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EXHIBIT 10.24
NOTE: CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED
SEPERATELY WITH THE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
TREATMENT UNDER RULE 24B-2(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED.
CD RADIO INC.
PREFERRED STOCK INVESTMENT AGREEMENT
PREFERRED STOCK INVESTMENT AGREEMENT ("AGREEMENT") dated as of
October 23, 1996 between CD Radio Inc., a Delaware corporation ("CDRD"), and
each entity listed as an investor on Schedule I attached to this Agreement
(each individually an "INVESTOR" and collectively the "INVESTORS").
W I T N E S S E T H:
WHEREAS, CDRD desires to sell and issue to the Investors, and
the Investors wish to purchase from CDRD, up to an aggregate of [Confidential
Portion Omitted] shares of CDRD's 5% Delayed Convertible Preferred Stock having
the rights, designations and preferences set forth in the Certificate of
Designations of CDRD (the "CERTIFICATE OF DESIGNATIONS") in the identical form
and substance of Exhibit 1 attached to this Agreement (the "PREFERRED SHARES"),
on the terms and conditions set forth in this Agreement;
WHEREAS, CDRD initially desires to sell to the Investors up to
[Confidential Portion Omitted] of the Preferred Shares ("FIRST CLOSING SHARES")
in the event that it, or its subsidiary, receives notice with respect to the
authority to provide satellite digital audio radio services ("SATELLITE DARS
LICENSE") that either: (i) the Federal Communications Commission ("FCC") has
issued an order stating that CDRD has been chosen to receive a Satellite DARS
License by virtue of its having been designated a pioneer and will not need to
participate in competitive bidding for such license (the "PIONEER'S PREFERENCE
ORDER"); or (ii) [Confidential portion omitted] all on the terms and
conditions set forth in this Agreement;
WHEREAS, CDRD will have the option to sell to the Investors a
number of Preferred Shares equal to the number of First Closing Shares ("SECOND
CLOSING SHARES") after the First Closing Shares have been sold, subject to the
terms and conditions set forth in this Agreement;
WHEREAS, the Preferred Shares will be convertible into shares
of common stock, par value $.001, of CDRD ("COMMON SHARES") and the Investors
will have registration rights with respect to such Common Shares issuable upon
conversion, and the Preferred Shares will be subject to certain rights of
redemption of CDRD;
NOW, THEREFORE, in consideration of the foregoing premises and
the covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
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ARTICLE I
PURCHASE AND SALE OF PREFERRED SHARES
Section 1.1 Purchase and Sale of Preferred Shares. Upon
the following terms and conditions, CDRD shall issue and sell to each Investor
severally, and each Investor severally shall purchase from CDRD, the number of
First Closing Shares and Second Closing Shares indicated next to such
Investor's name on Schedule I attached hereto.
Section 1.2 Purchase Price. The purchase price for the
Preferred Shares (the "PURCHASE PRICE") shall be [Confidential Portion Omitted]
per share; provided, however, that if any Warrants (as defined below) are
issued pursuant to Section 3.2, the Purchase Price shall be allocated between
the Preferred Shares and the Warrants such that the Warrants (or fraction
thereof) issuable to Investors for each Preferred Share shall be deemed to have
a purchase price of $0.05.
Section 1.3 The First Closing. (a) The closing of the
purchase and sale of the First Closing Shares (the "FIRST CLOSING"), shall take
place at the offices of the Investors' counsel:
(i) at 10:00 am., local time on the latest of:
(A) the earlier of the date: (1) five
business days after the Investors receive
notice from CDRD that the FCC has adopted the
Pioneer's Preference Order or (2) on which
the funds placed in the Escrow Account (as
defined below) are released in accordance
with the terms and conditions of the Escrow
Agreement (as defined below) in connection
with a Winning Bid; and
(B) the date on which the last to be
fulfilled or waived of the conditions set
forth in Article IV hereof and applicable to
the First Closing shall be fulfilled or
waived in accordance herewith; or
(ii) at such other time and place and/or on such
other date as all of the Investors and CDRD may agree.
The date on which the First Closing occurs is referred to herein as the "FIRST
CLOSING DATE."
(b) On the First Closing Date, CDRD shall deliver
to each Investor certificates (with the number of and denomination of such
certificates designated by such Investor) representing the First Closing Shares
and, if Warrants are then issuable pursuant to Section 3.2, such Warrants,
purchased by such Investor under this Agreement registered in the name of such
Investor (or its nominee) or deposit such First Closing Shares and Warrants, if
any, into accounts designated by such Investor, and such Investor shall
deliver, or cause to be delivered, to CDRD the Purchase Price for the number of
First Closing Shares and, if Warrants are then issuable pursuant to Section
3.2, such Warrants, purchased by such Investor under this Agreement, by wire
transfer in immediately available funds, to such account as CDRD designates in
writing to the Investors not later than 2 business days prior to the First
Closing Date; provided
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that if the FCC shall not have adopted the Pioneer's Preference Order, such
Purchase Price shall be paid into an escrow account ("ESCROW ACCOUNT") not
later than the later of (x) 5 business days prior to the announced date, as
specified in a written notice from CDRD to the Investors delivered not later
than 2 business days prior to the date such payment is to be made, of the FCC
auction of Satellite DARS Licenses and (y) the date on which the last to be
fulfilled or waived of the conditions set forth in Section 4.2(a), (b), (c),
(d), (f)(i), (g) and (j)(i) through (vii) hereof and applicable to the First
Closing Date shall be fulfilled or waived in accordance herewith in each case
(the "ESCROW DATE"), pursuant to the terms of that certain Escrow Agreement
between CDRD and the escrow agent named therein ("ESCROW AGENT") substantially
in the form of Exhibit 2 ("ESCROW AGREEMENT"); provided further that if the
Purchase Price is required to be paid into the Escrow Account as specified in
the immediately preceding proviso, CDRD shall deliver to the Investors copies
of all documents and certificates required to be delivered to the Escrow Agent
at least 2 business days prior to release of funds held in escrow as a
condition to release of funds held in escrow in accordance with the Escrow
Agreement. The Escrow Account shall be maintained at a financial institution
reasonably acceptable to the Investors and shall be an interest bearing
account, and the Escrow Agent shall be reasonably acceptable to the Investors.
(c) On the First Closing Date, CDRD shall pay
the following fees:
(i) the fees of the Escrow Agent; and
(ii) a funding fee to each Investor in the
amount of 2% of the aggregate amount of the
Purchase Price paid or payable by such
Investor for the First Closing Shares and
Warrants, if any, which funding fee shall be
paid directly or from amounts held under the
Escrow Agreement in accordance with the terms
and conditions of the Escrow Agreement.
Section 1.4 The Second Closing. (a) The closing of the
purchase and sale of the Second Closing Shares (the "SECOND CLOSING"), shall
take place at the offices of the Investors' counsel, at 10:00 am., local time
on:
(i) the latest of:
(A) ten days after written notice from CDRD
electing to sell the Second Closing Shares to
Investors ("SECOND CLOSING NOTICE"), which
Second Closing Notice shall be delivered to
the Investors not earlier than the First
Closing Date and not later than fifteen days
after the First Closing Date; and
(B) the date on which the last to be
fulfilled or waived of the conditions set
forth in Article IV hereof and applicable to
the Second Closing shall be fulfilled or
waived in accordance herewith, provided such
date is not later than 35 days after the
First Closing Date; or
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(ii) such other time and place and/or on such other
date as the Investors and CDRD may agree.
The date on which the Second Closing occurs is referred to herein as the
"SECOND CLOSING DATE."
(b) On the Second Closing Date, if any, CDRD
shall deliver to each Investor certificates (with the number of and
denomination of such certificates designated by such Investor) representing the
Second Closing Shares and, if Warrants are then issuable pursuant to Section
3.2, such Warrants, purchased by such Investor under this Agreement registered
in the name of such Investor (or its nominee) or deposit such Second Closing
Shares and Warrants, if any, into accounts designated by such Investor, and
such Investor shall deliver to CDRD the Purchase Price for the number of Second
Closing Shares and Warrants, if any, purchased by such Investor under this
Agreement by wire transfer in immediately available funds to such account as
CDRD designates in writing to the Investors not later than two business days
prior to the Second Closing Date.
Section 1.5 Covenant to Register.
(a) For purposes of this Agreement, unless the
context otherwise requires, the following definitions shall apply:
(i) The terms "REGISTER," "REGISTERED," and
"REGISTRATION" refer to a registration under the Securities Act of 1933, as
amended (the "ACT"), effected by preparing and filing a registration statement
or similar document in compliance with the Act, and the declaration or ordering
of effectiveness of such registration statement, document or amendment thereto.
(ii) The term "REGISTRABLE SECURITIES" means
the securities issuable upon conversion of the Preferred Shares sold to
Investors by CDRD (other than Preferred Shares issuable upon exercise of the
Libra Warrant (as defined in Section 7.1)), or otherwise issuable pursuant to
the Certificate of Designations, and any securities of CDRD or securities of
any successor corporation issued as, or issuable upon the conversion or
exercise of any warrant, right or other security that is issued as a dividend
or other distribution with respect to, or in exchange for, or in replacement
of, the Preferred Shares sold to Investors by CDRD, which are held by a holder
of Registrable Securities and which (i) have not been resold pursuant to an
effective registration statement or pursuant to Rule 144 under the Act or (ii)
are ineligible for resale pursuant to Rule 144(k) under the Act. For purposes
of this Agreement, securities will be considered ineligible for resale pursuant
to Rule 144(k) under the Act unless CDRD's transfer agent has accepted an
instruction from CDRD specifying that such securities are eligible for sale
pursuant to Rule 144(k).
(iii) The term "HOLDER OF REGISTRABLE
SECURITIES" means any Investor, and any subsequent holder of Preferred Shares
or Registrable Securities that purchases in the aggregate, including purchases
by funds or entities affiliated with such holder or managed by the same manager
or advised by the same advisor as such holder, at least the lesser of (1)
10,000 of the Preferred Shares (or Underlying Shares (as defined below) issued
upon the conversion of at least 10,000 Preferred Shares) sold to Investors by
CDRD, (2) an amount equal to all of the Preferred Shares sold to an Investor
by CDRD (or Underlying Shares issued upon conversion
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of all such Preferred Shares), and (3) all Preferred Shares (or
Underlying Shares issued upon conversion of all such Preferred Shares) then
held by an Investor.
(b) (i) CDRD shall, as expeditiously as possible
following the First Closing, file a "shelf" registration statement with the SEC
pursuant to Rule 415 of the Act on Form S-3, or if Form S-3 is not then
available, another appropriate form, covering all the Registrable Securities
(the "INITIAL REGISTRATION"), and shall use its best efforts to cause such
"shelf" registration statement to become effective by the later of (A) the
[Confidential Portion Omitted] calendar day after the First Closing Date and
(B) February 15, 1997 (the "INITIAL REGISTRATION DEADLINE"). CDRD shall
provide holders of Registrable Securities reasonable opportunity to review any
such registration statement or amendment or supplement thereto prior to the
filing thereof, but in no event shall such period exceed seven days, and CDRD
shall not file any such registration statement, amendment or supplement to
which any holder of Registrable Securities shall reasonably have objected. If
the Registrable Securities are registered initially on a form other than Form
S-3, CDRD shall use its best efforts to register the Registrable Securities on
Form S-3 as soon as use of such form is permissible.
(ii) Subject to Section 1.5(b)(iii) below,
CDRD may suspend the effectiveness of the registration statement or the use of
any prospectus used in connection with any such registration effected pursuant
to this Subsection (b) only in the event, and for such period of time as, CDRD
concludes in its reasonable judgment is required by applicable securities laws
or the rules and regulations of the Securities and Exchange Commission ("SEC").
CDRD will use its best efforts to cause such suspension to terminate at the
earliest possible date; provided that CDRD shall be permitted to maintain such
suspension if, and only for so long as, the Board of Directors of CDRD shall,
in good faith, determine that the failure to maintain such suspension is
reasonably likely to be seriously detrimental (excluding detriment resulting
from the price of the Common Stock or conversion of the Preferred Shares) to
CDRD or would interfere with a material transaction CDRD is then contemplating.
(iii) If (A) the registration statement
covering all Registrable Securities is not effective by the later of (1) the
[Confidential Portion Omitted] calendar day after the First Closing Date and
(2) February 15, 1997, (B) at any time after the later of (1) the [Confidential
Portion Omitted] calendar day after the First Closing Date and (2) February 15,
1997, (x) CDRD fails to have a sufficient number of shares of Common Shares
authorized or reserved to permit conversion of all of the then-outstanding
Preferred Shares, (y) CDRD fails, for any reason, to honor any request for
conversion of Preferred Shares except as permitted by the terms and conditions
of Section 4 of the Certificate of Designations, or (z) the Common Shares fail
to continue to be listed on the NASDAQ Small Capitalization Market, the NASDAQ
National Market, the New York Stock Exchange or the American Stock Exchange, or
(C) at any time after the registration statement has been declared effective,
the SEC suspends the effectiveness of the registration statement or CDRD
suspends the use of the prospectus used in connection with such registration
statement for more than 60 cumulative days (the "CUMULATIVE SUSPENSION") in the
aggregate in any twelve-month period (taking into account all such suspensions)
then CDRD shall (in addition to any other remedies available to such holders at
law or equity, including pursuant to the provisions of Section 7.2(a)) pay to
each (in the case of (B) above) holder of Preferred Shares and (in the case of
(A) or (C) above) holder of Registrable Securities (other than, in the case of
(A) above, any holder all of whose shares of Registrable
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Securities were included in a registration statement declared effective by the
date therein specified) a cash payment (the "REGISTRATION PAYMENT AMOUNT") in
an amount per share equal to 3% of the Liquidation Preference (as defined in
the Certificate of Designations) for all Preferred Shares or the equivalent in
securities issued or issuable upon conversion (the "UNDERLYING SHARES") then
held by such holder for each cumulative 30-day period thereafter until such
registration statement is effective or such failure is rectified, or during
which the effectiveness of the registration statement or use of the prospectus
shall be suspended (taking into account all such suspensions); provided,
however, that if (A) the registration statement with respect to the Qualifying
Offering (as defined in the Certificate of Designations) is not declared
effective on or before the fifth business day following the expected effective
date specified in the Effective Date Notice (as defined in the Certificate of
Designations), and (B) the Lock-up Request (as defined in the Certificate of
Designations) requests that the Lock-up is to become effective prior to the
effective date of the registration statement, then the number of days
comprising the Cumulative Suspension Days shall be reduced by one day for each
day that holders of Registrable Securities are subject to the Lock-up (as
defined in the Certificate of Designations). Such cash payments shall accrue
at the rate of 1/30th of Registration Payment Amount per day during which such
event occurs. Any cash payment required to be made pursuant to this subsection
(iii) shall be due and payable within 10 days of the end of any month in which
any such event occurs.
(c) Whenever required under this Section to
effect the registration of any Registrable Securities, including without
limitation, the Initial Registration, CDRD shall, as expeditiously as
reasonably possible:
(i) Prepare and file with the SEC a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration to become effective as provided in
Section 1.5(b)(i), and upon the request of any holder of Registrable Securities
keep such registration statement effective for so long as any holder of
Registrable Securities desires to dispose of the securities covered by such
registration statement, or, if earlier, until such Registrable Securities may
be sold under Rule 144(k) (provided that CDRD's transfer agent has accepted an
instruction from CDRD to such effect).
(ii) Prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement and notify the holders of
Registrable Securities of the filing and effectiveness of such registration
statement and any amendments or supplements; provided that CDRD shall not be
obligated to file more than two such supplements in any 30-day period to the
extent they relate solely to a transfer by a holder of Registrable Securities.
(iii) Furnish to each holder of Registrable
Securities such numbers of copies of a current prospectus conforming with the
requirements of the Act, copies of the registration statement, any amendment or
supplement thereto and any documents incorporated by reference therein and such
other documents as such holder of Registrable Securities may reasonably require
in order to facilitate the disposition of Registrable Securities owned by such
holder of Registrable Securities; provided that CDRD shall not be obligated to
furnish more than
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two such supplements in any 30-day period to the extent they relate solely to a
transfer by a holder of Registrable Securities.
(iv) Use its best efforts to register and
qualify the securities covered by such registration statement under such other
securities or "Blue Sky" laws of such jurisdictions as shall be reasonably
requested by the holder of Registrable Securities, provided that CDRD shall not
be required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
(v) Notify each holder of Registrable
Securities immediately of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing, and use its best efforts, subject
to Section 1.5(b)(ii), promptly to update and/or correct such prospectus.
(vi) In connection with an underwritten
offering, furnish, at the request of any holder of Registrable Securities, (1)
an opinion of counsel of CDRD, dated the closing date of such offering, in form
and substance reasonably satisfactory to such holder and its counsel and
covering, without limitation, such matters as the due authorization and
issuance of the securities being registered and compliance with securities laws
by CDRD in connection with the authorization, issuance and registration
thereof, and (2) a letter or letters of CDRD's independent public accountants
in form and substance reasonably satisfactory to the holder, such holder's lead
underwriter and their respective counsel, in each case, covering such matters
as would customarily be covered in an underwritten public offering.
(vii) Use its best efforts to list the
Registrable Securities covered by such registration statement with any
securities exchange or market on which the Common Shares are then listed.
(viii) Make available for inspection by the
holder of Registrable Securities, upon request, all SEC Documents (as defined
below) filed subsequent to the First Closing and require CDRD's officers,
directors and employees to supply all information reasonably requested by any
holder of Registrable Securities in connection with such registration
statement.
(ix) Subject to any Lock-up in effect,
permit any offering to be underwritten by an underwriter of recognized national
standing that is (A) selected by holders of a majority in interest of Preferred
Shares and Registrable Securities the holders of which have requested to be
included in a registration of CDRD securities and (B) reasonably acceptable to
CDRD, and enter into such agreements with such underwriter (including
agreements to indemnify) and cause delivery of such legal opinions and letters
of independent public accountants as is customary in underwritten public
offerings in accordance with clause (vi), in each case, at CDRD's expense;
provided that any such request may not be made prior to the earlier of (Y)
completion of the Qualifying Offering and (Z) October 16, 1997.
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(d) Each holder of Registrable Securities will
furnish to CDRD in connection with any registration under this Section such
information regarding itself, the Registrable Securities and other securities
of CDRD held by it, and the intended method of disposition of such securities
as shall be reasonably required to effect the registration of the Registrable
Securities held by such holder of Registrable Securities. Each Investor shall
provide such data promptly upon request made by CDRD after the First Closing.
The intended method of disposition (Plan of Distribution) of such securities as
so provided by any Investor shall be included without alteration in the
registration statement covering the Registrable Securities and shall not be
changed without the written consent of such Investor.
(e) (i) CDRD shall indemnify, defend and hold
harmless each holder of Registrable Securities that is included in a
registration statement pursuant to the provisions of Subsection (b) (each, a
"SELLING SHAREHOLDER") and each of its officers, directors, employees, agents,
partners or controlling persons (within the meaning of the Act) (each, a
"HOLDER INDEMNIFIED PARTY") from and against, and shall reimburse such Holder
Indemnified Party with respect to, any and all claims, suits, demands, causes
of action, losses, damages, liabilities, costs or expenses ("LIABILITIES") to
which such Holder Indemnified Party may become subject under the Act or
otherwise, arising from or relating to (A) any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any preliminary, final or summary prospectus contained therein or any amendment
or supplement thereto, or (B) the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading; provided, however, that CDRD shall not be liable with respect to
any Selling Shareholder in any such case to the extent that any such liability
arises out of or is based upon an untrue statement or omission so made in such
registration statement, preliminary, final or summary prospectus or amendment
or supplement thereto in reliance upon and in strict conformity with written
information furnished in an instrument duly executed by such Selling
Shareholder specifically for use in the registration statement; provided
further, that CDRD shall not be liable with respect to any Selling Shareholder
in any such case to the extent that any such Liability arises out of or is
based upon an untrue statement or omission made in any preliminary prospectus
if (A) such Selling Shareholder under an obligation to send or deliver a copy
of the prospectus with or prior to the delivery of written confirmation of the
sale of Registrable Securities to the person asserting such Liability who
purchased such Registrable Securities that are the subject thereof from such
Selling Shareholder failed to do so and (B) the prospectus would have
completely corrected such untrue statement or omission and if, having
previously been furnished by or on behalf of CDRD with copies of the prospectus
so correcting such untrue statement or omission, and if having been obligated
to deliver such prospectus such Selling Shareholder thereafter failed to
deliver such prospectus prior to or concurrently with the sale of Registrable
Securities to the person asserting such Liability who purchased such
Registrable Securities that are the subject thereof from such Selling
Shareholder; and provided further, that CDRD shall not be liable with respect
to any Selling Shareholder in any such case to the extent that any Liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission in the prospectus, if such untrue statement or
alleged untrue statement, omission or alleged omission is completely corrected
in an amendment or supplement to the prospectus and if, having previously been
furnished by or on behalf of CDRD with copies of the prospectuses so amended or
supplemented, having been advised by or on behalf of CDRD of such correction,
and having been obligated to deliver such prospectuses, such Selling
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Shareholder thereafter failed to deliver such prospectus as so amended or
supplemented, prior to or concurrently with the sale of Registrable Securities
to the person asserting such Liability who purchased such Registrable
Securities that are the subject thereof from such Selling Shareholder.
(ii) In the event of any registration under
the Act of Registrable Securities pursuant to Subsection (b), each holder of
such Registrable Securities hereby severally agrees to indemnify, defend and
hold harmless CDRD, and its officers, directors, employees, agents, partners or
controlling persons (within the meaning of the Act) (each, a "CDRD INDEMNIFIED
PARTY") from and against, and shall reimburse such CDRD Indemnified Party with
respect to, any and all Liabilities to which such CDRD Indemnified Party may
become subject under the Act or otherwise, arising from or relating to (A) any
untrue statement or alleged untrue statement of any material fact contained in
such registration statement, any preliminary, final or summary prospectus
contained therein or any amendment or supplement thereto, or (B) the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, that such
holders will be liable in any such case to the extent, and only to the extent,
that any such liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in such
registration statement, preliminary, final or summary prospectus or amendment
or supplement thereto in reliance upon and in strict conformity with written
information furnished in an instrument duly executed by such holder
specifically for use in the preparation thereof; provided further that in no
case shall any such holder be liable in any such case in an amount in excess of
the net proceeds received by such holder upon the sale of Registrable
Securities pursuant to such registration statement, prospectus or amendment or
supplement thereto.
(iii) (A) Promptly after receipt by any
Holder Indemnified Party of notice of the commencement of any action, such
Holder Indemnified Party shall, if a claim in respect thereof is to be made
against CDRD hereunder, notify CDRD in writing thereof but the omission so to
notify CDRD shall not relieve CDRD from any Liability that it may have to the
Holder Indemnified Party other than under this section and shall only relieve
it from any Liability that it may have to the Holder Indemnified Party under
this section if and to the extent CDRD is actually prejudiced by such omission.
In case any such action shall be brought against any Holder Indemnified Party
and such Holder Indemnified Party shall notify CDRD of the commencement
thereof, CDRD shall be entitled to participate in and, to the extent it shall
wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such Holder Indemnified Party, and, after notice from CDRD to
the Holder Indemnified Party of its election so to assume and undertake the
defense thereof CDRD shall not be liable to the Holder Indemnified Party under
this section for any legal expenses subsequently incurred by the Holder
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that if the defendants in any such action include both CDRD and such
Holder Indemnified Party and the Holder Indemnified Party shall have reasonably
concluded that there may be reasonable defenses available to it that are
different from or additional to those available to CDRD or if the interests of
the Holder Indemnified Party reasonably may be deemed to conflict with the
interests of CDRD, the Holder Indemnified Party shall have the right to select
a separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and
fees of such separate counsel and other reasonable expenses related to
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such participation to be reimbursed by CDRD as incurred. In clarification of
the foregoing, CDRD shall pay the reasonable expenses and fees of one separate
counsel whose selection is approved by the largest group of similarly situated
Holder Indemnified Parties as measured by the aggregate par value or principal
amount of such Registrable Securities owned by such group. Any Holder
Indemnified Party who chooses not to be represented by the foregoing separate
counsel shall be entitled, at its own expense, to be represented by counsel of
its own selection.
(B) Promptly after receipt by any CDRD
Indemnified Party of notice of the commencement of any action, such CDRD
Indemnified Party shall, if a claim in respect thereof is to be made against
any holder of Registrable Securities hereunder, notify such holder of
Registrable Securities in writing thereof but the omission so to notify such
holder of Registrable Securities shall not relieve such holder of Registrable
Securities from any Liability that it may have to the CDRD Indemnified Party
other than under this section and shall only relieve it from any Liability that
it may have to the CDRD Indemnified Party under this section if and to the
extent such holder of Registrable Securities is actually prejudiced by such
omission. In case any such action shall be brought against any CDRD
Indemnified Party and such CDRD Indemnified Party shall notify such holder of
Registrable Securities of the commencement thereof, such holder of Registrable
Securities shall be entitled to participate in and, to the extent it shall
wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such CDRD Indemnified Party, and, after notice from such holder
of Registrable Securities to the CDRD Indemnified Party of its election so to
assume and undertake the defense such holder of Registrable Securities shall
not be liable to the CDRD Indemnified Party under this section for any legal
expenses subsequently incurred by the CDRD Indemnified Party in connection with
the defense thereof other than reasonable costs of investigation and of liaison
with counsel so selected; provided, however, that if the defendants in any such
action include both the holders of Registrable Securities and such CDRD
Indemnified Party and the CDRD Indemnified Party shall have reasonably
concluded that there may be reasonable defenses available to it that are
different from or additional to those available to the holders of Registrable
Securities or if the interests of the CDRD Indemnified Party reasonably may be
deemed to conflict with the interests of the holders of Registrable Securities,
the CDRD Indemnified Party together with all other defendant CDRD Indemnified
Parties shall have the right to select one separate counsel and to assume such
legal defenses and otherwise to participate in the defense of such action, with
the reasonable expenses and fees of such separate counsel and other reasonable
expenses related to such participation to be reimbursed by such holders of
Registrable Securities as incurred.
(f) (i) With respect to the inclusion of
Registrable Securities in a registration statement pursuant to Subsection (b),
all fees, costs and expenses of and incidental to such registration, inclusion
and public offering shall be borne by CDRD; provided, however, that any
securityholders participating in such registration shall bear their pro-rata
share of the underwriting discounts and commissions, if any, incurred by them
in connection with such registration.
(ii) The fees, costs and expenses of
registration to be borne by CDRD as provided in this Subsection (f) shall
include, without limitation, all registration, filing and NASD fees, listing
fees, printing expenses, fees and disbursements of counsel and accountants for
CDRD, and all legal fees and disbursements and other expenses of complying with
state securities or Blue Sky laws of any jurisdiction or jurisdictions in which
securities to be offered
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are to be registered and qualified. Subject to appropriate agreements as to
confidentiality, CDRD shall make available to counsel for the holders of
Registrable Securities its documents and personnel for due diligence purposes.
Except as otherwise provided herein, fees and disbursements of counsel and
accountants for the selling securityholders shall be borne by the respective
selling securityholders.
(g) From and after the date of this Agreement,
CDRD shall not, nor shall it agree to allow the holders of any securities of
CDRD to, include any of their respective securities in any registration
statement filed by CDRD pursuant to Subsection (b) unless such inclusion will
not reduce the amount of the Registrable Securities included therein or in any
underwriting thereunder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of CDRD. CDRD
hereby makes the following representations and warranties to each of the
Investors:
(a) Organization and Qualification. CDRD and
each of its subsidiaries is a corporation duly incorporated and existing in
good standing under the laws of the state of its jurisdiction of incorporation
and has the requisite corporate power to own its properties and to carry on its
business as now being and contemplated to be conducted. CDRD does not have any
subsidiaries other than Satellite CD Radio, Inc., which is wholly-owned by
CDRD. CDRD and each of its subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary other than those in which the failure so to qualify
would not have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any
adverse effect on (i) the business, operations, properties, prospects or
financial condition of the entity with respect to which such term is used and
which is material to such entity and other entities controlling or controlled
by such entity taken as a whole, or (ii) the ability of CDRD to perform its
obligations hereunder or under any of the Certificate of Designations, the
Escrow Agreement and the Warrants, if any (collectively, the "OPERATIVE
AGREEMENTS).
(b) Authorization; Enforcement. (i) CDRD has
the requisite corporate power and authority to enter into and perform this
Agreement and the other Operative Agreements, to issue the Preferred Shares in
accordance with the terms of this Agreement, and to file the Certificate of
Designations, (ii) the execution and delivery of this Agreement and the other
Operative Agreements by CDRD and the consummation by it of the transactions
contemplated hereby and thereby , including the issuance of the Preferred
Shares and the filing of the Certificate of Designations, have been duly
authorized by all necessary corporate action, and no further consent or
authorization of CDRD or its Board of Directors or stockholders is required,
(iii) this Agreement has been, and, to the extent required to be executed and
delivered pursuant to the terms of this Agreement, the other
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Operating Agreements have been or will be, duly executed and delivered by CDRD,
and (iv) this Agreement constitutes and, to the extent required to be executed
and delivered pursuant to the terms of this Agreement, the other Operating
Agreements constitute or will constitute, a valid and binding obligation of
CDRD enforceable against CDRD in accordance with their respective terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized capital stock
of CDRD consists of no less than 50,000,000 Common Shares and no less than
10,000,000 shares of preferred stock; as of October 11, 1996, there are
10,184,748 Common Shares issued and outstanding (CDRD has also given an
instruction to the transfer agent for the Common Shares for the issuance of an
additional 50,643 Common Shares), all of which are listed on the NASDAQ Small
Capitalization Market, and no shares of preferred stock issued and outstanding.
All of the outstanding Common Shares have been validly issued and are fully
paid and non-assessable. No Common Shares are entitled to preemptive rights.
As of October 11, 1996, except as set forth on Schedule 2.1(c) attached to this
Agreement, no Common Shares are entitled to registration rights and there are
no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of CDRD, or contracts,
commitments, understandings or arrangements by which CDRD is or may become
bound to issue additional shares of capital stock of CDRD or options, warrants,
scrip, rights to subscribe to, or commitments to purchase or acquire, any
shares, or securities or rights convertible into shares, of capital stock of
CDRD. CDRD has furnished or made available to the Investors true and correct
copies of CDRD's by-laws as in effect on the date of this Agreement (the
"BY-LAWS") and certificate of incorporation as in effect on the date of this
Agreement (the "CERTIFICATE OF INCORPORATION").
(d) Issuance of Preferred Shares. The issuance
of the Preferred Shares has been duly authorized and, when paid for and issued
in accordance with the terms hereof, the Preferred Shares shall be validly
issued, fully paid and non-assessable, free and clear of any liens, claims or
encumbrances, and entitled to the rights and preferences set forth in the
Certificate of Designations. The Common Shares issuable upon conversion of the
Preferred Shares or exercise of the Warrants, if any, are duly authorized and
reserved for issuance and, upon issuance in accordance with the Certificate of
Designations or Warrants, as applicable, will be listed on the NASDAQ Small
Capitalization Market, the NASDAQ National Market, the New York Stock Exchange
or the American Stock Exchange, and will be validly issued, fully paid and
non-assessable, free and clear of all liens, claims, encumbrances and
preemptive rights, and the holders shall be entitled to all rights and
preferences accorded to a holder of Common Shares.
(e) No Conflicts. The execution, delivery and
performance of this Agreement by CDRD and the consummation by CDRD of the
transactions contemplated hereby do not and will not (i) result in a violation
of the Certificate of Designations, the Certificate of Incorporation or the
By-Laws or the charter or bylaws of any subsidiary of CDRD, or (ii) conflict
with, or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in or create
a lien under, any agreement, indenture or instrument to which CDRD or any of
its subsidiaries is a party, or result in a violation of any Federal, state,
local or foreign law, rule, regulation, order, judgment or decree (including
Federal and state securities laws and regulations) applicable to CDRD or any of
its subsidiaries or by which any
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property or asset of CDRD or any of its subsidiaries is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect); provided that, for purposes of such
representation as to Federal, state, local or foreign law, rule or regulation,
no representation is made herein with respect to any of the same applicable
solely to the Investors and not to CDRD. CDRD is not required under any
Federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing (except for informational filings
necessary to maintain the continuing accuracy of CDRD's application before the
FCC), or registration (other than SEC registrations required pursuant to this
Agreement or any approvals that may be required by the FCC in connection with
the conversion of the Preferred Shares or the exercise of the Warrants) with,
any court or governmental agency in order for it to execute, deliver or perform
any of its obligations under this Agreement or issue and sell the Preferred
Shares, the Warrants, if any, and the Common Shares in accordance with the
terms of this Agreement, provided that, for purposes of the representation made
in this sentence, CDRD is assuming and relying upon the accuracy of the
relevant representations and agreements of the Investors herein.
(f) SEC Documents; Financial Statements. The
Common Shares of CDRD are registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and CDRD has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act, including material filed pursuant to Section 13(a) or 15(d), in
addition to one or more registration statements and amendments thereto
heretofore filed by CDRD with the SEC (all of the foregoing including filings
incorporated by reference therein being referred to herein as the "SEC
DOCUMENTS"). CDRD has delivered or made available to the Investors true and
complete copies of all SEC Documents (including, without limitation, proxy
information and solicitation materials and registration statements) filed with
the SEC since December 31, 1995 and all annual SEC Documents filed with the SEC
since December 31, 1994. CDRD has not provided to the Investor any information
that, according to applicable law, rule or regulation, is required to have been
disclosed publicly by CDRD but that has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder and other Federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of CDRD included in the SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect to such requirements. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of CDRD and its subsidiaries as of the dates thereof and
their consolidated results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
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(g) No Material Adverse Change. Since June 30,
1996, the date through which the most recent quarterly report of CDRD on Form
10-Q has been prepared and filed with the SEC, a copy of which is included in
the SEC Documents, no Material Adverse Effect has occurred or exists with
respect to CDRD or its subsidiaries, except as otherwise disclosed or reflected
in other SEC Documents prepared through or as of a date subsequent to June 30,
1996. Notwithstanding the foregoing, no event described in Section 4.2(j)(i)
through (vii) has occurred and is continuing.
(h) Legal Proceedings. There are no actions,
suits, proceedings, arbitrations or investigations by any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or any state, county, city or other political subdivision
pending or, to the knowledge of CDRD, threatened against, relating to or
affecting CDRD or any of its subsidiaries which could reasonably be expected,
individually or in the aggregate with other such actions or proceedings, to
have a Material Adverse Effect; provided that except as otherwise provided in
this Agreement, it is expressly recognized that CDRD is involved in proceedings
with the FCC related to obtaining a Satellite DARS License, and the results of
such proceedings, whether favorable or not, shall be deemed to not have a
Material Adverse Effect for purposes of this Section 2.1(h).
(i) Compliance With Laws and Orders. The
business of CDRD and its subsidiaries is not being conducted in violation of
any law, ordinance or regulations of any governmental entity, or any order of
any governmental or regulatory authority except for violations which either
singly or in the aggregate do not and will not have a Material Adverse Effect.
(j) No Undisclosed Liabilities. CDRD and its
subsidiaries have no liabilities or obligations not disclosed in the SEC
Documents, other than those incurred in the ordinary course of CDRD's or its
subsidiaries' respective businesses since June 30, 1996, or which, individually
or in the aggregate, do not or would not have a Material Adverse Effect on CDRD
or its subsidiaries.
(k) No Undisclosed Events or Circumstances. No
event or circumstance has occurred or exists with respect to CDRD or its
subsidiaries or their respective businesses, properties, prospects, operations
or financial condition, that, under applicable law, rule or regulation,
requires public disclosure or announcement by CDRD but that has not been so
publicly announced or disclosed.
(l) No General Solicitation. Neither CDRD, nor
any of its affiliates, or, to its knowledge, any person acting on its or their
behalf (including Libra Investments, Inc. (the "PLACEMENT AGENT")), has engaged
in any form of general solicitation or general advertising (within the meaning
of Regulation D under the Act) in connection with the offer or sale of the
Preferred Shares and Warrants, if any.
(m) No Integrated Offering. Neither CDRD, nor
any of its affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would require
registration of the Preferred Shares under the Act.
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(n) Brokers. CDRD has taken no action that would
give rise to any claim by any person for brokerage commissions, finder's fees
or similar payments by any or all of the Investors relating to this Agreement
or the transactions contemplated hereby, except for amounts owing to the
Placement Agent and Xxxxxxxxxx & Partners ("B&P"), which amounts shall be paid
by CDRD.
(o) Intellectual Property. CDRD does not know of
any patents, copyrights or trademarks ("INTELLECTUAL PROPERTY") that CDRD
(and/or its wholly-owned subsidiaries) does not own or have a license to use or
that it (and/or they) will be unable to acquire on reasonable terms, that are
necessary to conduct the business of CDRD and its subsidiaries as it is now
being conducted or as proposed to be conducted. To the best of CDRD's
knowledge, except as described in the SEC Documents, such Intellectual Property
is (or will be) valid and enforceable and the use of such Intellectual Property
by CDRD and/or its subsidiaries does not (or will not) infringe upon or
conflict with any rights of any third party and neither CDRD nor any of its
subsidiaries has received notice of any such infringement or conflict, and
neither CDRD nor any of its subsidiaries has any knowledge of any infringement
of its respective Intellectual Property by any third party.
(p) [Confidential Portion Omitted]
Section 2.2 Representations and Warranties of the
Investors. Each of the Investors, severally and not jointly, hereby makes the
following representations and warranties to CDRD:
(a) Authorization; Enforcement. (i) Such
Investor has the requisite power and authority to enter into and perform this
Agreement and to purchase the Preferred Shares and Warrants, if any, being sold
to it hereunder, (ii) the execution and delivery of this Agreement by such
Investor and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate, partnership or limited
liability company action, and (iii) this Agreement constitutes a valid and
binding obligation of such Investor enforceable against such Investor in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies or by other equitable principles of general application.
(b) No Conflicts. The execution, delivery and
performance of this Agreement and the consummation by such Investor of the
transactions contemplated hereby do not and will not (i) result in a violation
of such Investor's organizational documents, or (ii) conflict with any
agreement, indenture or instrument to which such Investor is a party, or (iii)
result in a violation of any law, rule or regulation, or any order, judgment or
decree of any court or governmental agency applicable to such Investor. Such
Investor is not required to obtain any consent or authorization of any
governmental agency in order for it to perform its obligations under this
Agreement.
(c) Investment Representation. Such Investor is
purchasing the Preferred Shares for its own account and not with a view to
distribution in violation of any securities laws. Such Investor has no present
intention to sell the Preferred Shares and such
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Investor has no present arrangement (whether or not legally binding) to sell
the Preferred Shares to or through any person or entity; provided, however,
that by making the representations herein, such Investor does not agree to hold
the Preferred Shares for any minimum or other specific term and reserves the
right to dispose of the Preferred Shares at any time in accordance with Federal
and state securities laws applicable to such disposition.
(d) Accredited Investor. Such Investor is an
"accredited investor" as defined in Rule 501 promulgated under the Act. Such
Investor has such knowledge and experience in financial and business matters in
general and investments in particular, so that such Investor is able to
evaluate the merits and risks of an investment in the Preferred Shares and to
protect its own interests in connection with such investment. In addition (but
without limiting the effect of CDRD's representations and warranties contained
herein), such Investor has received such information as it considers necessary
or appropriate for deciding whether to purchase the Preferred Shares pursuant
hereto. Such Investor acknowledges that no representation or warranty is made
by the Placement Agent or any persons representing the Placement Agent with
respect to CDRD or the sale of the Preferred Shares.
(e) Rule 144. Such Investor understands that
there is no public trading market for the Preferred Shares, that none is
expected to develop, and that the Preferred Shares must be held indefinitely
unless such Preferred Shares are converted into Common Shares or registered
under the Act or an exemption from registration is available. Such Investor
has been advised or is aware of the provisions of Rule 144 promulgated under
the Act.
(f) Brokers. Such Investor has taken no action
that would give rise to any claim by any person for brokerage commissions,
finder's fees or similar payments by CDRD relating to this Agreement or the
transactions contemplated hereby, except for amounts owing to the Placement
Agent and B&P, which amounts shall be paid by CDRD.
(g) Reliance by CDRD. Such Investor understands
that the Preferred Shares are being offered and sold in reliance on a
transactional exemption from the registration requirements of Federal and state
securities laws and that CDRD is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
such Investor set forth herein in order to determine the applicability of such
exemptions and the suitability of such Investor to acquire the Preferred
Shares.
ARTICLE III
COVENANTS
Section 3.1 Registration and Listing. (a) Until the
later of (i) three (3) years after all Preferred Shares have been exchanged
into Common Shares and (ii) if any Warrants have been issued pursuant to
Section 3.2, four (4) years after all Warrants have been exercised, CDRD will
cause the Common Shares to continue to be registered under Sections 12(b) or
12(g) of the Exchange Act, to comply in all respects with its reporting and
filing obligations under the Exchange Act and to not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate
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or suspend CDRD's reporting and filing obligations under said act. Until the
later of (i) three (3) years after all Preferred Shares have been exchanged
into Common Shares and (ii) if any Warrants have been issued pursuant to
Section 3.2, four (4) years after all Warrants have been exercised, CDRD will
take all action within its power to continue the listing or trading of the
Common Shares on the NASDAQ Small Capitalization Market, the NASDAQ National
Market, the New York Stock Exchange or the American Stock Exchange, and comply
in all respects with CDRD's reporting, filing and other obligations under the
bylaws or rules of the NASD and NASDAQ and any exchange where the Common Shares
are traded. CDRD will not become a NASDAQ National Market or New York Stock
Exchange or American Stock Exchange listed company unless CDRD has first
obtained requisite shareholder approval concerning the issuance of Common
Shares upon conversion of the Preferred Shares in accordance with any
obligations of CDRD under any applicable agreements with the NASD or NASDAQ.
(b) CDRD shall notify the SEC and NASD,
in accordance with their requirements, of the transactions contemplated by this
Agreement, and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal
and valid issuance of the Preferred Shares and Common Shares issuable upon
conversion thereof to any Investor or subsequent holder.
Section 3.2 Warrants. In the event CDRD or its
subsidiary obtains the right to purchase a Satellite DARS License (by grant of
the Pioneer's Preference Order from the FCC or by submission of a Winning Bid)
and the purchase price payable by CDRD for such license exceeds [Confidential
Portion Omitted], CDRD promptly shall issue to the Investors warrants in the
form of Exhibit 3 (the "WARRANTS") to purchase a number of Common Shares, at an
exercise price of [Confidential Portion Omitted] per share, in an amount equal
to [Confidential Portion Omitted] multiplied by the quotient of (i) the number
of First Closing Shares divided by (ii) [Confidential Portion Omitted], for
each [Confidential Portion Omitted] increment (or portion thereof) by which
such purchase price exceeds [Confidential Portion Omitted]. The Warrants shall
be allocated among the Investors pro rata based on the number of Preferred
Shares specified on Schedule I for each Investor.
Section 3.3 Increase in Authorized Shares. CDRD shall
cause its number of authorized Common Shares to be increased to at least
100,000,000 on or before the later of (a) February 15, 1997 and (b) the
[Confidential Portion Omitted] calendar day after the First Closing Date. CDRD
shall at all times reserve and keep out of its authorized but unissued Common
Shares, solely for the purpose of effecting the conversion of the Preferred
Shares and exercise of the Warrants, if any, at least such number ("MINIMUM
RESERVE NUMBER") that is the greater of (x) 10,000,000 Common Shares (subject
to appropriate adjustment for stock splits, stock dividends and similar events)
and (y) 1.5 times the number of its Common Shares as shall from time to time be
sufficient to effect the conversion of all outstanding Preferred Shares and
exercise of all outstanding Warrants, if any. If (i) the number of authorized
Common Shares is not so increased by such date, or (ii) the number of Common
Shares is not so reserved at any time, then CDRD shall, in addition to any
other remedies available to such holders at law or equity, pay each holder of
Preferred Shares a cash payment in an amount per share equal to (1) the
Securities Deficiency Percentage (as defined herein) multiplied by (2) 3% of
the Liquidation Preference for all Preferred Shares (or the equivalent in
Underlying Shares) then held by such holder for each 30-day period thereafter
until such number of Common Shares authorized is so increased or so
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reserved; provided that such cash payment shall not apply to the extent CDRD is
required to make cash payments pursuant to Section 1.5(b)(iii)(x). Such cash
payment shall be pro-rated as to a period of less than 30 days. Any cash
payment required to be made pursuant to this subsection 3.3 shall be due and
payable within 10 days of the end of any month in which such event occurs. In
the event there is a Deficiency (as defined in the Certificate of
Designations), CDRD shall comply with its obligations pursuant to Section 4(i)
of the Certificate of Designations to purchase Preferred Shares as and to the
extent required by the Certificate of Designations. For purposes of this
Section 3.3, the "SECURITIES DEFICIENCY PERCENTAGE" shall be equal to (1) the
Minimum Reserve Number minus the number of shares of Common Stock authorized
and reserved by CDRD at the time of determination divided by (2) the Minimum
Reserve Number.
Section 3.4 Replacement Certificates. The certificate(s)
representing the Preferred Shares held by any Investor (or then holder) may be
exchanged by such Investor (or such holder) at any time and from time to time
for certificates with different denominations representing an equal aggregate
number of Preferred Shares, as requested by such Investor (or such holder) upon
surrendering the same. No service charge will be made for such registration of
transfer or exchange.
Section 3.5 Receipt of FCC Order. If the First Closing
occurs, CDRD or its wholly-owned subsidiary shall immediately take such actions
as required and when required, and otherwise use its best efforts, to acquire
the Satellite DARS License on the terms and conditions set forth in the
Pioneer's Preference Order or the Winning Bid, as applicable.
Section 3.6 Limitation on Conversion Rights.
Notwithstanding anything to the contrary contained in this Agreement, at any
time prior to the giving of a Redemption Notice (as defined in the Certificate
of Designations), no Preferred Share may be converted by an Investor to the
extent that, following conversion of such Preferred Share such Investor and its
affiliates (within the meaning of the Exchange Act) shall be the beneficial
owners (as defined in Rule 13d-3 under the Exchange Act) of more than the
percentage of the Common Shares indicated by the Investor by marking the
applicable box below the name of such Investor on the signature pages of this
Agreement; provided that each Investor shall have the right to waive this
restriction upon 61 days prior notice to CDRD (or such lesser number of days
prior notice as shall be indicated by such Investor on its signature page
hereto). A transferee of Preferred Shares shall not be bound by this provision
unless it expressly agrees to be so bound.
Section 3.7 Transfer of License and Subsidiary. In the
event that CDRD or its subsidiary obtains a Satellite DARS License, neither
CDRD nor any of its subsidiaries shall, prior to a Qualifying Offering (as such
term is defined in the Certificate of Designations), transfer or assign such
Satellite DARS License or any interest therein or the subsidiary (or any
interest therein) of CDRD that holds such license, or any material assets used
in connection with the employment of such license, to any third party.
Section 3.8 Additional Financings. Prior to a Qualifying
Offering (as such term is defined in the Certificate of Designations), CDRD
shall not undertake to conduct any debt or equity financing that is not either
pari passu or junior, in seniority, structure and maturity, to the Preferred
Shares. Prior to a final determination of whether the Pioneer's Preference
Order will be granted to CDRD, in addition to the limitations imposed by the
prior sentence, CDRD shall
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not issue or commit to issue any securities or evidences of indebtedness, other
than any issuance of Common Shares or the sale of the Preferred Shares pursuant
to this Agreement.
Section 3.9 Wire Transfers. All payments required to be
made by CDRD under this Agreement or the Certificate of Designations, shall,
upon the written request of any such payee, be made by wire transfer to the
account designated by such payee.
Section 3.10 Like Treatment of Holders. Neither CDRD nor
any of its affiliates shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any holder
of Registrable Securities or holder of Preferred Shares for or as an inducement
to any consent, waiver or amendment of any terms or provisions of the
Registrable Securities or Preferred Shares, this Agreement or the Escrow
Agreement (if any), unless such consideration is offered to be paid or agreed
to be paid to all holders of Registrable Securities and holders of Preferred
Shares which so consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or agreement. Neither
CDRD nor any of its affiliates shall, directly or indirectly, redeem or
repurchase any Registrable Securities or Preferred Shares unless such offer of
redemption or repurchase is made pro rata to all holders of Registrable
Securities and holders of Preferred Shares on identical terms.
Section 3.11 [Confidential Portion Omitted]
Section 3.12 Release of Escrowed Property to Investors. If
any of the events itemized in Section 3(b)(i) or (ii) of the Escrow Agreement
occur, then CDRD shall execute and deliver the certificate required by Section
4(b)(ii) of the Escrow Agreement.
Section 3.13 [Confidential Portion Omitted]
ARTICLE IV
CONDITIONS
Section 4.1 Conditions Precedent to the Obligation of
CDRD to Sell the Preferred Shares. The obligation under this Agreement of CDRD
to issue and/or sell the First Closing Shares or the Second Closing Shares to
the Investors is subject to the satisfaction, at or before the First Closing
Date or the Second Closing Date, as applicable, of each of the conditions set
forth below; provided that CDRD shall be under no obligation to issue and/or
sell the Second Closing Shares unless and until it shall have given the Second
Closing Notice. These conditions are for CDRD's sole benefit and may be waived
by CDRD in whole or in part at any time in its sole discretion.
(a) Accuracy of the Investors' Representations
and Warranties. The representations and warranties of each Investor shall be
true and correct in all material respects as of the date when made and as of
the First Closing Date or the Second Closing Date, as applicable, as though
made at that time (except for representations and warranties that speak as of a
particular date).
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(b) Performance by the Investors. Each Investor
shall have performed all agreements and satisfied all conditions required to be
performed or satisfied by such Investor at or prior to the First Closing.
(c) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
Section 4.2 Conditions Precedent to the Obligation of the
Investors to Purchase the Preferred Shares. The obligation under this
Agreement of each Investor to acquire and pay for the First Closing Shares or
the Second Closing Shares is subject to the satisfaction, at or before the
First Closing Date or the Second Closing Date, as applicable, of each of the
conditions set forth below. These conditions are for the Investors' sole
benefit and may be waived by any Investor in whole or in part at any time in
its sole discretion with respect to such Investor's obligation to acquire and
pay for the First Closing Shares or the Second Closing Shares, as applicable.
(a) Accuracy of CDRD's Representations and
Warranties. The representations and warranties of CDRD shall be true and
correct in all material respects as of the date when made and (except with
respect to the representations and warranties made in the first sentence of
Section 2.1(g) and in Section 2.1(j)) as of the Escrow Date, First Closing Date
or Second Closing Date, as applicable, as though made at that time (except for
representations and warranties that speak as of a particular date).
(b) Performance by CDRD. CDRD shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by CDRD at or prior to such date including, without limitation,
delivering all certificates required by Section 1.3(b) or Section 1.4(b), as
applicable.
(c) NASDAQ. From the date of this Agreement to
the Escrow Date, the First Closing Date or Second Closing Date, as applicable,
trading in CDRD's Common Shares shall not have been suspended by the SEC or the
NASDAQ Small Capitalization Market, and trading in securities generally as
reported by NASDAQ shall not have been suspended or limited, and the Common
Shares shall not have been delisted from any exchange or market on which they
are listed on the date of this Agreement.
(d) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(e) Opinion of Counsel. At the First Closing
Date or the Second Closing Date, as applicable, the Investors shall have
received an opinion of counsel to CDRD substantially to the effect of Section
2.1(a) through (e) (subject to reasonable qualifications, including reasonable
knowledge qualifications), and such other opinions, certificates and
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documents as the Investors or their counsel shall reasonably require incident
to the First Closing or the Second Closing, as applicable.
(f) Escrow Agreement. If the FCC does not adopt
the Pioneer's Preference Order, (i) CDRD and the Escrow Agent shall have
executed and delivered the Escrow Agreement in the form and substance of
Exhibit 2, and (ii) the conditions contained in such agreement for the release
of funds to CDRD shall have been satisfied or waived in accordance with such
agreement.
(g) Officer's Certificate. At the Escrow Date,
the First Closing Date or the Second Closing, as applicable, CDRD shall have
delivered to the Investors a certificate in form and substance reasonably
satisfactory to the Investors, executed by an executive officer of CDRD,
certifying as to satisfaction of conditions of the Escrow Date, the First
Closing or the Second Closing, as applicable, incumbency of signing officers,
the charter, by-laws and the authorizing resolutions of CDRD.
(h) Certificate of Designations. The Certificate
of Designations shall have been filed and become effective with the Secretary
of State of the State of Delaware and the Investors shall have received copies
of the filed Certificate of Designations.
(i) Warrants. If the purchase price for the
Satellite DARS License to be purchased by CDRD has been finally established and
such price exceeds [Confidential portion omitted], the Warrants shall have
been delivered by CDRD to the Investors.
(j) Lack of Adverse Changes. None of the
following events shall have occurred: (i) the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of CDRD or any of
its subsidiaries or of all or any substantial part of any of their respective
property and assets, (ii) CDRD or any of its subsidiaries shall have become
generally unable to pay its debts as they become due, (iii) CDRD or any of its
subsidiaries shall have made a general assignment for the benefit of its
creditors, (iv) CDRD or any of its subsidiaries shall have commenced a
voluntary case or had an involuntary case commenced against CDRD or any of its
subsidiaries under the Federal Bankruptcy Code or similar law or regulation,
(v) CDRD or any of its subsidiaries shall have filed a petition seeking to take
advantage of any law providing for the relief or debtors, (vi) CDRD or any of
its subsidiaries or any of their respective management shall have become
subject to any criminal proceedings or investigations or any enforcement or
disciplinary proceedings or investigations initiated by any governmental
authority having jurisdiction over CDRD or any of its subsidiaries or such
person, respectively, (vii) any announcement shall have been made by the FCC
that, or to the effect that, CDRD will not receive a Satellite DARS License, or
(viii) taking into account any cash or binding commitments for financing
(either of which may only be raised through financings that are either junior
to or pari passu with the Preferred Shares in seniority, structure and maturity
("PERMITTED FINANCINGS")) and any deferred payment terms available to CDRD in
connection with its acquisition of a Satellite DARS License ("DEFERRED PAYMENT
TERMS"), CDRD shall have insufficient liquidity to satisfy all of its scheduled
principal and interest obligations, including, without limitation, obligations
under any Permitted Financings or Deferred Payment Terms, as such obligations
become due during the 13 full months immediately following what would otherwise
be the First Closing Date.
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(k) Second Closing Notice. With respect to the
Second Closing, Investors shall have received the Second Closing Notice not
more than fifteen days after the First Closing Date.
(l) [Confidential portion omitted]
ARTICLE V
LEGEND AND SHARES
Each certificate representing the Preferred Shares shall be
stamped or otherwise imprinted with a legend substantially in the following
form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
CDRD agrees to reissue certificates representing the Preferred
Shares without the legend set forth above at such time as (i) the holder
thereof is permitted to dispose of such Preferred Shares pursuant to Rule
144(k) under the Act, (ii) such Preferred Shares are sold to a purchaser or
purchasers who (in the opinion of counsel to the seller or such purchaser, in
form and substance reasonably satisfactory to CDRD and its counsel) are able to
dispose of such shares publicly without registration under the Act, or (iii)
such Preferred Shares are registered under the Act. CDRD agrees to issue any
Common Shares issuable upon conversion of Preferred Shares if any, without any
legend that indicates a restriction on transferability at such times as (i) the
holder thereof is permitted to dispose of such Common Shares pursuant to Rule
144(k) under the Act, (ii) such Common Shares are sold to a purchaser or
purchasers who (in the opinion of counsel to the seller or such purchaser, in
form and substance reasonably satisfactory to CDRD and its counsel) are able to
dispose of such shares publicly without registration under the Act, or (iii)
such Common Shares are registered under the Act; provided in the case of clause
(iii), that
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the holder of such Common Shares or the recipient upon such conversion
represents to CDRD that such holder will only sell such shares, if at all,
pursuant to the plan of distribution described in an effective registration
statement.
ARTICLE VI
TERMINATION
Section 6.1 Termination by Mutual Consent. This
Agreement may be terminated at any time prior to the First Closing by the
mutual written consent of CDRD and all of the Investors.
Section 6.2 Automatic Termination. This Agreement
shall terminate without further action of the parties if the First Closing
[Confidential portion omitted] or the Pioneer's Preference Order has been
adopted, in each case, prior to [Confidential portion omitted].
Section 6.3 Termination on Failure of Conditions. This
Agreement shall terminate upon notice given to CDRD from a majority in interest
of the Investors (i) not earlier than 5 business days after the conclusion of
an auction for Satellite DARs Licenses if CDRD has failed to meet the
conditions enumerated in Section 1.3(b)(y), (ii) not earlier than 30 calendar
days after a Pioneer's Preference Order has been adopted if CDRD has failed to
meet the conditions enumerated in Section 1.3(a)(i), or (iii) at any time upon
the occurrence and during the continuance for a period of 30 calendar days of
any of the events set forth in Section 4.2(j)(i) through (vii).
ARTICLE VII
MISCELLANEOUS
Section 7.1 Stamp Taxes; Placement Agent Fee. CDRD shall
pay all stamp and other taxes and duties levied in connection with the issuance
of the Preferred Shares and Warrants, if any, pursuant to this Agreement and
the Common Shares issued upon conversion of such Preferred Shares or exercise
of such Warrants. On the First Closing Date and the Second Closing Date, if
any, CDRD shall pay the fee of the Placement Agent in connection with the
transactions contemplated by this Agreement, consisting of (A) a cash payment
of 7.5% of the aggregate gross proceeds received by CDRD from the sale of (1)
the First Closing Shares on the First Closing Date, and (2) the Second Closing
Shares on the Second Closing Date, if any, and (B) a warrant (the [Confidential
portion omitted]) to purchase, at the same purchase price as the purchase
price to the Investors, Preferred Shares in an amount equal to 9% of the
cumulative amount of Preferred Shares issued and sold at (1) the First Closing
on the First Closing Date, and (2) the Second Closing on the Second Closing
Date, if any.
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Section 7.2 Specific Enforcement, Consent to
Jurisdiction.
(a) CDRD and the Investors acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions of this Agreement, this remedy being in addition to any other remedy
to which any of them may be entitled by law or equity.
(b) CDRD (i) hereby irrevocably submits to the
jurisdiction of the United States District Court, the New York State courts and
other courts of the United States sitting in New York County, New York for the
purposes of any suit, action or proceeding arising out of or relating to this
Agreement and (ii) hereby waives, and agrees not to assert in any such suit
action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in
an inconvenient forum or that the venue of the suit, action or proceeding is
improper. CDRD consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
in this paragraph shall affect or limit any right to serve process in any other
manner permitted by law.
Section 7.3 Entire Agreement; Amendment; Additional
Investors. This Agreement, together with the agreements and documents executed
in connection with this Agreement and with such agreements and documents,
contains the entire understanding of the parties with respect to the matters
covered by this Agreement and by such agreements and documents and, except as
specifically set forth in this Agreement or in such agreements and documents,
neither CDRD nor any Investor makes any representation, warranty, covenant or
undertaking with respect to such matters. Except as otherwise provided herein,
no provision of this Agreement may be waived or amended other than by a written
instrument signed by the party against whom enforcement of any such amendment
or waiver is sought. Upon delivery of any such counterpart and acceptance
thereof by CDRD, such additional investor shall be an Investor (such term as
used in this Agreement to include such additional investor) and shall be as
fully a party to this Agreement as if such additional investor were an original
signatory of this Agreement, and no consent of any other Investor shall be
required for such addition.
Section 7.4 Notices. Any notice or other communication
required or permitted to be given under this Agreement shall be in writing and
shall be effective (a) upon hand delivery or delivery by telex (with correct
answer back received), telecopy or facsimile at the address or number
designated below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
to CDRD: CD Radio Inc.
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Sixth Floor
0000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Fax: (000) 000-0000
Attn: Xxxxx Xxxxxxxxx
with copies to: Xxxxx & Gates
0 Xxxxx Xxxxxx
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxxxxxxx X. Xxxxx
to the Investors: To each Investor at the address and/or
fax number set forth on Schedule I
of this Agreement.
with copies to: [Confidential portion omitted]
and: Milbank, Tweed, Xxxxxx & XxXxxx
000 X. Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attn: Xxxx X. Xxxxxx
Any party to this Agreement may from time to time change its address for
notices by giving at least 10 days' written notice of such changed address to
the other parties to this Agreement.
Section 7.5 Indemnity. In addition to the indemnities
provided in Section 1.5, each party shall indemnify each other party against
any loss, cost or damages (including reasonable attorney's fees) incurred as a
result of such parties' breach of any representation, warranty, covenant or
agreement in this Agreement; provided that in no case shall any Investor be
liable in an amount in excess of the Purchase Price paid by such Investor.
Section 7.6 Waivers. No waiver by any party of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver
of any other provision, condition or requirement of this Agreement, nor shall
any delay or omission of any party to exercise any right under this Agreement
in any manner impair the exercise of any such right accruing to it after such
waiver.
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Section 7.7 Headings. The headings in this Agreement are
for convenience only, do not constitute a part of this Agreement and shall not
be deemed to limit or affect any of the provisions of this Agreement.
Section 7.8 Successors and Assigns. Except as otherwise
provided in this Agreement, this Agreement shall be binding upon and inure to
the benefit of the parties to this Agreement and their successors and assigns.
The parties to this Agreement may amend this Agreement without notice to or the
consent of any third party. CDRD may not assign this Agreement or any rights
or obligations under this Agreement without the prior written consent of all
Investors (which consent may be withheld for any reason in such Investor's sole
discretion). Any Investor may assign this Agreement or any rights or
obligations under this Agreement in whole or in part without the consent of
CDRD or any other Investor in connection with any sale or transfer of all or
any part of the Preferred Shares or Warrants, if any, or Underlying Shares held
by such Investor; provided that an assignee that is not a holder of Registrable
Securities (as defined in Section 1.5(a)(iii)) will not receive the rights of a
holder of Registrable Securities set forth in Section 1.5.
Section 7.9 No Third Party Beneficiaries. This Agreement
is intended for the benefit of the parties to this Agreement and their
respective permitted successors and assigns and is not for the benefit of, nor
may any provision of this Agreement be enforced by, any other person.
Section 7.10 Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York without regard to such state's principles of conflict of
laws.
Section 7.11 Survival. The representations and warranties
and the agreements and covenants of CDRD and each Investor contained in this
Agreement shall survive the First Closing and the Second Closing.
Section 7.12 Execution. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement, it being understood that all parties need not sign the same
counterpart.
Section 7.13 Publicity. CDRD agrees that it will not
disclose, and will not include in any public or other announcement, the name of
any Investor without its consent, unless and until such disclosure is required
by law or applicable regulation, and then only to the extent of such
requirement.
Section 7.14 Agents. The parties acknowledge and agree
that the Investors are not agents, affiliates or partners of each other, that
all representations, warranties, covenants and agreements of the Investors
under this Agreement are several and not joint, that no Investor shall have any
responsibility or liability for the representations, warrants, agreements, acts
or omissions of any other Investor, and that any rights granted to "Investors"
under this Agreement shall be enforceable by each Investor under this
Agreement.
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Section 7.15 Severability; Interpretation. If any provision
of this Agreement is held to be illegal, invalid or unenforceable under any
present or future law, and if the rights or obligations of any party under this
Agreement will not be materially and adversely affected thereby, (a) such
provision will be fully severable, (b) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, and (c) the remaining provisions of this Agreement
will remain in full force and effect and will not be affected by the illegal,
invalid or unenforceable provision or by its severance from this Agreement.
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IN WITNESS WHEREOF, the parties to this Agreement have caused
this Agreement to be duly executed by their respective authorized officers as
of the date of this Agreement.
CDRD:
CD RADIO INC.
By:
-------------------------------
Name:
Its:
[Investors' signature pages have been omitted pursuant to a request for
confidentiality.]
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Schedule I
Investor* First Closing Shares Second Closing
-------- -------------------- --------------
Shares
------
[Confidential Portion Omitted]
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CERTIFICATE OF DESIGNATIONS
OF
5% DELAYED CONVERTIBLE PREFERRED STOCK
RESOLVED that there shall be a series of shares of the
Preferred Stock of CD Radio Inc. (the "CORPORATION"), designated "5% Delayed
Convertible Preferred Stock"; that the number of shares of such series shall be
[confidential portion omitted] and that the rights and preferences of such
series (the "5% PREFERRED") and the limitations or restrictions thereon, shall
be as follows:
1. Dividends.
(a) The holders of the 5% Preferred shall be entitled to
receive out of any assets legally available therefor cumulative dividends at
the rate of [confidential portion omitted] per share per annum, payable
semi-annually on April 15 and October 15 of each year, when and as declared by
the Board of Directors, in preference and priority to any payment of any
dividend on the Common Stock or any other class or series of stock of the
Corporation. Such dividends shall accrue on any given share from the date of
original issuance of the 5% Preferred and shall accrue from day to day whether
or not earned or declared, based on the actual days elapsed and a 360-day year
of 12 30-day months. If at any time dividends on the outstanding 5% Preferred
at the rate set forth above shall not have been paid or declared and set apart
for payment with respect to all preceding periods, the amount of the deficiency
shall be fully paid or declared and set apart for payment, but without
interest, before any distribution, whether by way of dividend or otherwise,
shall be declared or paid upon or set apart for the shares of any other class
or series of stock of the Corporation.
(b) Any dividend payable on the outstanding 5% Preferred
may be paid, at the option of the Corporation, either (i) in cash or (ii) by
adding the amount of such dividend to the Liquidation Preference (as defined
below); provided, however, that if the Corporation shall fail to pay any
dividend when due, the amount of such dividend shall be added to the
Liquidation Preference for such shares of 5% Preferred.
2. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
the holders of the 5% Preferred shall be entitled to receive, prior and in
preference to any distribution of any assets of the Corporation to the holders
of any other class or series of shares, the amount of [confidential portion
omitted] per share plus any accrued but unpaid dividends (the "LIQUIDATION
PREFERENCE").
31
3. Redemption; Forced Conversion; Lock-up.
(a) The 5% Preferred may be redeemed in whole but not in
part by the Corporation at any time (such date being referred to herein as the
"REDEMPTION DATE"), beginning on the later to occur of (i) December 15, 1997
and (ii) the date that is 10 months after the date of original issuance of the
5% Preferred, plus, in each case, one day for each day during which (x) a
registration statement has not been declared effective with respect to the
Common Stock issuable upon conversion of the 5% Preferred by the later of (A)
the [confidential portion omitted] calendar day after the date of original
issuance of the 5% Preferred and (B) February 15, 1997 (the "INITIAL
REGISTRATION DEADLINE"), or (y) any such registration statement is suspended or
the related prospectus is not current, complete and otherwise usable, at a
redemption price (the "REDEMPTION PRICE") equal to (A) the Liquidation
Preference plus (B) any accrued but unpaid cash payments due with respect to
the 5% Preferred in accordance with Sections 1.5(b), 3.3 and 3.11 of the
Preferred Stock Investment Agreement dated as of October 23, 1996, among the
Corporation and the Investors named therein (the "INVESTMENT AGREEMENT")("CASH
PAYMENTS"); provided, that the Corporation may not exercise such right of
redemption unless (i) the average closing price of the Common Stock as reported
in the Wall Street Journal for the 20 consecutive trading days prior to the
Redemption Notice (as defined below) shall equal or exceed [confidential
portion omitted] per share (subject to adjustment for stock dividends, stock
splits and reverse stock splits), and (ii) the shares of Common Stock issuable
upon conversion of the 5% Preferred are registered for resale by an effective
registration statement under the Securities Act of 1933, as amended (the
"ACT"), in compliance with the Investment Agreement, and such registration
statement remains in effect continuously without suspension and the prospectus
remains current, complete and otherwise usable from the date of the Redemption
Notice (as defined below) to and including the Redemption Date.
(b) At least 30 days but not more than 60 days prior to
the Redemption Date, irrevocable written notice (the "REDEMPTION NOTICE") shall
be mailed, first class postage prepaid, by the Corporation to each holder of
record of the 5% Preferred, at the address last shown on the records of the
Corporation for such holder, notifying such holder of the redemption that is to
be effected, specifying the Redemption Date, the Redemption Price, and the
place at which payment may be obtained and calling upon each such holder to
surrender to the Corporation, in the manner and at the place designated, a
certificate or certificates representing all the shares of 5% Preferred held by
such holder. Subject to the provisions of the following subsection (c), on or
after the Redemption Date, each holder of 5% Preferred shall surrender to the
Corporation the certificate or certificates representing all the shares of 5%
Preferred owned by such holder as of the Redemption Date, in the manner and at
the place designated in the Redemption Notice, and thereupon the Redemption
Price of such shares shall be payable to the order of the person whose name
appears on such certificate or certificates as the owner thereof and each
surrendered certificate shall be cancelled.
(c) If at the Redemption Date the registration condition
specified in clause (ii) of subsection (a) shall not be satisfied, then no
shares shall be redeemed and the Redemption Notice shall be deemed to be
withdrawn. In such event, any notice of conversion given by a holder of 5%
Preferred after the Redemption Notice was given shall be deemed to be
withdrawn, and any certificates for 5% Preferred which have been surrendered
for conversion or redemption shall be returned to the persons surrendering the
same; provided, however, that if a holder shall
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have received shares of Common Stock upon conversion of 5% Preferred after the
Redemption Notice was given but before the Redemption Date, such holder may
elect either to retain such Common Stock or tender such shares of Common Stock
to the Corporation for the Redemption Price.
(d) From and after the Redemption Date, unless there
shall have been a default in payment of the Redemption Price, all rights of the
holders of shares that have been redeemed (except the right to receive the
Redemption Price without interest upon surrender of the certificate or
certificates representing such shares) shall cease with respect to such shares,
and such shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever.
(e) (i) If the Corporation sells Common Stock for net
cash proceeds to the Corporation in an amount not less than [confidential
portion omitted] (other than stock issuable pursuant to a registration
statement on Form S-8 or S-4) prior to October 15, 1997 (a "QUALIFYING
OFFERING"), the Corporation may, upon consummation of the Qualifying Offering,
redeem the 5% Preferred in whole (but not in part) for an amount per share in
cash equal to (A) the sum of the Liquidation Preference plus any Cash Payments
due (B) divided by 72.125%. The Corporation shall give notice of such
redemption pursuant to this subsection (e) in the same manner as set forth for
Redemption Notices generally except that such notice must be given at the time
of the earlier of the initial filing or the public announcement of a proposed
filing with the Securities and Exchange Commission of the registration
statement with respect to the Qualifying Offering.
(ii) If the Corporation does not give notice of
redemption of the 5% Preferred pursuant to clause (i) of this subsection (e),
the Corporation and its underwriters may, by written notice from the
Corporation and its lead underwriter to each holder of 5% Preferred (a "LOCK-UP
REQUEST"), mailed on or after the time of the earlier of the initial filing or
the public announcement of a proposed filing with the Securities and Exchange
Commission of the registration statement with respect to the Qualifying
Offering, first class postage prepaid, at the address last shown on the records
of the Corporation for such holder, request that such holder of 5% Preferred
agree, and cause any transferee of such 5% Preferred to agree, to not offer,
sell or transfer any shares of the Common Stock into which the same may be
converted during the 180-day 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 Qualifying Offering (the "LOCK-UP");
provided that the Corporation shall specify the expected effective date by
notice to the holders given not later than two (2) business days prior to the
beginning of the Lock-up period (the "EFFECTIVE DATE NOTICE"). If the
Corporation so requests a Lock-up, each holder of 5% Preferred shall have the
right, regardless of whether the Corporation revokes or attempts to revoke the
Lock-up Request, to require the Corporation, upon consummation of the
Qualifying Offering, to purchase its 5% Preferred for a cash amount equal to
(A) the sum of the Liquidation Preference plus any Cash Payments due (B)
divided by an amount equal to 1 minus the Applicable Percentage; provided, that
the Applicable Percentage for purposes of this subsection (ii) shall be the
Applicable Percentage in effect under Section 4(d)(ii) determined by reference
to the date of consummation of the Qualifying Offering or, if such consummation
occurs prior to February 15, 1997, 12.125%. In order for any holder of 5%
Preferred to exercise such right, such holder must give notice of
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such fact to the Corporation not later than 15 days after the Corporation has
given the Lock-up Request. If any holder of 5% Preferred shall fail for any
reason to timely exercise such right, such holder, by acceptance of shares of
the 5% Preferred, shall be deemed to have agreed to (1) be bound by the Lock-up
Request and shall comply with and be bound by the Lock-up and (2) sign a
lock-up agreement in customary form if requested to do so by the lead
underwriter of the Qualifying Offering. Notwithstanding the foregoing, if the
Corporation requests in the Lock-up Request that the Lock-up become effective
prior to the effective date of the registration statement with respect to the
Qualifying Offering then such Lock-up shall terminate if such registration
statement is not declared effective by the Securities and Exchange Commission
on or before the fifth business day following the expected effective date
specified in the Effective Date Notice and may be reinstated only by the giving
of a new Effective Date Notice within 30 calendar days of such termination.
After such 30-day period, a new Lock-up Request shall be required in order to
effect a new Lock-up.
(f) The Corporation may, upon at least 30 days but not
more than 60 days prior notice to the holders of 5% Preferred given in the same
manner specified for Redemption Notices generally, require the holders of all
and not less than all of outstanding shares of 5% Preferred to convert such
shares into (x) Common Stock at the then applicable Conversion Price (as
defined in Section 4(d)) and (y) all Cash Payments due on the Optional
Conversion Date (as defined below), effective on a date (the "OPTIONAL
CONVERSION DATE") specified in such notice that is three years or more after
the date of original issuance of the 5% Preferred; provided that that no such
conversion shall occur if the Corporation has commenced voluntary bankruptcy,
become subject to involuntary bankruptcy, had a receiver, liquidator, trustee
or other officer having similar power over the Corporation appointed over all
or a substantial part of its property, has ceased operations or shall be in
default for money borrowed (or the deferred purchase price of property and
assets) in excess of $50,000,000 and, in each case, such situation shall not
have been remedied. Within 3 business days after the Optional Conversion Date,
written notice shall be mailed, first class postage prepaid, by the Corporation
to each holder of record of the 5% Preferred, at the address last shown on the
records of the Corporation for such holder, notifying such holder of the
optional conversion that has been effected, specifying the then applicable
Liquidation Preference, Cash Payments and Conversion Price (and the method of
calculation thereof) and the place at which such holder shall surrender the
certificate or certificates representing the Preferred Shares so converted, and
calling upon each such holder to surrender to the Corporation, in the manner
and at the place designated, a certificate or certificates representing all the
shares of 5% Preferred held by such holder. Each holder of 5% Preferred shall
surrender to the Corporation the certificate or certificates representing all
the shares of 5% Preferred owned by such holder as of the Optional Conversion
Date, in the manner and at the place designated in such notice, and thereupon
the Corporation shall issue and deliver to or upon the order of such holder a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled and shall pay to each such holder, in immediately
available funds, an amount equal to all Cash Payments due on the Optional
Conversion Date with respect to such holder's shares of 5% Preferred.
(g) If at any time a Reorganization (as defined in
Section 4(k)) shall occur or be proposed, each holder of 5% Preferred shall
have the right to require the Corporation, effective upon consummation of such
Reorganization, to purchase its 5% Preferred for a cash amount equal to (A) the
sum of the Liquidation Preference plus any Cash Payments due (B) divided by
-4-
34
72.125%. In order for any holder of 5% Preferred to exercise such right, such
holder must give notice of such fact to the Corporation not later than the
later to occur of (i) 30 days after receipt of notice of the Reorganization and
(ii) the consummation of the Reorganization. The Corporation shall provide
notice to holders of 5% Preferred given in the same manner as specified for
Redemption Notices generally, at least 30 days prior to the anticipated date of
the consummation of a Reorganization, which notice shall reasonably set forth
the rights of holders of 5% Preferred under this Section 3(g) and Section 4(k).
4. Conversion. The holders of the 5% Preferred shall have
optional conversion rights as follows:
(a) Accrual of Conversion Rights. Commencing on the
earlier to occur of (i) [confidential portion omitted] and (ii) [confidential
portion omitted] the 5% Preferred shares shall become convertible; provided
that the Corporation shall not be obligated to honor any request for conversion
of shares of the 5% Preferred at any time [confidential portion omitted] of the
issuance of shares of Common Stock upon such conversion is or would be required
and has not been obtained; provided further that if [confidential portion
omitted] with a conversion of shares of the 5% Preferred resulting in a holder
of shares of the 5% Preferred, or a group of persons who have an agreement or
understanding to act in concert of which such holder is a member, holding
[confidential portion omitted] or more of the voting securities of the
Corporation) is not obtained by a date that is [confidential portion omitted]
after the Initial Registration Deadline, then, at any time thereafter at the
request of any holder of shares of the 5% Preferred, the Corporation shall
promptly purchase from such holder, at a purchase price per share equal to
[confidential portion omitted].
(b) Right to Convert. At and after the time it has
become convertible, each share of 5% Preferred shall be convertible, at the
option of the holder thereof, into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing (i) the Liquidation
Preference plus any Cash Payments due on the date the notice of conversion is
given, by (ii) the Conversion Price determined as hereinafter provided in
effect on said date.
(c) Mechanics of Conversion. To convert shares of 5%
Preferred into shares of Common Stock, the holder 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
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
representing the shares to be converted, duly endorsed, at the office of the
Corporation or of 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 New York City 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 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 5% Preferred that such holder has not elected to convert
(in the number(s) and denomination(s) designated by such holder). The
Corporation shall effect such issuance and shall transmit the certificates by
-5-
35
messenger or overnight delivery service to reach the address designated by such
holder within two business days after the receipt of such notice. For all
purposes of this Certificate of Designations, such conversion shall be deemed
to have been made immediately prior to the close of business on the date such
notice of conversion is given. The person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock at the
close of business on such date.
(d) Determination of Conversion Price.
(i) At any date up to and including November 15,
1997, the "CONVERSION PRICE" shall be, as applicable, either (x) the
weighted-average (based upon the number of shares sold) of the actual selling
price (but not less than the lower of (A) the price of shares sold in the
Qualifying Offering if shares are so sold on the date of such trade and (B) the
low trading price on the date of such trade as reported on the principal market
for the Common Stock), at which the holder shall have sold shares of Common
Stock received or receivable upon conversion of the 5% Preferred, reduced by
any trading commissions or underwriting spreads paid by such holder, as
certified to the Corporation by such holder, multiplied by an amount equal to 1
minus the Applicable Percentage set forth below, or (y) the average of the
daily means between the low trading price of the Common Stock and the closing
price of the Common Stock for the 3 consecutive trading days immediately
preceding the date of conversion, multiplied by an amount equal to 1 minus the
Applicable Percentage set forth below; provided, however, that clause (x) shall
only apply to the extent shares of Common Stock are actually so sold and the
holder converting 5% Preferred shall have given notice to the Corporation of
such sale not more than 24 hours after such sale; provided further that,
failure to give such notice within such time shall result in determination of
the Conversion Price in accordance with clause (y).
(ii) The "APPLICABLE PERCENTAGE" shall be as
follows:
Conversion after the
following date: Applicable Percentage:
--------------- ----------------------
2/15/97 12.125%
3/15/97 14.250%
4/15/97 14.375%
5/15/97 18.125%
6/15/97 19.875%
7/15/97 21.625%
8/15/97 23.250%
9/15/97 24.875%
10/15/97 25.000%
11/15/97 27.875%
(iii) At any date after November 15, 1997,
the Conversion Price shall be 72.125% of the least of (x) the average of the
daily means between the low trading price of the Common Stock and the closing
price of the Common Stock for all the trading days
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36
between October 15, 1997 and November 15, 1997 (inclusive) for such trading
days, (y) the average of the daily means between the low trading price of the
Common Stock and the closing price of the Common Stock during the 3 consecutive
trading days immediately preceding the date of conversion and (z) the
weighted-average (based upon the number of shares sold) of the actual selling
price (but not less than the low trading price on the date of such trade as
reported on the principal market for the Common Stock), at which the holder
shall have sold shares of Common Stock received or receivable upon conversion
of the 5% Preferred, reduced by any trading commissions or underwriting spreads
paid by such holder, as certified to the Corporation by such holder; provided,
however, that clause (z) shall only apply to the extent shares of Common Stock
are actually sold and the holder converting 5% Preferred shall have given
notice to the Corporation of such sale not more than 24 hours after such sale;
provided, further that, clause (z) shall be unavailable if such holder shall
fail to give such notice within such time.
(iv) The "LOW TRADING PRICE" and the "CLOSING
PRICE", respectively, of the Common Stock on any day shall be (A) the lowest
reported sale price and the reported closing price (last sale price), regular
way, of the Common Stock on the principal stock exchange on which the Common
Stock is listed, or (B) if the Common Stock is not listed on a stock exchange,
the lowest reported sale price and the reported closing price of the Common
Stock on the principal automated securities price quotation system on which
sale prices of the Common Stock are reported, or (C) if the Common Stock is not
listed on a stock exchange and sale prices of the Common Stock are not reported
on an automated quotation system, the final bid price and the mean of the final
bid and asked prices for the Common Stock as reported by National Quotation
Bureau Incorporated if at least two securities dealers have inserted both bid
and asked quotations for the Common Stock on at least five of the ten preceding
trading days. If none of the foregoing provisions are applicable, the phrase
"MEANS BETWEEN THE LOW TRADING PRICE OF THE COMMON STOCK AND THE CLOSING PRICE
OF THE COMMON STOCK" on a day will be the fair market value of the Common Stock
on that day as determined by a member firm of the New York Stock Exchange,
Inc., selected in good faith by the Board of Directors of the Corporation. The
term "TRADING DAY" means (x) if the Common Stock is listed on at least one
stock exchange, a day on which there is trading on the principal stock exchange
on which the Common Stock is listed, (y) if the Common Stock is not listed on a
stock exchange but sale prices of the Common Stock are reported on an automated
quotation system, a day on which trading is reported on the principal automated
quotation system on which sales of the Common Stock are reported, or (z) if the
foregoing provisions are inapplicable, a day on which quotations are reported
by National Quotation Bureau Incorporated.
(v) In the event that during any period of
consecutive trading days provided for above, the Corporation shall declare or
pay any dividend on the Common Stock payable in Common Stock or in rights to
acquire Common Stock, or shall effect a stock split or reverse stock split, or
a combination, consolidation or reclassification of the Common Stock, then the
Conversion Price shall be proportionately decreased or increased, as
appropriate, to give effect to such event.
(e) Distributions. In the event the Corporation shall at
any time or from time to time make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation or other property
(other than cash paid out of current earnings) or any of its subsidiaries other
than
-7-
37
additional shares of Common Stock, then in each such event, in addition to the
number of shares of Common Stock receivable upon conversion, provision shall be
made so that the holders of 5% Preferred shall receive, upon the conversion
thereof, the securities of the Corporation that they would have received had
they been the owners on the date of such event of the number of shares of
Common Stock issuable to them upon conversion.
(f) Certificates as to Adjustments. Upon the occurrence
of any adjustment or readjustment of the Conversion Price pursuant to this
Section 4, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and cause
independent public accountants selected by the Corporation to verify such
computation and prepare and furnish to each holder of 5% Preferred a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of 5% Preferred,
furnish or cause to be furnished to such holder a like certificate prepared by
the Corporation setting forth (i) such adjustments and readjustments, and (ii)
the number of other securities and the amount, if any, of other property that
at the time would be received upon the conversion of 5% Preferred with respect
to each share of Common Stock received upon such conversion.
(g) Notice of Record Date. In the event of any taking by
the Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, any security or right convertible into or
entitling the holder thereof to receive additional shares of Common Stock, or
any right to subscribe for, purchase or otherwise acquire any shares of stock
of any class or any other securities or property, or to receive or exercise any
other right, the Corporation shall mail to each holder of 5% Preferred at least
10 days prior to the date specified therein, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend,
distribution, security or right and the amount and character of such dividend,
distribution, security or right.
(h) Issue Taxes. The Corporation shall pay any and all
issue and other taxes, excluding any income, franchise or similar taxes, that
may be payable in respect of any issue or delivery of shares of Common Stock on
conversion of shares of 5% Preferred pursuant hereto; provided, however, that
the Corporation shall not be obligated to pay any transfer taxes resulting from
any transfer requested by any holder in connection with any such conversion.
(i) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the 5% Preferred, at least such number of its
shares of Common Stock that is the greater of (a) 10,000,000 and (b) 1.5 times
the number as shall from time to time be sufficient to effect the conversion of
all outstanding shares of the 5% Preferred at the Conversion Price calculated
using the method set forth in Section 4(d)(i)(y) or Section 4(d)(iii)(x) or
(y), as applicable, and the Applicable Percentage, in each case as adjusted for
all subdivisions or combinations of the Common Stock or payments of dividends
on the Common Stock made in shares of Common Stock, and if at any time the
number of authorized but unissued and reserved shares of Common Stock shall not
be greater than or equal to such larger amount, the Corporation will take such
corporate action as may, in the opinion of
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38
its counsel, be necessary to increase its authorized but unissued and reserved
shares of Common Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in best efforts to obtain the
requisite stockholder approval. In the event that the Corporation shall at any
time fail to authorize or reserve the number of shares of Common Stock
sufficient to effect the conversion of all outstanding shares of the 5%
Preferred at the Conversion Price calculated using the method set forth in
Section 4(d)(i)(y) or Section 4(d)(iii)(x) or (y), as applicable, and the
Applicable Percentage, then at any time thereafter at the request of any holder
of shares of the 5% Preferred, the Corporation shall promptly purchase from
such holder, at a purchase price equal to (A) the sum of the Liquidation
Preference plus any Cash Payments due divided by (B) 72.125%, the number of
shares of the 5% Preferred equal to such holder's pro-rata share of the
"DEFICIENCY." The "DEFICIENCY" shall be equal to the number of shares of the
5% Preferred that would not be able to be converted for shares of Common Stock,
due to an insufficient amount of Common Stock available, if all the then
outstanding shares of the 5% Preferred were submitted for conversion.
(j) Fractional Shares. No fractional shares shall be
issued upon the conversion of any share or shares of 5% Preferred. All shares
of Common Stock (including fractions thereof) issuable upon conversion of more
than one share of 5% Preferred by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in the issuance of
any fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of a fraction of a share of Common Stock, the
Corporation shall, in lieu of issuing any fractional share, pay the holder
otherwise entitled to such fraction a sum in cash equal to the fair market
value of such fraction on the date of conversion (as determined in good faith
by the Board of Directors of the Corporation).
(k) Reorganization or Merger. In case of any
reorganization or any reclassification of the Common Stock or other capital
stock of the Corporation or any consolidation or merger of the Corporation with
or into any other corporation or corporations or a sale of all or substantially
all of the assets of the Corporation to any other person (a "REORGANIZATION"),
in which any of the holders of 5% Preferred does not elect to require the
Corporation to redeem the 5% Preferred as provided in Section 3(g), then, as
part of such Reorganization, provision shall be made so that each share of 5%
Preferred shall thereafter be convertible into the number of shares of stock or
other securities or property (including cash) to which a holder of the number
of shares of Common Stock deliverable upon conversion of such share of 5%
Preferred not so redeemed would have been entitled upon the record date of (or
date of, if no record date is fixed) such event and, in any case, appropriate
adjustment (as determined by the Board of Directors) shall be made in the
application of the provisions herein set forth with respect to the rights and
interests thereafter of the holders of the 5% Preferred, to the end that the
provisions set forth herein shall thereafter be applicable, as nearly as
equivalent as is practicable, in relation to any shares of stock or the
securities or property (including cash) thereafter deliverable upon the
conversion of the shares of 5% Preferred.
(l) Additional Satellite DARS Licenses. If (a) the
Corporation has issued shares of 5% Preferred in the second closing under the
Investment Agreement ("SECOND CLOSING") and (b) at any time within the earlier
of the closing of a Qualified Offering and twelve months after the Second
Closing, (i) more than two licenses (including the license awarded to the
Corporation) have been awarded by the Federal Communications Commission that
permit the
-9-
39
recipients thereof to provide satellite digital audio radio services
("SATELLITE DARS"), and (ii) more than two recipients of such licenses
(including the Corporation) commence or announce an intention to commence
Satellite DARS using their license and (iii) the holders of more than one-third
of the then outstanding shares of 5% Preferred shall so request in writing,
then, on the first business day following 60 calendar days after receipt of
such request, the Corporation shall promptly purchase one-half of the shares of
5% Preferred held by each such requesting holder as of such date at a purchase
price per share equal to (A) the sum of the Liquidation Preference plus any
Cash Payments then due and unpaid divided by (B) an amount equal to 1 minus the
Applicable Percentage.
5. Other Provisions. For all purposes of this Certificate of
Designations, the term "DATE OF ORIGINAL ISSUANCE OF THE 5% PREFERRED" shall
mean the day on which any shares of the 5% Preferred are first issued by the
Corporation pursuant to the terms of the Investment Agreement, and the terms
"TRADING PRICE", "LAST TRADE PRICE", "CLOSING PRICE" and "TRADING DAYS" shall
have the meanings given them in Section 4(d)(iv) hereof. Any provision herein
that conflicts with or violates any applicable usury law shall be seemed
modified to the extent necessary to avoid such conflict or violation.
6. Restrictions and Limitations. The Corporation shall not
undertake the following actions without the consent of the holders of a
majority of the 5% Preferred: (A) modify its Certificate of Incorporation or
Bylaws so as to amend or change any of the rights, preferences or privileges of
the 5% Preferred; (B) purchase or otherwise acquire for value any Common Stock
or other equity security of the Corporation or any non-wholly-owned subsidiary
thereof not held by the Corporation or any wholly-owned subsidiary while there
exists any arrearage in the payment of cumulative dividends hereunder or any
Cash Payments due or the Liquidation Preference exceeds [confidential portion
omitted]; or (C) prior to a Qualifying Offering: (i) authorize or issue any
other preferred equity security senior to the 5% Preferred (in security,
structure or maturity); (ii) declare or pay any dividends or make any
distribution except to the holders of the 5% Preferred; or (iii) effect any
Reorganization. The Corporation shall not, in connection with a repurchase of
any shares of 5% Preferred, undertake any of the following actions without the
consent of all of the holders of the 5% Preferred: (1) reduce the amount of 5%
Preferred whose holders must consent to an amendment or waiver, (2) reduce the
rate of, or change the time for payment of, dividends on the 5% Preferred or
alter the Liquidation Preference, or (3) alter the conversion provisions with
respect to the 5% Preferred.
7. Voting Rights. Except as provided herein or as provided for
by law, the 5% Preferred shall have no voting rights.
8. Notices. Any notice required by the provisions of this
Certificate of Designations to be given to the holders of shares of 5%
Preferred shall be deemed given five (5) days after deposit in the United
States mail, postage prepaid, or one day after deposit with a
nationally-recognized overnight courier, in either case addressed to each
holder of record at its address appearing on the books of the Corporation. The
Corporation shall distribute to the holders of shares of the 5% Preferred,
copies of all notices, materials, annual and quarterly reports, proxy
statements, information statements and any other documents distributed
generally to the holders of shares of Common Stock, at such times and by such
method as such documents are distributed to such holders.
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40
9. Attorneys' Fees. Any holder of 5% Preferred shall be entitled
to recover from the Corporation the reasonable attorneys, fees and expenses
incurred by such holder in connection with enforcement by such holder of any
obligation of the Corporation hereunder.
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41
THIS ESCROW AGREEMENT is made this 20th
---------------------------------------
Date
day of March , 1997 between/among
--------------------------------------------
Month
CD Radio Inc. (the " Party A " herein),
------------------------------------------ -----------------------
Party "A" Party " A "
" "
----------------------------------------------------------------------------
Party "B"
(the " " herein) and CITIBANK, N.A.
-------------------------------------------
Party "B"
(the "Escrow Agent" herein).
The above-named parties appoint said Escrow Agent with the duties and
responsibilities and upon the terms and conditions provided in Schedule A
annexed hereto and made apart hereof.
ARTICLE FIRST: The above-named parties agree that the following provisions shall
control with respect to the rights, duties, liabilities, privileges and
immunities of the Escrow Agent:
a) The Escrow Agent shall neither be responsible for or under, nor chargeable
with knowledge of, the terms and conditions of any other agreement,
instrument or document executed between/among the parties hereto, except
as may be specifically provided in Schedule A annexed hereto. This
Agreement sets forth all of the obligations of the Escrow Agent, and no
additional obligations shall be implied from the terms of this Agreement
or any other agreement, instrument or document.
b) The Escrow Agent may act in reliance upon any instructions, notice,
certification, demand, consent, authorization, receipt, power of attorney
or other writing delivered to it by any other party without being required
to determine the authenticity or validity thereof or the correctness of
any fact stated herein, the propriety or validity of the service thereof,
or the jurisdiction of the court issuing any judgment or order. The
Escrow Agent may act in reliance upon any signature believed by it to be
genuine, and may assume that such person has been properly authorized to
do so.
c) Each of the parties, jointly and severally, agrees to reimburse the Escrow
Agent on demand for, and to indemnify and hold the Escrow Agent harmless
against and with respect to, any and all loss, liability, damage or
expense (including, but without limitation, attorneys' fees, costs and
disbursements) that the Escrow Agent may suffer or incur in connection
with this Agreement and its performance hereunder or in connection
herewith, except to the extent such loss, liability, damage or expense
arises from its willful misconduct or gross negligence as adjudicated by a
court of competent jurisdiction. The Escrow Agent shall have the further
right at any time and from time to time to charge, and reimburse itself
from, the property held in escrow hereunder.
d) The Escrow Agent may consult with legal counsel of its selection in the
event of any dispute or question as to the meaning or construction of any
of the provisions hereof or its duties hereunder, and it shall incur no
liability and shall be fully protected in acting in accordance with the
opinion and instructions of such counsel. Each of the parties, jointly
and severally, agrees to reimburse the Escrow Agent on demand for such
legal fees, disbursements and expenses and in addition, the Escrow Agent
shall have the right to reimburse itself for such fees, disbursements and
expenses from the property held in escrow hereunder.
e) The Escrow Agent shall be under no duty to give the property held in
escrow by it hereunder any greater degree of care than it gives its own
similar property.
f) The Escrow Agent shall invest the property held in escrow in such a manner
as directed in Schedule A annexed hereto but which shall include deposits
in Citibank even though Citibank may receive a benefit or profit
therefrom.
THE PARTIES TO THIS AGREEMENT ACKNOWLEDGE THAT NON-DEPOSIT INVESTMENT
PRODUCTS ARE NOT OBLIGATION OF, OR GUARANTEED, BY CITIBANK/CITICORP NOR
ANY OF ITS AFFILIATES; ARE NOT FDIC INSURED; AND ARE SUBJECT TO
INVESTMENTS RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED. ONLY DEPOSITS IN THE UNITED STATES ARE SUBJECT TO FDIC
INSURANCE.
g) In the event of any disagreement between/among any of the parties to this
agreement, or between /among them or either or any of them and any other
person, resulting in adverse claims or demands being made in connection
with the subject matter of the Escrow, or in the event that the Escrow
Agent, in good faith, be in doubt as to what action it should take
hereunder, the Escrow Agent may, at its option, refuse to comply with any
claims or demands on it, or refuse to take any other action hereunder, so
long as such disagreement continues or such doubt exists, and in any such
event, the Escrow Agent shall not become liable in any way or to any
person for its failure or refusal to act, and the Escrow Agent shall be
entitled to continue so to refrain from acting until (i) the rights of all
parties shall have been fully and finally adjudicated by a court of
competent jurisdiction, or (ii) all differences shall have been adjusted
and all doubt resolved by agreement among all of the interested persons,
and the Escrow Agent shall have been notified thereof in writing signed by
all such persons. The rights of the Escrow Agent under this paragraph are
cumulative of all other rights which it may have by law or otherwise.
Page 2 Escrow Agreement - Preferred Custody Services
42
h) The Escrow Agent is authorized, for any securities at any time held
hereunder, to register such securities in the name of its nominee(s) or
the nominees of any securities depository, and such nominee(s) may sign
the name of any of the parties hereto to whom or to which such securities
belong and guarantee such signature in order to transfer securities or
certify ownership thereof to tax or other governmental authorities.
i) Notice to the parties shall be given as provided in Schedule A annexed
hereto.
ARTICLE SECOND: The Escrow Agent shall make payments of income earned on the
escrowed property as provided in Schedule A annexed hereto. Each such payee
shall provide to the Escrow Agent an appropriate W-9 form for tax identification
number certification or a W-8 form for non-resident alien certification. The
Escrow Agent shall be responsible only for income reporting to the Internal
Revenue Service with respect to income earned on the escrowed property.
ARTICLE THIRD: The Escrow Agent may, in its sole discretion, resign and
terminate its position hereunder at any time following 60 days written notice to
the parties to the Escrow Agreement herein. Any such resignation shall
terminate all obligations and duties of the Escrow Agent hereunder. On the
effective date of such resignation, the Escrow Agent shall deliver this Escrow
Agreement together with any and all related instruments or documents to any
successor Escrow Agent agreeable to the parties, subject to this Escrow
Agreement herein. If a successor Escrow Agent has not been appointed prior to
the expiration of 60 days following the date of the notice of such resignation,
the then acting Escrow Agent may petition any court of competent jurisdiction
for the appointment of a successor Escrow Agent, or other appropriate relief.
Any such resulting appointment shall be binding upon all parties to this
Agreement.
ARTICLE FOURTH: The Escrow Agent shall receive the fees provided in Schedule B
annexed hereto. In the event that such fees are not paid to the Escrow Agent
within 60 days of presentment to the party responsible for such fees as set
forth in said Schedule B, then the Escrow Agent may pay itself such fees from
the property held in escrow hereunder.
ARTICLE FIFTH: Any modification of this Agreement or any additional obligations
assumed by an party hereto shall be binding only if evidenced by a writing
signed by each of the parties hereto.
ARTICLE SIXTH: This Agreement may be executed in one or more counterparts, each
of which counterparts shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same Agreement.
In witness whereof, the parties have executed this Agreement as of the date
first above written.
CITIBANK, N.A.
as Escrow Agent
By: /s/ Xxxx X. Xxxxxx
-----------------------------------
Title: Vice President
---------------------------------
PARTY A
By: /s/ Xxxxx Xxxxxxxxx CD RADIO INC.
-----------------------------------
Title: Chairman & CEO
---------------------------------
PARTY B
By:
----------------------------------
Title:
---------------------------------
Escrow Agreement - Preferred Custody Services Page 3
43
IN WITNESS WHEREOF, the authorized representatives of the parties hereto
have set their hands or their names and seals, the day and year first above
written.
ENGELHARD/ICC
By: [SIG]
-----------------------------------
Name:
---------------------------------
Title: PRESIDENT - COO
--------------------------------
CARRIER ASIA PACIFIC OPERATIONS PTE. LTD.
By: [SIG]
-----------------------------------
Name:
---------------------------------
Title: PRESIDENT
---------------------------------
44
SCHEDULE A TO ESCROW AGREEMENT BETWEEN
CITIBANK, N.A., AS ESCROW AGENT, AND CD RADIO INC., AS PARTY A
1. Preferred Stock Investment Agreement. CD Radio Inc.
("PARTY A") has entered into a Preferred Stock Investment Agreement (the
"INVESTMENT AGREEMENT") dated as of October 23, 1996, as amended, with the
Investors identified therein (including their successors and assigns, the
"INVESTORS"), pursuant to which Party A has agreed to sell and issue to the
Investors an aggregate of up to [CONFIDENTIAL PORTION OMITTED] shares of Party
A's 5% Delayed Convertible Preferred Stock (the "PREFERRED SHARES") and, under
certain circumstances, warrants to purchase shares of Party A's common stock
(the "WARRANTS"). Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Investment Agreement.
2. Deposit with Escrow Agent. Upon the Escrow Date,
each Investor severally will deliver or cause to be delivered to the Escrow
Agent payment to the escrow account identified on the cover page hereof (the
"ESCROW ACCOUNT"), in the amount set forth next to such Investor's name in
column 1 on Exhibit C hereto (together with any income and interest that
accrues thereon, the "ESCROWED PROPERTY"). Such monies will be wire transferred
directly from the Investors to the Escrow Account.
3. Conditions for Release. The Escrowed Property shall
remain in the Escrow Account pursuant to the terms hereof until:
(a) [CONFIDENTIAL PORTION OMITTED]
(b) [CONFIDENTIAL PORTION OMITTED]
4. Release of Escrowed Property. The Escrow Agent
shall only release the Escrowed Property as specified below:
(a) if the Escrow Agent receives from Party A a copy of
a certificate of the chief executive, operating or financial officer of Party A
in the form of Exhibit A hereto issued to the Investors (the "CERTIFICATE")
stating that the conditions contained in paragraph (a) of Section 3 above have
been satisfied, then the Escrow Agent shall release and transfer to each
Investor, the amount set forth next to such Investor's name in column 2 of
Exhibit C hereto and the remainder of the Escrowed Property to an account
designated by Party A to the Escrow Agent in writing, on the second business
day following the Escrow Agent's receipt of such Certificate; or
(b) [CONFIDENTIAL PORTION OMITTED]
5. Interest Bearing Account. The Escrow Agent shall
hold the Escrowed Property in an interest bearing account. Any interest earned
on the Escrowed Property shall be paid to the party or parties entitled to the
Escrowed Property.
6. Third Party Beneficiary. Each of the Investors
shall be a third party beneficiary of, and entitled to enforce, this Agreement.
45
EXHIBIT A TO SCHEDULE A
[Date]
[CONFIDENTIAL PORTION OMITTED]
A-1
46
[CONFIDENTIAL PORTION OMITTED]
Citibank, N.A., Escrow Agent
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Re: Certificate Regarding Escrow Agreement Between
Citibank, NA and CD Radio Inc., dated March 20,
1997 (the "Escrow Agreement")
Ladies and Gentlemen:
We are writing pursuant to paragraph 4(a) of Schedule A to the
above-referenced Escrow Agreement. All capitalized terms not defined herein
shall have the same meaning as defined in the Escrow Agreement.
The following conditions for release of the Escrowed Property have been
met: (i) [CONFIDENTIAL PORTION OMITTED]
Citibank, N.A., as escrow agent, is therefore authorized to release to
each Investor on [insert date calculated based on Section 1.3(b) of the
Investment Agreement], the amounts set forth next to such Investor's name in
column 2 of Exhibit C to the Escrow Agreement and the remainder of the Escrowed
Property [CONFIDENTIAL PORTION OMITTED], plus all interest earned thereon, to
CD Radio Inc. as provided in paragraphs 4(a) and 5 of Schedule A to the Escrow
Agreement.
Yours very truly,
By:
------------------------------
Name:
Title: Chief [Executive] [Operating]
[Financial] Officer
A-2
47
ANNEX A
ANNEX A TO EXHIBIT A TO SCHEDULE A TO ESCROW AGREEMENT
[CONFIDENTIAL PORTION OMITTED]
A-3
48
EXHIBIT B TO SCHEDULE A
[Intentionally Omitted]
B-1
49
EXHIBIT C TO SCHEDULE A
Column 1
Payment Column 2
Investor* Amount** 2% Amount
[CONFIDENTIAL PORTION OMITTED]
C-1
50
EXHIBIT D TO SCHEDULE A
Citibank, N.A., Escrow Agent
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Re: Certificate Regarding Escrow Agreement Between Citibank, NA and
CD Radio Inc., dated March 20, 1997 (the "Escrow Agreement")
Ladies and Gentlemen:
All capitalized terms not defined herein shall have the same meaning
as defined in the Escrow Agreement. Pursuant to paragraph 4(b) of Schedule A to
the above-referenced Escrow Agreement, the undersigned hereby certify to you as
follows:
[CONFIDENTIAL PORTION OMITTED]
Citibank, N.A., as escrow agent, is therefore authorized to release to
Investors the Escrowed Property, plus all interest earned thereon, as provided
in paragraph 4(b) of Schedule A to the Escrow Agreement.
Yours very truly,
CD Radio, Inc.
Accepted and Approved:*
INVESTORS:
Dated: March ___, 1997 [INVESTORS' SIGNATURES OMITTED PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT.]
C-2
51
SCHEDULE B TO ESCROW AGREEMENT BETWEEN
CITIBANK, N.A., AS ESCROW AGENT, AND
CD RADIO INC., AS PARTY A
Escrow Agent Fees. The initial fees of the Escrow Agent for
acting as Escrow Agent hereunder shall be payable by Party A in the amount of
[Confidential portion omitted] on the date hereof. Upon the Escrow Date, an
additional fee shall be due and payable by Party A according to the following
schedule:
Total of Escrowed Property Additional Fee
[CONFIDENTIAL PORTION OMITTED]
E-1
52
EXHIBIT 3
Warrant No. __
WARRANT
to Purchase Common Stock of
CD RADIO INC.,
a Delaware corporation
THIS IS TO CERTIFY THAT:
[INSERT NAME OF INVESTOR]
--------------------
or registered assigns (the "Holder") is entitled to purchase from CD RADIO
INC., a Delaware corporation (the "Issuer"), at any time during the Exercise
Period (as defined below), a number of Stock Units (as defined below) equal to
[INSERT NUMBER], at a purchase price of [confidential portion omitted] per
Stock Unit (adjusted as provided below), all on the terms and conditions
provided in this warrant (this "Warrant").
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE PROPOSED TRANSACTION
DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR STATE
SECURITIES LAWS, OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR
QUALIFIED AS REQUIRED.
THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS.
SECTION 1. CERTAIN DEFINITIONS. As used in this Warrant,
unless the context otherwise requires:
"Additional Shares of Nonpreferred Stock" means all shares of
Nonpreferred Stock issued or issuable by the Issuer after the date of this
Warrant, other than the Warrant Stock.
"Affiliate" means, with respect to a specified Person, any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person. For purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person,
whether through the ownership of voting securities or by agreement or
otherwise.
-1-
53
"Appraised Value" means the fair market value of all
outstanding Common Stock (on a fully diluted basis including any fractional
shares and assuming the exercise in full of all then-outstanding Warrants and
all other options, warrants or other rights to purchase shares of Common Stock
that are then currently exercisable at exercise prices less than the Current
Market Price), as determined by the Board of Directors in good faith. "Fair
market value" is defined for this purpose as the price in a single transaction
determined on a going-concern basis that would be agreed upon by the most
likely hypothetical buyer for 100% of the equity capital of the Issuer (on a
fully diluted basis including any fractional shares and assuming the exercise
in full of all then-outstanding Warrants and all other options, warrants or
other rights to purchase shares of Common Stock that are then currently
exercisable at exercise prices less than the Current Market Price).
"Board of Directors" means either the board of directors of
the Issuer or any duly authorized committee of that board.
"Business Day" means any day that is not a Saturday or a
Sunday or a public holiday or a day on which banks are required or permitted to
close under the laws of the State of New York.
"Common Stock" means the Issuer's authorized common stock as
constituted on the date of original issuance of this Warrant, and any other
stock into which such Common Stock may be changed after such date.
"Convertible Securities" means evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for Additional Shares of Nonpreferred Stock, either immediately or upon the
arrival of a specified date or the happening of a specified event.
"Current Market Price" per share of Common Stock for the
purposes of any provision of this Warrant at the date herein specified, shall
be deemed to be the price determined pursuant to the first applicable of the
following methods:
(i) If the Common Stock is traded on a national
securities exchange or is traded in the over-the-counter market, the Current
Market Price per share of Common Stock shall be deemed to be the average of the
daily market prices for five (5) consecutive Business Days commencing five (5)
Business Days before such date. The market price for each such Business Day
shall be, (a) if the Common Stock is traded on a national securities exchange
or the NASDAQ National Market, its last reported sale price on the preceding
Business Day on such national securities exchange or the NASDAQ National Market
or, if there was no sale on that day, the last reported sale price on such
national securities exchange or the NASDAQ National Market on the next
preceding Business Day on which there was a sale, all as made available over
the Consolidated Last Sale Reporting System of the CTA Plan (the "CLSRS") or,
if the Common Stock is not then eligible for reporting over the CLSRS, its last
reported sale price on the preceding Business Day on such national securities
exchange or the NASDAQ National Market or, if there was no sale on that day, on
the next preceding Business Day on which there was a sale on such exchange or
(b) if the principal market for the Common Stock is the over-the-counter
market, but the Common Stock is not then eligible for reporting over the CLSRS,
but the Common Stock is quoted on the National Association of Securities
Dealers Automated Quotations System ("NASDAQ"), the last sale price reported on
NASDAQ on the preceding Business Day or, if the Common Stock is an issue for
which last sale prices are not reported on NASDAQ, the closing bid quotation on
such day, but, in each of the next preceding two cases, if the relevant NASDAQ
price or quotation did not exist on such day, then the price or quotation on
the next preceding Business Day in which there was such a price or quotation.
-2-
54
(ii) If the Current Market Price per share of Common
Stock cannot be ascertained by any of the methods set forth in paragraph (i)
immediately above, the Current Market Price per share of outstanding Common
Stock shall be deemed to be the price equal to the quotient determined by
dividing the Appraised Value by the number of shares (including any fractional
shares) of Common Stock on a fully-diluted basis as determined in accordance
with GAAP.
"Current Warrant Price" per share of Common Stock, for the
purpose of any provision of this Warrant at the date herein specified, means
the amount equal to the quotient resulting from dividing the Exercise Price in
effect on such date by the number of shares (including any fractional share) of
Common Stock comprising a Stock Unit on such date.
"Effective Date" means the date this Warrant was issued by
the Issuer.
"Election Notice" has the meaning ascribed to such term in
Section 2 of this Warrant.
"Exercise Period" shall mean the period commencing on the
Effective Date and expiring upon the date that is [confidential portion
omitted] after the Effective Date.
"Exercise Price" means the purchase price per Stock Unit as
set forth on the first page of this Warrant on the date of original issue of
this Warrant and thereafter shall mean such dollar amount as shall result from
the adjustments specified in Section 4, if any.
"Expiration Date" means the final date of the Exercise Period.
"GAAP" means generally accepted accounting principles,
consistently applied, as in effect at the time of application to the provisions
hereof.
"Holder" has the meaning ascribed to such term in the first
paragraph of this Warrant.
"Holder Indemnified Party" has the meaning ascribed to such
term in Section 10.6 of this Warrant.
"Investment Agreement" means that certain Preferred Stock
Investment Agreement dated as of October 23, 1996, by and among the Issuer and
the Investors named therein.
"Issuer" has the meaning ascribed to such term in the first
paragraph of this Warrant.
"Issuer's Business Office" has the meaning ascribed to such
term in Section 2 of this Warrant.
"Liabilities" has the meaning ascribed to such term in
Section 10.6 of this Warrant.
"Nonpreferred Stock" shall mean the Common Stock and shall
also include stock of the Issuer of any other class which is not preferred as
to dividends or assets over any other class of stock of the Issuer and which is
not subject to redemption.
"Person" means a corporation, an association, a trust, a
partnership, a joint venture, a limited liability company, an organization, a
business, an individual, a government or political subdivision thereof, a
governmental body or any other legal entity.
-3-
55
"Restricted Certificate" shall mean a Warrant bearing the
restrictive legend set forth in Section 10.1.
"Restricted Securities" shall mean Restricted Stock and
Restricted Warrants.
"Restricted Stock" shall mean Warrant Stock with respect to a
Restricted Warrant or otherwise evidenced by a Restricted Certificate.
"Restricted Warrant" shall mean a Warrant evidenced by a
Restricted Certificate.
"Securities Act" means the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be in effect at the time.
"SEC" means the Securities and Exchange Commission and any
successor agency.
"Seller" means a holder of Restricted Securities for which
the Issuer shall be required to file a registration statement or which shall be
registered under the Securities Act at the request of such holder pursuant to
any of the provisions of Section 10. Neither the Issuer nor any of its
Affiliates shall be deemed a "Seller" for any purposes of this Warrant.
"Stock Unit" shall constitute [confidential portion omitted].
"Warrants" shall mean this Warrant and all additional or new
warrants issued upon transfer, division or combination of, or in substitution
for this Warrant or any such additional or new warrant. All Warrants shall at
all times be identical as to terms and conditions and date, except as to the
number of Stock Units for which they may be exercised.
"Warrant Stock" means the shares of Common Stock purchasable
by the holder of a Warrant upon the exercise of such Warrant.
SECTION 2. EXERCISE OF WARRANT. The Holder may, at any time
during the Exercise Period, exercise this Warrant in whole at any time or in
part from time to time for the number of Stock Units which such Holder is then
entitled to purchase under this Warrant; provided that the Issuer shall not be
obligated to honor any request for exercise of this Warrant at any time
[confidential portion omitted].
[confidential portion omitted].
The Holder may exercise this Warrant, in whole or in part,
by either of the following methods:
(a) The Holder may deliver to the Issuer at its office
maintained pursuant to Section 15 ("Issuer's Business Office") for such purpose
(i) a written notice of such Holder's election to exercise this Warrant (an
"Election Notice"), which notice shall specify the number of Stock Units to be
purchased, (ii) this Warrant and (iii) a sum equal to the Exercise Price
therefor in immediately available funds; or
(b) The Holder may also exercise this Warrant, in whole or in
part, in a "cashless" or "net-issue" exercise by delivering to the Issuer's
Business Office (i) this Warrant and (ii) an Election Notice, which Election
Notice shall specify the number of Stock Units to be delivered to such Holder
("Deliverable Units") and the number of Stock Units with respect to which this
Warrant is being surrendered in payment of the aggregate Exercise Price for the
Deliverable Units ("Surrendered Units"); provided that the Exercise Price
multiplied by the number of Deliverable Units shall not exceed the value
-4-
56
of the Surrendered Units; provided further that the sum of number of
Deliverable Units and the number of Surrendered Units so specified shall not
exceed the aggregate Stock Units represented by this Warrant. For purposes of
this provision, each Stock Unit as to which this Warrant is surrendered will be
attributed a value equal to the product of (x) the Current Market Price per
share of Common Stock minus the Current Warrant Price per share of Common
Stock, multiplied by (y) the number of shares of Common Stock then comprising a
Stock Unit.
An Election Notice may be in the form of the subscription set
out at the end of this Warrant. Upon delivery thereof, the Issuer shall as
promptly as practicable, and in any event within two (2) Business Days
thereafter, cause to be executed and delivered to such Holder a certificate or
certificates representing the aggregate number of fully-paid and nonassessable
shares of Common Stock issuable upon such exercise.
The stock certificate or certificates for Warrant Stock so
delivered shall be in such denominations as may be specified in the Election
Notice and shall be registered in the name of such Holder or such other name or
names as shall be designated in the Election Notice. Such certificate or
certificates shall be deemed to have been issued and such Holder or any other
Person so designated to be named therein shall be deemed to have become a
holder of record of such shares, and shall have rights including, to the extent
permitted by law, the right to vote such shares or to consent or to receive
notice as a stockholder, as of the time the Election Notice is delivered to the
Issuer in accordance with this Section 2(b). If this Warrant shall have been
exercised only in part, the Issuer shall, at the time of delivery of said
certificate or certificates, deliver to such Holder a new Warrant dated the
date of the Election Notice, evidencing the rights of such Holder to purchase
Stock Units in an amount equal to the total number of Stock Units represented
by this Warrant minus the total number of Deliverable Units and Surrendered
Units received upon exercise of this Warrant through the date of such exercise
in part, which new Warrant shall in all other respects be identical to this
Warrant, or, at the request of such Holder, appropriate notation may be made on
this Warrant and this Warrant shall be returned to such Holder.
Except as otherwise provided in Section 8, the Issuer shall
pay all expenses, transfer taxes and other charges payable in connection with
the preparation, issuance and delivery of stock certificates under this Section
2, except that, if such stock certificates shall be registered in a name or
names other than the name of the Holder, funds sufficient to pay all stock
transfer taxes which shall be payable upon the issuance of such stock
certificate or certificates shall be paid by the Holder at the time of
delivering the Exercise Notice.
All shares of Common Stock issuable upon the exercise of this
Warrant shall be validly issued, fully paid and nonassessable, and free from
all liens and other encumbrances thereon, other than liens or other
encumbrances created by the Holder.
Except as provided in Section 7, the Issuer will not close
its books against the transfer of this Warrant or of any share of Warrant Stock
in any manner that interferes with the timely exercise of this Warrant.
If any fractional interest in a share of Common Stock would
be deliverable upon exercise of this Warrant, the Issuer shall, at its option,
either issue fractional shares of Common Stock or pay in cash an amount equal
to the Current Market Price of such fractional interest.
SECTION 3. TRANSFER, DIVISION AND COMBINATION. Subject to
Section 10, this Warrant and all rights hereunder are transferable, in whole or
in part, on the books of the Issuer to be maintained for such purpose, upon
surrender of this Warrant at the Issuer's Business Office, together with a
written assignment of this Warrant duly executed by the Holder or its agent or
attorney and payment of funds
-5-
57
sufficient to pay any stock transfer taxes payable upon the making of such
transfer. Upon such surrender and payment the Issuer shall, subject to Section
10, execute and deliver a new Warrant or Warrants in the name of the assignee
or assignees and in the denominations specified in such instrument of
assignment, and this Warrant shall promptly be canceled. If and when this
Warrant is assigned in blank (in case the restrictions on transferability in
Section 10 shall have been terminated), the Issuer may (but shall not be
obliged to) treat the bearer hereof as the absolute owner of this Warrant for
all purposes and the Issuer shall not be affected by any notice to the
contrary. This Warrant, if properly assigned in compliance with this Section 3
and Section 10, may be exercised by an assignee for the purchase of shares of
Common Stock without having a new Warrant issued.
This Warrant may, subject to Section 10, be divided or
combined with other Warrants upon presentation at the Issuer's Business Office
of the Issuer, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the Holder or
its agent or attorney. Subject to compliance with the preceding paragraph and
with Section 10, as to any transfer which may be involved in such division or
combination, the Issuer shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
The Issuer shall pay all expenses, taxes (except as provided
in Section 8) and other charges incurred by the Issuer in the performance of
its obligations in connection with the preparation, issue and delivery of
Warrants under this Section 3.
The Issuer agrees to maintain at the Issuer's Business Office
books for the registration and transfer of the Warrants.
SECTION 4. ADJUSTMENT OF STOCK UNIT OR EXERCISE PRICE. The
number of shares of Common Stock comprising a Stock Unit, and the Exercise
Price per Stock Unit, shall be subject to adjustment from time to time as set
forth in this Section 4 and in Section 5. The Issuer shall not take any action
with respect to its Nonpreferred Stock of any class requiring an adjustment
pursuant to any of the following Subsections 4.1, 4.2 or 4.7 without at the
same time taking like action with respect to its Nonpreferred Stock of each
other class; and the Issuer shall not create any class of Nonpreferred Stock
which carries any rights to dividends.
4.1. Stock Dividends, Subdivisions and Combinations. If at
any time or from time to time the Issuer shall:
(a) take a record of the holders of its Nonpreferred Stock
for the purpose of entitling them to receive a dividend payable in, or other
distribution of, Nonpreferred Stock; or
(b) subdivide its outstanding shares of Nonpreferred Stock
into a larger number of shares of Nonpreferred Stock; or
(c) combine its outstanding shares of Nonpreferred Stock into
a smaller number of shares of Nonpreferred Stock;
then the number of shares of Common Stock comprising a Stock Unit immediately
after the happening of any such event shall be adjusted so as to consist of the
number of shares of Common Stock which a record holder of the number of shares
of Common Stock comprising a Stock Unit immediately prior to the happening of
such event would own or be entitled to receive immediately after the happening
of such event.
-6-
58
4.2. Certain Other Dividends and Distributions. If at any
time or from time to time the Issuer shall take a record of the holders of its
Nonpreferred Stock for the purpose of entitling them to receive any dividend or
other distribution of:
(a) cash (other than a cash distribution made as a dividend
and payable out of earnings or earned surplus legally available for the payment
of dividends under the laws of the jurisdiction of incorporation of the Issuer,
to the extent, but only to the extent, that the aggregate of all such dividends
paid or declared after the date hereof, does not exceed the consolidated net
income of the Issuer earned subsequent to the date hereof determined in
accordance with GAAP), or
(b) any evidence of its indebtedness (other than Convertible
Securities), any shares of its stock (other than Additional Shares of
Nonpreferred Stock) or any other securities or property of any nature
whatsoever (other than cash and other than Convertible Securities or Additional
Shares of Nonpreferred Stock), or
(c) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness (other than Convertible Securities), any
shares of its stock (other than Additional Shares of Nonpreferred Stock) or any
other securities or property of any nature whatsoever (other than cash that, if
distributed, would give rise to an adjustment under Section 4.2(a)) and other
than Convertible Securities or Additional Shares of Nonpreferred Stock),
then the number of shares of Common Stock thereafter comprising a Stock Unit
shall be adjusted to that number determined by multiplying the number of shares
of Common Stock comprising a Stock Unit immediately prior to such adjustment by
a fraction (i) the numerator of which shall be the Current Market Price per
share of Common Stock at the date of taking such record, and (ii) the
denominator of which shall be such Current Market Price per share of Common
Stock at the date of taking such record minus the portion applicable to one
share of Nonpreferred Stock of any such cash so distributable and of the fair
value of any and all such evidences of indebtedness, shares of stock, other
securities or property, or warrants or other subscription or purchase rights,
so distributable. Such fair value shall be determined in good faith by the
Board of Directors. A reclassification of the Nonpreferred Stock into shares of
Nonpreferred Stock and shares of any other class of stock shall be deemed a
distribution by the Issuer to the holders of its Nonpreferred Stock of such
shares of such other class of stock within the meaning of this Subsection 4.2
and, if the outstanding shares of Nonpreferred Stock shall be changed into a
larger or smaller number of shares of Nonpreferred Stock as a part of such
reclassification, shall be deemed a subdivision or combination, as the case may
be, of the outstanding shares of Nonpreferred Stock within the meaning of
Subsection 4.1.
4.3. Issuance of Additional Shares of Nonpreferred Stock. If
at any time or from time to time the Issuer shall (except as provided below)
issue, whether in connection with the merger of a corporation into the Issuer
or otherwise, any Additional Shares of Nonpreferred Stock for a consideration
per share less than the Current Market Price per share of such stock, then the
number of shares of Common Stock thereafter comprising a Stock Unit shall be
adjusted to be that number determined by multiplying the number of shares of
Common Stock comprising a Stock Unit immediately prior to such adjustment by a
fraction (a) the numerator of which shall be the sum of (i) the number of such
Additional Shares of Nonpreferred Stock so issued and (ii) the number of shares
of Nonpreferred Stock outstanding immediately prior to such issuance, and (b)
the denominator of which shall be the sum of (i) the number of such Additional
Shares of Nonpreferred Stock that the aggregate consideration for the total
number of such shares of Additional Shares of Nonpreferred Stock would purchase
at the Current Market Price per share of Common Stock and (ii) the number of
shares of Nonpreferred Stock outstanding immediately prior to such issuance.
For purposes of this Subsection 4.3, the date as of which the Current Market
Price per share of Common Stock shall be computed shall be the earlier of (i)
the date on which the Issuer shall
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59
enter into a firm contract for the issuance of such Additional Shares of
Nonpreferred Stock, or (ii) the date of actual issuance of such Additional
Shares of Nonpreferred Stock. For the purpose of calculations pursuant to this
Section 4.3, Nonpreferred Stock issuable upon conversion of the Preferred
Shares (as defined in the Investment Agreement) or upon exercise or conversion
of Convertible Securities, warrants, options or other rights outstanding at the
time of such calculation (computed based on an assumed exercise or conversion
as of the date as to which number of outstanding shares of Nonpreferred Stock
is so calculated) for which an adjustment was required to be made, or it has
been determined that no adjustment was required to be made, pursuant to
Subsection 4.4 or 4.5, shall be deemed to be outstanding at the time of such
calculation. The provisions of this Subsection 4.3 shall not apply to any
issuance of Additional Shares of Nonpreferred Stock for which an adjustment is
provided under Subsection 4.1. No adjustment of the number of shares of Common
Stock comprising a Stock Unit shall be made under this Subsection 4.3 upon the
issuance of any Additional Shares of Nonpreferred Stock that are issued
pursuant to the exercise of any options, warrants or other subscription or
purchase rights or pursuant to the exercise of any conversion or exchange
rights in any Convertible Securities, if any such adjustment shall previously
have been made (or it was determined that no adjustment was to be made at the
time of issuance) upon the issuance of such options, warrants or other rights
or upon the issuance of such Convertible Securities (or upon the issuance of
any option, warrant or other right therefor) pursuant to Subsection 4.4 or 4.5.
Notwithstanding the foregoing, no adjustment shall be required pursuant to this
Subsection 4.3, (1) upon the issuance or conversion of the Preferred Shares (as
such term is defined in the Investment Agreement), (2) in connection with the
issuance of Additional Shares of Nonpreferred Stock upon the exercise or
conversion, in accordance with the terms thereof, of any warrants, options or
other rights to subscribe for or purchase such shares, or any Convertible
Securities, which were outstanding on [confidential portion omitted], or (3) in
connection with the issuance of no more than [confidential portion omitted]
(subject to appropriate adjustment for stock splits, stock dividends and
similar events) Additional Shares of Nonpreferred Stock (in addition to those
permitted in (2) immediately above) in accordance with and pursuant to any
employee benefit plan to which employees, directors and/or consultants of the
Issuer are entitled to participate, which plan shall have been approved by the
stockholders of the Issuer.
4.4. Issuance of Warrants, Options or Other Rights. If at any
time or from time to time the Issuer shall take a record of the holders of its
Nonpreferred Stock for the purpose of entitling them to receive a distribution
of, or shall otherwise issue, any warrants, options or other rights to
subscribe for or purchase any Additional Shares of Nonpreferred Stock or any
Convertible Securities and the consideration per share for which additional
shares of Nonpreferred Stock may at any time thereafter be issuable pursuant to
such warrants, options or other rights or pursuant to the terms of such
Convertible Securities shall be less than the Current Market Price per share of
Common Stock, then the number of shares of Common Stock thereafter comprising a
Stock Unit shall be adjusted as provided in Subsection 4.3 on the basis that
(i) the maximum number of Additional Shares of Nonpreferred Stock issuable
pursuant to all such warrants, options or other rights or necessary to effect
the conversion or exchange of all such Convertible Securities shall be deemed
to have been issued as of the date specified in the next following sentence of
this Subsection 4.4, (ii) the aggregate consideration for such maximum number
of Additional Shares of Nonpreferred Stock shall be deemed to be the minimum
consideration received and receivable by the Issuer for the issuance of such
Additional Shares of Nonpreferred Stock pursuant to such warrants, options or
other rights or pursuant to the terms of such Convertible Securities and (iii)
the consideration per share received by the Issuer for such Additional Shares
of Nonpreferred Stock shall be that number determined by dividing (a) the
aggregate consideration for such maximum number of Additional Shares of
Nonpreferred Stock (determined as set forth in clause (ii) of this sentence) by
(b) the maximum number of Additional Shares of Nonpreferred Stock issuable
pursuant to all such warrants, options or other rights or necessary to effect
the conversion or exchange of all such Convertible Securities (determined as
set forth in clause (i) of this sentence). For purposes of this Subsection 4.4,
the computation date for clause (i) above and as of which the Current Market
Price per share of Common Stock shall be computed shall be the earliest of (x)
the date on which the Issuer shall take a record of the
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holders of its Nonpreferred Stock for the purpose of entitling them to receive
any such warrants, options or other rights, (y) the date on which the Issuer
shall enter into a firm contract for the issuance of such warrants, options or
other rights (or, if such contract specifies that the price will be determined
as of a later date, then such later date shall be used for purposes of this
Subsection 4.5), and (z) the date of actual issuance of such warrants, options
or other rights. Notwithstanding the foregoing, no adjustment shall be required
pursuant to this Subsection 4.4, (1) upon the issuance or conversion of the
Preferred Shares (as such term is defined in the Investment Agreement), (2) in
connection with the issuance of Additional Shares of Nonpreferred Stock upon
the exercise or conversion, in accordance with the terms thereof, of any
warrants, options or other rights to subscribe for or purchase such shares, or
any Convertible Securities, which were outstanding on [confidential portion
omitted] and described on Schedule 2.1(c) of the Investment Agreement, or (3)
in connection with the issuance of no more than [confidential portion omitted]
(subject to appropriate adjustments for stock splits, stock dividends and
similar events) Additional Shares of Nonpreferred Stock (in addition to those
permitted in (2) immediately above) in accordance with and pursuant to any
employee benefit plan to which employees, directors and/or consultants of the
Issuer are entitled to participate, which plan shall have been approved by the
stockholders of the Issuer.
4.5. Issuance of Convertible Securities. (i) If at any time
or from time to time the Issuer shall take a record of the holders of its
Nonpreferred Stock for the purpose of entitling them to receive a distribution
of, or shall otherwise issue, any Convertible Securities and the consideration
per share for which Additional Shares of Nonpreferred Stock may at any time
thereafter be issuable pursuant to the terms of such Convertible Securities
shall be less than the Current Market Price per share of Common Stock, then the
number of shares of Common Stock thereafter comprising a Stock Unit shall be
adjusted as provided in Subsection 4.3 on the basis that (1) the maximum number
of Additional Shares of Nonpreferred Stock necessary to effect the conversion
or exchange of all such Convertible Securities shall be deemed to have been
issued as of the computation date specified in clause (ii) of this Subsection
4.5, (2) the aggregate consideration for such maximum number of Additional
Shares of Nonpreferred Stock shall be deemed to be the minimum consideration
received and receivable by the Issuer for the issuance of such Additional
Shares of Nonpreferred Stock pursuant to the terms of such Convertible
Securities and (3) the consideration per share received by the Issuer for such
Additional Shares of Nonpreferred Stock shall be that number determined by
dividing (a) the aggregate consideration for such maximum number of Additional
Shares of Nonpreferred Stock (determined as set forth in clause (2) of this
sentence) by (b) the maximum number of Additional Shares of Nonpreferred Stock
necessary to effect the conversion or exchange of all such Convertible
Securities (determined as set forth in clause (1) of this sentence).
(ii) For purposes of this Subsection 4.5, the computation
date for Section 4.5(i) (1) above and as of which the Current Market Price per
share of Common Stock shall be computed shall be the earliest of (x) the date
on which the Issuer shall take a record of the holders of its Nonpreferred
Stock for the purpose of entitling them to receive any such Convertible
securities, (y) the date on which the Issuer shall enter into a firm contract
for the issuance of such Convertible Securities (or, if such contract specifies
that the price will be determined as of a later date, then such later date
shall be used for purposes of this Subsection 4.5), and (z) the date of actual
issuance of such Convertible Securities; provided that with respect to any
Convertible Security for which the maximum number of Additional Shares of
Nonpreferred Stock necessary to effect the conversion of all such Convertible
Securities is not determinable at the time of issuance of such Convertible
Security, the computation date shall be the earlier of (a) the actual date of
conversion and (b) the date of exercise of this Warrant assuming such
Convertible Securities are converted on such date on the terms thereof. No
adjustment of the number of shares of Common Stock comprising a Stock Unit
shall be made under this Subsection 4.5 upon the issuance of any Convertible
Securities which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to Subsection 4.4. Subject to Section 4.6(f), the adjustments made in
this Section
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4 shall remain in effect regardless of whether any Convertible Securities are
converted or any warrants, options or other rights to purchase Additional
Shares of Nonpreferred Stock or Convertible Securities are ever exercised.
4.6. Other Provisions Applicable to Adjustments Under this
Section. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock comprising a Stock Unit
provided for above in this Section 4:
(a) Treasury Stock. The sale or other disposition of any
issued shares of Nonpreferred Stock owned or held by or for the account of the
Issuer shall be deemed an issuance thereof for purposes of this Section 4.
(b) Computation of Consideration. To the extent that any
Additional Shares of Nonpreferred Stock or any Convertible Securities or any
warrants, options or other rights to subscribe for or purchase any Additional
Shares of Nonpreferred Stock or any Convertible Securities shall be issued for
cash consideration, the consideration received by the Issuer therefor shall be
deemed to be the amount of cash received by the Issuer therefor, or, if such
Additional Shares of Nonpreferred Stock or Convertible Securities are offered
by the Issuer for subscription, the subscription price, or, if such Additional
Shares of Nonpreferred Stock or Convertible Securities are sold to underwriters
or dealers for public offering without a subscription offering, the initial
public offering price, in any such case excluding any amounts paid or
receivable for accrued interest or accrued dividends and without deduction of
any compensation, discounts or expenses paid or incurred by the Issuer for and
in the underwriting of, or otherwise in connection with, the issue thereof. To
the extent that such issuance shall be for a consideration other than solely
for cash, then, except as herein otherwise expressly provided, the amount of
such consideration shall be deemed to be the fair value of such consideration
at the time of such issuance as determined in good faith by the Board of
Directors of the Issuer. The consideration for any Additional Shares of
Nonpreferred Stock issuable pursuant to any warrants, options or other rights
to subscribe for or purchase the same shall be the consideration received or
receivable by the Issuer for issuing such warrants, options or other rights,
plus the additional consideration payable to the Issuer upon the exercise of
such warrants, options or other rights. The consideration for any Additional
Shares of Nonpreferred Stock issuable pursuant to the terms of any Convertible
Securities shall be the consideration received or receivable by the Issuer for
issuing any warrants, options or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to the Issuer in
respect of the subscription for or purchase of such Convertible Securities,
plus the additional consideration, if any, payable to the Issuer upon the
exercise of the right of conversion or exchange in such Convertible Securities.
In case of the issuance at any time of any Additional Shares of Nonpreferred
Stock or Convertible Securities in payment or satisfaction of any dividend upon
any class of stock other than Nonpreferred Stock, the Issuer shall be deemed to
have received for such Additional Shares of Nonpreferred Stock or Convertible
Securities a consideration equal to the amount of such dividend so paid or
satisfied.
(c) When Adjustments to Be Made. The adjustments required by
the preceding Subsections of this Section 4 shall be made whenever and as often
as any specified event requiring an adjustment shall occur, except that no
adjustment shall be made except pursuant to Subsection 4.1 if it would decrease
the number of shares of Common Stock comprising a Stock Unit immediately prior
to such adjustment. For the purpose of any adjustment, any specified event
shall be deemed to have occurred at the close of business on the date of its
occurrence.
(d) Fractional Interests. In computing adjustments under this
Section, fractional interests in Nonpreferred Stock shall be taken into account
to the nearest one-thousandth of a share.
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(e) When Adjustments Not Required. (i) If the Issuer shall
take a record of the holders of its Nonpreferred Stock for the purpose of
entitling them to receive a dividend or distribution or subscription or
purchase rights and shall, thereafter and before the distribution thereof to
stockholders, legally abandon its plan to pay or deliver such dividend,
distribution, subscription or purchase rights, then thereafter no adjustment
shall be required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded and annulled.
(ii) No adjustment shall be made for any warrant, option or
right granted or adjustment made to any other warrant, option or right which
grant or adjustment is triggered solely by an adjustment or exercise of this
Warrant.
(iii) No adjustment in the number of shares of Common Stock
comprising a Stock Unit or the Exercise Price shall be required by this Section
4 if such adjustment either by itself or with other adjustments required by
this Section 4 and not previously made would require an increase or decrease of
less than 1% in such number or price. Any adjustment representing a change of
less than such minimum amount that is so postponed shall be carried forward and
made when such adjustment, together with other adjustments required by this
Section 4 and not previously made, would result in an adjustment of 1% or
greater of such amount or price.
(f) When Readjustments Made. The number of shares of Common
Stock comprising a Stock Unit that may be purchased upon exercise of this
Warrant shall be readjusted to reflect the expiration of any warrants, options
or other rights, except where no adjustment of the number of shares of Common
Stock comprising a Stock Unit had previously been made with respect to such
expired warrant, option or right.
4.7. Merger, Consolidation or Disposition of Assets. In the
event the Issuer (1) shall consolidate with or merge into any other Person and
shall not be the continuing or surviving Person of such consolidation or
merger, or (2) shall permit any other Person to consolidate with or merge into
the Issuer and the Issuer shall be the continuing or surviving Person but, in
connection with such consolidation or merger, the Nonpreferred Stock shall be
changed into or exchanged for other securities of any other Person or cash or
any other property, or (3) shall transfer all or substantially all of its
properties or assets to any other Person, or (4) shall effect a capital
reorganization or reclassification of the Nonpreferred Stock, then, and in each
such event, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Subsection 4.7, the Holder shall have
the right, at the Holder's option, to receive either (i) a reduction of the
Exercise Price equal to the amount applicable to the number of shares of Common
Stock then comprising a Stock Unit of any such cash and of the fair value of
any and all such shares of stock or of other securities or property to be
received by or distributed to the holders of Nonpreferred Stock of the Company,
or (ii), upon the conversion of all or any part of this Warrant at any time
after the consummation of such consolidation, merger, transfer, reorganization
or reclassification, in lieu of the Common Stock issuable upon such conversion
prior to such consummation, the other securities, cash and property to which
such Holder would have been entitled upon such consummation if such Holder had
converted the Warrant immediately prior to such consummation, subject to
adjustments (subsequent to such action) as nearly equivalent as possible to the
adjustments provided for in this Section 4; provided that option (i) shall be
available upon the occurrence of any such event only if the holders of
Nonpreferred Stock prior to such event continue to hold Nonpreferred Stock upon
the occurrence of such event. Such fair value and such adjustments shall be
determined in good faith by the Board of Directors of the Company. Anything
contained in this Warrant to the contrary notwithstanding, the Issuer will not
effect any of the transactions described in clauses (1) through (4) above
unless, prior to the consummation of such transaction, each other Person (other
than the Issuer) that may be required to deliver any securities, cash or
property upon the conversion of the Warrant shall assume, by written
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instrument delivered to the Holder, the obligation to deliver to the Holder
such Common Stock, securities, cash or property as the Holder may be entitled
to receive upon such conversion.
The foregoing provisions of this Subsection 4.7 shall
similarly apply to successive mergers, consolidations or dispositions. In
addition to any other requirements under this Subsection 4.7, the Issuer shall
give notice to the Holder of this Warrant of any merger, consolidation or
disposition at least thirty (30) days before the occurrence of such merger,
consolidation or disposition.
4.8. Other Action Affecting Nonpreferred Stock. In case at
any time or from time to time the Issuer shall take any action affecting its
Nonpreferred Stock, other than an action described in any of the foregoing
Subsections 4.1 to 4.8, inclusive, then, unless in the opinion of the Holder
such action will not have a materially adverse effect upon the rights of the
Holder, the number of shares of Common Stock comprising a Stock Unit shall be
adjusted in such manner and at such time as the Issuer and the holders of
warrants exercisable for a majority of the Stock Units then issuable upon the
exercise of all warrants issued to the Investors (as defined in the Investment
Agreement) may in good faith agree to be equitable in the circumstances. If the
Issuer and such holders cannot agree upon a manner of adjustment, such
adjustment will be made in the manner determined by the Board of Directors in
good faith.
SECTION 5. NOTICE TO WARRANT HOLDERS.
5.1. Notice of Adjustment of Stock Unit or Exercise Price.
Whenever the number of shares of Common Stock comprising a Stock Unit, or the
price at which a Stock Unit may be purchased upon exercise of the Warrants,
shall be adjusted pursuant to Section 4, the Issuer shall obtain a certificate
signed by Coopers and Xxxxxxx, another "Big Six" accounting firm or independent
accountants selected by the Issuer and acceptable to the holders of warrants
exercisable for a majority of the Stock Units then issuable upon the exercise
of all warrants issued to the Investors (as defined in the Investment
Agreement), setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated (including a
statement of the fair value, as determined by the Board of Directors of the
Issuer or by appraisal (if applicable), of any evidences of indebtedness,
shares of stock, other securities or property or warrants or other subscription
or purchase rights referred to in Section 4.2, Section 4.6(b) or Section 4.7)
and specifying the number of shares of Common Stock comprising a Stock Unit and
(if such adjustment was made pursuant to Section 4.7) describing the number and
kind of any other shares of stock comprising a Stock Unit, and any change in
the purchase price or prices thereof, after giving effect to such adjustment or
change. The Issuer shall promptly, and in any case within 10 Business Days
after the making of such adjustment, cause a signed copy of such certificate to
be delivered to each holder of a Warrant in accordance with Section 16. The
Issuer shall keep at the Issuer's Business Office copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by the Holder or any prospective purchaser of a
Warrant designated by the Holder.
5.2. Notice of Certain Corporate Action. If the Issuer shall
propose (a) to pay any dividend payable in stock of any class to the holders of
its Nonpreferred Stock or to make any other distribution to the holders of its
Nonpreferred Stock (other than a cash dividend for which no adjustment is
required under Section 4.2), or (b) to offer to the holders of its Nonpreferred
Stock rights to subscribe for or to purchase any Additional Shares of
Nonpreferred Stock or shares of stock of any class or any other securities,
rights or options, or (c) to effect any reclassification of its Nonpreferred
Stock (other than a reclassification involving only the subdivision, or
combination, of outstanding shares of Nonpreferred Stock), or (d) to effect any
capital reorganization, or (e) to effect any consolidation, merger, sale,
transfer or other disposition of all or substantially all of its property,
assets or business, or (f) to effect the liquidation, dissolution or winding up
of the Issuer, then in each such case, the Issuer shall deliver to each holder
of a Warrant, in accordance with Section 16, a notice of such proposed action,
which shall specify
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the date on which a record is to be taken for the purposes of such stock
dividend, distribution or rights, or the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, disposition,
liquidation, dissolution or winding up is to take place and the date of
participation therein by the holders of Nonpreferred Stock, if any such date is
to be fixed, and shall also set forth such facts with respect thereto as shall
be reasonably necessary to indicate the effect of such action on the Common
Stock and the number and kind of any other shares of stock which will comprise
a Stock Unit, and the purchase price or prices thereof, after giving effect to
any adjustment which will be required as a result of such action. Such notice
shall be so delivered in the case of any action covered by clause (a) or (b)
above at least ten (10) days prior to the record date for determining holders
of the Nonpreferred Stock for purposes of such action, and in the case of any
other such action, at least thirty (30) days prior to the date of the taking of
such proposed action or the date of participation therein by the holders of
Nonpreferred Stock, whichever shall be the earlier.
5.3. Notice of Expiration Date. The Issuer shall deliver to
each holder of a Warrant notice of the Expiration Date. Such notice may be
delivered by the Issuer not less than thirty (30) days but not more than sixty
(60) days prior to the then existing Expiration Date. Failure to timely deliver
such notice shall extend the Expiration Date to a date that is the later of (i)
the Expiration Date or (ii) the date occurring thirty days after the date such
notice is delivered.
SECTION 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK. The
Issuer shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
exercise of this Warrant and all warrants issued to the Investors (as defined
in the Investment Agreement) and the conversion of the Preferred Shares (as
defined in the Investment Agreement), [confidential portion omitted]. All
shares of Common Stock which shall be issued upon exercise of this Warrant or
upon such conversion, as the case may be, shall be duly and validly issued and
fully-paid and nonassessable.
Before taking any action that would cause an adjustment
reducing the Current Warrant Price per share of Common Stock below the then par
value, if any, of the shares of Common Stock issuable upon exercise of the
Warrants, the Issuer shall take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Issuer may validly and legally
issue fully-paid and nonassessable shares of ordinary Common Stock at such
adjusted Current Warrant Price.
Before taking any action that would result in an adjustment
in the number of shares of Common Stock comprising a Stock Unit or in the
Current Warrant Price per share of Common Stock, the Issuer shall obtain all
such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction
thereof.
SECTION 7. TAKING OF RECORD; STOCK AND WARRANT TRANSFER
BOOKS. In the case of all dividends or other distributions by the Issuer to the
holders of its Nonpreferred Stock with respect to which any provision of
Section 4 refers to the taking of a record of such holders, the Issuer will in
each such case take such a record as of the close of business on a Business
Day. The Issuer will not at any time, except upon dissolution, liquidation or
winding up, close its stock transfer books or Warrant transfer books so as to
result in preventing or delaying the exercise or transfer of any Warrant.
SECTION 8. TRANSFER TAXES. The Issuer will pay any and all
transfer taxes that may be payable in respect of the issuance or delivery of
shares of Common Stock on exercise of this Warrant. The Issuer shall not,
however, be required to pay any tax that may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that in which this warrant is registered, and no such issue or
delivery shall be made unless and until the Person requesting
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such issue has paid to the Issuer the amount of any such tax, or has
established, to the satisfaction of the Issuer, that such tax has been paid.
SECTION 9. NO VOTING RIGHTS. Except as expressly provided in
this Warrant, this Warrant shall not entitle the holder hereof to any voting
rights or other rights as a stockholder of the Issuer.
SECTION 10. RESTRICTIONS ON EXERCISE AND TRANSFERABILITY. The
Restricted Securities shall not be transferable except upon the conditions
specified in this Section 10; provided that, notwithstanding any other
provisions of this Section 10, the Holder (and each other person mentioned
below in this clause) shall have the right to transfer any Restricted
Securities to any Affiliate of such Holder, in each case free of the
restrictions on transfer imposed by this Section 10 other than the requirement
as to the legending of the certificates for such Restricted Securities
specified in Section 10.1. Each such transferee shall be subject to the same
transfer restrictions imposed on the Warrant holder by this Agreement. The
Warrant Stock has not been registered under the Securities Act or registered or
qualified under the securities laws of any state, and this Warrant may not be
exercised unless the exercise of the Warrant does not require registration or
qualification under state or federal securities laws or unless the transaction
is registered or qualified as required. No holder of this Warrant that did not
purchase this Warrant directly from the Issuer shall be permitted to exercise
this Warrant unless such holder shall provide, if requested by the Issuer, an
opinion of counsel to such holder (in form and substance satisfactory to the
Issuer and its counsel) to the effect that such exercise may be accomplished
without such registration or qualification or that such registration or
qualification has occurred.
10.1. Restrictive Legend. Unless and until otherwise
permitted by this Section 10, each certificate for Warrants issued under this
Agreement, each certificate for any Warrants issued to any subsequent
transferee of any such certificate, each certificate for any Warrant Stock
issued upon exercise of any Warrant and each certificate for any Warrant Stock
issued to any subsequent transferee of any such certificate, shall be stamped
or otherwise imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER
FEDERAL OR STATE SECURITIES LAWS, OR UNLESS THE PROPOSED TRANSACTION IS
REGISTERED OR QUALIFIED AS REQUIRED.
In addition, each certificate for Warrants issued under this
Agreement and each certificate for any Warrants issued to any subsequent
transferee of any such certificate shall be stamped or otherwise imprinted with
a legend in substantially the following form:
THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED
OR QUALIFIED UNDER ANY STATE SECURITIES LAWS.
In addition, each certificate for Warrants issued to any
subsequent transferee of any such certificate shall be stamped or otherwise
imprinted with a legend in substantially the following form:
THIS WARRANT MAY NOT BE EXERCISED UNLESS SUCH TRANSACTION
DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR STATE
SECURITIES LAWS, OR UNLESS SUCH TRANSACTION IS REGISTERED OR QUALIFIED AS
REQUIRED.
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The Issuer agrees to issue any shares of Common Stock
issuable upon exercise of Warrants without any legend that indicates a
restriction on transferability at such times as (i) the holder thereof is
permitted to dispose of such shares of Common Stock pursuant to Rule 144(k)
under the Securities Act, (ii) such shares of Common Stock are sold to a
purchaser or purchasers who in the opinion of counsel to the seller or such
purchaser, in form and substance reasonably satisfactory to the Issuer and its
counsel) are able to dispose of such shares publicly without registration under
the Securities Act, or (iii) such shares of Common Stock are registered under
the Securities Act; provided in the case of (iii), that the holder of such
shares of Common Stock or the recipient upon such conversion or exercise
represents to the Issuer that such holder will only sell such shares, if at
all, pursuant to the plan of distribution described in an effective
registration statement.
10.2. Proposed Transfers. No transfer of any Restricted
Securities, other than a transfer covered by the proviso contained in the
introductory paragraph to this Section 10, may be made unless the proposed
transfer does not require registration under the Securities Act, or unless the
proposed transfer is registered as required. The Issuer may require an opinion
of counsel of such transferring holder (which counsel shall be reasonably
satisfactory to the Issuer) to the effect that such proposed transfer may be
effected without registration under the Securities Act. Each certificate
evidencing the Restricted Securities thus to be transferred (and each
certificate evidencing any untransferred balance of the Restricted Securities
evidenced by such Restricted Certificate) shall bear the restrictive legend set
forth in Subsection 10.1, unless in the opinion of the Issuer or the opinion of
such counsel, if requested, pursuant to Rule 144(k) of the Securities Act, such
legend is not required in order to ensure compliance with the Securities Act.
10.3. Demand Registration. Subject to the limitations
contained in Section 10.7, at any time after the earlier of the date that is
(i) [confidential portion omitted] after the Qualifying Offering (as defined in
the Investment Agreement) or (ii) [confidential portion omitted] if the
Qualifying Offering has not occurred by such date, the Issuer shall be
requested by holders of warrants exercisable for a majority of the Stock Units
then issuable upon the exercise of all warrants issued to the Investors (as
defined in the Investment Agreement) to effect the registration of any of its
Restricted Securities under the Securities Act, the Issuer shall promptly give
written notice of such proposed registration to all holders of outstanding
Restricted Securities and thereupon shall, as expeditiously as possible, use
its best efforts to effect the registration under the Securities Act by filing
pursuant to Rule 415 of the Securities Act a "shelf" registration statement on
Form S-3 (or, if the staff at the SEC takes the position that Form S-3 is not
available and holders of warrants exercisable for a majority of the Stock Units
then issuable upon the exercise of all warrants issued to the Investors so
request, on Form S-1) covering all Restricted Securities, the holder or holders
of which shall have made written request to the Issuer for registration thereof
within 30 days after the giving of such written notice by the Issuer, all to
the extent required to permit the disposition (in accordance with the intended
methods thereof, as aforesaid) by the prospective Seller or Sellers of the
Restricted Securities so registered; provided, that if Form S-3 is not
available, the Issuer shall notify the holders of warrants in writing of such
fact, which notice shall set forth the reasons therefor and the holders' right
to request registration on Form S-1. Any registration statement filed on Form
S-1 shall be maintained by the Issuer for a period of [confidential portion
omitted] and, if not so maintained shall not be deemed to count against the
number of effective registration statements pursuant to this Section 10.3
permitted to be made by holders pursuant to Section 10.7. Upon the Issuer's
request, the holder or holders making a request for registration shall promptly
provide the Issuer with description of the intended method of disposition of
such securities by the prospective Seller or Sellers. Sellers holding warrants
exercisable for a majority of the Stock Units then issuable upon the exercise
of all warrants issued to investors subject to such registration shall have the
right to select the managing underwriter or underwriters for the offering of
such Restricted Securities.
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In the case of an underwritten public offering of Restricted
Securities to be so registered, if the managing underwriter advises that the
number of securities to be so registered is too large a number to be reasonably
sold, the number of such securities sought to be registered by each Seller
shall be reduced, pro rata in proportion to the number of securities sought to
be registered by all Sellers, to the extent necessary to reduce the number of
securities to be registered to the number recommended by the managing
underwriter.
From and after the date of this Agreement, the Issuer shall
not, nor shall it allow the holders of any securities of the Issuer to, include
any of their securities in any registration statement filed by the Issuer
pursuant to this Section 10 unless such inclusion will not reduce the amount of
the Restricted Stock included therein.
10.4. Piggyback Registration. If the Issuer at any time
proposes to register any shares of Common Stock or warrants to purchase Common
Stock under the Securities Act on Form X-0, X-0 or S-3 or the equivalent
(otherwise than pursuant to Subsection 10.3), whether of its own accord or at
the request of any holder or holders of such securities, it shall each such
time give written notice to all holders of outstanding Restricted Securities of
its intention so to do.
Upon the written request of a holder or holders of any such
Restricted Securities given within 30 days after receipt of any such notice,
the Issuer shall use its best efforts to cause all Restricted Securities, the
holder or holders of which shall have so requested registration thereof, to be
registered under the Securities Act pursuant to such registration statement,
all to the extent required to permit the sale or other disposition (in
accordance with the intended methods thereof as aforesaid) by the prospective
Seller or Sellers of the Restricted Securities so registered; provided,
however, that the Issuer shall not be obligated to include any Restricted
Securities in the registration statement with respect to the Qualifying
Offering (as defined in the Investment Agreement). Upon the Issuer's request,
the holder or holders making a request for registration shall promptly provide
the Issuer with a description of the intended method of disposition of such
securities by the prospective Seller or Sellers.
If the managing underwriter for the respective offering
advises the Issuer in writing that the inclusion in such registration of some
or all of the Restricted Securities sought to be registered by the Seller or
Sellers in its opinion shall cause the proceeds or the price per unit the
Issuer or the requesting or demanding holder of securities shall derive from
such registration to be reduced or that the number of securities to be
registered at the instance of the Issuer or such requesting or demanding holder
plus the number of securities sought to be registered by the Sellers is too
large a number to be reasonably sold, the number of shares of Restricted
Securities shall be reduced pro rata, along with the securities sought to be
registered by any other holder or holders of Common Stock (other than any
holder exercising a demand registration right), to the extent necessary to
reduce the number of securities to be registered to the number recommended by
the managing underwriter.
The Issuer shall not grant to any Person at any time on or
after the Effective Date a "piggyback" right to request the Issuer to register
any securities of the Issuer under the Securities Act unless such right
provides that if the managing underwriter for the respective Sellers believes
that sale of such securities would adversely affect the amount of, or price at
which, the respective Restricted Securities being registered under this Section
10.4 can be sold, then, the amount of such securities that may be registered
and sold shall be reduced pro rata with the Restricted Securities in accordance
with the immediately preceding paragraph.
In the case of an underwritten public offering of Common
Stock by the Company, each Seller, if requested by the managing underwriter,
shall agree to exercise its rights pursuant to this Section 10.4 only through
participation in such underwritten public offering.
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10.5. Registration Procedures. (a) If and whenever the Issuer
is required by the provisions of this Section 10 to use its best efforts to
effect the registration of any of the Restricted Securities under the
Securities Act, the Issuer shall (except as otherwise provided in this
Warrant), as expeditiously as possible:
(i) Prepare and file with the SEC a registration statement
with respect to such Warrant Stock and use its best efforts to cause such
registration to become effective as provided in Subsection 10.3 or 10.4, and
upon the request of any holder of Warrant Stock keep such registration
statement effective for so long as any holder of Restricted Securities desires
to dispose of the securities covered by such registration statement (or, in the
case of a filing on Form S-1, [confidential portion omitted]), or, if earlier,
until such Warrant Stock may be sold under Rule 144(k) (provided that the
Issuer's transfer agent has accepted an instruction from the Issuer to such
effect). The Issuer may suspend or delay the effectiveness of a registration
statement with respect to such Warrant Stock or the use of any prospectus used
in connection with any such registration effected pursuant to this subsection
(i) only in the event, and for such period of time (not to exceed [confidential
portion omitted]) as, such a suspension as the Issuer concludes in its
reasonable judgment is required by applicable securities laws or the rules and
regulations of the Securities and Exchange Commission. The Issuer shall use its
best efforts to cause such suspension to terminate at the earliest possible
date; provided that the Issuer shall be permitted to maintain such suspension
if, and only for so long as, the Board of Directors of the Issuer shall, in
good faith, determine that failure to maintain such suspension is reasonably
likely to be seriously detrimental (excluding detriment resulting from the
price of the Common Stock or the exercise of this Warrant) to the Issuer or
would interfere with a material transaction that the Issuer is then
contemplating.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement and notify the holders of
Restricted Securities of the filing and effectiveness of such registration
statement and any amendments or supplements.
(iii) Furnish to each holder of Restricted Securities such
numbers of copies of a current prospectus conforming with the requirements of
the Securities Act, copies of the registration statement, any amendment or
supplement thereto and any documents incorporated by reference therein and such
other documents as such holder of Restricted Securities may reasonably require
in order to facilitate the disposition of Warrant Stock owned by such holder of
Restricted Securities.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or "Blue Sky" laws of such jurisdictions as shall be reasonably requested by
the holder of Restricted Securities, provided that the Issuer shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
(v) Notify each holder of Restricted Securities immediately
of the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing, and use its best efforts promptly to update and/or
correct such prospectus.
(vi) In connection with an underwritten offering, furnish, at
the request of any holder of Restricted Securities, (1) an opinion of counsel
of the Issuer, dated the closing date of the offering statement, in form and
substance reasonably satisfactory to such holder and its counsel and covering,
without limitation, such matters as the due authorization and issuance of the
securities being registered
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and compliance with securities laws by the Issuer in connection with the
authorization, issuance and registration thereof, and (2) if such registration
is made in connection with an underwritten public offering, a letter or letters
of the Issuer's independent public accountants in form and substance reasonably
satisfactory to the holder, such holder's lead underwriter and their respective
counsel.
(vii) Use its best efforts to list the Warrant Stock covered
by such registration statement with any securities exchange or market on which
the Common Stock is then listed.
(viii) Make available for inspection by the holder of
Restricted Securities, upon request, all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to
reporting requirements under the Securities Exchange Act of 1934, as amended,
including material filed pursuant to Section 13(a) or 15(d) and filed
subsequent to the Effective Date and require the Issuer's officers, directors
and employees to supply all information reasonably requested by any holder of
Restricted Securities in connection with such registration statement.
(ix) Permit an offering made pursuant to a registration made
at the request of requisite holders under Section 10.3 to be underwritten by an
underwriter of recognized national standing and enter into such agreements with
such underwriter (including agreements to indemnify) and cause delivery of such
legal opinions and letters of independent public accountants as is customary in
underwritten public offerings in accordance with clause (vi), in each case, at
the Issuer's expense.
(b) Each Seller will furnish to the Issuer in connection
with any registration under this Section 10 such information regarding itself,
the Restricted Stock and other securities of the Issuer held by it, and the
intended method of disposition of such securities as shall be reasonably
required to effect the registration of the Restricted Stock held by such
Seller. The intended method of disposition (Plan of Distribution) of such
securities as so provided by any such holder shall be included without
alteration in the registration statement covering the Restricted Stock and
shall not be changed without the written consent of such holder.
10.6. Indemnification. (a) The Issuer shall indemnify, defend
and hold harmless each Seller and each of its officers, directors, employees,
agents, partners or controlling persons (within the meaning of the Act) (each,
a "Holder Indemnified Party") from and against, and shall reimburse such Holder
Indemnified Party with respect to, any and all claims, suits, demands, causes
of action, losses, damages, liabilities, costs or expenses ("Liabilities") to
which such Holder Indemnified Party may become subject under the Securities Act
or otherwise, arising from or relating to (A) any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto, or (B)
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the Issuer shall not be liable with respect to any Seller in any such case to
the extent that any such liability arises out of or is based upon an untrue
statement or omission so made in such registration statement, prospectus or
amendment or supplement thereto in reliance upon and in strict conformity with
written information furnished in an instrument duly executed by such Seller
specifically for use in the registration statement; provided further, that the
Issuer shall not be liable with respect to any Seller in any such case to the
extent that any such Liability arises out of or is based upon an untrue
statement or omission made in any preliminary prospectus if (i) such Seller
under an obligation to send or deliver a copy of the prospectus with or prior
to the delivery of written confirmation of the sale of Restricted Stock to the
person asserting such Liability who purchased such Restricted Stock that are
the subject thereof from such Seller failed to do so and (ii) the prospectus
would have completely corrected such untrue statement or omission and if,
having previously been furnished by or on behalf of the Issuer with copies of
the prospectus so correcting such untrue statement or omission and having been
obligated to deliver such prospectus, such
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Seller thereafter failed to deliver such prospectus prior to or concurrently
with the sale of Restricted Stock to the person asserting such Liability who
purchased such Restricted Stock that is the subject thereof from such Seller;
and provided further, that the Issuer shall not be liable with respect to any
Seller in any such case to the extent that any Liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission in the prospectus, if such untrue statement or alleged untrue
statement, omission or alleged omission is completely corrected in an amendment
or supplement to the prospectus and if, having previously been furnished by or
on behalf of the Issuer with copies of the prospectuses so amended or
supplemented and having been obligated to deliver such prospectuses, such
Seller thereafter failed to deliver such prospectus as so amended or
supplemented, prior to or concurrently with the sale of Restricted Stock to the
person asserting such Liability who purchased such Restricted Stock that is the
subject thereof from such Seller.
(b) In the event of any registration under the Securities Act
of Restricted Stock pursuant to Section 10, each Seller hereby severally agrees
to indemnify, defend and hold harmless the Issuer, and its officers, directors,
employees, agents, partners or controlling persons (within the meaning of the
Act) (each, an "Issuer Indemnified Party") from and against, and shall
reimburse such the Issuer Indemnified Party with respect to, any and all
Liabilities to which such the Issuer Indemnified Party may become subject under
the Securities Act or otherwise, arising from or relating to (A) any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any amendment or
supplement thereto, or (B) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading;
provided, that such holders will be liable in any such case to the extent, and
only to the extent, that any such liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in such registration statement, prospectus or amendment or supplement
thereto in reliance upon and in strict conformity with written information
furnished in an instrument duly executed by such holder specifically for use in
the preparation thereof; provided further that in no case shall any such holder
be liable in any such case in an amount in excess of the net proceeds received
by such holder upon the sale of Restricted Stock pursuant to such registration
statement, prospectus or amendment or supplement thereto.
(c) (i) Promptly after receipt by any Holder Indemnified
Party of notice of the commencement of any action, such Holder Indemnified
Party shall, if a claim in respect thereof is to be made against the Issuer
hereunder, notify the Issuer in writing thereof but the omission so to notify
the Issuer shall not relieve the Issuer from any Liability that it may have to
the Holder Indemnified Party other than under this section and shall only
relieve it from any Liability that it may have to the Holder Indemnified Party
under this section if and to the extent the Issuer is actually prejudiced by
such omission. In case any such action shall be brought against any Holder
Indemnified Party and such Holder Indemnified Party shall notify the Issuer of
the commencement thereof, the Issuer shall be entitled to participate in and,
to the extent it shall wish, to assume and undertake the defense thereof with
counsel reasonably satisfactory to such Holder Indemnified Party, and, after
notice from such Seller to the Holder Indemnified Party of its election so to
assume and undertake the defense such Seller shall not be liable to the Holder
Indemnified Party under this section for any legal expenses subsequently
incurred by the Holder Indemnified Party in connection with the defense thereof
other than reasonable costs of investigation and of liaison with counsel so
selected; provided, however, that if the defendants in any such action include
both the Issuer and such Holder Indemnified Party and the Holder Indemnified
Party shall have reasonably concluded that there may be reasonable defenses
available to it that are different from or additional to those available to the
Issuer or if the interests of the Holder Indemnified Party reasonably may be
deemed to conflict with the interests of the Issuer, the Holder Indemnified
Party shall have the right to select a separate counsel and to assume such
legal defenses and otherwise to participate in the defense of such action, with
the reasonable expenses and fees of such separate counsel and other reasonable
expenses related to such participation to be reimbursed by the Issuer as
incurred. In
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clarification of the foregoing, the Issuer shall pay the reasonable expenses
and fees of one separate counsel whose selection is approved by the largest
group of similarly situated Holder Indemnified Parties as measured by the
aggregate par value of such Restricted Stock owned by such group. Any Holder
Indemnified Party who chooses not to be represented by the foregoing separate
counsel shall be entitled, at its own expense, to be represented by counsel of
its own selection.
(ii) Promptly after receipt by any Issuer Indemnified Party
of notice of the commencement of any action, such Issuer Indemnified Party
shall, if a claim in respect thereof is to be made against any Seller
hereunder, notify such Seller in writing thereof but the omission so to notify
such Seller shall not relieve such Seller from any Liability that it may have
to the Issuer Indemnified Party other than under this section and shall only
relieve it from any Liability that it may have to the Issuer Indemnified Party
under this section if and to the extent such Seller is actually prejudiced by
such omission. In case any such action shall be brought against any Issuer
Indemnified Party and such Issuer Indemnified Party shall notify Seller of the
commencement thereof, such Seller shall be entitled to participate in and, to
the extent it shall wish, to assume and undertake the defense thereof with
counsel reasonably satisfactory to such Issuer Indemnified Party, and, after
notice from such Seller to the Issuer Indemnified Party of its election so to
assume and undertake the defense such Seller shall not be liable to the Issuer
Indemnified Party under this section for any legal expenses subsequently
incurred by the Issuer Indemnified Party in connection with the defense thereof
other than reasonable costs of investigation and of liaison with counsel so
selected; provided, however, that if the defendants in any such action include
both the Sellers and such Issuer Indemnified Party and the Issuer Indemnified
Party shall have reasonably concluded that there may be reasonable defenses
available to it that are different from or additional to those available to the
Sellers or if the interests of the Issuer Indemnified Party reasonably may be
deemed to conflict with the interests of the Sellers, the Issuer Indemnified
Party together with all other defendant Issuer Indemnified Parties shall have
the right to select one separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the reasonable
expenses and fees of such separate counsel and other reasonable expenses
related to such participation to be reimbursed by such Sellers as incurred.
10.7. Expenses; Limitations on Registration. (a) With respect
to the inclusion of Restricted Stock in a registration statement pursuant to
Section 10, all fees, costs and expenses of and incidental to such
registration, inclusion and public offering shall be borne by the Issuer;
provided, however, that any securityholders participating in such registration
shall bear their pro-rata share of the underwriting discounts and commissions,
if any, incurred by them in connection with such registration.
(b) The fees, costs and expenses of registration to be borne
by the Issuer as provided in this Section 10 shall include, without limitation,
all registration, filing and NASD fees, listing fees, printing expenses, fees
and disbursements of counsel and accountants for the Issuer, and all legal fees
and disbursements and other expenses of complying with state securities or Blue
Sky laws of any jurisdiction or jurisdictions in which securities to be offered
are to be registered and qualified. Subject to appropriate agreements as to
confidentiality, the Issuer shall make available to counsel for the Sellers its
documents and personnel for due diligence purposes. Except as otherwise
provided herein, fees and disbursements of counsel and accountants for the
selling securityholders shall be borne by the respective selling
securityholders.
(c) The holders of all Restricted Securities shall be
entitled to an aggregate of [confidential portion omitted] effective
registrations pursuant to requests made under Section 10.3 and an unlimited
number of registrations pursuant to requests made under Section 10.4; provided
that any such registration request made by the requisite number of holders
which request shall be withdrawn (other than by reason of the Company's failure
to perform its obligations hereunder) by the holders of a majority in number of
shares evidenced or covered by the Restricted Securities sought to be so
registered, after the
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respective registration statement shall have become effective, shall be treated
as an "effective" registration for purposes of this Warrant.
(d) Notwithstanding the rights of the holders pursuant to
Sections 10.3 and 10.4, the Issuer shall have no obligation to effect a
registration for any securities that are eligible for resale pursuant to Rule
144(k) under the Securities Act, provided that the Issuer's transfer agent has
accepted an instruction from the Company specifying that such securities are
eligible for sale without restriction pursuant to Rule 144(k).
SECTION 11. LIMITATION OF LIABILITY. No provision hereof, in
the absence of affirmative action by the Holder to purchase shares of Warrant
Stock, and no mere enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of such Holder for the purchase price
of the Warrant Stock or as a stockholder of the Issuer, whether such liability
is asserted by the Issuer or by creditors of the Issuer.
SECTION 12. LOSS, DESTRUCTION OF WARRANT CERTIFICATES. Upon
receipt of evidence satisfactory to the Issuer of the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
(the original Warrant holder's or any other institutional Warrant holder's
indemnity being satisfactory indemnity in the event of loss, theft or
destruction of any Warrant owned by such original or institutional holder), or,
in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer shall make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing
the right to purchase the same aggregate number of shares of Common Stock.
SECTION 13. FURNISH INFORMATION. The Issuer agrees that it
shall deliver to the Holder promptly after their becoming available copies of
all financial statements, reports and proxy statements that the Issuer shall
have sent to its stockholders generally.
SECTION 14. AMENDMENTS; LIKE TREATMENT OF HOLDERS OF
WARRANTS. The terms of this Warrant and all other warrants issued to Investors
(as defined in the Investment Agreement) may be amended, and the observance of
any term therein may be waived, but only with the written consent of the
holders of warrants evidencing a majority in number of the total number of
Stock Units at the time purchasable upon the exercise of all then outstanding
warrants issued to Investors, provided that no such action may change the
number of shares of stock comprising a Stock Unit or the Exercise Price,
without the written consent of the holders of warrants evidencing [confidential
portion omitted] in number of the total number of Stock Units at the time
purchasable upon the exercise of all then outstanding warrants. For the
purposes of determining whether the holders of outstanding warrants issued to
Investors entitled to purchase a requisite number of Stock Units at any time
have taken any action authorized by this Warrant, any warrants owned by the
Issuer or any Affiliate of the Issuer (other than an institutional investor
which may be deemed an Affiliate solely by reason of the ownership of warrants)
shall be deemed not to be outstanding. Neither the Issuer nor any of its
subsidiaries shall, directly or indirectly, pay or cause to the paid any
consideration, whether by way of interest, fee or otherwise, to any holder of
warrants issued to Investors for, or as an inducement to any consent, waiver or
amendment of any terms or provisions of such warrants issued to Investors
unless such consideration is offered to be paid to or agreed to be paid to all
such holders which so consent, waive or agree to amend in the time frame set
forth in solicitation documents relating to such consent, waiver or agreement.
Neither the Issuer nor any of its subsidiaries shall, directly or indirectly,
redeem or repurchase any warrants issued to Investors unless such offer of
redemption or repurchase is made pro rata to all holders of such warrants on
identical terms.
SECTION 15. OFFICE OF THE ISSUER. So long as this Warrant
remains outstanding, the Issuer shall maintain an office in the City of New
York where this Warrant may be presented for exercise,
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transfer, division or combination as provided in this Warrant. Such office
shall be at[___________________ _____________________________________________],
Attention: [__________], unless and until the Issuer shall designate and
maintain some other office for such purposes and deliver written notice thereof
to the holders of all outstanding Warrants.
SECTION 16. NOTICES GENERALLY. Except as otherwise provided
in this Warrant, any notice or other communication required or permitted to be
given under this Warrant shall be in writing and shall be effective (a) upon
hand delivery or delivery by telex (with correct answer back received),
telecopy or facsimile at the address or number designated below (if delivered
on a Business Day during normal business hours where such notice is to be
received), or the first Business Day following such delivery (if delivered
other than on a Business Day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid addressed to such address or upon
actual receipt of such mailing, whichever shall first occur, to any holder of a
Warrant at its last known address appearing on the books of the Issuer, or,
except as herein otherwise expressly provided, to the Issuer at its principal
executive office, CD Radio Inc., Sixth Floor, 0000 00xx Xxxxxx X.X.,
Xxxxxxxxxx, X.X. 00000; Facsimile (000) 000-0000; Attention: Xxxxx Xxxxxxxxx,
or such other address as shall have been furnished to the party giving or
making such notice, demand or delivery.
SECTION 17. SUCCESSORS AND ASSIGNS. This Warrant shall bind
and inure to the benefit of an be enforceable by the parties to this Warrant
and their respective successors and assigns, and, without limiting the
generality of the foregoing, shall inure to the benefit of and be enforceable
by each Person who shall from time to time be the Holder of this Warrant.
SECTION 18. GOVERNING LAW. This Warrant shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the such state's principles of conflict of laws.
SECTION 19. NO WAIVER; CUMULATIVE REMEDIES. No waiver by any
party of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement of this Agreement, nor
shall any delay or omission of any party to exercise any right under this
Agreement in any manner impair the exercise of any such right accruing to it
after such waiver. The rights, remedies, powers and privileges provided in this
Warrant are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
SECTION 20. SPECIFIC PERFORMANCE AND COUNSEL FEES. The Issuer
and the Holder agree that irreparable damage would occur in the event that any
of the provisions of this Warrant were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
Holder shall be entitled to an injunction or injunctions to prevent breaches of
this Warrant and to enforce specifically the terms and provisions of this
Warrant in any court of the United States or any state of the United States
having jurisdiction, this being in addition to any other remedy to which it may
be entitled at law or in equity. In addition, in the event the Holder is
required to enforce the terms and provisions of this Warrant and is successful
in doing so, it shall be reimbursed by the Issuer for all costs and expenses,
including legal fees, which it may incur in bringing such legal proceeding.
SECTION 21. SEVERABILITY. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under any present or future
law, and if the rights or obligations of any party under this Agreement will
not be materially and adversely affected thereby, (a) such provision will be
fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (c) the remaining provisions of this Agreement will remain in full
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force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Agreement.
IN WITNESS WHEREOF, the Issuer has caused this warrant to be
signed in its name by its President or a Vice President.
Dated: , 1996
--------
CD RADIO INC., a
Delaware corporation
By:
-----------------------------
Name:
Title:
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SUBSCRIPTION FORM
(to be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for and purchases Stock Units of CD RADIO INC., a
Delaware corporation, purchasable with this Warrant, and [herewith makes
payment therefor in the amount of $________ ,] [hereby tenders _________ Stock
Units as payment therefor,] all at the price and on the terms and conditions
specified in this Warrant and requests that certificates for the shares of
Common Stock of CD Radio Inc. hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
_____________________________________ whose address is ________________________
__________________________ and, if such Stock Units shall not include all of the
Stock Units issuable as provided in this Warrant, that a new Warrant of like
tenor and date for the balance of the Stock Units issuable thereunder (less any
Stock Units used for payment of the Exercise Price) be delivered to the
undersigned.
Dated:
-----------------------------------------------
(Signature of Registered owner)
-----------------------------------------------
(Street Address)
-----------------------------------------------
(City) (State) (Zip Code)
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ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all
of the rights of the undersigned under this Warrant, with respect to the number
of Stock Units set forth below:
No. of Stock
Name and Address of Assignee Units
---------------------------- ------------
and does hereby irrevocably constitute and appoint ____________________
Attorney to make sure transfer on the books of CD RADIO INC., a Delaware
corporation, maintained for such purpose, with full power of substitution in
the premises.
Dated:
-----------------------------
Signature
-----------------------------
Witness
NOTICE: The signature to the assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or any change whatever.
The signature to this assignment must be guaranteed by a bank
or trust company having an office or correspondent in Los
Angeles, California, or New York, New York, or by a firm
having membership on the New York Stock Exchange.
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