UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 1998
Commission file number 0-24710
CD RADIO INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 52-1700207
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1180 AVENUE OF THE AMERICAS,
14TH FLOOR,
NEW YORK, NEW YORK 10036
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(Address of principal executive offices)
(Zip code)
212-899-5000
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(Registrant's telephone number, including area code)
SIXTH FLOOR, 2175 K STREET, N.W., WASHINGTON, D.C. 20037
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(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 16,048,691 SHARES
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(Class) (Outstanding as of May 13, 1998)
<PAGE>
CD RADIO INC.
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX
Part I - Financial Information
Page
----
Consolidated Statements of Operations (unaudited) for the three 1
month periods ended March 31, 1998 and 1997 and for the
period May 17, 1990 (date of inception) to March 31, 1998
Consolidated Balance Sheets (unaudited) as of March 31, 1998 2
and December 31, 1997
Consolidated Statements of Cash Flows (unaudited) for the three 3
month periods ended March 31, 1998 and 1997 and for the
period May 17, 1990 (date of inception) to March 31, 1998
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
<PAGE>
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative for
the period
Three Months Ended March 31, May 17, 1990
----------------------------------------------- (date of inception)
to March 31,
1998 1997 1998
----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
Revenue $ -- $ -- $ --
Operating expenses:
Legal, consulting and regulatory fees 978,013 307,439 11,463,421
Other general and administrative 1,338,018 284,877 12,442,359
Research and development 16,031 19,603 1,989,012
Write-off of investment in
Sky-Highway Radio Corp. -- -- 2,000,000
---------- ---------- ----------
Total operating expenses 2,332,062 611,919 27,894,792
---------- ---------- ----------
Other income (expense)
Interest income 2,317,633 59,681 6,720,114
Interest expense (5,822,931) (4,910) (7,935,344)
---------- ---------- ----------
(3,505,298) 54,771 (1,215,230)
---------- ---------- ----------
Net loss (5,837,360) (557,148) (29,110,022)
---------- ---------- ----------
Preferred stock dividend (4,781,430) -- (7,119,022)
Preferred stock deemed dividend -- -- (51,975,000)
Accretion of dividends in connection with the
issuance of Warrants on Preferred Stock
(4,274,737) -- (4,274,737)
---------- ---------- ----------
Net loss applicable to common stockholders $(14,893,527) $ (557,148) $(92,478,781)
========== ========== ==========
Per common shares:
Net loss $ (0.36) $ (0.05)
Preferred stock dividend requirements (0.30) --
Accretion of dividends in connection with
the issuance of Warrants on Preferred
Stock (0.27) --
---------- ----------
Net loss applicable to common stockholders
(basic and diluted) $ (0.93) $ (0.05)
========== ==========
Weighted average common shares outstanding 16,048,691 10,301,331
(basic and diluted) ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
--------------------------- ---------------------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $160,793,813 $170,381,220
Prepaid expense and other 814,556 928,068
------------ ------------
Total current assets 161,608,369 171,309,288
------------ ------------
Property and equipment, at cost:
Satellite construction in process 56,018,000 49,400,000
Launch construction in process 27,229,027 10,884,804
Technical equipment 254,200 254,200
Office equipment and other 111,693 96,345
Demonstration equipment 38,664 38,664
------------ ------------
83,651,584 60,674,013
Less accumulated depreciation (252,969) (243,031)
------------ ------------
83,398,615 60,430,982
Other assets:
FCC license 83,346,000 83,346,000
Debt issue cost, net 8,397,915 8,617,398
Deposits 103,793 103,793
------------ ------------
Total other assets 91,847,708 92,067,191
------------ ------------
Total assets $336,854,692 $323,807,461
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 179,192 401,147
Other -- 14,356
------------ ------------
Total current liabilities 179,192 415,503
Notes payable and accrued interest 150,507,512 131,386,610
Dividends payable 7,119,022 2,337,592
------------ ------------
Total liabilities 157,805,726 134,139,705
------------ ------------
Commitments and contingencies
10.5% Series C Convertible Preferred Stock, no par value: 2,025,000 shares
authorized, 1,846,799 shares issued and outstanding at March 31, 1998 and
December 31, 1997
(liquidation preference of $184,679,900), at net carrying value 108,203,918 110,237,336
Stockholders' equity:
Preferred stock, $0.001 par value, 50,000,000 shares authorized; 8,000,000
shares designated as 5% Delayed
Convertible Preferred Stock; none issued or outstanding -- --
Common stock, $0.001 par value; 200,000,000 shares
authorized; and 16,048,691 shares issued and outstanding
as of March 31, 1998 and December 31, 1997 16,049 16,049
Additional paid-in capital 99,939,021 102,687,033
Deficit accumulated during the development stage (29,110,022) (23,272,662)
------------ ------------
Total stockholders' equity 70,845,048 79,430,420
------------ ------------
Total liabilities and stockholders' equity $336,854,692 $323,807,461
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative for
the period
Three Months Ended March 31, May 17, 1990
----------------------------------------------- (date of inception)
to March 31,
1998 1997 1998
----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
Cash flows from development stage activities:
Net Loss $ (5,837,360) $ (557,148) $ (29,110,022)
Adjustments to reconcile net loss to net cash used in
development stage activities:
Depreciation expense 9,938 10,571 263,068
Amortization of debt issue costs 219,483 -- 292,644
Write off of investment in Sky-Highway Radio Corp. -- -- 2,000,000
Accretion of notes payable charged as interest expense 5,603,448 -- 7,471,264
Compensation expense in connection with issuance of
stock options -- -- 2,163,625
Common stock issued for services rendered -- -- 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 113,512 2,810 (814,556)
Due to related party -- -- 350,531
Deposits -- -- (303,793)
Accounts payable and accrued expenses (221,955) 26,291 254,431
Accrued interest and other liabilities (14,356) (5,218) --
------------- ------------ -------------
Net cash used in development stage activities (127,290) (522,694) (16,411,412)
------------- ------------ -------------
Cash flows from investing activities:
Purchase of FCC license -- (3,000,000) (83,346,000)
Payments for satellite construction (6,618,000) -- (55,918,000)
Advance payments for launch services (2,826,769) -- (9,118,383)
Capital expenditures (15,348) -- (414,656)
Acquisition of Sky-Highway Radio Corp. -- -- (2,000,000)
------------- ------------ -------------
Net cash used in investing activities (9,460,117) (3,000,000) (150,797,039)
------------- ------------ -------------
Cash flows from financing activities:
Proceeds from issuance of common stock, net -- -- 85,379,320
Proceeds from issuance of 5% Preferred Stock, net -- -- 120,517,811
Proceeds from exercise of stock options -- 18,800 211,000
Proceeds from exercise of stock warrants -- -- 4,589,088
Proceeds from issuance of promissory note and Units -- -- 116,535,045
Proceeds from issuance of promissory notes to related
parties -- -- 2,965,000
Repayment of promissory note -- -- (200,000)
Repayment of promissory notes to related parties -- -- (2,435,000)
Loan from officer -- -- 440,000
------------- ------------ -------------
Net cash provided by financing activities -- 18,800 328,002,264
------------- ------------ -------------
Net increase (decrease) in cash and cash equivalents (9,587,407) (3,503,894) 160,793,813
Cash and cash equivalents at the beginning of period 170,381,220 4,583,562 --
------------- ------------ -------------
Cash and cash equivalents at the end of period $ 160,793,813 $ 1,079,668 $ 160,793,813
============= ============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
GENERAL
The accompanying unaudited consolidated financial statements of CD
Radio Inc. (the "Company") 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. These financial
statements should be read in connection with the Company's consolidated
financial statements and the notes thereto for the fiscal year ended December
31, 1997 included in the Company's annual report on Form 10-K as filed with the
Securities and Exchange Commission (the "SEC").
NET LOSS PER COMMON 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. Since December 15, 1997, the Company is
required to report earnings (loss) per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128").
As long as the Company continues to experience net losses, there will be no
impact on the Company's net loss per common share from adoption of SFAS No. 128.
Earnings per share for all periods presented conform to SFAS No. 128.
COMPREHENSIVE INCOME
In 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
("SFAS No. 130"), which requires additional reporting with respect to certain
changes in assets and liabilities that previously were included in stockholders'
equity. The Company has no comprehensive income items to report for the current
presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
The FASB has issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which requires financial and descriptive
information with respect to operating segments of an entity based on the way
management disaggregates the entity for internal operating decisions. There is
no impact to the Company's March 31, 1998 financial statements from the adoption
of this standard.
NON CASH TRANSACTIONS
During the three months ended March 31, 1998, the Company borrowed a
total of $13,240,000 under the loan agreements (the "AEF Agreements"), dated
July 22, 1997, between the Company and Arianespace Finance S.A. Capitalized
interest on these borrowings was $277,000 for the quarter. These amounts are
reflected in the Launch Construction in Process and Notes Payable balances at
March 31, 1998.
4
<PAGE>
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), the Company is hereby
providing cautionary statements identifying important factors that could cause
the Company's actual results to differ materially from those projected in
forward-looking statements (as such term is defined in the Reform Act) made in
this report. Any statements that express, or involve discussions as to,
expectations, beliefs, plans, objectives, assumptions or future events or
performance (often, but not always, through the use of words or phrases such as
"will likely result," "are expected to," "will continue," "is anticipated,"
"estimated," "intends," "plans," "projection" and "outlook") are not historical
facts and may be forward-looking and, accordingly, such statements involve
estimates, assumptions and uncertainties that could cause actual results to
differ materially from those expressed in the forward-looking statements.
Accordingly, any such statements are qualified in their entirety by reference
to, and are accompanied by, the factors discussed throughout this report. Among
the key factors that have a direct bearing on the Company's future results of
operations are the potential risk of delay in implementing the Company's
business plan; increased costs of construction and launch of necessary
satellites; dependence on satellite construction and launch contractors; risk of
launch failure; unproven market for the Company's proposed service; unproven
applications of existing technology; and the Company's need for substantial
additional financing.
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,
obtaining regulatory approval for the CD Radio service, commencement of
construction of three satellites, acquisition of content for its programming,
strategic planning, market research, recruitment of its senior management team
and securing financing for working capital and capital expenditures. In April
1997, the Company was the winning bidder in a FCC auction for one of two FCC
Licenses with a winning bid of $83 million, of which $17 million was paid as a
deposit. The Company paid the balance due the FCC in October 1997 and was
awarded the FCC License on October 10, 1997. The Company does not expect to
generate any revenues from operations until 2000 at the earliest, and expects
that positive cashflow from operations will not be generated until late 2000 at
the earliest. In addition, the Company will require substantial additional
capital to complete development and commence commercial operations of CD Radio.
There can be no assurance that CD Radio will ever commence operations, that the
Company will attain any particular level of revenues or that the Company will
achieve profitability.
Upon commencing commercial operations, the Company expects its primary
source of revenues to be monthly subscription fees. The Company currently
anticipates that its subscription fee will be $9.95 per month to receive CD
Radio broadcasts, with a one time, modest activation fee per subscriber. In
addition, the Company expects to derive additional revenues from providers of
sports, news and talk programming for providing national distribution of their
programming to CD Radio subscribers and from directly selling or bartering
advertising time on the Company's sports, news and talk channels. To receive CD
Radio, subscribers will need to purchase a radio card or S-band radio together
with the associated miniature satellite dish antenna.
5
<PAGE>
The Company does not intend to manufacture these products and thus will
not receive any revenues from their sale. Although the Company holds patents
covering certain technology to be used in the radio cards, S-band radios and
miniature satellite dish antennas, the Company expects to license its technology
to manufacturers at no charge.
The Company expects that the operating expenses associated with
commercial operations will consist primarily of marketing, sales, programming,
maintenance of the satellite and broadcasting system and general and
administrative costs. Costs to acquire programming are expected to include
payments to build and maintain an extensive music library and royalty payments
for broadcasting music (calculated based on a percentage of revenues).
Marketing, sales, general and administrative costs are expected to consist
primarily of advertising costs, salaries of employees, rent and other
administrative expenses. The Company expects that the number of its employees
will increase from 16 on March 31, 1998, to approximately 130 by the time it
commences commercial operations.
In addition to funding initial operating losses, the Company will
require funds for working capital, interest and financing costs on borrowings
and capital expenditures. The Company's interest expense will increase
significantly as a result of the issuance in November 1997 of Units (the
"Units") consisting of the Company's 15% Senior Secured Discount Notes due 2007
("Senior Secured Notes") and warrants (the "Warrants") to purchase additional
Senior Secured Notes. However, a substantial portion of this indebtedness will
not require cash payments of interest until 2003.
On March 31, 1998, the Company signed a lease (the "Lease") for the
36th and 37th floors and certain portions of the roof and basement at 1221
Avenue of the Americas, New York, New York, to house the Company's new
headquarters and National Broadcast Studio. The Company will use portions of the
roof to install and maintain satellite transmission equipment and will use a
portion of the 8th floor setback to install an emergency electric power
generator. The term of the Lease is 15 years and 10 months, with an option to
renew for an additional five years at fair market value. The Company also has a
right of first refusal, from and after the third anniversary of the commencement
date, to lease any full floor which becomes available on floors 27 through 37 of
the building at fair market value. The initial annual rental beginning October
1, 1998 is approximately $4 million, with specified increases and escalations
based on operating expenses.
In April 1998, the Company entered into an agreement with Lucent
Technologies, Inc. ("Lucent") for the development and manufacture of a chip set
that will be the essential element of S-band radios and of a plug and play
adapter card ("radio card") that will enable consumers to receive CD Radio in
their cars through existing cassette and CD players.
RESULTS OF OPERATIONS
The Company recorded net losses of $5,837,000 and $557,000 for the
three months ended March 31, 1998 and 1997, respectively. The Company's total
operating expenses were $2,332,000 and $612,000 for the three months ended March
31, 1998 and 1997, respectively.
Legal, consulting and regulatory fees increased for the three months
ended March 31, 1998 to $978,000 from $307,000 for the three months ended March
31, 1997. The increase in the level of expenditures is the result of greater
consulting expenses due to the accelerated execution of the Company's business
plan.
6
<PAGE>
Research and development costs were $16,000 and $20,000 for the three
months ended March 31, 1998 and 1997, 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, 1998 to $1,338,000 from $285,000 for the three months
ended March 31, 1997. General and administrative activities have grown as the
Company continues to expand its management team and the workforce necessary to
develop and commence the broadcast of CD Radio.
The increase of interest income to $2,318,000 for the three months
ended March 31, 1998, from $60,000 in the three months ended March 31, 1997, was
the result of a higher average cash balance during the first quarter of 1998.
The cash and cash equivalents on hand were primarily obtained from the public
offerings of 3,050,000 shares of common stock (the "Common Stock Offering") and
the Units (the "Units Offering") completed in November 1997, as well as the sale
to Space Systems/Loral ("Loral") of $25 million of Common Stock in August 1997.
Interest expense, net of capitalized interest, increased to $5,823,000
for the three months ended March 31, 1998, from $5,000 in the 1997 period. This
increase was primarily due to interest expense accruing on the Senior Secured
Notes. No cash interest on the Senior Secured Notes will be paid until June
2003.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had working capital of approximately
$161,429,000 compared with $170,894,000 at December 31, 1997. The decrease in
working capital was primarily the result of payments for satellite construction,
advance payments for launch services and operating expenses exceeding interest
income during the period. The cash and cash equivalents on hand were primarily
obtained from the Common Stock Offering and the Units Offering completed in
November 1997, as well as the sale to Loral of $25 million of Common Stock in
August 1997.
FUNDING REQUIREMENTS
The Company is a development stage company and as such will continue to
require substantial amounts of continued outside financing to acquire and
develop its assets and commence commercial operations. The Company estimates
that it will require approximately $648.5 million to develop and commence
commercial operation of CD Radio by the end of 1999. Of this amount, the Company
has raised approximately $446.4 million (including commitments under the AEF
Agreements referred to below), leaving anticipated additional cash needs of
approximately $202.1 million to fund its operations through 1999. The Company
anticipates additional cash requirements of approximately $100 million to fund
its operations through the first full year of operations. The Company expects to
finance the remainder of its funding requirements through the issuance of debt
or equity securities, or a combination thereof. Furthermore, if the Company were
to exercise its option under the Loral Satellite Contract to purchase and deploy
an additional satellite, substantial additional funds would be required.
To build and launch the satellites necessary for the operations of CD
Radio, the Company has entered into the Loral Satellite Contract and the
Arianespace Launch Service Agreement. The Loral Satellite Contract provides for
Loral to construct for the Company three satellites, two of which the Company
intends to launch and the third of which will be kept in reserve as a spare, and
includes an option granted to the Company to purchase a fourth satellite. Under
the Arianespace Launch Service Agreement, Arianespace has
7
<PAGE>
agreed to launch two of the Company's satellites into orbit. The Company is
committed to make aggregate payments of $275.8 million under the Loral Satellite
Contract and of $176.0 million under the Arianespace Launch Service Agreement.
As of March 31, 1998 the Company has made aggregate payments of $56 million to
Loral. Under the Loral Satellite Contract, with the exception of a payment made
at the time of the signing of the Loral Satellite Contract in March 1993,
payments are to be made in 22 installments commencing in April 1997 and ending
in November 2000, the expected delivery date for the third satellite.
Approximately half of these payments are contingent on Loral meeting specified
milestones in the manufacture of the three satellites. In addition, Loral has
agreed to defer a total of $20.4 million of the contract price, which is to be
paid in four equal installments of $5.1 million commencing November 2001 until
March 2003, subject to the completion of certain milestones. Amounts due under
the Arianespace Launch Service Agreement, except for payments made for each of
the two launches prior to the execution of the Arianespace Launch Service
Agreement, are payable on various dates between November 1997 and July 1999 for
the first launch, and, for the second launch, are payable on various dates
between February 1998 and the earlier of October 1999 or ten days prior to the
second launch. As of March 31, 1998, the Company had made payments of $27
million to Arianespace.
The Company also will require funds for working capital, interest on
borrowings, acquisition of programming, financing costs and operating expenses
until some time after the commencement of commercial operations of CD Radio. The
Company's interest expense will increase significantly as a result of its
financing plan; however, a substantial portion of its planned indebtedness will
not require cash payments of interest for some time. The Senior Secured Notes do
not require cash payments until June 2003. Interest on funds borrowed by the
Company under the AEF Agreements is deferred until repayment of such amounts.
The Company believes that its working capital at March 31, 1998 is sufficient to
fund planned operations and construction of its satellite system through the
first quarter of 1999.
SOURCES OF FUNDING
To date the Company has funded its capital needs through the issuance
of debt and equity. As of March 31, 1998, the Company had received a total of
$221.5 million in equity capital. A significant portion of the Company's equity
capital was received in 1997 as a result of the Company's issuance of 5,400,000
shares of 5% Delayed Convertible Preferred Stock (the "5% Preferred Stock") and
4,955,488 shares of Common Stock resulting in net proceeds of $121 million and
$71 million, respectively. Of the total shares of common stock sold, 1,905,488
shares were sold to Loral in August 1997 and 3,050,000 shares were sold to the
public in the Common Stock Offering in November 1997. In November 1997, the
Company exchanged (the "Exchange Offer") 1,846,799 shares of its newly issued 10
1/2% Series C Convertible Preferred Stock ("Series C Preferred Stock") for all
of the previously outstanding shares of 5% Preferred Stock. The Company received
no proceeds from the Exchange Offer.
In November 1997, the Company also received net proceeds of $116
million from the issuance of 12,910 Units, each Unit consisting of $20,000
aggregate principal amount at maturity of Senior Secured Notes and a Warrant to
purchase additional Senior Secured Notes with an aggregate principal amount at
maturity of $3,000. All Warrants were exercised in 1997. The aggregate value at
maturity of the Senior Secured Notes originally issued and Senior Secured Notes
resulting from the exercise of Warrants is $258 million and $38 million,
respectively. The Senior Secured Notes mature on November 15, 2007 with the
first cash interest payment due in June 2003. The Indenture under which the
Senior Secured Notes were issued (the "Indenture") contains certain limitations
on the Company's ability to incur additional indebtedness. The Senior Secured
Notes are secured by a pledge of the stock of Satellite CD Radio, Inc., the
subsidiary of the Company that holds the Company's FCC License.
8
<PAGE>
On July 22, 1997, the Company entered into two loan agreements
(collectively, the "AEF Agreements") with Arianespace France, S.A. ("AEF"), a
subsidiary of Arianespace, to finance approximately $105 million of the
estimated $176 million price of the launch services to be provided by
Arianespace. Under these agreements, the Company is able to borrow funds to meet
the progress payments due to Arianespace for the construction of each launch
vehicle and other launch costs (the "Tranche A Loans"). The Company has the
opportunity, upon satisfying a variety of conditions specified in the AEF
Agreements, to convert up to $80 million of the Tranche A loans into term loans
(the "Tranche B Loans"). If not converted, or the Company is unable to comply
with the terms and covenants of the Tranche B Loans, the Company will be
required to repay the loans in full, together with accrued interest and all fees
and other amounts due, approximately three months before the applicable launch
date, which will be prior to the time CD Radio commences commercial operations.
There can be no assurance that the Company will have sufficient funds to make
such repayment. As of March 31, 1998, the Company had borrowed approximately $18
million under the AEF Agreements.
The AEF Agreements impose certain restrictions on the Company's ability
to incur additional indebtedness, make investments or permit liens on certain
assets of the Company, other than liens in favor of AEF. If AEF determines that
the Tranche A Loans are eligible for conversion into Tranche B Loans, the
Company will also be subject to provisions restricting its ability to change its
capital structure or organizational documents or to merge, consolidate or
combine with another entity. If the Tranche A Loans are converted, the Company's
obligations to AEF will be secured by a lien on specified assets of the Company,
including the satellites and, to the extent permitted by applicable law, the FCC
License. In addition, the Indenture permits indebtedness under the AEF
Agreements to be secured on a PARI PASSU basis with the Notes by a first
priority security interest in the stock (the "Pledged Stock") of Satellite CD
Radio, Inc.
Pursuant to a Multiparty Agreement among the Company, AEF and
Arianespace in connection with the AEF Agreements, if the Company is unable to
obtain sufficient financing to complete the construction and launch of the
satellites, or if the Company terminates the Arianespace Launch Service
Agreement, the Company will be required to pay Arianespace a termination fee
ranging from 5% to 40% of the launch services price, based on the proximity of
the date of termination to the scheduled launch date. The termination fee will
be payable prior to the time the Company commences commercial operations and
there can be no assurance that the Company will have sufficient funds to pay
this fee.
The Loral Satellite Contract provides for payments to be made in
installments commencing in April 1997 and ending in November 2000, subject to
achievement by Loral of certain milestones in the manufacture of the satellites.
Loral has agreed to defer payment of $20.4 million from two milestone payments
due in June and September of 1998. The deferred amount will be paid in four
installments of $5.1 million, with the first payment to be made 27 months after
the delivery of the first satellite, the second payment to be made 27 months
after delivery of the second satellite, the third payment to be made one year
after the first payment date and the fourth payment to be one year after the
second payment date.
In the event of a satellite or launch failure, the Company will be
required to pay Loral the full- deferred amount for the affected satellite no
later than 120 days after the date of the failure. If the Company should elect
to put a satellite into ground storage, rather than having it shipped to the
launch site, the full- deferred amount for the affected satellite will become
due within 60 days of such election.
As a condition to the deferred payments, the Company has agreed to
provide Loral a security interest in properties and assets of the Company and
its subsidiaries, of substantially the same nature and quality, and of
substantially equivalent value relative to the amount of the secured
obligations, and on the same terms and conditions, as the Company has provided
or may provide to any other party under any and all of its
9
<PAGE>
loan, credit and other similar agreements. There currently is no such security
interest. The Indenture permits indebtedness under the Loral Satellite Contract
to be secured on a PARI PASSU basis with the Notes by a first priority security
interest in the Pledged Stock.
The Company expects it will require an additional $202.1 million in
financing through 1999. However, there can be no assurance that the Company's
actual cash requirements will not increase. Potential sources of additional
financing include the sale of debt or equity securities in the public or private
markets. There can be no assurance that the Company will be able to obtain
additional financing on favorable terms, or at all, or that it will be able to
do so in a timely fashion. The Indenture contains, and documents governing any
indebtedness incurred in the future are expected to contain, provisions limiting
the ability of the Company to incur additional indebtedness. The issuance by the
Company of additional equity securities could cause substantial dilution of the
interest in the Company of the Company's current stockholders. 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 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 costs. 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.
10
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities
On January 21, 1998, the Company filed a Certificate
of Correction of the Certificate of Designations, Preferences and
Relative, Participating, Optional and Other Special Rights of its
10- 1/2% Series C Convertible Preferred Stock ("Series C Preferred
Stock"), pursuant to Section 103(f) of the Delaware General
Corporation Law, in order to, among other things, clarify that the
number of shares of Series C Preferred Stock that the Company was
authorized to issue was 2,000,000 shares, and that dividends on the
Series C Preferred Stock accrue quarterly at the rate of 2.625% of
the sum of (x) the liquidation preference and (y) all accrued and
unpaid dividends, whether or not declared, from the date of
issuance of the Series C Preferred Stock to the applicable dividend
payment date.
On April 20, 1998, the Company filed a Certificate of
Increase under Section 151(g) of the Delaware General Corporation
Law which had the effect of increasing the number of shares of
Series C Preferred Stock that the Company is authorized to issue
from 2,000,000 to 2,025,000.
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:
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Amended and Restated Certificate of Incorporation (incorporated
by reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-1 (File No. 33-74782) (the "S-1 Registration
Statement")).
3.2 Amended and Restated By-Laws (incorporated by reference to
Exhibit 3.2 to the S-1 Registration Statement).
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")).
3.4 Form of Certificate of Designations of Series B Preferred Stock
(incorporated by reference to Exhibit A to Exhibit 1 to the
Company's Registration Statement on Form 8-A, filed with the
Commission on October 30, 1997 (the "Form 8-A")).
3.5.1 Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of 10 1/2%
Series C Convertible Preferred Stock (the "Series C Certificate
of Designations") (incorporated by reference to Exhibit 4.1 to
the Company's Registration Statement on Form S-4 (File No.
333-34761) (the "S-4 Registration Statement")).
3.5.2 Certificate of Correction of the Series C Certificate of
Designations.
3.5.3 Certificate of Increase of 10-1/2% Series C Convertible
Preferred Stock.
11
<PAGE>
3.6 Certificate of Designations of Series D Convertible Preferred
Stock (incorporated by reference to Exhibit 4.2 to the S-4
Registration Statement).
4.1 Form of Certificate for Shares of Common Stock (incorporated by
reference to Exhibit 4.3 to the S-1 Registration Statement).
4.2 Form of Certificate for Shares of 10 1/2% Series C Convertible
Preferred Stock (incorporated by reference to Exhibit 4.4 to the
S-4 Registration Statement).
4.3 Form of Certificate for Shares of Series D Convertible Preferred
Stock (incorporated by reference to Exhibit 4.5 to the S-4
Registration Statement).
4.4 Rights Agreement, dated as of October 22, 1997, between the
Company and Continental Stock Transfer & Trust Company, as
Rights Agent (incorporated by reference to Exhibit 1 to the Form
8-A).
4.5 Form of Right Certificate (incorporated by reference to Exhibit
B to Exhibit 1 to Form 8-A).
4.6 Indenture, dated as of November 26, 1997, between the Company
and IB.. Schroder Bank & Trust Company, as Trustee (incorporated
by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-3 (File No. 333-34769) (the "Units
Registration Statement")).
4.7 Form of Note (incorporated by reference to Exhibit 4.2 to the
Units Registration Statement).
4.8 Pledge Agreement, dated as of November 26, 1997, between the
Company, as Pledgor, and IB. Schroder Bank & Trust Company, as
Collateral Agent (incorporated by reference to Exhibit 4.5 to
the Units Registration Statement).
4.9 Warrant Agreement, dated as of November 26, 1997, between the
Company and IB. Schroder Bank & Trust Company, as Warrant Agent
(incorporated by reference to Exhibit 4.3 to the Units
Registration Statement).
4.10 Form of Warrant (incorporated by reference to Exhibit 4.4 to the
Units Registration Statement).
4.11 Form of Preferred Stock Warrant Agreement, dated as of April 9,
1997, between the Company and each Warrantholder thereof
(incorporated by reference to Exhibit 4.11 to the Form 10-K for
the year ended December 31, 1997).
4.12 Form of Common Stock Purchase Warrant granted by the Company to
Everest Capital Master Fund, L.P. and to The Ravich Revocable
Trust of 1989 (incorporated by reference to Exhibit 4.11 to the
Form 10-K for the year ended December 31, 1997).
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 S-1
Registration Statement).
10.2.1 Engagement Letter Agreement, dated November 18, 1992, between
the Company and Batchelder & Partners, Inc. (incorporated by
reference to Exhibit 10.4 to the S-1 Registration Statement).
10.2.2 Engagement Termination Letter Agreement, dated December 4, 1997,
between the Company and Batchelder & Partners, Inc.
(Incorporated by reference to Exhibit 4.11 to the Form 10-K for
the year ended December 31, 1997)
10.3.1 Proprietary Information and Non-Competition Agreement, dated
February 9, 1993, for Robert D. Briskman (incorporated by
reference to Exhibit 10.8.1 to the S-1 Registration Statement).
10.3.2 Amendment No. 1 to Proprietary Information and Non Competition
Agreement between the Company and Robert D. Briskman
(incorporated by reference to Exhibit 10.8.2 to the S-1
Registration Statement.)
10.4.1 Satellite Construction Agreement, dated March 2, 1993, between
Space Systems/Loral, Inc. and the Company (incorporated by
reference to Exhibit 10.9.1 to the S-1 Registration Statement)
(+).
10.4.2 Amendment No. 1 to Satellite Construction Agreement, effective
March 2, 1994, between the Space Systems/Loral, Inc. and the
Company (incorporated by reference to Exhibit 10.9.2 to the S-1
Registration Statement) (+).
10.4.3 Amendment No. 2 to Satellite Construction Agreement, effective
March 8, 1994, between the Space Systems/Loral, Inc. and the
Company (incorporated by reference to Exhibit 10.9.3 to the S-1
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 Quarterly Report on 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 Quarterly Report on 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).
12
<PAGE>
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).
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 (incorporated by reference to Exhibit 10.4.11 to the
Company's Quarterly Report on Form 10-Q/A for the period ended
March 31, 1997).
10.4.12 Amendment No. 13 to Satellite Construction Agreement, effective
April 28, 1997, between the Space Systems/Loral, Inc. and the
Company (incorporated by reference to Exhibit 10.4.12 to the
Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1997).
10.4.13 Amendment No. 14 to Satellite Construction Agreement, effective
June 30, 1997, between the Space Systems/Loral, Inc. and the
Company (incorporated by reference to Exhibit 10.4.13 to the
Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1997).
10.4.14 Amendment No. 15 to Satellite Construction Agreement, effective
July 31, 1997, between the Space Systems/Loral, Inc. and the
Company (incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K, filed with the Commission
on October 7, 1997).
10.4.15 Amendment No. 16 to Satellite Construction Agreement, effective
August 4, 1997, between the Space Systems/Loral, Inc. and the
Company (incorporated by reference to Exhibit 99.2 to the
Company's Current Report on Form 8-K, filed with the Commission
on October 7, 1997).
10.5 Assignment of Technology Agreement, dated April 15, 1993,
between Robert D. Briskman and the Company (incorporated by
reference to Exhibit 10.10 to the S-1 Registration Statement).
10.6.1 Amended and Restated Option Agreement between the Company and
Robert D. Briskman (incorporated by reference to Exhibit 10.13
to the S-1 Registration Statement).
10.6.2 Stock Option Agreement, dated as of October 15, 1997, between
the Company and Robert D. Briskman.
10.7.1 Launch Reservation Agreement, dated September 20, 1993, between
the Company and Arianespace S.A. (incorporated by reference to
Exhibit 10.15.1 to the S-1 Registration Statement).
10.7.2 Modification of Launch Reservation Agreement, dated April 1,
1994, between the Company and Arianespace S.A. (incorporated by
reference to Exhibit 10.15.2 to the S-1 Registration Statement).
10.7.3 Second Modification of Launch Reservation Agreement, dated
August 10, 1994, between the Company and Arianespace S.A.
(incorporated by reference to Exhibit 10.15.3 to the S-1
Registration Statement).
10.7.4 Third Modification of Launch Reservation Agreement, dated
November 8, 1995, between the Company and Arianespace S.A.
(incorporated by reference to Exhibit 10.14.4 to the Company's
Quarterly Report on 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 S.A.
(incorporated by reference to Exhibit 10.14.5 to the Company's
Quarterly Report on 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 S.A.
(incorporated by reference to Exhibit 10.10.6 to the 1996 Form
10-K).
10.8.1 Employment and Noncompetition Agreement between the Company and
David Margolese (incorporated by reference to Exhibit 10.18.1 to
the S-1 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 S-1 Registration Statement).
10.9.1 Employment and Noncompetition Agreement between the Company and
Robert D. Briskman (incorporated by reference to Exhibit 10.19.1
to the S-1 Registration Statement).
10.9.2 First Amendment to Employment Agreement between the Company and
Robert D. Briskman (incorporated by reference to Exhibit 10.19.2
to the S-1 Registration Statement).
10.9.3 Second Amendment to Employment Agreement between the Company and
Robert D. Briskman (incorporated by reference to Exhibit 10.12.3
to the 1996 Form 10-K).
10.10 Employment and Noncompetition Agreement, dated as of July 10,
1997, between the Company and Andrew J. Greenebaum (incorporated
by reference to Exhibit 10.10 to the Company's Quarterly Report
on Form 10-Q for the period ended September 30, 1997).
10.11 Employment and Noncompetition Agreement, dated as of April 16,
1997, between the Company and Joseph S. Capobianco (incorporated
by reference to Exhibit 10.17 to the Company's Quarterly Report
on Form 10-Q/A for the period ended March 31, 1997).
13
<PAGE>
10.12 Employment and Noncompetition Agreement, dated as of April 28,
1997, between the Company and Keno V. Thomas (incorporated by
reference to Exhibit 10.18 to the Company's Quarterly Report on
Form 10-Q/A for the period ended March 31, 1997).
10.13 Registration Agreement, dated January 2, 1994, between the
Company and M.A. Rothblatt and B.A. Rothblatt (incorporated by
reference to Exhibit 10.20 to the S-1 Registration Statement).
10.14 1994 Stock Option Plan (incorporated by reference to Exhibit
10.21 to the S-1 Registration Statement).
10.15 Amended and Restated 1994 Directors' Nonqualified Stock Option
Plan (incorporated by reference to Exhibit 10.22 to the 1995
Form 10-K).
10.16.1 Option Agreement, dated as of October 21, 1992, between the
Company and Batchelder & Partners, Inc. (incorporated by
reference to Exhibit 10.24 to the S-1 Registration Statement).
10.16.2 Form of Option Agreement, dated as of December 29, 1997, between
the Company and each Optionee.
10.17 Settlement Agreement, dated as of April 1, 1994, among the
Company, M.A. Rothblatt, B.A. Rothblatt and Marcor, Inc.
(incorporated by reference to Exhibit 10.27 to the S-1
Registration Statement).
10.18 1995 Stock Compensation Plan (incorporated by reference to
Exhibit 10.37 to the 1995 Form 10-K).
10.19.1 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).
10.19.2 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).
10.19.3 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).
10.20 Stock Purchase Agreement, dated as of August 5, 1997, between
the Company, David Margolese and Loral Space & Communications
Ltd. (incorporated by reference to Exhibit 99.1 to the Company's
Current Report on Form 8-K, filed with the Commission on August
19, 1997).
10.21.1 Arianespace Customer Loan Agreement, dated as of July 22, 1997,
between the Company and Arianespace Finance S.A., relating to
Launch 1 (the "Arianespace Loan Agreement 1") (incorporated by
reference to Exhibit 10.11.1 to the Company's Quarterly Report
on Form 10-Q for the period ended September 30, 1997).
10.21.2 Amendment No. 1 and Waiver to Arianespace Loan Agreement 1,
dated as of July 22, 1997, between Arianespace S.A., Arianespace
Finance S.A. and the Company (incorporated by reference to
Exhibit 10.11.1.1 to the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1997).
10.22 Multiparty Agreement relating to Launch 1, entered into as of
July 22, 1997, among Arianespace S.A., Arianespace Finance S.A.
and the Company (incorporated by reference to Exhibit 10.11.2 to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1997).
10.23.1 Arianespace Customer Loan Agreement, dated as of July 22, 1997,
between the Company and Arianespace Finance S.A., relating to
Launch 2 (the "Arianespace Loan Agreement 2") (incorporated by
reference to Exhibit 10.12.1 to the Company's Quarterly Report
on Form 10-Q for the period ended September 30, 1997).
10.23.2 Amendment No. 1 and Waiver to Arianespace Loan Agreement 2,
dated as of July 22, 1997, between Arianespace S.A., Arianespace
Finance S.A. and the Company (incorporated by reference to
Exhibit 10.12.1.1 to the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1997).
10.24 Multiparty Agreement relating to Launch 2, entered into as of
July 22, 1997, among Arianespace S.A., Arianespace Finance S.A.
and the Company (incorporated by reference to Exhibit 10.12.2 to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1997).
10.25 Summary Term Sheet/Commitment, dated June 15, 1997, among the
Company and Everest Capital International, Ltd., Everest Capital
Fund, L.P. and The Ravich Revocable Trust of 1989 (incorporated
by reference to Exhibit 99.1 to the Company's Current Report on
Form 8-K, filed with the Commission on July 8, 1997)
10.26.1 Engagement Letter Agreement, dated June 14, 1997, between the
Company and Libra Investments, Inc. (Incorporated by reference
to Exhibit 10.26.1 in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997)
10.26.2 Engagement Termination Letter Agreement, dated August 6, 1997,
between the Company and Libra Investments, Inc. (Incorporated by
reference to Exhibit 10.26.1 in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997)
10.27 Engagement Letter Agreement, dated October 8, 1997, between the
Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
(Incorporated by reference to Exhibit 10.26.1 in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997)
14
<PAGE>
10.28 Radio License Agreement, dated January 21, 1998 between the
Company and Bloomberg Communications Inc. (+)
27.1 Financial Data Schedule.
(+) Portions of this exhibit have been omitted pursuant to an Application for
Confidential Treatment filed by the Company with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
(b) Reports on 8-K
None
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CD RADIO INC.
Date: May 14, 1998 By:_________________________________
David Margolese
Chairman and Chief Executive Officer
Date: May 14, 1998 By:_________________________________
Andrew J. Greenbaum
Executive Vice President and
Chief Financial Officer
(principal financial officer)
16
<PAGE>
INDEX OF EXHIBITS
3.1 Amended and Restated Certificate of Incorporation (incorporated
by reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-1 (File No. 33-74782) (the "S-1 Registration
Statement")).
3.2 Amended and Restated By-Laws (incorporated by reference to
Exhibit 3.2 to the S-1 Registration Statement).
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")).
3.4 Form of Certificate of Designations of Series B Preferred Stock
(incorporated by reference to Exhibit A to Exhibit 1 to the
Company's Registration Statement on Form 8-A, filed with the
Commission on October 30, 1997 (the "Form 8-A")).
3.5.1 Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of 10 1/2%
Series C Convertible Preferred Stock (the "Series C Certificate
of Designations") (incorporated by reference to Exhibit 4.1 to
the Company's Registration Statement on Form S-4 (File No.
333-34761) (the "S-4 Registration Statement")).
3.5.2 Certificate of Correction of the Series C Certificate of
Designations.
3.5.3 Certificate of Increase of 10-1/2% Series C Convertible
Preferred Stock.
3.6 Certificate of Designations of Series D Convertible Preferred
Stock (incorporated by reference to Exhibit 4.2 to the S-4
Registration Statement).
4.1 Form of Certificate for Shares of Common Stock (incorporated by
reference to Exhibit 4.3 to the S-1 Registration Statement).
4.2 Form of Certificate for Shares of 10 1/2% Series C Convertible
Preferred Stock (incorporated by reference to Exhibit 4.4 to the
S-4 Registration Statement).
4.3 Form of Certificate for Shares of Series D Convertible Preferred
Stock (incorporated by reference to Exhibit 4.5 to the S-4
Registration Statement).
4.4 Rights Agreement, dated as of October 22, 1997, between the
Company and Continental Stock Transfer & Trust Company, as
Rights Agent (incorporated by reference to Exhibit 1 to the Form
8-A).
4.5 Form of Right Certificate (incorporated by reference to Exhibit
B to Exhibit 1 to Form 8-A).
4.6 Indenture, dated as of November 26, 1997, between the Company
and IB.. Schroder Bank & Trust Company, as Trustee (incorporated
by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-3 (File No. 333-34769) (the "Units
Registration Statement")).
4.7 Form of Note (incorporated by reference to Exhibit 4.2 to the
Units Registration Statement).
4.8 Pledge Agreement, dated as of November 26, 1997, between the
Company, as Pledgor, and IB. Schroder Bank & Trust Company, as
Collateral Agent (incorporated by reference to Exhibit 4.5 to
the Units Registration Statement).
17
<PAGE>
4.9 Warrant Agreement, dated as of November 26, 1997, between the
Company and IB. Schroder Bank & Trust Company, as Warrant Agent
(incorporated by reference to Exhibit 4.3 to the Units
Registration Statement).
4.10 Form of Warrant (incorporated by reference to Exhibit 4.4 to the
Units Registration Statement).
4.11 Form of Preferred Stock Warrant Agreement, dated as of April 9,
1997, between the Company and each Warrantholder thereof
(incorporated by reference to Exhibit 4.11 to the Form 10-K for
the year ended December 31, 1997).
4.12 Form of Common Stock Purchase Warrant granted by the Company to
Everest Capital Master Fund, L.P. and to The Ravich Revocable
Trust of 1989 (incorporated by reference to Exhibit 4.11 to the
Form 10-K for the year ended December 31, 1997).
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 S-1
Registration Statement).
10.2.1 Engagement Letter Agreement, dated November 18, 1992, between
the Company and Batchelder & Partners, Inc. (incorporated by
reference to Exhibit 10.4 to the S-1 Registration Statement).
10.2.2 Engagement Termination Letter Agreement, dated December 4, 1997,
between the Company and Batchelder & Partners, Inc.
(incorporated by reference to Exhibit 4.11 to the Form 10-K for
the year ended December 31, 1997)
10.3.1 Proprietary Information and Non-Competition Agreement, dated
February 9, 1993, for Robert D. Briskman (incorporated by
reference to Exhibit 10.8.1 to the S-1 Registration Statement).
10.3.2 Amendment No. 1 to Proprietary Information and Non Competition
Agreement between the Company and Robert D. Briskman
(incorporated by reference to Exhibit 10.8.2 to the S-1
Registration Statement.)
10.4.1 Satellite Construction Agreement, dated March 2, 1993, between
Space Systems/Loral, Inc. and the Company (incorporated by
reference to Exhibit 10.9.1 to the S-1 Registration Statement)
(+).
10.4.2 Amendment No. 1 to Satellite Construction Agreement, effective
March 2, 1994, between the Space Systems/Loral, Inc. and the
Company (incorporated by reference to Exhibit 10.9.2 to the S-1
Registration Statement) (+).
10.4.3 Amendment No. 2 to Satellite Construction Agreement, effective
March 8, 1994, between the Space Systems/Loral, Inc. and the
Company (incorporated by reference to Exhibit 10.9.3 to the S-1
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 Quarterly Report on Form 10-Q for the period ended
September 30, 1996).
18
<PAGE>
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 Quarterly Report on 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).
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 (incorporated by reference to Exhibit 10.4.11 to the
Company's Quarterly Report on Form 10-Q/A for the period ended
March 31, 1997).
10.4.12 Amendment No. 13 to Satellite Construction Agreement, effective
April 28, 1997, between the Space Systems/Loral, Inc. and the
Company (incorporated by reference to Exhibit 10.4.12 to the
Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1997).
10.4.13 Amendment No. 14 to Satellite Construction Agreement, effective
June 30, 1997, between the Space Systems/Loral, Inc. and the
Company (incorporated by reference to Exhibit 10.4.13 to the
Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1997).
10.4.14 Amendment No. 15 to Satellite Construction Agreement, effective
July 31, 1997, between the Space Systems/Loral, Inc. and the
Company (incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K, filed with the Commission
on October 7, 1997).
10.4.15 Amendment No. 16 to Satellite Construction Agreement, effective
August 4, 1997, between the Space Systems/Loral, Inc. and the
Company (incorporated by reference to Exhibit 99.2 to the
Company's Current Report on Form 8-K, filed with the Commission
on October 7, 1997).
10.5 Assignment of Technology Agreement, dated April 15, 1993,
between Robert D. Briskman and the Company (incorporated by
reference to Exhibit 10.10 to the S-1 Registration Statement).
10.6.1 Amended and Restated Option Agreement between the Company and
Robert D. Briskman (incorporated by reference to Exhibit 10.13
to the S-1 Registration Statement).
10.6.2 Stock Option Agreement, dated as of October 15, 1997, between
the Company and Robert D. Briskman.
19
<PAGE>
10.7.1 Launch Reservation Agreement, dated September 20, 1993, between
the Company and Arianespace S.A. (incorporated by reference to
Exhibit 10.15.1 to the S-1 Registration Statement).
10.7.2 Modification of Launch Reservation Agreement, dated April 1,
1994, between the Company and Arianespace S.A. (incorporated by
reference to Exhibit 10.15.2 to the S-1 Registration Statement).
10.7.3 Second Modification of Launch Reservation Agreement, dated
August 10, 1994, between the Company and Arianespace S.A.
(incorporated by reference to Exhibit 10.15.3 to the S-1
Registration Statement).
10.7.4 Third Modification of Launch Reservation Agreement, dated
November 8, 1995, between the Company and Arianespace S.A.
(incorporated by reference to Exhibit 10.14.4 to the Company's
Quarterly Report on 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 S.A.
(incorporated by reference to Exhibit 10.14.5 to the Company's
Quarterly Report on 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 S.A.
(incorporated by reference to Exhibit 10.10.6 to the 1996 Form
10-K).
10.8.1 Employment and Noncompetition Agreement between the Company and
David Margolese (incorporated by reference to Exhibit 10.18.1 to
the S-1 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 S-1 Registration Statement).
10.9.1 Employment and Noncompetition Agreement between the Company and
Robert D. Briskman (incorporated by reference to Exhibit 10.19.1
to the S-1 Registration Statement).
10.9.2 First Amendment to Employment Agreement between the Company and
Robert D. Briskman (incorporated by reference to Exhibit 10.19.2
to the S-1 Registration Statement).
10.9.3 Second Amendment to Employment Agreement between the Company and
Robert D. Briskman (incorporated by reference to Exhibit 10.12.3
to the 1996 Form 10-K).
10.10 Employment and Noncompetition Agreement, dated as of July 10,
1997, between the Company and Andrew J. Greenebaum (incorporated
by reference to Exhibit 10.10 to the Company's Quarterly Report
on Form 10-Q for the period ended September 30, 1997).
10.11 Employment and Noncompetition Agreement, dated as of April 16,
1997, between the Company and Joseph S. Capobianco (incorporated
by reference to Exhibit 10.17 to the Company's Quarterly Report
on Form 10-Q/A for the period ended March 31, 1997).
20
<PAGE>
10.12 Employment and Noncompetition Agreement, dated as of April 28,
1997, between the Company and Keno V. Thomas (incorporated by
reference to Exhibit 10.18 to the Company's Quarterly Report on
Form 10-Q/A for the period ended March 31, 1997).
10.13 Registration Agreement, dated January 2, 1994, between the
Company and M.A. Rothblatt and B.A. Rothblatt (incorporated by
reference to Exhibit 10.20 to the S-1 Registration Statement).
10.14 1994 Stock Option Plan (incorporated by reference to Exhibit
10.21 to the S-1 Registration Statement).
10.15 Amended and Restated 1994 Directors' Nonqualified Stock Option
Plan (incorporated by reference to Exhibit 10.22 to the 1995
Form 10-K).
10.16.1 Option Agreement, dated as of October 21, 1992, between the
Company and Batchelder & Partners, Inc. (incorporated by
reference to Exhibit 10.24 to the S-1 Registration Statement).
10.16.2 Form of Option Agreement, dated as of December 29, 1997, between
the Company and each Optionee.
10.17 Settlement Agreement, dated as of April 1, 1994, among the
Company, M.A. Rothblatt, B.A. Rothblatt and Marcor, Inc.
(incorporated by reference to Exhibit 10.27 to the S-1
Registration Statement).
10.18 1995 Stock Compensation Plan (incorporated by reference to
Exhibit 10.37 to the 1995 Form 10-K).
10.19.1 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).
10.19.2 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).
10.19.3 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).
10.20 Stock Purchase Agreement, dated as of August 5, 1997, between
the Company, David Margolese and Loral Space & Communications
Ltd. (incorporated by reference to Exhibit 99.1 to the Company's
Current Report on Form 8-K, filed with the Commission on August
19, 1997).
21
<PAGE>
10.21.1 Arianespace Customer Loan Agreement, dated as of July 22, 1997,
between the Company and Arianespace Finance S.A., relating to
Launch 1 (the "Arianespace Loan Agreement 1") (incorporated by
reference to Exhibit 10.11.1 to the Company's Quarterly Report
on Form 10-Q for the period ended September 30, 1997).
10.21.2 Amendment No. 1 and Waiver to Arianespace Loan Agreement 1,
dated as of July 22, 1997, between Arianespace S.A., Arianespace
Finance S.A. and the Company (incorporated by reference to
Exhibit 10.11.1.1 to the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1997).
10.22 Multiparty Agreement relating to Launch 1, entered into as of
July 22, 1997, among Arianespace S.A., Arianespace Finance S.A.
and the Company (incorporated by reference to Exhibit 10.11.2 to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1997).
10.23.1 Arianespace Customer Loan Agreement, dated as of July 22, 1997,
between the Company and Arianespace Finance S.A., relating to
Launch 2 (the "Arianespace Loan Agreement 2") (incorporated by
reference to Exhibit 10.12.1 to the Company's Quarterly Report
on Form 10-Q for the period ended September 30, 1997).
10.23.2 Amendment No. 1 and Waiver to Arianespace Loan Agreement 2,
dated as of July 22, 1997, between Arianespace S.A., Arianespace
Finance S.A. and the Company (incorporated by reference to
Exhibit 10.12.1.1 to the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1997).
10.24 Multiparty Agreement relating to Launch 2, entered into as of
July 22, 1997, among Arianespace S.A., Arianespace Finance S.A.
and the Company (incorporated by reference to Exhibit 10.12.2 to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1997).
10.25 Summary Term Sheet/Commitment, dated June 15, 1997, among the
Company and Everest Capital International, Ltd., Everest Capital
Fund, L.P. and The Ravich Revocable Trust of 1989 (incorporated
by reference to Exhibit 99.1 to the Company's Current Report on
Form 8-K, filed with the Commission on July 8, 1997)
10.26.1 Engagement Letter Agreement, dated June 14, 1997, between the
Company and Libra Investments, Inc. (Incorporated by reference
to Exhibit 10.26.1 in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997)
10.26.2 Engagement Termination Letter Agreement, dated August 6, 1997,
between the Company and Libra Investments, Inc. (Incorporated by
reference to Exhibit 10.26.1 in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997)
22
<PAGE>
10.27 Engagement Letter Agreement, dated October 8, 1997, between the
Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
(Incorporated by reference to Exhibit 10.26.1 in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997)
10.28 Radio License Agreement, dated January 21, 1998 between the
Company and Bloomberg Communications Inc. (+)
27.1 Financial Data Schedule.
Exhibit 3.5.3
CERTIFICATE OF INCREASE
OF
10 1/2% SERIES C CONVERTIBLE PREFERRED STOCK
OF
CD RADIO INC.
-----------------------------------------
Pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware
-----------------------------------------
CD Radio Inc., a Delaware corporation (the "Corporation"), certifies
pursuant to Section 151(g) of the General Corporation Law of the State of
Delaware that:
FIRST: A Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of 10 1/2% Series C Convertible
Preferred Stock (the "Certificate of Designations") was filed in the office of
the Secretary of State of the State of Delaware on the 18th day of November,
1997 and a Certificate of Corrections of the Certificate of Designations was
filed in the office of the Secretary of State of the State of Delaware on
January 21, 1998.
SECOND: The Board of Directors of the Corporation, by unanimous written
consent, has duly adopted a resolution authorizing the increase in the number of
authorized shares of the Corporation's 10 1/2% Series C Convertible Preferred
Stock by an the amount of 25,000 shares, so that the aggregate number of
authorized shares of such 10 1/2% Series C Convertible Preferred Stock after
such increase shall be 2,025,000, all as contemplated by Section 151(g) of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned officer of the Corporation does hereby
certify under penalties of perjury that this Certificate of Increase is the act
and deed of the Corporation and the facts stated therein are true and,
accordingly, has hereunto set his hand this day of April, 1998.
CD RADIO INC.
By: ___________________________
Name: Lawrence F. Gilberti
Title: Secretary
RADIO LICENSE AGREEMENT
Agreement made this __ day of January, 1998 between CD Radio Inc., a Delaware
corporation currently located at 2175 K Street, N.W., Washington, DC ("CD
Radio"), and Bloomberg Communications Inc., a Delaware corporation currently
located at 499 Park Avenue, New York, NY ("BCI"), for the distribution by CD
Radio of Bloomberg News Radio. For good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. DEFINITIONS.
"Bloomberg News Radio" or "the Service" means the
current standard twenty-four (24) hour Bloomberg
News Radio programming service, currently including
program segments such as World and National News;
Financial Market Updates; Business Features;
Lifestyles; Agricultural Reports; Top Business
Stories; Market Minutes; Sports; Headline Minutes;
but subject to modification at any time in BCI's
sole discretion.
"Platform" means CD Radio's digital audio radio
delivery system, consisting of the appropriate
digital satellite delivery technology and equipment
configured to provide Subscribers with digital
audio radio service via a consumer reception
device.
"Subscriber" means any person in the Territory
receiving any form of service from CD Radio via the
Platform.
"Territory" means the United States, its territories and possessions.
2. LIMITED LICENSE. Subject to the terms and conditions of this Agreement, BCI
hereby grants to CD Radio a non-transferable, non-exclusive license to transmit
Bloomberg News Radio to Subscribers via the Platform. CD Radio acknowledges and
agrees that the copyright, patent, trade secret, and all other intellectual
property rights of whatever nature that are now existing or may accrue in the
Service (and any promotional materials created and provided exclusively by BCI
related thereto) are and shall remain the property of BCI and nothing in this
Agreement shall be construed as transferring any aspects of such rights to CD
Radio or any third party other than as expressly set forth in this Agreement. No
other rights are granted to CD Radio and CD Radio is specifically prohibited
from copying, editing, modifying, transmitting, distributing, publicly
performing or publicly displaying the Service other than as expressly permitted
in this Agreement. All rights not expressly granted to CD Radio in this
Agreement are expressly reserved by BCI for its exclusive use.
<PAGE>
2
3. TERM. The term of this Agreement shall commence on the date hereof and shall
extend for five (5) years from the date the Platform begins offering service to
the public (the "Launch Date") and shall automatically renew for successive two
(2) year terms unless either party notifies the other in writing of its
intention not to renew no less than one hundred twenty (120) days before the
expiration of the initial term or any renewal term (collectively, the "Term").
Notwithstanding the foregoing, BCI shall have the right to terminate this
Agreement immediately in its entirety at any time without notice and without
incurring any liability if (a) BCI ceases to produce or offer the Service, or
(b) BCI does not receive any necessary licenses or approvals required in
connection with the performance of its obligations and duties under this
Agreement. CD Radio shall have the right to terminate this Agreement immediately
in its entirety at any time without notice and without incurring any liability
if (x) CD Radio permanently ceases to offer service via the Platform, (y) CD
Radio does not receive any necessary licenses or approvals required in
connection with the performance of its obligations and duties under this
Agreement, or (z) BCI, on other than a temporary basis, materially alters the
format of the Service from that defined herein without the prior consent of CD
Radio.
4. REMEDY. Either party may terminate this Agreement prior to the normal
expiration of the Term if: (a) the other party fails to cure (or provide
evidence, to the other party's satisfaction, that it is working diligently
towards curing) a material breach or violation within fifteen (15) days of
receipt of written notice from the other party; or (b) the representations and
warranties made by the other party in this Agreement are no longer true. Such
termination (in addition to the indemnifications provided hereunder) shall be CD
Radio's sole and exclusive remedy for any breach on the part of BCI.
5. DISTRIBUTION. From the Launch Date of the Service until the end of the Term,
CD Radio shall make the Service available to Subscribers on a full-time basis
(twenty-four hours a day, seven days per week) via the Platform. The Service
shall be offered via the Platform on a channel dedicated solely to Bloomberg
News Radio. CD Radio shall only distribute the Service in the United States of
America in accordance with all applicable local, state and federal laws at the
times and in the manner specified above, without modification, material delay,
or alteration other than advertising and promotional insertions as provided for
under this agreement. BCI will be responsible for delivery of the Service to CD
Radio's uplink facility. CD Radio shall be responsible for all other costs of
making the Service available to Subscribers. BCI shall make its feed available
to CD Radio for test purposes beginning September 1, 1999.
<PAGE>
3
6. COMMERCIAL TIME.*/
7. REPORTS AND RECORDS. Promptly following the last day of each standard
broadcast month in which the Service or segments thereof are scheduled for
broadcast by CD Radio and in no event more than fifteen (15) days following the
last day of such month, CD Radio will deliver to BCI in a form deemed acceptable
to BCI, a complete and accurate report and certificate verifying that the
Service was broadcast and cleared in accordance with this Agreement without any
material alteration, modification, delay or interruption.
8. PROMOTION.
(a) Without limiting any other related obligations contained in this
Agreement, from the date hereof and throughout the Term, CD Radio will
promote the Service to its Subscribers and prospective subscribers in a
manner consistent with its promotion of other similar services on the
Platform. Any marketing and promotional matter which features BCI alone
or in a group (including BCI) of not more than three (3) information
channels shall require the prior written approval of BCI, which consent
shall not be unreasonably withheld.
(b) **/
(c) Throughout the Term, BCI shall have the right to promote its
availability on the Platform through any of its media outlets. CD Radio
shall provide BCI with any promotional materials CD Radio has made
generally available to services on the Platform for such promotional
purposes. Any promotional material used by BCI to promote BCI's
availability on the Platform which is not provided by CD Radio shall be
subject to CD Radio's reasonable approval.
(d) No party shall make any public announcement regarding this Agreement or
any of the contents contained herein without the consent and cooperation
of the other party, except and unless required by applicable law.
9. ADDITIONAL SERVICE. CD Radio and BCI agree to work together in good faith to
develop a second full-time radio service for delivery over an additional
- --------
*/ The following confidential material has been omitted from this Form 10-Q and
has been filed separately with the Commission as provided pursuant to 17 CFR
ss. 200.83(c).
**/ The following confidential material has been omitted from this Form 10-Q and
has been filed separately with the Commission as provided pursuant to 17 CFR
ss. 200.83(c).
<PAGE>
4
channel on the Platform. CD Radio shall keep channel capacity available on the
Platform for the purpose of carrying the second service; provided, however, that
such service is ready (in a mutually agreeable form) for launch on the Platform
before April 1, 1999. The new service will be specifically created for CD
Radio's exclusive use and will be made available to CD Radio on terms and
conditions to be mutually agreed upon between the parties.
10. REPRESENTATIONS AND WARRANTIES.
(a) Power and Authority. Each party warrants to the other that it has the
power and authority to enter into this Agreement and to perform all of
its obligations hereunder.
(b) Quality and Nature of the Transmission. CD Radio warrants that its
transmissions of the Service shall be of a technical quality that is at
all times equal to the quality of other information services provided on
the Platform.
(c) Noninfringement. BCI warrants that it has the right to grant the license
to the Service granted in this Agreement and that CD Radio's
distribution of the Service in accordance with the terms and conditions
of this Agreement will not infringe the proprietary rights of any third
party or any right of personality or publicity, will not be libelous or
defamatory, and will not otherwise result in injury or damage to any
third party.
(d) No Conflict. Each party represents and warrants that neither the
execution and delivery of this Agreement, nor the performance of its
obligations hereunder, will violate any federal, state, or local law or
regulation to which it is subject.
(e) Performance Guarantee. CD Radio represents, warrants, and covenants that
it will provide the services required by this Agreement to all persons
in the Territory who become Subscribers during the term of this
Agreement.
11. INDEMNITY. CD Radio shall defend, indemnify, and hold BCI harmless from any
loss, expense, or claim that arises from an action brought against BCI by a
third party alleging facts based on CD Radio's breach of its warranties or
obligations under this Agreement. BCI shall defend, indemnify, and hold CD Radio
harmless from any loss, expense, or claim that arises from an action brought
against CD Radio by a third party alleging facts based on BCI's breach of its
warranties or obligations under this Agreement.
<PAGE>
5
12. PIRACY. CD Radio shall safeguard and protect the Service from theft, piracy,
or unauthorized access in a manner consistent with the protections CD Radio uses
to protect any other services carried on the Platform.
13. LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT:
(a) IN NO EVENT SHALL ANY PARTY BE LIABLE FOR ANY INCIDENTAL, SPECULATIVE OR
CONSEQUENTIAL DAMAGES, WHETHER FORESEEABLE OR NOT (INCLUDING, WITHOUT
LIMITATION, THOSE ARISING FROM NEGLIGENCE), OCCASIONED BY ANY FAILURE TO
PERFORM OR THE BREACH OF ANY OBLIGATION UNDER THIS AGREEMENT FOR ANY
CAUSE WHATSOEVER.
(b) NEITHER CD RADIO NOR BCI MAKE ANY WARRANTIES EXCEPT FOR THE WARRANTIES
SPECIFIED IN THIS AGREEMENT. CD RADIO AND BCI DISCLAIM ALL OTHER EXPRESS
WARRANTIES AND ALL IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PURPOSE OR USE.
14. ASSIGNMENT. The rights and obligations of CD Radio under this Agreement may
only be assigned or transferred without the consent of BCI in the event CD Radio
transfers its entire control and/or ownership of the Platform to a third party;
provided, however, that such third party will agree to accept and abide by all
of the terms and conditions of this Agreement. Notwithstanding the foregoing, CD
Radio may assign this Agreement to any entity which, as of the date of this
Agreement, controls, is controlled by, or is under common control with CD Radio.
15. MISCELLANEOUS. Neither party will be liable to the other under the terms of
this Agreement for any delays, preemptions or other failure to perform when such
delays, preemption or failures are due to any cause beyond the control of the
party whose performance is so affected. Neither CD Radio nor BCI shall disclose
to any third party (other than their respective employees and agents, in their
capacity as such) any confidential business information concerning the other or
any of the terms or conditions of this Agreement. This Agreement, and all
collateral matters relating thereto, will be governed and construed under the
laws of the State of New York (without regard to conflict of laws or choice of
law principles in the governing jurisdiction), applicable to agreements fully
made and performed therein, subject to applicable provisions of the
Communications Act of 1994, as amended, and the applicable rules, regulations
and orders of the FCC. In addition to the rights and remedies provided herein,
the parties may seek all rights and remedies available at law and/or equity.
Nothing contained herein will be deemed to create, and the parties do not intend
to create, any relationship as partners or joint venturers between CD
<PAGE>
6
Radio and BCI with respect to this Agreement. The invalidity or unenforceability
of any provision of this Agreement will not affect the validity of any other
provision of this Agreement, and in the event that any provisions are determined
to be invalid or otherwise illegal, this Agreement will remain in effect and
will be construed in accordance with its terms as if the invalid or illegal
provision were not contained herein. This Agreement constitutes the entire
agreement and understanding between the parties with regard to the subject
matter hereof, and supersedes all prior or contemporaneous oral or written
agreements and representations between the parties. Any amendment, modification
or alteration of this Agreement must be in writing and signed by the duly
authorized representatives of the parties. BCI will not be liable for, and CD
Radio will pay and hold harmless BCI from, any federal, state or local taxes,
including any fees payable to local franchising authorities which were based
upon revenues derived from operations of CD Radio. No term or condition of this
Agreement will be deemed waived, and no breach will be excused, unless such
waiver or excuse is in writing and signed by the party against whom such waiver
or excuse is claimed. The captions and headings in this Agreement are intended
only for conveniences, and will in no event be construed to define, limit or
describe the scope or intent of this Agreement, or of any provision of this
Agreement, nor in any way affect the interpretation of this Agreement. This
Agreement may be executed in several counterparts, each of which shall be deemed
as original and all such counterparts together shall constitute but one and the
same instrument. The parties also agree that this Agreement shall be binding
upon the facsimile transmission by each party of a signed signature page thereof
to the other party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of the ___
day of January 1998.
CD RADIO INC.: BLOOMBERG COMMUNICATIONS INC.:
- -------------------------- -------------------------------
By:_______________________ By:____________________________
(Authorized Signature) (Authorized Signature)
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 160,793,813
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<CURRENT-ASSETS> 161,608,369
<PP&E> 83,651,584
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108,203,918
0
<COMMON> 16,042
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