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Sample Business Contracts

Engagement Letter - Libra Investments Inc. and CD Radio Inc.

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                     [Letterhead of Libra Investments, Inc.]
                       11766 Wilshire Boulevard, Suite 870
                          Los Angeles, California 90025
                               Tel: (310) 312-5600
                               Fax: (310) 312-5666

                                  June 14, 1997

Strictly Confidential

CD Radio Inc.
Sixth Floor

1001 22nd Street, N.W.
Washington, D.C.  20037
Attn:  David Margolese

Dear Mr. Margolese:

                  This letter will confirm our understanding that CD Radio Inc.,
a Delaware corporation, (the "Issuer") has engaged Libra Investments, Inc. (the
"Advisor") to act as the Issuer's exclusive financial advisor and placement
agent in connection with the issuance and sale by the Issuer (the "Private
Placement") of Convertible Preferred Stock (the "Securities"). It is currently
contemplated that the Securities will be authorized by the Issuer as soon as
practicable and will reflect the terms contained in Appendix A. Capitalized
terms not defined herein shall have the meaning specified in Appendix A.

                  Section 1. Services to Rendered. In connection with this
engagement, the Advisor shall act as financial advisor to and agent for the
Issuer in connection with the Private Placement, which duties will include:

                           (a) advising as to the specific terms of the
         Securities and the Private Placement;

                           (b) developing a list of potential purchasers of the
         Securities;

                           (c) consulting with the Issuer from time to time as
         to such potential purchasers;




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David Margolese
CD Radio, Inc.
June 14, 1997
Page 2

                           (d) if requested by the Issuer, assisting the Issuer
         and its counsel in the preparation and distribution of appropriate
         offering materials; and

                           (e) attempting to arrange the Private Placement of
         the Securities at a price and on terms acceptable to the Issuer, it
         being understood and agreed that the aggregate offering price for the
         Securities is currently expected to be up to a maximum of approximately
         $150 million, and that such consideration may take the form of cash
         and/or exchanges of the Issuer's 5% Delayed Convertible Preferred
         Stock.

Nothing contained herein constitutes a commitment on the part of the Advisor to
purchase any of the Securities or an assurance that the Private Placement will
be completed, and the Advisor shall not have the power or authority to bind the
Issuer to any sale of the Securities.

                  Section 2. Compensation. In consideration of the Advisor's
agreements hereunder, the Advisor shall be paid an advisory fee of 3.0% of the
aggregate gross proceeds from the Securities sold, payable in immediately
available funds upon closing of the Private Placement; provided, that such fee
shall be reduced to 1.875% of gross proceeds with respect to the first
$50,000,000 of Securities purchased by Everest Capital International, Ltd.,
Everest Capital Fund L.P. and other entities managed by Everest Capital Limited
(i.e. such fee shall be reduced by $562,500). In the event that the Private
Placement is completed in multiple closings, a pro rata portion of such advisory
fee shall be paid to the Advisor at each closing.

                  No fee payable to any other financial advisor either by the
Issuer or any other entity shall reduce or otherwise affect the fees payable
hereunder to the Advisor.

                  Section 3. The Advisor's Expenses. In addition to the
compensation payable pursuant to Section 2 of this Agreement, the Issuer shall
reimburse the Advisor for all reasonable costs and expenses (including without
limitation reasonable fees and disbursements of its legal counsel) incurred in
connection with this engagement, whether or not the Private Placement is
consummated.

                  Section 4. Term of Engagement. Either party to this Agreement
may terminate this Agreement, with or without cause, by giving 10 day's prior
written notice to the other party at any time after December 15, 1997; provided,
however, that Section 3, the second paragraph of this Section 4 and Sections 5,
6 and 9 hereof shall survive any termination of this Agreement.





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David Margolese
CD Radio, Inc.
June 14, 1997
Page 3

                  The Advisor shall be entitled to receive its full compensation
under Section 2 hereof if at any time prior to the date twelve months after the
termination of this Agreement a transaction is agreed to or consummated by the
Issuer involving the sale or issuance of securities of the type contemplated
hereby in a private placement to investors contacted by Advisor regarding
purchase of Securities in connection with this engagement (the "Libra
Investors"). Promptly following termination of this engagement, Advisor shall
provide Issuer with a list of Libra Investors.

                  Section 5. Indemnification. The Company agrees to the
indemnification, contribution, limitation of liability and expense reimbursement
obligations set forth in Exhibit A hereto, the provisions of which are
incorporated herein in their entirety.

                  Section 6. Work Product. The Advisor's advice shall be the
proprietary work product and intellectual property of the Advisor and such
advice may not be disclosed to other parties by the Issuer without the prior
written permission of the Advisor unless such disclosure is required by law. Any
document or information prepared by the Advisor in connection with this
engagement shall not be duplicated by the Issuer and shall be returned by the
Issuer to the Advisor upon termination of this Agreement.

                  Section 7. Cooperation. The Issuer shall furnish the Advisor
with all information, data or documents that the Advisor shall reasonably deem
appropriate in connection with its activities hereunder and shall provide the
Advisor full access to the Issuer's officers, employees and professional
advisors. Issuer represents and warrants that all such information, data and
documents, taken in their entirety, shall not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements herein not misleading. The Issuer agrees to advise the Advisor if any
such information, data or documents becomes materially inaccurate, misleading or
incomplete during the term of this Agreement. The Advisor shall be entitled to
rely on the accuracy and completeness of such information, data and documents,
and the Advisor shall not be required to make an independent verification
thereof. If requested by the Advisor, the Issuer shall provide to the Advisor a
certificate signed by two of its executive officers as to the accuracy of the
second sentence of this paragraph at each closing of a sale of the Securities.

                  It is further understood that the Issuer shall involve the
Advisor in all discussions between the Issuer and potential purchasers and shall
make available to the Advisor all information regarding potential purchasers
that it shall receive from any source whatsoever. The Issuer recognizes and
confirms that the Advisor in acting pursuant to this authorization will be using
information provided by the Issuer and



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David Margolese
CD Radio, Inc.
June 14, 1997
Page 4

that the Advisor does not assume responsibility for the accuracy or completeness
of any such information.

                  Section 8. Confidentiality. Advisor agrees that all
confidential information which it may now possess or may obtain relating to the
financial condition, results of operations, business properties, assets,
liabilities, or future prospects of the Issuer shall not be published, disclosed
or made accessible by it to any other person or any entity at any time or used
by it without the written consent of the Issuer; provided, however, that the
restrictions of this sentence shall not apply (a) as may otherwise be required
by law, (b) as may be necessary or appropriate in connection with this
Agreement, or (c) to the extent such information shall be or shall have
otherwise become publicly available, including without limitation all
information contained in the Issuer's publicly-available reports and filings
with the Securities and Exchange Commission, if any.

                  Section 9. Outside Advisors and Conflicts. The Issuer
acknowledges that the Advisor and its affiliates may have and may continue to
have investment banking, broker-dealer and other relationships with parties
other than the Issuer pursuant to which the Advisor may acquire information of
interest to the Issuer. The Advisor shall have no obligation to disclose such
information to the Issuer (except to the extent such information relates
directly to the Issuer or the Securities), or to use such information in
connection with its efforts hereunder.

                  Section 10. Exclusivity. No other financial advisor or other
entity is or will be authorized by the Issuer during the term of this Agreement
to perform services on its behalf of the type which the Advisor is authorized to
perform hereunder.

                  Section 11. Notices. All notices and other communications
provided for in this Agreement shall be made by first class mail or telecopier.
All notices to the Issuer shall be delivered at the address shown on the first
page of this agreement or to telecopier number (202) 296-6265. All notices to
the Advisor shall be delivered as follows:

                           Libra Investments, Inc.
                           11766 Wilshire Boulevard
                           Suite 870
                           Los Angeles, CA  90025
                           Attn:  Jess M. Ravich
                           Telecopier:  (310) 996-9590





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David Margolese
CD Radio, Inc.
June 14, 1997
Page 5

                  Either party hereto may amend such address or telecopier
information by written notice to the other party delivered as provided in this
Section 11.

                  Section 12. Third Party Beneficiaries. This Agreement is
intended solely for the benefit of the parties hereto and, with the exception of
the rights and benefits conferred upon the Indemnified Persons by Section 5 of
this Agreement, shall not be deemed or interpreted to confer any rights upon any
third parties.

                  Section 13. Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of New York without
giving effect to the choice of law or conflict of law principles hereof.

                  Section 14. Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
Agreement.

                  Section 15. Complete Agreement; Amendments; Assignment. This
Agreement sets forth the entire understanding of the parties relating to the
subject matter hereof and supersedes and cancels any prior communications,
understandings and agreements between the parties. This Agreement may not be
amended or modified except in writing. The rights of the Advisor hereunder shall
be freely assignable, and this Agreement shall apply to, inure to the benefit of
and be binding upon and enforceable against the Advisor and its successors and
assigns; provided, however, that the Advisor shall not assign this Agreement to
any party that is not an affiliate of the Advisor.

                  If the foregoing terms meet with your approval, please
indicate your acceptance by signing and returning the attached copy of this
letter to us.

                                                     Very truly yours,

                                                     LIBRA INVESTMENTS, INC.

                                                     By:      /s/ Jess M. Ravich
                                                        ------------------------
                                                         Jess M. Ravich
                                                         Chairman





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David Margolese
CD Radio, Inc.
June 14, 1997
Page 6

AGREED TO AND ACCEPTED:

CD RADIO INC.

By:      /s/ David Margolese
   -------------------------------
    David Margolese
    Chairman and CEO





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                                    EXHIBIT A

                  The Issuer agrees to indemnify and hold harmless the Advisor,
its affiliates, and each person, if any, who controls the Advisor, or any of its
affiliates, within the meaning of either the Securities Act of 1933, as amended
(the "Act") or the Securities Exchange Act of 1934, as amended (a "Controlling
Person"), and the respective agents, employees, officers and directors of the
Advisor, its affiliates, and any such Controlling Person (each an "Indemnified
Party" and collectively, the "Indemnified Parties"), from and against any and
all losses, claims, damages, liabilities and expenses (including, without
limitation and as incurred, reasonable costs of investigating, preparing or
defending any such claim or action) arising out of, or in connection with any
activities contemplated by the letter to which this Exhibit A is attached or any
other services rendered in connection therewith, including, but not limited to,
losses, claims, damages, liabilities or expenses arising out of or based upon
(i) any untrue statement or any alleged untrue statement of a material fact or
any omission or any alleged omission to state a material fact in any disclosure,
offering, consent solicitation or confidential information documents prepared or
approved by the Issuer (the "Disclosure Documents") pertaining to any of the
transactions or proposed transactions contemplated by such letter (collectively,
the "Transaction"), or (ii) any engagement or retention by the Issuer of any
other person, corporation or entity that has acted or is acting as a finder,
agent, broker, dealer, consultant or advisor to or on behalf of the Issuer with
respect to the activities contemplated by the letter to which this Exhibit A is
attached. The Issuer will not, however, be responsible for any claims,
liabilities, losses, damages or expenses based on statements or omissions made
by an Indemnified Party (or in reliance on information provided by an
Indemnified Party) concerning such Indemnified Party or that have resulted from
such Indemnified Party's willful misconduct or gross negligence. The Issuer also
agrees that (i) no Indemnified Party shall have liability to the Issuer or any
other person in connection with the services rendered pursuant to the agreement
except for claims, liabilities, damages, losses or expenses, including
reasonable legal fees, incurred by the Issuer based on statements or omissions
made by an Indemnified Party (or in reliance on information provided by an
Indemnified Person) concerning such Indemnified Party or that have resulted from
such Indemnified Party's willful misconduct or gross negligence and (ii) in no
event shall the Indemnified Parties be liable, in the aggregate, to the Issuer
or any other person for an amount grater than the fee actually received by the
Advisor pursuant to the letter to which this Exhibit A is attached.

                  In case any action shall be brought against an Indemnified
Person with respect to which indemnity may be sought against the Issuer under
this agreement, the Indemnified Party shall promptly notify the Issuer in
writing and the Issuer shall, if requested by the Indemnified Party, assume the
defense thereof, including the employment of counsel reasonably satisfactory to
the Indemnified Party and payment of all reasonable fees and expenses. The
failure to so notify the Issuer shall not affect any obligations the Issuer may
have to the Indemnified Parties under this letter





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agreement or otherwise unless the Issuer is materially adversely affected by
such failure.

                  If for any reason the foregoing indemnity is unavailable to an
Indemnified Party or insufficient to hold an Indemnified Party harmless, then in
lieu of indemnifying such Indemnified Party, the Issuer shall contribute to the
amount paid or payable by such Indemnified Party as a result of such claims,
liabilities, losses, damages, or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Issuer on the one
hand and by the Advisor on the other from the Transaction or (ii) if the
allocation provided by clause (i) is not permitted under applicable law, in such
proportion as is appropriate to reflect not only the relative benefits received
by the Issuer on the one hand and the Advisor on the other, but also the
relative fault of the Issuer and the Advisor as well as any other relevant
equitable considerations. It is hereby further agreed that the relative benefits
to the Issuer on the one hand and the Advisor on the other with respect to any
Transaction shall be deemed to be in the same proportion as (i) the principal
amount of the Securities sold in the Transaction bears to (ii) the fees paid to
the Advisor with respect to such Transaction. The relative fault of the Issuer
on the one hand and the Advisor on the other with respect to the Transaction
shall be determined by reference to, among other things, whether any untrue or
alleged untrue statement of material fact or the omission or alleged omission to
state a material fact related to information supplied by the Issuer or by the
Advisor and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Notwithstanding
anything to the contrary in the provisions of this Exhibit A, the aggregate
contribution of all Indemnified Parties shall not exceed the amount of fees
actually received by the Advisor pursuant to the letter to which this Exhibit A
is attached. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent representation.

                  The indemnity, contribution and expense reimbursement
obligations set forth herein (i) shall be in addition to any liability the
Issuer may have to any Indemnified Party at common law or otherwise, (ii) shall
survive the conclusion of the Advisor's services in connection with the
Transaction and (iii) shall remain operative and in full force and effect
regardless or any investigation made by or on behalf of the Advisor or any other
Indemnified Party.





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                                   APPENDIX A

                          SUMMARY TERM SHEET/COMMITMENT

ISSUER:                  CD Radio Inc. (the "Company")

ISSUE:                   Convertible Preferred Stock (the "Preferred")

PRINCIPAL AMOUNT:        Up to a Maximum of $150 million

MATURITY:                10 years

CONVERTIBLE:             Any time after closing, at a price of
                         $21.00; provided, however, that the conversion price
                         will reset to market price if on the 4th anniversary of
                         the issuance of the Preferred the market price of the
                         common stock of the Company (as so defined) is below
                         $21.00; provided further that in no event shall the
                         reset be below $10.00. (For the purpose hereof, the
                         term "market price" shall mean the average of the
                         closing prices of the Company's common stock for the 20
                         trading days ending 5 days prior to the 4th
                         anniversary.)

OPTIONAL REDEMPTION:     Non-call for first three years.
                         During years four and five, callable at par plus
                         accrued but unpaid dividends if the closing market
                         price of the Company's Common Stock exceeds $31 1/2per
                         share for 20 trading days out of any 30 consecutive
                         trading days. Thereafter, callable at anytime at par
                         plus accrued but unpaid dividends.

DIVIDEND RATE:           5% PIK or cash, at the Company's option.

RANKING:                 The Preferred will be junior to all debt (bank
                         debt, high- yield offering), but senior to the common
                         equity. (The foregoing ranking is not intended to
                         constitute a restriction on other financings by the
                         Company.)

COVENANTS:               None

PLACEMENT FEE:           3% of the gross proceeds payable to
                         Libra Investments, Inc. upon closing; provided, that
                         such fee shall be 1.875% of gross proceeds with respect
                         to the first

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                         $50,000,000 of Preferred purchased by the Everest
                         Funds.

COMMITMENT:              Everest Capital International, Ltd.,
                         Everest Capital Fund L.P. and other entities managed by
                         Everest Capital Limited (collectively the "Everest
                         Funds") and The Ravich Revocable Trust of 1989
                         ("Ravich" together with the Everest Funds, the "Buyer")
                         will commit to buy $50 million and $2 million (the
                         committed amounts), respectively, of the Preferred (by
                         either exchanging shares of the Company's 5% Delayed
                         Convertible Preferred Stock (the "Delayed Preferred
                         Stock") having an Exchange Value (see below) equal to
                         the foregoing amount or by paying in cash) and the
                         Company will commit to sell such amounts simultaneous
                         with the closing of any financing (not including this
                         financing up to an amount equal to the Liquidation
                         Preference of all outstanding Delayed Preferred Stock
                         divided by 72.125%) yielding "new money" gross proceeds
                         equal to or in excess of $150 million completed on or
                         prior to November 15, 1997 (the "New Financing" and
                         such date shall be referred to as the "New Financing
                         Date"); provided, that it shall be a condition of the
                         Buyers' obligation that (a) all Delayed Preferred Stock
                         is redeemed or converted on or prior to the New
                         Financing Date, and (b) a mutually agreeable (it being
                         understood that an expert chosen by any of Morgan,
                         Stanley & Co., Donaldson Lufkind & Jenrette, Lehman
                         Brothers, Inc., Merrill, Lynch, Pierce, Fenner & Smith
                         or Bear Stearns & Co. shall be deemed to be mutually
                         agreeable) third party expert verify to Buyers that the
                         system (e.g. only two satellites and limited
                         terrestrial repeaters) of delivering digital audio to
                         automobiles, as described in its business plan
                         (including, but not limited to, being able to reach at
                         least 90% of the United States population), is
                         technically feasible; and provided further, that, if in
                         connection with the New Financing, any common stock,
                         securities convertible or exchangeable into common
                         stock or warrants (each an "Equity Equivalent") is sold
                         or given in conjunction with such New Financing where
                         the lowest of the (i) sale price, (ii) conversion
                         price, (iii) "market price" (as defined above) of the
                         common stock measured over the 20 trading days prior to
                         the date of such sale or (iv) exercise price (the
                         "Equity Equivalent Price") is less than $21.00 per
                         share of common stock,





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                         then the conversion price of the Preferred shall be
                         reset (but never above $21.00) to the Equity Equivalent
                         Price; and provided further that in lieu of purchasing
                         the Preferred the Buyers, at their option, may purchase
                         a like amount of the Equity Equivalent.

EVEREST OPTION:          The Everest Funds shall have the option
                         to increase its commitment (on the same terms as herein
                         provided) to $98 million provided it gives written
                         notice to the Company on or before July 3, 1997 (the
                         "Everest Option"). The Everest Option shall not be
                         transferable.

LISTING:                 The Company undertakes to list the Preferred
                         on the same exchange on which the Company's common
                         stock trades.

COMMITMENT FEE:          Upon execution of this Commitment Term
                         Sheet (or as soon thereafter as practical), the Company
                         will issue to the Everest Funds and Ravich 1,560,000
                         (or, if the Everest Option is exercised 1,560,000 times
                         the total amount committed by the Everest Funds and
                         Ravich divided by $52 million) eight-year warrants to
                         purchase common stock at a price of $50.00 per share,
                         allocable pro rata between the Everest Funds and
                         Ravich based on amounts purchased. The Warrants shall
                         not be exercisable until the date one year after
                         execution of this Commitment Term Sheet, at which date
                         they shall become exercisable for the remainder of
                         their term. The Warrants shall contain customary terms
                         and conditions, and shall be callable by the Company
                         after three years at a price of $0.01 per warrant if
                         the closing market price of the Company's Common Stock
                         exceeds $75.00 per share for at least 20 trading days
                         in any 30 consecutive trading day period after three
                         years from the date of issuance. In addition to the
                         Warrants, the Company shall pay the Everest Funds a
                         cash commitment fee equal to $562,500, payable upon
                         closing of Everest's purchase of at least $50,000,000
                         of Preferred (whether through purchase for cash or by
                         exchanging Delayed Preferred Stock).


STANDSTILL AGREEMENT OF
EVEREST FUNDS:           The following limitations (the "Standstill Agreement")
                         apply to the Everest Funds and their affiliates, and to


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                         certain transferees. Until the date one year after
                         execution of this Commitment Term Sheet, the Everest
                         Funds and their affiliates (i) shall not acquire common
                         stock, including by means of conversion of the
                         Preferred or Delayed Preferred Stock or exercise of any
                         other right, if, upon such acquisition, the Everest
                         Funds and their affiliates will have or share, directly
                         or indirectly, voting or investment power over ten
                         percent or more of the outstanding class of common
                         stock (for purposes of this clause (i), a right to
                         acquire upon exercise or conversion will not be deemed
                         to confer voting or investment power over the
                         underlying security in the absence of an exercise or
                         conversion), and (ii) shall not sell or otherwise
                         dispose of Warrants, Preferred or Delayed Preferred
                         Stock to any one purchaser if, following such sale or
                         disposition, the purchaser and its affiliates would be
                         beneficial owners of ten percent or more of the
                         outstanding class of stock, except for a sale or
                         disposition of Warrants, Preferred and/or Delayed
                         Preferred Stock to a purchaser who, for itself and its
                         affiliates, agrees to be bound by the limitations set
                         forth in this Standstill Agreement. Except as provided
                         otherwise in the parenthetical language in clause (i)
                         above, terms and concepts used in this Standstill
                         Agreement shall have the meanings set forth in Section
                         13(d) of the Securities Act of 1934 and the rules and
                         regulations thereunder.

EXCHANGE VALUE:          "Exchange Value" shall be defined as 1.3865 times the
                         Liquidation Preference of the Delayed Preferred Stock
                         being exchanged (including accrued but unpaid dividends
                         and fees, if any).

EXCHANGE OFFER/
REGISTRATION RIGHTS:              Within 180 days after the New Financing Date,
                                  the Company shall use its best efforts to file
                                  with the SEC, if permitted by then applicable
                                  interpretations of the SEC staff, a
                                  registration statement with respect to an
                                  offer to exchange the Preferred (the "Exchange
                                  Offer") for preferred stock of the Company
                                  with identical terms to the Preferred (other
                                  than restrictions on transfer) and convertible
                                  into registered shares of Common Stock. The
                                  Company shall also use its best efforts to
                                  cause such registration statement to





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                                  become effective, and to obtain all other
                                  necessary approvals, including the FCC (if
                                  applicable), within 90 days of such filing
                                  with the SEC. The Everest Funds and Ravich
                                  understand that such SEC Staff interpretations
                                  currently would not permit the Company to
                                  undertake the Exchange Offer as contemplated
                                  above. In the event applicable interpretations
                                  of the staff of the SEC do not permit the
                                  Company to effect the Exchange Offer, or if
                                  for any other reason the Exchange Offer is not
                                  consummated, the Company will use its best
                                  efforts to a) within 180 days after the New
                                  Financing Date, file a shelf registration
                                  statement with respect to resales of the
                                  Preferred and the shares issuable upon
                                  conversion of the Preferred, and (b) within 90
                                  days of such filing with the SEC, cause such
                                  registration to become effective and to obtain
                                  all other necessary approvals, including the
                                  FCC (if applicable). The parties shall enter
                                  into a registration rights agreement with
                                  respect to the foregoing containing customary
                                  terms, conditions and indemnities, including
                                  without limitation provision for reasonable
                                  cash penalties for failure to timely comply
                                  with the foregoing obligations.

WARRANT
REGISTRATION RIGHTS:              Within 180 days after the New Financing Date,
                                  the Company shall use its best efforts to
                                  register for resale the shares of common stock
                                  issuable upon exercise of the Warrants with
                                  the SEC pursuant to a shelf registration on
                                  Form S-3 (if available) or Form S-1 (if Form
                                  S-3 is not available) and to obtain all other
                                  necessary approvals, including the FCC (if
                                  applicable), for the resale of such shares.
                                  The parties shall enter into a registration
                                  rights agreement with respect to such
                                  registration containing customary terms,
                                  conditions and indemnities, including without
                                  limitation provision for reasonable cash
                                  penalties for failure to timely register the
                                  shares.

CONDITIONAL OPTION
TO EXCHANGE FOR


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CONVERTIBLE DEBT:        If at any time within six months after the New
                         Financing Date, the Company raises not less than $75
                         million in gross proceeds from the sale of common stock
                         (and/or convertible preferred stock provided that such
                         convertible preferred stock shall not have a reset and
                         provided further that in either instance no additional
                         equity securities are granted along with such common
                         stock or convertible preferred stock) (the "Equity
                         Sale"), the Company shall have the option, exercisable
                         not earlier than 187 days nor later than 200 days after
                         the New Financing Date, to require the conversion of
                         all or any portion of the Preferred into convertible
                         subordinated debt (the "Convertible Debt".) The
                         Convertible Debt shall have the same terms and
                         conditions as the Preferred (e.g. 10 year term
                         (commencing from the New Financing Date), same
                         conversion privileges, etc.) except that (i) interest
                         must either be paid in cash at 8% or PIKed at 10% (with
                         such PIK option being available for only the first 3
                         years), (ii) the conversion price shall reset (but
                         never above $21.00) to the price at which the stock is
                         sold in the Equity Sale (or, if the sale is of
                         convertible preferred stock, the conversion price shall
                         reset (but never above $21.00) to the "market price"
                         (as defined above) of the common stock measured over
                         the 20 trading days prior to the date of such sale),
                         and (iii) the conversion price shall not be reset to
                         market on the 4th anniversary.

STOCK SPLITS/
COMBINATIONS:            All share amounts and share prices set
                         forth herein shall be appropriately adjusted for any
                         stock splits, stock dividends, stock combinations and
                         the like occurring after the date hereof.

CONDITIONS:              The Company's obligations hereunder are subject to the
                         following conditions:

                                   a) shareholder approval of the issuance of
                                      the Preferred, if required to list the
                                      Preferred, or to maintain the listing of
                                      the Common, on the Nasdaq Small Cap
                                      Market, and

                                   b) FCC approval, if required to issue the
                                      Preferred or Common Stock upon


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                                      conversion of Preferred or exercise of
                                      Warrants

                                    ; provided that (i) the Company shall use
                                    its best efforts to cause the foregoing
                                    conditions to be fulfilled as promptly as
                                    reasonably practicable, and (ii) David
                                    Margolese and Darlene Friedland agree to
                                    cause all shares of Company stock held by
                                    them or over which they exercise voting
                                    control to approve the matter described in
                                    subpagraph (a) above and to require any
                                    transferees of their stock to so vote such
                                    stock, it being understood that Friedland
                                    and Margolese, taken together, currently
                                    hold approximately 43% of the outstanding
                                    common stock of the Company.

AMENDMENT TO
DELAYED PREFERRED
STOCK AGREEMENT:                    Each of the Everest Funds and Ravich will
                                    cause all shares of Delayed Preferred Stock
                                    held by them or over which they exercise
                                    voting power to consent to the following
                                    amendments to the terms of the Delayed
                                    Preferred Stock if so requested by
                                    the Company:

                                       a) amend the definition of Qualifying
                                          Offering in Section 3(e)(i) of the
                                          Certificate of Designations of the
                                          Delayed Preferred Stock to include the
                                          offering of any securities of the
                                          Company in an offering which is either
                                          registered under the Securities Act of
                                          1933 or exempt from registration
                                          thereunder for net proceeds of not
                                          less than $100 million; and

                                       b) change the date "October 15, 1997"
                                          in such Section 3(e)(i) to "November
                                          15, 1997."

BINDING COMMITMENT:                 The obligations of the signatories hereto
                                    shall not be subject to any conditions or
                                    exceptions other than those expressly set
                                    forth herein. As soon as practicable after
                                    the signing of this  Commitment Term Sheet,
                                    the number of shares of Delayed Preferred
                                    Stock to be exchanged by the Everest Funds
                                    and Ravich shall be deposited with an escrow
                                    agent acceptable to the parties pursuant
                                    to a stock exchange agreement reflecting
                                    the terms and





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<PAGE>


<PAGE>







                                    conditions of this Commitment Term Sheet and
                                    other customary terms and conditions, or, in
                                    the absence of such an agreement, this
                                    Commitment Term Sheet shall constitute a
                                    binding agreement for the transactions
                                    contemplated hereby. This Commitment Term
                                    Sheet may be executed in any number of
                                    counterparts, all of which taken together
                                    constitute a single agreement.

Date:  June 15, 1997                        Everest Capital International, Ltd.
                                            Everest Capital Fund, L.P.


                                            By: /s/ M. Dimitrijevic
                                                --------------------------
                                                 Marko Dimitrijevic

                                            Ravich Revocable Trust of 1989

                                            By: /s/ Jess M. Ravich
                                                --------------------------
                                                 Jess M. Ravich, Trustee

                                            CD Radio Inc

                                            By: /s/ David Margolese
                                                --------------------------
                                                 David Margolese, Chairman
                                                  and Chief Executive Officer


                                        8




<PAGE>


<PAGE>






                            Agreement of Stockholders

                  The undersigned stockholders of CD Radio Inc. hereby agree to
be bound by the provisions set forth in clause (ii) of the proviso in the
section captioned "Conditions" in the above Summary Term Sheet.

 /s/ David Margolese
----------------------
David Margolese

 /s/ Darlene Friedland
----------------------
Darlene Friedland


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