at the SEC takes the position that Form S-3 is not available and
holders of warrants exercisable for a majority of the Stock Units then
issuable upon the exercise of all warrants issued to the Investors so request,
on Form S-1) covering all Restricted Securities, the holder or holders of
which shall have made written request to the Issuer for registration thereof
within 30 days after the giving of such written notice by the Issuer, all to
the extent required to permit the disposition (in accordance with the intended
methods thereof, as aforesaid) by the prospective Seller or Sellers of the
Restricted Securities so registered; provided, that if Form S-3 is not
available, the Issuer shall notify the holders of warrants in writing of such
fact, which notice shall set forth the reasons therefor and the holders' right
to request registration on Form S-1. Any registration statement filed on Form
S-1 shall be maintained by the Issuer for a period of 45 continuous days and,
if not so maintained shall not be deemed to count against the number of
effective registration statements pursuant to this Section 10.3 permitted to
be made by holders pursuant to Section 10.7. Upon the Issuer's request, the
holder or holders making a request for registration shall promptly provide the
Issuer with description of the intended method of disposition of such
securities by the prospective Seller or Sellers. Sellers holding warrants
exercisable for a majority of the Stock Units then issuable upon the exercise
of all warrants issued to investors subject to such registration shall have
the right to select the managing underwriter or underwriters for the offering
of such Restricted Securities.
In the case of an underwritten public offering of Restricted
Securities to be so registered, if the managing underwriter advises that the
number of securities to be so registered is too large a number to be
reasonably sold, the number of such securities sought to be registered by each
Seller shall be reduced, pro rata in proportion to the number of securities
sought to be registered by all Sellers, to the extent necessary to reduce the
number of securities to be registered to the number recommended by the
managing underwriter.
From and after the date of this Agreement, the Issuer shall
not, nor shall it allow the holders of any securities of the Issuer to,
include any of their securities in any registration statement filed by the
Issuer pursuant to this Section 10 unless such inclusion will not reduce the
amount of the Restricted Stock included therein.
10.4. Piggyback Registration. If the Issuer at any time
proposes to register any shares of Common Stock or warrants to purchase Common
Stock under the Securities Act on Form S-1, S-2 or
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S-3 or the equivalent (otherwise than pursuant to Subsection 10.3), whether of
its own accord or at the request of any holder or holders of such securities,
it shall each such time give written notice to all holders of outstanding
Restricted Securities of its intention so to do.
Upon the written request of a holder or holders of any such
Restricted Securities given within 30 days after receipt of any such notice,
the Issuer shall use its best efforts to cause all Restricted Securities, the
holder or holders of which shall have so requested registration thereof, to be
registered under the Securities Act pursuant to such registration statement,
all to the extent required to permit the sale or other disposition (in
accordance with the intended methods thereof as aforesaid) by the prospective
Seller or Sellers of the Restricted Securities so registered; provided,
however, that the Issuer shall not be obligated to include any Restricted
Securities in the registration statement with respect to the Qualifying
Offering (as defined in the Investment Agreement). Upon the Issuer's request,
the holder or holders making a request for registration shall promptly provide
the Issuer with a description of the intended method of disposition of such
securities by the prospective Seller or Sellers.
If the managing underwriter for the respective offering advises
the Issuer in writing that the inclusion in such registration of some or all
of the Restricted Securities sought to be registered by the Seller or Sellers
in its opinion shall cause the proceeds or the price per unit the Issuer or
the requesting or demanding holder of securities shall derive from such
registration to be reduced or that the number of securities to be registered
at the instance of the Issuer or such requesting or demanding holder plus the
number of securities sought to be registered by the Sellers is too large a
number to be reasonably sold, the number of shares of Restricted Securities
shall be reduced pro rata, along with the securities sought to be registered
by any other holder or holders of Common Stock (other than any holder
exercising a demand registration right), to the extent necessary to reduce the
number of securities to be registered to the number recommended by the
managing underwriter.
The Issuer shall not grant to any Person at any time on or
after the Effective Date a "piggyback" right to request the Issuer to register
any securities of the Issuer under the Securities Act unless such right
provides that if the managing underwriter for the respective Sellers believes
that sale of such securities would adversely affect the amount of, or price at
which, the respective Restricted Securities being registered under this
Section 10.4 can be sold, then, the amount of such securities that may be
registered and sold shall be reduced pro rata with the Restricted Securities
in accordance with the immediately preceding paragraph.
In the case of an underwritten public offering of Common Stock
by the Company, each Seller, if requested by the managing underwriter, shall
agree to exercise its rights pursuant to this Section 10.4 only through
participation in such underwritten public offering.
10.5. Registration Procedures. (a) If and whenever the
Issuer is required by the provisions of this Section 10 to use its best
efforts to effect the registration of any of the Restricted Securities under
the Securities Act, the Issuer shall (except as otherwise provided in this
Warrant), as expeditiously as possible:
(i) Prepare and file with the SEC a registration statement
with respect to such Warrant Stock and use its best efforts to cause such
registration to become effective as provided in Subsection 10.3 or 10.4, and
upon the request of any holder of Warrant Stock keep such registration
statement effective for so long as any holder of Restricted Securities desires
to dispose of the securities covered by such registration statement (or, in
the case of a filing on Form S-1, 45 continuous days), or, if earlier, until
such Warrant Stock may be sold under Rule 144(k) (provided that the Issuer's
transfer agent has accepted an instruction from the Issuer to such effect).
The Issuer may suspend or delay the effectiveness of a
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registration statement with respect to such Warrant Stock or the use of any
prospectus used in connection with any such registration effected pursuant to
this subsection (i) only in the event, and for such period of time (not to
exceed 90 cumulative aggregate days in any 12 month-period) as, such a
suspension as the Issuer concludes in its reasonable judgment is required by
applicable securities laws or the rules and regulations of the Securities and
Exchange Commission. The Issuer shall use its best efforts to cause such
suspension to terminate at the earliest possible date; provided that the
Issuer shall be permitted to maintain such suspension if, and only for so long
as, the Board of Directors of the Issuer shall, in good faith, determine that
failure to maintain such suspension is reasonably likely to be seriously
detrimental (excluding detriment resulting from the price of the Common Stock
or the exercise of this Warrant) to the Issuer or would interfere with a
material transaction that the Issuer is then contemplating.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement and notify the holders of
Restricted Securities of the filing and effectiveness of such registration
statement and any amendments or supplements.
(iii) Furnish to each holder of Restricted Securities such
numbers of copies of a current prospectus conforming with the requirements of
the Securities Act, copies of the registration statement, any amendment or
supplement thereto and any documents incorporated by reference therein and
such other documents as such holder of Restricted Securities may reasonably
require in order to facilitate the disposition of Warrant Stock owned by such
holder of Restricted Securities.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or "Blue Sky" laws of such jurisdictions as shall be reasonably requested by
the holder of Restricted Securities, provided that the Issuer shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
(v) Notify each holder of Restricted Securities immediately of
the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement
of material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing, and use its best efforts promptly to update
and/or correct such prospectus.
(vi) In connection with an underwritten offering, furnish, at
the request of any holder of Restricted Securities, (1) an opinion of counsel
of the Issuer, dated the closing date of the offering statement, in form and
substance reasonably satisfactory to such holder and its counsel and covering,
without limitation, such matters as the due authorization and issuance of the
securities being registered and compliance with securities laws by the Issuer
in connection with the authorization, issuance and registration thereof, and
(2) if such registration is made in connection with an underwritten public
offering, a letter or letters of the Issuer's independent public accountants
in form and substance reasonably satisfactory to the holder, such holder's
lead underwriter and their respective counsel.
(vii) Use its best efforts to list the Warrant Stock covered
by such registration statement with any securities exchange or market on which
the Common Stock is then listed.
(viii) Make available for inspection by the holder of
Restricted Securities, upon request, all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to
reporting requirements under the Securities Exchange Act of 1934, as amended,
including
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material filed pursuant to Section 13(a) or 15(d) and filed subsequent to the
Effective Date and require the Issuer's officers, directors and employees to
supply all information reasonably requested by any holder of Restricted
Securities in connection with such registration statement.
(ix) Permit an offering made pursuant to a registration made
at the request of requisite holders under Section 10.3 to be underwritten by
an underwriter of recognized national standing and enter into such agreements
with such underwriter (including agreements to indemnify) and cause delivery
of such legal opinions and letters of independent public accountants as is
customary in underwritten public offerings in accordance with clause (vi), in
each case, at the Issuer's expense.
(b) Each Seller will furnish to the Issuer in connection with
any registration under this Section 10 such information regarding itself, the
Restricted Stock and other securities of the Issuer held by it, and the
intended method of disposition of such securities as shall be reasonably
required to effect the registration of the Restricted Stock held by such
Seller. The intended method of disposition (Plan of Distribution) of such
securities as so provided by any such holder shall be included without
alteration in the registration statement covering the Restricted Stock and
shall not be changed without the written consent of such holder.
10.6. Indemnification. (a) The Issuer shall indemnify,
defend and hold harmless each Seller and each of its officers, directors,
employees, agents, partners or controlling persons (within the meaning of the
Act) (each, a "Holder Indemnified Party") from and against, and shall
reimburse such Holder Indemnified Party with respect to, any and all claims,
suits, demands, causes of action, losses, damages, liabilities, costs or
expenses ("Liabilities") to which such Holder Indemnified Party may become
subject under the Securities Act or otherwise, arising from or relating to
(A) any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein or
any amendment or supplement thereto, or (B) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading; provided, however, that the Issuer shall not be liable
with respect to any Seller in any such case to the extent that any such
liability arises out of or is based upon an untrue statement or omission so
made in such registration statement, prospectus or amendment or supplement
thereto in reliance upon and in strict conformity with written information
furnished in an instrument duly executed by such Seller specifically for use
in the registration statement; provided further, that the Issuer shall not be
liable with respect to any Seller in any such case to the extent that any such
Liability arises out of or is based upon an untrue statement or omission made
in any preliminary prospectus if (i) such Seller under an obligation to send
or deliver a copy of the prospectus with or prior to the delivery of written
confirmation of the sale of Restricted Stock to the person asserting such
Liability who purchased such Restricted Stock that are the subject thereof
from such Seller failed to do so and (ii) the prospectus would have completely
corrected such untrue statement or omission and if, having previously been
furnished by or on behalf of the Issuer with copies of the prospectus so
correcting such untrue statement or omission and having been obligated to
deliver such prospectus, such Seller thereafter failed to deliver such
prospectus prior to or concurrently with the sale of Restricted Stock to the
person asserting such Liability who purchased such Restricted Stock that is
the subject thereof from such Seller; and provided further, that the Issuer
shall not be liable with respect to any Seller in any such case to the extent
that any Liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission in the prospectus, if
such untrue statement or alleged untrue statement, omission or alleged
omission is completely corrected in an amendment or supplement to the
prospectus and if, having previously been furnished by or on behalf of the
Issuer with copies of the prospectuses so amended or supplemented and having
been obligated to deliver such prospectuses, such Seller thereafter failed to
deliver such prospectus as so amended or supplemented, prior to or
concurrently
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with the sale of Restricted Stock to the person asserting such Liability who
purchased such Restricted Stock that is the subject thereof from such Seller.
(b) In the event of any registration under the Securities Act
of Restricted Stock pursuant to Section 10, each Seller hereby severally
agrees to indemnify, defend and hold harmless the Issuer, and its officers,
directors, employees, agents, partners or controlling persons (within the
meaning of the Act) (each, an "Issuer Indemnified Party") from and against,
and shall reimburse such the Issuer Indemnified Party with respect to, any and
all Liabilities to which such the Issuer Indemnified Party may become subject
under the Securities Act or otherwise, arising from or relating to (A) any
untrue statement or alleged untrue statement of any material fact contained in
such registration statement, any prospectus contained therein or any amendment
or supplement thereto, or (B) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading; provided, that such holders will be liable in any such case to the
extent, and only to the extent, that any such liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in such registration statement, prospectus or
amendment or supplement thereto in reliance upon and in strict conformity with
written information furnished in an instrument duly executed by such holder
specifically for use in the preparation thereof; provided further that in no
case shall any such holder be liable in any such case in an amount in excess
of the net proceeds received by such holder upon the sale of Restricted Stock
pursuant to such registration statement, prospectus or amendment or supplement
thereto.
(c) (i) Promptly after receipt by any Holder Indemnified
Party of notice of the commencement of any action, such Holder Indemnified
Party shall, if a claim in respect thereof is to be made against the Issuer
hereunder, notify the Issuer in writing thereof but the omission so to notify
the Issuer shall not relieve the Issuer from any Liability that it may have to
the Holder Indemnified Party other than under this section and shall only
relieve it from any Liability that it may have to the Holder Indemnified Party
under this section if and to the extent the Issuer is actually prejudiced by
such omission. In case any such action shall be brought against any Holder
Indemnified Party and such Holder Indemnified Party shall notify the Issuer of
the commencement thereof, the Issuer shall be entitled to participate in and,
to the extent it shall wish, to assume and undertake the defense thereof with
counsel reasonably satisfactory to such Holder Indemnified Party, and, after
notice from such Seller to the Holder Indemnified Party of its election so to
assume and undertake the defense such Seller shall not be liable to the Holder
Indemnified Party under this section for any legal expenses subsequently
incurred by the Holder Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with
counsel so selected; provided, however, that if the defendants in any such
action include both the Issuer and such Holder Indemnified Party and the
Holder Indemnified Party shall have reasonably concluded that there may be
reasonable defenses available to it that are different from or additional to
those available to the Issuer or if the interests of the Holder Indemnified
Party reasonably may be deemed to conflict with the interests of the Issuer,
the Holder Indemnified Party shall have the right to select a separate counsel
and to assume such legal defenses and otherwise to participate in the defense
of such action, with the reasonable expenses and fees of such separate counsel
and other reasonable expenses related to such participation to be reimbursed
by the Issuer as incurred. In clarification of the foregoing, the Issuer
shall pay the reasonable expenses and fees of one separate counsel whose
selection is approved by the largest group of similarly situated Holder
Indemnified Parties as measured by the aggregate par value of such Restricted
Stock owned by such group. Any Holder Indemnified Party who chooses not to be
represented by the foregoing separate counsel shall be entitled, at its own
expense, to be represented by counsel of its own selection.
(ii) Promptly after receipt by any Issuer Indemnified Party of
notice of the commencement of any action, such Issuer Indemnified Party shall,
if a claim in respect thereof is to be
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made against any Seller hereunder, notify such Seller in writing thereof but
the omission so to notify such Seller shall not relieve such Seller from any
Liability that it may have to the Issuer Indemnified Party other than under
this section and shall only relieve it from any Liability that it may have to
the Issuer Indemnified Party under this section if and to the extent such
Seller is actually prejudiced by such omission. In case any such action shall
be brought against any Issuer Indemnified Party and such Issuer Indemnified
Party shall notify Seller of the commencement thereof, such Seller shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
Issuer Indemnified Party, and, after notice from such Seller to the Issuer
Indemnified Party of its election so to assume and undertake the defense such
Seller shall not be liable to the Issuer Indemnified Party under this section
for any legal expenses subsequently incurred by the Issuer Indemnified Party
in connection with the defense thereof other than reasonable costs of
investigation and of liaison with counsel so selected; provided, however, that
if the defendants in any such action include both the Sellers and such Issuer
Indemnified Party and the Issuer Indemnified Party shall have reasonably
concluded that there may be reasonable defenses available to it that are
different from or additional to those available to the Sellers or if the
interests of the Issuer Indemnified Party reasonably may be deemed to conflict
with the interests of the Sellers, the Issuer Indemnified Party together with
all other defendant Issuer Indemnified Parties shall have the right to select
one separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and
fees of such separate counsel and other reasonable expenses related to such
participation to be reimbursed by such Sellers as incurred.
10.7. Expenses; Limitations on Registration. (a) With
respect to the inclusion of Restricted Stock in a registration statement
pursuant to Section 10, all fees, costs and expenses of and incidental to such
registration, inclusion and public offering shall be borne by the Issuer;
provided, however, that any securityholders participating in such registration
shall bear their pro-rata share of the underwriting discounts and commissions,
if any, incurred by them in connection with such registration.
(b) The fees, costs and expenses of registration to be borne
by the Issuer as provided in this Section 10 shall include, without
limitation, all registration, filing and NASD fees, listing fees, printing
expenses, fees and disbursements of counsel and accountants for the Issuer,
and all legal fees and disbursements and other expenses of complying with
state securities or Blue Sky laws of any jurisdiction or jurisdictions in
which securities to be offered are to be registered and qualified. Subject to
appropriate agreements as to confidentiality, the Issuer shall make available
to counsel for the Sellers its documents and personnel for due diligence
purposes. Except as otherwise provided herein, fees and disbursements of
counsel and accountants for the selling securityholders shall be borne by the
respective selling securityholders.
(c) The holders of all Restricted Securities shall be entitled
to an aggregate of two (2) effective registrations pursuant to requests made
under Section 10.3 and an unlimited number of registrations pursuant to
requests made under Section 10.4; provided that any such registration request
made by the requisite number of holders which request shall be withdrawn
(other than by reason of the Company's failure to perform its obligations
hereunder) by the holders of a majority in number of shares evidenced or
covered by the Restricted Securities sought to be so registered, after the
respective registration statement shall have become effective, shall be
treated as an "effective" registration for purposes of this Warrant.
(d) Notwithstanding the rights of the holders pursuant to
Sections 10.3 and 10.4, the Issuer shall have no obligation to effect a
registration for any securities that are eligible for resale pursuant to Rule
144(k) under the Securities Act, provided that the Issuer's transfer agent has
accepted an
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instruction from the Company specifying that such securities are eligible for
sale without restriction pursuant to Rule 144(k).
SECTION 11. LIMITATION OF LIABILITY. No provision hereof, in
the absence of affirmative action by the Holder to purchase shares of Warrant
Stock, and no mere enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of such Holder for the purchase price
of the Warrant Stock or as a stockholder of the Issuer, whether such liability
is asserted by the Issuer or by creditors of the Issuer.
SECTION 12. LOSS, DESTRUCTION OF WARRANT CERTIFICATES. Upon
receipt of evidence satisfactory to the Issuer of the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
(the original Warrant holder's or any other institutional Warrant holder's
indemnity being satisfactory indemnity in the event of loss, theft or
destruction of any Warrant owned by such original or institutional holder),
or, in the case of any such mutilation, upon surrender and cancellation of
such Warrant, the Issuer shall make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing
the right to purchase the same aggregate number of shares of Common Stock.
SECTION 13. FURNISH INFORMATION. The Issuer agrees that it
shall deliver to the Holder promptly after their becoming available copies of
all financial statements, reports and proxy statements that the Issuer shall
have sent to its stockholders generally.
SECTION 14. AMENDMENTS; LIKE TREATMENT OF HOLDERS OF WARRANTS.
The terms of this Warrant and all other warrants issued to Investors (as
defined in the Investment Agreement) may be amended, and the observance of any
term therein may be waived, but only with the written consent of the holders
of warrants evidencing a majority in number of the total number of Stock Units
at the time purchasable upon the exercise of all then outstanding warrants
issued to Investors, provided that no such action may change the number of
shares of stock comprising a Stock Unit or the Exercise Price, without the
written consent of the holders of warrants evidencing 100% in number of the
total number of Stock Units at the time purchasable upon the exercise of all
then outstanding warrants. For the purposes of determining whether the
holders of outstanding warrants issued to Investors entitled to purchase a
requisite number of Stock Units at any time have taken any action authorized
by this Warrant, any warrants owned by the Issuer or any Affiliate of the
Issuer (other than an institutional investor which may be deemed an Affiliate
solely by reason of the ownership of warrants) shall be deemed not to be
outstanding. Neither the Issuer nor any of its subsidiaries shall, directly
or indirectly, pay or cause to the paid any consideration, whether by way of
interest, fee or otherwise, to any holder of warrants issued to Investors for,
or as an inducement to any consent, waiver or amendment of any terms or
provisions of such warrants issued to Investors unless such consideration is
offered to be paid to or agreed to be paid to all such holders which so
consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or agreement. Neither the Issuer
nor any of its subsidiaries shall, directly or indirectly, redeem or
repurchase any warrants issued to Investors unless such offer of redemption or
repurchase is made pro rata to all holders of such warrants on identical
terms.
SECTION 15. OFFICE OF THE ISSUER. So long as this Warrant
remains outstanding, the Issuer shall maintain an office in the City of New
York where this Warrant may be presented for exercise, transfer, division or
combination as provided in this Warrant. Such office shall be at
[____________________________________________________________________________],
Attention: [__________], unless and until the Issuer shall designate and
maintain some other office for such purposes and deliver written notice thereof
to the holders of all outstanding Warrants.
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SECTION 16. NOTICES GENERALLY. Except as otherwise provided
in this Warrant, any notice or other communication required or permitted to be
given under this Warrant shall be in writing and shall be effective (a) upon
hand delivery or delivery by telex (with correct answer back received),
telecopy or facsimile at the address or number designated below (if delivered
on a Business Day during normal business hours where such notice is to be
received), or the first Business Day following such delivery (if delivered
other than on a Business Day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of
mailing by express courier service, fully prepaid addressed to such address or
upon actual receipt of such mailing, whichever shall first occur, to any
holder of a Warrant at its last known address appearing on the books of the
Issuer, or, except as herein otherwise expressly provided, to the Issuer at
its principal executive office, CD Radio Inc., Sixth Floor, 1001 22nd Street
N.W., Washington, D.C. 20037; Facsimile (202) 296-6265; Attention: David
Margolese, or such other address as shall have been furnished to the party
giving or making such notice, demand or delivery.
SECTION 17. SUCCESSORS AND ASSIGNS. This Warrant shall bind
and inure to the benefit of an be enforceable by the parties to this Warrant
and their respective successors and assigns, and, without limiting the
generality of the foregoing, shall inure to the benefit of and be enforceable
by each Person who shall from time to time be the Holder of this Warrant.
SECTION 18. GOVERNING LAW. This Warrant shall be governed by
and construed and enforced in accordance with the internal laws of the State
of New York, without regard to the such state's principles of conflict of
laws.
SECTION 19. NO WAIVER; CUMULATIVE REMEDIES. No waiver by any
party of any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement of this Agreement, nor
shall any delay or omission of any party to exercise any right under this
Agreement in any manner impair the exercise of any such right accruing to it
after such waiver. The rights, remedies, powers and privileges provided in
this Warrant are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
SECTION 20. SPECIFIC PERFORMANCE AND COUNSEL FEES. The Issuer
and the Holder agree that irreparable damage would occur in the event that any
of the provisions of this Warrant were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
Holder shall be entitled to an injunction or injunctions to prevent breaches
of this Warrant and to enforce specifically the terms and provisions of this
Warrant in any court of the United States or any state of the United States
having jurisdiction, this being in addition to any other remedy to which it
may be entitled at law or in equity. In addition, in the event the Holder is
required to enforce the terms and provisions of this Warrant and is successful
in doing so, it shall be reimbursed by the Issuer for all costs and expenses,
including legal fees, which it may incur in bringing such legal proceeding.
SECTION 21. SEVERABILITY. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under any present or future
law, and if the rights or obligations of any party under this Agreement will
not be materially and adversely affected thereby, (a) such provision will be
fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (c) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Agreement.
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IN WITNESS WHEREOF, the Issuer has caused this warrant to be
signed in its name by its President or a Vice President.
Dated: ________, 1996
CD RADIO INC., a
Delaware corporation
By:
------------------------------------
Name:
Title:
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<PAGE> 122
SUBSCRIPTION FORM
(to be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for and purchases Stock Units of CD RADIO INC., a
Delaware corporation, purchasable with this Warrant, and [herewith makes
payment therefor in the amount of $__________,] [hereby tenders __________
Stock Units as payment therefor,] all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock of CD Radio Inc. hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of
and delivered to ____________________ whose address is
________________________________________________________________ and, if such
Stock Units shall not include all of the Stock Units issuable as provided in
this Warrant, that a new Warrant of like tenor and date for the balance of the
Stock Units issuable thereunder (less any Stock Units used for payment of the
Exercise Price) be delivered to the undersigned.
Dated:
-------------------------------------------
(Signature of Registered owner)
-------------------------------------------
(Street Address)
-------------------------------------------
(City) (State) (Zip Code)
<PAGE> 123
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all
of the rights of the undersigned under this Warrant, with respect to the
number of Stock Units set forth below:
No. of Stock
Name and Address of Assignee Units
---------------------------- ------------
and does hereby irrevocably constitute and appoint ____________________
Attorney to make sure transfer on the books of CD RADIO INC., a Delaware
corporation, maintained for such purpose, with full power of substitution in
the premises.
Dated:
--------------------------------------
Signature
--------------------------------------
Witness
NOTICE: The signature to the assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or any change whatever.
The signature to this assignment must be guaranteed by a bank or
trust company having an office or correspondent in Los Angeles,
California, or New York, New York, or by a firm having membership on
the New York Stock Exchange.