<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 1997
Commission file number 0-24710
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CD RADIO INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 52-1700207
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
SIXTH FLOOR, 1001 22ND STREET, N.W., WASHINGTON, D.C.
20037
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip code)
202-296-6192
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK, $.001 PAR VALUE 10,313,391
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(Class) (Outstanding as of May 13, 1997)
<PAGE> 2
CD RADIO INC.
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX
<TABLE>
<CAPTION>
Part I - Financial Information
Page
<S> <C>
Consolidated Statements of Operations (unaudited) for the three 1
month periods ended March 31, 1997 and 1996 and for the
period May 17, 1990 (date of inception) to March 31, 1997
Consolidated Balance Sheets (unaudited) as of March 31, 1997 2
and December 31, 1996
Consolidated Statements of Cash Flows (unaudited) for the three 3
month periods ended March 31, 1997 and 1996 and for the
period May 17, 1990 (date of inception) to March 31, 1997
Notes to Consolidated Financial Statements (unaudited) 4
Management's Discussion and Analysis of Financial Condition and 5
Results of Operations
Part II - Other Information 8
Signatures
</TABLE>
<PAGE> 3
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the period
Three months ended May 17,1990
------------------------------------- (date of inception)
March 31, March 31, to March 31,
1997 1996 1997
------------------ --------------- ---------------------------
<S> <C> <C> <C>
Revenue $ - $ - $ -
----------------- --------------- ---------------------------
Expenses:
Legal, consulting and
regulatory fees 307,439 227,674 7,556,403
Other general and administrative 284,877 281,681 7,817,640
Research and development 19,603 27,901 1,935,958
Write-off of investment in
Sky-Highway Radio Corp. - - 2,000,000
----------------- --------------- ---------------------------
Total expenses 611,919 537,256 19,310,001
----------------- --------------- ---------------------------
Other income (expense)
Interest income 59,681 25,290 388,353
Interest expense (4,910) (4,917) (171,360)
----------------- --------------- ---------------------------
54,771 20,373 216,993
----------------- --------------- ---------------------------
Net loss $ (557,148) $ (516,883) $ (19,093,008)
================= =============== ===========================
Net loss per common share $ (0.05) $ (0.06)
================= ===============
Weighted average common shares
outstanding 10,301,331 9,357,793
================= ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
1
<PAGE> 4
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1997 1996
------------------- ----------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,079,668 $ 4,583,562
Prepaid expense and other 6,558 9,368
------------------- ----------------------
Total current assets 1,086,226 4,592,930
------------------- ----------------------
Property and equipment, at cost:
Technical equipment 254,200 254,200
Office equipment and other 89,220 89,220
Demonstration equipment 38,664 38,664
------------------- ----------------------
382,084 382,084
Less accumulated depreciation (223,915) (213,344)
------------------- ----------------------
158,169 168,740
------------------- ----------------------
Auction deposit 3,000,000 -
------------------- ----------------------
Deposits 303,793 303,793
------------------- ----------------------
Total Assets $ 4,548,188 $ 5,065,463
=================== ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 157,409 $ 131,118
Other 20,700 20,174
------------------- ----------------------
Total current liabilities 178,109 151,292
Deferred rent and other 10,051 15,795
------------------- ----------------------
Total liabilities 188,160 167,087
------------------- ----------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 10,000,000 shares
authorized; none issued or outstanding - -
Common stock, $0.001 par value; 50,000,000 shares
authorized; 10,309,708 and 10,300,391 shares issued and
outstanding at March 31, 1997 and December 31, 1996,
respectively 10,310 10,300
Additional paid-in capital 23,442,726 23,423,936
Deficit accumulated during the development stage (19,093,008) (18,535,860)
------------------- ----------------------
Total stockholders' equity 4,360,028 4,898,376
------------------- ----------------------
Total liabilities and stockholders' equity $ 4,548,188 $ 5,065,463
=================== ======================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
2
<PAGE> 5
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the period
Three months ended May 17,1990
------------------------------------- (date of inception)
March 31, March 31, to March 31,
1997 1996 1997
------------------ --------------- ---------------
<S> <C> <C> <C>
Cash flows from development stage activities:
Net loss $ (557,148) $ (516,883) $ (19,093,008)
Adjustments to reconcile net loss to net
cash used in development stage activities:
Depreciation and amortization 10,571 14,472 234,613
Write off of investment in Sky-Highway Radio Corp. - - 2,000,000
Compensation expense in connection with
issuance of stock options - 80,000 1,715,500
Common stock issued for services rendered - 63,418 901,576
Common stock options granted for services
rendered - - 119,820
Increase (decrease) in cash and cash equivalents
resulting from changes in assets and liabilities:
Prepaid expense and other 2,810 1,659 (6,557)
Due to related party - - 350,531
Deposits - - (303,793)
Accounts payable and accrued expenses 26,291 31,404 232,647
Other liabilities (5,218) (5,155) 30,752
------------------ --------------- --------------
Net cash used in development stage activities (522,694) (331,085) (13,817,919)
------------------ --------------- --------------
Cash flows from investing activities:
Capital expenditures - - (392,783)
Auction deposit (3,000,000) - (3,000,000)
Acquisition of Sky-Highway Radio Corp. - - (2,000,000)
------------------ --------------- --------------
Net cash used in investing activities (3,000,000) - (5,392,783)
------------------ --------------- --------------
Cash flows from financing activities:
Proceeds from issuance of units and common stock - - 14,557,482
Proceeds from exercise of stock warrants - - 4,589,088
Proceeds from issuance of promissory notes - - 200,000
Proceeds from issuance of promissory notes to
related parties - - 2,965,000
Proceeds from exercise of stock options by
Company officers 18,800 80,000 173,800
Repayment of promissory note - - (200,000)
Repayment of promissory notes to related parties - - (2,435,000)
Loan from officer - - 440,000
Deferred offering costs - - -
------------------ --------------- --------------
Net cash provided by financing activities 18,800 - 20,290,370
------------------ --------------- --------------
Net increase (decrease) in cash and cash equivalents (3,503,894) (251,096) 1,079,668
Cash and cash equivalents at the beginning of period 4,583,562 1,799,814 -
------------------ --------------- --------------
Cash and cash equivalents at the end of period $ 1,079,668 $ 1,548,718 $ 1,079,668
================== =============== ==============
Supplemental disclosure of cash information:
Cash paid during the period for interest $ - $ - $ 40,063
================== =============== ==============
Supplemental disclosure of non-cash financing activities:
Common stock issued in satisfaction of notes
payable to related parties, including
accrued interest $ - $ - $ 998,452
================== =============== ==============
Common stock issued in satisfaction of due to
related parties including accrued interest $ - $ - $ 409,390
================== =============== ==============
Common stock issued in satisfaction of
commissions payable $ - $ - $ 20,000
================== =============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
3
<PAGE> 6
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
GENERAL
The accompanying consolidated financial statements do not include all
of the information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles. In the opinion of management, all adjustments (consisting only of
normal, recurring adjustments) considered necessary to fairly reflect the
Company's consolidated financial position and consolidated results of
operations have been included.
SUBSEQUENT EVENTS
In March 1997, the Company extended its satellite construction contract
with Space Systems/Loral ("Loral") and amended the contract to allow Loral to
commence work associated with the first five months of the program schedule.
In April 1997, the FCC held an auction for two national satellite radio
broadcast licenses. The Company was one of the winning bidders in such auction
with a bid price of $83,346,000. Of the total bid price, $16,669,200 has been
deposited with the FCC, with the remainder due within 10 business days
following the public notice by the FCC that it is prepared to award the
license.
In April 1997, the Company completed a private placement of its 5%
Delayed Convertible Preferred Stock (the "5'% Preferred Stock"). The Company
sold a total of 5,400,000 shares of the 5% Preferred Stock for an aggregate
sale price of $135 million. In connection with the private placement, the
Company paid $10,125,000 in fees to its placement agent, Libra Investments,
Inc. ("Libra"), and $2.7 million to Batchelder & Partners, Inc., a financial
advisory firm. In addition, the Company agreed to grant a warrant to Libra to
purchase 486,000 shares of the 5% Preferred Stock with an exercise price of
$25.00 per share. As a result of the private placement, options to purchase
200,000 shares of Common Stock held by Batchelder & Partners, Inc. vest and
become exercisable for three years with an exercise price of $6.25. Reference
is made to the Company's report on Form 8-K filed May 5, 1997 for a description
of the terms of the 5% Preferred Stock.
Net Loss Per Share
Net loss per common share is based on the weighted average number of
common shares outstanding during such periods. Options and warrants
granted by the Company have not been included in the calculation of net loss
per share because such items were antidilutive. For reporting periods ending
after December 15, 1997, the Company will be required to report earnings (loss)
per share in accordance with Statement of Financial Accounting Standards No.
128, "Earnings Per Share" ("SFAS 128"). As long as the Company continues to
experience net losses, there will be no impact on the Company's net loss
per share from adoption of SFAS 128.
4
<PAGE> 7
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was organized in May 1990 and is in its development stage.
The Company's principal activities to date have included technology
development, pursuing regulatory approval for CD Radio, market research,
design, development, contract negotiations with satellite and launch vehicle
contractors, technical efforts with respect to standards and specifications,
development of a mobile demonstration program and securing adequate working
capital. The Company has been unprofitable to date and expects to continue to
incur substantial losses through at least the first full year of CD Radio
service. Since its inception, the Company has not derived any revenues from
operations and does not expect to generate any revenues from operations prior
to the commencement of CD Radio, which is not expected to occur before the fall
of 1999 at the earliest. In order to commence CD Radio service, the Company
will require a license from the Federal Communications Commission ("FCC") to
provide Digital Audio Radio Service the ("FCC License") and substantial
additional funds to finance construction of its satellite system, to plan and
implement its service, to provide working capital and to sustain its operations
until it generates positive cash flows from operations.
In April 1997, the FCC held an auction among four existing applicants
to auction two FCC Licenses. The Company was a winning bidder in the auction
with a bid of $83.3 million, of which $16.7 million has been paid as a deposit.
The award of the FCC License is subject to the satisfaction of a number of
requirements, and it remains a possibility that the Company will not receive
the FCC License. The Company completed a private placement in April 1997 of
$135 million of its 5% Delayed Convertible Preferred Stock, of which an
aggregate of $12.8 million was paid in fees to the Company's placement agent
and a financial advisor, and $1.7 million was paid as a commitment fee to the
investors. Assuming the FCC License is received, the Company will
require substantial additional financing to complete the construction and
launch of its satellite system and to fund the first full year of CD Radio
service.
After being a winning bidder in the auction for the FCC License and
competing the 5% Preferred Stock financing, the Company paid $6.5 million
to Space Systems/Loral in order to commence satellite construction, and $3.4
million to Arianespace to secure satellite launch reservations. The Company has
also hired, and intends to continue to hire, additional key employees to
manage the design, development, construction and launch of the CD Radio system
and to plan and implement marketing strategies and to develop key relationships
in the entertainment and consumer electronics industries. These measures will
result in substantial increases in expenses in the three months ending June 30,
1997 and in subsequent periods over expense levels in past periods.
5
<PAGE> 8
RESULTS OF OPERATIONS
The Company recorded net losses of $557,000 and $517,000 for the three
months ended March 31, 1997 and 1996, respectively. The Company's total
operating expenses were $612,000 and $537,000 for the three months ended March
31, 1997 and 1996, respectively.
Legal, consulting and regulatory fees increased for the three months
ended March 31, 1997 to $307,000 from $228,000 for the three months ended March
31, 1996. These levels of expenditures are the result of continued regulatory
activity.
Research and development costs were $20,000 and $28,000 for the three
months ended March 31, 1997 and 1996, respectively. This level of research and
development cost is the result of the Company completing the majority of such
activities in 1994.
Other general and administrative expenses increased for the three
months ended March 31, 1997 to $285,000 from $282,000 for the three months
ended March 31, 1996. General and administrative expenses continued to remain
at a low level prior to the Company being the winning bidder for the FCC
License. The Company also incurred a non-cash charge of $80,000 for the three
month period ended March 31, 1996, attributable to the recognition of
compensation expense in connection with stock options issued to officers of the
Company.
The increase of interest income to $60,000 for the three months ended
March 31, 1997, from $25,000 in the three months ended March 31, 1996, was the
result of a higher average cash balance during the first quarter of 1997. The
cash and cash equivalents on hand were primarily obtained from the exercise of
stock warrants in late 1996.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had working capital of approximately
$908,000 compared to $4,442,000 at December 31, 1996. The decrease in working
capital was primarily the result of the $3,000,000 deposit made to the FCC to
participate in the license auction and $523,000 in net cash used in development
stage activities for the quarter ended March 31, 1997.
The Company was a winning bidder in the FCC auction for two FCC
Licenses with a winning bid of $83.3 million, of which $16.7 million has been
paid as a deposit. The Company would be required to pay the balance of the
winning bid after the revised license applications are finalized and assuming
petitions to deny the License are dismissed. In order to finance the payment of
the purchase price for the FCC License and for working capital prior to the
completion of subsequent financings, the Company completed a private placement
of $135 million of the 5% Preferred Stock, of which $12.8 million was paid in
commissions and fees to its placement agent and a financial advisor, and $1.7
million was paid in commitment fees to the investors. The Company has also
commenced satellite construction with Space Systems/Loral.
6
<PAGE> 9
The Company estimates that, assuming receipt of the FCC License, the
aggregate cost of the FCC License, the contruction and launch of the Company's
satellites and the commencement of CD Radio service and cash reserves for the
first year of service will be at least $600 million. The amount and timing of
cash payments will vary based on payment terms with satellite and launch
contracts.
The Company believes that its working capital is sufficient to maintain
its construction schedule approximately through December 1997 and to fund
operations through the second quarter of 1998. There can be no assurance,
however, that the Company's actual cash requirements will not be greater than
currently anticipated. The Company intends to seek additional financing through
the issuance of debt and equity securities. However, there can be no
assurance that the Company will be able to obtain additional financing on
favorable terms, if at all, or that such financing will be available in a
timely manner. If additional financing were not available on a timely basis,
the Company would be required to delay satellite and/or launch vehicle
construction in order to conserve cash to fund continued operations, which
would cause delays in the commencement of operations and increased costs.
The terms of the 5% Preferred Stock financing require that additional
financings be pari passu or junior to the 5% Preferred Stock in seniority,
structure and maturity until the Company completes a public offering of Common
Stock that meets certain specified criteria.
The Company's estimates of the cost of commencing CD Radio service, its
cash requirements and the adequacy of its current cash resources to satisfy its
cash requirements through December 1997 and the second quarter of 1998 are
forward-looking statements that involve a number of risks and uncertainties
that could cause actual events to differ materially from those anticipated by
the Company. The estimates assume that service will commence in the fall of
1999 and do not include interest costs or any payments that may be required to
holders of the 5% Preferred Stock as the result of failure to satisfy certain
requirements under the terms of the 5% Preferred Stock financing in a timely
manner. The amount and timing of the Company's actual cash requirements will
depend upon numerous factors, including costs associated with the construction
and deployment of its satellite system and the rate of growth of its business
subsequent to commencing service, costs of financing and the possibility of
unanticipated expenses. Additional funds would be required in the event of
delay, cost overruns, launch failure, launch services or satellite system
change orders, or any shortfalls in estimated levels of operating cash flow, or
to meet unanticipated expenses.
7
<PAGE> 10
PART II
OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities
In March 1997, the Board of Directors authorized for
issuance 8 million shares of 5% Delayed Convertible Preferred
Stock (the "5% Preferred Stock'). For a description of the 5%
Preferred Stock, see "Description of Securities" contained on
the Form 8-K filed by the Company on May 5, 1997, which is
incorporated by reference herein in its entirety. In April 1997,
the Company sold an aggregate of 5,400,000 shares of the 5%
Preferred Stock at $25.00 per share to 51 institutional
investors, each of which the Company believes to be an
"accredited investor"' within the meaning of Rule 502(a) of
Regulation D under the Securities Act. In connection with the
private placement, the Company paid $10,125,000 in fees to its
placement agent, Libra Investments, Inc. ("Libra"), a commitment
fee of $1.7 million to the investors and $2.7 million to
Batchelder & Partners, Inc., a financial advisory firm. In
addition, the Company agreed to grant a warrant to Libra to
purchase 486,000 shares of the 5% Preferred Stock with an
exercise price of $25 .00 per share. As a result of the private
placement, options previously granted to purchase 200,000 shares
of Common Stock held by Batchelder & Partners, Inc. vest and
become exercisable for three years with an exercise price of
$6.25. The sale of the 5% Preferred Stock was exempt from
registration pursuant to Section 4(2) of the Securities Act and
Rule 506 of Regulation D thereunder.
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
*3.1 Amended and Restated Certificate of Incorporation.
*3.2 Amended and Restated By-Laws.
3.3 Certificate of Designations of 5% Delayed Convertible Preferred
Stock (Incorporated by reference to Exhibit 10.24 to the Form 10-K/A
for the year ended December 31, 1996 (the " 1996 Form 10-K")).
*4.1 Description of Capital Stock contained in the Amended and Restated
Certificate of Incorporation and Certificate of Designations (see
Exhibits 3.1 and 3.3).
*4.2 Description of Rights of Security Holders contained in the Amended
and Restated Bylaws (see Exhibit 3.2).
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
*4.3 Form of Certificate for Shares of Common Stock.
10.1 Lease Agreement, dated October 20, 1992, between 22nd & K Street
Office Building Limited Partnership and the Company (Incorporated by
reference to Exhibit 10.3 to the Company's Registration Statement
on Form S-1 (File No. 33-74782) (the "Registration Statement")).
10.2 Letter Agreement, dated November 18, 1992, between the Company and
Batchelder & Partners, Inc. (Incorporated by reference to Exhibit
10.4 to the Registration Statement).
10.3.1 Proprietary Information and Non-Competition Agreement, dated
February 9, 1993, for Robert Briskman (Incorporated by reference to
Exhibit 10.9.1 to the Registration Statement).
10.3.2 Amendment No. 1 to Proprietary Information and Non-Competition Agreement
between the Company and Robert Briskman (Incorporated by reference to
Exhibit 10.8.2 to the Registration Statement).
+10.4.1 Satellite Construction Agreement, dated March 2, 1993, between Space
Systems/Loral and the Company (Incorporated by reference to Exhibit
10.9.1 to the Registration Statement).
+10.4.2 Amendment No. 1 to Satellite Construction Agreement, effective
December 28, 1993, between Space Systems/Loral and the Company
(Incorporated by reference to Exhibit 10.9.2 to the Registration
Statement).
+10.4.3 Amendment No. 2 to Satellite Construction Agreement, effective
March 8, 1994, between the Space Systems/Loral and the Company
(Incorporated by reference to Exhibit 10.9.3 to the Registration
Statement).
10.4.4 Amendment No. 3 to Satellite Construction Agreement, effective
February 12, 1996, between the Space System/Loral, Inc. and the
Company (Incorporated by reference to Exhibit 10.9.4 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995
(the "1995 Form 10-K")).
10.4.5 Amendment No. 4 to Satellite Construction Agreement, effective June
18, 1996, between the Space Systems/Loral, Inc. and the Company.
(Incorporated by reference to Exhibit 10.8.5 to the Company's Form 10-Q
for the period ended September 30, 1996.)
10.4.6 Amendment No. 5 to Satellite Construction Agreement, effective August
26, 1996, between the Space Systems/Loral, Inc. and the Company.
(Incorporated by reference to Exhibit 10.8.6 to the Company's Form
10-Q for the period ended September 30, 1996.)
10.4.7 Amendment No. 6 to Satellite Construction Agreement, effective
August 26, 1996, between the Space System/Loral, Inc. and the Company
(Incorporated by reference to Exhibit 10.5.7 to the 1996 Form 10-K.
10.4.8 Amendment No. 8 to Satellite Construction Agreement, effective January 29,
1997, between the Space System/Loral, Inc. and the Company (Incorporated
by reference to Exhibit 10.5.8 to the 1996 Form 10-K.
10.4.9 Amendment No. 9 to Satellite Construction Agreement, effective February 26,
1997, between the Space System/Loral, Inc. and the Company (Incorporated
by reference to Exhibit 10.5.9 to the 1996 Form 10-K
10.4.10 Amendment No. 11 to Satellite Construction Agreement, effective March 24,
1997, between the Space Systems/Loral, Inc., and the Company
(Incorporated by reference to Exhibit 10.5.10 to the 1996 Form 10-K.
10.4.11 Amendment No. 12 to Satellite Construction Agreement, effective
April 25, 1997, between the Space Systems/Loral, Inc. and the Company.
10.5 Assignment of Technology Agreement, dated April 15, 1993, between
Robert Briskman and the Company (Incorporated by reference to
Exhibit 10.10 to the Registration Statement).
10.6 Assignment of Technology Agreement, dated April 15, 1993, between Robert
Briskman and the Company.
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
10.7.1 Launch Reservation Agreement, dated September 20, 1993, between the
Company and Arianespace (Incorporated by reference to Exhibit
10.15.1 to the Registration Statement.
10.7.2 Modification of Launch Reservation Agreement, dated April 1, 1994,
between Arianespace (Incorporated by reference to Exhibit 10.1 5.2
to the Registration Statement).
10.7.3 Second Modification of Launch Reservation Agreement, dated August
to, 1994, between the Company and Arianespace (Incorporated by
reference to Exhibit 10.,15.3 to the Registration Statement).
10.7.4 Third Modification Launch Reservation Agreement, dated November 8,
1995, between the Company and Arianespace (Incorporated by reference
to Exhibit 10.14.4 to the Company's Form 10Q for the period ended
September 30, 1996).
10.7.5 Fourth Modification of Launch Reservation Agreement, dated August 30,
1996, between the Company and Arianespace (Incorporated by reference
to Exhibit 10.14.5 to the Company's Form 1O-Q for the period ended
September 30. 1995).
10.7.6 Fifth Modification of Launch Reservation Agreement, dated December
10, 1996, between the Company and Arianespace.
10.8.1 Employment and Noncompetition Agreement between the Company and
David Margolese (Incorporated by reference to Exhibit 10.18.1 to
the Registration Statement).
10.8.2 First Amendment to Employment Agreement between the Company and
David Margolese (Incorporated by reference to Exhibit 10.18.2 to
the Registration Statement).
10.9.1 Employment and Noncompetition Agreement between the Company and
Robert Briskman (Incorporated by reference to Exhibit 10.19.1 to
the Registration Statement).
10.9.2 First Amendment to Employment Agreement between the Company and
Robert Briskman (Incorporated by reference to Exhibit 10.19.2 to
the Registration Statement).
10.9.3 Second Amendment to Employment Agreement between the Company
and Robert Briskman (Incorporated by reference to Exhibit 10.12.3
to the 1996 Form 10-K).
10.10 1994 Stock Option Plan (Incorporated by reference to Exhibit 10.21
to the Registration Statement).
10.11 Amended and Restated 1994 Directors' Nonqualified Stock Option
Plan (Incorporated by reference to Exhibit 10.22 to the 1995 Form 10-K).
10.12 Option Agreement, dated as of October 21, 1992, between the Company
and Batchelder & Partners, Inc. (Incorporated by reference to
Exhibit 10.24 to the Registration Statement).
10.13.1 Demand Note, dated April 19, 1994, in favor of David Margolese
(Incorporated by reference to Exhibit 10.28.1 to the Registration
Statement).
10.13.2 Note, dated June 30, 1994, in favor of David Margolese (Incorporated
by reference to Exhibit 10.28.2 to the Registration Statement).
10.14 Demand Note, dated April 19, 1994, between the Company and D.
Friedland (Incorporated by reference to Exhibit 10.29 to the
Registration Statement).
10.15 1995 Stock Compensation Plan (Incorporated by reference to Exhibit
10.37 to the 1995 Form 10-K).
10.16 Preferred Stock Investment Agreement dated October 23, 1996 between
the Company and certain investors (Incorporated by reference to
Exhibit 10.24 to the 1996 Form 10-K).
10.16.1 First Amendment to Preferred Stock Investment Agreement dated March 7,
1997 between the Company and certain investors (Incorporated by
reference to Exhibit 10.24.1 to the 1996 Form 10-K).
10.16.2 Second Agreement to Preferred Stock Investment Agreement dated March
14, 1997 between the Company and certain investors (Incorporated by
reference to Exhibit 10.24.2 to the 1996 Form 10-K).
10.17 Employment and Noncompetition Agreement between the Company and
Joseph Capobianco
10.18 Employment and Noncompetition Agreement between the Company and
Keno Thomas
11.1 Statement Re Computation of Historical Net Loss Per Share.
21.1 List of the Company's subsidiaries (incorporated by reference to
Exhibit 21.1 to the 1994 Form 10-K).
27 Financial Data Schedule
</TABLE>
- ----------------
* Incorporated by reference to the same exhibit number of the Company
Registration Statement on Form S-1, Commission File No. 33-74782.
10
<PAGE> 13
+ Portions of these exhibits, which are incorporated by reference to
Registration No. 33-74782, have been omitted pursuant to an Application
for Confidential Treatment filed by the Company with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
(b) Reports on Form 8-K
On March 17, 1997, the Company filed a report on Form 8-K
under Item 5 regarding the terms of the FCC auction scheduled
for April 1, 1997.
On March 18, 1997, the Company filed a report on Form 8-K
under Item 5 regarding the extension of the satellite
construction contract with Space Systems/Loral, Inc.
On April 10, 1997 , the Company filed a report on Form 8-K
under Item 5 and Item 7 regarding the private placement of
approximately $86 million of the 5% Preferred Stock.
On May 5, 1997, the Company filed a report on Form 8-K under
Item 5 regarding the completion of the second tranche of the
private placement of the 5% Preferred Stock resulting in an
aggregate sale price for the first and second tranches of $135
million. The Form 8-K also contained a description of the
capital stock of the Company.
11
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned hereunto duly authorized.
CD RADIO INC.
Date: May 16, 1997 By /s/ David Margolese
--------------------------
David Margolese
Chairman of the Board and Chief Executive Officer
(Duly authorized officer and principal
financial officer)
12
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
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EXHIBIT DESCRIPTION
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*3.1 Amended and Restated Certificate of Incorporation.
*3.2 Amended and Restated By-Laws.
3.3 Certificate of Designations of 5% Delayed Convertible Preferred Stock (Incorporated by reference to
Exhibit 10.24 to the Form 10-K/A for the year ended December 31, 1996 (the "1996 Form 10-K")).
*4.1 Description of Capital Stock contained in the Amended and Restated Certificate of Incorporation and
Certificate of Designations (see Exhibits 3.1 and 3.3).
*4.2 Description of Rights of Security Holders contained in the Amended and Restated Bylaws (see Exhibit
3.2.).
*4.3 Form of Certificate for Shares of Common Stock.
10.1 Lease Agreement, dated October 20, 1992, between 22nd & K Street Office Building Limited Partnership
and the Company (Incorporated by reference to Exhibit 10.3 to the Company's Registration Statement
on Form S-1 (File No. 33-74782) (the "Registration Statement")).
10.2 Letter Agreement, dated November 18, 1992, between the Company and Batchelder & Partners, Inc.
(Incorporated by reference to Exhibit 10.4 to the Registration Statement).
10.3.1 Proprietary Information and Non-Competition Agreement, dated February 9, 1993, for Robert Briskman
(Incorporated by reference to Exhibit 10.8.1 to the Registration Statement).
10.3.2 Amendment No. I to Proprietary Information and Non-Competition Agreement between the Company and
Robert Briskman (Incorporated by reference to Exhibit 10.8.2 to the Registration Statement).
+10.4.1 Satellite Construction Agreement, dated March 2, 1993, between Space Systems/Loral and the Company
(Incorporated by reference to Exhibit 10.9.1 to the Registration Statement).
+10.4.2 Amendment No. I to Satellite Construction Agreement, effective December 28, 1993, between Space
Systems/Loral and the Company (Incorporated by reference to Exhibit 10.9.2 to the Registration
Statement).
+10.4.3 Amendment No. 2 to Satellite Construction Agreement, effective March 8, 1994, between the Space
Systems/Loral and the Company (Incorporated by reference to Exhibit 10.9.3 to the Registration
Statement).
10.4.4 Amendment No. 3 to Satellite Construction Agreement, effective February 12, 1996, between the Space
Systems/Loral, Inc. and the Company (Incorporated by reference to Exhibit 10.9.4 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995 (the "1995 Form 10-K"))
10.4.5 Amendment No. 4 to Satellite Construction Agreement, effective June 18, 1996, between the Space
Systems/Loral, Inc. and the Company. (Incorporated by reference to Exhibit 10.8.5 to the Company's
Form 10-Q for the period ended September 30, 1996.)
10.4.6 Amendment No. 5 to Satellite Construction Agreement, effective August 26, 1996, between the Space
Systems/Loral, Inc. and the Company. (Incorporated by reference to Exhibit 10.8.6 to the Company's
Form 10-Q for the period ended September 30, 1996.)
10.4.7 Amendment No. 6 to Satellite Construction Agreement, effective August 26, 1996, between the Space
Systems/Loral, Inc. and the Company (Incorporated by reference to Exhibit 10.5.7 to the 1996 Form
10-K).
10.4.8 Amendment No. 8 to Satellite Construction Agreement, effective January 29, 1997, between the Space
Systems/Loral, Inc. and the Company (Incorporated by reference to Exhibit 10.5.8 to the 1996 Form
10-K).
10.4.9 Amendment No. 9 to Satellite Construction Agreement, effective February 26, 1997, between the Space
Systems/Loral, Inc. and the Company (Incorporated by reference to Exhibit 10.5.9 to the 1996 Form
10-K).
</TABLE>
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<PAGE> 16
<TABLE>
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EXHIBIT DESCRIPTION
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<S> <C>
10.4.10 Amendment No. 11 to Satellite Construction Agreement, effective March 24, 1997, between the Space
Systems/Loral, Inc. and the Company (Incorporated by reference to Exhibit 10.5.10 to the 1996 Form
10-K).
10.4.11 Amendment No. 12 to Satellite Construction Agreement, effective April 25, 1997, between the Space
Systems/Loral, Inc. and the Company.
10.5 Assignment of Technology Agreement, dated April 15, 1993, between Robert Briskman and the Company
(Incorporated by reference to Exhibit 10.10 to the Registration Statement).
10.6 Amended and Restated
Option Agreement between the Company and Robert Briskman (Incorporated by reference to Exhibit
10.13 to the Registration Statement).
10.7.1 Launch Reservation Agreement, dated September 20, 1993, between the Company and Arianespace
(Incorporated by reference to Exhibit 10.15.1 to the Registration Statement).
10.7.2 Modification of Launch Reservation Agreement, dated April 1, 1994, between the Company and Arianespace
(Incorporated by reference to Exhibit 10.15.2 to the Registration Statement).
10.7.3 Second Modification of Launch Reservation Agreement, dated August 10, 1994, between the Company and
Arianespace (Incorporated by reference to Exhibit 10.15.3 to the Registration Statement).
10.7.4 Third Modification of Launch Reservation Agreement, dated November 8, 1995, between the Company and
Arianespace (Incorporated by reference to Exhibit 10.14.4 to the Company's Form 10-Q for the period
ended September 30, 1996).
10.7.5 Fourth Modification of Launch Reservation Agreement, dated August 30, 1996, between the Company and
Arianespace (Incorporated by reference to Exhibit 10.14.5 to the Company's Form 10-Q for the period
ended September 30, 1995).
10.7.6 Fifth Modification of Launch Reservation Agreement, dated December 10, 1996, between the Company and
Arianespace.
10.8.1 Employment and Noncompetition Agreement between the Company and David Margolese (Incorporated by
reference to Exhibit 10.18.1 to the Registration Statement).
10.8.2 First Amendment to Employment Agreement between the Company and David Margolese (Incorporated by
reference to Exhibit 10.18.2 to the Registration Statement).
10.9.1 Employment and Noncompetition Agreement between the Company and Robert Briskman (Incorporated by
reference to Exhibit 10.19.1 to the Registration Statement).
10.9.2 First Amendment to Employment Agreement between the Company and Robert Briskman (Incorporated by
reference to Exhibit 10.19.2 to the Registration Statement).
10.9.3 Second Amendment to Employment Agreement between the Company and Robert Briskman (Incorporated by
reference to Exhibit 10.12.3 to the 1996 Form 10-K).
10.10 1994 Stock Option Plan (Incorporated by reference to Exhibit 10.21 to the Registration Statement).
10.11 Amended and Restated 1994 Directors' Nonqualified Stock Option Plan (Incorporated by reference to
Exhibit 10.22 to the 1995 Form 10-K).
10.12 Option Agreement, dated as of October 21, 1992, between the Company and Batchelder & Partners, Inc.
(Incorporated by reference to Exhibit 10.24 to the Registration Statement).
10.13.1 Demand Note, dated April 19, 1994, in favor of David Margolese (Incorporated by reference to Exhibit
10.28.1 to the Registration Statement).
10.13.2 Note, dated June 30, 1994, in favor of David Margolese (Incorporated by reference to Exhibit 10.28.2
to the Registration Statement).
10.14 Demand Note, dated April 19, 1994, between the Company and D. Friedland (Incorporated by reference to
Exhibit 10.29 to the Registration Statement).
10.15 1995 Stock Compensation Plan (Incorporated by reference to Exhibit 10.37 to the 1995 Form 10-K).
</TABLE>
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<PAGE> 17
<TABLE>
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10.16 Preferred Stock Investment Agreement dated October 23, 1996 between the Company and certain investors
(Incorporated by reference to Exhibit 10.24 to the 1996 Form 10-K).
10.16.1 First Amendment to Preferred Stock Investment Agreement dated March 7, 1997 between the Company and
certain investors (Incorporated by reference to Exhibit 10.24.1 to the 1996 Form 10-K)..
10.16.2 Second Amendment to Preferred Stock Investment Agreement dated March 14, 1997 between the Company and
certain investors (Incorporated by reference to Exhibit 10.24.2 to the 1996 Form 10-K).
10.17 Employment and Noncompetition Agreement between the Company and Joseph Capobianco
10.18 Employment and Noncompetition Agreement between the Company and Keno Thomas
11.1 Statement Re Computation of Historical Net Loss Per Share.
21.1 List of the Company's Subsidiaries (Incorporated by reference to Exhibit 21.1 to the 1994 Form 10-K).
27 Financial Data Schedule
</TABLE>
- -----------------------
* Incorporated by reference to the same exhibit number of the Company
Registration Statement on Form S-1, Commission File No. 33-74782.
+ Portions of these exhibits, which are incorporated by reference to
Registration No. 33-74782, have been omitted pursuant to an Application for
Confidential Treatment filed by the Company with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
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<PAGE> 1
EXHIBIT 10.4.11
AMENDMENT NO. 12
TO
CONTRACT NO. SS/L-TP93002-01
AND
SPACE SYSTEMS/LORAL
FOR
DELIVERY OF CD RADIO DARS SYSTEM
THIS CONTRACT AMENDMENT NO. 12 (the "Amendment") is entered into
effective as of the 25th day of April, 1997, between CD RADIO INC. (the
"Purchaser") and SPACE SYSTEMS/LORAL, INC. (the "Contractor").
WHEREAS, Contractor and Purchaser are parties to Contract No.
SS/L-TP93002- 01 dated March 2, 1993, as amended by the parties thereto, most
recently pursuant to Contract Amendment No. 11 dated March 24, 1997 (as so
amended, the "Contract").
WHEREAS, Contractor and Purchaser desire to amend the Contract,
NOW, THEREFORE, in consideration of the mutual covenants and
conditions in this Amendment and in the Agreement, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. The page from the Contract, attached to this Amendment as Exhibit A
and incorporated herein by reference, are hereby substituted for existing pages
in the Contract, in their entirety, as follows:
Existing Page (Remove) Replacement Page (Attached)
71 71
2. All capitalized terms in this Amendment, not otherwise defined
herein, shall have the meanings ascribed to them in the Contract.
3. The Contract, as modified by the express terms of this Amendment,
is hereby ratified and affirmed by Purchaser and Contractor, and shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment effective
as of the date first above written.
<TABLE>
<CAPTION>
CONTRACTOR: PURCHASER:
SPACE SYSTEMS/LORAL, INC. CD RADIO INC.
<S> <C>
By: /s/ R.A. Haley By: /s/ R.D. Briskman
-------------------------------------- -------------------------------------------------
Name: R.A. Haley Name: R.D. Briskman
-------------------------------------- -------------------------------------------------
Title: Vice President & CFO Title: President
-------------------------------------- -------------------------------------------------
</TABLE>
<PAGE> 2
EXHIBIT A - AMENDMENT 12
ARTICLE 44 AGREEMENT EXPIRATION
It is agreed between the Parties that if CD Radio Inc. has not been granted a
license and construction permit from the Federal Communications Commission by
the end of March 31, 1997, then the provisions of this Contract shall become
null and void, and the Parties shall have no further obligation whatsoever to
each other, and no financial obligation shall exist by either Party to the
other Party.
71
<PAGE> 1
EXHIBIT 10.17
EMPLOYMENT AND NONCOMPETITION AGREEMENT
This EMPLOYMENT AND NONCOMPETITION AGREEMENT is dated as of
April 16, 1997 (the "Agreement"), by and between CD RADIO INC., a Delaware
corporation, (the "Company"), and JOSEPH S. CAPOBIANCO (the "Executive"). In
consideration of the mutual covenants and conditions set forth herein, the
Company and the Executive agree as follows:
1. EMPLOYMENT. The Company hereby employs the
Executive and the Executive hereby accepts employment with the
Company subject to the covenants and conditions of this
Agreement.
2. DUTIES AND REPORTING RELATIONSHIP.
(a) Duties. The Executive shall be employed in the
capacity of a Vice President of the Company responsible for content and
programming. During the term of this Agreement the Executive shall, on a
full-time basis, use his skills and render services to the best of his ability
in supervising the programming affairs of the Company and shall, in addition,
perform such other activities and duties as the Chairman and Chief Executive
Officer of the Company shall, from time to time, specify and direct.
(b) Reporting Relationship. The Executive shall
report to the Chairman and Chief Executive Officer of the
Company.
3. TERM. The term of this Agreement shall be deemed
to have commenced and be effective on and from April 16, 1997,
and end on April 16, 2000, unless terminated earlier pursuant to
the provisions of Paragraph 6 below.
4. COMPENSATION.
(a) Annual Salary. During the term of this
Agreement, the Executive shall be paid a salary of U.S. $200,000 per year,
subject to any increases that the Board of Directors or the compensation
committee thereof shall approve.
(b) Stock Options. The Company hereby grants to
the Executive the option to purchase 50,000 shares of the Company's common
stock, par value $0.001 per share (the "Common Stock") at U.S.$13.00 per share,
on such terms and subject to such conditions as are set forth in the option
agreement attached hereto as Exhibit A.
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<PAGE> 2
(c) Other. All compensation paid to the Executive
hereunder shall be subject to any and all such payroll and withholding
deductions as are required by the law of any applicable jurisdiction, state or
federal, with taxing authority with respect to such compensation.
5. ADDITIONAL COMPENSATION, EXPENSES AND BENEFITS.
(a) Expenses. The Company shall promptly
reimburse the Executive for all reasonable and necessary business expenses
incurred and advanced by his in carrying out his duties under this Agreement.
The Executive shall present to the Company from time to time an itemized
account of such expenses in such form as may be required by the Company.
(b) Benefits. During the term of employment
hereunder, the Executive shall be entitled to participate fully in any benefit
plans, programs, policies and any fringe benefits which may be made available
to the corporate officers of the Company generally including but not limited to
medical, dental and life insurance; provided, however, that the Executive shall
participate in any bonus, stock option or stock purchase or compensation plan
currently in effect or subsequently established by the Company to the extent,
and only to the extent authorized by the plan document or the Board of
Directors or the compensation committee thereof.
6. TERMINATION.
(a) Termination for Cause. The Company has the
right and may elect to terminate this Agreement for Cause. For purposes of this
Agreement, "Cause" shall be limited to (i) action by the Executive involving
willful malfeasance having a material adverse effect on the Company or (ii) the
Executive being convicted of a felony; provided that any action by the
Executive shall not constitute "Cause" if, in good faith, the Executive
believed such action to be in or not opposed to the best interests of the
Company, or if the Executive shall be entitled, under applicable law or the
Certificate of Incorporation or Bylaws of the Company, to be indemnified with
respect to such action. Termination or the Executive for Cause pursuant to this
Subparagraph 6(a) shall be communicated by a Notice of Termination. For
purposes of this Agreement a "Notice of Termination" shall mean delivery to the
Executive of a copy of a resolution duly adopted by the affirmative vote of not
less than a majority of the directors present and voting at a meeting of the
Company's Board or Directors called and held for that purpose after reasonable
notice to the Executive and reasonable opportunity for the Executive, together
with the Executive's counsel, to be heard before the Board prior to such vote,
finding that in the good faith opinion of the Board the Executive was
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<PAGE> 3
guilty of conduct set forth in the first sentence of this Subparagraph 6(a) and
specifying the particulars thereof in detail (the date of such termination by
the Board is referred hereinafter as the "Termination Date"). For purposes of
this Agreement, no such purported termination of the Executive's employment
shall be effective without such Notice of Termination.
(b) Voluntary Resignation. Should the Executive
wish to resign from his position with the Company during the term of his
employment, the Executive shall give thirty (30) days written notice to the
Company, setting forth the reasons and specifying the date as of which his
resignation is to become effective. The date specified in such written notice
shall be referenced herein as the "Termination Date." Failure to provide such
notice shall entitle the Company only to fix the Termination Date as of the
last business day on which the Executive reported for work at his principal
place of employment with the Company and shall have no other effect.
(c) Without Cause. The Company shall have the
absolute right to terminate the Executive's employment without cause at any
time. If the Company elects to terminate the Executive without cause, the
Company shall give thirty (30) days written notice to the Executive. Thirty
(30) days after such notice is given to the Executive shall be referenced
herein as the "Termination Date."
(d) Compensation and Benefits Upon Termination.
If the employment of the Executive is terminated for any reason except (i) by
the Company for Cause or (ii) by the Executive voluntarily, the Executive shall
be entitled to receive, and the Company shall pay without setoff, counterclaim
or other withholding except as set forth in Paragraph 4(c) the following amount
(in addition to any salary, benefits or other sums due the Executive through
the Termination Date):
(i) nothing ($0.00) if the written notice advising
of the Executive's termination is given on or before,
July 16, 1997;
(ii) an amount equal to one-third (1/3) of his
annual salary then in effect, if the written notice advising
of the Executive's termination is given after July 16, 1997
but on or before October 16, 1997; or
(iii) an amount equal to one-half (1/2) of his
annual salary then in effect, if the written notice advising
of the Executive's termination is given after October 16,
1997.
Any amount becoming payable under this Paragraph 6(d) shall be paid on the
Termination Date.
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<PAGE> 4
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. As a
condition of his employment hereunder, the Executive has executed and delivered
to the Company an agreement addressing the nondisclosure of confidential
information (the "Nondisclosure Agreement") in the form attached hereto as
Exhibit B and incorporated herein by reference as if set forth in full herein.
8. COVENANT NOT TO COMPETE. For a period beginning on
the date of this Agreement and ending one (1) years after the Termination Date,
the Executive will not, directly or indirectly, enter into the employment of,
render services to or acquire any interest whatsoever in (whether for his own
account as an individual proprietor, or as a partner, associate, shareholder,
officer, director, consultant, trustee or otherwise), or otherwise assist, any
person or entity engaged in any operations in North America involving any
satellite digital audio radio service or any subscription-based digital audio
radio service delivered to cars or other mobile vehicles; provided, however,
that nothing herein shall prevent the purchase or ownership by the Executive by
way of investment of up to four percent (4%) of the shares or equity interest
of any corporation or other entity. Without limiting the generality of the
foregoing, the Executive agrees that during the one (1) year period set forth
above the Executive will not call on or otherwise solicit business or assist
others to solicit business from any of the customers or potential customers of
the Company as to any product or service that competes with any product or
service provided or marketed by or actually under development by the Company at
the time of the Executive's termination. The Executive furthermore agrees that
he will not solicit or assist others to solicit the employment of or hire any
employee of the Company throughout the term of this Covenant Not To Compete
without the prior written consent of the Company. Notwithstanding the
foregoing, this Covenant Not To Compete will not become effective and will be
null and void, and of no force and effect, in the event the notice of
termination of the Executive's employment hereunder is given for any reason
prior to July 16, 1997.
9. REMEDIES. The Executive agrees that damages for
breach of any of his covenants under Paragraphs 7 and 8 above will be difficult
to determine and inadequate to remedy the harm which may be caused thereby, and
therefore consents that these covenants may be enforced by temporary or
permanent injunction without the necessity of bond. Such injunctive relief
shall be in addition to and not in place of any other remedies available at law
or equity. The Executive believes, as of the date of this Agreement, that the
provisions of this Agreement are reasonable and that the Executive is capable
of gainful employment without breaching this Agreement. However, should any
court or tribunal decline to enforce any provision of Paragraph 7 or 8 of this
Agreement, this Agreement shall, to the extent applicable in the
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<PAGE> 5
circumstances before such court or tribunal, be deemed to be modified to
restrict the Executive's competition with the Company to the maximum extent of
time, scope and geography which the court or tribunal shall find enforceable,
and such provisions shall be so enforced. The losing party shall reimburse the
prevailing party for any costs and attorneys fees incurred in connection with
any action to enforce the covenants under Paragraph 8 above. The Company and
the Executive shall have available to them all remedies at law and in equity
for the enforcement of this Agreement, which remedies (including but not
limited to termination of this Agreement as provided herein) shall be
cumulative and not elective.
10. INDEMNIFICATION. The Company shall indemnify the
Executive to the full extent provided in the Company's Certificate of
Incorporation and Bylaws and the law of the State of Delaware in connection
with his activities as an officer and director of the Company.
11. GOLDEN PARACHUTE PAYMENTS. If as a result of a
change in control, the Executive is required to pay an excise tax on "excess
parachute payments" (as defined in Section 280G(b) of the Code) under Section
4999 of the Code, the Company shall reimburse the Executive for the amount of
such taxes paid. In addition, the Company shall pay the Executive such
additional amounts as are necessary to place the Executive in the same
financial position that she would have been in if she had not incurred any tax
liability under Section 4999 of the Code as a result of such change in control;
provided, however, that the Company shall in no event pay the Executive any
amounts with respect to any penalties or interest due under any provision of
the Code. The determination of the amount, if any, of any "excess parachute
payments" and any tax liability under Section 4999 of the Code shall be made by
a nationally-recognized independent accounting firm agreed to by the Company
and the Executive. The fees and expenses of such accounting firm shall be paid
by the Company. The determination of such accounting firm shall be final and
binding on the parties. The Company agrees to pay to the Executive any amounts
to be paid or reimbursed under this Paragraph 11 within thirty (30) days after
receipt by the Company of written notice from the accounting firm which sets
forth such accounting firm's determination.
12. ENTIRE AGREEMENT. The provisions contained herein
and the exhibits hereto constitute the entire agreement between the parties with
respect to the subject matter hereof and supersede any and all prior
agreements, understandings and communications between the parties, oral or
written, with respect to such subject matter.
13. MODIFICATION. Any waiver, alteration, amendment
or modification of any provisions of this Agreement and the
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<PAGE> 6
exhibits hereto shall not be valid unless in writing, approved by a majority of
the directors of the Company who are not full-time employees of the Company,
and signed by both the Executive and the Company.
14. SEVERABILITY. If any provision of this Agreement
shall be declared to be invalid or unenforceable, in whole or in
part, such invalidity or unenforceability shall not affect the
remaining provisions hereof, which shall remain in full force and
effect.
15. ASSIGNMENT. The Executive may not assign any of
his rights or delegate any of his duties hereunder without the
written consent of the Company. The Company may not assign any
of its rights or delegate any of its obligations hereunder.
16. BINDING EFFECT. Subject to the limitations set
forth in Paragraph 13 above, this Agreement shall be binding upon
and inure to the benefit of the successors in interest of the
Executive and the Company.
17. NOTICE. All notices and other communications
required or permitted hereunder shall be made in writing and
shall be deemed effective when initially transmitted by courier
or facsimile transmission and five (5) days after mailing by
registered or certified mail:
(i) if to the Company:
CD Radio Inc.
Sixth Floor
1001 22nd Street, N.W.
Washington, D.C. 20037
Telecopier No.: (202)296-6265
(ii) if to the Executive:
Joseph S. Capobianco
14 Evergreen Court
Suffern, New York 10901
Telecopier No.: (914)368-1720
or to such other person or address as either of the parties shall furnish in
writing to the other party from time to time.
17. CHOICE OF LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York applicable to contracts made and to be performed entirely
within said state jurisdiction.
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<PAGE> 7
18. ATTORNEYS' FEES. In the event of litigation arising
out of or in connection with this Agreement, the prevailing party shall be
entitled to recover from the other party all of its attorneys' fees and other
expenses incurred in connection with such litigation.
19. NON-MITIGATION. After the termination of his
employment hereunder, the Executive shall not be required to mitigate damages or
the amount of any benefit or payment provided under this Agreement by seeking
other employment, or otherwise; nor shall the amount of any benefit or payment
provided for under this Agreement be reduced by any compensation earned by the
Executive as the result of employment by another employer.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above mentioned.
CD RADIO INC.
By:/s/ David Margolese
-------------------
Name: David Margolese
Title: Chairman and Chief
Executive Officer
EXECUTIVE
/s/ Joseph S. Capobianco
------------------------
Joseph S. Capobianco
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<PAGE> 1
EXHIBIT 10.18
EMPLOYMENT AND NONCOMPETITION AGREEMENT
This EMPLOYMENT AND NONCOMPETITION AGREEMENT is dated as of
April 28, 1997 (the "Agreement"), by and between CD RADIO INC., a Delaware
corporation, (the "Company"), and KENO THOMAS (the "Executive"). In
consideration of the mutual covenants and conditions set forth herein, the
Company and the Executive agree as follows:
1. EMPLOYMENT. The Company hereby employs the
Executive and the Executive hereby accepts employment with the
Company subject to the covenants and conditions of this
Agreement.
2. DUTIES AND REPORTING RELATIONSHIP.
(a) Duties. The Executive shall be employed in the
capacity of a Executive Vice President of the Company responsible for
marketing. During the term of this Agreement the Executive shall, on a
full-time basis, use his skills and render services to the best of his
ability in supervising the marketing affairs of the Company and shall, in
addition, perform such other activities and duties as the Chairman and Chief
Executive Officer of the Company shall, from time to time, specify and direct.
(b) Reporting Relationship. The Executive shall
report to the Chairman and Chief Executive Officer of the
Company.
3. TERM. The term of this Agreement shall be deemed
to have commenced and be effective on and from April 28, 1997,
and end on April 28, 2000, unless terminated earlier pursuant to
the provisions of Paragraph 6 below.
4. COMPENSATION.
(a) Annual Salary. During the term of this
Agreement, the Executive shall be paid a salary computed on an annualized base
of U.S. $225,000.00 per year for the period of his employment hereunder through
December 31, 1997 and thereafter during the balance of the term of this
Agreement at a salary computed on an annualized base of $250,000.00, subject to
any increases that the Board of Directors or the compensation committee thereof
shall approve.
(b) Stock Options. The Company hereby grants to
the Executive the option to purchase 50,000 shares of the Company's common
stock, par value $0.001 per share (the "Common
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<PAGE> 2
Stock") at U.S.$12.875 per share, on such terms and subject to such conditions
as are set forth in the option agreement attached hereto as Exhibit A.
(c) Other. All compensation paid to the
Executive hereunder shall be subject to any and all such payroll and withholding
deductions as are required by the law of any applicable jurisdiction, state or
federal, with taxing authority with respect to such compensation.
5. ADDITIONAL COMPENSATION, EXPENSES AND BENEFITS.
(a) Expenses. The Company shall promptly
reimburse the Executive for all reasonable and necessary business expenses
incurred and advanced by him in carrying out his duties under this Agreement.
The Executive shall present to the Company from time to time an itemized
account of such expenses in such form as may be required by the Company.
(b) Benefits. During the term of employment
hereunder, the Executive shall be entitled to participate fully in any benefit
plans, programs, policies and any fringe benefits which may be made available
to the corporate officers of the Company generally including but not limited to
medical, dental and life insurance; provided, however, that the Executive shall
participate in any bonus, stock option or stock purchase or compensation plan
currently in effect or subsequently established by the Company to the extent,
and only to the extent authorized by the plan document or the Board of
Directors or the compensation committee thereof.
(c) Moving Expenses. The Executive presently
resides in Los Angeles, California. It is expect and understood as a condition
of his continued employment under this Agreement that the Executive shall
establish his principal residence within the metropolitan area of the City of
New York, New York within [sixty (60) days] after his receipt from the Company
of a written request that he do so, but in all events on or before December 31,
1997. The Company shall reimburse him for the reasonable expenses which he
shall incur in moving his principal residence to New York, including, but not
limited to, the costs of shipping his furniture, furnishing and personal
effects to New York and any fees or commissions he may incur in leasing a
residence there.
6. TERMINATION.
(a) Termination for Cause. The Company has the
right and may elect to terminate this Agreement for Cause. For purposes of this
Agreement, "Cause" shall be limited to (i) action by the Executive involving
willful malfeasance having a material adverse effect on the Company or (ii) the
Executive
-2-
<PAGE> 3
being convicted of a felony; provided that any action by the Executive shall
not constitute "Cause" if, in good faith, the Executive believed such action to
be in or not opposed to the best interests of the Company, or if the Executive
shall be entitled, under applicable law or the Certificate of Incorporation or
Bylaws of the Company, to be indemnified with respect to such action.
Termination of the Executive for Cause pursuant to this Subparagraph 6(a) shall
be communicated by a Notice of Termination. For purposes of this Agreement a
"Notice of Termination" shall mean delivery to the Executive of a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of
the directors present and voting at a meeting of the Company's Board or
Directors called and held for that purpose after reasonable notice to the
Executive and reasonable opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board prior to such vote, finding
that in the good faith opinion of the Board the Executive was guilty of conduct
set forth in the first sentence of this Subparagraph 6(a) and specifying the
particulars thereof in detail (the date of such termination by the Board is
referred hereinafter as the "Termination Date"). For purposes of this
Agreement, no such purported termination of the Executive's employment shall be
effective without such Notice of Termination.
(b) Voluntary Resignation. Should the Executive
wish to resign from his position with the Company during the term of his
employment, the Executive shall give thirty (30) days written notice to the
Company, setting forth the reasons and specifying the date as of which his
resignation is to become effective. The date specified in such written notice
shall be referenced herein as the "Termination Date." Failure to provide such
notice shall entitle the Company only to fix the Termination Date as of the
last business day on which the Executive reported for work at his principal
place of employment with the Company and shall have no other effect.
(c) Without Cause. The Company shall have the
absolute right to terminate the Executive's employment without cause at any
time. If the Company elects to terminate the Executive without cause, the
Company shall give thirty (30) days written notice to the Executive. Thirty
(30) days after such notice is given to the Executive shall be referenced
herein as the "Termination Date."
(d) Compensation and Benefits Upon Termination.
If the employment of the Executive is terminated for any reason except (i) by
the Company for Cause or (ii) by the Executive voluntarily, the Executive shall
be entitled to receive, and the Company shall pay to the Executive without
setoff, counterclaim or other withholding except as set forth in Paragraph 4(c)
an amount (in addition to any salary, benefits or other sums due the Executive
through the Termination Date) equal to one-half (1/2)
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<PAGE> 4
of his annualized salary base then in effect. Any amount becoming payable under
this Paragraph 6(d) shall be paid on the Termination Date.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. As a
condition of his employment hereunder, the Executive has executed and delivered
to the Company an agreement addressing the nondisclosure of confidential
information (the "Nondisclosure Agreement") in the form attached hereto as
Exhibit B and incorporated herein by reference as if set forth in full herein.
8. COVENANT NOT TO COMPETE. For a period beginning on
the date of this Agreement and ending one (1) years after the Termination Date,
the Executive will not, directly or indirectly, enter into the employment of,
render services to or acquire any interest whatsoever in (whether for his own
account as an individual proprietor, or as a partner, associate, shareholder,
officer, director, consultant, trustee or otherwise), or otherwise assist, any
person or entity engaged in any operations in North America involving any
satellite digital audio radio service or any subscription-based digital audio
radio service delivered to cars or other mobile vehicles; provided, however,
that nothing herein shall prevent the purchase or ownership by the Executive by
way of investment of up to four percent (4%) of the shares or equity interest
of any corporation or other entity. Without limiting the generality of the
foregoing, the Executive agrees that during the one (1) year period set forth
above the Executive will not call on or otherwise solicit business or assist
others to solicit business from any of the customers or potential customers of
the Company as to any product or service that competes with any product or
service provided or marketed by or actually under development by the Company at
the time of the Executive's termination. The Executive furthermore agrees that
he will not solicit or assist others to solicit the employment of or hire any
employee of the Company throughout the term of this Covenant Not To Compete
without the prior written consent of the Company.
9. REMEDIES. The Executive agrees that damages for
breach of any of his covenants under Paragraphs 7 and 8 above will be difficult
to determine and inadequate to remedy the harm which may be caused thereby, and
therefore consents that these covenants may be enforced by temporary or
permanent injunction without the necessity of bond. Such injunctive relief
shall be in addition to and not in place of any other remedies available at law
or equity. The Executive believes, as of the date of this Agreement, that the
provisions of this Agreement are reasonable and that the Executive is capable
of gainful employment without breaching this Agreement. However, should any
court or tribunal decline to enforce any provision of Paragraph 7 or 8 of this
Agreement, this Agreement shall, to the extent applicable in the circumstances
before such court or tribunal, be deemed to be
-4-
<PAGE> 5
modified to restrict the Executive's competition with the Company to the
maximum extent of time, scope and geography which the court or tribunal shall
find enforceable, and such provisions shall be so enforced. The losing party
shall reimburse the prevailing party for any costs and attorneys fees incurred
in connection with any action to enforce the covenants under Paragraph 8 above.
The Company and the Executive shall have available to them all remedies at law
and in equity for the enforcement of this Agreement, which remedies (including
but not limited to termination of this Agreement as provided herein) shall be
cumulative and not elective.
10. INDEMNIFICATION. The Company shall indemnify the
Executive to the full extent provided in the Company's
Certificate of Incorporation and Bylaws and the law of the State
of Delaware in connection with his activities as an officer and
director of the Company.
11. GOLDEN PARACHUTE PAYMENTS. If as a result of a
change in control, the Executive is required to pay an excise tax on "excess
parachute payments" (as defined in Section 280G(b) of the Code) under Section
4999 of the Code, the Company shall reimburse the Executive for the amount of
such taxes paid. In addition, the Company shall pay the Executive such
additional amounts as are necessary to place the Executive in the same
financial position that he would have been in if he had not incurred any tax
liability under Section 4999 of the Code as a result of such change in control;
provided, however, that the Company shall in no event pay the Executive any
amounts with respect to any penalties or interest due under any provision of
the Code. The determination of the amount, if any, of any "excess parachute
payments" and any tax liability under Section 4999 of the Code shall be made by
a nationally-recognized independent accounting firm agreed to by the Company
and the Executive. The fees and expenses of such accounting firm shall be paid
by the Company. The determination of such accounting firm shall be final and
binding on the parties. The Company agrees to pay to the Executive any amounts
to be paid or reimbursed under this Paragraph 11 within thirty (30) days after
receipt by the Company of written notice from the accounting firm which sets
forth such accounting firm's determination.
12. ENTIRE AGREEMENT. The provisions contained herein
and the exhibits hereto constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede any and all prior
agreements, understandings and communications between the parties, oral or
written, with respect to such subject matter.
13. MODIFICATION. Any waiver, alteration, amendment
or modification of any provisions of this Agreement and the
exhibits hereto shall not be valid unless in writing, approved by
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<PAGE> 6
a majority of the directors of the Company who are not full-time employees of
the Company, and signed by both the Executive and the Company.
14. SEVERABILITY. If any provision of this Agreement
shall be declared to be invalid or unenforceable, in whole or in
part, such invalidity or unenforceability shall not affect the
remaining provisions hereof, which shall remain in full force and
effect.
15. ASSIGNMENT. The Executive may not assign any of
his rights or delegate any of his duties hereunder without the
written consent of the Company. The Company may not assign any
of its rights or delegate any of its obligations hereunder.
16. BINDING EFFECT. Subject to the limitations set
forth in Paragraph 13 above, this Agreement shall be binding upon
and inure to the benefit of the successors in interest of the
Executive and the Company.
17. NOTICE. All notices and other communications
required or permitted hereunder shall be made in writing and
shall be deemed effective when initially transmitted by courier
or facsimile transmission and five (5) days after mailing by
registered or certified mail:
(i) if to the Company:
CD Radio Inc.
Sixth Floor
1001 22nd Street, N.W.
Washington, D.C. 20037
Telecopier No.: (202)296-6265
(ii) if to the Executive:
Keno Thomas
325 16th Street
Santa Monica, California 90402
Telecopier No.: (310)899-9191
or to such other person or address as either of the parties shall furnish in
writing to the other party from time to time.
18. CHOICE OF LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York applicable to contracts made and to be performed entirely
within said state jurisdiction.
19. ATTORNEYS' FEES. In the event of litigation
arising out of or in connection with this Agreement, the
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<PAGE> 7
prevailing party shall be entitled to recover from the other party all of its
attorneys' fees and other expenses incurred in connection with such litigation.
20. NON-MITIGATION. After the termination of his
employment hereunder, the Executive shall not be required to mitigate damages
or the amount of any benefit or payment provided under this Agreement by
seeking other employment, or otherwise; nor shall the amount of any benefit or
payment provided for under this Agreement be reduced by any compensation earned
by the Executive as the result of employment by another employer.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above mentioned.
CD RADIO INC.
By:/s/ Lawrence F. Gilberti
------------------------
Name: Lawrence F. Gilberti
Title: Secretary
EXECUTIVE
/s/ Keno Thomas
---------------
Keno Thomas
-7-
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