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________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A
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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 the 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
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CD RADIO INC.
(NAME OF REGISTRANT AS 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)(1) 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 (sets forth the amount on which
the filing fee is calculated and state how it was determined):
(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.
1180 AVENUE OF THE AMERICAS
14TH FLOOR
NEW YORK, NEW YORK 10036
TO THE STOCKHOLDERS OF CD RADIO INC.:
The Board of Directors of CD Radio Inc. (the 'Company') is seeking the
approval of its stockholders of (i) the issuance and sale of 1,350,000 shares of
its 9.2% Series A Junior Cumulative Convertible Preferred Stock (the 'Series A
Preferred Stock') pursuant to a Stock Purchase Agreement, dated as of November
13, 1998, by and among the Company, Apollo Investment Fund IV, L.P. and Apollo
Overseas Partners IV, L.P. (the 'Stock Purchase Agreement'), (ii) the issuance
and sale, at the Company's option, of 650,000 shares of its 9.2% Series B Junior
Cumulative Convertible Preferred Stock (the 'Series B Preferred Stock') pursuant
to the Stock Purchase Agreement, (iii) the issuance of up to 2,950,000 shares of
Series A Preferred Stock in payment of dividends that may be paid on the Series
A Preferred Stock from time to time, and (iv) the issuance up to 1,450,000
shares of Series B Preferred Stock in payment of dividends that may be paid on
the Series B Preferred Stock from time to time (the 'Proposal'). Each share of
Preferred Stock will be convertible at any time into shares of the Company's
Common Stock at a price of $30 per share.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT HOLDERS OF THE COMPANY'S
COMMON STOCK CONSENT TO THE PROPOSAL.
THE CONSENT OF THE HOLDERS OF A MAJORITY OF THE ISSUED AND OUTSTANDING
COMMON STOCK OF THE COMPANY IS REQUIRED TO APPROVE THE PROPOSAL.
The Consent Solicitation Statement on the following pages describes the
matters being presented to the stockholders in this consent solicitation (the
'Consent Solicitation'). Because this solicitation of written consents is in
lieu of a meeting of stockholders, there will be no meeting of stockholders held
in connection with the Consent Solicitation.
We hope you will have your stock represented in this Consent Solicitation
by signing, dating and returning your consent in the enclosed envelope as soon
as possible. If you submit a properly executed consent within sixty (60) days of
the delivery of the first dated consent delivered to the Company, your stock
will be voted in favor of the Proposal. Any other action by you will have the
practical effect of voting against the Proposal.
Sincerely,
/S/ PATRICK L. DONNELLY
PATRICK L. DONNELLY
Secretary
December 7, 1998
New York, New York
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CD RADIO INC.
1180 AVENUE OF THE AMERICAS
14TH FLOOR
NEW YORK, NEW YORK 10036
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CONSENT SOLICITATION STATEMENT
DECEMBER 7, 1998
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INFORMATION REGARDING CONSENTS
This Consent Solicitation Statement and the accompanying form of consent
are furnished in connection with the solicitation of stockholder consents (the
'Consent Solicitation') by the Board of Directors of CD Radio Inc. (the
'Company'), in lieu of a meeting of stockholders, in connection with (i) the
issuance and sale by the Company of 1,350,000 shares of its 9.2% Series A Junior
Cumulative Convertible Preferred Stock, par value $.001 per share (the 'Series A
Preferred Stock'), pursuant to a Stock Purchase Agreement (the 'Stock Purchase
Agreement'), dated as of November 13, 1998, by and among the Company, Apollo
Investment Fund IV, L.P. ('AIF IV') and Apollo Overseas Partners IV, L.P. ('AOP
IV' and, together with AIF IV, and including their respective successors and
permitted assigns, the 'Apollo Investors'), (ii) the issuance and sale, at the
option of the Company, of 650,000 shares of its 9.2% Series B Junior Cumulative
Convertible Preferred Stock, par value $.001 per share (the 'Series B Preferred
Stock' and, together with the Series A Preferred Stock, the 'Junior Preferred
Stock'), pursuant to the Stock Purchase Agreement, (iii) the issuance of up to
2,950,000 shares of Series A Preferred Stock in payment of dividends that may be
paid on the Series A Preferred Stock from time to time, and (iv) the issuance of
up to 1,450,000 shares of Series B Preferred Stock in payment of dividends that
may be paid on the Series B Preferred Stock from time to time (the 'Proposal').
Only stockholders of record on the books of the Company at the close of business
on December 1, 1998 (the 'Record Date') will be entitled to submit a consent.
These Consent Solicitation materials are being mailed to stockholders commencing
on December 7, 1998.
The Company is incorporated in Delaware and therefore is subject to the
Delaware General Corporation Law (the 'DGCL'). Section 228 of the DGCL permits
the stockholders of the Company to take action without a meeting if written
consents, setting forth the action so taken, are signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take action at a meeting at which all shares entitled
to vote thereon were present and voted. The DGCL also provides that the minimum
necessary votes must be received by the Company within 60 days of the date of
the first such written consent. Accordingly, if, within 60 days following its
receipt of the first written consent approving the Proposal, the Company
receives executed consents approving the Proposal from the holders of a majority
of the issued and outstanding shares of common stock, par value $.001 (the
'Common Stock'), of the Company and those consents have not been revoked, the
stockholders will be deemed to have approved the Proposal.
All written consents received by the Company, regardless of when dated,
will expire unless valid, written, unrevoked consents constituting the necessary
vote for approval of the Proposal are received by the Company within 60 days of
receipt of the first such consent.
As required by the DGCL, if the Proposal is approved by the stockholders,
the Company will promptly notify the stockholders from whom consent has not been
received.
A consent executed by a stockholder may be revoked at any time provided
that a written, dated revocation is executed and delivered to the Company on or
prior to the time at which the Company receives written consents sufficient to
approve the Proposal. The Company intends to consummate the transactions
contemplated by the Proposal as soon as practicable following the receipt of the
necessary consents and expiration of the required period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. A revocation may be in any
written form validly signed by the stockholder as long as it
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clearly states that the consent previously given is no longer effective. The
revocation should be addressed to Patrick L. Donnelly, Secretary, CD Radio Inc.,
1180 Avenue of the Americas, 14th Floor, New York, New York 10036.
DISSENTERS' RIGHT OF APPRAISAL
Neither the laws of the State of Delaware, the Amended and Restated
Certificate of Incorporation nor the Amended and Restated By-laws of the Company
provide a right of a stockholder to dissent and obtain appraisal of or payment
for such stockholder's shares in connection with the Proposal.
INTEREST OF CERTAIN PERSONS IN OR OPPOSITION TO MATTERS TO BE ACTED UPON
No officers, directors or associates of the Company have any substantial
interest, direct or indirect, in the Proposal, except insofar as such officers,
directors or associates thereof may be stockholders of the Company, in which
case the approval of the Proposal will affect them in the same manner as it
affects all other stockholders of the Company.
VOTING SECURITIES AND PRINCIPAL HOLDERS
Holders of record of the Common Stock, at the close of business on
December 1, 1998, will be entitled to submit a consent on the accompanying form.
On November 17, 1998, the Company had outstanding 23,178,464 shares of Common
Stock. Each share of stock is entitled to one vote in the Consent Solicitation.
Consents evidencing a majority of the outstanding shares of the Common Stock
issued and outstanding and entitled to vote are required to approve the Proposal
being submitted to the stockholders of the Company for approval in the Consent
Solicitation.
To be counted toward the majority for approval of the Proposal, a consent
must be delivered to the Company within 60 days of the receipt by the Company of
the first dated consent. Any action, other than the delivery of a properly
executed consent with such 60 day period, including abstentions and broker
nonvotes, will have the practical effect of voting against the Proposal.
Pursuant to a Voting Agreement dated November 13, 1998, between David
Margolese, Chairman and Chief Executive Officer of the Company, and the Apollo
Investors, Mr. Margolese has consented to the Proposal in respect of all shares
of Common Stock owned by him or which he is entitled to vote as voting trustee.
See 'Voting Trust Agreement' below.
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of November 17, 1998 by (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 executive 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 COMMON STOCK
BENEFICIAL OWNER OF COMMON STOCK(1) BENEFICIALLY OWNED BENEFICIALLY OWNED(2)
----------------------------------- ------------------ ---------------------
<S> <C> <C>
David Margolese(3) ................................................... 5,134,500 21.5%
c/o CD Radio Inc.
1180 Avenue of the Americas
14th Floor
New York, New York 10036
Prime 66 Partners, L.P.(4) ........................................... 5,061,700 21.8%
201 Main Street
Suite 2600
Fort Worth, Texas 76102
</TABLE>
(table continued on next page)
2
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(table continued from previous page)
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF TOTAL
NAMES AND ADDRESS OF OF COMMON STOCK COMMON STOCK
BENEFICIAL OWNER OF COMMON STOCK(1) BENEFICIALLY OWNED BENEFICIALLY OWNED(2)
------------------------------------ ------------------ ---------------------
<S> <C> <C>
Darlene Friedland(5) ................................................. 2,834,500 12.2%
1210 Wolseley Road
Point Piper 2027
Sydney, Australia
Loral Space & Communications Ltd. .................................... 1,905,488 8.2%
600 Third Avenue
New York, New York 10016
BankAmerica Corporation(6) ........................................... 1,666,000 7.2%
555 California Street, Suite 2600
San Francisco, California 94104
Robert D. Briskman(7)................................................. 192,500 *
Lawrence F. Gilberti(8)............................................... 35,000 *
Joseph V. Vittoria(9)................................................. 13,334 *
Ralph V. Whitworth(10)................................................ 52,800 *
Joseph Capobianco(11)................................................. 10,000 *
Ira H. Bahr(12)....................................................... -- *
Patrick L. Donnelly(13)............................................... -- *
Andrew J. Greenebaum(14).............................................. 59,000 *
All Executive Officers and Directors as a Group (9 persons)(15)....... 5,497,134 22.7%
</TABLE>
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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 shares of
Common Stock outstanding on November 17, 1998. 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 (the 'Exchange Act'). 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.
(3) Includes 700,000 shares issuable pursuant to stock options that are
exercisable within 60 days. Pursuant to a voting trust agreement (the
'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 acquired by
Darlene Friedland and certain of her affiliates (currently 2,834,500
shares) for a period of five years commencing November 20, 1997.
(4) This information is based upon the Schedule 13D dated November 12, 1998
filed by Prime 66 Partners, L.P. with the Securities and Exchange
Commission (the 'Commission').
(5) Pursuant to the Voting Trust Agreement, David Margolese has the power to
vote in his discretion all shares of Common Stock owned or acquired by
Darlene Friedland and certain of her affiliates (currently 2,834,500
shares) for a period of five years commencing November 20, 1997.
(6) Shares are owned by a group including the following: The Robertson
Stephens Orphan Fund (which has shared voting and shared dispositive
power over 1,056,000 shares), Robertson, Stephens & Company Investment
Management, L.P. (with shared voting and shared dispositive power
over 1,666,000 shares), BankAmerica Corporation (with shared voting and
shared dispositive power over 1,666,000 shares), and Robertson Stephens
Investment Management Co. (with shared voting and shared dispositive power
over 1,666,000 shares). The source of the information in this footnote
(footnotes continued on next page)
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(footnotes continued from previous page)
is the Schedule 13G dated September 30, 1998 filed by BankAmerica
Corporation, parent of Robertson Stephens Investment Management Co.
(7) Represents 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 that are not exercisable within
60 days.
(8) Represents 35,000 shares of Common Stock issuable pursuant to stock
options exercisable within 60 days.
(9) Represents 13,334 shares of Common Stock issuable pursuant to stock
options exercisable within 60 days. Does not include 26,666 shares of
Common Stock issuable pursuant to stock options that are not exercisable
within 60 days.
(10) Represents 52,800 shares of Common Stock issuable pursuant to
stock options exercisable within 60 days.
(11) Represents 10,000 shares of Common Stock issuable pursuant to stock
options exercisable within 60 days. Does not include 90,000 shares
issuable pursuant to stock options that are not exercisable within
60 days.
(12) Does not include 100,000 shares issuable pursuant to stock options
that are not exercisable within 60 days.
(13) Does not include 110,000 shares issuable pursuant to stock options
that are not exercisable within 60 days.
(14) 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.
(15) Includes 1,062,634 shares of Common Stock issuable pursuant to stock
options exercisable within 60 days. Does not include 550,166 shares
issuable pursuant to stock options that are not exercisable within 60 days.
VOTING TRUST AGREEMENT
The Company is a party to a Voting Trust Agreement by and among Darlene
Friedland, as grantor, and David Margolese, as the voting trustee. 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 was 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 of
Common Stock are initially deposited and the termination of the Trust. The Trust
will terminate on November 26, 2002.
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 of Common Stock 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
of Common Stock held in the Trust in relation to any matter upon which the
holders of such Common 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 of
Common Stock held by the Trust, with the number of shares of Common
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Stock 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 Amended and Restated
Certificate of Incorporation or the Amended and Restated 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 of Common Stock 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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THE PROPOSAL:
APPROVAL OF THE ISSUANCE AND SALE
OF 1,350,000 SHARES OF
9.2% SERIES A JUNIOR CUMULATIVE
CONVERTIBLE PREFERRED STOCK AND
650,000 SHARES OF
9.2% SERIES B JUNIOR CUMULATIVE
CONVERTIBLE PREFERRED STOCK
BACKGROUND
On November 11, 1998, the Board of Directors of the Company adopted
resolutions approving the Stock Purchase Agreement and recommending to the
holders of the Common Stock that they approve the transactions contemplated
thereby. Pursuant to the Stock Purchase Agreement, the Company agreed to sell a
total of 1,350,000 shares of the Series A Preferred Stock to the Apollo
Investors, for an aggregate purchase price of $135 million, and the Apollo
Investors granted the Company an option to sell the Apollo Investors an
additional 650,000 shares of the Series B Preferred Stock for an aggregate
purchase price of $65 million (the 'Series B Put Option'). The Company may
exercise the Series B Put Option at any time prior to the earlier of ten months
from the closing of the issuance and sale of the Series A Preferred Stock and
September 30, 1999.
The Apollo Investors are investment partnerships managed by Apollo
Management IV, L.P., a Delaware limited partnership founded by Leon Black with
offices in New York and California. The Apollo investment funds have invested
more than $7 billion in over 25 companies, including Vail Resorts, Inc. and
Telemundo Group, Inc.
The Junior Preferred Stock will be convertible at any time into shares of
Common Stock, at a price of $30 per share of Common Stock. Assuming the Company
issues the Series A Preferred Stock but does not exercise the Series B Put
Option, the Junior Preferred Stock will be convertible into an aggregate of
4,500,000 shares of Common Stock, or approximately 16.3% of the Common Stock
that would be outstanding assuming full conversion of the Series A Preferred
Stock. If the Company does exercise the Series B Put Option, the Junior
Preferred Stock will be convertible into 6,666,667 shares of Common Stock, or
approximately 22.3% of the Common Stock that would be outstanding assuming full
conversion of the Junior Preferred Stock.
The issuance and sale of the Junior Preferred Stock by the Company (the
'Contemplated Transactions') is conditioned upon the satisfaction or waiver (by
the party entitled to so waive) of a number of conditions set forth in the Stock
Purchase Agreement, including (i) the expiration or termination of the
applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and (ii) the consent of the common stockholders to the
Contemplated Transactions.
The Junior Preferred Stock will be callable by the Company beginning
November 15, 2001 if the current market price of the Common Stock, as defined in
the Certificate of Designation of the Junior Preferred Stock, exceeds $60 per
share for a period of 20 consecutive trading days, and will be callable in all
events beginning November 15, 2003 at a price of 100% and must be redeemed by
the Company on November 15, 2011. Dividends on the Junior Preferred Stock are
payable annually either in cash or in kind by the issuance of additional shares
of Junior Preferred Stock (valued at their liquidation preference of $100 per
share), at the option of the Company. The Junior Preferred Stock will have the
right to vote, on an as-converted basis, on matters in which the holders of the
Common Stock have the right to vote. See ' -- Description of Junior Preferred
Stock.'
RELATED TRANSACTIONS
In connection with the execution of the Stock Purchase Agreement, David
Margolese, Chairman and Chief Executive Officer of the Company, entered into a
Voting Agreement with the Apollo Investors (the 'Voting Agreement') pursuant to
which he agreed to, and did, consent to the transactions contemplated by the
Stock Purchase Agreement, including the issuance of the Junior
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Preferred Stock, with respect to 1,600,000 shares of Common Stock of the Company
owned by him and an additional 2,834,500 shares of Common Stock which he has the
right to vote pursuant to the terms of the Voting Trust Agreement.
In connection with the execution of the Stock Purchase Agreement, David
Margolese and the Company also entered into a Tag-Along Agreement with the
Apollo Investors (the 'Tag-Along Agreement'). Pursuant to the Tag-Along
Agreement, in the event that Mr. Margolese sells more than 800,000 shares of
Common Stock of the Company prior to the earlier of the date that the Apollo
Investors beneficially own less than 2,000,000 shares of Common Stock or the
date that is six months after the nationwide commercial introduction of the
Company's CD Radio service, then the Apollo Investors have certain rights to
sell, on a pro rata basis with Mr. Margolese, a portion of the Common Stock
owned by the Apollo Investors in any subsequent transaction in which Mr.
Margolese disposes of 80,000 or more shares of Common Stock.
To induce each other to enter into the Stock Purchase Agreement and to
complete the Contemplated Transactions, the Company and the Apollo Investors
made certain customary representations and warranties and agreed to certain
covenants, as set forth in the Stock Purchase Agreement. The Apollo Investors'
covenants include an agreement to refrain from selling or otherwise disposing of
any of the Junior Preferred Stock at the request of the Company and its
underwriter for a period of up to 180 days if the Company is conducting a
registered offering of Common Stock or securities convertible into Common Stock.
As an additional inducement to enter into the Stock Purchase Agreement and
to complete the Contemplated Transactions, the Company also agreed to grant the
Apollo Investors certain registration rights in respect of the Junior Preferred
Stock, as described below. See ' -- Description of Junior Preferred
Stock -- Registration Rights.'
On November 13, 1998, the Company amended the Rights Agreement, dated as of
October 22, 1997 (the 'Rights Agreement'), between the Company and Continental
Stock Transfer & Trust Company, as rights agent, to render the Rights Agreement
inapplicable to the Contemplated Transactions and to permit the Apollo
Investors, and any other person deemed to beneficially own the shares of Junior
Preferred Stock owned by the Apollo Investors, to (i) purchase shares of Junior
Preferred Stock pursuant to the Stock Purchase Agreement, (ii) acquire
additional shares of Junior Preferred Stock pursuant to dividends declared on
the Junior Preferred Stock, (iii) acquire additional shares of Common Stock upon
the conversion of shares of Junior Preferred Stock into shares of Common Stock,
or (iv) acquire up to an additional 1% of the outstanding shares of Common
Stock, in each case, without the Apollo Investors becoming 'Acquiring Persons'
within the meaning of the Rights Agreement.
BOARD ACTION
The Board of Directors considered the financing options available to the
Company in light of current market conditions and determined that it is in the
Company's best interests to consummate the issuance and sale of the Series A
Preferred Stock and to have the option to sell the Series B Preferred Stock. In
addition, the Board of Directors believes that the reputation and financial
resources of the Apollo Investors make the Proposal an attractive financing
arrangement.
If the Proposal is approved by the stockholders, the Company will promptly
file the Certificates of Designations, Preferences and Relative, Participating,
Optional and Other Special Rights of the Series A Preferred Stock and the
Series B Preferred Stock with the Delaware Secretary of State and will promptly
take all other actions necessary to consummate the issuance and sale of the
Series A Preferred Stock to the Apollo Investors. The net proceeds from the sale
of the Series A Preferred Stock and, if applicable, the Series B Preferred
Stock, together with the Company's current working capital and the proceeds from
a recently completed sale of Common Stock to Prime 66 Partners, L.P., a Texas
limited partnership affiliated with Sid Bass, should enable the Company to fund
planned operations and construction of its satellite system through the fourth
quarter of 1999.
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DILUTION
The conversion of the Series A Preferred Stock or Series B Preferred Stock
into shares of Common Stock will cause dilution of the interest in the Company
of existing holders of Common Stock. The Company is unable to predict the effect
that sales by the Apollo Investors of the Junior Preferred Stock or shares of
Common Stock into which shares of Junior Preferred Stock are converted, whether
made under Rule 144, pursuant to future registration statements or otherwise,
may have on any then prevailing market price for shares of the Common Stock.
Nevertheless, sales of a substantial amount of Common Stock in the public market
or the perception that such sales could occur, could adversely affect market
prices. See ' -- Description of Junior Preferred Stock -- Conversion.'
DESCRIPTION OF JUNIOR PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations prescribed
by law, without further stockholder approval, to issue from time to time up to
an aggregate of 50,000,000 shares of the Company's authorized class of
undesignated Preferred Stock, in one or more series. Each such series of
Preferred Stock shall have such number of shares, designations, preferences,
powers, qualifications and special or relative rights or privileges as may be
determined by the Board of Directors, which may include, among others, dividend
rights, voting rights, redemption and sinking fund provisions, liquidation
preferences, conversion rights and preemptive rights. The stockholders of the
Company have granted the Board of Directors authority to issue Preferred Stock
and to determine its rights and preferences to eliminate delays associated with
a stockholder vote on specific issuances. The rights of the holders of Common
Stock will be subject to the rights of any Preferred Stock issued in the future.
Initially, the Company will issue 1,350,000 shares of Series A Preferred
Stock and, if it exercises the Series B Put Option, will issue 650,000 shares of
Series B Preferred Stock. In order to permit the Company to issue additional
shares of Series A Preferred Stock and Series B Preferred Stock in payment of
dividends that may be required to be paid thereon from time to time, the Board
of Directors has authorized the issuance of up to 4,300,000 shares of the
Series A Preferred Stock and up to 2,100,000 shares of the Series B Preferred
Stock. The following is a summary of the rights of the Junior Preferred Stock
proposed to be issued.
Dividends. The annual dividend rate per share of the Junior Preferred Stock
will be an amount equal to 9.2% of the sum of (x) the Liquidation Preference (as
defined below) of the Junior Preferred Stock and (y) all unpaid dividends, if
any, whether or not declared, from the date of issuance of such share of Junior
Preferred Stock (for shares of Series A Preferred Stock, the 'Closing Date' and,
for shares of Series B Preferred Stock, the 'Option Closing Date') to the
applicable dividend payment date. Dividends on the shares of Junior Preferred
Stock will be cumulative, accruing annually and, when and as declared by the
Board of Directors of the Company, will be payable annually initially on
November 15, 1999 and on each November 15 thereafter (each, a 'Dividend Payment
Date'). If any dividend payable on any Dividend Payment Date is not declared or
paid on such Dividend Payment Date in full, in cash or in additional shares of
Junior Preferred Stock of the same series, then the amount of such unpaid
dividend ('Default Dividends') will be accumulated and will accrue dividends,
until paid, compounded annually at a rate equal to 15% per annum. Dividends may
be paid in cash, shares of Junior Preferred Stock of the same series or any
combination thereof, at the option of the Company. Default Dividends may only be
paid in shares of Junior Preferred Stock of the same series.
With respect to the payment of dividends, the Series A Preferred Stock will
rank on a parity with the Series B Preferred Stock. If and so long as full
cumulative dividends payable on the shares of Junior Preferred Stock in respect
of all prior dividend periods have not been paid or set apart for payment and
proper provision has not been made such that holders of Junior Preferred Stock
are offered the opportunity to make a Payout Election (as defined below) in lieu
of a Conversion Price adjustment (as described below), the Company will not pay
any dividends, except for dividends payable in Common Stock or capital stock of
the Company ranking junior to the Junior Preferred Stock in payment of dividends
('Junior Dividend Stock') or make any distributions of assets on or redeem,
purchase or otherwise acquire for consideration shares of Common Stock or Junior
Dividend Stock.
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If and so long as any accrued and unpaid dividends payable on any shares of
capital stock of the Company ranking senior to the Junior Preferred Stock in
payment of dividends have not been paid or set apart for payment, the Company
will not pay any dividends in cash on shares of Junior Preferred Stock. No
dividends paid in cash will be paid or declared and set apart for payment on any
shares of Junior Preferred Stock or of capital stock of the Company ranking on a
parity with the Junior Preferred Stock in the payment of dividends ('Parity
Dividend Stock') for any period unless the Company has paid or declared and set
apart for payment, or contemporaneously pays or declares and sets apart for
payment, on the Junior Preferred Stock all accrued and unpaid dividends for all
dividend payment periods terminating on or prior to the date of payment of such
dividends; provided, however, that all dividends accrued by the Company on
shares of Junior Preferred Stock or Parity Dividend Stock will be declared pro
rata with respect to all shares of Junior Preferred Stock and Parity Dividend
Stock then outstanding, based on the ratio of unpaid dividends on the Junior
Preferred Stock to unpaid dividends on the Parity Dividend Stock. No dividends
paid in cash will be paid or declared and set apart for payment on Junior
Preferred Stock for any period unless the Company has paid or declared and set
apart for payment, or contemporaneously pays or declares and sets apart for such
payment, on any shares of Parity Dividend Stock all accrued and unpaid dividends
for all dividend payment periods terminating on or prior to the date of payment
of such dividends.
Redemption. Except as described below, shares of Junior Preferred Stock may
not be redeemed by the Company at its option prior to November 15, 2003. From
and after November 15, 2001 and prior to November 15, 2003, the Company may
redeem shares of Junior Preferred Stock, in whole or in part, at any time at a
redemption price of 100% of the Liquidation Preference (as defined below) of the
shares of Junior Preferred Stock redeemed, plus unpaid dividends, if any,
whether or not declared, to the redemption date, if the average closing price of
the Common Stock as reported in The Wall Street Journal or, at the election of
the Company, other reputable financial news source, for the 20 consecutive
trading days prior to the notice of redemption thereof (the 'Current Market
Price') equals or exceeds $60 per share (subject to adjustments).
From and after November 15, 2003, the Company may redeem shares of Junior
Preferred Stock, in whole or in part, at any time at a redemption price of 100%
of the Liquidation Preference of the Junior Preferred Stock redeemed, plus
unpaid dividends, if any, whether or not declared, to the redemption date.
On November 15, 2011, the Company will be required to redeem all
outstanding shares of Junior Preferred Stock at a redemption price of 100% of
the Liquidation Preference of the Junior Preferred Stock redeemed, plus unpaid
dividends, if any, whether or not declared, to the redemption date.
The amount paid to the holders of shares of Junior Preferred Stock upon
redemption that is allocable to the Liquidation Preference of the shares of
Junior Preferred Stock will be paid in cash and the amount of any unpaid
dividends to be paid on the shares of Junior Preferred Stock redeemed will be
paid in cash, shares of Junior Preferred Stock of the same series or any
combination thereof at the option of the Company.
Change of Control. Upon the occurrence of a Change of Control (as defined
below), the Company must make an offer (a 'Change of Control Offer') to purchase
all then outstanding shares of Junior Preferred Stock at a purchase price in
cash equal to 101% of their Liquidation Preference, plus any unpaid dividends
(paid in cash), if any, whether or not declared, to the date such shares are
purchased; provided that if the purchase of the Junior Preferred Stock would
violate or constitute a default under (i) the Company's 15% Senior Secured
Discount Notes due 2007 (the 'Senior Secured Notes') or the indenture relating
to the Senior Secured Notes (the 'Indenture') or (ii) the indenture or
indentures or other agreement or agreements under which there may be issued or
outstanding from time to time other indebtedness of the Company ('Other
Agreements') in an aggregate principal amount not exceeding $450 million (less
the amount, if any, of indebtedness issued to replace, refinance or refund the
Senior Secured Notes) because the Company has not satisfied all of its
obligations under the Indenture and such Other Agreements arising from the
Change of Control (collectively, the 'Senior Obligations'), then the Company
will be required to use its best efforts to satisfy the Senior Obligations as
promptly as possible or to obtain the requisite consents necessary to permit the
repurchase of the Junior Preferred
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Stock, and until such Senior Obligations are satisfied or such consents are
obtained, the Company will not be obligated to make a Change of Control Offer.
A 'Change of Control' is defined as the occurrence of any of the following
events: (i) any 'person' or 'group' (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the 'beneficial owner' (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have 'beneficial ownership' of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 40% of the total
outstanding voting stock of the Company; (ii) the Company consolidates with or
merges with or into another person or conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any person, or any person
consolidates with or merges with or into the Company, in any such event,
pursuant to a transaction in which the outstanding voting stock of the Company
is converted into or exchanged for cash, securities or other property, other
than, at all times when the Senior Secured Notes are outstanding, those
transactions that are not deemed a 'Change of Control' under the terms of the
Indenture; (iii) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election to such Board of Directors, or
whose nomination for election by the stockholders of the Company, was approved
by a vote of 66 2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office; or (iv) the
Company is liquidated or dissolved or a special resolution is passed by the
stockholders of the Company approving a plan of liquidation or dissolution,
other than, at all times when the Senior Secured Notes are outstanding, those
transactions that are not deemed a 'Change of Control' under the terms of the
Indenture.
Notwithstanding the foregoing, no transaction or event will be deemed a
'Change of Control' if (i) all of the outstanding shares of Common Stock are to
be converted pursuant thereto solely into the right to receive, for each share
of Common Stock so converted, cash and/or shares of Qualifying Acquiror Common
Stock (as defined below) (valued at its Current Market Price) together having a
value in excess of $30.30, (ii) the Company has declared and paid all dividends
on the Junior Preferred Stock, whether or not theretofore declared or
undeclared, to the date of the Change of Control and the holders thereof have
been given reasonable opportunity to convert, prior to such Change of Control,
any shares of Junior Preferred Stock so issued as a dividend, and (iii)
immediately following such event the number of shares of Qualifying Acquiror
Common Stock into which shares of Junior Preferred Stock have been converted
(together with, if shares of Junior Preferred Stock are to remain outstanding,
any shares of Qualifying Acquiror Common Stock into which all outstanding shares
of Junior Preferred Stock would be convertible) represent both (A) less than 5%
of the total number of shares of Qualifying Acquiror Common Stock outstanding
immediately after such event and (B) less than one third of the number of shares
of Qualifying Acquiror Common Stock that would be Publicly Traded immediately
after such event. The term 'Qualifying Acquiror Common Stock' means the common
stock of any corporation if listed on or admitted to trading on the New York
Stock Exchange, American Stock Exchange or Nasdaq, and the term 'Publicly
Traded' means shares of such Qualifying Acquiror Common Stock that are both (a)
held by persons who are neither officers, directors or Affiliates of such
corporation nor the 'beneficial owner' (as such term is defined in Rule 13d-3
under the Exchange Act) of 5% or more of the total number of shares then issued
and outstanding, and (b) not 'restricted securities' (as such term is defined in
Rule 144 of the Securities Act of 1933, as amended).
Conversion. Each share of Junior Preferred Stock may be converted at any
time, at the option of the holder, unless previously redeemed, into a number of
shares of Common Stock calculated by dividing the Liquidation Preference of the
Junior Preferred Stock (without unpaid dividends) by $30.00 (as adjusted from
time to time, the 'Conversion Price'). The Conversion Price will not be adjusted
at any time for unpaid dividends on the shares of Junior Preferred Stock, but
will be subject to adjustment for the occurrence of certain corporate events
affecting the Common Stock. Upon conversion, holders of the Junior Preferred
Stock will be entitled to receive any unpaid dividends upon the shares of Junior
Preferred Stock converted payable in cash, shares of Common Stock or a
combination thereof, at the option of the Company.
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The Conversion Price for shares of Junior Preferred Stock will be subject
to adjustment in certain events, including (i) dividends and other distributions
payable in Common Stock on any class of capital stock of the Company, (ii)
subdivisions, combinations and reclassifications of the Common Stock, (iii) the
issuance to all holders of Common Stock of rights or warrants entitling them to
subscribe for or purchase Common Stock at less than fair market value, (iv)
distributions to all holders of Common Stock of evidence of indebtedness of the
Company or assets, (v) repurchases, redemptions or other acquisitions of the
Common Stock by the Company at a price per share greater than the Current Market
Price per share of Common Stock on the date of such event, (vi) issuance or sale
of Common Stock by the Company at a price per share more than 15% below (or, in
the case of any issuance or sale to an affiliate of the Company, any amount
below) the Current Market Price per share of Common Stock on the date of such
event (except for issuances to or through a nationally recognized investment
banking firm in which affiliates of the Company purchase less than 25% of the
shares in such offering) and (vii) a consolidation or merger to which the
Company is a party or the sale or transfer of all or substantially all of the
assets of the Company.
The Conversion Price for shares of Junior Preferred Stock will not be
adjusted in the event that (i) such adjustment would not require an increase or
decrease of at least 1% in the Conversion Price then in effect or (ii) with
respect to each series of Junior Preferred Stock and in connection with an
adjustment that would be made in respect of a dividend, purchase, redemption or
other acquisition, holders of a majority of the outstanding shares of such
series of Junior Preferred Stock elect to participate in such dividend,
purchase, redemption or other acquisition (a 'Payout Election') pro rata with
the holders of Common Stock or capital stock ranking junior to the Junior
Preferred Stock ('Junior Stock').
Voting Rights. So long as any shares of Junior Preferred Stock are
outstanding, each share of Junior Preferred Stock will entitle the holder
thereof to vote, in person or by proxy, at any special or annual meeting of
stockholders, on all matters entitled to be voted on by holders of Common Stock
voting together as a single class with all other shares entitled to vote
thereon. With respect to any such vote, each share of Junior Preferred Stock
will entitle the holder thereof to cast that number of votes per share as is
equal to the number of votes that such holder would be entitled to cast had such
holder converted its shares of Junior Preferred Stock into shares of Common
Stock on the record date for determining the stockholders of the Company
eligible to vote on any such matters.
In addition to any vote or consent of stockholders required by law or by
the Company's Amended and Restated Certificate of Incorporation, the consent or
vote of the holders of at least a majority of the shares of a particular series
of Junior Preferred Stock at any time issued and outstanding will be necessary
for effecting or validating any reclassification of such series of Junior
Preferred Stock or amendment, alteration or repeal of any of the provisions of
the Amended and Restated Certificate of Incorporation or Amended and Restated
By-laws of the Company which adversely affects the voting powers, rights or
preferences of the holders of the shares of such series of Junior Preferred
Stock. The consent of the holders of at least a majority of the shares of Junior
Preferred Stock at the time issued and outstanding, acting as a single class,
will be necessary for effecting or validating any amendment, alteration or
repeal of any of the provisions of the Amended and Restated Certificate of
Incorporation or Amended and Restated By-laws of the Company which affects
adversely the voting powers, rights or preferences of the holders of the shares
of both series of Junior Preferred Stock. Any amendment of the provisions of the
Company's Amended and Restated Certificate of Incorporation so as to authorize
or create, or to increase the authorized amount of, any Junior Stock will not be
deemed to affect adversely the voting powers, rights or preferences of the
holders of shares of Junior Preferred Stock. The consent of at least a majority
of the shares of each series of Junior Preferred Stock will also be necessary
for effecting or validating:
(i) the authorization or creation of, or the increase in the
authorized amount of, or the issuance of any shares of any class or series
of capital stock ranking senior to the Junior Preferred Stock ('Senior
Stock') or any security convertible into shares of any class or series of
Senior Stock;
(ii) the authorization or creation of, or the increase in the
authorized amount of, or the issuance of any shares of any class or series
of capital stock ranking on a parity with the Junior Preferred Stock
('Parity Stock') or any security convertible into shares of any class or
series of
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Parity Stock such that the aggregate liquidation preference of all
outstanding shares of Parity Stock (other than (x) shares of Junior
Preferred Stock issued pursuant to the Stock Purchase Agreement and (y)
shares of Junior Preferred Stock issued as a dividend in respect of shares
issued in respect of (x) or (y)) would exceed the sum of (A) $135,000,000
and (B) the aggregate liquidation preference of the shares of Series B
Preferred Stock issued at the Option Closing, if any;
(iii) the merger or consolidation of the Company with or into any
other entity, unless the resulting corporation will thereafter have no
class or series of shares and no other securities either authorized or
outstanding ranking prior to, or on a parity with, shares of Junior
Preferred Stock; provided, however, that no such vote or consent of the
holders of Junior Preferred Stock will be required if prior to the time
when such merger or consolidation is to take effect, and regardless of
whether such merger or consolidation would constitute a Change of Control,
a Change of Control Offer is made for all shares of Junior Preferred Stock
at the time outstanding; and
(iv) the application of any funds, property or assets of the Company
to the purchase, redemption, sinking fund or other retirement of any shares
of any class of Junior Stock, or the declaration, payment or making of any
dividend or distribution on any shares of any class of Junior Stock, other
than a dividend or dividends payable solely in shares of Common Stock or
Junior Stock of the same series, unless the holders of Junior Preferred
Stock have been offered the opportunity to make a Payout Election with
respect to such event.
In connection with the foregoing class rights to vote, each holder of
shares of Junior Preferred Stock shall have one vote for each share of Junior
Preferred Stock held. The above notwithstanding, and subject to their right to
vote on an as-converted-basis on matters on which holders of Common Stock are
entitled to vote, no consent of holders of Junior Preferred Stock will be
required for the creation of any indebtedness of any kind of the Company.
Liquidation. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the Series A Preferred Stock will rank
on a parity with the Series B Preferred Stock and, before any distribution of
the assets of the Company to the holders of shares of Common Stock or any other
class or series of Junior Stock, but after payment of the liquidation preference
payable on the Company's 10 1/2% Series C Convertible Preferred Stock, par value
$.001 per share, or any other class or series of Senior Stock, the holders of
shares of Junior Preferred Stock will be entitled to receive out of the assets
of the Company available for distribution to its stockholders, whether from
capital, surplus or earnings, an amount per share of Junior Preferred Stock
equal to $100 (the 'Liquidation Preference'), plus accrued and unpaid dividends
on such share of Junior Preferred Stock, if any, to the date of final
distribution.
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, before any distribution of assets of the Company to
the holders of shares of Junior Preferred Stock or Parity Stock, the holders of
any shares of Senior Stock will be entitled to receive out of the assets of the
Company available for distribution to its stockholders, whether from capital,
surplus or earnings, an amount per share of such Senior Stock equal to the
liquidation preference thereof, plus accrued and unpaid dividends thereon, if
any, to the date of final distribution.
If, upon any liquidation, dissolution or winding up of the Company, the
amounts payable with respect to the shares of Junior Preferred Stock or any
Parity Stock are not paid in full, then such holders will share ratably in any
such distribution of assets, or proceeds thereof, in proportion to the full
respective preferential amounts to which they are entitled. Neither a
consolidation nor a merger of the Company with one or more other corporations,
nor a sale or a transfer of all or substantially all of the assets of the
Company, will be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of the Company.
Exchange. Shares of Junior Preferred Stock may be exchanged at any time and
from time to time, at the Company's option, for the Company's 9.2% Convertible
Debentures (the 'Convertible Debt'). The Convertible Debt will be issued
pursuant to an indenture to be agreed upon by the Company and the Apollo
Investors or, if no such indenture has been agreed upon as of the Closing Date,
an indenture acceptable, in form and substance, to a majority of the holders of
the Junior Preferred Stock immediately prior to the effectiveness of such
indenture.
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The Convertible Debt will have a maturity date 13 years following the
Closing Date, a principal amount equal to the aggregate Liquidation Preference
of the shares of Junior Preferred Stock exchanged and will provide for the
payment of interest at a rate of 9.2% per annum, payable annually in cash or
additional Convertible Debt, at the option of the Company. The Convertible Debt
will be convertible and redeemable on terms substantially similar to those of
the Junior Preferred Stock.
Registration Rights. Under the Stock Purchase Agreement, at any time after
the date which is the second anniversary of the Closing Date, holders of shares
of Series A Preferred Stock, or shares of Common Stock into which shares of
Series A Preferred Stock have been converted, representing, in the aggregate, at
least 50% of the shares of Common Stock into which shares of Series A Preferred
Stock have been or may be converted (assuming conversion of the Series A
Preferred Stock) ('Series A Registrable Securities') will be entitled, on two
occasions, to require the Company to register the Series A Registrable
Securities for sale in an underwritten public offering by a nationally
recognized investment banking firm or firms reasonably acceptable to the
Company. At any time after the date which is the second anniversary of the
Closing Date, holders of shares of Series B Preferred Stock or shares of Common
Stock into which shares of Series B Preferred Stock have been converted
representing, in the aggregate, at least 50% of the shares of Common Stock into
which shares of Series B Preferred Stock have been or may be converted (assuming
conversion of the Series B Preferred Stock) ('Series B Registrable Securities')
will be entitled, on one occasion, to require the Company to register the
Series B Registrable Securities for sale in an underwritten public offering by a
nationally recognized investment banking firm or firms reasonably acceptable to
the Company.
In the event that a demand registration would be seriously detrimental to
the Company and its stockholders, such demand registration may be deferred, at
the request of the Company, twice in any 12-month period for an aggregate period
of time of up to 90 days. In addition, holders of Junior Preferred Stock will be
subject to customary 'lockup' agreements at the request of the managing
underwriter of any public offering on behalf of the Company. In the event the
Company plans to file a registration statement on behalf of one or more security
holders, holders of Junior Preferred Stock also have the right, subject to
customary limitations and the rights of such other security holders, to request
that such registration include their Registrable Securities. Holders of Junior
Preferred Stock or Registrable Securities are entitled to an unlimited number of
such 'piggyback' registrations.
THE PRECEDING DESCRIPTION OF THE PROPOSAL AND THE RIGHTS AND PREFERENCES OF
THE JUNIOR PREFERRED STOCK IS ONLY A SUMMARY AND DOES NOT PURPORT TO BE A
COMPLETE DESCRIPTION OF ALL TERMS RELATED THERETO. THIS DESCRIPTION IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO (A) THE STOCK PURCHASE AGREEMENT, A COPY OF
WHICH IS ATTACHED AS ANNEX 1, (B) THE FORMS OF THE CERTIFICATES OF DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF
THE SERIES A PREFERRED STOCK AND THE SERIES B PREFERRED STOCK, COPIES OF WHICH
ARE ATTACHED AS EXHIBIT A AND EXHIBIT B TO THE STOCK PURCHASE AGREEMENT,
RESPECTIVELY, (C) THE FORM OF OPINION OF COUNSEL TO THE COMPANY, A COPY OF WHICH
IS ATTACHED AS EXHIBIT C TO THE STOCK PURCHASE AGREEMENT, (D) THE VOTING
AGREEMENT, A COPY OF WHICH IS ATTACHED AS ANNEX 2, (E) THE TAG-ALONG AGREEMENT,
A COPY OF WHICH IS ATTACHED AS ANNEX 3 AND (F) THE AMENDMENT TO THE RIGHTS
AGREEMENT, A COPY OF WHICH IS ATTACHED AS ANNEX 4.
VOTING REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the shares of Common Stock
outstanding is required to approve the Proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS CONSENT TO THE
PROPOSAL.
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SOLICITATION EXPENSES
The Company will bear the cost of soliciting consents. Consents are being
solicited by mail and, in addition, directors, officers, and employees of the
Company may solicit consents personally or by telephone or facsimile
transmission. No additional compensation will be paid on account of any such
solicitations. The Company has also retained D.F. King & Co., Inc. to assist in
the consent solicitation and tabulate the votes. The Company will pay D.F. King
& Co., Inc. a fee of $5,000 and reimburse it for customary fees and expenses in
connection with such engagement. Although there is no formal agreement to do so,
the Company will reimburse custodians, brokerage houses, nominees, and other
fiduciaries for the cost of sending Consent Solicitation material to their
principals.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at its
regional offices located at Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661-2511; and 13th Floor, 7 World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such reports, proxy statements and other information
concerning the Company also can be inspected and copied at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006, which supervises the Nasdaq National Market on which the
Company's Common Stock is traded. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of the Commission's Web site is http://www.sec.gov.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next annual
meeting of the stockholders of the Company must have been received by the
Company at its offices at 1180 Avenue of the Americas, 14th Floor, New York, New
York 10036, on or before January 4, 1999, and satisfied the conditions
established by the Commission for stockholder proposals to be included in the
Company's proxy statement for that meeting.
By order of the Board of Directors
/S/ PATRICK L. DONNELLY
PATRICK L. DONNELLY
Secretary
December 7, 1998
New York, N.Y.
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ANNEX 1
_______________________________________________________________________________
STOCK PURCHASE AGREEMENT
BY AND AMONG
CD RADIO INC.,
APOLLO INVESTMENT FUND IV, L.P.
AND
APOLLO OVERSEAS PARTNERS IV, L.P.
DATED: NOVEMBER 13, 1998
_______________________________________________________________________________
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TABLE OF CONTENTS
<TABLE>
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ARTICLE 1
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DEFINITIONS............................................................................................ 1
1.1 Definitions........................................................................................ 1
ARTICLE 2
PURCHASE AND SALE OF SECURITIES........................................................................ 4
2.1 Purchase and Sale of Securities.................................................................... 4
2.2 Certificates of Designation........................................................................ 4
2.3 Closing............................................................................................ 4
2.4 Option............................................................................................. 5
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................... 5
3.1 Corporate Existence and Power...................................................................... 5
3.2 Subsidiaries....................................................................................... 6
3.3 Corporate Authorization; No Contravention.......................................................... 6
3.4 Governmental Authorization; Third Party Consents................................................... 6
3.5 Binding Effect..................................................................................... 6
3.6 Capitalization of the Company...................................................................... 6
3.7 SEC Filings; Financial Statements.................................................................. 7
3.8 Absence of Certain Developments.................................................................... 7
3.9 Compliance with Laws............................................................................... 7
3.10 Licenses........................................................................................... 7
3.11 Litigation......................................................................................... 7
3.12 Intellectual Property.............................................................................. 8
3.13 Private Offering................................................................................... 8
3.14 Rights Agreement................................................................................... 8
3.15 Board Approval; Delaware GCL 203; Stockholder Approval............................................. 8
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS....................................................... 8
4.1 Existence and Power................................................................................ 8
4.2 Authorization; No Contravention.................................................................... 9
4.3 Governmental Authorization; Third Party Consents................................................... 9
4.4 Binding Effect..................................................................................... 9
4.5 Purchase for Own Account........................................................................... 9
4.6 Sufficient Funds................................................................................... 9
ARTICLE 5
COVENANTS OF THE COMPANY............................................................................... 9
5.1 Conduct of Business................................................................................ 9
5.2 Indemnification of Brokerage....................................................................... 10
5.3 Rule 144........................................................................................... 10
5.4 Stockholder Approval............................................................................... 10
5.5 Rights Agreement and Board Approval................................................................ 10
5.6 Convertible Debt Indenture......................................................................... 10
ARTICLE 6
COVENANTS OF THE PURCHASER............................................................................. 10
6.1 Indemnification of Brokerage....................................................................... 10
6.2 Lock-Up Agreement.................................................................................. 11
6.3 Short Sales and Derivatives........................................................................ 11
6.4 Convertible Debt Indenture......................................................................... 11
</TABLE>
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ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO CLOSE...................................... 11
7.1 Representations and Covenants...................................................................... 12
7.2 Consents and Approvals............................................................................. 12
7.3 Filing of Certificates of Designation.............................................................. 12
7.4 Opinion of Counsel to the Company.................................................................. 12
7.5 HSR Act............................................................................................ 12
7.6 No Claims.......................................................................................... 12
ARTICLE 8
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO CLOSE......................................... 12
8.1 Representations and Covenants...................................................................... 12
8.2 Consents and Approvals............................................................................. 12
8.3 HSR Act............................................................................................ 12
8.4 No Claims.......................................................................................... 13
ARTICLE 9
REGISTRATION RIGHTS.................................................................................... 13
9.1 Requested Registration............................................................................. 13
9.2 Company Registration............................................................................... 14
9.3 Transferability.................................................................................... 14
9.4 Expenses of Registration........................................................................... 14
9.5 Registration Procedures............................................................................ 15
9.6 Indemnification.................................................................................... 16
9.7 ................................................................................................... 17
ARTICLE 10
TERMINATION OF AGREEMENT............................................................................... 17
10.1 Termination........................................................................................ 17
10.2 Survival After Termination......................................................................... 18
ARTICLE 11
MISCELLANEOUS.......................................................................................... 18
11.1 HSR Approval....................................................................................... 18
11.2 Expenses........................................................................................... 18
11.3 Notices............................................................................................ 18
11.4 Successors and Assigns............................................................................. 19
11.5 Amendment and Waiver............................................................................... 19
11.6 Counterparts....................................................................................... 19
11.7 Headings........................................................................................... 19
11.8 GOVERNING LAW...................................................................................... 19
11.9 Severability....................................................................................... 19
11.10 Entire Agreement................................................................................... 19
11.11 Further Assurances................................................................................. 20
11.12 Public Announcements............................................................................... 20
</TABLE>
<TABLE>
<S> <C>
SCHEDULE 3.2 Subsidiaries of the Company
SCHEDULE 3.4 Required Consents
EXHIBIT A Form of Certificate of Designation of 9.2% Series A Junior Cumulative Convertible Preferred
Stock
EXHIBIT B Form of Certificate of Designation of 9.2% Series B Junior Cumulative Convertible Preferred
Stock
EXHIBIT C Form of Opinion of Counsel to the Company
</TABLE>
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of November 13, 1998 (this 'Agreement'),
by and among CD RADIO INC., a Delaware corporation (the 'Company'), and APOLLO
INVESTMENT FUND IV, L.P., a Delaware limited partnership ('AIF IV') and APOLLO
OVERSEAS PARTNERS IV, L.P., a Cayman Islands limited partnership ('AOP IV,' and
together with AIF IV, and including their respective successors and permitted
assigns, the 'Purchasers').
WHEREAS, the Company proposes to issue and sell to the Purchasers, and the
Purchasers propose to buy, for an aggregate purchase price of One Hundred
Thirty-Five Million Dollars ($135,000,000), 1,350,000 shares of 9.2% Series A
Junior Cumulative Convertible Preferred Stock, par value $.001 per share, of the
Company;
WHEREAS, the Company wishes to acquire from the Purchasers, and the
Purchasers wish to grant to the Company, an option to require the Purchasers to
purchase an aggregate of 650,000 shares of 9.2% Series B Junior Cumulative
Convertible Preferred Stock, par value $.001 per share, of the Company on the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, and unless the context requires
a different meaning, the following terms shall have the meanings set forth
below:
'Affiliate' means a Person that directly, or indirectly through one or
more intermediaries, Controls or is Controlled by, or is under common
Control with the Person specified.
'Agreement' means this Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.
'AIF IV' has the meaning assigned to such term in the preamble.
'Allocation Notice' has the meaning assigned to such term in Section
2.3(b).
'AOP IV' has the meaning assigned to such term in the preamble.
'Beneficial Owner' shall mean a Person who beneficially owns any
securities within the meaning of Rule 13d-3 under the Exchange Act, and
'beneficially owned' and 'beneficial ownership' shall have correlative
meanings.
'Board of Directors' means the board of directors of the Company or
any duly authorized committee thereof.
'Broker' has the meaning assigned to such term in Section 5.2.
'Business Day' means any day other than Saturday, Sunday or other day
on which commercial banks in the State of New York are authorized or
required by law or executive order to close.
'Bylaws' means the bylaws of the Company, as the same may have been
amended and in effect as of the Closing Date.
'Certificate of Incorporation' means the Amended and Restated
Certificate of Incorporation of the Company, as the same may have been
amended and in effect as of the Closing Date.
'Claims' means actions, causes of action, suits, claims, complaints,
demands, litigations or legal, administrative or arbitral proceedings.
'Closing' has the meaning assigned to such term in Section 2.3.
'Closing Date' has the meaning assigned to such term in Section 2.3.
'Commission' means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
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'Common Stock' means the Common Stock, par value $.001 per share, of
the Company, or any other capital stock of the Company into which such
stock is reclassified or reconstituted.
'Company Options' has the meaning assigned to such term in Section
3.6.
'Contemplated Transactions' means the transactions contemplated by
this Agreement, including without limitation the purchase and sale of the
Series A Preferred Stock and, if applicable, the Series B Preferred Stock.
'Contractual Obligation' means, as to any Person, any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other
instrument to which such Person is a party or by which it or any of its
property is bound.
'Control' (including the terms 'controlling,' 'controlled by' and
'under common control with') means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities,
by contract or otherwise.
'Delaware GCL' means the Delaware General Corporation Law.
'Demand Notice' has the meaning assigned to such term in Section
9.1(a).
'Exchange Act' means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder.
'Exercising Holder' has the meaning assigned to such term in Section
9.1(d).
'Existing Plans' has the meaning assigned to such term in Section 3.6.
'FCC' has the meaning assigned to such term in Section 2.4(c)(i).
'GAAP' means United States generally accepted accounting principles as
in effect from time to time.
'Governmental Authority' means the government of any nation, state,
city, locality or other political subdivision of any thereof, and any
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government or any
international regulatory body having or asserting jurisdiction over a
Person, its business or its properties.
'HSR Act' means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations of the Federal Trade
Commission thereunder.
'Holder' means a holder of shares of Series A Preferred Stock, shares
of Series B Preferred Stock, Series A Registrable Securities or Series B
Registrable Securities.
'Intellectual Property' has the meaning assigned to such term in
Section 3.12.
'Lien' means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other), restriction or other
security interest of any kind or nature whatsoever.
'Lock-up Period' has the meaning assigned to such term in Section 6.2.
'Lock-up Request' has the meaning assigned to such term in Section
6.2.
'Loral' means Loral Space & Communications, Ltd., a Bermuda
corporation.
'Material Adverse Effect' has the meaning assigned to such term in
Section 3.8.
'NASD' means the National Association of Securities Dealers, Inc.
'Offering' has the meaning assigned to such term in Section 6.2.
'Option' has the meaning assigned to such term in Section 2.4(a).
'Option Allocation Notice' has the meaning assigned to such term in
Section 2.4(a).
'Option Closing' has the meaning assigned to such term in Section
2.4(b).
'Option Closing Date' has the meaning assigned to such term in Section
2.4(a).
'Option Notice' has the meaning assigned to such term in Section
2.4(a).
'Option Shares' has the meaning assigned to such term in Section
2.4(a).
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'Person' means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, Governmental Authority or other entity of any
kind.
'Prospectus' shall mean the prospectus included in any Registration
Statement (including without limitation a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement and all other
amendments and supplements to such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
'Purchased Shares' has the meaning assigned to such term in Section
2.1.
'Registrable Securities' has the meaning assigned to such term in
Section 9.1(d).
'Registration Expenses' means all expenses incurred by the Company in
compliance with Article 9, including without limitation all registration
and filing fees, printing expenses, fees and disbursements of counsel for
the Company, blue sky fees and expenses and the expense of any special
audit incident to or required by any such registration.
'Registration Statement' shall mean any registration statement of the
Company under the Securities Act that covers any of the Registrable
Securities pursuant to the provisions of this Agreement, including the
related Prospectus, all amendments and supplements to such registration
statement (including post-effective amendments), all exhibits and all
material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
'Required Consents' has the meaning assigned to such term in Section
3.4.
'Requirement of Law' means, as to any Person, the Certificate of
Incorporation and Bylaws or other organizational or governing documents of
such Person, and any law, treaty, rule, regulation, qualification, license
or franchise or determination (including, without limitation, those related
to taxes) of an arbitrator or a court or other Governmental Authority or of
the NASD or the Nasdaq National Market or any national securities exchange
on which the Common Stock is listed or admitted to trading, in each case
applicable or binding upon such Person or any of its property or to which
such Person or any of its property is subject or pertaining to any or all
of the transactions contemplated hereby.
'Rights Agreement' has the meaning assigned to such term in Section
3.14(a).
'Rule 144' shall mean Rule 144 promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission.
'SEC Reports' means all proxy statements, registration statements,
reports and other documents filed or required to be filed by the Company or
any of its Subsidiaries with the Commission pursuant to the Securities Act
or the Exchange Act since December 31, 1997.
'Securities Act' means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
'Seller's Fee' has the meaning assigned to such term in Section 5.2.
'Series A Preferred Stock' means the Company's 9.2% Series A Junior
Cumulative Convertible Preferred Stock, par value $.001 per share,
established by the filing of the Certificate of Designations thereof in the
form attached hereto as Exhibit A in the Office of the Secretary of State
of Delaware.
'Series A Registrable Securities' shall mean the shares of Common
Stock into which shares of Series A Preferred Stock issued hereunder may be
converted and any capital stock of the Company issued as a dividend or
other distribution with respect to, or in exchange for or in replacement
of, such shares of Common Stock, until, in the case of any such share, (i)
it is effectively registered under the Securities Act and disposed of in
accordance with the Registration Statement covering it,
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(ii) in the opinion of outside counsel to the Company, it is saleable by
the holder thereof pursuant to Rule 144(k), or (iii) it is distributed to
the public by the holder thereof pursuant to Rule 144; provided, however,
that for purposes of Article 9 and Article 6, during the period in which
disposition of such Purchased Shares would violate the terms of a lock-up
agreement, Series A Registrable Securities shall not include any shares of
Common Stock into which shares of Series A Preferred Stock that are subject
to such lock-up agreement may be converted.
'Series B Preferred Stock' means the Company's 9.2% Series B Junior
Cumulative Convertible Preferred Stock, par value $.001 per share,
established by the filing of the Certificate of Designations thereof in the
form attached hereto as Exhibit B in the Office of the Secretary of State
of Delaware.
'Series B Registrable Securities' shall mean the shares of Common
Stock into which shares of Series B Preferred Stock issued hereunder may be
converted and any capital stock of the Company issued as a dividend or
other distribution with respect to, or in exchange for or in replacement
of, such shares of Common Stock, until, in the case of any such share, (i)
it is effectively registered under the Securities Act and disposed of in
accordance with the Registration Statement covering it, (ii) in the opinion
of outside counsel to the Company, it is saleable by the holder thereof
pursuant to Rule 144(k), or (iii) it is distributed to the public by the
holder thereof pursuant to Rule 144; provided, however, that for purposes
of Article 9 and Article 6, during the period in which disposition of such
Option Shares would violate the terms of a lock-up agreement, Series B
Registrable Securities shall not include any shares of Common Stock into
which shares of Series B Preferred Stock that are subject to such lock-up
agreement may be converted.
'Series C Preferred Stock' means the Company's 10 1/2% Series C
Convertible Preferred Stock, par value $.001 per share.
'Series C Warrants' has the meaning assigned to such term in Section
3.6.
'Subsidiary' means in respect of any Person any other Person which, at
the time as of which any determination is made, such Person or one or more
of its Subsidiaries has, directly or indirectly, voting control.
'Termination Date' has the meaning assigned to such term in Section
10.1(a).
'Transfer' means any sale, assignment, hypothecation, transfer or
other disposition. 'Transferor' and 'Transferee' shall have correlative
meanings.
ARTICLE 2
PURCHASE AND SALE OF SECURITIES
2.1 Purchase and Sale of Securities. Subject to the terms set forth herein
and in reliance upon the representations set forth below, the Company agrees to
sell to the Purchasers, and the Purchasers agree collectively to purchase from
the Company, on the Closing Date, an aggregate of 1,350,000 shares of Series A
Preferred Stock for the aggregate purchase price of $135,000,000 (all of the
shares of Series A Preferred Stock being purchased pursuant hereto being
referred to herein as the 'Purchased Shares').
2.2 Certificates of Designation. The Series A Preferred Stock shall have
the powers, rights and preferences set forth in the form of Certificate of
Designation thereof attached hereto as Exhibit A. The Series B Preferred Stock
shall have the powers, rights and preferences set forth in the form of the
Certificate of Designation thereof attached hereto as Exhibit B.
2.3 Closing. (a) The purchase and issuance of the Purchased Shares shall
take place at a closing (the 'Closing') to be held at the offices of Paul,
Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York, New
York 10019-6064, at 10:00 A.M., local time, on the fifth Business Day after the
conditions to closing set forth in Articles 7 and 8 (other than those to be
satisfied at the Closing, which shall be satisfied or waived at the Closing)
have been satisfied or waived by the party entitled to waive such condition (the
'Closing Date').
(b) Not less than two Business Days prior to the Closing, the Purchasers
shall advise the Company in writing (the 'Allocation Notice') of the names in
which to register the shares of Series A Preferred
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Stock to be purchased at the Closing (which shall be the names of one or both of
the Purchasers or their nominees) and the number of shares to be purchased by
each Purchaser (which numbers, when added together, shall equal 1,350,000). At
the Closing, the Company shall deliver to the Purchasers certificates
representing the Purchased Shares, duly registered in the name of each Purchaser
or its nominee (as set forth in the Allocation Notice), and the Purchasers shall
deliver to the Company the aggregate purchase price therefor by wire transfer of
immediately available funds to an account designated in writing by the Company
to the Purchasers at least two Business Days before the Closing.
2.4 Option. (a) Subject to all of the terms and conditions of this
Agreement, the Purchasers grant an option (the 'Option') to the Company to sell
650,000 shares of Series B Preferred Stock (the 'Option Shares') to the
Purchasers at the same price per share as the Purchasers shall pay for the
Purchased Shares. The Option may be exercised, in whole but not in part, at any
time, upon written notice (the 'Option Notice') by the Company to the Purchasers
no later than 12:00 noon, local time on or before the date that is the earlier
of September 30, 1999 or ten months after the Closing Date, setting forth the
aggregate number of Option Shares to be sold and the time and date for such sale
(the 'Option Closing Date'), which date shall be at least 15 and no more than 20
Business Days after the date the Option Notice is delivered. Not less than two
Business Days prior to the Option Closing (as defined below), the Purchasers
shall advise the Company in writing (the 'Option Allocation Notice') of the
names in which to register the shares of Series B Preferred Stock to be
purchased at the Option Closing (which shall be the names of one or both of the
Purchasers or their nominees) and the number of shares of Series B Preferred
Stock to be purchased by each Purchaser.
(b) On the Option Closing Date, the purchase and issuance of the Option
Shares (the 'Option Closing') shall take place at the offices specified in
Section 2.3, at the time and date specified in the Option Notice. At the Option
Closing, the Company shall deliver to the Purchasers certificates representing
the Option Shares, duly registered in the name of each Purchaser or its nominee
(as set forth in the Option Allocation Notice), and the Purchasers shall deliver
to the Company the aggregate purchase price therefor by wire transfer of
immediately available funds to an account designated in writing by the Company
to the Purchasers at least two Business Days before the Option Closing Date.
(c) The obligations of the Purchasers to purchase the Option Shares at the
Option Closing are subject to satisfaction of the following conditions at or
prior to the Option Closing (unless expressly waived in writing by the
Purchasers at or prior to the Option Closing):
(i) the representations and warranties of the Company set forth in
Sections 3.1, 3.3, 3.4, 3.5, 3.7, 3.8, 3.9, 3.10(a), 3.10(b) (other than
with respect to Federal Communications Commission ('FCC') approvals), 3.13
and 3.14 of this Agreement shall be true and correct in all material
respects (other than those which are qualified as to materiality, Material
Adverse Effect or other similar term, which shall be true and correct in
all respects) with the same force and effect as though made on and as of
the Option Closing Date, and the Company shall have delivered to the
Purchasers a certificate, dated the date of the Option Closing Date and
signed by an executive officer of the Company, to the foregoing effect; and
(ii) the conditions specified in Sections 7.2, 7.4, 7.5 and 7.6 of
this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchasers as follows:
3.1 Corporate Existence and Power. The Company (a) is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware; (b) has all requisite corporate power and authority to own and
operate its property, to lease the property it operates as lessee and to conduct
the business in which it is engaged; and (c) has the corporate power and
authority to execute, deliver and perform its obligations under this Agreement.
The Company is duly qualified to do business as a foreign corporation in, and is
in good standing under the laws of, each jurisdiction in which the conduct of
its business or the nature of the property owned requires such qualification.
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3.2 Subsidiaries. Except as set forth on Schedule 3.2, the Company has no
Subsidiaries and no interest or investments in any corporation, partnership,
limited liability company, trust or other entity or organization. Each
Subsidiary listed on Schedule 3.2 has been duly organized, is validly existing
and in good standing under the laws of the jurisdiction of its organization, has
the corporate power and authority to own its properties and to conduct its
business and is duly registered, qualified and authorized to transact business
and is in good standing in each jurisdiction in which the conduct of its
business or the nature of its properties requires such registration,
qualification or authorization. Except as disclosed on Schedule 3.2, all of the
issued and outstanding capital stock (or equivalent interests) of each
Subsidiary set forth on Schedule 3.2 has been duly authorized and validly
issued, is fully paid and non-assessable and is owned by the Company free and
clear of any Liens and there are no rights, options or warrants outstanding or
other agreements to acquire shares of capital stock (or equivalent interests) of
such Subsidiary.
3.3 Corporate Authorization; No Contravention. The execution, delivery and
performance by the Company of this Agreement and the Contemplated Transactions,
including, without limitation, the sale, issuance and delivery of the Purchased
Shares and the Option Shares, (a) have been duly authorized by all necessary
corporate action of the Company; (b) do not contravene the terms of the
Certificate of Incorporation or Bylaws of the Company or the organizational
documents of its Subsidiaries; and (c) do not violate or result in any breach or
contravention of, or the creation of any Lien under, any Contractual Obligation
of the Company or its Subsidiaries or any Requirement of Law applicable to the
Company or its Subsidiaries. No event has occurred and no condition exists
which, upon notice or the passage of time (or both), would constitute a default
or change of control under any indenture, mortgage, deed of trust, credit
agreement, note or other evidence of indebtedness or other material agreement of
the Company or its Subsidiaries or the Certificate of Incorporation or Bylaws or
the organizational documents of the Company's Subsidiaries.
3.4 Governmental Authorization; Third Party Consents. Except for the
approvals and consents as listed on Schedule 3.4 hereto (collectively, the
'Required Consents'), no approval, consent, exemption, authorization or other
action by, or notice to, or filing with, any Governmental Authority or any other
Person in respect of any Requirement of Law, Contractual Obligation or
otherwise, and no lapse of a waiting period under a Requirement of Law, is
necessary or required in connection with the execution, delivery or performance
(including, without limitation, the sale, issuance and delivery of the Purchased
Shares or the Option Shares) by the Company, or enforcement against the Company,
of this Agreement or the Contemplated Transactions.
3.5 Binding Effect. This Agreement has been duly executed and delivered by
the Company and constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
3.6 Capitalization of the Company. The authorized capital stock of the
Company consists of (i) 200,000,000 shares of Common Stock, of which, as of
November 6, 1998 (a) 23,145,104 shares were issued and outstanding and (b)
13,252,221 shares were reserved for issuance upon the exercise of outstanding
stock options, warrants to purchase Common Stock and conversion of outstanding
shares of Series C Preferred Stock and shares of Series C Preferred Stock
issuable pursuant to warrants to purchase Series C Preferred Stock, and (ii)
50,000,000 shares of Preferred Stock, of which 1,476,516 shares of Series C
Preferred Stock were issued and outstanding as of November 6, 1998. Each share
of Series C Preferred Stock may be converted at any time, at the option of the
holder, unless previously redeemed, into a number of shares of Common Stock
calculated by dividing the $100 liquidation preference of the Series C Preferred
Stock (without accrued and unpaid dividends) by $18 (as adjusted from time to
time). The Company has previously provided the Purchasers with a true and
correct list of all outstanding options or warrants to purchase shares of any
class or series of capital stock of the Company other than Series C Preferred
Stock (collectively, the 'Company Options'), a true and correct list of all
outstanding options or warrants to purchase Series C Preferred Stock
(collectively, the 'Series C Warrants') and a true and correct list of each of
the Company's stock option, incentive or other plans pursuant to which options
or warrants to purchase capital stock of the Company may be issued, including
any such plan adopted as of the date hereof but which remain subject to
stockholder approval (collectively, the 'Existing Plans'). Except (a) as set
forth in this Section 3.6, (b) shares of
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Common Stock issued (i) pursuant to the exercise of outstanding Company Options
or (ii) on the conversion of outstanding shares of Series C Preferred Stock or
shares of Series C Preferred Stock issuable upon the exercise of outstanding
Series C Warrants and (c) options granted under Existing Plans, on the Closing
Date there will be no shares of Common Stock or any other equity security of the
Company issuable upon conversion or exchange of any security of the Company nor
will there be any rights, options or warrants outstanding or other agreements to
acquire shares of capital stock of the Company nor will the Company be
contractually obligated to purchase, redeem or otherwise acquire any of its
outstanding shares of capital stock. The Company has not created any 'phantom
stock,' stock appreciation rights or other similar rights the value of which is
related to or based upon the price or value of the Common Stock or Series C
Preferred Stock. None of the Company's outstanding debt or debt instruments
provide voting rights with respect to the Company to the holders thereof. Other
than Loral, which has waived its rights in connection with the Contemplated
Transactions, no stockholder of the Company is entitled to any preemptive or
similar rights to subscribe for shares of capital stock of the Company. All of
the issued and outstanding shares of Common Stock and Series C Preferred Stock
are, and the Purchased Shares (when issued hereunder) after payment of the
purchase price therefor to the Company, will be, duly authorized, validly
issued, fully paid and nonassessable.
3.7 SEC Filings; Financial Statements. The Company has timely filed all SEC
Reports. The SEC Reports complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as applicable, and did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
in the SEC Reports, in light of the circumstances under which they were made,
not misleading. Each of the Company's financial statements (including, in each
case, any related notes) contained in the SEC Reports complied as to form in all
material respects with applicable published rules and regulations of the
Commission with respect thereto, was prepared in accordance with GAAP applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes to such financial statements) and fairly presented the financial
position of the Company and its Subsidiaries as at the respective dates and for
the periods indicated, except that the unaudited financial statements were
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount or effect.
3.8 Absence of Certain Developments. Since December 31, 1997, except as
described in the SEC Reports filed with the Commission prior to the date hereof
(together with the draft quarterly report on Form 10-Q for the quarter ended
September 30, 1998 delivered to the Purchasers prior to the date hereof), there
has been no material adverse change, or any development involving a prospective
material adverse change, in or affecting the business, management or condition,
financial or otherwise, of the Company and its Subsidiaries, taken as a whole (a
'Material Adverse Effect'). For purposes of this Agreement, 'Material Adverse
Effect' shall include any material adverse change in or affecting the technical
feasibility of the Company's proposed satellite broadcast system (including,
without limitation, its terrestrial repeater transmitter network or customer
end-user components such as integrated circuits, adapters for existing radios
and antennas), existing or proposed FCC approvals and proposed agreements with
one or more consumer electronics manufacturers, in each case as may be required
in connection with the Company's planned operations as described in the
Company's SEC Reports filed as of the date hereof, but shall not include any
change or prospective change which principally affects the date on which the
Company will commence commercial operations but does not do any of the
following: (a) affect the underlying technical feasibility of the Company's
operations, (b) materially increase the total cost of achieving commercial
operability or (c) affect the timing of any FCC approval.
3.9 Compliance with Laws. None of the Company or its Subsidiaries is in
material violation of any Requirement of Law to which it is subject.
3.10 Licenses. The Company has no reason to believe that either (a) it will
not finally obtain any license, permit, franchise or other authorizations
necessary for it to conduct its business as described in the SEC Reports or (b)
such license, permit, franchise or authorization will not be obtained on a
timely basis.
3.11 Litigation. Except with respect to certain filings made with the
Federal Communications Commission by Primosphere, there is no legal action,
suit, arbitration or other legal, administrative or
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other governmental investigation, inquiry or proceeding pending or, to the best
knowledge of the Company, threatened against or affecting the Company or its
Subsidiaries which, if determined adversely to the Company, could reasonably be
expected to have a Material Adverse Effect.
3.12 Intellectual Property. The Company and its Subsidiaries own, free and
clear of all Liens, and has good and marketable title to, or holds adequate
licenses or otherwise possesses all such rights as are necessary to use all
patents (and applications therefor), patent disclosures, trademarks, service
marks, trade names, copyrights (and applications therefor), inventions,
discoveries, processes, know-how, scientific, technical, engineering and
marketing data, formulae and techniques (collectively, 'Intellectual Property')
used or proposed to be used in or necessary for the conduct of its business as
now conducted or as proposed to be conducted in the SEC Reports. The Company has
not received notice or otherwise has reason to know of any conflict or alleged
conflict with the rights of others pertaining to the Company's Intellectual
Property. To the best of the Company's knowledge, the business of the Company as
presently conducted and as proposed to be conducted in the SEC Reports does not
infringe upon or violate any Intellectual Property rights of others.
3.13 Private Offering. No form of general solicitation or general
advertising was used by the Company or its representatives in connection with
the offer or sale of the Purchased Shares. No registration of the Purchased
Shares pursuant to the provisions of the Securities Act or any state securities
or 'blue sky' laws will be required by the offer, sale, or issuance of the
Purchased Shares pursuant to this Agreement, assuming the accuracy of the
Purchaser's representation contained in Section 4.5.
3.14 Rights Agreement. (a) The execution and delivery of this Agreement by
the Company and the consummation of the Contemplated Transactions do not and
will not (i) result in the ability of any person to exercise any Rights under
the Rights Agreement, dated as of October 22, 1997, between the Company and
Continental Stock Transfer & Trust Company, as rights agent (the 'Rights
Agreement'), (ii) enable or require the Rights (as defined in the Rights
Agreement) to separate from the shares of Common Stock to which they are
attached or to be triggered or become exercisable, (iii) cause any 'Distribution
Date' or 'Shares Acquisition Date' (as such terms are defined in the Rights
Agreement) to occur or (iv) prior to the Closing Date, cause either Purchaser to
'beneficially own' (as such term is defined in the Rights Agreement) any shares
of Common Stock.
(b) No 'Distribution Date' or 'Shares Acquisition Date' (as such terms are
defined in the Rights Agreement) has occurred.
3.15 Board Approval; Delaware GCL 203; Stockholder Approval. (a) The Board
of Directors, at a meeting duly called and held, has determined the Contemplated
Transactions to be advisable and in the best interests of the Company and its
stockholders and has approved each of the Contemplated Transactions and has
resolved to recommend that the stockholders vote to approve or consent to each
Contemplated Transaction.
(b) The Company has taken all action necessary to cause the restriction
contained in Section 203 of the Delaware GCL to be inapplicable to the
Contemplated Transactions and to approve the Purchasers becoming 'interested
stockholders' within the meaning of Section 203 of the Delaware GCL.
(c) The affirmative approval, by vote or written consent, of the holders of
shares of Common Stock representing a majority of the votes that may be cast by
holders of all of the outstanding shares of Common Stock is the only vote of the
holders of any class or series of capital stock of the Company necessary to the
consummation of the Contemplated Transactions.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants to the Company as follows as
to itself:
4.1 Existence and Power. Such Purchaser (a) is duly organized and validly
existing as a limited partnership under the laws of the jurisdiction of its
formation and (b) has the requisite power and authority to execute, deliver and
perform its obligations under this Agreement.
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4.2 Authorization; No Contravention. The execution, delivery and
performance by such Purchaser of this Agreement and the Contemplated
Transactions (a) have been duly authorized by all necessary action, (b) do not
contravene the terms of such Purchaser's organizational documents, or any
amendment thereof, and (c) do not violate, conflict with or result in any breach
or contravention of, or the creation of any Lien under, any Contractual
Obligation of such Purchaser or any Requirement of Law applicable to such
Purchaser, except for such violation, conflict, breach or Lien which will not
result in a material adverse effect on such Purchaser's ability to consummate
the Contemplated Transactions.
4.3 Governmental Authorization; Third Party Consents. Except for the
Required Consents, no approval, consent, exemption, authorization, or other
action by, or notice to, or filing with, any Governmental Authority or any other
Person in respect of any Requirement of Law, and no lapse of a waiting period
under a Requirement of Law, is necessary or required in connection with the
execution, delivery or performance by such Purchaser, or enforcement against
such Purchaser, of this Agreement or the consummation of the Contemplated
Transactions.
4.4 Binding Effect. This Agreement has been duly executed and delivered by
such Purchaser and constitutes the legal, valid and binding obligation of the
Purchaser, enforceable against it in accordance with its terms.
4.5 Purchase for Own Account. The Purchased Shares and, if applicable, the
Option Shares are being acquired by such Purchaser for its own account and with
no intention of distributing or reselling such Purchased Shares, Option Shares
or any part thereof in any transaction that would be in violation of the
securities laws of the United States of America or any state, without prejudice,
however, to the rights of such Purchaser at all times to sell or otherwise
dispose of all or any part of such Purchased Shares or, if applicable, Option
Shares under an effective Registration Statement under the Securities Act or
under an exemption from said registration available under the Securities Act.
Such Purchaser understands and agrees that if such Purchaser should in the
future decide to dispose of any Purchased Shares or Option Shares, it may do so
only in compliance with the Securities Act and applicable state securities laws,
as then in effect. Such Purchaser agrees to the imprinting, so long as required
by law, of a legend on all certificates representing such Purchased Shares and
Option Shares to the following effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
4.6 Sufficient Funds. The partners of each Purchaser are obligated, upon
notice, to provide sufficient funds to such Purchaser to purchase the Purchased
Shares in accordance with the terms of this Agreement and to perform its
obligations hereunder and on the Closing Date, each Purchaser will have
available funds sufficient to purchase the Purchased Shares in accordance with
the terms of this Agreement and to perform its obligations hereunder.
ARTICLE 5
COVENANTS OF THE COMPANY
5.1 Conduct of Business. From the date hereof through the Closing Date, the
Company and its Subsidiaries shall conduct their businesses in a manner such
that the representations and warranties contained in Article 3 shall continue to
be true and correct in all material respects on and as of the Closing Date
(except for representations and warranties made as of a specific date) as if
made on and as of the Closing Date. The Company shall give the Purchasers prompt
notice of any event, condition or circumstance occurring from the date hereof
through the Closing Date that would constitute a violation or breach of (i) any
representation or warranty, whether made as of the date hereof or as of the
Closing
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Date, or (ii) any covenant of the Company contained in this Agreement; provided,
however, that no such notification shall relieve or cure any such breach or
violation of any such representation, warranty or covenant or otherwise affect
the accuracy of any such representation or warranty for the purposes of Section
2.4(c) or Section 7.1.
5.2 Indemnification of Brokerage. The Company represents and warrants to
the Purchasers that, except for Merrill Lynch & Co., Libra Investments and
Batchelder & Partners, no broker, finder, agent or similar intermediary (a
'Broker') has acted on behalf of the Company or its Subsidiaries in connection
with this Agreement or the Contemplated Transactions, and that, except for fees
to Batchelder & Partners, Inc., Merrill Lynch & Co. and Libra Investments (the
'Seller's Fee'), which fees have previously been disclosed to the Purchasers in
writing, there are no brokerage commissions, finder's fees or similar fees or
commissions payable in connection therewith based on any agreement, arrangement
or understanding with the Company or any of the Subsidiaries or any action taken
by the Company or any of its Subsidiaries. The Company agrees to pay the
Seller's Fee and to indemnify and hold harmless the Purchasers from any Claim or
demand for commission or other compensation by any Broker claiming to have been
employed by or on behalf of the Company or any of its Subsidiaries and to bear
the cost of legal expenses incurred in defending against any such claim.
5.3 Rule 144. The Company shall file all reports required to be filed by it
under the Securities Act and the Exchange Act and shall take such further action
as the Purchasers may reasonably request, all to the extent required to enable
the Purchasers to sell the Common Stock into which the Purchased Shares and, if
applicable, the Option Shares may be converted pursuant to and in accordance
with Rule 144. Such action shall include, but not be limited to, making
available adequate current public information meeting the requirements of
paragraph (c) of Rule 144.
5.4 Stockholder Approval. As promptly as possible following the execution
of this Agreement, the Company shall seek to obtain approval of the Contemplated
Transactions from its stockholders and, in connection therewith, shall make such
filings and prepare and distribute to its stockholders such documents, shall
inform the stockholders that the Board of Directors has determined the
Contemplated Transactions to be advisable and in the best interests of the
Company and its stockholders, shall recommend that the stockholders approve the
Contemplated Transactions, and shall take all such other action as shall be
necessary to complete the Contemplated Transactions.
5.5 Rights Agreement and Board Approval. (a) On or before the Closing Date,
the Company shall amend its Rights Agreement to provide that neither of the
Purchasers shall be or become an 'Acquiring Person' (as that term is defined in
the Rights Agreement) by virtue of the acquisition and ownership by itself and
the other Purchaser of (i) Purchased Shares; (ii) Options Shares; (iii)
additional shares of Series A Preferred Stock or Series B Preferred Stock issued
as dividends upon the Purchased Shares or Option Shares; (iv) any shares of
Common Stock acquired upon conversion of any of the shares referred to in
clauses (i), (ii) or (iii); and (v) a number of additional shares of Common
Stock equal to 1% of the total number shares of Common Stock outstanding at any
time.
5.6 Convertible Debt Indenture. The Company and the Purchasers shall
cooperate in good faith to agree prior to Closing upon terms for a form of
Convertible Debt Indenture (as defined in Exhibit A and Exhibit B hereto) on
mutually satisfactory terms. In the event such a form is agreed upon prior to
Closing, such form shall be attached as Exhibit D hereto.
ARTICLE 6
COVENANTS OF THE PURCHASER
6.1 Indemnification of Brokerage. The Purchasers represent and warrant to
the Company that no Broker has acted on behalf of any Purchaser in connection
with this Agreement or the Contemplated Transactions, and that there are no
brokerage commissions, finders' fees or similar fees or commissions payable in
connection therewith based on any agreement, arrangement or understanding with
any Purchaser, or any action taken by any Purchaser. The Purchasers agree to
indemnify and hold harmless the Company from any Claim or demand for commission
or other compensation by any Broker claiming to have been employed by or on
behalf of any Purchaser, and to bear the cost of legal expenses incurred in
defending against any such claim.
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6.2 Lock-Up Agreement. At any time prior to the earlier of (a) November 13,
2001 and (b) the date that the Purchasers cease collectively to beneficially own
10% or more of the Common Stock, the Company and its underwriters, by written
notice from the Company and its lead underwriter to the Purchasers (a 'Lock-up
Request'), given as provided herein on or after the time of the initial filing
with the Commission of any registration statement (other than a registration
statement relating to an offering described in Section 9.1) with respect to any
offering of Common Stock or securities convertible into Common Stock (the
'Offering'), may request that the Purchasers agree not to offer, sell or
transfer any of the Purchased Shares and, if applicable, the Option Shares, or
engage in any hedging or similar transactions with respect to the Purchased
Shares and, if applicable, the Option Shares, during the 180-day period (the
'Lock-up Period') beginning on a date specified in the Lock-up Request, which
date may be as early as five (5) Business Days prior to the expected effective
date (but no later than the effective date) with respect to the registration
statement for the Offering, and each Purchaser agrees to consent to and be bound
by the restrictions specified in any such Lock-up Request; provided, however,
that such a lock-up agreement with respect to any Offering shall not prevent any
Purchaser from selling Purchased Shares which it is entitled to sell in such
Offering pursuant to Section 9.2 if it shall have made the request specified
therein. The foregoing notwithstanding, no Lock-up Request shall be effective
and binding upon the Purchasers unless a similar lock-up is imposed upon all
other Persons beneficially owning 10% or more of the Common Stock with respect
to which the Company then has the power to request or impose such lock-up. Any
such lock-up imposed upon any other Person shall be for the shorter of (i) the
Lock-up Period and (ii) the maximum period the Company has the right or power to
impose upon such other Person. The Lock-up Period may be terminated as to the
Purchasers on written notice from either the Company or the lead underwriter of
the Offering, and automatically shall be terminated immediately as to the
Purchasers in the event it is terminated as to any other Person (including the
Company and its Affiliates) or any other Person is otherwise released from any
lock-up obligations with respect to the Offering. The Company shall specify the
expected effective date of any Offering by notice to the Purchasers given not
later than two (2) Business Days prior to the beginning of the Lock-up Period.
Each Purchaser shall cause each Person to whom it Transfers, in one or a series
of related transactions, the equivalent of 1,000,000 or more shares of Common
Stock (assuming conversion of the Series A Preferred Stock and Series B
Preferred Stock) to execute and deliver to the Company a letter agreement
pursuant to which such transferee agrees (and to cause each other Person to whom
it Transfers any shares of Common Stock if, after giving effect to such
Transfer, such Person, together with its Affiliates, would beneficially own
1,000,000 or more shares of Common Stock (assuming conversion of Series A
Preferred Stock and Series B Preferred Stock) to execute and deliver to the
Company a similar letter agreement) to comply with the requirements of this
Section 6.2 (including this sentence) to the same extent and subject to the same
terms and conditions as the Purchaser.
6.3 Short Sales and Derivatives. The Purchasers represent and warrant that
neither Purchaser maintains a short position in the Common Stock nor
beneficially owns, directly or indirectly, any put, or any other instrument
intended to have the same economic effect as a put, on the Common Stock. Each
Purchaser represents that, at all times prior to the date which is the second
anniversary of the Closing Date, the Purchasers shall not maintain any short
position in the Common Stock or purchase any put, or any other instrument
intended to have the same economic effect as a put, on the Common Stock.
6.4 Convertible Debt Indenture. The Company and the Purchasers shall
cooperate in good faith to agree prior to Closing upon terms for a form of
Convertible Debt Indenture (as defined in Exhibit A and Exhibit B hereto) on
mutually satisfactory terms. In the event such a form is agreed upon prior to
Closing, such form shall be attached as Exhibit D hereto.
ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATION
OF THE PURCHASERS TO CLOSE
The obligations of the Purchasers to enter into and complete the Closing
are subject to the fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which may be waived by the Purchasers:
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7.1 Representations and Covenants. The representations and warranties of
the Company contained in this Agreement shall be true and correct in all
material respects (other than those which are qualified as to materiality,
Material Adverse Effect or other similar term, which shall be true and correct
in all respects) on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date; the Company shall have performed and
complied with all covenants and agreements required by this Agreement to be
performed or complied with by the Company on or prior to the Closing Date; and
the Company shall have delivered to the Purchasers a certificate, dated the date
of the Closing and signed by an executive officer of the Company, to the
foregoing effect.
7.2 Consents and Approvals. All Required Consents shall have been obtained
and be in full force and effect, and the Purchasers shall have been furnished
with evidence reasonably satisfactory to it that such Required Consents have
been granted and obtained.
7.3 Filing of Certificates of Designation. The Certificate of Designation
of the Series A Preferred Stock in the form attached hereto as Exhibit A and the
Certificate of Designation of the Series B Preferred Stock in the form attached
hereto as Exhibit B shall have been filed in the Office of the Secretary of
State of Delaware in accordance with Section 242 of the Delaware GCL.
7.4 Opinion of Counsel to the Company. The Purchasers shall have received
the legal opinion of Paul, Weiss, Rifkind, Wharton & Garrison, counsel to the
Company, dated the Closing Date, addressed to the Purchaser, to the effect set
forth in Exhibit C.
7.5 HSR Act. Any Person required in connection with the Contemplated
Transactions to file a notification and report form in compliance with the HSR
Act shall have filed such form and the applicable waiting period with respect to
each such form (including any extension thereof by reason of a request for
additional information) shall have expired or been terminated.
7.6 No Claims. (a) No Claims shall be pending before any Governmental
Authority (including investigations instituted by the United States Department
of Justice or the Federal Trade Commission in connection with antitrust
regulations) to restrain or prohibit this Agreement or the consummation of the
Contemplated Transactions.
(b) No law, order, decree, rule or injunction shall have been enacted,
entered, promulgated or enforced by any Governmental Authority that prohibits or
makes illegal the consummation of any of the Contemplated Transactions.
ARTICLE 8
CONDITIONS PRECEDENT TO THE OBLIGATION
OF THE COMPANY TO CLOSE
The obligation of the Company to enter into and complete the Closing and
the Option Closing, if applicable, is subject to the fulfillment on or prior to
the Closing Date of the following conditions, any one or more of which may be
waived by the Company:
8.1 Representations and Covenants. The representations and warranties of
the Purchasers contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date; the Purchasers shall have
performed and complied with all covenants and agreements required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date; and the Purchasers shall have delivered to the Company a certificate,
dated the date of the Closing and signed by a general partner of each Purchaser,
to the foregoing effect.
8.2 Consents and Approvals. All Required Consents shall have been obtained
and be in full force and effect.
8.3 HSR Act. Any Person required in connection with the Contemplated
Transactions to file a notification and report form in compliance with the HSR
Act shall have filed such form and the applicable waiting period with respect to
each such form (including any extension thereof by reason of a request for
additional information) shall have expired or been terminated.
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8.4 No Claims. (a) No Claims shall be pending before any Governmental
Authority (including investigations instituted by the United States Department
of Justice or the Federal Trade Commission in connection with antitrust
regulations) to restrain or prohibit this Agreement or the consummation of the
Contemplated Transactions.
(b) No law, order, decree, rule or injunction shall have been enacted,
entered, promulgated or enforced by any Governmental Authority that prohibits or
makes illegal the consummation of any of the Contemplated Transactions.
ARTICLE 9
REGISTRATION RIGHTS
9.1 Requested Registration. (a) If, at any time after the date which is the
second anniversary of the Closing Date, the Company shall receive from holders
of Series A Registrable Securities or Purchased Shares representing, in the
aggregate, at least 50% of the Series A Registrable Securities (which
calculation shall include all Series A Registrable Securities then outstanding
and all Series A Registrable Securities into which all Purchased Shares then
outstanding may be converted), a written request (which shall specify whether
the distribution will be made by means of an underwriting) that the Company
effect a registration (a 'Demand Notice') with respect to all or a part of the
Series A Registrable Securities, which Demand Notice shall request registration
of not less than 1,000,000 shares of Common Stock, the Company will, as soon as
practicable, use its best efforts to effect such registration under the
Securities Act (which shall be a 'shelf' Registration Statement pursuant to Rule
415 under the Securities Act (or a successor provision), if so requested by the
Holders of a majority of the Series A Registrable Securities specified in the
Demand Notice and if the Company is eligible therefor at such time) as may be so
requested and as would permit or facilitate the sale and distribution of the
Series A Registrable Securities as are specified in such request. After the
Company has effected two (2) such registrations pursuant to this Section 9.1(a),
the related Registration Statements have been declared effective and the
distribution contemplated thereunder completed, the Company shall have no
further obligation under this Section 9.1(a).
(b) If, at any time after the date which is the second anniversary of the
Closing Date, the Company shall receive from holders of Series B Registrable
Securities or Option Shares representing, in the aggregate, at least 50% of the
Series B Registrable Securities (which calculation shall include all Series B
Registrable Securities then outstanding and all Series B Registrable Securities
into which all Option Shares then outstanding may be converted), a Demand Notice
with respect to all or a part of the Series B Registrable Securities, which
Demand Notice shall request registration of not less than 1,000,000 shares of
Common Stock, the Company will, as soon as practicable, use its best efforts to
effect such registration under the Securities Act (which shall be a 'shelf'
Registration Statement pursuant to Rule 415 under the Securities Act (or a
successor provision), if so requested by the Holders of a majority of the shares
specified in the Demand Notice and if the Company is eligible therefor at such
time) as may be so requested and as would permit or facilitate the sale and
distribution of the Series B Registrable Securities as are specified in such
request. After the Company has effected one (1) such registration pursuant to
this Section 9.1(b), the related Registration Statement has been declared
effective and the distribution contemplated thereunder completed, the Company
shall have no further obligation under this Section 9.1(b).
(c) Notwithstanding any other provision of this Section 9.1, if the Company
shall furnish to Holders who have elected to exercise their rights under
Sections 9.1(a) or 9.1(b) (each, an 'Exercising Holder') a certificate signed by
the President or the Chief Executive Officer of the Company stating that, in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for a Registration
Statement to be filed pursuant to Section 9.1(a) or 9.1(b), as the case may be,
and it is therefore desirable and in the best interests of the Company to defer
the filing of such registration statement, then the Company shall have the right
to defer such filing for a period of time after receipt of such request;
provided, however, that the Company may not make such a request more than twice
in any 12-month period and the aggregate period of time during which the Company
may defer such filing shall not exceed 90 days.
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(d) If the Company or any stockholder, other than an Exercising Holder,
wishes to offer any of its securities in connection with any registration
initiated pursuant to this Section 9.1 other than pursuant to any 'piggy back'
or other similar registration rights granted by the Company prior to the date
hereof, no such securities may be offered by the Company or such other
stockholder without the consent of the Holders of a majority of the Series A
Registrable Securities and Series B Registrable Securities (either referred to
herein as 'Registrable Securities') specified in the Demand Notice related to
such offering.
(e) In connection with any underwritten offering pursuant to this Section
9.1, Exercising Holders shall have the right to select the underwriter or
underwriters, which shall be a nationally recognized investment banking firm or
firms reasonably acceptable to the Company.
9.2 Company Registration. (a) If the Company shall determine to register
any shares of Common Stock for the account of a security holder or holders or
otherwise (other than a registration relating solely to employee benefit plans,
or a registration relating solely to a merger, exchange offer or a transaction
of the type specified in Rule 145(a) under the Securities Act), the Company will
promptly deliver to each of the Holders a written notice thereof of such
proposed transaction at least 20 Business Days prior to the filing of a
Registration Statement and include in such registration, and in any underwriting
involved therein, all the Registrable Securities specified in written requests
made by Holders within ten Business Days after receipt of the written notice
from the Company described above. Each Holder shall be entitled to have its
shares included in an unlimited number of registrations pursuant to Section 9.2.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
9.2(a). In such event, the right of each Holder to registration pursuant to
Section 9.2(a) shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of the Registrable Securities in the underwriting
to the extent provided herein. If the Holders shall have elected to exercise
their rights under Section 9.2(a), they shall enter into an underwriting
agreement in customary form with the representative of the underwriter or
underwriters selected for underwriting by the Company. Notwithstanding any other
provision of this Section 9.2, if the representative determines and so advises
the Company in writing that marketing factors require a limitation on the number
of shares to be underwritten, the Company shall so advise the Holders. In such
an event, the number of Registrable Securities that may be included in the
registration and underwriting by the Holders shall be reduced, on a pro rata
basis (based on the number of shares of Common Stock held by each such Holder
(counting shares of Series A Preferred Stock and Series B Preferred Stock on an
as-converted-to-common basis) and each other Person (other than the Company)
registering shares under such registration), by such minimum number of shares as
is necessary to comply with such limitation. If a Holder disapproves of the
terms of any such underwriting, it may elect to withdraw therefrom by written
notice to the Company and the underwriter. Any Registrable Securities excluded
or withdrawn from such underwriting shall be withdrawn from such registration.
9.3 Transferability. Each Transferee wishing to participate as a Holder in
any registration pursuant to Section 9.1 or 9.2 shall, prior thereto, execute
and deliver to the Company a letter agreement in form and substance satisfactory
to the Company pursuant to which such Transferee agrees (and to cause each other
Person to whom it assigns its registration rights under this Article 9 to
execute and deliver to the Company a similar letter agreement) to comply with
the requirements of this Article 9 (including this sentence) to the same extent
and subject to the same terms and conditions as the Purchaser.
9.4 Expenses of Registration. In connection with any registration pursuant
to Section 9.1 or Section 9.2, the Company shall pay all registration, filing
and NASD fees, all fees and expenses of complying with securities or 'blue sky'
laws; provided, however, that each Holder shall pay its pro rata share of any
commissions, fees and disbursements of underwriters customarily paid by sellers
of securities (based on offering proceeds to be received by it). In any
registration pursuant to Section 9.1 or Section 9.2, the Company shall be
responsible for the fees and disbursements of counsel for the Company, its
independent public accountants and any expert retained by the Company in
connection with any such registration and premiums and other costs of policies
of insurance against liabilities arising out of the public offering of the
Registrable Securities.
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9.5 Registration Procedures. In the case of each registration effected by
the Company pursuant to Article 9, the Company will:
(a) furnish to the Exercising Holders prior to the filing of the requisite
Registration Statement copies of drafts of such Registration Statement as is
proposed to be filed (and give such holders and their counsel a reasonable
opportunity to comment on such documents), and thereafter such number of copies
of such Registration Statement, each amendment and supplement thereto (in each
case including all exhibits thereto), the Prospectus included in such
Registration Statement (including each preliminary prospectus) and such other
documents in such quantities as the Exercising Holders may reasonably request
from time to time in order to facilitate its distribution;
(b) notify the Exercising Holders promptly of any request by the Commission
for the amending or supplementing of such Registration Statement or Prospectus
or for additional information and promptly deliver to the Exercising Holders and
their counsel copies of any comments received by the SEC;
(c) notify the Exercising Holders, promptly after the Company shall receive
notice thereof, of the time when the Registration Statement becomes effective or
when any amendment or supplement or any prospectus forming a part of the
Registration Statement has been filed;
(d) advise the Exercising Holders promptly after the Company shall receive
notice or obtain knowledge of the issuance of any stop order by the Commission
suspending the effectiveness of any such Registration Statement or amendment
thereto or of the initiation or threatening of any proceeding for that purpose,
and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal promptly if such stop order should be issued;
(e) use all reasonable efforts to register or qualify the Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
the Exercising Holders (or the managing underwriter, in the case of underwritten
offerings) reasonably request; provided that the Company shall not be required
to qualify to do business or become subject to service of process or taxation in
any jurisdiction in which it is not already so qualified or subject;
(f) use all reasonable efforts to cause the Registrable Securities included
in the Registration Statement to be listed on any securities exchange or
authorized for quotation on any national quotation system on which any of the
Common Stock is then listed;
(g) notify the Exercising Holders, at any time when a prospectus relating
to the proposed sale is required to be delivered under the Securities Act, of
the happening of any event as a result of which the Prospectus included in such
Registration Statement or amendment contains an untrue statement of a material
fact or omits to state any material fact required to be stated therein in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, and the Company will prepare a supplement or
amendment to such Prospectus so that, as thereafter delivered to the purchasers
of the Registrable Securities, such Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein in order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(h) enter into customary agreements (including without limitation, an
underwriting agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities included in the Registration Statement;
(i) in the case of a Registration Statement filed pursuant to Section 9.1
involving a shelf Registration Statement, prepare and file with the Commission
such amendments and supplements to such shelf Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep such shelf
Registration Statement effective until the earlier of (i) the sale of all
Registrable Securities covered thereby or (ii) two years (exclusive of any
period during which the distribution is postponed pursuant to Section 9.1), and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all Registrable Securities covered by such Registration
Statement;
(j) make available, upon reasonable prior notice and during normal business
hours in New York City, for inspection by Exercising Holders, any underwriter
participating in any disposition pursuant to the Registration Statement and any
attorney, accountant or other agent retained by the Exercising Holders or any
such underwriter all relevant financial and other records, pertinent corporate
documents
15
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and properties of the Company and cause the Company's officers, directors and
employees, upon reasonable prior notice and during normal business hours in New
York City, to supply all relevant information reasonably requested by the
Exercising Holders or any such underwriter, attorney, accountant or agent in
connection with the Registration Statement;
(k) request the Company's independent public accountants to provide to the
underwriters, if any, and the Exercising Holders, if permissible, a comfort
letter in customary form and covering such matters of the type customarily
covered by comfort letters to underwriters in connection with public offerings;
and
(l) cooperate and assist in any filings required to be made with the NASD
and in the performance of any due diligence investigation by any underwriter in
an underwritten offering.
9.6 Indemnification. (a) The Company will indemnify each Exercising Holder,
each of its officers and directors, and each Person controlling such Exercising
Holder within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder, with respect to each registration which has been
effected pursuant to this Article 9, and each underwriter, if any, and each
Person who controls any underwriter within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any Prospectus or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse such Exercising Holder, each of its officers and directors, and each
Person controlling such Exercising Holder, each such underwriter and each Person
who controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating and defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon information furnished in writing to the Company by such
Exercising Holder with respect to such Exercising Holder and stated to be
specifically for use therein. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of any indemnified
Exercising Holder and shall survive the transfer of the Registrable Securities
by the Exercising Holder.
(b) Each Exercising Holder will, if Registrable Securities held by it are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities covered by
such a registration statement, each Person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act and the rules
and regulations thereunder, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact with respect to the such
Exercising Holder contained in any such registration statement, prospectus or
other document made by such Exercising Holder, or any omission (or alleged
omission) to state therein a material fact with respect to such Exercising
Holder required to be stated therein or necessary to make the statements by such
Exercising Holder therein not misleading, and will reimburse the Company and
such other directors, officers, partners, persons, underwriters or control
Persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus or other document in reliance
upon and in conformity with information furnished in writing to the Company by
such Exercising Holder with respect to such Exercising Holder and stated to be
specifically for use therein; provided, however, that the obligations of such
Exercising Holder hereunder shall be limited to an amount equal to the proceeds
to such Exercising Holder of securities sold as contemplated herein.
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(c) If the indemnification provided for in this Section 9.6 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
9.7 Each Exercising Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 9.5(f)
hereof, such Exercising Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 9.5(f) hereof, and, if so directed by the Company, such Exercising
Holder will deliver to the Company (at the Company's expense), all copies in its
possession, other than permanent file copies then in such Holder's possession,
of the Prospectus covering such Registrable Securities current at the time of
receipt of such notice.
ARTICLE 10
TERMINATION OF AGREEMENT
10.1 Termination. This Agreement may be terminated prior to the Closing as
follows:
(a) by either the Purchasers or the Company if the Closing shall not have
occurred before the Termination Date (as defined below); provided, however, that
the right to terminate this Agreement under this Section 10.1(a) shall not be
available to any party whose failure to perform any covenant or obligation under
this Agreement or willful breach of a representation or warranty has been the
cause of or resulted in the failure of the Closing to occur on or before such
date. The 'Termination Date' shall be January 31, 1999, unless the failure of
any condition to any party's obligation to consummate the Closing as of such
date shall be caused by the failure of any Governmental Authority to grant any
approval, authorization or consent required for consummation of the Contemplated
Transactions or the failure to expire of the applicable waiting periods under
the HSR Act, in which cases the Termination Date shall be March 31, 1999; or
(b) at the election of the Purchaser, if prior to the Closing Date there
shall have been a breach of any of the Company's representations, warranties,
covenants or agreements, which breach would result in the failure to satisfy any
of the conditions set forth in Section 7.1, and such breach shall be incapable
of being cured or, if capable of being cured, shall not have been cured within
30 days after written notice thereof shall have been received by the Company;
(c) at the election of the Company, if prior to the Closing Date there
shall have been a breach of any of the Purchasers' representations, warranties,
covenants or agreements, which breach would result in the failure to satisfy any
of the conditions set forth in Section 8.1, and such breach shall be incapable
of being cured or, if capable of being cured, shall not have been cured within
30 days after written notice thereof shall have been received by the Purchasers;
(d) at the election of the Company or the Purchaser, if any legal
proceeding is commenced and pending by any Governmental Authority seeking to
prevent the consummation of the Closing or any other Contemplated Transaction
and the Company or the Purchaser, as the case may be, reasonably and in good
faith deems it impracticable or inadvisable to proceed in view of such legal
proceeding; or
(e) at any time on or prior to the Closing Date, by mutual written consent
of the Company and the Purchasers.
17
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If this Agreement so terminates, it shall become null and void and have no
further force or effect, except as provided in Section 10.2.
10.2 Survival After Termination. If this Agreement terminates pursuant to
Section 10.1 and the Contemplated Transactions are not consummated, this
Agreement shall become null and void and have no further force or effect, except
that any such termination shall be without prejudice to the rights of any party
on account of the nonsatisfaction of the conditions set forth in Articles 7 and
8 resulting from the intentional or willful breach or violation of the
representations, warranties, covenants or agreements of another party under this
Agreement. Notwithstanding anything in this Agreement to the contrary, the
provisions of Sections 5.2 and 6.1, this Section 10.2 and Sections 11.2, 11.8
and 11.10 shall survive any termination of this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 HSR Approval. Promptly upon execution and delivery (and in any event
within three (3) Business Days of the date) of this Agreement, the Purchasers
and the Company will prepare and file, or cause to be prepared and filed, with
the appropriate Governmental Authorities, a notification with respect to the
Contemplated Transactions pursuant to the HSR Act, supply all information
requested by Governmental Authorities in connection with the HSR Act
notification and cooperate with each other in responding to any such request.
11.2 Expenses. Each of the Company and each Purchaser shall pay its own
expenses incurred in connection with the negotiation, execution, delivery and
performance of this Agreement.
11.3 Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be delivered personally, telecopied or
sent by certified, registered or express mail, postage prepaid. Any such notice
shall be deemed given if delivered personally or telecopied, on the date of such
delivery or sent by reputable overnight courier, on the first Business Day
following the date of such mailing, as follows:
(a) if to the Company:
CD Radio Inc.
1180 Avenue of the Americas
14th Floor
New York, New York 10036
Attention: Patrick L. Donnelly
Telecopy: (212) 899-5036
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Mitchell S. Fishman
Telecopy: (212) 757-3990
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(b) if to the Purchasers:
c/o Apollo Management, L.P.
1301 Avenue of the Americas, 38th Floor
New York, NY 10019
Attention: Marc J. Rowan
Telecopy: (212) 261-4071
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: David A. Katz
Telecopy: (212) 403-2000
Any party may by notice given in accordance with this Section 11.3 designate
another address or person for receipt of notices hereunder.
11.4 Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of the parties hereto.
No Person other than the parties hereto and their successors and permitted
assigns is intended to be a beneficiary of this Agreement. No party hereto may
assign its rights under this Agreement without the prior written consent of the
other party hereto; provided, however, that prior to the Closing, either
Purchaser may assign all or any portion of its rights hereunder (along with the
corresponding obligations) to any Affiliate of the Purchasers that is an
investment fund managed or advised by Apollo Management, L.P.
11.5 Amendment and Waiver. (a) No failure or delay on the part of the
Company or the Purchasers in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies provided for
herein are cumulative and are not exclusive of any remedies that may be
available to the Company or the Purchasers at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to any provision of
this Agreement and any waiver of any provision of this Agreement shall be
effective only if it is made or given in writing and signed by the Company and
the Purchaser.
11.6 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, all of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
11.7 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
11.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF WHICH WOULD REQUIRE THE APPLICATION OF THE
LAWS OF ANOTHER STATE.
11.9 Severability. If any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
11.10 Entire Agreement. This Agreement, together with the schedules and
exhibits hereto, is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the agreement
and understanding of the parties hereto in respect of the subject matter
contained herein and therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein or therein. This
Agreement, together with the schedules and exhibits hereto, supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
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11.11 Further Assurances. Each of the parties shall execute such documents
and take, or cause to be taken, all appropriate action, and shall do or cause to
be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Contemplated Transactions and
obtaining any consents, exemptions, authorizations, or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person.
11.12 Public Announcements. Except to the extent required by law or the
regulations of any national securities exchange or the Nasdaq National Market,
neither party hereto will issue or make any reports, statements or releases to
the public with respect to this Agreement or the Contemplated Transactions
without consulting the other, and, during the period from the date hereof until
thirty (30) days after the Closing Date, without the approval of the other
parties (such approval not to be unreasonably withheld).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective officers hereunto duly authorized as
of the date first above written.
CD RADIO INC.
By: /s/ PATRICK L. DONNELLY
.................................
Patrick L. Donnelly
Executive Vice President and
General Counsel
APOLLO INVESTMENT FUND IV, L.P.
By: Apollo Advisors, IV, L.P., its
general partner
By: Apollo Capital Management IV,
Inc., its general partner
By: /s/ ANDREW AFRICK
...............................
Andrew Africk
Vice President
APOLLO OVERSEAS PARTNERS IV, L.P.
By: Apollo Advisors, IV, L.P., its
general partner
By: Apollo Capital Management IV,
Inc., its general partner
By: /s/ ANDREW AFRICK
...............................
Andrew Africk
Vice President
20
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SCHEDULE 3.2
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION
---- ---------------
<S> <C>
Satellite CD Radio, Inc.(1)........................................................................ Delaware
</TABLE>
- ------------
(1) All of the stock of this Subsidiary is pledged to secure the Company's
outstanding 15% Senior Secured Discount Notes due 2007.
<PAGE>
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SCHEDULE 3.4
REQUIRED CONSENTS
1. The filings required under the HSR Act.
2. Waiver by Loral Space & Communications Ltd. of its rights under Sections
5.2(b) and 5.3 of the Stock Purchase Agreement dated August 5, 1997 by
and among CD Radio Inc., David Margolese and Loral Space & Communications
Ltd. in respect of the Contemplated Transactions.
3. Approval by the stockholders of the Company of the Contemplated
Transactions in accordance with the rules and regulations of the National
Association of Securities Dealers, Inc.
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EXHIBIT A
CD RADIO INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF
9.2% SERIES A JUNIOR CUMULATIVE CONVERTIBLE PREFERRED STOCK
- ----------------------------------------------------------
PURSUANT TO SECTION 151(g) OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
------------------------
CD Radio Inc. (the 'Corporation'), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify
that pursuant to the provisions of Section 151 of the General Corporation Law of
the State of Delaware, the Board of Directors of the Corporation (the 'Board of
Directors'), in a duly convened meeting thereof on November 11, 1998, adopted
the following resolution, which resolution remains in full force and effect as
of the date hereof:
WHEREAS, the Board of Directors is authorized, within the limitations and
restrictions stated in the Certificate of Incorporation of the Corporation, to
fix by resolution or resolutions the designation of each series of Preferred
Stock of the Corporation (the 'Preferred Stock') and the powers, preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereof, including, without limiting
the generality of the foregoing, such provisions as may be desired concerning
voting, redemption, dividends, dissolution or distribution of assets, conversion
or exchange, and such other subjects or matters as may be fixed by resolutions
of the Board of Directors under the General Corporation Law of the State of
Delaware; and
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to its authority as aforesaid, to authorize and fix the terms of a
series of Preferred Stock and the number of shares constituting such series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized such series
of Preferred Stock on the terms and with the provisions herein set forth:
1. Number of Shares; Designation. A total of 4,300,000 shares of Preferred
Stock of the Corporation are hereby designated as 9.2% Series A Junior
Cumulative Convertible Preferred Stock (the 'Series A Preferred Stock').
2. Rank. The Series A Preferred Stock shall, with respect to payment of
dividends, redemption payments and rights upon liquidation, dissolution or
winding up of the affairs of the Corporation, (x) rank senior and prior to the
Common Stock, par value $.001 per share, of the Corporation (the 'Common Stock')
and any other class or series of capital stock of the Corporation that by its
terms ranks junior to the Series A Preferred Stock as to payment of dividends,
redemption payments and rights upon liquidation, dissolution or winding up of
the affairs of the Corporation, (y) rank on a parity with the Corporation's 9.2%
Series B Junior Cumulative Convertible Preferred Stock (the 'Series B Preferred
Stock') and all Parity Dividend Stock (as defined in Section 3(a)) and all
Parity Liquidation Stock (as defined in Section 5(b)), and (z) rank junior to
the Corporation's 10 1/2% Series C Convertible Preferred Stock ('Series C
Preferred Stock') and all Senior Dividend Stock (as defined in Section 3(c)),
all Senior Liquidation Stock (as defined in Section 5(b)) and to any class or
series of capital stock of the Corporation (other than the Common Stock),
whether currently issued or issued in the future, that does not by its terms
expressly provide that it ranks on a parity with or junior to the Series A
Preferred Stock as to dividends and rights upon liquidation, dissolution or
winding-up of the Corporation (which shall include, for purposes of the
foregoing, any entity with which the Corporation may be merged or consolidated
or to which all or substantially all the assets of the Corporation may be
transferred or which transfers all or substantially all of its assets to the
Corporation).
3. Dividends. (a)(1) The holders of the issued and outstanding shares of
the Series A Preferred Stock shall be entitled to receive, as and when declared
by the Board of Directors, out of funds legally
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available therefor in the case of dividends paid in cash, cumulative dividends
at the annual rate per share of 9.2% of the sum of (x) the Liquidation
Preference (defined in Section 5 hereof) and (y) all unpaid dividends, if any,
whether or not declared, from the date of issuance of the shares of Series A
Preferred Stock (the 'Closing Date') to the applicable dividend payment date.
Dividends on shares of Series A Preferred Stock shall be payable annually
initially on November 15, 1999 and each November 15 thereafter (each, a
'Dividend Payment Date'), except that if any Dividend Payment Date is not a
business day then the Dividend Payment Date shall be on the first immediately
succeeding business day (as used herein, the term 'business day' shall mean any
day except a Saturday, Sunday or day on which banking institutions are legally
authorized to close in The City of New York).
(2) If any Dividend payable on any Dividend Payment Date is not declared or
paid on such Dividend Payment Date, as provided in Section 3(a)(1), in full in
cash or in additional shares of Series A Preferred Stock, then the amount of
such unpaid dividend ('Default Dividends') shall be accumulated. Any Default
Dividends shall, from the Dividend Payment Date on which such dividends accrued,
accrue dividends until paid, compounded annually, at a rate equal to 15% per
annum. Default Dividends shall be payable in shares of Series A Preferred Stock,
but not in cash.
(3) Dividends on the Series A Preferred Stock may be paid, in the sole
discretion of the Board of Directors, either in (i) cash, (ii) shares of Series
A Preferred Stock or (iii) any combination of cash or shares of Series A
Preferred Stock, and the issuance of the requisite number of such shares of
Series A Preferred Stock (such number determined as provided in the next
sentence) pursuant to (ii) or (iii) shall constitute full payment of any such
dividend. Series A Preferred Stock issued to pay dividends shall be valued at
their Liquidation Preference. All dividend payments paid with respect to shares
of Series A Preferred Stock shall be paid pro rata to the holders entitled
thereto. All shares of Series A Preferred Stock issued as a dividend with
respect to shares of Series A Preferred Stock shall thereupon be duly
authorized, validly issued, fully paid and non-assessable. In no event shall an
election by the Board of Directors to pay dividends, in full or in part, in cash
or in shares of Series A Preferred Stock in lieu of payment, in full or in part,
in cash preclude the Board of Directors from electing any such alternative in
respect of all or any portion of any subsequent dividend. The Corporation shall
not issue fractional shares of Series A Preferred Stock upon payment of any
dividends in shares of Series A Preferred Stock and any amount of fractional
shares of Series A Preferred Stock otherwise issuable upon the payment of any
dividend in shares of Series A Preferred Stock shall be paid in cash.
(4) Dividends to be paid on a Dividend Payment Date shall be paid to the
holders of record of shares of the Series A Preferred Stock as they appear on
the stock register of the Corporation at the close of business on such record
dates (each, a 'Dividend Payment Record Date'), which shall be not more than 40
days nor fewer than 10 days preceding each Dividend Payment Date thereof, as
shall be fixed by the Board of Directors of the Corporation. Default Dividends
shall be declared and paid at any time as of which funds legally available
therefor are available to the Corporation, without reference to any regular
Dividend Payment Date, to the holders of record on such date, not exceeding 40
days nor fewer than 10 days preceding the date on which dividends in arrears
will be paid, as may be fixed by the Board of Directors of the Corporation.
Holders of shares of the Series A Preferred Stock shall be entitled to receive
dividends in preference to and in priority over dividends upon the Common Stock
and any other series or class of the Corporation's capital stock that ranks
junior as to dividends to the Series A Preferred Stock ('Junior Dividend Stock')
and shall be on a parity as to dividends with the Series B Preferred Stock and
any series or class of the Corporation's capital stock that does not rank senior
or junior as to dividends with the Series A Preferred Stock (together with the
Series B Preferred Stock, 'Parity Dividend Stock'). The holders of shares of the
Series A Preferred Stock shall not be entitled to any dividends in excess of
full cumulative dividends (including Default Dividends), as herein provided.
(b) No dividends, other than dividends payable solely in Common Stock,
Junior Dividend Stock, or warrants or other rights to acquire such Common Stock
or Junior Dividend Stock, shall be paid or declared and set apart for payment
on, and no purchase, redemption or other acquisition shall be made by the
Corporation or entity directly or indirectly controlled by the Corporation of,
any Common Stock or Junior Dividend Stock unless and until (i) all accrued and
unpaid dividends on the Series A Preferred Stock shall have been paid and (ii)
proper provision shall have been made such that holders
A-2
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of shares of Series A Preferred Stock are offered the opportunity to elect
(each, a 'Payout Election'), in lieu of the Conversion Price adjustment referred
to in Section 6(f)(ii), Section 6(f)(iii) or Section 6(f)(iv), as the case may
be, to participate in such dividend, purchase, redemption or other acquisition
pro rata with the holders of Common Stock or Junior Dividend Stock, as the case
may be, as if each share of Series A Preferred Stock had been converted as of
the record date for such dividend or immediately prior to such purchase,
redemption or other acquisition, as the case may be, at the Conversion Price
then in effect (without any requirement that any such shares of Series A
Preferred Stock actually be so converted). Each Payout Election shall be made
upon the affirmative vote or consent of holders of a majority of the total
number of shares of Series A Preferred Stock then outstanding and shall be
effective as to and binding upon all such shares. So long as a sufficient amount
of cash, assets, evidences of indebtedness or securities are set aside for
payment to the holders of Series A Preferred Stock as of the payment date for
such dividend or the date for such purchase, redemption or acquisition, payment
need not be made to the holders of Series A Preferred Stock on such date but may
be made at any time up to the tenth Business Day following such date.
(c) If at any time the Corporation issues any class or series of capital
stock ranking senior and prior to the Series A Preferred Stock with respect to
the payment of dividends ('Senior Dividend Stock') and fails to pay or declare
and set apart for payment accrued and unpaid dividends on such Senior Dividend
Stock, in whole or in part, then (except to the extent allowed by the terms of
the Senior Dividend Stock) no dividend paid in cash shall be paid or declared
and set apart for payment on the Series A Preferred Stock unless and until all
accrued and unpaid dividends with respect to the Senior Dividend Stock shall
have been paid or declared and set apart for payment, without interest. Except
as provided in Section 3(d) below, no dividends paid in cash shall be paid or
declared and set apart for payment on any Parity Dividend Stock for any period
unless the Corporation has paid or declared and set apart for payment, or
contemporaneously pays or declares and sets apart for payment, on the Series A
Preferred Stock all accrued and unpaid dividends for all dividend payment
periods terminating on or prior to the date of payment of such dividends. Except
as provided in Section 3(d) below, no dividends paid in cash shall be paid or
declared and set apart for payment on the Series A Preferred Stock for any
period unless the Corporation has paid or declared and set apart for payment, or
contemporaneously pays or declares and sets apart for such payment, on any
Parity Dividend Stock all accrued and unpaid dividends for all dividend payment
periods terminating on or prior to the date of payment of such dividends.
(d) If at any time the Corporation has failed to pay accrued dividends on
any shares of Series A Preferred Stock on any Dividend Payment Date or any
Parity Dividend Stock on a stated payment date, as the case may be, the
Corporation shall not:
(i) purchase any shares of the Series A Preferred Stock or Parity
Dividend Stock (except for a consideration payable in Common Stock or
Junior Dividend Stock) or redeem fewer than all of the shares of the
Series A Preferred Stock and Parity Dividend Stock then outstanding except
for (x) the repurchase or redemption of shares of the Series A Preferred
Stock made pro rata among the holders of the shares of the Series A
Preferred Stock then outstanding and (y) the repurchase or redemption made
pro rata with respect to all shares of the Series A Preferred Stock and
Parity Dividend Stock then outstanding so that the amounts repurchased or
redeemed shall in all cases bear to each other the same ratio that, at the
time of the repurchase or redemption, the required redemption payments on
the shares of the Series A Preferred Stock and the other Parity Dividend
Stock then outstanding, respectively, bear to each other, or
(ii) permit any corporation or other entity directly or indirectly
controlled by the Corporation to purchase any Common Stock, Junior Dividend
Stock, shares of the Series A Preferred Stock or Parity Dividend Stock,
except to the same extent that the Corporation could purchase such shares.
Unless and until all dividends unpaid in respect of prior dividend payment
periods on shares of the Series A Preferred Stock and any Parity Dividend Stock
at the time outstanding have been paid in full or a sum sufficient for such
payment is declared and set apart, as provided in the paragraph (c), all
dividends accrued by the Corporation upon shares of the Series A Preferred Stock
or Parity Dividend Stock shall be declared pro rata with respect to all shares
of the Series A Preferred Stock and Parity Dividend Stock then outstanding, so
that the amounts of any dividends declared on shares of the
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Series A Preferred Stock and on the Parity Dividend Stock shall in all cases
bear to each other the same ratio that, at the time of the declaration, all
unpaid dividends in respect of prior dividend payment periods on shares of the
Series A Preferred Stock and the other Parity Dividend Stock, respectively, bear
to each other.
4. Redemption. (a)(1) Optional Redemption. Except as provided in subsection
(a)(2) of this Section 4 or in Section 9, shares of the Series A Preferred Stock
shall not be redeemable prior to November 15, 2003. From and after November 15,
2003, subject to the restrictions in Section 3 above, the Corporation may redeem
shares of Series A Preferred Stock, in whole or in part, at the option of the
Corporation, to the extent it has funds legally available therefor at a
redemption price of 100% of the Liquidation Preference thereof plus accrued and
unpaid dividends, if any, whether or not declared, to the date of redemption.
(2) Special Redemption. From and after November 15, 2001 and prior to
November 15, 2003, the Corporation, at its option, may redeem shares of Series A
Preferred Stock, in whole or in part, in the sole discretion of the Board of
Directors, to the extent it has funds legally available therefor, at the
redemption price of 100% of the Liquidation Preference thereof, plus an amount
equal to the dividends unpaid thereon, if any, whether or not declared, to the
redemption date, if the Current Market Price of the Common Stock on the date of
the notice of redemption (described below) equals or exceeds $60.00 per share.
As used herein, the 'Current Market Price' for a given date shall mean the
average Closing Price of the Common Stock as reported in The Wall Street Journal
or, at the election of the Corporation, other reputable financial news source,
for the 20 consecutive trading days immediately preceding such date. The $60.00
per share benchmark shall be subject to adjustment upon the occurrence of
certain events in the same manner as the Conversion Price (defined herein) shall
be subject to adjustment as set forth in Section 6(f) hereof. For purposes of
this paragraph, the Current Market Price shall be deemed to be less than $60 per
share at any time during which the Common Stock is not listed, quoted or
admitted to trading on either the New York Stock Exchange, Inc. (the 'NYSE'),
the American Stock Exchange ('AMEX') or The Nasdaq Stock Market, Inc.'s National
Market ('Nasdaq'). As used herein, the 'Closing Price' of any security on any
day means the last reported sale price regular way on such day or, in the case
no such sale takes place on such day, the average of the reported closing bid
and asked prices regular way of the Common Stock, in each case on the NYSE or,
if not listed or admitted to trading on such exchange, as quoted on AMEX or
Nasdaq.
(3) Mandatory Redemption. On November 15, 2011, the Corporation shall
redeem all outstanding shares of Series A Preferred Stock, to the extent it has
funds legally available therefor, at the redemption price of 100% of the
Liquidation Preference thereof, plus an amount equal to the dividends unpaid
thereon, if any, whether or not declared, to the redemption date.
(4) Payment of Redemption Price. (a) The amount of the redemption price on
any shares of Series A Preferred Stock redeemed, on any redemption set forth
herein, that is allocable to the Liquidation Preference thereon shall be paid in
cash (to the extent funds are legally available therefor) and any unpaid
dividends to be paid on the shares of Series A Preferred Stock redeemed on such
redemption date may be paid in cash (to the extent funds are legally available
therefor) or shares of Series A Preferred Stock, or any combination thereof, in
the sole discretion of the Board of Directors as provided in Section 3(a)(3)
hereof.
(b) Not less than 15 days nor more than 45 days (such date as fixed by the
Board of Directors of the Corporation is referred to herein as the 'Redemption
Record Date') prior to the date fixed for any redemption of shares of the
Series A Preferred Stock pursuant to this Section 4, a notice specifying the
time and place of the redemption and the number of shares to be redeemed shall
be given by first class mail, postage prepaid, to the holders of record on the
Redemption Record Date of the shares of the Series A Preferred Stock to be
redeemed at their respective addresses as the same shall appear on the books of
the Corporation, calling upon each holder of record to surrender to the
Corporation on the redemption date at the place designated in the notice such
holder's certificate or certificates representing the number of shares specified
in the notice of redemption. Neither failure to mail such notice, nor any defect
therein or in the mailing thereof, to any particular holder shall affect the
sufficiency of the notice or the validity of the proceedings for redemption with
respect to the other holders. Any notice mailed in the manner herein provided
shall be conclusively presumed to have been
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duly given whether or not the holder receives the notice. On or after the
redemption date, each holder of shares of Series A Preferred Stock to be
redeemed shall present and surrender such holder's certificate or certificates
for such shares to the Corporation at the place designated in the redemption
notice and thereupon the redemption price of the shares, and any unpaid
dividends thereon to the redemption date, shall be paid to or on the order of
the person whose name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be canceled. In case fewer than
all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(c) If a notice of redemption has been given pursuant to this Section 4 and
if, on or before the redemption date, the funds (or shares of Series A Preferred
Stock if any dividends are to be paid in shares of Series A Preferred Stock),
necessary for such redemption (including all dividends on the shares of Series A
Preferred Stock to be redeemed that will accrue to the redemption date) shall
have been set aside by the Corporation, separate and apart from its other funds
(or reserved and authorized for issuance if any dividends are to be paid in
shares of Series A Preferred Stock), in trust for the pro rata benefit of the
holders of the shares of Series A Preferred Stock so called for redemption,
then, notwithstanding that any certificates for such shares of Series A
Preferred Stock have not been surrendered for cancellation, on the redemption
date dividends shall cease to accrue on the shares of the Series A Preferred
Stock to be redeemed, and at the close of business on the date on which such
funds have been segregated and set aside by the Corporation as provided in this
Section 4(c), the holders of such shares shall cease to be stockholders with
respect to those shares, shall have no interest in or claims against the
Corporation by virtue thereof and shall have no voting or other rights with
respect thereto, except the conversion rights provided in subsection (d) of this
Section 4 and Section 6 below and the right to receive the moneys payable (or
shares of Series A Preferred Stock issued if any dividends are to be paid in
shares of Series A Preferred Stock) upon such redemption, without interest
thereon, upon surrender (and endorsement, if required by the Corporation) of
their certificates, and the shares of Series A Preferred Stock evidenced thereby
shall no longer be outstanding. Subject to applicable escheat laws, any moneys
so set aside (or shares of Series A Preferred Stock authorized and reserved if
any dividends are to be paid in shares of Series A Preferred Stock) by the
Corporation and unclaimed at the end of two years from the redemption date shall
revert to the general funds of the Corporation (or be released from the
reservation thereof in the case of shares of Series A Preferred Stock), after
which reversion the holders of such shares so called for redemption shall look
only to the general funds of the Corporation for the payment of the redemption
price, without interest. Any interest accrued on funds so deposited shall belong
to the Corporation and be paid thereto from time to time.
(d) If a notice of redemption has been given pursuant to this Section 4 and
any holder of shares of Series A Preferred Stock shall, prior to the close of
business on the business day immediately preceding the redemption date, give
written notice to the Corporation pursuant to Section 6 below of the conversion
of any or all of the shares to be redeemed held by the holder (accompanied by a
certificate or certificates for such shares, duly endorsed or assigned to the
Corporation, and any necessary transfer tax payment, as required by Section 6
below), then such redemption shall not become effective as to such shares to be
converted and such conversion shall become effective as provided in Section 6
below, whereupon any funds deposited by the Corporation for the redemption of
such shares shall (subject to any right of the holder of such shares to receive
the dividend payable thereon as provided in Section 6 below) immediately upon
such conversion be returned to the Corporation or, if then held in trust by the
Corporation, shall automatically and without further corporate action or notice
be discharged from the trust.
(e) In every case of redemption of fewer than all of the outstanding shares
of the Series A Preferred Stock pursuant to this Section 4, the shares to be
redeemed shall be selected pro rata, provided that only whole shares shall be
selected for redemption.
5. Liquidation. (a) In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, the holders of the
Series A Preferred Stock shall be entitled to receive $100.00 per share (the
'Liquidation Preference'), plus an amount equal to the accrued and unpaid
dividends thereon, if any, whether or not declared, to the payment date.
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(b) In the event of any voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation, the holders of shares of Series A Preferred
Stock (i) shall not be entitled to receive the Liquidation Preference of the
shares held by them until payment in full or provision has been made for the
payment of all claims of creditors of the Corporation and the liquidation
preference of any class or series of capital stock ranking senior to the Series
A Preferred Stock with respect to redemption rights and rights upon liquidation,
dissolution or winding up of the affairs of the Corporation ('Senior Liquidation
Stock' and together with the Senior Dividend Stock, the 'Senior Stock'), plus
accrued and unpaid dividends thereon, if any, whether or not declared, to the
payment date, shall have been paid in full and (ii) shall be entitled to receive
the Liquidation Preference of such shares held by them, plus accrued and unpaid
dividends thereon, if any, whether or not declared, to the payment date, in
preference to and in priority over any distributions upon the Common Stock and
any other series or class of the Corporation's capital stock that ranks junior
to the Series A Preferred Stock as to redemption rights and rights upon
liquidation, dissolution or winding up of the affairs of the Corporation
('Junior Liquidation Stock' and together with the Junior Dividend Stock, the
'Junior Stock'). Upon payment in full of the Liquidation Preference to which the
holders of shares of the Series A Preferred Stock are entitled, the holders of
shares of the Series A Preferred Stock shall not be entitled to any further
participation in any distribution of assets by the Corporation. Subject to
clause (i) above, if the assets of the Corporation are not sufficient to pay in
full the Liquidation Preference payable to the holders of shares of the Series A
Preferred Stock and the liquidation preference payable to the holders of any
series or class of the Corporation's capital stock, outstanding on the date
hereof or hereafter issued, that ranks on a parity with the Series A Preferred
Stock as to redemption rights and rights upon liquidation, dissolution or
winding up of the affairs of the Corporation ('Parity Liquidation Stock' and
together with the Parity Dividend Stock, the 'Parity Stock'), the holders of all
such shares shall share ratably in proportion to the full respective
preferential amounts payable on such shares in any distribution.
(c) For the purposes of this Section 5, neither the sale of all or
substantially all of the assets of the Corporation nor the consolidation or
merger of the Corporation with or into any other entity shall be deemed to be a
voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation, unless such sale, consolidation or merger shall be in connection
with a plan of liquidation, dissolution or winding up of the Corporation.
6. Optional Conversion. (a) Holders of shares of Series A Preferred Stock
may, at any time, convert shares of Series A Preferred Stock, unless previously
redeemed, into a number of shares of Common Stock calculated by dividing the
Liquidation Preference (without unpaid dividends) by $30.00, subject to
adjustment as described below in Section 6(f) (the 'Conversion Price'). If more
than one share of Series A Preferred Stock shall be surrendered for conversion
at one time by the same record holder, the number of full shares of Common Stock
issuable upon conversion thereof shall be computed on the basis of the aggregate
number of shares of Series A Preferred Stock so surrendered. In the case of
shares of Series A Preferred Stock called for redemption, conversion rights
shall expire at the close of business on the business day immediately preceding
the redemption date. The holders of shares of Series A Preferred Stock that
convert such shares into shares of Common Stock shall be entitled to receive any
unpaid dividends thereon, if any, whether or not declared, and such dividends
shall be payable in cash or shares of Common Stock, or any combination thereof,
in the sole discretion of the Board of Directors.
(b) Any holder of shares of Series A Preferred Stock electing to convert
the shares or any portion thereof in accordance with Section 6(a) above shall
give written notice to the Corporation (which notice may be given by facsimile
transmission) that such holder elects to convert the same and shall state
therein the number of shares of Series A Preferred Stock to be converted and the
name or names in which such holder wishes the certificate or certificates for
shares of Common Stock to be issued. Promptly thereafter, the holder shall
surrender the certificate or certificates of shares of Series A Preferred Stock
to be converted, duly endorsed, at the office of the Corporation or any transfer
agent for such shares, or at such other place designated by the Corporation,
provided that the Corporation shall at all times maintain an office or agency in
The City of New York for such purposes. The Corporation shall, immediately upon
receipt of such notice, issue and deliver to or upon the order of such holder,
against delivery of the certificates representing the shares of Series A
Preferred Stock that
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have been converted, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled (in the number(s) and
denomination(s) designated by such holder), and the Corporation shall deliver to
such holder a certificate or certificates for the number of shares of Series A
Preferred Stock that such holder has not elected to convert. The conversion
right with respect to any shares of Series A Preferred Stock shall be deemed to
have been exercised at the date upon which the certificates therefor (and the
payment required by Section 6(d), if applicable), shall have been so delivered,
and the person or persons entitled to receive the Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or holders of
such Common Stock upon that date.
(c) No fractional shares of Common Stock shall be issued upon conversion of
shares of Series A Preferred Stock. Instead of any fractional share of Common
Stock otherwise issuable upon conversion of any shares of Series A Preferred
Stock, the Corporation shall pay a cash adjustment in respect of such fraction
in an amount equal to the same fraction of the Closing Price of the Common Stock
at the close of business on the day of conversion. In the absence of a Closing
Price, the Board of Directors shall in good faith determine the current market
price on such basis as it reasonably considers appropriate and such current
market price shall be used to calculate the cash adjustment; provided that in no
case shall the Closing Price be less than the Conversion Price then in effect.
(d) If a holder converts shares of Series A Preferred Stock, the
Corporation shall pay any documentary, stamp or similar issue or transfer tax
due on the issue of Common Stock upon the conversion or due upon the issuance of
a new certificate or certificates for any shares of Series A Preferred Stock not
converted. The holder, however, shall pay any such tax that is due because any
such shares of the Common Stock or of the Series A Preferred Stock are issued in
a name other than the name of the holder.
(e) The Corporation shall reserve out of its authorized but unissued Common
Stock held in treasury enough shares of Common Stock to permit the conversion of
all of the then-outstanding shares of Series A Preferred Stock. For the purposes
of this Section 6(e), the full number of shares of Common Stock then issuable
upon the conversion of all then-outstanding shares of Series A Preferred Stock
shall be computed as if at the time of computation all outstanding shares of
Series A Preferred Stock were held by a single holder. The Corporation shall
from time to time, in accordance with the laws of the State of Delaware and its
certificate of incorporation, increase the authorized amount of its Common Stock
if at any time the authorized amount of its Common Stock remaining unissued
shall not be sufficient to permit the conversion of all shares of Series A
Preferred Stock at the time outstanding. All shares of Common Stock issued upon
conversion of the shares of Series A Preferred Stock shall be validly issued,
fully paid and nonassessable.
(f) The Conversion Price shall be subject to adjustment as follows:
(i) In case the Corporation shall (A) pay a dividend on any class of
its capital stock in shares of its Common Stock, (B) subdivide its
outstanding shares of Common Stock into a greater number of shares or (C)
combine its outstanding shares of Common Stock into a smaller number of
shares, the Conversion Price in effect immediately prior thereto shall be
adjusted (as provided below) so that the holders of any shares of Series A
Preferred Stock thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock which such holder would have
owned or have been entitled to receive immediately following such action
had such shares of Series A Preferred Stock been converted immediately
prior to such time. The Conversion Price as adjusted shall be determined by
multiplying the Conversion Price at which the shares of Series A Preferred
Stock were theretofore convertible by a fraction of which the denominator
shall be the number of shares of Common Stock outstanding immediately
following such action and of which the numerator shall be the number of
shares of Common Stock outstanding immediately prior thereto. Such
adjustment shall be made whenever any event listed above shall occur and
shall become effective retroactively immediately after the record date in
the case of a dividend and immediately after the effective date in the case
of a subdivision or combination.
(ii) In case the Corporation shall issue rights or warrants to any
Person (including holders of its Common Stock) entitling such Person or
Persons to subscribe for or purchase shares of Common Stock at a price per
share less than the Current Market Price per share of Common Stock at the
record date therefor, or in case the Corporation shall issue to any Person
(including holders
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of its Common Stock) other securities convertible into or exchangeable for
Common Stock for a consideration per share of Common Stock deliverable upon
conversion or exchange thereof less than the Current Market Price at the
record date therefore, then the Conversion Price in effect immediately
prior thereto shall be adjusted as provided below so that the Conversion
Price therefor shall be equal to the price determined by multiplying (A)
the Conversion Price at which shares of Series A Preferred Stock were
theretofore convertible by (B) a fraction of which (x) the denominator
shall be the sum of (1) the number of shares of Common Stock outstanding on
the date of issuance of the convertible or exchangeable securities, rights
or warrants and (2) the number of additional shares of Common Stock offered
for subscription or purchase, or issuable upon such conversion or exchange,
and (y) the numerator shall be the sum of (1) the number of shares of
Common Stock outstanding on the date of issuance of such convertible or
exchangeable securities, rights or warrants and (2) the number of
additional shares of Common Stock which the aggregate offering price of the
number of shares of Common Stock so offered would purchase at the Current
Market Price per share of Common Stock. Such adjustment shall be made
whenever such convertible or exchangeable securities, rights or warrants
are issued, and shall become effective immediately after the record date
for the determination of stockholders entitled to receive such securities.
However, upon the expiration of any right or warrant to purchase Common
Stock, the issuance of which resulted in an adjustment in the Conversion
Price pursuant to this Section 6(f)(ii), if any such right or warrant shall
expire and shall not have been exercised, the Conversion Price shall be
recomputed immediately upon such expiration and effective immediately upon
such expiration shall be increased to the price it would have been (but
reflecting any other adjustments to the Conversion Price made pursuant to
the provisions of this Section 6(f) after the issuance of such rights or
warrants) had the adjustment of the Conversion Price made upon the issuance
of such rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock
actually purchased upon the exercise of such rights or warrants. No further
adjustment shall be made upon exercise of any right, warrant, convertible
security or exchangeable security if any adjustment shall have been made
upon issuance of such security. The foregoing notwithstanding, no
adjustment shall be made pursuant to this subparagraph (ii) with respect to
any particular dividend or other event with respect to which a Payout
Election is made.
(iii) In case the Corporation shall pay a dividend to all holders of
its Common Stock (including any dividend paid in connection with a
consolidation or merger in which the Corporation is the continuing
corporation) of any shares of capital stock of the Corporation or its
subsidiaries (other than Common Stock) or evidences of its indebtedness or
assets or cash (excluding dividends or distributions in connection with the
liquidation, dissolution or winding up of the Corporation) or rights or
warrants to subscribe for or purchase any of its securities or those of its
subsidiaries or securities convertible or exchangeable for Common Stock
(excluding those securities referred to in Section 6(f)(ii) above), then in
each such case the Conversion Price in effect immediately prior thereto
shall be adjusted as provided below so that the Conversion Price thereafter
shall be equal to the price determined by multiplying (A) the Conversion
Price in effect on the record date mentioned below by (B) a fraction, the
numerator of which shall be the Current Market Price per share of Common
Stock on the record date mentioned below less the then fair market value
(as determined by the Board of Directors, whose good faith determination
shall be conclusive) as of such record date of the cash, assets, evidences
of indebtedness or securities so paid with respect to one share of Common
Stock, and the denominator of which shall be the Current Market Price per
share of Common Stock on such record date; provided, however, that in the
event the then fair market value (as so determined) so paid with respect to
one share of Common Stock is equal to or greater than the Current Market
Price per share of Common Stock on the record date mentioned above, in lieu
of the foregoing adjustment, adequate provision shall be made so that each
holder of shares of the Series A Preferred Stock shall have the right to
receive the amount and kind of assets, evidences of indebtedness, or
securities such holder would have received had such holder converted each
such share of Series A Preferred Stock immediately prior to the record date
for such dividend. Such adjustment shall be made whenever any such payment
is made, and shall become effective retroactively immediately after the
record date for the determination of stockholders entitled to
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receive the payment. The foregoing notwithstanding, no adjustment shall be
made pursuant to this subparagraph (iii) with respect to any particular
dividend or other event with respect to which a Payout Election is made.
(iv) In case the Corporation shall purchase, redeem or otherwise
acquire any shares of Common Stock at a price per share greater than the
Current Market Price per share of Common Stock on the date of such event,
or in case the Corporation shall purchase, redeem or otherwise acquire
other securities convertible into or exchangeable for Common Stock for a
consideration per share of Common Stock into which such security is
convertible or exchangeable greater than the per share Current Market Price
on the date of such event, then the Conversion Price in effect immediately
prior thereto shall be adjusted as provided below so that the Conversion
Price therefor shall be equal to the price determined by multiplying (A)
the Conversion Price at which shares of Series A Preferred Stock were
theretofore convertible by (B) a fraction of which (x) the denominator
shall be the Current Market Price per share on the date of such event, and
(y) the numerator shall be the Current Market Price per share on the date
of such event less the difference between (1) the consideration paid by the
Corporation per share of Common Stock (or, in the case of securities
convertible into or exchangeable for Common Stock, the consideration per
share of Common Stock into which such security is convertible or
exchangeable) purchased, redeemed or acquired in such event and (2) the
Current Market Price per share on the date of such event. Such adjustment
shall be made whenever such Common Stock is issued or sold, and shall
become effective immediately after the issuance or sale of such securities.
The foregoing notwithstanding, no adjustment shall be made pursuant to this
subparagraph (iv) with respect to any particular purchase, redemption or
acquisition with respect to which a Payout Election is made.
(v) In case the Corporation shall issue or sell any shares of Common
Stock at a price per share more than 15% below (or, in the case of any
issuance or sale to an affiliate (as defined in the rules of the Securities
and Exchange Commission promulgated under the Securities Exchange Act of
1934, as amended) of the Corporation, any amount below) the Current Market
Price per share of Common Stock on the date the Corporation commits or
agrees to such sale or issuance, then the Conversion Price in effect
immediately prior thereto shall be adjusted as provided below so that the
Conversion Price therefor shall be equal to the price determined by
multiplying (A) the Conversion Price at which shares of Series A Preferred
Stock were theretofore convertible by (B) a fraction of which (x) the
denominator shall be the sum of (1) the number of shares of Common Stock
outstanding on the date of issuance or sale of such shares of Common Stock
and (2) the number of additional shares of Common Stock offered for sale or
subject to issuance, and (y) the numerator shall be the sum of (1) the
number of shares of Common Stock outstanding on the date of issuance or
sale of such shares of Common Stock and (2) the number of additional shares
of Common Stock which the aggregate offering price of the number of shares
of Common Stock so offered or issued would purchase at the Current Market
Price per share of Common Stock. Such adjustment shall be made whenever
such Common Stock is issued or sold, and shall become effective immediately
after the issuance or sale of such securities; provided, however, that the
provisions of this subparagraph shall not apply to (1) shares of Common
Stock issued upon conversion of shares of Series A Preferred Stock or
Series B Preferred Stock, or (2) shares of Common Stock issued upon
conversion, exercise or exchange of any security with respect to which an
adjustment to the Conversion Price was made in accordance with clause (ii)
above at the time of issuance of such security, or (3) shares of Common
Stock issued in a bona fide public offering to or through a nationally
recognized investment banking firm in which affiliates (as defined in the
rules of the Securities and Exchange Commission promulgated under the
Securities Exchange Act of 1934, as amended) of the Corporation purchase
less than 25% of the shares in such offering.
(vi) No adjustment in the Conversion Price shall be required unless
the adjustment would require an increase or decrease of at least 1% in the
Conversion Price then in effect; provided, however, that any adjustments
that by reason of this Section 6(f)(vi) are not required to be made shall
be carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 6(f) shall be made to the nearest cent.
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(vii) In the event that, at any time as a result of an adjustment made
pursuant to Section 6(f)(i) through 6(f)(vi) above, the holder of any share
of Series A Preferred Stock thereafter surrendered for conversion shall
become entitled to receive any shares of the Corporation other than shares
of the Common Stock, thereafter the number of such other shares so
receivable upon conversion of any share of Series A Preferred Stock shall
be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 6(f)(i) through 6(f)(vi) above, and the
other provisions of this Section 6 with respect to the Common Stock shall
apply on like terms to any such other shares.
(viii) Whenever the Conversion Price is adjusted, as herein provided,
the Corporation shall promptly file with the transfer agent for the Series
A Preferred Stock, or, if there is no transfer agent, the Corporation shall
promptly send to each holder of record by first class mail, postage
pre-paid, a certificate of an officer of the Corporation setting forth the
Conversion Price after the adjustment and setting forth a brief statement
of the facts requiring such adjustment and a computation thereof. The
certificate shall be conclusive evidence of the correctness of the
adjustment. The Corporation shall promptly cause a notice of the adjusted
Conversion Price to be mailed to each registered holder of shares of
Series A Preferred Stock.
(ix) In case of any reclassification of the Common Stock, any
consolidation of the Corporation with, or merger of the Corporation into,
any other entity, any merger of another entity into the Corporation (other
than a merger that does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of the
Corporation), any sale or transfer of all or substantially all of the
assets of the Corporation or any compulsory share exchange pursuant to
which share exchange the Common Stock is converted into other securities,
cash or other property, then lawful provision shall be made as part of the
terms of such transaction whereby the holder of each share of Series A
Preferred Stock then outstanding shall have the right thereafter, during
the period such share of Series A Preferred Stock shall be convertible, to
convert such share only into the kind and amount of securities, cash and
other property receivable upon the reclassification, consolidation, merger,
sale, transfer or share exchange by a holder of the number of shares of
Common Stock of the Corporation into which a share of Series A Preferred
Stock would have been convertible immediately prior to the
reclassification, consolidation, merger, sale, transfer or share exchange.
The Corporation, the person formed by the consolidation or resulting from
the merger or which acquires such assets or which acquires the
Corporation's shares, as the case may be, shall make provisions in its
certificate or articles of incorporation or other constituent document to
establish such rights and such rights shall be clearly provided for in the
definitive transaction documents relating to such transaction. The
certificate or articles of incorporation or other constituent document
shall provide for adjustments, which, for events subsequent to the
effective date of the certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 6. The provisions of this
Section 6(f)(ix) shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
(g) The Corporation from time to time may reduce the Conversion Price by
any amount for any period of time if the period is at least 20 days and if the
reduction is irrevocable during the period. Whenever the Conversion Price is so
reduced, the Corporation shall mail to holders of record of the Series A
Preferred Stock a notice of the reduction at least 15 days before the date the
reduced Conversion Price takes effect, stating the reduced Conversion Price and
the period it will be in effect. A voluntary reduction of the Conversion Price
does not change or adjust the Conversion Price otherwise in effect for purposes
of paragraph 6(f) above.
7. Status of Shares. All shares of the Series A Preferred Stock that are at
any time redeemed pursuant to Section 4 above or converted or exchanged pursuant
to Section 6 above and all shares of the Series A Preferred Stock that are
otherwise reacquired by the Corporation and subsequently canceled by the Board
of Directors of the Corporation shall have the status of authorized but unissued
shares of Preferred Stock, without designation as to series, subject to
reissuance by the Board of Directors of the Corporation as shares of any one or
more other series.
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8. Voting Rights. Except as set forth below or otherwise required by law,
holders of shares of the Series A Preferred Stock shall have no voting rights.
(a) So long as any shares of the Series A Preferred Stock are outstanding,
each share of Series A Preferred Stock shall entitle the holder thereof to
notice of and to vote, in person or by proxy, at any special or annual meeting
of stockholders, on all matters entitled to be voted on by holders of Common
Stock and any other series or class of Voting Stock voting together as a single
class with all other shares entitled to vote thereon. With respect to any such
vote, each share of Series A Preferred Stock shall entitle the holder thereof to
cast that number of votes per share as is equal to the number of votes that such
holder would be entitled to cast had such holder converted its shares of Series
A Preferred Stock into shares of Common Stock as of the record date for
determining the stockholders of the Corporation eligible to vote on any such
matters.
(b) So long as any shares of the Series A Preferred Stock are outstanding,
in addition to any vote or consent of stockholders required by law or by the
Corporation's Certificate of Incorporation, the affirmative vote or consent of
the holders of at least a majority of the shares of Series A Preferred Stock at
any time issued and outstanding, acting as a single class, given in person or by
proxy at any meeting called for such purpose, shall be necessary for effecting
or validating
(i) any reclassification of the Series A Preferred Stock or any
amendment, alteration or repeal (including as a result of a merger or
consolidation involving the Corporation or otherwise by operation of law)
of any of the provisions of the Certificate of Incorporation or By-laws of
the Corporation which adversely affects the voting powers, rights or
preferences of the holders of the shares of Series A Preferred Stock;
provided that the consent of the holders of at least a majority of the
shares of Series A Preferred Stock and Series B Preferred Stock at the time
issued and outstanding, acting as a single class, given in person or by
proxy by vote at any meeting called for such purpose, shall be necessary
for effecting or validating any reclassification or any amendment,
alteration or repeal of any of the provisions of the Corporation's
Certificate of Incorporation or By-laws of the Corporation which affects
adversely the voting powers, rights or preferences of the holders of the
shares of Series A Preferred Stock and Series B Preferred Stock; and
provided, further, that any amendment of the provisions of the
Corporation's Certificate of Incorporation so as to authorize or create, or
to increase the authorized amount of, the Junior Stock shall not be deemed
to affect adversely the voting powers, rights or preferences of the holders
of shares of Series A Preferred Stock or Series B Preferred Stock;
(ii) the authorization or creation of, or the increase in the
authorized amount of, or the issuance of any shares of any class or series
of Senior Stock or any security convertible into shares of any class or
series of Senior Stock;
(iii) the authorization or creation of, or the increase in the
authorized amount of, or the issuance of any shares of any class or series
of Parity Stock or any security convertible into shares of any class or
series of Parity Stock such that the aggregate liquidation preference of
all outstanding shares of Parity Stock (other than (x) shares of Series A
Preferred Stock or Series B Preferred Stock issued pursuant to the Stock
Purchase Agreement, dated as of November 13, 1998, by and among Apollo
Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P. and the
Corporation (the 'Stock Purchase Agreement') and (y) any shares of Series A
Preferred Stock or Series B Preferred Stock issued as a dividend in respect
of shares referred to in clause (x) or in respect of shares referred to in
this clause (y)) would exceed the sum of (1) $135,000,000 and (2) the
aggregate liquidation preference of the shares of Series B Preferred Stock
issued at the Option Closing (as such term is defined in the Stock Purchase
Agreement), if any;
(iv) the merger or consolidation of the Corporation with or into any
other entity, unless the resulting corporation will thereafter have no
class or series of shares and no other securities either authorized or
outstanding ranking prior to, or on a parity with, shares of Series A
Preferred Stock in the payment of dividends or the distribution of its
assets on liquidation, dissolution or winding up; provided, however, that
no such vote or consent of the holders of Series A Preferred Stock shall be
required if prior to the time when such merger or consolidation is to take
effect, and regardless of whether such merger or consolidation would
constitute a Change of Control (as defined in
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Section 9), a Change of Control Offer (as defined in Section 9) is made for
all shares of Series A Preferred Stock at the time outstanding in
accordance with Section 9; and
(v) the application of any funds, property or assets of the
Corporation or any of its subsidiaries to the purchase, redemption, sinking
fund or other retirement of any shares of any class of Junior Stock, or the
declaration, payment or making of any dividend or distribution (in cash,
property or obligations) on any shares of any class of Junior Stock, other
than a dividend or dividends payable solely in Common Stock or Junior
Stock, unless the holders of Series A Preferred Stock shall have been
offered the opportunity to make a Payout Election with respect to such
event.
In connection with any right to vote pursuant to Section 8(b), each holder of
shares of Series A Preferred Stock shall have one vote for each share held. The
above notwithstanding, and subject to Section 8(a), no consent of holders of
Series A Preferred Stock or Series B Preferred Stock shall be required for the
creation of any indebtedness of any kind of the Corporation.
(c) The term 'Voting Stock' means any class or classes of capital stock, or
securities convertible into or exchangeable for any class of capital stock, of
the Corporation pursuant to which the holders thereof have the general power
under ordinary circumstances to vote with respect to the election of at least a
majority of the Board of Directors of the Corporation, irrespective of whether
or not, at the time, stock of any other class or classes shall have, or might
have, voting power by reason of the happening of any contingency.
9. Change of Control. (a) In the event of a Change of Control (the date of
such event being the 'Change of Control Date'), the Corporation shall notify the
holders of the Series A Preferred Stock in writing of such event promptly upon
the Corporation becoming aware that a Change of Control is expected to occur or
has occurred and shall, pursuant to Section 9(b), make an offer to purchase (the
'Change of Control Offer') all of the then outstanding shares of Series A
Preferred Stock at a purchase price of 101% of the Liquidation Preference
thereof, payable in cash, plus any unpaid dividends thereon, if any, whether or
not declared, to the date such shares are purchased, payable in cash.
(b) Subject to the provisions of Section 9(e), within 30 days following the
Change of Control Date, the Corporation shall send, by first class mail, postage
prepaid, a notice to each holder of Series A Preferred Stock at such holder's
address as it appears on the stock books of the Corporation, which notice shall
govern the terms of the Change of Control Offer. The notice to the holders shall
contain all instructions and materials necessary to enable such holders to
tender their shares of Series A Preferred Stock pursuant to the Change of
Control Offer. Such notice shall state:
(i) that a Change of Control has occurred, that the Change of Control
Offer is being made pursuant to this Section 9 and that all shares of
Series A Preferred Stock validly tendered and not withdrawn will be
accepted for payment;
(ii) the purchase price (plus the amount of unpaid dividends, if any)
and the purchase date (the 'Change of Control Payment Date') which shall be
a date no earlier than 30 days nor later than 60 days from the date such
notice is mailed, other than as may be required by law (the 'Initial Date')
or, if any of the Corporation's 15% Senior Secured Discount Notes due 2007
('Senior Secured Notes') or Senior Obligations remain outstanding, the
later of the Initial Date and a date that is not more than 30 days
following the date the Corporation sends notice pursuant to Section 9(e)
that it has satisfied all of the Senior Obligations;
(iii) that any shares of Series A Preferred Stock not tendered will
remain outstanding on the same terms and will continue to accrue dividends;
(iv) that, unless the Corporation defaults in making payment therefor,
any share of Series A Preferred Stock tendered and accepted for payment
pursuant to the Change of Control Offer shall cease to accrue dividends
after the Change of Control Payment Date;
(v) that holders electing to have any shares of Series A Preferred
Stock purchased pursuant to a Change of Control Offer will be required to
surrender the certificate or certificates representing such shares,
properly endorsed for transfer together with such customary documents as
the Corporation and the transfer agent may reasonably require, in the
manner and at the place
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specified in the notice prior to the close of business on the business day
prior to the Change of Control Payment Date;
(vi) that holders shall be entitled to withdraw their election if the
Corporation receives, not later than five business days prior to the Change
of Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the holder, the number of shares of
Series A Preferred Stock the holder delivered for purchase and a statement
that such holder is withdrawing his election to have such shares of Series
A Preferred Stock purchased;
(vii) that holders whose shares of Series A Preferred Stock are
purchased only in part will be issued a new certificate representing the
unpurchased shares of Series A Preferred Stock; and
(viii) the circumstances and relevant facts regarding such Change of
Control.
(c) The Corporation shall comply with any securities laws and regulations,
to the extent such laws and regulations are applicable to the repurchase of the
Series A Preferred Stock in connection with a Change of Control Offer.
(d) On the Change of Control Payment Date, the Corporation shall (x) accept
for payment the shares of Series A Preferred Stock validly tendered pursuant to
the Change of Control Offer, (y) pay to the holders of shares so accepted the
purchase price therefor (plus the amount of unpaid dividends, if any) and (z)
cancel and retire each surrendered certificate (subject to issuing a new
certificate representing the unpurchased shares of Series A Preferred Stock).
Unless the Corporation defaults in the payment for the shares of Series A
Preferred Stock tendered pursuant to the Change of Control Offer, dividends
shall cease to accrue with respect to the shares of Series A Preferred Stock
tendered and all rights of holders of such tendered shares shall terminate,
except for the right to receive payment therefor, on the Change of Control
Payment Date.
(e) If the purchase of Series A Preferred Stock under this Section 9 would
violate or constitute a default under (i) the Senior Secured Notes or the
indenture relating thereto (the 'Indenture'), or (ii) the indenture or
indentures or other agreement or agreements under which there may be issued or
outstanding from time to time other indebtedness of the Company ('Other
Agreements') in an aggregate principal amount not exceeding $450 million (less
the amount, if any, of indebtedness issued to replace, refinance or refund the
Senior Secured Notes) because the Corporation has not satisfied all of its
obligations under such Other Agreements arising from the Change of Control
(collectively, 'Senior Obligations'), then, notwithstanding anything to the
contrary contained above, prior to complying with the foregoing provisions, the
Corporation shall use its best efforts to satisfy the Senior Obligations as
promptly as possible or to obtain the requisite consents under the Indenture and
the Other Agreements necessary to permit the repurchase of the Series A
Preferred Stock required by this Section 9. Until the requirements of the
immediately preceding sentence are satisfied, the Corporation shall not be
obligated to make any Change of Control Offer. Within 15 days following the date
the Corporation has satisfied all of the Senior Obligations or obtained such
requisite consents or waivers, the Corporation shall send, by first class mail,
postage prepaid, a notice to each holder of Series A Preferred Stock at such
holder's address as it appears on the stock books of the Corporation that the
Corporation has satisfied all of the Senior Obligations or obtained such
requisite consents or waivers, and such notice shall state the date the Senior
Obligations were satisfied or waived and the Change of Control Payment Date.
(f) For the purposes of this Section 9, 'Change of Control' means the
occurrence of any of the following events: (i) any 'person' or 'group' (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934 (the 'Exchange Act')) is or becomes the 'beneficial owner' (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have 'beneficial ownership' of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 40% of the total
outstanding Voting Stock of the Corporation; (ii) the Corporation consolidates
with or merges with or into another person or conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any person, or
any person consolidates with or merges with or into the Corporation, in any such
event, pursuant to a transaction in which the outstanding voting stock of the
Corporation is converted into or exchanged for cash, securities or other
property, other than, at all times when the
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Senior Secured Notes are outstanding, those transactions that are not deemed a
'Change of Control' under the terms of the Indenture; (iii) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors of the Corporation (together with any new
directors whose election to such Board of Directors, or whose nomination for
election by the stockholders of the Corporation, was approved by a vote of
66 2/3% of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Corporation then in office; or (iv) the Corporation is
liquidated or dissolved or a special resolution is passed by the stockholders of
the Corporation approving the plan of liquidation or dissolution, other than, at
all times when the Senior Secured Notes are outstanding, those transactions that
are not deemed a 'Change of Control' under the terms of the Indenture; provided,
however, that no transaction or event shall be deemed to be a 'Change of
Control' for purposes of this Section 9 if (1) all of the outstanding shares of
Common Stock are to be converted pursuant thereto solely into the right to
receive, for each share of Common Stock so converted, cash and/or shares of
Qualifying Acquiror Common Stock (as defined below) (valued at its Current
Market Price) together having a value in excess of $30.30, (2) the Corporation
shall have declared and paid all dividends on the Series A Preferred Stock and
Series B Preferred Stock, whether or not theretofore declared or undeclared, to
the date of the Change of Control and the holders thereof shall have been given
reasonable opportunity to convert, prior to such Change of Control, any shares
of Series A Preferred Stock or Series B Preferred Stock so issued as a dividend,
and (3) immediately following such event the number of shares of Qualifying
Acquiror Common Stock into which shares of Series A Preferred Stock and Series B
Preferred Stock shall have been converted (together with, if shares of Series A
Preferred Stock and/or Series B Preferred Stock are to remain outstanding, any
shares of Qualifying Acquiror Common Stock into which all outstanding Shares of
Series A Preferred Stock and Series B Preferred Stock would be convertible)
would represent both (A) less than 5% of the total number of shares of
Qualifying Acquiror Common Stock outstanding immediately after such event and
(B) less than one third of the number of shares of Qualifying Acquiror Common
Stock that would be Publicly Traded immediately after such event. For purposes
of this Section 9, the term 'Qualifying Acquiror Common Stock' means the common
stock of any corporation if listed on or admitted to trading on the NYSE, AMEX
or Nasdaq, and the term 'Publicly Traded' means shares of such Qualifying
Acquiror Common Stock that are both (1) held by persons who are neither
officers, directors or Affiliates of such corporation nor the 'beneficial owner'
(as such term is defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended) of 5% or more of the total number of shares then issued and
outstanding, and (2) not 'restricted securities' (as such term is defined in
Rule 144 of the Securities Act of 1933, as amended).
(g) The Corporation shall not engage in any transaction of the type
referred to in clause (ii) of paragraph (f) above (other than one which is not a
'Change of Control' by virtue of application of the proviso to paragraph (f)
above) unless (i) if the Corporation shall be the surviving or continuing entity
of such transaction, the Corporation shall, after consummation thereof, have
sufficient funds to perform its obligations under this Section 9, and (ii) if
the Corporation shall not be the surviving or continuing entity of such
transaction, proper and adequate provision shall be made, in the definitive
documentation providing for such transaction or otherwise, to ensure that the
surviving or continuing corporation of such transaction shall expressly assume
the Corporation's obligations under this Section 9 and shall have sufficient
funds to perform its obligations under this Section 9.
10. Sinking Fund Redemption. The shares of the Series A Preferred Stock are
not subject to sinking fund requirements.
11. Exchange. (a) Shares of Series A Preferred Stock shall be exchangeable
for Convertible Debt, in whole or in part, out of surplus of the Corporation
legally available for such exchange, at any time and from time to time at the
option of the Corporation. All accrued and unpaid dividends on the shares of
Series A Preferred Stock, including Default Dividends and dividends accrued from
the last preceding Dividend Payment Date through the date fixed for such
exchange, shall be declared and paid prior to or on the same date as the date of
any exchange pursuant to this Section 11. The Corporation shall cause the
Convertible Debt to be issued on and dated the date which coincides with the
date of exchange of the Series A Preferred Stock.
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(b) Any notice of any exchange of the Series A Preferred Stock given by the
Corporation shall be mailed to each holder of shares of Series A Preferred Stock
to be exchanged at such Holder's address as it appears on the books of the
Corporation. Such notice shall set forth the procedures for exchanging
certificates representing Series A Preferred Stock for Convertible Debt with a
principal amount equal to 100% of the aggregate Liquidation Preference of the
shares of Series A Preferred Stock being exchanged. The Corporation shall as
promptly as practicable thereafter mail to each such holder a notice setting
forth the procedures for exchanging certificates representing Series A Preferred
Stock for Convertible Debt. Upon such exchange, the rights of the holders of
Series A Preferred Stock to be exchanged as stockholders of the Corporation
shall cease, and the person or persons entitled to receive the Convertible Debt
issuable upon such exchange shall be treated for all purposes as the registered
holder or holders of such Convertible Debt.
(c) The shares of Series A Preferred Stock which have been exchanged shall
no longer be deemed to be outstanding and shall be retired and all rights with
respect to such shares, including, without limitation, the rights, if any, to
receive dividends (and interest thereon) and to receive notices and to vote or
consent (except for the right of the holders to receive accrued and unpaid
dividends, if any, and Convertible Debt and Common Stock, as provided herein, in
exchange therefor) shall forthwith cease.
(d) Upon any exchange of shares of Series A Preferred Stock into
Convertible Debt, as provided herein, in accordance with this Section 11, the
Corporation will pay any documentary, stamp or similar issue or transfer taxes
which may be due with respect to the transfer and exchange of such exchanged
shares, if any; provided, however, that if the Convertible Debt into which the
shares of Series A Preferred Stock is exchangeable pursuant to this Section 11
is to be issued in the name of any person other than the holder of the shares of
Series A Preferred Stock to be so exchanged, the amount of any transfer taxes
(whether imposed on the Corporation, the holder or such other person) payable on
account of the transfer to such person will be payable by the holder.
(e) Unless otherwise agreed by the Corporation and each holder of shares of
Series A Preferred Stock, any shares exchanged at the Corporation's election
shall be called for exchange on a pro rata basis from all holders of Series A
Preferred Stock. Any exchange for which shares are called for exchange on a pro
rata basis (whether or not some of such shares so called are subsequently
converted pursuant to Section 11) shall comply with this Section 11. Any
fractional share of Series A Preferred Stock which would otherwise be issuable
as a result of any exchange of less than all shares held shall be included in
the shares exchanged.
(f) The Convertible Debt shall have a maturity date 13 years following the
Closing Date; a principal amount a described in Section 11(a) thereof (and a
proportionate principal amount for any fractional share exchanged); and shall
provide for payment of interest at the rate of 9.2% per annum, payable annually
in cash; shall be convertible and redeemable on terms substantially the same as
those of the Series A Preferred Stock; in each case, on the terms and conditions
set forth in the Convertible Debt Indenture and shall otherwise be on the terms
set forth in the Convertible Debt Indenture.
(g) Definitions. (i) 'Convertible Debt' means the 9.2% Convertible
Debentures of the Corporation issued pursuant to the Convertible Debt Indenture,
as amended, modified, supplemented, restructured, replaced, extended or
refinanced from time to time in accordance with the terms hereof and thereof.
(ii) 'Convertible Debt Indenture' means the indenture pursuant to
which the Convertible Debt is to be issued, in the form attached as Exhibit
D to that certain Stock Purchase Agreement, dated as of November 13, 1998,
among the Corporation and the Purchasers prior to the Closing (as defined
therein), or, if no such form is agreed upon as of the Closing, in form and
substance acceptable to holders of a majority of Series A Preferred Stock
immediately prior to the effectiveness of such indenture.
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IN WITNESS WHEREOF, CD RADIO INC. has caused this Certificate to be duly
executed on its behalf by its undersigned duly authorized officer this th day
of , 199 .
CD RADIO INC.
By:
.................................
Name: Patrick L. Donnelly
Title: Secretary
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EXHIBIT B
CD RADIO INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF
9.2% SERIES B JUNIOR CUMULATIVE CONVERTIBLE PREFERRED STOCK
------------------------
PURSUANT TO SECTION 151(g) OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
------------------------
CD RADIO INC. (the 'Corporation'), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify
that pursuant to the provisions of Section 151 of the General Corporation Law of
the State of Delaware, the Board of Directors of the Corporation (the 'Board of
Directors'), in a duly convened meeting thereof on November 11, 1998, adopted
the following resolution, which resolution remains in full force and effect as
of the date hereof:
WHEREAS, the Board of Directors is authorized, within the limitations and
restrictions stated in the Certificate of Incorporation of the Corporation, to
fix by resolution or resolutions the designation of each series of Preferred
Stock of the Corporation (the 'Preferred Stock') and the powers, preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereof, including, without limiting
the generality of the foregoing, such provisions as may be desired concerning
voting, redemption, dividends, dissolution or distribution of assets, conversion
or exchange, and such other subjects or matters as may be fixed by resolutions
of the Board of Directors under the General Corporation Law of the State of
Delaware; and
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to its authority as aforesaid, to authorize and fix the terms of a
series of Preferred Stock and the number of shares constituting such series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized such series
of Preferred Stock on the terms and with the provisions herein set forth:
1. Number of Shares; Designation. A total of 2,100,000 shares of
Preferred Stock of the Corporation are hereby designated as 9.2% Series B
Junior Cumulative Convertible Preferred Stock (the 'Series B Preferred
Stock').
2. Rank. The Series B Preferred Stock shall, with respect to payment
of dividends, redemption payments and rights upon liquidation, dissolution
or winding up of the affairs of the Corporation, (x) rank senior and prior
to the Common Stock, par value $.001 per share, of the Corporation (the
'Common Stock') and any other class or series of capital stock of the
Corporation that by its terms ranks junior to the Series B Preferred Stock
as to payment of dividends, redemption payments and rights upon
liquidation, dissolution or winding up of the affairs of the Corporation,
(y) rank on a parity with the Corporation's 9.2% Series A Junior Cumulative
Convertible Preferred Stock (the 'Series A Preferred Stock') and all Parity
Dividend Stock (as defined in Section 3(a)) and all Parity Liquidation
Stock (as defined in Section 5(b)), and (z) rank junior to the
Corporation's 10 1/2% Series C Convertible Preferred Stock ('Series C
Preferred Stock') and all Senior Dividend Stock (as defined in Section
3(c)), all Senior Liquidation Stock (as defined in Section 5(b)) and to any
class or series of capital stock of the Corporation (other than the Common
Stock), whether currently issued or issued in the future, that does not by
its terms expressly provide that it ranks on a parity with or junior to the
Series B Preferred Stock as to dividends and rights upon liquidation,
dissolution or winding-up of the Corporation (which shall include, for
purposes of the foregoing, any entity with which the Corporation may be
merged or consolidated or to which all or substantially all the assets of
the Corporation may be transferred or which transfers all or substantially
all of its assets to the Corporation).
3. Dividends. (a)(1) The holders of the issued and outstanding shares
of the Series B Preferred Stock shall be entitled to receive, as and when
declared by the Board of Directors, out of funds
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legally available therefor in the case of dividends paid in cash,
cumulative dividends at the annual rate per share of 9.2% of the sum of
(x) the Liquidation Preference (defined in Section 5 hereof) and (y) all
unpaid dividends, if any, whether or not declared, from the date of
issuance of the shares of Series B Preferred Stock (the 'Closing Date') to
the applicable dividend payment date. Dividends on shares of Series B
Preferred Stock shall be payable annually initially on November 15, 1999
and each November 15 thereafter (each, a 'Dividend Payment Date'), except
that if any Dividend Payment Date is not a business day then the Dividend
Payment Date shall be on the first immediately succeeding business day (as
used herein, the term 'business day' shall mean any day except a Saturday,
Sunday or day on which banking institutions are legally authorized to close
in The City of New York).
(2) If any Dividend payable on any Dividend Payment Date is not
declared or paid on such Dividend Payment Date, as provided in Section
3(a)(1), in full in cash or in additional shares of Series B Preferred
Stock, then the amount of such unpaid dividend ('Default Dividends') shall
be accumulated. Any Default Dividends shall, from the Dividend Payment Date
on which such dividends accrued, accrue dividends until paid, compounded
annually, at a rate equal to 15% per annum. Default Dividends shall be
payable in shares of Series B Preferred Stock, but not in cash.
(3) Dividends on the Series B Preferred Stock may be paid, in the sole
discretion of the Board of Directors, either in (i) cash, (ii) shares of
Series B Preferred Stock or (iii) any combination of cash or shares of
Series B Preferred Stock, and the issuance of the requisite number of such
shares of Series B Preferred Stock (such number determined as provided in
the next sentence) pursuant to (ii) or (iii) shall constitute full payment
of any such dividend. Series B Preferred Stock issued to pay dividends
shall be valued at their Liquidation Preference. All dividend payments paid
with respect to shares of Series B Preferred Stock shall be paid pro rata
to the holders entitled thereto. All shares of Series B Preferred Stock
issued as a dividend with respect to shares of Series B Preferred Stock
shall thereupon be duly authorized, validly issued, fully paid and
non-assessable. In no event shall an election by the Board of Directors to
pay dividends, in full or in part, in cash or in shares of Series B
Preferred Stock in lieu of payment, in full or in part, in cash preclude
the Board of Directors from electing any such alternative in respect of all
or any portion of any subsequent dividend. The Corporation shall not issue
fractional shares of Series B Preferred Stock upon payment of any dividends
in shares of Series B Preferred Stock and any amount of fractional shares
of Series B Preferred Stock otherwise issuable upon the payment of any
dividend in shares of Series B Preferred Stock shall be paid in cash.
(4) Dividends to be paid on a Dividend Payment Date shall be paid to
the holders of record of shares of the Series B Preferred Stock as they
appear on the stock register of the Corporation at the close of business on
such record dates (each, a 'Dividend Payment Record Date'), which shall be
not more than 40 days nor fewer than 10 days preceding each Dividend
Payment Date thereof, as shall be fixed by the Board of Directors of the
Corporation. Default Dividends shall be declared and paid at any time as of
which funds legally available therefor are available to the Corporation,
without reference to any regular Dividend Payment Date, to the holders of
record on such date, not exceeding 40 days nor fewer than 10 days preceding
the date on which dividends in arrears will be paid, as may be fixed by the
Board of Directors of the Corporation. Holders of shares of the Series B
Preferred Stock shall be entitled to receive dividends in preference to and
in priority over dividends upon the Common Stock and any other series or
class of the Corporation's capital stock that ranks junior as to dividends
to the Series B Preferred Stock ('Junior Dividend Stock') and shall be on a
parity as to dividends with the Series A Preferred Stock and any series or
class of the Corporation's capital stock that does not rank senior or
junior as to dividends with the Series B Preferred Stock (together with the
Series A Preferred Stock, 'Parity Dividend Stock'). The holders of shares
of the Series B Preferred Stock shall not be entitled to any dividends in
excess of full cumulative dividends (including Default Dividends), as
herein provided.
(b) No dividends, other than dividends payable solely in Common Stock,
Junior Dividend Stock, or warrants or other rights to acquire such Common
Stock or Junior Dividend Stock, shall be paid or declared and set apart for
payment on, and no purchase, redemption or other acquisition shall be made
by the Corporation or entity directly or indirectly controlled by the
Corporation of,
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any Common Stock or Junior Dividend Stock unless and until (i) all accrued
and unpaid dividends on the Series B Preferred Stock shall have been paid
and (ii) proper provision shall have been made such that holders of shares
of Series B Preferred Stock are offered the opportunity to elect (each, a
'Payout Election'), in lieu of the Conversion Price adjustment referred to
in Section 6(f)(ii), Section 6(f)(iii) or Section 6(f)(iv), as the case may
be, to participate in such dividend, purchase, redemption or other
acquisition pro rata with the holders of Common Stock or Junior Dividend
Stock, as the case may be, as if each share of Series B Preferred Stock had
been converted as of the record date for such dividend or immediately prior
to such purchase, redemption or other acquisition, as the case may be, at
the Conversion Price then in effect (without any requirement that any such
shares of Series B Preferred Stock actually be so converted). Each Payout
Election shall be made upon the affirmative vote or consent of holders of a
majority of the total number of shares of Series B Preferred Stock then
outstanding and shall be effective as to and binding upon all such shares.
So long as a sufficient amount of cash, assets, evidences of indebtedness
or securities are set aside for payment to the holders of Series B
Preferred Stock as of the payment date for such dividend or the date for
such purchase, redemption or acquisition, payment need not be made to the
holders of Series B Preferred Stock on such date but may be made at any
time up to the tenth Business Day following such date.
(c) If at any time the Corporation issues any class or series of
capital stock ranking senior and prior to the Series B Preferred Stock with
respect to the payment of dividends ('Senior Dividend Stock') and fails to
pay or declare and set apart for payment accrued and unpaid dividends on
such Senior Dividend Stock, in whole or in part, then (except to the extent
allowed by the terms of the Senior Dividend Stock) no dividend paid in cash
shall be paid or declared and set apart for payment on the Series B
Preferred Stock unless and until all accrued and unpaid dividends with
respect to the Senior Dividend Stock shall have been paid or declared and
set apart for payment, without interest. Except as provided in Section 3(d)
below, no dividends paid in cash shall be paid or declared and set apart
for payment on any Parity Dividend Stock for any period unless the
Corporation has paid or declared and set apart for payment, or
contemporaneously pays or declares and sets apart for payment, on the
Series B Preferred Stock all accrued and unpaid dividends for all dividend
payment periods terminating on or prior to the date of payment of such
dividends. Except as provided in Section 3(d) below, no dividends paid in
cash shall be paid or declared and set apart for payment on the Series B
Preferred Stock for any period unless the Corporation has paid or declared
and set apart for payment, or contemporaneously pays or declares and sets
apart for such payment, on any Parity Dividend Stock all accrued and unpaid
dividends for all dividend payment periods terminating on or prior to the
date of payment of such dividends.
(d) If at any time the Corporation has failed to pay accrued dividends
on any shares of Series B Preferred Stock on any Dividend Payment Date or
any Parity Dividend Stock on a stated payment date, as the case may be, the
Corporation shall not:
(i) purchase any shares of the Series B Preferred Stock or Parity
Dividend Stock (except for a consideration payable in Common Stock or
Junior Dividend Stock) or redeem fewer than all of the shares of the
Series B Preferred Stock and Parity Dividend Stock then outstanding
except for (x) the repurchase or redemption of shares of the Series B
Preferred Stock made pro rata among the holders of the shares of the
Series B Preferred Stock then outstanding and (y) the repurchase or
redemption made pro rata with respect to all shares of the Series B
Preferred Stock and Parity Dividend Stock then outstanding so that the
amounts repurchased or redeemed shall in all cases bear to each other
the same ratio that, at the time of the repurchase or redemption, the
required redemption payments on the shares of the Series B Preferred
Stock and the other Parity Dividend Stock then outstanding,
respectively, bear to each other, or
(ii) permit any corporation or other entity directly or indirectly
controlled by the Corporation to purchase any Common Stock, Junior
Dividend Stock, shares of the Series B Preferred Stock or Parity
Dividend Stock, except to the same extent that the Corporation could
purchase such shares.
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Unless and until all dividends unpaid in respect of prior dividend
payment periods on shares of the Series B Preferred Stock and any Parity
Dividend Stock at the time outstanding have been paid in full or a sum
sufficient for such payment is declared and set apart, as provided in the
paragraph (c), all dividends accrued by the Corporation upon shares of the
Series B Preferred Stock or Parity Dividend Stock shall be declared pro
rata with respect to all shares of the Series B Preferred Stock and Parity
Dividend Stock then outstanding, so that the amounts of any dividends
declared on shares of the Series B Preferred Stock and on the Parity
Dividend Stock shall in all cases bear to each other the same ratio that,
at the time of the declaration, all unpaid dividends in respect of prior
dividend payment periods on shares of the Series B Preferred Stock and the
other Parity Dividend Stock, respectively, bear to each other.
4. Redemption. (a)(1) Optional Redemption. Except as provided in
subsection (a)(2) of this Section 4 or in Section 9, shares of the Series B
Preferred Stock shall not be redeemable prior to November 15, 2003. From
and after November 15, 2003, subject to the restrictions in Section 3
above, the Corporation may redeem shares of Series B Preferred Stock, in
whole or in part, at the option of the Corporation, to the extent it has
funds legally available therefor at a redemption price of 100% of the
Liquidation Preference thereof plus accrued and unpaid dividends, if any,
whether or not declared, to the date of redemption.
(2) Special Redemption. From and after November 15, 2001 and prior to
November 15, 2003, the Corporation, at its option, may redeem shares of
Series B Preferred Stock, in whole or in part, in the sole discretion of
the Board of Directors, to the extent it has funds legally available
therefor, at the redemption price of 100% of the Liquidation Preference
thereof, plus an amount equal to the dividends unpaid thereon, if any,
whether or not declared, to the redemption date, if the Current Market
Price of the Common Stock on the date of the notice of redemption
(described below) equals or exceeds $60.00 per share. As used herein, the
'Current Market Price' for a given date shall mean the average Closing
Price of the Common Stock as reported in The Wall Street Journal or, at the
election of the Corporation, other reputable financial news source, for the
20 consecutive trading days immediately preceding such date. The $60.00 per
share benchmark shall be subject to adjustment upon the occurrence of
certain events in the same manner as the Conversion Price (defined herein)
shall be subject to adjustment as set forth in Section 6(f) hereof. For
purposes of this paragraph, the Current Market Price shall be deemed to be
less than $60 per share at any time during which the Common Stock is not
listed, quoted or admitted to trading on either the New York Stock
Exchange, Inc. (the 'NYSE'), the American Stock Exchange ('AMEX') or The
Nasdaq Stock Market, Inc.'s National Market ('Nasdaq'). As used herein, the
'Closing Price' of any security on any day means the last reported sale
price regular way on such day or, in the case no such sale takes place on
such day, the average of the reported closing bid and asked prices regular
way of the Common Stock, in each case on the NYSE or, if not listed or
admitted to trading on such exchange, as quoted on AMEX or Nasdaq.
(3) Mandatory Redemption. On November 15, 2011, the Corporation shall
redeem all outstanding shares of Series A Preferred Stock, to the extent it
has funds legally available therefor, at the redemption price of 100% of
the Liquidation Preference thereof, plus an amount equal to the dividends
unpaid thereon, if any, whether or not declared, to the redemption date.
(4) Payment of Redemption Price. (a) The amount of the redemption
price on any shares of Series B Preferred Stock redeemed, on any redemption
set forth herein, that is allocable to the Liquidation Preference thereon
shall be paid in cash (to the extent funds are legally available therefor)
and any unpaid dividends to be paid on the shares of Series B Preferred
Stock redeemed on such redemption date may be paid in cash (to the extent
funds are legally available therefor) or shares of Series B Preferred
Stock, or any combination thereof, in the sole discretion of the Board of
Directors as provided in Section 3(a)(3) hereof.
(b) Not less than 15 days nor more than 45 days (such date as fixed by
the Board of Directors of the Corporation is referred to herein as the
'Redemption Record Date') prior to the date fixed for any redemption of
shares of the Series B Preferred Stock pursuant to this Section 4, a notice
specifying the time and place of the redemption and the number of shares to
be redeemed shall be given by first class mail, postage prepaid, to the
holders of record on the Redemption Record Date
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of the shares of the Series B Preferred Stock to be redeemed at their
respective addresses as the same shall appear on the books of the
Corporation, calling upon each holder of record to surrender to the
Corporation on the redemption date at the place designated in the notice
such holder's certificate or certificates representing the number of shares
specified in the notice of redemption. Neither failure to mail such notice,
nor any defect therein or in the mailing thereof, to any particular holder
shall affect the sufficiency of the notice or the validity of the
proceedings for redemption with respect to the other holders. Any notice
mailed in the manner herein provided shall be conclusively presumed to have
been duly given whether or not the holder receives the notice. On or after
the redemption date, each holder of shares of Series B Preferred Stock to
be redeemed shall present and surrender such holder's certificate or
certificates for such shares to the Corporation at the place designated in
the redemption notice and thereupon the redemption price of the shares, and
any unpaid dividends thereon to the redemption date, shall be paid to or on
the order of the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall
be canceled. In case fewer than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing
the unredeemed shares.
(c) If a notice of redemption has been given pursuant to this Section
4 and if, on or before the redemption date, the funds (or shares of Series
B Preferred Stock if any dividends are to be paid in shares of Series B
Preferred Stock), necessary for such redemption (including all dividends on
the shares of Series B Preferred Stock to be redeemed that will accrue to
the redemption date) shall have been set aside by the Corporation, separate
and apart from its other funds (or reserved and authorized for issuance if
any dividends are to be paid in shares of Series B Preferred Stock), in
trust for the pro rata benefit of the holders of the shares of Series B
Preferred Stock so called for redemption, then, notwithstanding that any
certificates for such shares of Series B Preferred Stock have not been
surrendered for cancellation, on the redemption date dividends shall cease
to accrue on the shares of the Series B Preferred Stock to be redeemed, and
at the close of business on the date on which such funds have been
segregated and set aside by the Corporation as provided in this Section
4(c), the holders of such shares shall cease to be stockholders with
respect to those shares, shall have no interest in or claims against the
Corporation by virtue thereof and shall have no voting or other rights with
respect thereto, except the conversion rights provided in subsection (d) of
this Section 4 and Section 6 below and the right to receive the moneys
payable (or shares of Series B Preferred Stock issued if any dividends are
to be paid in shares of Series B Preferred Stock) upon such redemption,
without interest thereon, upon surrender (and endorsement, if required by
the Corporation) of their certificates, and the shares of Series B
Preferred Stock evidenced thereby shall no longer be outstanding. Subject
to applicable escheat laws, any moneys so set aside (or shares of Series B
Preferred Stock authorized and reserved if any dividends are to be paid in
shares of Series B Preferred Stock) by the Corporation and unclaimed at the
end of two years from the redemption date shall revert to the general funds
of the Corporation (or be released from the reservation thereof in the case
of shares of Series B Preferred Stock), after which reversion the holders
of such shares so called for redemption shall look only to the general
funds of the Corporation for the payment of the redemption price, without
interest. Any interest accrued on funds so deposited shall belong to the
Corporation and be paid thereto from time to time.
(d) If a notice of redemption has been given pursuant to this Section
4 and any holder of shares of Series B Preferred Stock shall, prior to the
close of business on the business day immediately preceding the redemption
date, give written notice to the Corporation pursuant to Section 6 below of
the conversion of any or all of the shares to be redeemed held by the
holder (accompanied by a certificate or certificates for such shares, duly
endorsed or assigned to the Corporation, and any necessary transfer tax
payment, as required by Section 6 below), then such redemption shall not
become effective as to such shares to be converted and such conversion
shall become effective as provided in Section 6 below, whereupon any funds
deposited by the Corporation for the redemption of such shares shall
(subject to any right of the holder of such shares to receive the dividend
payable thereon as provided in Section 6 below) immediately upon such
conversion be returned to the Corporation or, if then held in trust by the
Corporation, shall automatically and without further corporate action or
notice be discharged from the trust.
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(e) In every case of redemption of fewer than all of the outstanding
shares of the Series B Preferred Stock pursuant to this Section 4, the
shares to be redeemed shall be selected pro rata, provided that only whole
shares shall be selected for redemption.
5. Liquidation. (a) In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, the holders of
the Series B Preferred Stock shall be entitled to receive $100.00 per share
(the 'Liquidation Preference'), plus an amount equal to the accrued and
unpaid dividends thereon, if any, whether or not declared, to the payment
date.
(b) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, the holders of shares of
Series B Preferred Stock (i) shall not be entitled to receive the
Liquidation Preference of the shares held by them until payment in full or
provision has been made for the payment of all claims of creditors of the
Corporation and the liquidation preference of any class or series of
capital stock ranking senior to the Series B Preferred Stock with respect
to redemption rights and rights upon liquidation, dissolution or winding up
of the affairs of the Corporation ('Senior Liquidation Stock' and together
with the Senior Dividend Stock, the 'Senior Stock'), plus accrued and
unpaid dividends thereon, if any, whether or not declared, to the payment
date, shall have been paid in full and (ii) shall be entitled to receive
the Liquidation Preference of such shares held by them, plus accrued and
unpaid dividends thereon, if any, whether or not declared, to the payment
date, in preference to and in priority over any distributions upon the
Common Stock and any other series or class of the Corporation's capital
stock that ranks junior to the Series B Preferred Stock as to redemption
rights and rights upon liquidation, dissolution or winding up of the
affairs of the Corporation ('Junior Liquidation Stock' and together with
the Junior Dividend Stock, the 'Junior Stock'). Upon payment in full of the
Liquidation Preference to which the holders of shares of the Series B
Preferred Stock are entitled, the holders of shares of the Series B
Preferred Stock shall not be entitled to any further participation in any
distribution of assets by the Corporation. Subject to clause (i) above, if
the assets of the Corporation are not sufficient to pay in full the
Liquidation Preference payable to the holders of shares of the Series B
Preferred Stock and the liquidation preference payable to the holders of
any series or class of the Corporation's capital stock, outstanding on the
date hereof or hereafter issued, that ranks on a parity with the Series B
Preferred Stock as to redemption rights and rights upon liquidation,
dissolution or winding up of the affairs of the Corporation ('Parity
Liquidation Stock' and together with the Parity Dividend Stock, the 'Parity
Stock'), the holders of all such shares shall share ratably in proportion
to the full respective preferential amounts payable on such shares in any
distribution.
(c) For the purposes of this Section 5, neither the sale of all or
substantially all of the assets of the Corporation nor the consolidation or
merger of the Corporation with or into any other entity shall be deemed to
be a voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation, unless such sale, consolidation or merger shall be in
connection with a plan of liquidation, dissolution or winding up of the
Corporation.
6. Optional Conversion. (a) Holders of shares of Series B Preferred
Stock may, at any time, convert shares of Series B Preferred Stock, unless
previously redeemed, into a number of shares of Common Stock calculated by
dividing the Liquidation Preference (without unpaid dividends) by $30.00,
subject to adjustment as described below in Section 6(f) (the 'Conversion
Price'). If more than one share of Series B Preferred Stock shall be
surrendered for conversion at one time by the same record holder, the
number of full shares of Common Stock issuable upon conversion thereof
shall be computed on the basis of the aggregate number of shares of Series
B Preferred Stock so surrendered. In the case of shares of Series B
Preferred Stock called for redemption, conversion rights shall expire at
the close of business on the business day immediately preceding the
redemption date. The holders of shares of Series B Preferred Stock that
convert such shares into shares of Common Stock shall be entitled to
receive any unpaid dividends thereon, if any, whether or not declared, and
such dividends shall be payable in cash or shares of Common Stock, or any
combination thereof, in the sole discretion of the Board of Directors.
(b) Any holder of shares of Series B Preferred Stock electing to
convert the shares or any portion thereof in accordance with Section 6(a)
above shall give written notice to the Corporation
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(which notice may be given by facsimile transmission) that such holder
elects to convert the same and shall state therein the number of shares of
Series B Preferred Stock to be converted and the name or names in which
such holder wishes the certificate or certificates for shares of Common
Stock to be issued. Promptly thereafter, the holder shall surrender the
certificate or certificates of shares of Series B Preferred Stock to be
converted, duly endorsed, at the office of the Corporation or any transfer
agent for such shares, or at such other place designated by the
Corporation, provided that the Corporation shall at all times maintain an
office or agency in The City of New York for such purposes. The Corporation
shall, immediately upon receipt of such notice, issue and deliver to or
upon the order of such holder, against delivery of the certificates
representing the shares of Series B Preferred Stock that have been
converted, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled (in the number(s) and
denomination(s) designated by such holder), and the Corporation shall
deliver to such holder a certificate or certificates for the number of
shares of Series B Preferred Stock that such holder has not elected to
convert. The conversion right with respect to any shares of Series B
Preferred Stock shall be deemed to have been exercised at the date upon
which the certificates therefor (and the payment required by Section 6(d),
if applicable), shall have been so delivered, and the person or persons
entitled to receive the Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such Common
Stock upon that date.
(c) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series B Preferred Stock. Instead of any fractional
share of Common Stock otherwise issuable upon conversion of any shares of
Series B Preferred Stock, the Corporation shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction of the
Closing Price of the Common Stock at the close of business on the day of
conversion. In the absence of a Closing Price, the Board of Directors shall
in good faith determine the current market price on such basis as it
reasonably considers appropriate and such current market price shall be
used to calculate the cash adjustment; provided that in no case shall the
Closing Price be less than the Conversion Price then in effect.
(d) If a holder converts shares of Series B Preferred Stock, the
Corporation shall pay any documentary, stamp or similar issue or transfer
tax due on the issue of Common Stock upon the conversion or due upon the
issuance of a new certificate or certificates for any shares of Series B
Preferred Stock not converted. The holder, however, shall pay any such tax
that is due because any such shares of the Common Stock or of the Series B
Preferred Stock are issued in a name other than the name of the holder.
(e) The Corporation shall reserve out of its authorized but unissued
Common Stock held in treasury enough shares of Common Stock to permit the
conversion of all of the then-outstanding shares of Series B Preferred
Stock. For the purposes of this Section 6(e), the full number of shares of
Common Stock then issuable upon the conversion of all then-outstanding
shares of Series B Preferred Stock shall be computed as if at the time of
computation all outstanding shares of Series B Preferred Stock were held by
a single holder. The Corporation shall from time to time, in accordance
with the laws of the State of Delaware and its certificate of
incorporation, increase the authorized amount of its Common Stock if at any
time the authorized amount of its Common Stock remaining unissued shall not
be sufficient to permit the conversion of all shares of Series B Preferred
Stock at the time outstanding. All shares of Common Stock issued upon
conversion of the shares of Series B Preferred Stock shall be validly
issued, fully paid and nonassessable.
(f) The Conversion Price shall be subject to adjustment as follows:
(i) In case the Corporation shall (A) pay a dividend on any class
of its capital stock in shares of its Common Stock, (B) subdivide its
outstanding shares of Common Stock into a greater number of shares or
(C) combine its outstanding shares of Common Stock into a smaller number
of shares, the Conversion Price in effect immediately prior thereto
shall be adjusted (as provided below) so that the holders of any shares
of Series B Preferred Stock thereafter surrendered for conversion shall
be entitled to receive the number of shares of Common Stock which such
holder would have owned or have been entitled to receive immediately
following such action had such shares of Series B Preferred Stock been
converted
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immediately prior to such time. The Conversion Price as adjusted shall
be determined by multiplying the Conversion Price at which the shares of
Series B Preferred Stock were theretofore convertible by a fraction of
which the denominator shall be the number of shares of Common Stock
outstanding immediately following such action and of which the numerator
shall be the number of shares of Common Stock outstanding immediately
prior thereto. Such adjustment shall be made whenever any event listed
above shall occur and shall become effective retroactively immediately
after the record date in the case of a dividend and immediately after
the effective date in the case of a subdivision or combination.
(ii) In case the Corporation shall issue rights or warrants to any
Person (including holders of its Common Stock) entitling such Person or
Persons to subscribe for or purchase shares of Common Stock at a price
per share less than the Current Market Price per share of Common Stock
at the record date therefor, or in case the Corporation shall issue to
any Person (including holders of its Common Stock) other securities
convertible into or exchangeable for Common Stock for a consideration
per share of Common Stock deliverable upon conversion or exchange
thereof less than the Current Market Price at the record date therefore,
then the Conversion Price in effect immediately prior thereto shall be
adjusted as provided below so that the Conversion Price therefor shall
be equal to the price determined by multiplying (A) the Conversion Price
at which shares of Series B Preferred Stock were theretofore convertible
by (B) a fraction of which (x) the denominator shall be the sum of (1)
the number of shares of Common Stock outstanding on the date of issuance
of the convertible or exchangeable securities, rights or warrants and
(2) the number of additional shares of Common Stock offered for
subscription or purchase, or issuable upon such conversion or exchange,
and (y) the numerator shall be the sum of (1) the number of shares of
Common Stock outstanding on the date of issuance of such convertible or
exchangeable securities, rights or warrants and (2) the number of
additional shares of Common Stock which the aggregate offering price of
the number of shares of Common Stock so offered would purchase at the
Current Market Price per share of Common Stock. Such adjustment shall be
made whenever such convertible or exchangeable securities, rights or
warrants are issued, and shall become effective immediately after the
record date for the determination of stockholders entitled to receive
such securities. However, upon the expiration of any right or warrant to
purchase Common Stock, the issuance of which resulted in an adjustment
in the Conversion Price pursuant to this Section 6(f)(ii), if any such
right or warrant shall expire and shall not have been exercised, the
Conversion Price shall be recomputed immediately upon such expiration
and effective immediately upon such expiration shall be increased to the
price it would have been (but reflecting any other adjustments to the
Conversion Price made pursuant to the provisions of this Section 6(f)
after the issuance of such rights or warrants) had the adjustment of the
Conversion Price made upon the issuance of such rights or warrants been
made on the basis of offering for subscription or purchase only that
number of shares of Common Stock actually purchased upon the exercise of
such rights or warrants. No further adjustment shall be made upon
exercise of any right, warrant, convertible security or exchangeable
security if any adjustment shall have been made upon issuance of such
security. The foregoing notwithstanding, no adjustment shall be made
pursuant to this subparagraph (ii) with respect to any particular
dividend or other event with respect to which a Payout Election is made.
(iii) In case the Corporation shall pay a dividend to all holders
of its Common Stock (including any dividend paid in connection with a
consolidation or merger in which the Corporation is the continuing
corporation) of any shares of capital stock of the Corporation or its
subsidiaries (other than Common Stock) or evidences of its indebtedness
or assets or cash (excluding dividends or distributions in connection
with the liquidation, dissolution or winding up of the Corporation) or
rights or warrants to subscribe for or purchase any of its securities or
those of its subsidiaries or securities convertible or exchangeable for
Common Stock (excluding those securities referred to in Section 6(f)(ii)
above), then in each such case the Conversion Price in effect
immediately prior thereto shall be adjusted as provided below so that
the Conversion Price thereafter shall be equal to the price determined
by multiplying (A) the Conversion Price in effect on the record date
mentioned below by (B) a fraction, the
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numerator of which shall be the Current Market Price per share of Common
Stock on the record date mentioned below less the then fair market value
(as determined by the Board of Directors, whose good faith determination
shall be conclusive) as of such record date of the cash, assets,
evidences of indebtedness or securities so paid with respect to one
share of Common Stock, and the denominator of which shall be the Current
Market Price per share of Common Stock on such record date; provided,
however, that in the event the then fair market value (as so determined)
so paid with respect to one share of Common Stock is equal to or greater
than the Current Market Price per share of Common Stock on the record
date mentioned above, in lieu of the foregoing adjustment, adequate
provision shall be made so that each holder of shares of the Series B
Preferred Stock shall have the right to receive the amount and kind of
assets, evidences of indebtedness, or securities such holder would have
received had such holder converted each such share of Series B Preferred
Stock immediately prior to the record date for such dividend. Such
adjustment shall be made whenever any such payment is made, and shall
become effective retroactively immediately after the record date for the
determination of stockholders entitled to receive the payment. The
foregoing notwithstanding, no adjustment shall be made pursuant to this
subparagraph (iii) with respect to any particular dividend or other
event with respect to which a Payout Election is made.
(iv) In case the Corporation shall purchase, redeem or otherwise
acquire any shares of Common Stock at a price per share greater than the
Current Market Price per share of Common Stock on the date of such
event, or in case the Corporation shall purchase, redeem or otherwise
acquire other securities convertible into or exchangeable for Common
Stock for a consideration per share of Common Stock into which such
security is convertible or exchangeable greater than the per share
Current Market Price on the date of such event, then the Conversion
Price in effect immediately prior thereto shall be adjusted as provided
below so that the Conversion Price therefor shall be equal to the price
determined by multiplying (A) the Conversion Price at which shares of
Series A Preferred Stock were theretofore convertible by (B) a fraction
of which (x) the denominator shall be the Current Market Price per share
on the date of such event, and (y) the numerator shall be the Current
Market Price per share on the date of such event less the difference
between (1) the consideration paid by the Corporation per share of
Common Stock (or, in the case of securities convertible into or
exchangeable for Common Stock, the consideration per share of Common
Stock into which such security is convertible or exchangeable)
purchased, redeemed or acquired in such event and (2) the Current Market
Price per share on the date of such event. Such adjustment shall be made
whenever such Common Stock is issued or sold, and shall become effective
immediately after the issuance or sale of such securities. The foregoing
notwithstanding, no adjustment shall be made pursuant to this
subparagraph (iv) with respect to any particular purchase, redemption or
acquisition with respect to which a Payout Election is made.
(v) In case the Corporation shall issue or sell any shares of
Common Stock at a price per share more than 15% below (or, in the case
of any issuance or sale to an affiliate (as defined in the rules of the
Securities and Exchange Commission promulgated under the Securities
Exchange Act of 1934, as amended) of the Corporation, any amount below)
the Current Market Price per share of Common Stock on the date the
Corporation commits or agrees to such sale or issuance, then the
Conversion Price in effect immediately prior thereto shall be adjusted
as provided below so that the Conversion Price therefor shall be equal
to the price determined by multiplying (A) the Conversion Price at which
shares of Series A Preferred Stock were theretofore convertible by (B) a
fraction of which (x) the denominator shall be the sum of (1) the number
of shares of Common Stock outstanding on the date of issuance or sale of
such shares of Common Stock and (2) the number of additional shares of
Common Stock offered for sale or subject to issuance, and (y) the
numerator shall be the sum of (1) the number of shares of Common Stock
outstanding on the date of issuance or sale of such shares of Common
Stock and (2) the number of additional shares of Common Stock which the
aggregate offering price of the number of shares of Common Stock so
offered or issued would purchase at the Current Market Price per share
of Common Stock. Such adjustment shall be made whenever such Common
Stock is issued or sold, and shall become effective immediately
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after the issuance or sale of such securities; provided, however, that
the provisions of this subparagraph shall not apply to (1) shares of
Common Stock issued upon conversion of shares of Series A Preferred
Stock or Series B Preferred Stock, or (2) shares of Common Stock issued
upon conversion, exercise or exchange of any security with respect to
which an adjustment to the Conversion Price was made in accordance with
clause (ii) above at the time of issuance of such security, or (3)
shares of Common Stock issued in a bona fide public offering to or
through a nationally recognized investment banking firm in which
affiliates (as defined in the rules of the Securities and Exchange
Commission promulgated under the Securities Exchange Act of 1934, as
amended) of the Corporation purchase less than 25% of the shares in such
offering.
(vi) No adjustment in the Conversion Price shall be required unless
the adjustment would require an increase or decrease of at least 1% in
the Conversion Price then in effect; provided, however, that any
adjustments that by reason of this Section 6(f)(vi) are not required to
be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 6(f) shall be
made to the nearest cent.
(vii) In the event that, at any time as a result of an adjustment
made pursuant to Section 6(f)(i) through 6(f)(vi) above, the holder of
any share of Series B Preferred Stock thereafter surrendered for
conversion shall become entitled to receive any shares of the
Corporation other than shares of the Common Stock, thereafter the number
of such other shares so receivable upon conversion of any share of
Series B Preferred Stock shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in Section 6(f)(i)
through 6(f)(vi) above, and the other provisions of this Section 6 with
respect to the Common Stock shall apply on like terms to any such other
shares.
(viii) Whenever the Conversion Price is adjusted, as herein
provided, the Corporation shall promptly file with the transfer agent
for the Series B Preferred Stock, or, if there is no transfer agent, the
Corporation shall promptly send to each holder of record by first class
mail, postage pre-paid, a certificate of an officer of the Corporation
setting forth the Conversion Price after the adjustment and setting
forth a brief statement of the facts requiring such adjustment and a
computation thereof. The certificate shall be conclusive evidence of the
correctness of the adjustment. The Corporation shall promptly cause a
notice of the adjusted Conversion Price to be mailed to each registered
holder of shares of Series B Preferred Stock.
(ix) In case of any reclassification of the Common Stock, any
consolidation of the Corporation with, or merger of the Corporation
into, any other entity, any merger of another entity into the
Corporation (other than a merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock of the Corporation), any sale or transfer of all
or substantially all of the assets of the Corporation or any compulsory
share exchange pursuant to which share exchange the Common Stock is
converted into other securities, cash or other property, then lawful
provision shall be made as part of the terms of such transaction whereby
the holder of each share of Series B Preferred Stock then outstanding
shall have the right thereafter, during the period such share of Series
B Preferred Stock shall be convertible, to convert such share only into
the kind and amount of securities, cash and other property receivable
upon the reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Common Stock of
the Corporation into which a share of Series B Preferred Stock would
have been convertible immediately prior to the reclassification,
consolidation, merger, sale, transfer or share exchange. The
Corporation, the person formed by the consolidation or resulting from
the merger or which acquires such assets or which acquires the
Corporation's shares, as the case may be, shall make provisions in its
certificate or articles of incorporation or other constituent document
to establish such rights and such rights shall be clearly provided for
in the definitive transaction documents relating to such transaction.
The certificate or articles of incorporation or other constituent
document shall provide for adjustments, which, for events subsequent to
the effective date of the certificate or articles of incorporation or
other constituent document,
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shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 6. The provisions of this Section 6(f)(ix)
shall similarly apply to successive reclassifications, consolidations,
mergers, sales, transfers or share exchanges.
(g) The Corporation from time to time may reduce the Conversion Price by
any amount for any period of time if the period is at least 20 days and if the
reduction is irrevocable during the period. Whenever the Conversion Price is so
reduced, the Corporation shall mail to holders of record of the Series B
Preferred Stock a notice of the reduction at least 15 days before the date the
reduced Conversion Price takes effect, stating the reduced Conversion Price and
the period it will be in effect. A voluntary reduction of the Conversion Price
does not change or adjust the Conversion Price otherwise in effect for purposes
of paragraph 6(f) above.
7. Status of Shares. All shares of the Series B Preferred Stock that are at
any time redeemed pursuant to Section 4 above or converted or exchanged pursuant
to Section 6 above and all shares of the Series B Preferred Stock that are
otherwise reacquired by the Corporation and subsequently canceled by the Board
of Directors of the Corporation shall have the status of authorized but unissued
shares of Preferred Stock, without designation as to series, subject to
reissuance by the Board of Directors of the Corporation as shares of any one or
more other series.
8. Voting Rights. Except as set forth below or otherwise required by law,
holders of shares of the Series B Preferred Stock shall have no voting rights.
(a) So long as any shares of the Series B Preferred Stock are outstanding,
each share of Series B Preferred Stock shall entitle the holder thereof to
notice of and to vote, in person or by proxy, at any special or annual meeting
of stockholders, on all matters entitled to be voted on by holders of Common
Stock and any other series or class of Voting Stock voting together as a single
class with all other shares entitled to vote thereon. With respect to any such
vote, each share of Series B Preferred Stock shall entitle the holder thereof to
cast that number of votes per share as is equal to the number of votes that such
holder would be entitled to cast had such holder converted its shares of Series
B Preferred Stock into shares of Common Stock as of the record date for
determining the stockholders of the Corporation eligible to vote on any such
matters.
(b) So long as any shares of the Series B Preferred Stock are outstanding,
in addition to any vote or consent of stockholders required by law or by the
Corporation's Certificate of Incorporation, the affirmative vote or consent of
the holders of at least a majority of the shares of Series B Preferred Stock at
any time issued and outstanding, acting as a single class, given in person or by
proxy at any meeting called for such purpose, shall be necessary for effecting
or validating
(i) any reclassification of the Series B Preferred Stock or any
amendment, alteration or repeal (including as a result of a merger or
consolidation involving the Corporation or otherwise by operation of law)
of any of the provisions of the Certificate of Incorporation or By-laws of
the Corporation which adversely affects the voting powers, rights or
preferences of the holders of the shares of Series B Preferred Stock;
provided that the consent of the holders of at least a majority of the
shares of Series B Preferred Stock and Series A Preferred Stock at the time
issued and outstanding, acting as a single class, given in person or by
proxy by vote at any meeting called for such purpose, shall be necessary
for effecting or validating any reclassification or any amendment,
alteration or repeal of any of the provisions of the Corporation's
Certificate of Incorporation or By-laws of the Corporation which affects
adversely the voting powers, rights or preferences of the holders of the
shares of Series B Preferred Stock and Series A Preferred Stock; and
provided, further, that any amendment of the provisions of the
Corporation's Certificate of Incorporation so as to authorize or create, or
to increase the authorized amount of, the Junior Stock shall not be deemed
to affect adversely the voting powers, rights or preferences of the holders
of shares of Series B Preferred Stock or Series A Preferred Stock;
(ii) the authorization or creation of, or the increase in the
authorized amount of, or the issuance of any shares of any class or series
of Senior Stock or any security convertible into shares of any class or
series of Senior Stock;
(iii) the authorization or creation of, or the increase in the
authorized amount of, or the issuance of any shares of any class or series
of Parity Stock or any security convertible into shares
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of any class or series of Parity Stock such that the aggregate liquidation
preference of all outstanding shares of Parity Stock (other than (x) shares
of Series B Preferred Stock or Series A Preferred Stock issued pursuant to
the Stock Purchase Agreement, dated as of November 13, 1998, by and among
Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P. and the
Corporation (the 'Stock Purchase Agreement') and (y) any shares of Series B
Preferred Stock or Series A Preferred Stock issued as a dividend in respect
of shares referred to in clause (x) or in respect of shares referred to in
this clause (y)) would exceed the sum of (1) $135,000,000 and (2) the
aggregate liquidation preference of the shares of Series B Preferred Stock
issued at the Option Closing (as such term is defined in the Stock Purchase
Agreement), if any;
(iv) the merger or consolidation of the Corporation with or into any
other entity, unless the resulting corporation will thereafter have no
class or series of shares and no other securities either authorized or
outstanding ranking prior to, or on a parity with, shares of Series B
Preferred Stock in the payment of dividends or the distribution of its
assets on liquidation, dissolution or winding up; provided, however, that
no such vote or consent of the holders of Series B Preferred Stock shall be
required if prior to the time when such merger or consolidation is to take
effect, and regardless of whether such merger or consolidation would
constitute a Change of Control (as defined in Section 9), a Change of
Control Offer (as defined in Section 9) is made for all shares of Series B
Preferred Stock at the time outstanding in accordance with Section 9; and
(v) the application of any funds, property or assets of the
Corporation or any of its subsidiaries to the purchase, redemption, sinking
fund or other retirement of any shares of any class of Junior Stock, or the
declaration, payment or making of any dividend or distribution (in cash,
property or obligations) on any shares of any class of Junior Stock, other
than a dividend or dividends payable solely in Common Stock or Junior
Stock, unless the holders of Series B Preferred Stock shall have been
offered the opportunity to make a Payout Election with respect to such
event.
In connection with any right to vote pursuant to Section 8(b), each holder of
shares of Series B Preferred Stock shall have one vote for each share held. The
above notwithstanding, and subject to Section 8(a), no consent of holders of
Series B Preferred Stock or Series A Preferred Stock shall be required for the
creation of any indebtedness of any kind of the Corporation.
(c) The term 'Voting Stock' means any class or classes of capital stock, or
securities convertible into or exchangeable for any class of capital stock, of
the Corporation pursuant to which the holders thereof have the general power
under ordinary circumstances to vote with respect to the election of at least a
majority of the Board of Directors of the Corporation, irrespective of whether
or not, at the time, stock of any other class or classes shall have, or might
have, voting power by reason of the happening of any contingency.
9. Change of Control. (a) In the event of a Change of Control (the date of
such event being the 'Change of Control Date'), the Corporation shall notify the
holders of the Series B Preferred Stock in writing of such event promptly upon
the Corporation becoming aware that a Change of Control is expected to occur or
has occurred and shall, pursuant to Section 9(b), make an offer to purchase (the
'Change of Control Offer') all of the then outstanding shares of Series B
Preferred Stock at a purchase price of 101% of the Liquidation Preference
thereof, payable in cash, plus any unpaid dividends thereon, if any, whether or
not declared, to the date such shares are purchased, payable in cash.
(b) Subject to the provisions of Section 9(e), within 30 days following the
Change of Control Date, the Corporation shall send, by first class mail, postage
prepaid, a notice to each holder of Series B Preferred Stock at such holder's
address as it appears on the stock books of the Corporation, which notice shall
govern the terms of the Change of Control Offer. The notice to the holders shall
contain all instructions and materials necessary to enable such holders to
tender their shares of Series B Preferred Stock pursuant to the Change of
Control Offer. Such notice shall state:
(i) that a Change of Control has occurred, that the Change of Control
Offer is being made pursuant to this Section 9 and that all shares of
Series B Preferred Stock validly tendered and not withdrawn will be
accepted for payment;
(ii) the purchase price (plus the amount of unpaid dividends, if any)
and the purchase date (the 'Change of Control Payment Date') which shall be
a date no earlier than 30 days nor later than 60
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days from the date such notice is mailed, other than as may be required by
law (the 'Initial Date') or, if any of the Corporation's 15% Senior Secured
Discount Notes due 2007 ('Senior Secured Notes') or Senior Obligations
remain outstanding, the later of the Initial Date and a date that is not
more than 30 days following the date the Corporation sends notice pursuant
to Section 9(e) that it has satisfied all of the Senior Obligations;
(iii) that any shares of Series B Preferred Stock not tendered will
remain outstanding on the same terms and will continue to accrue dividends;
(iv) that, unless the Corporation defaults in making payment therefor,
any share of Series B Preferred Stock tendered and accepted for payment
pursuant to the Change of Control Offer shall cease to accrue dividends
after the Change of Control Payment Date;
(v) that holders electing to have any shares of Series B Preferred
Stock purchased pursuant to a Change of Control Offer will be required to
surrender the certificate or certificates representing such shares,
properly endorsed for transfer together with such customary documents as
the Corporation and the transfer agent may reasonably require, in the
manner and at the place specified in the notice prior to the close of
business on the business day prior to the Change of Control Payment Date;
(vi) that holders shall be entitled to withdraw their election if the
Corporation receives, not later than five business days prior to the Change
of Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the holder, the number of shares of
Series B Preferred Stock the holder delivered for purchase and a statement
that such holder is withdrawing his election to have such shares of Series
B Preferred Stock purchased;
(vii) that holders whose shares of Series B Preferred Stock are
purchased only in part will be issued a new certificate representing the
unpurchased shares of Series B Preferred Stock; and
(viii) the circumstances and relevant facts regarding such Change of
Control.
(c) The Corporation shall comply with any securities laws and regulations,
to the extent such laws and regulations are applicable to the repurchase of the
Series B Preferred Stock in connection with a Change of Control Offer.
(d) On the Change of Control Payment Date, the Corporation shall (x) accept
for payment the shares of Series B Preferred Stock validly tendered pursuant to
the Change of Control Offer, (y) pay to the holders of shares so accepted the
purchase price therefor (plus the amount of unpaid dividends, if any) and (z)
cancel and retire each surrendered certificate (subject to issuing a new
certificate representing the unpurchased shares of Series B Preferred Stock).
Unless the Corporation defaults in the payment for the shares of Series B
Preferred Stock tendered pursuant to the Change of Control Offer, dividends
shall cease to accrue with respect to the shares of Series B Preferred Stock
tendered and all rights of holders of such tendered shares shall terminate,
except for the right to receive payment therefor, on the Change of Control
Payment Date.
(e) If the purchase of Series B Preferred Stock under this Section 9 would
violate or constitute a default under (i) the Senior Secured Notes or the
indenture relating thereto (the 'Indenture'), or (ii) the indenture or
indentures or other agreement or agreements under which there may be issued or
outstanding from time to time other indebtedness of the Company ('Other
Agreements') in an aggregate principal amount not exceeding $450 million (less
the amount, if any, of indebtedness issued to replace, refinance or refund the
Senior Secured Notes) because the Corporation has not satisfied all of its
obligations under such Other Agreements arising from the Change of Control
(collectively, 'Senior Obligations'), then, notwithstanding anything to the
contrary contained above, prior to complying with the foregoing provisions, the
Corporation shall use its best efforts to satisfy the Senior Obligations as
promptly as possible or to obtain the requisite consents under the Indenture and
the Other Agreements necessary to permit the repurchase of the Series B
Preferred Stock required by this Section 9. Until the requirements of the
immediately preceding sentence are satisfied, the Corporation shall not be
obligated to make any Change of Control Offer. Within 15 days following the date
the Corporation has satisfied all of the Senior Obligations or obtained such
requisite consents or waivers, the Corporation shall send, by first class mail,
postage prepaid, a notice to each holder of Series B Preferred Stock at such
holder's address as it appears on the stock books of the Corporation that the
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Corporation has satisfied all of the Senior Obligations or obtained such
requisite consents or waivers, and such notice shall state the date the Senior
Obligations were satisfied or waived and the Change of Control Payment Date.
(f) For the purposes of this Section 9, 'Change of Control' means the
occurrence of any of the following events: (i) any 'person' or 'group' (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934 (the 'Exchange Act')) is or becomes the 'beneficial owner' (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have 'beneficial ownership' of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 40% of the total
outstanding Voting Stock of the Corporation; (ii) the Corporation consolidates
with or merges with or into another person or conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any person, or
any person consolidates with or merges with or into the Corporation, in any such
event, pursuant to a transaction in which the outstanding voting stock of the
Corporation is converted into or exchanged for cash, securities or other
property, other than, at all times when the Senior Secured Notes are
outstanding, those transactions that are not deemed a 'Change of Control' under
the terms of the Indenture; (iii) during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of the Corporation (together with any new directors whose election to
such Board of Directors, or whose nomination for election by the stockholders of
the Corporation, was approved by a vote of 66 2/3% of the directors then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Corporation
then in office; or (iv) the Corporation is liquidated or dissolved or a special
resolution is passed by the stockholders of the Corporation approving the plan
of liquidation or dissolution, other than, at all times when the Senior Secured
Notes are outstanding, those transactions that are not deemed a 'Change of
Control' under the terms of the Indenture; provided, however, that no
transaction or event shall be deemed to be a 'Change of Control' for purposes of
this Section 9 if (1) all of the outstanding shares of Common Stock are to be
converted pursuant thereto solely into the right to receive, for each share of
Common Stock so converted, cash and/or shares of Qualifying Acquiror Common
Stock (as defined below) (valued at its Current Market Price) together having a
value in excess of $30.30, (2) the Corporation shall have declared and paid all
dividends on the Series B Preferred Stock and Series A Preferred Stock, whether
or not theretofore declared or undeclared, to the date of the Change of Control
and the holders thereof shall have been given reasonable opportunity to convert,
prior to such Change of Control, any shares of Series B Preferred Stock or
Series A Preferred Stock so issued as a dividend, and (3) immediately following
such event the number of shares of Qualifying Acquiror Common Stock into which
shares of Series B Preferred Stock and Series A Preferred Stock shall have been
converted (together with, if shares of Series B Preferred Stock and/or Series A
Preferred Stock are to remain outstanding, any shares of Qualifying Acquiror
Common Stock into which all outstanding Shares of Series B Preferred Stock and
Series A Preferred Stock would be convertible) would represent both (A) less
than 5% of the total number of shares of Qualifying Acquiror Common Stock
outstanding immediately after such event and (B) less than one third of the
number of shares of Qualifying Acquiror Common Stock that would be Publicly
Traded immediately after such event. For purposes of this Section 9, the term
'Qualifying Acquiror Common Stock' means the common stock of any corporation if
listed on or admitted to trading on the NYSE, AMEX or Nasdaq, and the term
'Publicly Traded' means shares of such Qualifying Acquiror Common Stock that are
both (1) held by persons who are neither officers, directors or Affiliates of
such corporation nor the 'beneficial owner' (as such term is defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended) of 5% or more of
the total number of shares then issued and outstanding, and (2) not 'restricted
securities' (as such term is defined in Rule 144 of the Securities Act of 1933,
as amended).
(g) The Corporation shall not engage in any transaction of the type
referred to in clause (ii) of paragraph (f) above (other than one which is not a
'Change of Control' by virtue of application of the proviso to paragraph (f)
above) unless (i) if the Corporation shall be the surviving or continuing entity
of such transaction, the Corporation shall, after consummation thereof, have
sufficient funds to perform its obligations under this Section 9, and (ii) if
the Corporation shall not be the surviving or continuing entity of such
transaction, proper and adequate provision shall be made, in the definitive
documentation
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providing for such transaction or otherwise, to ensure that the surviving or
continuing corporation of such transaction shall expressly assume the
Corporation's obligations under this Section 9 and shall have sufficient funds
to perform its obligations under this Section 9.
10. Sinking Fund Redemption. The shares of the Series B Preferred Stock are
not subject to sinking fund requirements.
11. Exchange. (a) Shares of Series B Preferred Stock shall be exchangeable
for Convertible Debt, in whole or in part, out of surplus of the Corporation
legally available for such exchange, at any time and from time to time at the
option of the Corporation. All accrued and unpaid dividends on the shares of
Series B Preferred Stock, including Default Dividends and dividends accrued from
the last preceding Dividend Payment Date through the date fixed for such
exchange, shall be declared and paid prior to or on the same date as the date of
any exchange pursuant to this Section 11. The Corporation shall cause the
Convertible Debt to be issued on and dated the date which coincides with the
date of exchange of the Series B Preferred Stock.
(b) Any notice of any exchange of the Series B Preferred Stock given by the
Corporation shall be mailed to each holder of shares of Series B Preferred Stock
to be exchanged at such Holder's address as it appears on the books of the
Corporation. Such notice shall set forth the procedures for exchanging
certificates representing Series B Preferred Stock for Convertible Debt with a
principal amount equal to 100% of the aggregate Liquidation Preference of the
shares of Series B Preferred Stock being exchanged. The Corporation shall as
promptly as practicable thereafter mail to each such holder a notice setting
forth the procedures for exchanging certificates representing Series B Preferred
Stock for Convertible Debt. Upon such exchange, the rights of the holders of
Series B Preferred Stock to be exchanged as stockholders of the Corporation
shall cease, and the person or persons entitled to receive the Convertible Debt
issuable upon such exchange shall be treated for all purposes as the registered
holder or holders of such Convertible Debt.
(c) The shares of Series B Preferred Stock which have been exchanged shall
no longer be deemed to be outstanding and shall be retired and all rights with
respect to such shares, including, without limitation, the rights, if any, to
receive dividends (and interest thereon) and to receive notices and to vote or
consent (except for the right of the holders to receive accrued and unpaid
dividends, if any, and Convertible Debt and Common Stock, as provided herein, in
exchange therefor) shall forthwith cease.
(d) Upon any exchange of shares of Series B Preferred Stock into
Convertible Debt, as provided herein, in accordance with this Section 11, the
Corporation will pay any documentary, stamp or similar issue or transfer taxes
which may be due with respect to the transfer and exchange of such exchanged
shares, if any; provided, however, that if the Convertible Debt into which the
shares of Series B Preferred Stock is exchangeable pursuant to this Section 11
is to be issued in the name of any person other than the holder of the shares of
Series B Preferred Stock to be so exchanged, the amount of any transfer taxes
(whether imposed on the Corporation, the holder or such other person) payable on
account of the transfer to such person will be payable by the holder.
(e) Unless otherwise agreed by the Corporation and each holder of shares of
Series A Preferred Stock, any shares exchanged at the Corporation's election
shall be called for exchange on a pro rata basis from all holders of Series B
Preferred Stock. Any exchange for which shares are called for exchange on a pro
rata basis (whether or not some of such shares so called are subsequently
converted pursuant to Section 11) shall comply with this Section 11. Any
fractional share of Series B Preferred Stock which would otherwise be issuable
as a result of any exchange of less than all shares held shall be included in
the shares exchanged.
(f) The Convertible Debt shall have a maturity date 13 years following the
Closing Date; a principal amount a described in Section 11(a) thereof (and a
proportionate principal amount for any fractional share exchanged); and shall
provide for payment of interest at the rate of 9.2% per annum, payable annually
in cash; shall be convertible and redeemable on terms substantially the same as
those of the Series B Preferred Stock; in each case, on the terms and conditions
set forth in the Convertible Debt Indenture and shall otherwise be on the terms
set forth in the Convertible Debt Indenture.
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(g) Definitions. (i) 'Convertible Debt' means the 9.2% Convertible
Debentures of the Corporation issued pursuant to the Convertible Debt Indenture,
as amended, modified, supplemented, restructured, replaced, extended or
refinanced from time to time in accordance with the terms hereof and thereof.
(ii) 'Convertible Debt Indenture' means the indenture pursuant to
which the Convertible Debt is to be issued, in the form attached as
Exhibit D to that certain Stock Purchase Agreement, dated as of November
13, 1998, among the Corporation and the Purchasers prior to the Closing (as
defined therein), or, if no such form is agreed upon as of the Closing, in
form and substance acceptable to holders of a majority of Series B
Preferred Stock immediately prior to the effectiveness of such indenture.
IN WITNESS WHEREOF, CD Radio Inc. has caused this Certificate to be duly
executed on its behalf by its undersigned duly authorized officer this th day
of , 199 .
CD RADIO INC.
By:
...................................
Name: Patrick L. Donnelly
Title: Secretary
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EXHIBIT C
[FORM OF OPINION OF COUNSEL TO THE COMPANY]
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware with full
corporate power and authority to own, lease or operate its properties and to
conduct its businesses as described in the SEC Reports and to consummate the
transactions contemplated under this Agreement.
(ii) The Purchased Shares have been duly authorized, by all necessary
corporate action, for issuance and sale to the Purchasers pursuant to this
Agreement and, when issued in accordance with the terms of this Agreement, the
Purchased Shares will be duly authorized, validly issued, fully paid and
non-assessable shares of the Company, free of all preemptive or similar rights
and (assuming that the Purchasers do not have any notice of any 'adverse claim'
within the meaning of the Uniform Commercial Code as in effect in the State of
New York) free and clear of any Liens.
(iii) Respective certificates of designation relating to the Series A
Preferred Stock and the Series B Preferred Stock have been duly filed with the
Secretary of State of the State of Delaware in the form attached to the
Agreement as Exhibit A and Exhibit B, respectively, and neither of such
certificates has been amended or withdrawn as of the date hereof.
(iv) The execution, delivery and performance by the Company of this
Agreement and the Contemplated Transactions, including, without limitation, the
sale, issuance and delivery of the Purchased Shares and the Option Shares, (a)
do not violate the terms of the Certificate of Incorporation or Bylaws of the
Company or the organizational documents of its Subsidiary; and (b) do not
violate or result in any breach of, or the creation of any Lien under, any
Contractual Obligation of the Company or its Subsidiaries.
(v) This Agreement has been duly authorized, executed and delivered by the
Company and constitutes a valid and legally binding obligation of the Company
enforceable against it in accordance with its terms, subject as to enforcement,
to bankruptcy, insolvency, rehabilitation, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
principles of equity.
(vi) No consent, approval, authorization, order, registration or
qualification of or with any Governmental Authority is required for the issue
and sale of the Purchased Shares by the Company or the consummation by the
Company of the Contemplated Transactions.
(vii) The issuance and sale of the Purchased Shares do not require
registration under Section 5 of the Securities Act or qualification under any
state securities or the blue sky laws of the State of New York.
The opinion of Paul, Weiss, Rifkind, Wharton & Garrison shall be limited to
the laws of the State of New York, the Federal Laws of the United States of
America (excluding the Federal Communications Act and the rules and regulations
of the FCC thereunder) and the General Corporation Law of the State of Delaware.
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ANNEX 2
VOTING AGREEMENT
VOTING AGREEMENT, dated as of November 13, 1998, by and among APOLLO
INVESTMENT FUND IV, L.P., a Delaware limited partnership ('AIF IV'), APOLLO
OVERSEAS PARTNERS IV, L.P., a Cayman Islands limited partnership ('AOP IV', and
together with AIF IV, and including their respective successors and permitted
assigns, the 'Purchasers'), and DAVID MARGOLESE (the 'Stockholder').
WHEREAS, concurrently herewith, the Purchasers and CD Radio Inc., a
Delaware corporation (the 'Company'), are entering into a Stock Purchase
Agreement pursuant to which the Company will issue to the Purchasers shares of
one or more series of preferred stock of the Company having an aggregate
liquidation preference of up to $200,000,000 (the 'Purchase Agreement');
capitalized terms used herein without definition shall have the meanings
ascribed to them in the Purchase Agreement;
WHEREAS, the issuance of preferred stock of the Company pursuant to the
Purchase Agreement is subject to stockholder approval as set forth in the
Purchase Agreement;
WHEREAS, the Stockholder is the record and beneficial owner of certain
shares of Common Stock and exercises voting power with respect to certain
additional shares of Common Stock; and
WHEREAS, the Board of Directors of the Company has, prior to the execution
of this Agreement, duly and validly approved and adopted the Purchase Agreement
and the Contemplated Transactions;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, and as an inducement to the Purchasers to enter
into the Purchase Agreement, the parties hereto agree as follows:
SECTION 1. Shares. (a) The Stockholder hereby represents and warrants that
(i) he is the record and beneficial owner, as of the date hereof, of 1,600,000
shares of Common Stock (the 'Owned Shares'), (ii) that he has the sole right and
power to vote or to direct the voting of the Owned Shares and any shares
acquired upon exercise of any options to purchase shares of Common Stock held by
him as of the date of this Agreement, (iii) that he owns the Owned Shares free
and clear of all liens, charges, encumbrances, voting agreements and commitments
of every kind, other than this Agreement and (iv) that pursuant to that certain
Voting Trust Agreement, dated August 26, 1997, by and among Darlene Friedland,
as Grantor, David Margolese, as Trustee, and the Company (the 'Trust
Agreement'), the Stockholder has the sole right and power to vote or direct the
voting with respect to an additional 2,834,500 shares of Common Stock (the
'Trust Shares'). The Owned Shares, the Trust Shares, and any other shares of
Common Stock or other securities of the Company entitled to vote with respect to
the Contemplated Transactions that are acquired by the Stockholder after the
date of this Agreement or with respect to which after the date of this Agreement
Stockholder becomes entitled to vote or direct the voting are collectively
referred to as 'Voting Shares.'
SECTION 2. Consent; Agreement to Vote. (a) The Stockholder agrees that,
immediately following the execution and delivery of this Agreement and the
Purchase Agreement, he shall execute and deliver, or cause to be executed and
delivered by the record owner thereof, in accordance with Section 228 of the
General Corporation Law of the State of Delaware (the 'DGCL'), the Stockholder
Consent in the form attached hereto as Annex A with respect to all Voting
Shares.
(b) The Stockholder hereby further agrees that, during the term of this
Agreement, he shall, from time to time, at the request of the Purchasers, (i)
timely execute and deliver (or cause to be timely executed and delivered) an
additional written consent with respect to, or (ii) vote, or cause to be voted,
at any meeting of stockholders of the Company held prior to the earlier of the
Closing and the termination of the Purchase Agreement, or at any adjournment or
postponement of such meeting, in person or by proxy, all Voting Shares, (x) in
favor of approval and adoption of the Purchase Agreement and the Contemplated
Transactions, and any action required in furtherance thereof, and (y) against
any action or agreement that would result in a material breach of any
representation, warranty, covenant or obligation of the Company contained in the
Purchase Agreement.
(c) The Stockholder agrees that prior to the earlier of (1) the date that
the Contemplated Transactions have been validly approved by written consent of
holders of a majority of the outstanding
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shares of Common Stock of the Company or (2) the record date for a special
meeting of stockholders of the Company called for the purpose of obtaining the
requisite stockholder approval of the Contemplated Transactions, he will not
contract to sell, sell or otherwise pledge, encumber, transfer or dispose of any
shares of Common Stock owned beneficially or of record by him(or any interest
therein or securities convertible thereinto or any voting rights with respect
thereto) and will not encourage or assist any person to sell or otherwise
dispose of the Trust Shares; provided, however that in the event of any such
sale, transfer or other disposition, the Stockholder shall not (A) change his
vote with respect to the matters referred to in clauses (x) and (y) of paragraph
(b), (B) withdraw any consent, vote or proxy given pursuant to paragraph (a) or
(b), or (C) cast any vote or deliver any proxy or written consent that could
have the effect of frustrating, preventing or nullifying stockholder approval of
the Contemplated Transactions.
SECTION 3. Termination. In the event the Purchase Agreement is terminated
in accordance with its terms, this Agreement shall automatically terminate and
be of no further force or effect. Upon such termination, except for any rights
any party may have in respect of any breach by any other party of its
obligations hereunder, none of the parties hereto shall have any further
obligation or liability hereunder.
SECTION 4. Authority; Binding Effect. (a) The Stockholder represents and
warrants that he has full power and authority to enter into, execute and deliver
and perform his obligations under this Agreement and to make the representations
and warranties made herein.
(b) This Agreement constitutes the valid and binding agreement of the
Stockholder, enforceable against him in accordance with its terms.
SECTION 5. Miscellaneous. (a) Notices, Etc. All notices or other
communications required or permitted hereunder shall be in writing and shall be
delivered personally, telecopied or sent by certified, registered or express
mail, postage prepaid. Any such notice shall be deemed given if delivered
personally or telecopied, on the date of such delivery or sent by reputable
overnight courier, on the first business day following the date of such mailing,
as follows:
If to the Purchasers:
c/o Apollo Management, L.P.
1301 Avenue of the Americas, 38th Floor
New York, NY 10019
Attention: Marc J. Rowan
Telecopy: (212) 261-4071
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: David A. Katz, Esq.
Telecopy: (212) 403-2000
If to the Stockholder:
David Margolese
CD Radio Inc.
1180 Avenue of the Americas
14th Floor
New York, New York 10036
Telecopy: (212) 899-5050
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attn: Mitchell S. Fishman
Telecopy: (212) 757-3990
2
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or to such other address as such party shall have designated by notice received
by each other party.
(b) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or, except as expressly set forth in
Section 3, terminated, except by an instrument in writing signed by each party
hereto.
(c) Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns; provided that neither the rights nor the obligations of
any party may be assigned or delegated without the prior written consent of the
other parties, except that the Purchasers may make any assignment permitted by
the Purchase Agreement without the written consent of the Stockholder.
(d) Specific Performance. The parties acknowledge that money damages are
not an adequate remedy for violations of this Agreement and that any party may,
in its sole discretion, apply to a court of competent jurisdiction for specific
performance or injunctive or such other relief as such court may deem just and
proper in order to enforce this Agreement or prevent any violation hereof and,
to the extent permitted by applicable law, each party waives any objection to
the imposition of such relief or any requirement for a bond.
(e) Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, without regard to the principles of conflict of law thereof.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies each signed by less than all, but together signed by all, the
parties hereto.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
APOLLO INVESTMENT FUND IV, L.P.
By: Apollo Advisors, IV, L.P., its
general partner
By: Apollo Capital Management IV,
Inc., its general partner
By: /s/ ANDREW AFRICK
...............................
Name: Marc J. Rowan
Title: Vice President
APOLLO OVERSEAS PARTNERS IV, L.P.
By: Apollo Advisors, IV, L.P., its
general partner
By: Apollo Capital Management IV,
Inc., its general partner
By: /s/ ANDREW AFRICK
...............................
Name: Marc J. Rowan
Title: Vice President
/s/ DAVID MARGOLESE
.....................................
David Margolese
3
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ANNEX A
WRITTEN CONSENT OF STOCKHOLDERS OF
CD RADIO INC.
Pursuant to the provisions of Section 228 of the General Corporation Law of
the State of Delaware, I, David Margolese, the holder of the number shares of
Common Stock, par value $.001 per share (the 'Common Stock'), of CD Radio Inc.
(the 'Company') indicated below on my own behalf and the holder of the number
shares of Common Stock indicated below held by me as Trustee of such shares
pursuant to a Voting Trust Agreement, dated as of August 26, 1997, among the
Company, Darlene Friedland and myself, as Trustee (the 'Voting Trust
Agreement'), do hereby consent to, approve and adopt the following resolution:
WHEREAS, the Board of Directors of the Company has approved the
Contemplated Transactions (as such term is defined in that certain Stock
Purchase Agreement, dated as of November 13, 1998, by and among the
Company, Apollo Investment Fund IV, L.P., a Delaware limited partnership,
and Apollo Overseas Partners IV, L.P., a Cayman Islands limited partnership
(the 'Purchase Agreement')), including, without limitation, the issuance or
issuances by the Company of securities convertible into Common Stock
equaling 20% or more of the Common Stock or 20% or more of the voting power
outstanding before issuance (the 'Issuances');
NOW THEREFORE, BE IT RESOLVED, that the Purchase Agreement and the
Contemplated Transactions, including the Issuances, be, and they hereby
are, consented to, approved and adopted in all respects.
DAVID MARGOLESE,
on his own behalf
/S/ DAVID MARGOLESE
.....................................
David Margolese
Shares of Common Stock Held: 1,600,000
DAVID MARGOLESE,
as Trustee with respect to securities
of the Company held in trust pursuant
to the Voting Trust Agreement
/S/ DAVID MARGOLESE
.....................................
David Margolese,
Trustee
Shares of Common Stock Held in Trust:
2,834,500
Date: November 13, 1998
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ANNEX 3
TAG-ALONG AGREEMENT
TAG-ALONG AGREEMENT, dated as of November 13, 1998, by and among APOLLO
INVESTMENT FUND IV, L.P., a Delaware limited partnership ('AIF IV'), APOLLO
OVERSEAS PARTNERS IV, L.P., a Cayman Islands limited partnership ('AOP IV', and
together with AIF IV, and including their respective successors and permitted
assigns, the 'Purchasers'), CD RADIO INC., a Delaware corporation (the
'Company') and DAVID MARGOLESE (the 'Stockholder').
WHEREAS, concurrently herewith, the Purchasers and the Company are entering
into a Stock Purchase Agreement pursuant to which the Company will issue to the
Purchasers shares of one or more series of preferred stock of the Company having
an aggregate liquidation preference of up to $200,000,000 (the 'Purchase
Agreement'); capitalized terms used in this agreement and not otherwise defined
shall have the meanings ascribed to them in the Purchase Agreement;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, and as an inducement to the Purchasers to enter
into the Purchase Agreement, the parties hereto agree as follows:
SECTION 1. Tag-Along Right. During the Tag-Along Period (as defined in
Section 5), in the event the Margolese Sellers (or any of them) propose to make
a Tag-Along Sale (as defined in Section 5), each of the Purchasers shall have
the right to participate (a 'Tag-Along Right') in such sale with respect to any
shares of Common Stock (including shares obtainable upon the conversion of
shares of Series A Preferred Stock and Series B Preferred Stock) held by them,
on a pro rata basis (based on the ratio of the aggregate number of shares of
Common Stock (or Common Stock equivalents) to be sold by Margolese Sellers (as
defined in Section 5) to the aggregate number of shares of Common Stock
beneficially owned by the Margolese Sellers participating in such sale
immediately prior to such sale), for the greatest consideration per share of
Common Stock and otherwise on the best terms by which any Margolese Seller sells
its shares of Common Stock (or Common Stock equivalent).
SECTION 2. Notice and Procedure for Public Offerings. In the case of a
Tag-Along Sale involving registration under the Securities Act of 1933, as
amended (the 'Securities Act'), by the Company of the Margolese Shares to be
sold in the Tag-Along Sale, then if circumstances occur which give rise to the
Tag-Along Right, the Purchasers shall have the right to participate therein as
provided for in Sections 9.2 through 9.7 of the Purchase Agreement (without
regard to the amount of time that that shall have elapsed from the Closing Date
to the proposed date of the Tag-Along Sale); provided, however, that in the
event the number of shares to be underwritten in any such offering is limited or
'cut-back' pursuant to Section 9.2(b) of the Purchase Agreement, the parties
hereto agree that the Margolese Sellers and the Purchasers shall be cut-back
proportionally to preserve the ratio of (x) the number of shares of Common Stock
(or Common Stock equivalents) the Margolese Sellers desire to have included in
such sale over (y) the number of shares the Purchasers desire to have included
in such sale (the 'Relative Ratio'), and each of the Margolese Sellers agree to
voluntarily reduce the number of Margolese Shares to be included in such
registration in order to preserve the Relative Ratio.
SECTION 3. Notice and Procedure for Private Transactions. In the case of a
Tag-Along Sale that does not involve registration under the Securities Act by
the Company of the Margolese Shares to be sold in the Tag-Along Sale, then if
circumstances occur which give rise to the Tag-Along Right, the participating
Margolese Sellers shall give written notice to each of the Purchasers not less
than 20 days prior to such proposed sale providing a summary of the terms of the
proposed sale to the buyer and advising each such Purchaser of their Tag-Along
Rights. Each Purchaser may exercise its Tag-Along Right (each, an 'Apollo
Tagging Stockholder') by written notice to any of the Margolese Sellers
participating in the Tag-Along Sale stating the number of shares of Common Stock
that it wishes to sell. If the prospective purchaser or purchasers of the shares
to be sold in such Tag-Along Sale declines to purchase the aggregate number of
shares sought to be sold by the participating Margolese Sellers and
participating Purchasers, the Margolese Sellers and the Purchasers agree to
reduce the number of shares of each participating party to be included in such
sale on a proportionate basis that preserves the Relative Ratio. If an Apollo
Tagging Stockholder gives written notice indicating that such Apollo
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Tagging Stockholder wishes to sell shares in the Tag-Along Sale, such Apollo
Tagging Stockholder shall be obligated to sell that number of shares specified
in such Apollo Tagging Stockholder's written acceptance notice (as such number
may be reduced pursuant to the immediately preceding sentence) for the greatest
consideration and upon the best terms by which any Margolese Seller is selling
to the buyer, such obligation to be conditioned upon and contemporaneous with
completion of the transaction of purchase and sale with the buyer and, if any
Apollo Tagging Stockholder intends to sell shares of Common Stock issuable upon
conversion of shares of Series A Preferred Stock or Series B Preferred Stock,
upon the Company satisfying its conversion obligations with respect thereto (as
set forth in the certificate of designations relating to the relevant series of
preferred stock).
SECTION 4. Effectiveness and Termination. This Agreement shall terminate
automatically after the later of (1) the expiration of the Tag-Along Period and
(2) the first date after which the Stockholder, each Permitted Transferee (as
defined in Section 5) and the Company shall have satisfied and fulfilled any and
all of their respective obligations arising hereunder (including any obligations
arising under the Purchase Agreement as a result of this Agreement) prior to the
expiration of the Tag-Along Period. In the event the Purchase Agreement is
terminated in accordance with its terms prior to the Closing Date, this
Agreement shall automatically terminate and be of no further force or effect.
Upon any such termination, except for any rights any party may have in respect
of any breach by any other party of its obligations hereunder, none of the
parties hereto shall have any further obligation or liability hereunder.
SECTION 5. Definitions. (a) The term 'Tag Along Sale' means the sale or
disposition, directly or indirectly, by David Margolese, any Permitted
Transferee of David Margolese, or any Person having power to sell or dispose of
Margolese Shares (or any of them) (collectively, 'Margolese Sellers'), in one or
more transactions (other than a transfer from a Margolese Seller to a Permitted
Transferee) of any Margolese Shares if (i) immediately following such sale the
Margolese Sellers collectively would have sold in the aggregate from the date
hereof 800,000 or more shares of Common Stock (as such number may be adjusted
for stock splits, dividends paid in Common Stock, reclassifications of the
Common Stock, and other similar events), and (ii) the number of shares of Common
Stock proposed to be sold or disposed of in the Tag-Along Sale in the aggregate
by the Margolese Sellers is equal to or greater than 80,000 (as such number may
be adjusted for stock splits, dividends paid in Common Stock, reclassifications
of the Common Stock, and other similar events).
(b) The term 'Margolese Shares' means all shares of Common Stock
beneficially owned at any time by David Margolese and any Permitted Transferee
of David Margolese.
(c) The term 'Permitted Transferees' means any of the following who, prior
to receiving, accepting or acquiring any shares of Common Stock (or any options,
warrants or other securities convertible into shares of Common Stock) from David
Margolese or any other Permitted Transferee, agrees in writing to be bound by
and to be a 'Permitted Transferee' pursuant to this Agreement: (1) the spouse,
parents, children, grandchildren or siblings of David Margolese, (2) a trust or
similar entity of David Margolese, the beneficiaries of which, include only
David Margolese and any of David Margolese's spouse, parents, children or
grandchildren or (3) a charitable trust or similar entity of David Margolese
established for charitable or educational purposes with respect to which David
Margolese has the power to direct the voting and/or disposition of any shares of
Common Stock transferred to or acquired by such trust or similar entity.
(d) The term 'Tag-Along Period' means the period from the Closing Date to
the earlier of (i) the first date on which the Purchasers beneficially own less
than 2,000,000 shares of Common Stock in the aggregate (as such number may be
adjusted for stock splits, dividends paid in Common Stock, reclassifications of
the Common Stock, and other similar events), and (ii) the date that is six
months from the first date after nationwide commercial introduction of the
Company's service as described in the SEC Reports (as defined in the Purchase
Agreement) filed as of the date of this Agreement, including the following: (1)
the service is available for subscription on a nationwide, non-test basis, (2)
satellite signals carrying the Company's programming can be received nationwide,
and (3) radios and/or adaptors to existing radios capable of receiving the
Company's satellite signals are available for purchase on a nationwide basis.
(e) A person 'beneficially owns' any shares of any security with respect to
which such person would be a beneficial owner pursuant to Rule 13d-3 promulgated
under the Securities and Exchange
2
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Act of 1934, as amended; provided, however, that for purposes of this Agreement,
the Stockholder shall not be deemed to beneficially own any shares solely by
virtue of his power to vote or direct the voting thereof pursuant to that
certain Voting Trust Agreement, dated August 26, 1997, by and among Darlene
Friedland, as Grantor, David Margolese, as Trustee, and the Company.
SECTION 6. Authority; Binding Effect. (a) Each party hereto hereby
represents and warrants to each other party hereto that:
(b) such party has full power and authority to enter into, execute and
deliver and perform his obligations under this Agreement and to make the
representations and warranties made herein and, in the case of any party that is
not a natural person, no further corporate or trust action or approval is
required in connection herewith;
(c) Assuming due execution and delivery by each other party hereto, this
Agreement constitutes the valid and binding agreement of such party, enforceable
against such party in accordance with its terms.
SECTION 7. Miscellaneous. (a) Notices, Etc. All notices or other
communications required or permitted hereunder shall be in writing and shall be
delivered personally, telecopied or sent by certified, registered or express
mail, postage prepaid. Any such notice shall be deemed given if delivered
personally or telecopied, on the date of such delivery or sent by reputable
overnight courier, on the first business day following the date of such mailing,
as follows:
If to the Purchasers:
c/o Apollo Management, L.P.
1301 Avenue of the Americas, 38th Floor
New York, NY 10019
Attention: Marc J. Rowan
Telecopy: (212) 261-4071
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: David A. Katz, Esq.
Telecopy: (212) 403-2000
If to the Stockholder:
David Margolese
CD Radio Inc.
1180 Avenue of the Americas
14th Floor
New York, New York 10036
Telecopy: (212) 899-5036
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attn: Mitchell S. Fishman
Telecopy: (212) 757-3990
If to the Company:
CD Radio Inc.
1180 Avenue of the Americas
14th Floor
New York, New York 10036
Attn: Patrick Donnelly, Esq.
Telecopy: (212) 899-5036
3
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with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attn: Mitchell S. Fishman, Esq.
Telecopy: (212) 757-3990
or to such other address as such party shall have designated by notice received
by each other party.
(b) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or, except as expressly set forth in
Section 4, terminated, except by an instrument in writing signed by each party
hereto.
(c) Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns; provided that neither the rights nor the obligations of
any party may be assigned or delegated without the prior written consent of the
other parties, except that the Purchasers may make any assignment permitted by
the Purchase Agreement without any additional written consent of any other party
hereto.
(d) Specific Performance. The parties acknowledge that money damages are
not an adequate remedy for violations of this Agreement and that any party may,
in its sole discretion, apply to a court of competent jurisdiction for specific
performance or injunctive or such other relief as such court may deem just and
proper in order to enforce this Agreement or prevent any violation hereof and,
to the extent permitted by applicable law, each party waives any objection to
the imposition of such relief or any requirement for a bond.
(e) Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, without regard to the principles of conflict of law thereof.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies each signed by less than all, but together signed by all, the
parties hereto.
(g) Entire Agreement. As among the Purchasers and the Company, this
Agreement, together with the Purchase Agreement and the schedules and exhibits
thereto, constitutes the entire agreement with respect to the subject matter
contained herein and therein; as among the Purchasers and the Stockholder, this
Agreement, together with the that certain Voting Agreement, dated as of
November 13, 1998 the exhibits and annexes thereto, constitutes the entire
agreement with respect to the subject matter contained herein and therein.
4
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
APOLLO INVESTMENT FUND IV, L.P.
By: Apollo Advisors, IV, L.P., its
general partner
By: Apollo Capital Management IV,
Inc., its general partner
By: /S/ ANDREW AFRICK
..............................
Name: Andrew Africk
Title: Vice President
APOLLO OVERSEAS PARTNERS IV, L.P.
By: Apollo Advisors, IV, L.P., its
general partner
By: Apollo Capital Management IV,
Inc., its general partner
By: /S/ ANDREW AFRICK
..............................
Name: Andrew Africk
Title: Vice President
CD RADIO INC.
By: /S/ PATRICK L. DONNELLY
...................................
Name: Patrick L. Donnelly
Title:Executive Vice President
and General Counsel
/S/ DAVID MARGOLESE
.....................................
David Margolese
5
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ANNEX 4
AMENDMENT TO RIGHTS AGREEMENT
AMENDMENT, dated November 13, 1998 (this 'Amendment'), by and between CD
RADIO INC., a Delaware corporation (the 'Company'), and CONTINENTAL STOCK
TRANSFER & TRUST COMPANY (the 'Rights Agent').
RECITALS
WHEREAS, the Company and the Rights Agent are parties to a Rights
Agreement, dated as of October 22, 1997 (the 'Rights Agreement');
WHEREAS, the Company proposes to issue and sell up to 1,350,000 shares of
its 9.2% Series A Junior Cumulative Convertible Preferred Stock, par value $.001
per share ('Series A Preferred Stock'), and up to 650,000 shares of its 9.2%
Series B Junior Cumulative Convertible Preferred Stock, par value $.001 per
share ('Series B Preferred Stock' and, together with the Series A Preferred
Stock, the 'Junior Preferred Stock') to Apollo Investment Fund IV, L.P. ('AIF
IV'), a Delaware limited partnership, and Apollo Overseas Partners IV, L.P., a
Cayman Islands limited partnership ('AOP IV' and together with AIF IV, the
'Purchasers'), pursuant to a Stock Purchase Agreement, dated as of November 13,
1998 (the 'Stock Purchase Agreement'), by and among the Company and the
Purchasers; and
WHEREAS, the Company may issue up to an additional 1,950,000 shares of
Series A Preferred Stock as dividends on outstanding shares of Series A
Preferred Stock and may issue up to an additional 1,450,000 shares of Series B
Preferred Stock as dividends on outstanding shares of Series B Preferred Stock,
in each case in lieu of paying dividends in cash on such shares;
WHEREAS, under the terms of the Rights Agreement, unless the Rights
Agreement is amended, the Purchasers would become 'Acquiring Persons,' as
defined in Section 1(a) of the Rights Agreement, upon the purchase of the Junior
Preferred Stock pursuant to the Stock Purchase Agreement; and
WHEREAS, the Board of Directors of the Company deems it desirable and in
the best interests of the Company and its stockholders to amend the Rights
Agreement to exclude the Purchasers and any of the Purchasers' Affiliates and
Associates who would otherwise be deemed Beneficial Owners (as defined in the
Rights Agreement) as a result of such transaction from such definition of
'Acquiring Person.'
Accordingly, the parties agree as follows:
1. Amendment of Section 1(a). The definition of 'Acquiring Person' set
forth in paragraph 1(a) of the Rights Agreement is amended by adding the
following clause at the end of such Section 1(a):
'; provided, further, that Apollo Investment Fund IV, L.P., a
Delaware limited partnership (hereinafter referred to as 'AIF IV'),
and Apollo Overseas Partners IV, L.P., a Cayman Islands limited
partnership (hereinafter referred to as 'AOP IV'), and any of the
Affiliates or Associates of AIF IV or AOP IV that would otherwise be
deemed to be Beneficial Owners of the Company's 9.2% Series A Junior
Cumulative Convertible Preferred Stock (hereinafter referred to as
the 'Series A Preferred Stock') or the Company's 9.2% Series B
Junior Cumulative Convertible Preferred Stock (hereinafter referred
to as the 'Series B Preferred Stock' and, together with the Series A
Preferred Stock, the 'Junior Preferred Stock') (such Affiliates and
Associates, together with AIF IV and AOP IV, are hereinafter
referred to as the 'Apollo Investors') shall not be, or be deemed to
be, an Acquiring Person solely by reason of (w) the purchase by the
Apollo Investors of shares of the Junior Preferred Stock pursuant to
the Stock Purchase Agreement dated as of November 13, 1998 by and
among the Company, AIF IV and AOP IV, (x) the acquisition by the
Apollo Investors of additional shares of Junior Preferred Stock
pursuant to dividends declared on the Junior Preferred Stock, (y)
the acquisition by the Apollo Investors of Common Shares upon the
exercise of conversion rights set forth in the Certificates of
Designations, Preferences and Relative, Participating, Optional and
Other Special Rights of the Junior Preferred Stock or (z) the
acquisition by the Apollo
<PAGE>
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Investors of the Beneficial Ownership, collectively, of an
additional one percent (1%) or more of the outstanding Common
Shares.'
2. Miscellaneous. This Amendment shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be governed
by and construed in accordance with the laws of such state applicable to
contracts to be made and performed entirely within such state. This Amendment
may be executed in any number of counterparts, each of such counterparts shall
for all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument. If any provision, covenant
or restriction of this Amendment is held by a court of competent jurisdiction or
other authority to be invalid, illegal or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Amendment shall remain in
full force and effect and shall in no way be effected, impaired or invalidated.
EXECUTED as of the date set forth above.
CD RADIO INC.
By: /S/ PATRICK L. DONNELLY
.................................
Name: Patrick L. Donnelly
Title: Executive Vice President,
General Counsel and Secretary
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
By: /S/ WILLIAM F. SEEGRABER
.................................
Name: William F. Seegraber
Title: Vice President
2
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APPENDIX I
CD RADIO INC.
THIS CONSENT IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, a stockholder of record of CD Radio Inc. (the 'Company') as
of the close of business on December 1, 1998, hereby takes the following action,
with respect to all stock of the Company held by the undersigned, in connection
with the solicitation by the Board of Directors of the Company of written
consents without a meeting, pursuant to Section 228 of the Delaware General
Corporation Law, to the transactions contemplated by a Stock Purchase Agreement
by and among the Company, Apollo Investment Fund IV, L.P. and Apollo Overseas
Partners IV, L.P., including, without limitation, (i) the issuance and sale of
1,350,000 shares of the Company's 9.2% Series A Junior Cumulative Convertible
Preferred Stock (the 'Series A Preferred Stock'), (ii) an option to sell 650,000
shares of the Company's 9.2% Series B Junior Cumulative Convertible Preferred
Stock (the 'Series B Preferred Stock'), (iii) the issuance of up to 2,950,000
shares of Series A Preferred Stock in payment of dividends that may be paid on
the Series A Preferred Stock from time to time, and (iv) the issuance of up to
1,450,000 shares of Series B Preferred Stock in payment of dividends that may be
paid on the Series B Preferred Stock from time to time, as described in the
Company's Consent Solicitation Statement, dated December 7, 1998 (the
'Proposal').
(Continued and to be dated and signed on other side.)
- -------------------------------------------------------------------------------
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(Place an 'X' in the appropriate box)
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS CONSENT TO THE PROPOSAL.
CONSENT [ ] CONSENT WITHHELD [ ] ABSTAIN [ ]
IF NO BOX IS MARKED WITH RESPECT TO THE ACTION DESCRIBED ABOVE, THE
UNDERSIGNED WILL BE DEEMED TO HAVE CONSENTED TO THE PROPOSAL.
DATED: _________________, 1998
______________________________
Signatures(s)
______________________________
Please sign as registered
and return promptly in the
enclosed envelope. Executors,
trustees and others signing in
a representative capacity
should include their names and
the capacity in which they
sign.
STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as.................................. 'SS'
