UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
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CD RADIO INC.
(Name of Issuer)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(Title of Class of Securities)
125127-10-0
(CUSIP Number)
-----------------------
LEONARD V. QUIGLEY
MITCHELL S. FISHMAN
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, N.Y. 10019-6064
TEL. NO.: (212) 373-3000
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
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NOVEMBER 20, 1997
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
statement because of Rule 13d-1(b)(3) or (4), check the following box [ ].
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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Page 1 of 9 Pages
<PAGE>
SCHEDULE 13D
CUSIP NO. 125127-10-0 Page 2 of 9 Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
David Margolese
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Canada
7 SOLE VOTING POWER
NUMBER OF 5,134,500 (includes 2,834,500 shares
pursuant to a voting trust agreement)
SHARES
8 SHARED VOTING POWER
BENEFICIALLY OWNED
0
BY EACH REPORTING
9 SOLE DISPOSITIVE POWER
PERSON
2,300,000
WITH
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,134,500
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
30.7%
14 TYPE OF REPORTING PERSON
IN
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Page 3 of 9 Pages
SCHEDULE 13D
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Item 1. Security and Issuer.
This Statement relates to the common stock, par value $.001
("Common Stock"), of CD Radio Inc., a Delaware corporation (the "Company"), the
principal executive offices of which are located at Sixth Floor, 2175 K Street,
N.W., Washington, D.C. 20037.
Item 2. Identity and Background.
(a), (b), (c) and (f). This Statement on Schedule 13D is being
filed by David Margolese. His business address is Ninth Floor, 730 Fifth Avenue,
New York, NY 10019. His present principal occupation or employment is as
Chairman and Chief Executive Officer of CD Radio Inc. Mr. Margolese is a citizen
of Canada. (d) and (e). During the last five years, Mr. Margolese has neither
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) nor been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction where as a result of such
proceeding he was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Pursuant to a Voting Trust Agreement (defined in Item 6),
dated as of August 26, 1997, entered into by Darlene Friedland, as grantor,
David Margolese, as trustee, and the Company, Mr. Margolese has the power to
vote in his discretion all
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Page 4 of 9 Pages
shares of Common Stock owned or hereafter acquired by Darlene Friedland and
certain of her affiliates (currently 2,834,500 shares) for a period of five
years commencing on November 20, 1997. No consideration was paid in connection
with the execution of the Voting Trust Agreement.
Item 4. Purpose of Transaction.
In order to assist the Company to complete certain financing
transactions, consisting of (i) an offer to exchange shares of the Company's 10
1/2% Series C Convertible Preferred Stock for shares of the Company's
outstanding 5% Delayed Convertible Preferred Stock, (ii) an underwritten public
offering of 2,440,000 shares of the Company's Common Stock in the United States
and Canada and 610,000 shares outside the United States and Canada and (iii) an
underwritten public offering of units consisting of the Company's 15% Senior
Secured Discount Notes due 2007 ("Senior Notes") and warrants to purchase
additional Senior Notes, all of which were completed in November 1997, Mr.
Margolese entered into a voting trust agreement with Darlene Friedland, a
stockholder of the Company. See Item 6 below for a description of the terms of
the Voting Trust Agreement.
Other than as described in the Voting Trust Agreement, Mr.
Margolese does not have any present plans or proposals which relate to or would
result in: (a) the acquisition by any person of additional securities of the
Company, or the disposition of securities of the Company; (b) an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or any of its subsidiaries; (c) a sale or transfer of a
material amount of assets of the Company or of any of its subsidiaries; (d) any
change in the present board of directors or management of the Company, including
any plans or proposals to change the number
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Page 5 of 9 Pages
or term of directors or to fill any existing vacancies on the board; (e) any
material change in the present capitalization or dividend policy of the Company;
(f) any other material changes in the Company's business or corporate structure;
(g) changes in the Company's charter, bylaws or instruments corresponding
thereto or other actions that may impede the acquisition of control of the
Company by any person; (h) causing a class of securities of the Company to be
delisted from a national securities exchange or to cease to be authorized to be
quoted in an inter-dealer quotation system of a registered national securities
association; (i) a class of equity securities of the Company becoming eligible
for termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934; or (j) any action similar to any of those enumerated
above.
Item 5. Interest in Securities of the Issuer.
(a) through (c). As of December 31, 1997, Mr. Margolese
beneficially owned (within the meaning of the rules and regulations of the
Securities and Exchange Commission) 5,134,500 shares of Common Stock,
representing approximately 30.7% of the then outstanding shares of Common Stock.
This aggregate number includes 700,000 shares issuable pursuant to stock options
that are exercisable within 60 days. Pursuant to the Voting Trust Agreement
(defined in Item 6), Mr. Margolese has the power to vote in his discretion all
shares of Common Stock owned or hereafter acquired by Darlene Friedland and
certain of her affiliates for a period of five years commencing on November 20,
1997. Currently, 2,834,500 shares of Common Stock are subject to the Voting
Trust Agreement.
Mr. Margolese has sole power to vote or to direct the vote of
5,134,500 shares of Common Stock of the Company. He has sole power to dispose
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Page 6 of 9 Pages
or to direct the disposition of 2,300,000 shares of Common Stock of the Company.
Darlene Friedland and certain of her affiliates retain sole power to dispose or
to direct the disposition of the 2,834,500 shares currently subject to the
Voting Trust Agreement. Except as set forth above, Mr. Margolese does not
beneficially own any shares of Common Stock and has not effected any transaction
in shares of Common Stock during the preceding 60 days.
(d). Darlene Friedland and certain of her affiliates have the
right to receive dividends and distributions of the shares subject to the Voting
Trust Agreement and the right to direct the trustee to sell, assign, transfer,
encumber or grant any option therein. Other than as described in the Voting
Trust Agreement, to the best knowledge of Mr. Margolese, no other person has the
right to receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the shares of Common Stock owned thereby.
(e). Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
David Margolese is a party to a voting trust agreement dated
August 26, 1997 (the "Voting Trust Agreement") by and among Darlene Friedland,
as grantor, Mr. Margolese, as the voting trustee thereunder, and the Company.
The Voting Trust Agreement provides for the establishment of a
trust (the "Trust") into which (i) there have been deposited all of the shares
of Common Stock owned by Mrs. Friedland on August 26, 1997 and (ii) there shall
be deposited any shares of Common Stock acquired by Mrs. Friedland, her spouse
Robert Friedland, any member of either of their immediate families or any entity
directly or
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Page 7 of 9 Pages
indirectly controlled by Mrs. Friedland, her spouse or any member of their
immediate families (the "Friedland Affiliates") between the date shares are
initially deposited and the termination of the Trust. The voting trust will
terminate on the fifth anniversary of the initial deposit of shares into the
Trust.
The Voting Trust Agreement does not restrict the ability of
Mrs. Friedland or any of the Friedland Affiliates to sell, assign, transfer or
pledge any of the shares deposited into the Trust, nor does it prohibit Mrs.
Friedland or the Friedland Affiliates from purchasing additional shares of
Common Stock, provided those shares become subject to the Trust, as described
above.
Under the Voting Trust Agreement, the trustee has the power to
vote shares held in the Trust in relation to any matter upon which the holders
of such stock would have a right to vote, including without limitation the
election of directors. For so long as David Margolese remains trustee of the
Trust, he may exercise such voting rights in his discretion. Any successor
trustee or trustees of the Trust must vote as follows: (i) on the election of
directors, the trustee(s) must vote the entire number of shares held by the
Trust, with the number of shares voted for each director (or nominee for
director) determined by multiplying the total number of votes held by the Trust
by a fraction, the numerator of which is the number of votes cast for such
person by other stockholders of the Company and the denominator of which is the
sum of the total number of votes represented by all shares casting any votes in
the election of directors; (ii) if the matter under Delaware law or the
Certificate of Incorporation or the Bylaws of the Company requires at least an
absolute majority of all outstanding shares of Common Stock of the Company in
order to be approved, the trustee(s) must vote all of the shares in the Trust in
the same manner as the majority
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Page 8 of 9 Pages
of all votes that are cast for or against the matter by all other stockholders
of the Company; and (iii) on all other matters, including without limitation any
amendment of the Voting Trust Agreement for which a stockholder vote is
required, the trustee(s) must vote all of the shares in the Trust for or against
the matter in the same manner as all votes that are cast for or against the
matter by all other stockholders of the Company.
The Voting Trust Agreement may not be amended without the
prior written consent of the Company, acting by unanimous vote of the Board of
Directors, and approval of the Company's stockholders, acting by the affirmative
vote of two-thirds of the total voting power of the Company, except in certain
limited circumstances where amendments to the Voting Trust Agreement are
required to comply with applicable law.
Item 7. Material to be Filed as Exhibits.
1. Voting Trust Agreement, dated as of August 26, 1997, by and
between the Company, Darlene Friedland and David Margolese.
<PAGE>
Page 9 of 9 Pages
SIGNATURES
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: March 9, 1998
/s/ David Margolese
-------------------
David Margolese
EXHIBIT 1
VOTING TRUST AGREEMENT
AGREEMENT, made this 26th day of August, 1997, among CD RADIO
INC., a Delaware corporation (the "Company"), DARLENE FRIEDLAND ("DF"), a
stockholder of the Company and DAVID MARGOLESE (hereinafter called the
"Trustee").
RECITALS
WHEREAS, the Company intends to make through Merrill Lynch &
Co. (i) an offer registered under the Securities Act of 1933, as amended, to
exchange shares of a new class of its preferred stock for all outstanding shares
of its 5% Delayed Convertible Preferred Stock, par value $.001 per share (the
"Exchange Offer"), (ii) an underwritten public offering of its common stock, par
value $.001 per share ("Common Stock") (the "Stock Offering"), and (iii) an
underwritten public offering of senior debt securities of the Company (the "Debt
Offering", and together with the Exchange Offer and the Stock Offering, the
"Offers); and
WHEREAS, DF owns 2,834,500 shares of Common Stock (the
"Current Shares") and ROBERT M. FRIEDLAND ("RMF") is the husband of DF; and
<PAGE>
WHEREAS, in order to assist the Company in marketing and
completing the Offerings and for other consideration, DF has agreed to enter
into this Agreement and to deposit the Friedland Securities (as defined below)
into the trust created hereby; and
WHEREAS, DF agrees to deposit, or cause the deposit into the
trust created hereby of the Current Shares and any other shares of capital stock
of the Company ("Other Shares") that may hereafter be acquired or beneficially
owned by any of RMF, DF, members of RMF's or DF's immediate family or any entity
in which any of RMF, DF or members of RMF's or DF's immediate family have,
directly or indirectly, a controlling interest or, on a best efforts basis, more
than 25% of such entity's equity or debt (the "Friedland Affiliates", acting as
a group or severally as the context requires), including, without limitation,
any shares of capital stock of the Company that may be issued upon exercise of
any rights, warrants or options to purchase, or other securities convertible
into, Common Stock (collectively with the Current Shares and the Other Shares,
the "Friedland Securities"); and
WHEREAS, in order to induce the Trustee to act hereunder, the
Company has agreed to indemnify the Trustee for his services hereunder; and
WHEREAS, in the interests of all the stockholders of the
Company, the parties hereto are desirous of creating a trust;
2
<PAGE>
NOW, THEREFORE, the parties hereby agree as follows:
1. The Friedland Affiliates shall forthwith, and from time to
time in the future if any of the Friedland Affiliates acquires additional
Friedland Securities, endorse in blank and assign and deliver to the Trustee all
certificates for the Friedland Securities and shall do all things necessary for
the transfer of the Friedland Securities to the Trustee on the books of the
Company. The Trustee shall issue and deliver in exchange therefor voting trust
certificates for the Friedland Securities so transferred to the Trustee in
substantially the form attached hereto as Appendix I.
2. (a) The Trustee shall hold the Friedland Securities so
transferred to him in trust hereunder for the benefit of the Friedland
Affiliates, under the terms and conditions set forth herein.
(b) Notwithstanding any provision hereof, each of the
Friedland Affiliates shall have the right to sell, assign, transfer or pledge
any or all of the Friedland Securities to unaffiliated third parties and the
Trustee shall use his reasonable efforts to cause any Friedland Securities so
sold, assigned, transferred or hypothecated to be transferred promptly to the
purchaser, assignee, transferee or pledgee thereof against delivery of the
voting trust certificates representing the Friedland Securities; PROVIDED in the
case of a pledge that the pledgee shall not have any right to vote the Friedland
Securities. Friedland Securities sold, assigned, transferred or hypothecated to
an affiliate of any of the Friedland Affiliates shall
3
<PAGE>
remain in trust hereunder subject to the terms of this Agreement. Friedland
Securities sold or transferred to third parties not affiliated with the
Friedland Affiliates shall be released from the trust upon such sale or
transfer. A third party shall be deemed "affiliated" for purposes of this
Section 2(b) if such third party (i) is controlled by, controls or is under
common control with RMF, DF or a member of the immediate family of RMF or DF,
(ii) is retained by RMF, DF or a member of the immediate family of RMF or DF as
consultant generally operating at the direction of such person, (iii) is
employed, directly or indirectly, by RMF, DF, a member of the immediate family
of RMF or DF or a person controlled by, controlling or under common control with
RMF or DF, or (iv) has made a substantial business investment of any nature in
any entity with RMF, DF or a member of the immediate family of RMF or DF. The
term "substantial business investment" refers to investments by a third party
comprising more than 5% of the equity or debt of a company, partnership or joint
venture (other than the Company) in which RMF, DF or an affiliate of RMF or DF
has an investment of at least 5%.
3. The Trustee shall surrender to the proper officers of the
Company for cancellation all certificates of stock which shall be assigned and
delivered to him as hereinbefore provided, and in their stead shall procure new
certificates to be issued to him as Trustee under this Agreement.
4. (a) The Trustee shall have only the powers set forth in
this Agreement.
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(b) With respect to all Friedland Securities held in trust
by the Trustee hereunder, the Friedland Affiliates shall severally retain the
entire economic and beneficial ownership rights therein, including without
limitation the right to receive dividends and distributions on the Friedland
Securities and the right to direct the Trustee in any order whatsoever to sell,
assign, transfer, encumber or grant any option therein to or in favor of any
person other than RMF, DF or another Friedland Affiliate or agree to do any such
thing, except that the Trustee shall have the exclusive and absolute right in
respect of such Friedland Securities to vote (in person, by proxy, by written
consent or otherwise) the Friedland Securities at all times during the term of
this Agreement, including without limitation the right to vote at any election
of directors and in favor of or in opposition to any resolution, any
dissolution, liquidation, merger or consolidation of the Company, any sale of
all or substantially all the Company's assets, any issuance or authorization of
securities, or any action of any character whatsoever which may be presented at
any meeting or require the consent of stockholders of the Company. David
Margolese as Trustee shall vote the Friedland Securities in his discretion. In
the case of his incapacity, the successor Trustee or Trustees shall at all times
vote in respect of any action as follows: (i) if the matter concerned is the
election of directors, then the Trustees shall vote the entire number of shares
held by the trust created hereunder for each director (or nominee for director)
by multiplying the total number of votes held by the trust by a fraction, the
numerator of which is the number of votes cast in respect of shares of the
Company other than Friedland Securities (the "Nonaffiliated Votes") for such
person and the denominator of which is the sum of the total number of votes
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represented by all shares casting any votes in the election of directors; (ii)
where the matter under Delaware law or the Certificate of Incorporation or the
Bylaws of the Company requires at least an absolute majority of a all
outstanding shares of common stock of the Company in order to be effected, then
the Trustees shall vote all of the Friedland Securities in this manner as the
majority of all Nonaffiliated Votes are cast for or against the matter; and
(iii) on all other matters, including without limitation any amendment of this
Agreement for which a stockholders vote is required under Section 9 hereof, the
Trustees shall at all times vote all of the Friedland Securities for or against
the matter in the same manner in favor of or in opposition to such matter as
Nonaffiliated Votes are cast for or against the matter. If any calculation of
votes under the preceding sentence would require a fractional vote, the Trustees
shall vote the next lower number of whole shares. Notwithstanding the foregoing,
the Trustee or the Trustees shall vote the Friedland Securities against any
proposal to elect RMF, DF, any other Friedland Affiliate or any other person
affiliated with RMF or DF (as defined in Section 2(b) above) as an officer or
director of the Company. The Trustee shall use all reasonable commercial efforts
to ensure, with respect to the Friedland Securities held in trust hereunder,
that all of the Friedland Securities are counted as being present for the
purposes of any quorum required for stockholder action of the Company and to
vote as set forth above.
(c) The Trustee may vote with respect to all the Friedland
Securities held hereunder in person or by such person or persons as it may from
time
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to time select as their proxy; PROVIDED that the Trustee shall at all times do
so in conformity with the provisions of Section 4(b) hereof.
(d) The Trustee shall have no authority to sell or
otherwise dispose of or to pledge, encumber or hypothecate, any of the stock
deposited pursuant to the provisions of this Agreement, unless directed to do so
by the Friedland Affiliates as provided in Section 2(b) above.
5. To the fullest extent permitted by law, the Trustee shall
not be liable for any vote cast, or consent given by him, or for any other
action hereunder taken or omitted by him hereunder, in good faith, or in the
absence of gross negligence or willful misconduct. To the fullest extent
permitted by law, the Trustee shall not be liable in acting on any notice,
request, consent, certificate, instruction, or other paper or document or
signature reasonably believed to be genuine and to have been signed by the
proper party. The Trustee may consult with legal counsel (reasonably competent
for the purpose) and, to the fullest extent permitted by law, any act or
omission undertaken by the Trustee in good faith in accordance with the opinion
of such legal counsel shall not result in any liability of the Trustee.
6. The Trustee shall collect and receive all dividends that
may accrue upon the shares of stock subject to this trust, and shall distribute
the same to the Friedland Affiliates in accordance with their respective
ownership interests, except
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that dividends payable in capital stock of the Company shall be held in trust as
additional Friedland Securities hereunder.
7. In the event of any Trustee dying or resigning or refusing
or becoming unable to act (any of which is deemed incapacity), a successor
Trustee, which shall be a bank incorporated under the laws of Canada or any of
the Provinces thereof having a capital and surplus of at least $500,000,000 CDN,
shall be appointed by the Board of Directors of the Company, and any Trustee so
appointed shall thereupon be vested with all the duties, powers, and authority
of a Trustee hereunder as if originally named herein. No successor Trustee shall
be liable for actions or omissions of any other Trustee.
8. This Agreement and the trust created herein shall become
effective on the closing of the first of the Offers and shall terminate upon the
fifth anniversary of the closing date. This Agreement is subject to any required
regulatory approvals. Until termination of this Agreement and the trust created
herein as provided above, such trust will be irrevocable. Upon the termination
of this Agreement, the Trustee shall assign and transfer to the Friedland
Affiliates in accordance with their respective ownership interests all the
Friedland Securities remaining in trust hereunder.
9. The Company and its stockholders are hereby expressly made
third party beneficiaries of this Agreement and, accordingly, to the fullest
extent
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permitted by law, this Agreement may not be amended without the prior written
consent of the Company, acting by unanimous vote of its Board of Directors, and
approval of the Company's stockholders acting by the affirmative vote of
two-thirds of the total voting power of the capital stock of the Company
generally entitled to vote on matters submitted to a stockholder vote; PROVIDED,
HOWEVER, that the parties hereto may enter into any amendment of this Agreement,
without regard to this Section 9, and the parties agree to enter into any such
amendment, if such amendment is in the opinion of legal counsel to the Company
and DF necessary or appropriate to maintain technical compliance of the terms of
this agreement with the laws of the State of Delaware.
10. The Trustee is expressly authorized to incur and pay such
reasonable expenses and charges, to employ and pay such agents, attorneys and
counsel, and to incur and pay such other charges and expenses as the Trustee may
deem reasonably necessary and proper for administering this Agreement. All such
charges and expenses shall be paid by the Company. The Company hereby agrees to
indemnify any Trustee serving hereunder against any loss or liability, including
attorneys' fees, incurred in serving as voting trustee hereunder, to the fullest
extent permitted by law.
11. (a) Except as provided in Section 8 above, all of the
covenants and agreements contained in this Agreement shall be binding upon, and
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inure to the benefit of, the respective parties and their successors, assigns,
heirs, executors, administrators and other legal representatives, as the case
may be.
(b) This Agreement, and the rights of the parties hereto,
shall be governed by and construed in accordance with the laws of the State of
Delaware.
(c) This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
shall constitute one and the same instrument.
(d) If any provision of this Agreement shall be declared
void or unenforceable by any court or administrative board of competent
jurisdiction, such provision shall be deemed to have been severed from the
remainder of the Agreement and this Agreement shall continue in all respects to
be valid and enforceable. Each of the parties hereto shall take any and all
actions necessary for the enforceability of this Agreement under Delaware Law,
including without limitation any necessary filings or actions required by
Section 218 of the General Corporation Law of Delaware.
(e) Whenever the context of this Agreement shall so
require, the use of the singular number shall include the plural and the use of
the gender shall include all genders.
10
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IN WITNESS WHEREOF, the Company and DF have hereunto
set their hands and seals, and the Trustee, in token of his acceptance of the
trust hereby created, has hereunto set his hand and seal.
CD RADIO INC.
By: /s/ David Margolese
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Chairman and Chief Executive Officer
/s/ David Margolese
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David Margolese
/s/ Darlene Friedland
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Darlene Friedland
- --------------------------------------------------------------------------------
CONSENT AND AGREEMENT
I hereby consent to the creation of the voting trust provided for in
the foregoing agreement, and I hereby agree to take all action necessary so as
to effectuate the provisions thereof affecting the Friedland Affiliates and the
Friedland Securities.
/s/ Robert M. Friedland
-----------------------
Robert M. Friedland
11
