CD RADIO INC, DEF 14A, 1998-03-25

CD RADIO INC
DEF 14A, 1998-03-25
RADIO BROADCASTING STATIONS

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SECURITIES AND EXCHANGE COMMISSION
------------------------
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant [x]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement

[ ] Confidential, For Use of Commission Only (as permitted by Rule
14a-6(e)(2))

[x] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to 'SS' 240.14a-11(c) or 'SS' 240.14a-12

CD RADIO INC.
(NAME OF REGISTRANT SPECIFIED IN ITS CHARTER)

(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT)

------------------------

Payment of Filing Fee:
(Check the appropriate box)

[x] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.

1) Title of each class of securities to which transaction applies:

______________________________________________________________________

2) Aggregate number of securities to which transaction applies:

______________________________________________________________________

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:

______________________________________________________________________

4) Proposed maximum aggregate value of transaction:

______________________________________________________________________

5) Total fee paid:

______________________________________________________________________

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.

1) Amount Previously Paid: ________________________

2) Form, Schedule or Registration Statement No.: ________________________

3) Filing Party: ________________________

4) Date Filed: ________________________

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CD RADIO INC.
SIXTH FLOOR, 2175 K STREET, N.W.
WASHINGTON, D.C. 20037

------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 20, 1998
------------------------

To Our Stockholders:

The Annual Meeting of the Stockholders of CD Radio Inc., a Delaware
corporation ('CD Radio' or the 'Company'), will be held at The Grand Hyatt
Hotel, Ballroom E, Park Avenue at Grand Central, New York, New York 10017 on
Monday, April 20, 1998 at 10:30 a.m., to consider and vote on the following
matters described in this notice and the accompanying Proxy Statement:

1. To elect directors to hold office until the next Annual Meeting of
the Stockholders.

2. To approve amendments to the Company's 1994 Stock Option Plan and
1994 Directors' Nonqualified Stock Option Plan pursuant to which the
aggregate number of shares of Common Stock reserved for issuance under such
plans will be increased by 1,500,000 shares.

3. To ratify the appointment of Coopers & Lybrand LLP as independent
accountants for the Company for the fiscal year ended December 31, 1998.

4. To transact such other business as may properly come before the
meeting or any adjournments thereof.

The Board of Directors has fixed the close of business on March 2, 1998 as
the record date for determination of stockholders entitled to vote at the Annual
Meeting, or any adjournments thereof, and only record holders of Common Stock at
the close of business on that day will be entitled to vote.

In accordance with Delaware law, a list of CD Radio stockholders entitled
to vote at the Annual Meeting will be available for examination at the offices
of the Company, Sixth Floor, 2175 K Street, N.W., Washington, D.C. 20037 and at
the offices of Lawrence F. Gilberti, Fischbein Badillo Wagner Harding, 909 Third
Avenue, New York, New York 10022 for ten days prior to the meeting, between the
hours of 9:00 a.m. and 5:00 p.m., and at the meeting.

TO ASSURE REPRESENTATION AT THE ANNUAL MEETING, STOCKHOLDERS ARE URGED TO
SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE
POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. Any stockholder attending
the Annual Meeting may vote in person even if he or she previously returned a
proxy.

If you do plan to attend the Annual Meeting in person, we would appreciate
your response by indicating at the appropriate place on the proxy card enclosed.

By Order of the Board of Directors,

/s/ LAWRENCE F. GILBERTI

LAWRENCE F. GILBERTI
Secretary

New York, New York
March 25, 1998

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CD RADIO INC.
SIXTH FLOOR, 2175 K STREET, N.W.
WASHINGTON, D.C. 20037

------------------------------------------
PROXY STATEMENT
------------------------------------------

ANNUAL MEETING OF STOCKHOLDERS
MEETING DATE: APRIL 20, 1998

This Proxy Statement is being sent on or about March 25, 1998 in connection
with the solicitation of proxies by the Board of Directors of CD Radio Inc., a
Delaware corporation ('CD Radio' or the 'Company'). The proxies are for use at
the Annual Meeting of the Stockholders of the Company (the 'Annual Meeting'),
which will be held at The Grand Hyatt Hotel, Ballroom E, Park Avenue at Grand
Central, New York, New York 10017 on Monday, April 20, 1998 at 10:30 a.m., and
at any adjournment thereof (the 'Annual Meeting'). The record date for the
Annual Meeting is the close of business on March 2, 1998 (the 'Record Date').
Only holders of record of the Company's Common Stock, $0.001 par value per share
(the 'Common Stock'), on the Record Date are entitled to notice of the Annual
Meeting and to vote at the Annual Meeting and at any adjournment thereof.

A proxy card is enclosed. Whether or not you plan to attend the Annual
Meeting in person, please date, sign and return the enclosed proxy card as
promptly as possible, in the postage-prepaid envelope provided, to ensure that
your shares will be voted at the Annual Meeting. Any stockholder who returns a
proxy in such form has the power to revoke it at any time prior to its effective
use by filing an instrument revoking it or a duly executed proxy bearing a later
date with the Secretary of the Company or by attending the Annual Meeting and
voting in person. Unless contrary instructions are given, any such proxy, if not
revoked, will be voted at the Annual Meeting for (i) the nominees for election
as directors as set forth in this Proxy Statement, (ii) the proposal to approve
the amendments to the Company's 1994 Stock Option Plan (the '1994 Plan') and
1994 Directors' Nonqualified Stock Option Plan (the 'Directors' Plan'), pursuant
to which the Company will reserve a total of 1,500,000 shares of Common Stock
for issuance under such plans, (iii) the ratification of the appointment of
Coopers & Lybrand LLP as independent accountants for the Company and (iv) with
regard to all other matters which may properly come before the Annual Meeting,
for or against such matters as recommended by the Board of Directors, in its
discretion.

An Annual Report to the Stockholders is being distributed concurrently to
stockholders of record as of the Record Date. The date of this Proxy Statement
is the approximate date on which the Proxy Statement and form of proxy were
first sent or given to stockholders.

VOTING SECURITIES AND VOTES REQUIRED

At the Record Date, there were 16,048,691 shares of Common Stock
outstanding. The presence, either in person or by proxy, of persons entitled to
vote not less than one-third of the Company's outstanding Common Stock is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. Abstentions and broker non-votes are counted for purposes of
determining a quorum, but are not considered as having voted for purposes of
determining the outcome of a vote. No other voting securities of the Company
were outstanding at the Record Date. Holders of Common Stock have one vote for
each share on any matter that may be presented for consideration and action by
the stockholders at the Annual Meeting. Each director will be elected by a
plurality of the votes cast by the stockholders present in person or represented
by proxy at the Annual Meeting. The amendments to the 1994 Plan and Directors'
Plan and the ratification of the appointment of the independent accountants must
be approved by a majority vote of the stockholders present in person or
represented by proxy at the Annual Meeting.

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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of December 31, 1997 of (i) each
stockholder known by the Company to be the beneficial owner of more than 5% of
the outstanding Common Stock, (ii) each director of the Company, (iii) each
executive officer of the Company and (iv) all directors and officers as a group.
Except as otherwise indicated, the Company believes that the beneficial owners
of the Common Stock listed below, based on information furnished by such owners,
have sole investment and voting power with respect to such shares, subject to
community property laws where applicable.

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF TOTAL
NAMES AND ADDRESS OF OF COMMON STOCK OF COMMON STOCK
BENEFICIAL OWNER OF COMMON STOCK(1) BENEFICIALLY OWNED BENEFICIALLY OWNED(2)
- ---------------------------------------------------------------------- ------------------ ----------------------
<S> <C> <C>
Directors, Executive Officers and 5% Stockholders
David Margolese(3) ................................................... 5,134,500 30.7%
c/o CD Radio Inc.
Sixth Floor
2175 K Street, N.W.
Washington, D.C. 20037
Darlene Friedland(4) ................................................. 2,834,500 17.7
1210 Wolseley Road
Point Piper 2027
Sydney, Australia
Everest Capital International, Ltd.(5)(6) ............................ 2,338,706 12.7
c/o Morgan Stanley & Co. Incorporated
One Pierpont Plaza
10th Floor
Brooklyn, New York 11201
Continental Casualty Company(7) ...................................... 2,292,367 12.5
c/o Chase Manhattan Bank
4 New York Plaza
New York, New York 10004
Loral Space & Communications Ltd.(8) ................................. 1,905,488 11.9
600 Third Avenue
New York, New York 10016
BankAmerica Corporation(9) ........................................... 1,881,000 11.7
555 California Street, Suite 2600
San Francisco, CA 94104
Mackay-Shields Financial Corporation(10) ............................. 1,229,939 7.1
9 West 57th Street
New York, NY 10019
Jess M. Ravich(11) ................................................... 966,944 5.7
c/o Libra Investments, Ltd.
11766 Wilshire Boulevard
Suite 870
Los Angeles, CA 90025
Everest Capital Fund, L.P.(6)(12) .................................... 878,217 5.2
c/o Morgan Stanley & Co. Incorporated
One Pierpont Plaza
10th Floor
Brooklyn, New York 11201
Robert D. Briskman(13)................................................ 192,500 1.2
Jack Z. Rubinstein(14)................................................ 227,000 1.4
Peter K. Pitsch(15)................................................... 70,000 *
Lawrence F. Gilberti(16).............................................. 35,000 *
Ralph V. Whitworth(17)................................................ 52,800 *
Joseph Capobianco(18)................................................. 0 *
Keno V. Thomas(19).................................................... 0 *
</TABLE>

(table continued on next page)

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(table continued from previous page)

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* Less than 1%

(1) This table is based upon information supplied by directors, officers and
principal stockholders. Percentage of ownership is based on 16,048,691
shares of Common Stock outstanding on December 31, 1997. Unless otherwise
indicated, the address of the beneficial owner is the Company.

(2) Determined in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, as amended. Under this rule, a person is deemed to be the
beneficial owner of securities that can be acquired by such person within
60 days from the date of determination upon the exercise of options, and
each beneficial owner's percentage ownership is determined by assuming that
options that are held by such person (but not those held by any other
person) and that are exercisable within 60 days from the date of
determination have been exercised. Unless otherwise noted, the Company
believes that all persons named in the table have sole voting and
investment power with respect to all shares of Common Stock beneficially
owned by them.

(3) Includes 700,000 shares issuable pursuant to stock options that are
exercisable within 60 days. Pursuant to a voting trust agreement ('Voting
Trust Agreement') 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 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. See
'Security Ownership of Certain Beneficial Ownership and
Management -- Voting Trust Agreement.'

(4) Pursuant to the Voting Trust Agreement, David 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 (currently
2,834,500 shares) for a period of five years commencing on November 20,
1997. See 'Security Ownership of Certain Beneficial Ownership and
Management -- Voting Trust Agreement.'

(5) Represents shares of Common Stock issuable upon conversion of 420,967
shares of 10 1/2% Series C Convertible Preferred Stock.

(6) Does not include shares of Common Stock issuable pursuant to warrants to
purchase 1,740,000 shares of Common Stock at a purchase price of $50.00 per
share. The warrants are exercisable from June 15, 1998 through and
including June 15, 2005.

(7) Represents shares of Common Stock issuable upon conversion of 412,626
shares of 10 1/2% Series C Convertible Preferred Stock.

(8) On August 5, 1997, the Company completed the sale of 1,905,488 shares to
Loral Space & Communications Ltd., subject to demand registration rights
after the Company's two satellites are launched and operational.

(9) Shares are owned by a group including the following: The Robertson Stephens
Orphan Fund (which has shared voting and shared dispositive power over
1,069,200 shares), The Robertson Stephens Orphan Offshore Fund (with shared
voting and shared dispositive power over 226,800 shares), The Robertson
Stephens Global Low-Priced Stock Fund (with shared voting and shared
dispositive power over 60,000 shares), The Contrarian Fund (with shared
voting and shared dispositive power over 525,000 shares), Robertson,
Stephens & Company Investment Management, LP (with shared voting and shared
dispositive power over 1,881,000 shares), Bayview Investors, LTD (with
shared voting and shared dispositive power over 1,069,200 shares), Bayview
Holdings, Inc. (with shared voting and shared dispositive power over
1,881,000 shares), BankAmerica Corporation (with shared voting and shared
dispositive power over 1,881,000 shares), Robertson Stephens Investment
Management Co. (with shared voting and shared dispositive power over
1,881,000 shares), and Robertson, Stephens & Company Private Equity Group,
LLC (with shared voting and shared dispositive power over 1,069,200
shares). The source of the information in this footnote is the Schedule 13D
dated December 1, 1997 filed by BankAmerica Corporation, parent of
Robertson Stephens Investment Management Co.

(10) Represents shares of Common Stock issuable upon conversion of 221,389
shares of 10 1/2% Series C Convertible Preferred Stock.

(11) Represents 114,378 shares of 10 1/2% Series C Convertible Preferred Stock
beneficially owned by Mr. Ravich and 59,672 shares of 10 1/2% Series C
Convertible Preferred Stock beneficially owned by Libra Investments, Ltd.
('Libra'). Mr. Ravich is the Chairman, Chief Executive Officer and
controlling stockholder of Libra. Mr. Ravich disclaims beneficial ownership
of the shares owned by Libra except to the extent of his ownership interest
in Libra. Amount does not include warrants to purchase 60,000 shares of
Common Stock at a purchase price of $50.00 per share held by The Ravich
Revocable Trust of 1989, of which Mr. Ravich is a trustee. The warrants are
exercisable from June 15, 1998 through and including June 15, 2005.

(12) Represents shares of Common Stock issuable upon conversion of 158,079
shares of 10 1/2% Series C Convertible Preferred Stock.

(13) Includes 192,500 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days. Does not include 57,500 shares issuable
pursuant to stock options not exercisable within 60 days (all of which
shares are subject to replenishment by the Company).

(14) Includes 195,000 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days and 7,700 shares of Common Stock held in trust
for his daughters. Excludes 20,000 shares held by DICA Partners, LP of
which Mr. Rubinstein is the General Partner.

(15) Includes 60,000 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days.

(16) Represents 35,000 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days.

(footnotes continued on next page)

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(footnotes continued from previous page)

(17) Represents 52,800 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days.

(18) Does not include 75,000 shares issuable pursuant to stock options that are
not exercisable within 60 days (of which 25,000 are subject to
replenishment by the Company).

(19) Does not include 100,000 shares issuable pursuant to stock options that are
not exercisable within 60 days (of which 50,000 shares are subject to
replenishment by the Company).

(20) Represents 59,000 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days. Does not include 166,000 shares of Common Stock
issuable pursuant to stock options not exercisable within 60 days (of which
50,000 shares are subject to replenishment by the Company).

(21) Includes 1,294,300 shares of Common Stock issuable pursuant to stock option
exercisable within 60 days. Does not include 398,500 shares issuable
pursuant to options that are not exercisable within 60 days (of which
182,500 shares are subject to replenishment by the Company).

VOTING TRUST AGREEMENT

The Company is a party to a voting trust agreement dated August 26, 1997
(the 'Voting Trust Agreement') by and among Darlene Friedland, as grantor, and
David Margolese, as the voting trustee thereunder, and the Company. The
following summary description of the Voting Trust Agreement does not purport to
be complete and is qualified in its entirety by reference to the complete text
thereof.

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 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 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.

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ELECTION OF DIRECTORS

All directors hold office until the next Annual Meeting of the Stockholders
and the election and qualification of their successors.

At the Annual Meeting, the stockholders will elect directors to hold
office, subject to the provisions of the Company's By-laws, until the next
Annual Meeting of the Stockholders and until their successors shall have been
duly elected and qualified. Unless contrary instructions are given, the shares
represented by the enclosed proxy will be voted for the election of the nominees
set forth below. Proxies cannot be voted for a greater number of directors than
the number of nominees named.

The nominees set forth below have consented to being named in this proxy
statement and to serve if elected. However, if any nominee at the time of his
election is unable or unwilling to serve or is otherwise unavailable for
election, and as a result another nominee is designated by the Board of
Directors, the persons named in the enclosed proxy, or their substitutes, will
have discretion and authority to vote or refrain from voting for such nominee in
accordance with their judgment.

NOMINEES

The nominees for election as director, together with certain information
about them, are set forth below.

<TABLE>
<CAPTION>
NAME POSITION AGE
- ----------------------------------- ------------------------------------------------------------ ---
<S> <C> <C>
David Margolese.................... Chairman, Chief Executive Officer and Director 40
Robert D. Briskman................. Executive Vice President, Engineering and Operations and 65
Director
Lawrence F. Gilberti............... Director and Secretary 47
Joseph V. Vittoria................. Director 63
Ralph V. Whitworth................. Director 42
</TABLE>

David Margolese. Mr. Margolese has served as the Company's Chairman since
August 1993, as Chief Executive Officer since November 1992 and as a director
since August 1991. Prior to his involvement with the Company, Mr. Margolese
proposed and co-founded Cantel Inc., Canada's national cellular telephone
carrier, and Canadian Telecom Inc., a radio paging company. He served as a Vice
President of Cantel from 1982 to 1984 and as President of Canadian Telecom from
1980 until its sale in 1987. Cantel was acquired by Rogers Communications Inc.
in 1989.

Robert D. Briskman. Mr. Briskman is CD Radio's co-founder and has served as
Executive Vice President, Engineering and Operations and as a director since
October 1991. Mr. Briskman is one of the world's leading satellite engineering
authorities and has overseen the design, development and launch of numerous
major satellite systems. During his twenty-two year career at COMSAT, he was
responsible for the engineering and implementation of satellite systems for both
COMSAT and various nations (PALAPA, ITALSAT, MORELOS, ARABSAT, CHINASAT, among
others) that contracted with COMSAT for turnkey satellite programs. Mr. Briskman
was one of the early engineers hired at NASA in 1959, and received the APOLLO
Achievement Award for the design and implementation of the Unified S-Band
System. He is past chairman of the IEEE Standards Board, past president of the
Aerospace and Electronics Systems Society and served on the industry advisory
council to NASA. He is the Telecommunications Editor of McGraw Hill's
Encyclopedia of Science and Technology and is a recipient of the IEEE Centennial
Medal.

Lawrence F. Gilberti. Mr. Gilberti was elected Secretary of the Company in
November 1992 and has served as a director since September 1993. Since December
1992, he has been the Secretary and sole director of, and from December 1992 to
September 1994 was the President of, Satellite CD Radio, Inc. Mr. Gilberti has
been a partner in the law firm of Fischbein Badillo Wagner Harding since August
1994, and has provided legal services to the Company since 1992. From 1987 to
August 1994, Mr. Gilberti was an attorney with the law firm of Goodman Phillips
& Vineberg.

Joseph V. Vittoria. From September 1987 to February 1997, Mr. Vittoria was
the Chairman and Chief Executive Officer of Avis Inc., one of the world's
largest rental car companies, and served as its

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President and Chief Operating Officer during the prior five years. During that
time, Mr. Vittoria was responsible for creating the Avis Employee Stock
Ownership Plan and for the sale of Avis to HFS in 1996. Mr. Vittoria currently
serves as Chairman and Chief Executive Officer of Travel Services International,
Inc., a travel services distributor, as a director of Transmedia Europe and
Transmedia Asia and as a member of the Board of Overseers of Columbia Business
School.

Ralph V. Whitworth. Mr. Whitworth became a director of the Company in March
1994. Since April 1996, he has been a managing member at Relational Investors,
LLC, a financial management firm. In January 1997, Mr. Whitworth became a
partner of Batchelder & Partners, Inc., a financial advisory firm. From August
1988 to December 1996, he was President of Whitworth and Associates, a
Washington, D.C.-based consulting firm. Mr. Whitworth was President of United
Shareholders Association, a shareholders' association, from its founding in 1986
to 1993. From 1989 to 1992, he served as a director and as President of
Development of United Thermal Corporation. Mr. Whitworth is a director of Apria
Healthcare Group, Inc. (homecare products and services) and Wilshire
Technologies, Inc.

RECOMMENDATION

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE 'FOR' THE
ELECTION OF EACH OF ITS NOMINEES TO SERVE ON THE COMPANY'S BOARD
OF DIRECTORS. UNLESS OTHERWISE INSTRUCTED, SIGNED PROXIES WHICH
ARE RETURNED IN A TIMELY MANNER WILL BE VOTED IN FAVOR OF SUCH
NOMINEES.

MEETINGS AND COMMITTEES

The Company has an Audit Committee and a Compensation Committee. There is
no standing nominating committee.

The Audit Committee, currently comprised of Messrs. Gilberti, Whitworth,
Peter K. Pitsch and Jack Z. Rubinstein, assists the Board of Directors in
overseeing the financial reporting and internal operating control of the
Company. The functions of the Compensation Committee, currently comprised of
Messrs. Gilberti and Whitworth, are to approve and review the compensation of
the officers and agents of the Company.

During the fiscal year ended December 31, 1997, there were 11 meetings of
the Board of Directors, five written consents in lieu of meetings of the Board
of Directors, one written consent in lieu of a special meeting of the
non-employee Directors, seven meetings of the Compensation Committee and one
meeting of the Audit Committee. Each Director attended more than 75% of the
aggregate of the total number of meetings of the Board and the meetings held by
all committees on which he served.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following persons are the executive officers and directors of the
Company.

<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH COMPANY
- ---------------------------------------- ---- ------------------------------------------------------------------
<S> <C> <C>
David Margolese......................... 40 Chairman, Chief Executive Officer and Director
Robert D. Briskman...................... 65 Executive Vice President, Engineering and Operations and Director
Andrew J. Greenebaum.................... 35 Executive Vice President and Chief Financial Officer
Keno V. Thomas.......................... 40 Executive Vice President, Marketing
Joseph S. Capobianco.................... 48 Executive Vice President, Content
Lawrence F. Gilberti(1)(2).............. 47 Director and Secretary
Peter K. Pitsch(1)...................... 46 Director
Jack Z. Rubinstein(1)................... 49 Director
Ralph V. Whitworth(1)(2)................ 42 Director
</TABLE>

- ------------

(1) Member of the Audit Committee.

(2) Member of the Compensation Committee.

------------------------
Set forth below is certain information with respect to the executive
officers of the Company who are not also directors.

Andrew J. Greenebaum. Mr. Greenebaum has served as Executive Vice President
and Chief Financial Officer of the Company since August 1997. From August 1989
to August 1997, he held a variety of senior management positions with The Walt
Disney Company. From March 1996 to August 1997, Mr. Greenebaum was Vice
President, Corporate Finance in charge of corporate and project finance. From
May 1995 to March 1996, he was Director, Strategic Planning. From October 1992
to May 1995, he was Director, Corporate Finance and from April 1991 to October
1992, he was Manager, Corporate Finance. From August 1989 to April 1991, he was
a Senior Treasury Analyst. Prior to Disney, Mr. Greenebaum was an investment
banker with L.F. Rothschild.

Keno V. Thomas. Mr. Thomas has served as Executive Vice President,
Marketing of the Company since April 1997. From July 1995 to April 1997, he was
an independent management consultant to the media and entertainment industry.
From January 1994 to July 1995, Mr. Thomas was Executive Vice President,
Marketing at DMX Inc., a cable radio company. From February 1992 to January
1994, he served as Vice President of Programming at DIRECTV, a satellite
television company. From December 1986 to February 1992, he held senior
management positions, including Vice President, International at ESPN
Enterprises, Inc., a cable television sports network. From May 1982 to December
1986, he held senior management positions, including Vice President, Marketing
at Times Mirror Cable, an operator of cable televisions systems and a subsidiary
of the Times Mirror Company.

Joseph S. Capobianco. Mr. Capobianco has served as Executive Vice
President, Content of the Company since April 1997. From 1981 to April 1997, he
was an independent consultant providing programming, production, marketing and
strategic planning consulting services to media and entertainment companies,
including Home Box Office, a cable television service and a subsidiary of Time
Warner Entertainment Company, L.P., and the ABC Radio Networks. From May 1990 to
February 1995, he served as Vice President of Programming at Music Choice, which
operates a 40-channel music service available to subscribers to DIRECTV, and is
partially owned by Warner Music Group Inc., Sony Entertainment Inc. and EMI.

<PAGE>

<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity security to file with the Securities
and Exchange Commission ('SEC') reports of ownership and changes in ownership of
common stock and other equity securities of the Company. Officers, directors and
greater than 10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.

Based solely on a review of the copies of such reports furnished to the
Company or written representations that no other reports were required, the
Company believes that, during the 1997 fiscal year, all filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with during the fiscal year ended December 31, 1997.

EXECUTIVE COMPENSATION

The following table sets forth the compensation for services rendered
during the three-year period ending December 31, 1997 for the executive officers
of the Company whose 1997 salary and bonus exceeded $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION NUMBER OF
---------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
SALARY BONUS COMPENSATION OPTIONS
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#)
- -------------------------------------------------- ----- ------- ------ ------------- ------------
<S> <C> <C> <C> <C> <C>
David Margolese .................................. 1997 268,714 -- -- --
Chairman of the Board and Chief 1996 95,833 -- -- 400,000
Executive Officer 1995 100,000 -- -- --
Robert D. Briskman ............................... 1997 234,583 -- -- 87,500(4)
Executive Vice President Engineering 1996 106,249 20,000 190,938 30,000
and Operations 1995 100,000 -- 1,340 --
Andrew J. Greenebaum(1) .......................... 1997 88,141 -- 90,000 225,000(5)
Executive Vice President and Chief 1996 -- -- -- --
Financial Officer 1995 -- -- -- --
Keno V. Thomas(2) ................................ 1997 152,557 -- -- 100,000(6)
Executive Vice President, Marketing 1996 -- -- -- --
1995 -- -- -- --
Joseph S. Capobianco(3) .......................... 1997 141,667 -- -- 75,000
Executive Vice President, Content 1996 -- -- -- --
1995 -- -- -- --
</TABLE>

- ------------

(1) Mr. Greenebaum became an executive officer in August 1997.

(2) Mr. Thomas became an executive officer in April 1997.

(3) Mr. Capobianco became an executive officer in April 1997.

(4) Includes 57,500 shares issuable pursuant to stock options granted to the
executive, subject to approval by the stockholders of an amendment to the
Company's 1994 Stock Option Plan to increase the number of options that may
be granted thereunder.

(5) Includes 50,000 shares issuable pursuant to stock options granted to the
executive, subject to approval by the stockholders of an amendment to the
Company's 1994 Stock Option Plan to increase the number of options that may
be granted thereunder.

(6) Includes 50,000 shares issuable pursuant to stock options granted to the
executive, subject to approval by the stockholders of an amendment to the
Company's 1994 Stock Option Plan to increase the number of options that may
be granted thereunder.

<PAGE>

<PAGE>
The following table sets forth certain information for the fiscal year
ended December 31, 1997, with respect to options granted to individuals named in
the Summary Compensation table above.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE
SECURITIES AT ASSUMED ANNUAL RATES
UNDERLYING PERCENT OF TOTAL EXERCISE OF STOCK PRICE
OPTIONS OPTIONS GRANTED OR APPRECIATION
GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION ------------------------
NAME (#) FISCAL YEAR (#/SHARE) DATE 5% 10%
- ----------------------------- ---------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David Margolese.............. 0 0% $ 0 -- $ 0 $ 0
Robert Briskman.............. 57,500 16.9% $14.5000 7/9/07 $ 524,341 $1,328,783
30,000 $ 8.5625 10/15/07 $ 161,547 $ 409,393
Andrew J. Greenebaum......... 175,000 43.4% $15.1250 8/25/07 $1,664,605 $4,218,437
50,000 $17.1250 12/2/07 $ 538,491 $1,364,642
Keno V. Thomas............... 50,000 19.3% $12.8750 4/28/07 $ 404,851 $1,025,972
25,000 $14.5000 7/9/07 $ 227,974 $ 577,732
25,000 $17.1250 12/2/07 $ 269,246 $ 682,321
Joseph S. Capobianco......... 50,000 14.5% $13.0000 4/16/07 $ 408,781 $1,035,933
25,000 $14.5000 7/9/07 $ 227,974 $ 577,732
</TABLE>

The following table sets forth certain information with respect to the
number of shares covered by both exercisable and unexercisable stock options
held by the individuals named in the Summary Compensation Table above as of
December 31, 1997. Also reported are the values for 'in-the-money' stock options
that represent the positive spread between the respective exercise prices of
outstanding stock options and the fair market value of the Common Stock as of
December 31, 1997 ($16.9375 per share).

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
EXERCISE VALUE REALIZED AT FISCAL YEAR END (#) FISCAL YEAR END ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------ ----------- -------------- ------------------------------ ------------------------
<S> <C> <C> <C> <C>
David Margolese............... 0 0 700,000/0 6,931,250/0
Robert Briskman............... 0 0 192,500/57,500 635,016/140,156
Andrew J. Greenebaum.......... 0 0 59,000/166,000 106,938/210,250
Keno V. Thomas................ 0 0 0/100,000 0/264,063
Joseph S. Capobianco.......... 0 0 0/75,000 0/257,813
</TABLE>

<PAGE>

<PAGE>
EMPLOYMENT AND OTHER AGREEMENTS

The Company is a party to an employment agreement with each of Messrs.
Margolese, Briskman, Greenebaum, Capobianco and Thomas (the 'Employment
Agreements').

MR. MARGOLESE

Effective January 1, 1994, the Company entered into an employment agreement
to employ David Margolese as Chairman and Chief Executive Officer of the Company
for a term of five years. The agreement provided for an annual base salary of
$300,000, subject to increase from time to time by the Board of Directors. An
amendment to this agreement, dated as of June 8, 1994, provided for an annual
base salary of $100,000, effective June 8, 1994. Subsequently, Mr. Margolese
waived his base salary payable for the three-month period ended December 31,
1994. In April 1996, the Company granted to Mr. Margolese pursuant to the 1994
Stock Option Plan an option to purchase 400,000 shares of Common Stock which
became exercisable upon the grant of a license from the Federal Communications
Commission (the 'FCC'). In January 1997, the Board of Directors increased Mr.
Margolese's annual base salary to $150,000. In July 1997, the Board of Directors
increased Mr. Margolese's annual base salary to $400,000. Under his original
employment agreement and pursuant to the Company's 1994 Stock Option Plan, the
Company granted to Mr. Margolese an option to purchase 300,000 shares of Common
Stock at $5.00 per share, which option is fully vested and exercisable. If Mr.
Margolese is terminated without 'Cause,' as defined in the agreement, or if Mr.
Margolese resigns for 'Good Reason,' as defined in the agreement, the Company is
obligated to pay to Mr. Margolese the sum of $800,000. The employment agreement
restricts Mr. Margolese from engaging in any business involving the transmission
of radio entertainment programming in North America for a period of two years
after the termination of his employment.

MR. BRISKMAN

Effective January 1, 1994, the Company entered into an agreement to employ
Robert D. Briskman as the Vice President and Chief Technical Officer of the
Company for a term of three years. The agreement provided for an annual base
salary of $150,000. An amendment to this agreement, dated as of June 8, 1994,
provided for an annual base salary of $100,000, effective June 8, 1994. In
October 1996, the Board of Directors increased Mr. Briskman's annual base salary
to $150,000 and in January 1997, extended the term of the agreement until
January 1, 1998. In addition, under his original employment agreement and
pursuant to the Company's 1994 Stock Option Plan, the Company granted to Mr.
Briskman an option to purchase 80,000 shares of Common Stock at $1.00 per share,
which option is fully vested and exercisable. In May 1997, the Board of
Directors named Mr. Briskman the Company's Executive Vice President, Engineering
and Operations and extended the term of the agreement until December 31, 2000.
The Board of Directors also increased Mr. Briskman's annual base salary to
$235,000, effective May 1, 1997, with an additional increase to $260,000,
effective January 1, 1998. The original employment agreement also provided for
the grant to Mr. Briskman of options to purchase 112,500 shares of Common Stock
at $1.00 per share upon completion of certain milestones prior to December 31,
1994. Such options were granted to Mr. Briskman on December 23, 1994 and are
fully vested and exercisable. In April 1996, the Company also granted Mr.
Briskman options to purchase 60,000 shares of Common Stock at a price per share
of $8.5625 share. The options were exercisable subject to certain milestones;
however, the options relating to 30,000 of such shares lapsed. On July 9, 1997,
the Board of Directors granted Mr. Briskman further options to purchase up to
57,500 shares of Common Stock at a price per share of $14.50. The options will
vest and become exercisable in two stages contingent upon Mr. Briskman's
continued employment with the Company. On October 15, 1997, the Company granted
Mr. Briskman an option to purchase 30,000 shares of Common Stock at a price per
share of $8.5625 which options were immediately exercisable. If Mr. Briskman's
employment is terminated for any reason other than 'Cause,' as defined in the
agreement, the Company is obligated to pay to Mr. Briskman a sum equal to 50% of
his then annual salary and, at Mr. Briskman's option, to repurchase all of the
shares of Common Stock then owned by Mr. Briskman at a price of $1.25 per share.
The Company also has entered into a proprietary information and non-competition
agreement with Mr. Briskman. Under this agreement, Mr. Briskman may not (i)
disclose any proprietary information of the Company during or after his
employment with the Company or (ii) engage in any

<PAGE>

<PAGE>
business directly competitive with any business of the Company in North America
for a period of one year after termination of his employment.

MR. GREENEBAUM

Effective August 25, 1997, the Company entered into an employment agreement
with Andrew J. Greenebaum which provides for his employment as Executive Vice
President and Chief Financial Officer of the Company for a term of three years.
Pursuant to the agreement with Mr. Greenebaum, the Company will pay Mr.
Greenebaum an annualized base salary of $250,000 per year for the period of his
employment with the Company through December 31, 1997 and thereafter an
annualized base salary of $275,000, subject to any increases approved by the
Board of Directors. Upon the commencement of his employment with the Company,
the Company paid Mr. Greenebaum an additional sum of $90,000. The Company has
also granted Mr. Greenebaum options to purchase up to 175,000 shares of Common
Stock at a price per share of $15.125. The options will vest and be exercisable
in three stages contingent upon the continued employment of Mr. Greenebaum with
the Company at predetermined dates. The dismissal of Mr. Greenebaum other than
for 'Cause' (as defined in the agreement) subsequent to the passing of certain
milestones, however, will cause the options otherwise exercisable only at the
end of that stage to vest immediately notwithstanding the dismissal. On December
2, 1997, the Company granted him an additional option to purchase 50,000 shares
of Common Stock at a price per share of $17.125, such option to vest and become
exercisable on a predetermined date contingent upon Mr. Greenebaum's continued
employment with the Company and the replenishment of the number of shares of
Common Stock in the 1994 Stock Option Plan by the Company. The dismissal of Mr.
Greenebaum other than for 'Cause' (as defined in the agreement) subsequent to
the passing of a certain milestone, however, will cause the option otherwise
exercisable only at the predetermined date to vest immediately notwithstanding
the dismissal. If Mr. Greenebaum's employment is terminated for any reason other
than by the Company for 'Cause,' as defined in the agreement, or by Mr.
Greenebaum voluntarily, Mr. Greenebaum will be entitled to receive, in addition
to any other sums then due to him, an amount equal to his annualized base salary
then in effect. The Company and Mr. Greenebaum also have entered into a
proprietary information and non-competition agreement. Under this agreement, Mr.
Greenebaum may not (i) during his employment with the Company and for three
years thereafter disclose any proprietary information of the Company or (ii)
during his employment with the Company and for one year thereafter engage in any
business involving any satellite radio broadcast service or any
subscription-based digital audio radio service delivered to cars or other mobile
vehicles in North America.

MR. THOMAS

Effective April 28, 1997, the Company entered into an employment agreement
to employ Keno V. Thomas as Executive Vice President, Marketing for a term of
three years. The agreement provides for an annualized base salary of $225,000
through December 31, 1997, and $250,000 thereafter through the term of the
agreement, subject to increase from time to time by the Board of Directors. The
Company also granted Mr. Thomas an option to purchase 50,000 shares of Common
Stock at $12.875 per share, such option to vest pursuant to the schedule set
forth in the option agreement. On July 9, 1997, the Company granted Mr. Thomas
additional options to purchase up to 25,000 shares of Common Stock at a price
per share of $14.50, which will vest and become exercisable in two stages
contingent upon Mr. Thomas' continued employment with the Company and the
replenishment by the Company of the number of shares of Common Stock in the 1994
Stock Option Plan. On December 2, 1997, the Company granted Mr. Thomas an
additional option to purchase 25,000 shares of Common Stock at a price per share
of $17.125, such option to vest and become exercisable at the predetermined date
contingent upon Mr. Thomas' continued employment with the Company and the
replenishment of the number of shares of Common Stock in the 1994 Stock Option
Plan by the Company. If Mr. Thomas is terminated except by the Company for
'Cause,' as defined in the agreement, or by Mr. Thomas voluntarily, the Company
will be obligated to pay to Mr. Thomas an amount equal to one-half of his then
annual salary. The Company also has entered into a proprietary information and
non-competition agreement with Mr. Thomas. Under this agreement he may not (i)
disclose any proprietary information

<PAGE>

<PAGE>
of the Company during his employment with the Company and for three years
thereafter or (ii) during his respective employment with the Company and for one
year thereafter, engage in any business involving any satellite radio broadcast
service or any subscription-based digital audio radio service delivered to cars
or other mobile vehicles in North America.

MR. CAPOBIANCO

Effective April 16, 1997, the Company entered into an employment agreement
to employ Joseph S. Capobianco as Executive Vice President, Content for a term
of three years. The agreement provides for an annual base salary of $200,000,
subject to increase from time to time by the Board of Directors. The Company
also granted Mr. Capobianco an option to purchase 50,000 shares of Common Stock
at $13 per share, such option to vest pursuant to the schedule set forth in the
option agreement. On July 9, 1997, the Company granted Mr. Capobianco further
options to purchase up to 25,000 shares of Common Stock at a price per share of
$14.50, subject to replenishment by the Company of the number of shares in the
1994 Stock Option Plan. These options will vest and become exercisable in two
stages contingent upon Mr. Capobianco's continued employment with the Company.
If Mr. Capobianco is terminated except by the Company for 'Cause,' as defined in
the agreement, or by Mr. Capobianco voluntarily, the Company will be obligated
to pay to him an amount equal to one-half of his annual salary. The Company also
has entered into a proprietary information and non-competition agreement with
Mr. Capobianco. Under this agreement he may not (i) disclose any proprietary
information of the Company during his employment with the Company and for three
years thereafter or (ii) during his respective employment with the Company and
for one year thereafter, engage in any business involving any satellite radio
broadcast service or any subscription-based digital audio radio service
delivered to cars or other mobile vehicles in North America.

COMPENSATION OF MEMBERS OF THE BOARD OF DIRECTORS

Commencing in 1994, directors of the Company who are not full-time
employees of the Company were entitled to receive a fee of $20,000 per year for
serving on the Board of Directors. In June 1994, all directors entitled to fees
agreed to forego any payments for their services as directors of the Company.
Pursuant to the Company's 1994 Directors' Nonqualified Stock Option Plan, each
director who is not a full-time employee of the Company is entitled to receive
an option to purchase 15,000 shares of Common Stock upon becoming a director (or
upon the effective date of the plan in the case of non-employee directors who
became directors prior to the effective date) and to an automatic annual grant
of an option to purchase 10,000 shares of Common Stock on the first business day
following the Company's annual meeting. The exercise price for all such options
is the fair market value of the Company's Common Stock on the date of grant.
Prior to the implementation of the Directors' Plan, the Company from time to
time granted options to certain non-employee directors. The Company reimburses
each director for reasonable expense incurred in attending meetings of the Board
of Directors.

In 1991, the Company retained Pitsch Communications to provide legal
services to the Company in March 1992, the Company began paying Pitsch
Communications a monthly retainer of $3,000, increased to $5,000 in July 1996.
The retainer could be terminated by either party at any time. Peter K. Pitsch is
the principal of Pitsch Communications. The retainer was terminated in May 1997.
Mr. Pitsch received $144,907 for his services to the Company for the fiscal year
ended December 31, 1997.

The Company had retained Jack Z. Rubinstein to provide consulting services
to the Company for a monthly retainer of $5,000. The retainer was terminated
effective February 1998. Mr. Rubinstein received $60,000 for his consulting
services to the Company for the fiscal year ended December 31, 1997.

Ralph V. Whitworth, as a partner in Batchelder & Partners, Inc., a
financial advisory firm ('Batchelder'), received $60,000 from the total fees
received by Batchelder from the Company for the fiscal year ended December 31,
1997. On December 29, 1997, Mr. Whitworth received, pursuant to options given
Batchelder by the Company, an option to purchase 17,800 shares of Common Stock
at an exercise price of $6.25. The option is exercisable for a period of 10
years from the date of grant.

<PAGE>

<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal 1997, Messrs. Gilberti and Whitworth served as members of the
Compensation Committee of the Board of Directors.

Since December 1992, Mr. Gilberti has been the Secretary and sole director
of, and from December 1992 to September 1994 was the President of, the Company's
subsidiary, Satellite CD Radio, Inc. He has been a partner in the law firm of
Fischbein Badillo Wagner Harding since August 1994, and has provided legal
services to the Company since 1992.

On September 13, 1995, Batchelder entered into an agreement (the 'Whitworth
Agreement') with Whitworth and Associates, of which Ralph V. Whitworth is
President, pursuant to which Mr. Whitworth was to provide consulting services to
Batchelder for a fee equal to a percentage of the fee received by Batchelder
from the Company pursuant to an agreement dated October 21, 1992 (the
'Batchelder Agreement'). Under the Batchelder Agreement, the Company retained
the services of Batchelder to provide the Company with certain financial
consulting services. See 'Certain Relationships and Related Transactions.' In
January 1997, Mr. Whitworth became a partner in Batchelder, and the Whitworth
Agreement was terminated. The Batchelder Agreement was terminated on November
30, 1997 and Batchelder agreed to accept a payment of $500,000 from the Company
in full satisfaction of the Company's remaining obligations under the agreement;
however, the parties agreed that the termination would not affect the Company's
obligations with respect to certain transactions entered into within 24 months
of the termination date. In the fiscal year ended December 31, 1997, Mr.
Whitworth, as a partner in Batchelder, received $60,000 from the total fees
received by Batchelder from the Company. On December 29, 1997, Mr. Whitworth
received, pursuant to options given Batchelder, an option to purchase 17,800
shares of Common Stock at an exercise price of $6.25. The option is exercisable
for a period of 10 years from the date of grant.

<PAGE>

<PAGE>
REPORT OF COMPENSATION COMMITTEE

The Compensation Committee of the Board of Directors (the 'Committee') is
responsible for making or reviewing all compensation decisions of the Company
for its officers and agents, including approving base salaries and granting
stock options.

The Company's compensation philosophy is that its employees are its most
valuable assets. Executive officers of the Company, together with senior
management, direct the Company's strategic planning and have overall
responsibility for the Company's results. The Company has planned a compensation
structure intended to attract and retain highly talented individuals, reward the
creativity of its executive officers in maximizing business opportunities and
provide incentives to the executive officers to execute the Company's objectives
and enhance stockholder value by achieving both short and long term business
objectives.

The Company sets base salaries taking into consideration individual
performance and prevailing market data for similar positions. In fiscal year
1997, salary determinations with respect to executive officers and other key
executives were made by the Committee, following management recommendation, and
were subject to the approval of the Board of Directors. The Committee
subjectively evaluates the performance of each executive officer by taking into
account several factors, including individual accomplishments and the overall
contribution to the Company made by each such executive, without any specific
weight being assigned to any particular factor. Upon management's request, in
fiscal year 1997 the Committee approved the base salaries for the newly hired
Messrs. Greenebaum, Capobianco and Thomas and increased the base salaries for
Messrs. Margolese and Briskman. See 'Management -- Employment and Other
Agreements.'

Grants of stock options are awarded to the Company's executive officers and
other key employees as an incentive for future performance. The Committee's
intention in granting stock options is to reward employees for their
contribution to the Company's achievement of corporate goals, to encourage stock
ownership and to align the objectives of the Company with those of its
employees. In addition, stock options granted to employees of the Company have
vesting schedules that are designed to reward employees who remain with the
Company for long periods of time.

Stock option grants are awarded to the Company's executive officers
periodically pursuant to the 1994 Stock Option Plan. Because the Company has now
entered its initial operations phase (including the financing, construction and
launching of the satellites required to provide the broadcast service and the
development and production of the necessary satellite radios), the Company has
begun to hire officers and employees as to whom it is appropriate for the
compensation to include options to purchase Common Stock as an incentive for
their continued service with the Company and the successful performance of their
duties. Stock option grants are determined by the Committee based upon the level
and responsibility of each individual executive. The Committee also considers
each executive's potential contribution to the Company's achievement of its
goals.

In April 1996, the Company granted to David Margolese pursuant to the 1994
Stock Option Plan an option to purchase 400,000 shares of Common Stock which
became exercisable upon the grant of a license from the Federal Communications
Commission (the 'FCC') to build, launch and operate a national satellite radio
broadcast service (the 'FCC License'). In April 1996, the Company also granted
to Robert Briskman pursuant to the 1994 Stock Option Plan an option to purchase
60,000 shares of Common Stock, 30,000 shares of which were exercisable upon the
FCC's grant of the FCC License to the Company and the remaining 30,000 shares of
which were exercisable on September 18, 1997, if, as of such date, the FCC had
granted the FCC License and Mr. Briskman was still employed by the Company. The
FCC License was granted in October 1997, however, and the second 30,000 options
lapsed. In recognition of Mr. Briskman's services to the Company and in view of
the unexpected delay by the FCC in awarding the Company's FCC License, on
October 15, 1997, the Committee granted Mr. Briskman options to purchase 30,000
shares of Common Stock at a price of $8.5625 per share under the 1994 Stock
Option Plan. Such options are exercisable immediately.

In December 1997, the Committee granted Messrs. Greenebaum and Thomas
options to purchase 50,000 and 25,000 shares of Common Stock, respectively, at a
price of $17.125 per share under the 1994 Stock Option Plan (i) to adjust upward
the level of options granted them upon commencement of their

<PAGE>

<PAGE>
employment, (ii) to reward their substantial efforts in the successful
completion of the Company's recent debt and equity offerings, (iii) to encourage
their further employment with and service for the benefit of the Company and
(iv) as an incentive for their efforts in that latter regard.

In July 1997, the Committee granted Mr. Margolese an increase in his base
salary to an annualized base of $400,000 per year for the balance of his current
employment agreement with the Company after considering (i) the level of the
salaries being paid to the Company's Executive Vice Presidents, (ii) the
salaries paid to chief executive officers of similar companies at similar stages
in their development and (iii) the substantial efforts which he has made on
behalf of the Company.

It is the Compensation Committee's philosophy to generally structure
compensation arrangements for the Company's executive officers in a manner that
complies with the exemptive requirements of Section 162(m) of the Internal
Revenue Code in order to avoid applicability of the limit on deductibility
otherwise imposed by such Section, while reserving the discretion to pay
compensation that does not qualify for exemption under Section 162(m) where the
Committee believes such action to be in the Company's best interest.

Compensation Committee

LAWRENCE F. GILBERTI
RALPH V. WHITWORTH

<PAGE>

<PAGE>
PERFORMANCE GRAPH

Set forth below is a line graph comparing the cumulative performance of the
Company's Common Stock with the Standard & Poor's Composite-500 Stock Index (the
'S&P 500') and the Nasdaq Telecommunications Index as of September 13, 1994 (the
date on which the Company's Common Stock began to trade on the Nasdaq market),
and December 31, 1997 (the date nearest the end of the Company's fiscal year for
which index data is readily available). The graph assumes that $100 was invested
on September 13, 1994 in each of the Company's Common Stock, the S&P 500 and the
Nasdaq Telecommunications Index and that all dividends were reinvested.

[GRAPH]

100.00 100.00 100.00
44.00 99.00 94.00
153.00 137.00 129.00
151.00 159.00 132.00
428.00 193.00 175.00

TOTAL SHAREHOLDER RETURNS

<TABLE>
<CAPTION>
NASDAQ
DATE CD RADIO INC. (1) S&P 500 INDEX TELECOMMUNICATIONS INDEX
- ------------------------------------ ------------------ ------------- ------------------------------
<S> <C> <C> <C>
September 13, 1994.................. $100.00 $100.00 $100.00
December 31, 1997................... $427.64 $192.75 $174.63
</TABLE>

- ------------

(1) In accordance with the rules of the Securities and Exchange Commission, the
share price of the Company's Common Stock on September 13, 1994 used for the
performance graph is $4.63, the closing price on the first day of trading of
the Common Stock on the Nasdaq SmallCap Market. The Company's Common Stock
began trading on the Nasdaq National Market on October 24, 1997. The
Industry Group, Nasdaq Telecommunications Index, is a
capitalization-weighted index designed to measure the performance of all
NASDAQ stocks in the telecommunications sector, including satellite
technology.

<PAGE>

<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On March 4, 1996, the Company granted to Jack Z. Rubinstein pursuant to the
1994 Stock Option Plan a stock option to purchase 60,000 shares of Common Stock
at an exercise price of $4.50. The option is exercisable for a period of 10
years from the date of grant and terminates 18 months after the termination for
any reason of Mr. Rubinstein's service as a consultant to the Company.

On July 17, 1996, the Company granted to Mr. Pitsch pursuant to the 1994
Stock Option Plan a stock option to purchase 25,000 shares of Common Stock at an
exercise price of $8.25 which would have vested upon the occurrence of a certain
milestone. The milestone was not met and consequently this option did not vest.

Pursuant to the Batchelder Agreement, the Company retained the services of
Batchelder to provide the Company with certain financial consulting services.
See 'Compensation Committee Interlocks and Insider Participation.' On September
13, 1995, Batchelder entered into the Whitworth Agreement, of which Ralph V.
Whitworth is President, pursuant to which Whitworth was to provide consulting
services to Batchelder for a fee equal to a percentage of the fee received by
Batchelder from the Company under the Batchelder Agreement. In January 1997, Mr.
Whitworth became a partner in Batchelder, and the Whitworth Agreement was
terminated. In the fiscal year ended December 31, 1997, Mr. Whitworth, as a
partner in Batchelder, received $60,000 from the total fees received by
Batchelder from the Company. On December 29, 1997, Mr. Whitworth received,
pursuant to options given Batchelder, an option to purchase 17,800 shares of
Common Stock at an exercise price of $6.25. The option is exercisable for a
period of 10 years from the date of grant.

To build and launch the satellites necessary for the operations of CD
Radio, the Company entered into the Satellite Construction Agreement (the 'Loral
Satellite Contract') with Space Systems/Loral, Inc. ('SS/L'), a wholly-owned
subsidiary of Loral Space & Communications Ltd. ('Loral') in March 1993. The
Loral Satellite Contract provides for SS/L 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 for an option to be granted to the
Company to purchase a fourth satellite. The Company is committed to make
aggregate payments of $275.8 million under the Loral Satellite Contract. Under
the Loral Satellite Contract, with the exception of a payment made at the time
of the signing of the Satellite Contract, 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 SS/L meeting specified milestones in the manufacture of the three
satellites. On August 5, 1997, the Company completed the sale of 1,905,488
shares of Common Stock to Loral for aggregate consideration of $25 million.
Pursuant to an Amendment No. 16 dated August 4, 1997 to the Loral Satellite
Contract, Loral agreed to defer payment of a total of $20.0 million of the
contract price, which deferred amount is to be paid in four installments of $5.0
million commencing November 2001 until March 2003.

APPROVAL OF AMENDMENTS TO 1994 STOCK OPTION PLAN
AND 1994 DIRECTORS' NONQUALIFIED STOCK OPTION PLAN

PROPOSED AMENDMENTS

Under the current terms of each of the 1994 Stock Option Plan (the '1994
Plan') and the 1994 Directors' Nonqualified Stock Option Plan (the 'Directors'
Plan'), the Plan Administrator is authorized to grant options to acquire up to a
total of 1,600,000 shares of the Company's authorized, but unissued or
reacquired, Common Stock, less any shares issuable upon the exercise of options
granted under the other plan. Subject to the approval of the Company's
stockholders, the Board of Directors has approved amendments to the 1994 Plan
and the Directors' Plan, pursuant to which the Company will reserve an
additional 1,500,000 shares of Common Stock for issuance under both plans
increasing the aggregate number from 1,600,000 to 3,100,000 shares.

The purposes of the 1994 Plan and Directors' Plan are to attract and retain
the services of key employees, to fairly compensate outside directors for their
contribution to the Company, to encourage such persons to acquire a greater
proprietary interest with the Company, thereby strengthening their

<PAGE>

<PAGE>
incentive to achieve the objectives of the stockholders and to serve as an aid
and inducement in hiring new employees, consultants and others. The principal
provisions of the 1994 Plan and Directors' Plan are summarized below. This
summary is not complete and is qualified in its entirety by the terms of the
1994 Plan and Directors' Plan, as amended.

DESCRIPTION OF THE 1994 PLAN AND DIRECTORS' PLAN

The 1994 Plan, as amended, provides for options to purchase Common Stock
and is administered by the Plan Administrator, which may be either the Company's
Board of Directors or a committee thereof designated by the Board of Directors.
The Company's Compensation Committee, consisting of Messrs. Gilberti and
Whitworth, acts as Plan Administrator. Options granted under the 1994 Plan may
be 'incentive stock options' that meet the requirements under section 422 of the
Internal Revenue Code of 1986, as amended (the 'Code'), or options that do not
qualify under Code section 422 ('nonqualified options'). Incentive stock options
may be granted to any employee of the Company or any related company (as defined
in the 1994 Plan). Nonqualified options may be granted to any employee of the
Company or any related company and any other person other than non-employee
directors of the Company. The maximum number of shares with respect to which
options may be granted to any employee during any calendar year shall not exceed
300,000 shares of Common Stock. Approximately 14 individuals are currently
eligible to participate in the 1994 Plan. In accordance with the 1994 Plan, the
Plan Administrator determines the employees to whom options are granted, the
number of shares subject to each option, the exercise price and the vesting
schedule of each option. Options generally vest over a four-year period, but may
vest over a different period at the discretion of the Plan Administrator. The
aggregate fair market value of the shares of Common Stock with respect to which
incentive stock options are exercisable for the first time by an optionee during
any calendar year, under all plans maintained by the Company, certain related
companies and any predecessors, shall not exceed $100,000 or such other limit as
may be prescribed by the Code. Upon the occurrence of certain stock dividends,
reorganizations, consolidations or similar transactions, the Plan Administrator
shall make certain adjustments to outstanding options to preserve certain rights
of optionees and the number of shares available for issuance under the 1994 Plan
may automatically be increased or decreased proportionately. Upon the occurrence
of certain events constituting a change in control (as defined in the 1994
Plan), options that have been outstanding for at least six months become
immediately vested and exercisable for a limited period of time. Options granted
under the 1994 Plan are exercisable for a period determined by the Plan
Administrator, but no more than 10 years from the date of grant in the case of
incentive stock options (five years in the case of incentive stock options
granted to persons who own more than 10% of the Common Stock). Unless otherwise
provided at the time of grant, vested options terminate on the earliest to occur
of the expiration of the option's term, 90 days after the optionee's termination
of employment with the Company for any reason other than death or disability,
and one year after termination upon death or disability. Unless otherwise
determined by the Plan Administrator, the exercise price of incentive stock
options granted under the 1994 Plan must be equal to or greater than the fair
market value of the Common Stock on the date of grant (110% of the fair market
value, in the case of incentive stock options granted to persons who own more
than 10% of the Common Stock). Upon exercise, the aggregate exercise price may
be paid to the Company (i) in cash, (ii) upon approval of the Plan
Administrator, by delivering to the Company shares of Common Stock previously
held by such Optionee, or (iii) by complying with any other payment mechanism
approved by the Plan Administrator from time to time. Unless otherwise provided
by the Plan Administrator, options may not be transferred or assigned other than
by will or laws of descent and distribution. The Plan Administrator may modify,
amend or terminate the 1994 Plan, subject to shareholder approval if required to
continue to meet the requirements of Rule 16b-3 under the Securities Exchange
Act of 1934, as amended, or any successor rule thereto.

The Directors' Plan provides that non-employee directors of the Company in
office as of the date the plan was adopted and persons who thereafter become
non-employee directors of the Company shall be granted options to purchase
15,000 shares of Common Stock upon first becoming directors (or upon the
effective date of the Directors' Plan in the case of non-employee directors who
became directors prior to the effective date) ('initial options'), and
thereafter shall annually be granted options ('annual options') to purchase
10,000 shares of Common Stock on the first business day following the Company's

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<PAGE>
annual meeting for such year. Approximately four directors are currently
eligible to participate in the Plan. The exercise price for options granted
under the Directors' Plan is the fair market value of the Company's Common Stock
on the date of grant. Initial options become exercisable on the first
anniversary of the date of grant; annual options granted under the Directors'
Plan become exercisable immediately upon grant. Options granted under the
Directors' Plan expire on the earliest of 10 years from the date of grant, 18
months after a director's termination as a director of the Company for any
reason other than death or disability, and one year after termination upon death
or disability. Upon exercise, the exercise price may be paid (i) in cash, (ii)
in shares of Common Stock or (iii) by the Company, withholding from the number
of shares to be received on exercise that number of shares of Common Stock with
a fair market value on the date of exercise equal to the aggregate exercise
price of the option. Upon the occurrence of certain stock dividends,
reorganizations, consolidations or similar transactions, options shall be
adjusted to preserve the rights of optionees and the number of shares available
under the Directors' Plan may automatically be increased or decreased
proportionately. Unless otherwise specified in an option, options may not be
transferred or assigned other than by will or laws of descent and distribution.
The Company may modify, amend or terminate the Directors' Plan, subject to
shareholder approval if required to continue to meet the requirements of Rule
16b-3 under the Securities Exchange Act of 1934, as amended, or any successor
rule thereto.

As of March 2, 1998, the market value of a share of Common Stock was
$15.875.

NEW PLAN BENEFITS

1994 STOCK OPTION PLAN

Set forth below are the benefits that will be received in fiscal year 1997
if the proposed amendments to the 1994 Plan are approved by the Stockholders.

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND POSITION UNDERLYING OPTIONS OPTION EXERCISE PRICE
- ----------------------------------------------------------------------- ------------------ ---------------------
<S> <C> <C>
David Margolese ....................................................... 0 $ 0
Chairman and Chief Executive Officer
Robert D. Briskman .................................................... 57,500 $14.500
Executive Vice President, Engineering and Operations
Andrew J. Greenebaum .................................................. 50,000 $17.125
Executive Vice President and Chief Financial Officer
Keno V. Thomas ........................................................ 25,000 $14.500
Executive Vice President, Marketing 25,000 $17.125
Joseph Capobianco ..................................................... 25,000 $14.500
Executive Vice President, Content
All Executive Officers as a Group...................................... 107,500 $14.500
75,000 $17.125
All Current Directors who are not Executive Officers
as a Group........................................................... -- $--
All Employees who are not Executive Officers as a Group................ 30,000 $2.00 - 14.50
</TABLE>

<PAGE>

<PAGE>
FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN STOCK OPTION PLANS

The following sets forth a summary of the principal federal income tax
consequences of options granted under the 1994 Plan and Directors' Plan. This
summary is not intended to be exhaustive and does not describe state, local or
foreign tax consequences. The provisions of the Code and the regulations
thereunder relating to these matters are complicated and their impact in any one
case may depend upon the particular circumstances. Each holder of an option
under the 1994 Plan and Directors' Plan should consult his or her own
accountant, legal counsel or other financial advisor regarding the tax
consequences of participation in the 1994 Plan and Directors' Plan. This
discussion is based on the Code as currently in effect.

No income will be realized by an optionee upon grant of a nonqualified
stock option. Upon exercise of a nonqualified stock option, the optionee will
recognize ordinary compensation income in an amount equal to the excess, if any,
of the fair market value of the underlying stock over the option exercise price
(the 'Spread') at the time of exercise. The Spread will be deductible by the
Company for federal income tax purposes subject to the possible limitations on
deductibility under sections 280G and 162(m) of the Code of compensation paid to
executives designated in those sections. The optionee's tax basis in the
underlying shares acquired by exercise of a nonqualified stock option will equal
the exercise price plus the amount taxable as compensation to the optionee. Upon
sale of the shares received by the optionee upon exercise of the nonqualified
stock option, any gain or loss is generally long-term or short-term capital gain
or loss, depending on the holding period. The optionee's holding period for
shares acquired pursuant to the exercise of a nonqualified stock option will
begin on the date of exercise of such option.

Pursuant to currently applicable rules under section 16(b) of the Exchange
Act, the grant of an option (and not its exercise) to a person who is subject to
the reporting and short-swing profit provisions under section 16 of the Exchange
Act (a 'Section 16 Person') begins the six-month period of potential short-swing
liability. The taxable event for the exercise of an option that has been
outstanding at least six months ordinarily will be the date of exercise. If an
option is exercised by a Section 16 Person within six months after the date of
grant, however, taxation ordinarily will be deferred until the date which is six
months after the date of grant, unless the person has filed a timely election
pursuant to section 83(b) of the Code to be taxed on the date of exercise. The
six month period of potential short-swing liability may be eliminated if the
option grant (i) is approved in advance by the Company's board of directors (or
a committee composed solely of two or more non-employee directors) or (ii)
approved in advance, or subsequently ratified by the Company's shareholders, no
later than the next annual meeting of shareholders. Consequently, the taxable
event for the exercise of an option that satisfies either of the conditions
described in clauses (i) or (ii) above will be the date of exercise.

The payment by an optionee of the exercise price, in full or in part, with
previously acquired shares will not affect the tax treatment of the exercise
described above. No gain or loss generally will be recognized by the optionee
upon the surrender of the previously acquired shares to the Company, and shares
received by the optionee, equal in number to the previously surrendered shares,
will have the same tax basis as the shares surrendered to the Company and will
have a holding period that includes the holding period of the shares
surrendered. The value of shares received by the optionee in excess of the
number of shares surrendered to the Company will be taxable to the optionee.
Such additional shares will have a tax basis equal to the fair market value of
such additional shares as of the date ordinary income is recognized, and will
have a holding period that begins on the date ordinary income is recognized.

The Code requires that, for incentive stock option treatment, shares
acquired through exercise of an incentive stock option cannot be disposed of
before two years from the date of grant and one year from the date of exercise.
Incentive stock option holders will generally incur no federal income tax
liability at the time of grant or upon exercise of such options. However, the
Spread will be an 'item of tax preference' which may give rise to 'alternative
minimum tax' liability at the time of exercise. If the optionee does not dispose
of the shares before two years from the date of grant and one year from the date
of exercise, the difference between the exercise price and the amount realized
upon disposition of the shares will constitute long-term capital gain or loss,
as the case may be. Assuming both the holding periods are satisfied, no
deduction will be allowable to the Company for federal income tax purposes in
connection with the grant or exercise of the option. If, within two years of the
date of grant or within

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<PAGE>
one year from the date of exercise, the holder of shares acquired through the
exercise of an incentive stock option disposes of such shares, the optionee will
generally realize ordinary taxable compensation at the time of such disposition
equal to the difference between the exercise price and the lesser of the fair
market value of the stock on the date of initial exercise or the amount realized
on the subsequent disposition, and such amount will generally be deductible by
the Company for federal income tax purposes, subject to the possible limitations
on deductibility under sections 280G and 162(m) of the Code for compensation
paid to executives designated in those sections.

RECOMMENDATION

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE 'FOR' THE
AMENDMENTS TO THE 1994 STOCK OPTION PLAN AND 1994 DIRECTORS'
NONQUALIFIED STOCK OPTION PLAN. UNLESS OTHERWISE INSTRUCTED,
SIGNED PROXIES WHICH ARE RETURNED IN A TIMELY MANNER WILL BE
VOTED IN FAVOR OF SUCH AMENDMENTS.

RATIFICATION OF APPOINTMENT
OF INDEPENDENT ACCOUNTANTS

The Board of Directors, upon recommendation of the Audit Committee, has
appointed Coopers & Lybrand LLP as the Company's independent accountants for the
year ended December 31, 1997. A proposal will be presented at the Annual Meeting
to ratify the appointment of Coopers & Lybrand LLP as the Company's independent
auditors. If the shareholders fail to ratify such selection by the affirmative
vote of a majority of the shares present in person or represented by proxy at
the Annual Meeting, other independent accountants will be considered by the
Board of Directors upon recommendation by the Audit Committee. The Company has
been advised that representatives of Coopers & Lybrand LLP will be present at
the Meeting, will be available to respond to appropriate questions, and will be
given an opportunity to make a statement if they so desire.

RECOMMENDATION

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE 'FOR'
RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND LLP AS
INDEPENDENT ACCOUNTANTS FOR THE COMPANY FOR THE YEAR ENDING
DECEMBER 31, 1997. UNLESS OTHERWISE INSTRUCTED SIGNED PROXIES
WHICH ARE RETURNED IN A TIMELY MANNER WILL BE VOTED IN FAVOR OF
SUCH APPOINTMENT.

<PAGE>

<PAGE>
OTHER BUSINESS

As of the date of this Proxy Statement, the only business which the Board
of Directors intends to present, and knows that others will present, at the
Annual Meeting is that set forth herein. If any other matter or matters are
properly brought before the Annual Meeting or any adjournments thereof, it is
the intention of the persons named in the accompanying form of proxy to vote the
proxy on such matter as recommended by the Board of Directors.

ANNUAL REPORT

A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1997, AS AMENDED, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, WITHOUT EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO EACH
STOCKHOLDER WHO SUBMITS A WRITTEN REQUEST THEREFOR ADDRESSED TO LAWRENCE F.
GILBERTI, SECRETARY, CD RADIO INC., SIXTH FLOOR, 2175 K STREET N.W., WASHINGTON,
D.C. 20037.

STOCKHOLDER PROPOSALS

Proposals of stockholders intended to be presented at the Company's next
Annual Meeting of Stockholders must be received by the Company on or prior to
January 4, 1999 to be eligible for inclusion in the Company's Proxy Statement
and form of Proxy to be used in connection with the next Annual Meeting.

OTHER INFORMATION

The cost of preparing, assembling, printing and mailing this Proxy
Statement and the accompanying form of proxy, and the cost of soliciting proxies
relating to the Annual Meeting, will be borne by the Company.

By Order of the Board of Directors,

/s/ LAWRENCE F. GILBERTI

LAWRENCE F. GILBERTI
Secretary

New York, New York
March 25, 1998

<PAGE>

APPENDIX 1

CD RADIO INC.

This proxy is solicited on behalf of the Board of Directors for the Annual
Meeting of Shareholders on April 20, 1998.

The undersigned hereby appoints David Margolese and Lawrence F. Gilberti,
and each of them, attorneys and proxies, with power of substitution in each of
them, to vote for and on behalf of the undersigned at the Annual Meeting of the
Stockholders of the Company to be held on April 20, 1998 and at any adjournment
thereof, upon matters properly coming before the meeting, as set forth in the
related Notice of Meeting and Proxy Statement, both of which have been received
by the undersigned. Without otherwise limiting the general authorization given
hereby, said attorneys and proxies are instructed to vote as follows:

1. ELECTION OF DIRECTORS:

David Margolese, Robert D. Briskman, Lawrence F. Gilberti,
Joseph V. Vittoria and Ralph V. Whitworth

[ ] FOR all nominees listed above
(except as marked to the contrary)

[ ] WITHHOLD AUTHORITY to vote for all the nominees listed

(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)

- --------------------------------------------------------------------------------

2. APPROVE AMENDMENTS TO THE 1994 STOCK OPTION PLAN AND 1994 DIRECTORS'
NONQUALIFIED STOCK OPTION PLAN.

FOR [ ] AGAINST [ ] ABSTAIN [ ]

(Continued and to be dated and signed on other side.)

<PAGE>

<PAGE>
(Continued from other side)

3. RATIFY THE APPOINTMENT OF COOPERS & LYBRAND LLP AS INDEPENDENT ACCOUNTANTS
FOR THE COMPANY FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997.

FOR [ ] AGAINST [ ] ABSTAIN [ ]

4. TO TAKE ACTION UPON ANY OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING.

FOR [ ] AGAINST [ ] ABSTAIN [ ]

UNLESS OTHERWISE SPECIFIED IN THE SQUARE OR SPACE PROVIDED IN THIS PROXY,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.

DO YOU INTEND TO ATTEND THE MEETING? [ ] YES [ ] NO

DATED: _________________, 1998
______________________________
Signed
______________________________
Please sign this proxy and
return it promptly whether or
not you expect to attend the
meeting. You may nevertheless
vote in person if you attend.
Please sign exactly as your
name appears herein. Give full
title if an Attorney,
Executor, Administrator,
Trustee, Guardian, etc. For an
account in the name of two or
more persons, each should
sign, or if one signs, he
should attach evidence of his
authority.

STATEMENT OF DIFFERENCES
------------------------

The section symbol shall be expressed as.............................. 'SS'