FORM OF
CD RADIO INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF
10 1/2% SERIES C CONVERTIBLE PREFERRED STOCK
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PURSUANT TO SECTION 151(g) OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
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CD Radio Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of the
Corporation (the "Board of Directors"), in a duly convened meeting thereof on
October 13, 1997, adopted the following resolution, which resolution remains in
full force and effect as of the date hereof:
WHEREAS, the Board of Directors is authorized, within the
limitations and restrictions stated in the Certificate of Incorporation of the
Corporation, to fix by resolution or resolutions the designation of each series
of Preferred Stock of the Corporation (the "Preferred Stock") and the powers,
preferences and relative, participating, optional or other special rights and
the qualifications, limitations or restrictions thereof, including, without
limiting the generality of the foregoing, such provisions as may be desired
concerning voting, redemption, dividends, dissolution or distribution of assets,
conversion or exchange, and such other subjects or matters as may be fixed by
resolutions of the Board of Directors under the General Corporation Law of
Delaware; and
WHEREAS, it is the desire of the Board of Directors of the
Corporation, pursuant to its authority as aforesaid, to authorize and fix the
terms of a series of Preferred Stock and the number of shares constituting such
series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized
such series of Preferred Stock on the terms and with the provisions herein set
forth:
1. Number of Shares; Designation. A total of 2,000,000 shares of
Preferred Stock of the Corporation are hereby designated as 10 1/2% Series C
Convertible Preferred Stock (the "Series C Preferred Stock"). The number of
authorized shares of Series C Preferred Stock may be decreased, at any time and
from time to time, by resolution of the Board of Directors of the Corporation;
provided, however, that no decrease shall reduce the authorized number of shares
of the series to a number less than the number of shares of Series C Preferred
Stock outstanding.
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2. Rank. The Series C Preferred Stock shall, with respect to
payment of dividends, redemption payments and rights upon liquidation,
dissolution or winding up of the affairs of the Corporation, (x) rank senior and
prior to the Common Stock, par value $.001 per share, of the Corporation (the
"Common Stock") and any other class or series of capital stock of the
Corporation that by its terms ranks junior to the Series C Preferred Stock as to
payment of dividends, redemption payments and rights upon liquidation,
dissolution or winding up of the affairs of the Corporation, (y) rank on a
parity with all Parity Dividend Stock (as defined in Section 3(a)) and all
Parity Liquidation Stock (as defined in Section 5(b)), and (z) rank junior to
the Corporation's 5% Delayed Convertible Preferred Stock and all Senior Dividend
Stock (as defined in Section 3(c)), all Senior Liquidation Stock (as defined in
Section 5(b)) and to any class or series of capital stock of the Corporation
(other than the Common Stock), whether currently issued or issued in the future,
that does not by its terms expressly provide that it ranks on a parity with or
junior to the Series C Preferred Stock as to dividends and rights upon
liquidation, dissolution or winding-up of the Corporation (which shall include,
for purposes of the foregoing, any entity with which the Corporation may be
merged or consolidated or to which all or substantially all the assets of the
Corporation may be transferred or which transfers all or substantially all of
its assets to the Corporation).
3. Dividends. (a)(1) Except as provided in Section 3(a)(2) hereof, the
holders of the issued and outstanding shares of the Series C Preferred Stock
shall be entitled to receive, as and when declared by the Board of Directors,
out of funds legally available therefor in the case of dividends paid in cash,
cumulative dividends at the annual rate per share of 10.5% of the sum of (x) the
Liquidation Preference (defined in Section 5 hereof) and (y) all accrued and
unpaid dividends, if any, whether or not declared, from the date of issuance of
the shares of Series C Preferred Stock to the applicable dividend payment date.
Dividends on shares of Series C Preferred Stock shall accrue quarterly at the
rate per share of 2.625% of the sum of (x) the Liquidation Preference and (y)
all accrued and unpaid dividends, if any, whether or not declared, from the
date of issuance of the shares of Series C Preferred Stock to the applicable
dividend payment date and shall be payable quarterly in arrears initially on
November 15, 2002 (the "First Scheduled Dividend Payment Date") and thereafter
on February 15, May 15, August 15 and November 15 of each year (each, a
"Dividend Payment Date"), except that if any Dividend Payment Date is not a
business day then the Dividend Payment Date shall be on the first immediately
succeeding business day (as used herein, the term "business day" shall mean any
day except a Saturday, Sunday or day on which banking institutions are legally
authorized to close in The City of New York). No dividends shall be paid to the
holders of Series C Preferred Stock prior to the First Scheduled Dividend
Payment Date, except as provided in Section 3(a)(2) hereof or unless prior to
such date, shares of Series C Preferred Stock are redeemed by the Corporation
pursuant to Section 4 hereof or purchased by the Corporation upon a Change of
Control (as defined herein) pursuant to Section 6 hereof, in which case the
holders of such shares of Series C Preferred Stock redeemed or purchased by the
Corporation shall be entitled to receive accrued dividends on the date of
redemption or purchase thereof, as the case may be.
(2) The holders of Series C Preferred Stock shall not be entitled
to receive any dividends on any shares of Series C Preferred Stock that are
converted into shares of
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Common Stock prior to the First Scheduled Dividend Payment Date unless such
shares of Series C Preferred Stock are converted on or prior to a redemption
date by holders of Series C Preferred Stock electing to convert such shares
after having received a notice of redemption pursuant to Section 4 hereof.
(3) Dividend on the Series C Preferred Stock may be paid, in the
sole discretion of the Board of Directors, either in (i) cash, (ii) shares of
Common Stock or (iii) any combination of cash or shares of Common Stock, and the
issuance of such shares of Common Stock pursuant to (ii) or (iii) shall
constitute full payment of any such dividend. Common Stock issued to pay
dividends shall be valued at the Current Market Rate on the date of payment. As
used herein, the "Current Market Rate" shall mean the average closing price of
the Common Stock as reported in The Wall Street Journal for the 20 consecutive
trading days prior to the date in question. All dividend payments paid with
respect to shares of Series C Preferred Stock shall be paid pro rata to the
holders entitled thereto. All shares of Common Stock issued as a dividend with
respect to shares of Series C Preferred Stock will thereupon be duly authorized,
validly issued, fully paid and non-assessable. In no event shall an election by
the Board of Directors to pay dividends, in full or in part, in cash or in
shares of Common Stock in lieu of payment, in full or in part, in cash preclude
the Board of Directors from electing either such alternative in respect of all
or any portion of any subsequent dividend. The Company shall not issue
fractional shares of Common Stock upon payment of any dividends in shares of
Common Stock and any amount of fractional shares of Common Stock otherwise
issuable upon the payment of any dividend in shares of Common Stock shall be
either paid in cash or accrued. If any shares of Common Stock to be issued for
the payment of dividends on the Series C Preferred Stock hereunder require
registration with or approval of any governmental authority under any federal or
state law before the shares may be issued, the Corporation shall in good faith
and as expeditiously as possible endeavor to cause the shares to be so
registered or approved.
(4) Dividends to be paid on a Dividend Payment Date shall be paid
to the holders of record of shares of the Series C Preferred Stock as they
appear on the stock register of the Corporation at the close of business on such
record dates (each, a "Dividend Payment Record Date"), which shall be not more
than 40 days nor fewer than 10 days preceding each Dividend Payment Date
thereof, as shall be fixed by the Board of Directors of the Corporation.
Dividends on account of arrears for any past dividend periods may be declared
and paid at any time, without reference to any regular Dividend Payment Date, to
the holders of record on such date, not exceeding 40 days nor fewer than 10 days
preceding the date on which dividends in arrears will be paid, as may be fixed
by the Board of Directors of the Corporation. Holders of shares of the Series C
Preferred Stock shall be entitled to receive dividends in preference to and in
priority over dividends upon the Common Stock and any other series or class of
the Corporation's capital stock that ranks junior as to dividends to the Series
C Preferred Stock ("Junior Dividend Stock") and shall be on a parity as to
dividends with any series or class of the Corporation's capital stock that
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does not rank senior or junior as to dividends with the Series C Preferred Stock
("Parity Dividend Stock"). The holders of shares of the Series C Preferred Stock
shall not be entitled to any dividends in excess of full cumulative dividends,
as herein provided. No interest shall be payable with respect to any dividend
payment or payments on the Series C Preferred Stock that may be in arrears for
any past dividend period.
(b) No dividends, other than dividends payable solely in Common
Stock, Junior Dividend Stock, or warrants or other rights to acquire such Common
Stock or Junior Dividend Stock, shall be paid or declared and set apart for
payment on, and no purchase, redemption or other acquisition shall be made by
the Corporation of, any Common Stock or Junior Dividend Stock unless and until
all accrued and unpaid dividends on the Series C Preferred Stock shall have been
paid or declared and set apart for payment without interest.
(c) If at any time the Corporation issues any class or series of
capital stock ranking senior and prior to the Series C Preferred Stock with
respect to the payment of dividends ("Senior Dividend Stock") and fails to pay
or declare and set apart for payment accrued and unpaid dividends on such Senior
Dividend Stock, in whole or in part, then (except to the extent allowed by the
terms of the Senior Dividend Stock) no dividend shall be paid or declared and
set apart for payment on the Series C Preferred Stock unless and until all
accrued and unpaid dividends with respect to the Senior Dividend Stock shall
have been paid or declared and set apart for payment, without interest. Except
as provided in Section 3(d) below, no dividends shall be paid or declared and
set apart for payment on any Parity Dividend Stock for any period unless the
Corporation has paid or declared and set apart for payment, or contemporaneously
pays or declares and sets apart for payment, on the Series C Preferred Stock all
accrued and unpaid dividends for all dividend payment periods terminating on or
prior to the date of payment of such dividends. Except as provided in Section
3(d) below, no dividends shall be paid or declared and set apart for payment on
the Series C Preferred Stock for any period unless the Corporation has paid or
declared and set apart for payment, or contemporaneously pays or declares and
sets apart for such payment, on any Parity Dividend Stock all accrued and unpaid
dividends for all dividend payment periods terminating on or prior to the date
of payment of such dividends.
(d) If at any time the Corporation has failed to pay accrued
dividends on any shares of Series C Preferred Stock on any Dividend Payment Date
or any Parity Dividend Stock on a stated payment date, as the case may be, the
Corporation shall not:
(i) purchase any shares of the Series C Preferred Stock or
Parity Dividend Stock (except for a consideration payable in
Common Stock or Junior Dividend Stock) or redeem fewer than all
of the shares of the Series C Preferred Stock and Parity Dividend
Stock then outstanding except for (x) the repurchase or
redemption of shares of the Series C Preferred Stock made pro
rata among the holders of the shares of the Series C Preferred
Stock then
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outstanding and (y) the repurchase or redemption made pro rata
with respect to all shares of the Series C Preferred Stock and
Parity Dividend Stock then outstanding so that the amounts
repurchased or redeemed shall in all cases bear to each other the
same ratio that, at the time of the repurchase or redemption, the
required redemption payments on the shares of the Series C
Preferred Stock and the other Parity Dividend Stock then
outstanding, respectively, bear to each other, or
(ii) permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase any Common
Stock, Junior Dividend Stock, shares of the Series C Preferred
Stock or Parity Dividend Stock, except to the same extent that
the Corporation could purchase such shares.
Unless and until all dividends accrued but unpaid in respect of
prior dividend payment periods on shares of the Series C Preferred Stock and any
Parity Dividend Stock at the time outstanding have been paid in full or a sum
sufficient for such payment is declared and set apart, as provided in the
preceding paragraph, all dividends accrued by the Corporation upon shares of the
Series C Preferred Stock or Parity Dividend Stock shall be declared pro rata
with respect to all shares of the Series C Preferred Stock and Parity Dividend
Stock then outstanding, so that the amounts of any dividends declared on shares
of the Series C Preferred Stock and on the Parity Dividend Stock shall in all
cases bear to each other the same ratio that, at the time of the declaration,
all accrued but unpaid dividends in respect of prior dividend payment periods on
shares of the Series C Preferred Stock and the other Parity Dividend Stock,
respectively, bear to each other.
4. Redemption. (a)(1) Optional Redemption. Except as provided in
subsections (a)(2) and (a)(3) of this Section 4, shares of the Series C
Preferred Stock shall not be redeemable prior to November 15, 2002. Thereafter,
subject to the restrictions in Section 3 above, the Corporation may redeem
shares of Series C Preferred Stock, in whole or in part, at the option of the
Corporation, to the extent it has funds legally available therefor in the case
of dividends paid in cash, at the following redemption prices (expressed as
percentages of the Liquidation Preference thereof) per share if redeemed during
the 12-month period beginning November 15 in the year indicated below:
Year Percentage
- ---- ----------
- -------------------------------------------------------
2002........................................ 105.25%
2003........................................ 102.63%
2004........................................ 101.81%
2005 and thereafter......................... 100.00%
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plus, in each case, an amount equal to the dividends accrued and unpaid thereon,
if any, whether or not declared, to the redemption date.
(2) Special Redemption. (A) From November 15, 1999 to November
15, 2002, the Corporation may redeem shares of Series C Preferred Stock, in
whole or in part, in the sole discretion of the Board of Directors, to the
extent it has funds legally available therefor in the case of dividends paid in
cash, at the redemption price of 100% of the Liquidation Preference thereof,
plus an amount equal to the dividends accrued and unpaid thereon, if any,
whether or not declared, to the redemption date, if the Current Market Price of
the Common Stock on the date of the notice of redemption (described below)
equals or exceeds $31.50 per share. The $31.50 per share benchmark shall be
subject to adjustment upon the occurrence of certain events in the same manner
as the Conversion Price (defined herein) shall be subject to adjustment as set
forth in Section 6(f) hereof.
(B) Within 30 days of the closing date of the initial public
offering by the Corporation of debt securities in excess of $50,000,000 pursuant
to a registration statement filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act") or pursuant
to Rule 144A under the Securities Act, the Corporation may redeem up to 50% of
the outstanding shares of Series C Preferred Stock, to the extent it has funds
legally available therefor in the case of dividends paid in cash, at the
redemption price of 100% of the Liquidation Preference thereof, plus an amount
equal to the dividends accrued and unpaid thereon, if any, whether or not
declared, to the redemption date.
(3) Mandatory Redemption. On November 15, 2012 (the "Mandatory
Redemption Date"), the Corporation shall redeem all outstanding shares of Series
C Preferred Stock, to the extent it has funds legally available therefor in the
case of dividends paid in cash, at the redemption price of 100% of the
Liquidation Preference thereof, plus an amount equal to the dividends accrued
and unpaid thereon, if any, whether or not declared, to the redemption date.
(4) Payment of Redemption Price. (a) The amount of the redemption
price on any shares of Series C Preferred Stock redeemed, on any redemption set
forth herein, shall be paid in cash (to the extent funds are legally available
therefor) and any accrued and unpaid dividends to be paid on the shares of
Series C Preferred Stock redeemed on such redemption date may be paid in cash
(to the extent funds are legally available therefor) or shares of Common Stock,
or any combination thereof, in the sole discretion of the Board of Directors as
provided in Section 3(a)(3) hereof.
(b) Not less than 15 days nor more than 40 days (such date as
fixed by the Board of Directors of the Corporation referred to herein as the
"Redemption Record Date") prior to the date fixed for any redemption of shares
of the Series C Preferred Stock pursuant
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to this Section 4, a notice specifying the time and place of the redemption and
the number of shares to be redeemed shall be given by first class mail, postage
prepaid, to the holders of record on the Redemption Record Date of the shares of
the Series C Preferred Stock to be redeemed at their respective addresses as the
same shall appear on the books of the Corporation, calling upon each holder of
record to surrender to the Corporation on the redemption date at the place
designated in the notice such holder's certificate or certificates representing
the number of shares specified in the notice of redemption. Neither failure to
mail such notice, nor any defect therein or in the mailing thereof, to any
particular holder shall affect the sufficiency of the notice or the validity of
the proceedings for redemption with respect to the other holders. Any notice
mailed in the manner herein provided shall be conclusively presumed to have been
duly given whether or not the holder receives the notice. On or after the
redemption date, each holder of shares of Series C Preferred Stock to be
redeemed shall present and surrender such holder's certificate or certificates
for such shares to the Corporation at the place designated in the redemption
notice and thereupon the redemption price of the shares, and any accrued and
unpaid dividends thereon to the redemption date, shall be paid to or on the
order of the person whose name appears on such certificate or certificates as
the owner thereof, and each surrendered certificate shall be canceled. In case
fewer than all the shares represented by any such certificate are redeemed, a
new certificate shall be issued representing the unredeemed shares.
(c) If a notice of redemption has been given pursuant to this
Section 4 and if, on or before the redemption date, the funds (or shares of
Common Stock if any dividends are to be paid in shares of Common Stock),
necessary for such redemption (including all dividends on the shares of Series C
Preferred Stock to be redeemed that will accrue to the redemption date) shall
have been set aside by the Corporation, separate and apart from its other funds
(or reserved and authorized for issuance if any dividends are to be paid in
shares of Common Stock), in trust for the pro rata benefit of the holders of the
shares of Series C Preferred Stock so called for redemption, then,
notwithstanding that any certificates for such shares of Series C Preferred
Stock have not been surrendered for cancellation, on the redemption date
dividends shall cease to accrue on the shares of the Series C Preferred Stock to
be redeemed, and at the close of business on the date on which such funds have
been segregated and set aside by the Corporation as provided in this Section
4(c), the holders of such shares shall cease to be stockholders with respect to
those shares, shall have no interest in or claims against the Corporation by
virtue thereof and shall have no voting or other rights with respect thereto,
except the conversion rights provided in subsection (d) of this Section 4 and
Section 6 below and the right to receive the moneys payable (or shares of Common
Stock issued if any dividends are to be paid in shares of Common Stock) upon
such redemption, without interest thereon, upon surrender (and endorsement, if
required by the Corporation) of their certificates, and the shares of Series C
Preferred Stock evidenced thereby shall no longer be outstanding. Subject to
applicable escheat laws, any moneys so set aside (or shares of Common Stock
authorized and reserved if any dividends are to be paid in shares of Common
Stock) by the Corporation and unclaimed at the end of two years from
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the redemption date shall revert to the general funds of the Corporation (or be
released from the reservation thereof in the case of shares of Common Stock),
after which reversion the holders of such shares so called for redemption shall
look only to the general funds of the Corporation for the payment of the
redemption price, without interest. Any interest accrued on funds so deposited
shall belong to the Corporation and be paid thereto from time to time.
(d) If a notice of redemption has been given pursuant to this
Section 4 and any holder of shares of Series C Preferred Stock shall, prior to
the close of business on the business day immediately preceding the redemption
date, give written notice to the Corporation pursuant to Section 6 below of the
conversion of any or all of the shares to be redeemed held by the holder
(accompanied by a certificate or certificates for such shares, duly endorsed or
assigned to the Corporation, and any necessary transfer tax payment, as required
by Section 6 below), then such redemption shall not become effective as to such
shares to be converted and such conversion shall become effective as provided in
Section 6 below, whereupon any funds deposited by the Corporation for the
redemption of such shares shall (subject to any right of the holder of such
shares to receive the dividend payable thereon as provided in Section 6 below)
immediately upon such conversion be returned to the Corporation or, if then held
in trust by the Corporation, shall automatically and without further corporate
action or notice be discharged from the trust.
(e) In every case of redemption of fewer than all of the
outstanding shares of the Series C Preferred Stock pursuant to this Section 4,
the shares to be redeemed shall be selected pro rata or by lot or in such other
manner as the Board of Directors of the Corporation may determine, as may be
prescribed by resolution of the Board of Directors of the Corporation, provided
that only whole shares shall be selected for redemption.
5. Liquidation. (a) In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, the holders of the
Series C Preferred Stock shall be entitled to receive $100.00 per share (the
"Liquidation Preference"), plus an amount equal to the accrued and unpaid
dividends thereon, whether or not declared, to the payment date.
(b) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, the holders of shares of Series C
Preferred Stock (i) shall not be entitled to receive the Liquidation Preference
of the shares held by them until payment in full or provision has been made for
the payment of all claims of creditors of the Corporation and the liquidation
preference of any class or series of capital stock ranking senior to the Series
C Preferred Stock with respect to redemption rights and rights upon liquidation,
dissolution or winding up of the affairs of the Corporation ("Senior Liquidation
Stock" and together with the Senior Dividend Stock, the "Senior Stock") shall
have been paid in full and (ii) shall be entitled to receive the Liquidation
Preference of such shares held by them in preference to and in priority over any
distributions upon the Common Stock and any other
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series or class of the Corporation's capital stock that ranks junior to the
Series C Preferred Stock as to redemption rights and rights upon liquidation,
dissolution or winding up of the affairs of the Corporation ("Junior Liquidation
Stock" and together with the Junior Dividend Stock, the "Junior Stock"). Upon
payment in full of the Liquidation Preference to which the holders of shares of
the Series C Preferred Stock are entitled, the holders of shares of the Series C
Preferred Stock shall not be entitled to any further participation in any
distribution of assets by the Corporation. Subject to clause (i) above, if the
assets of the Corporation are not sufficient to pay in full the Liquidation
Preference payable to the holders of shares of the Series C Preferred Stock and
the liquidation preference payable to the holders of any series or class of the
Corporation's capital stock, outstanding on the date hereof or hereafter issued,
that ranks on a parity with the Series C Preferred Stock as to redemption rights
and rights upon liquidation, dissolution or winding up of the affairs of the
Corporation ("Parity Liquidation Stock" and together with the Parity Dividend
Stock, the "Parity Stock"), the holders of all such shares shall share ratably
in accordance with the respective preferential amounts payable on such shares in
any distribution.
(c) For the purposes of this Section 5, neither the voluntary
sale, conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets of
the Corporation nor the consolidation or merger of the Corporation with or into
any other entity shall be deemed to be a voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, unless such voluntary sale,
conveyance, exchange, transfer, consolidation or merger shall be in connection
with a plan of liquidation, dissolution or winding up of the Corporation.
6. Conversion. (a) Holders of shares of Series C Preferred Stock shall
have the right, exercisable at any time, to convert shares of Series C Preferred
Stock into shares of Common Stock at a conversion price (x) prior to the date of
the first underwritten public offering of the Company's Common Stock following
the initial issuance of the Series C Preferred Stock, of $21.00, and (y)
thereafter, of the equal to the lower of (i) $21.00 per share of Common Stock or
(ii) the public offering price of the Common Stock in the first underwritten
public offering of the Corporation's Common Stock following the initial issuance
of the Series C Preferred Stock, subject to adjustment as described below in
Section 6(f) (the "Conversion Price"). The number of shares of Common Stock into
which a share of Series C Preferred Stock shall be convertible (calculated as to
each conversion to the nearest 1/100th of a share) shall be determined by
dividing $100.00 by the Conversion Price then in effect. If more than one share
of Series C Preferred Stock shall be surrendered for conversion at one time by
the same record holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares of Series C Preferred Stock so surrendered. In the case of shares of
Series C Preferred Stock called for redemption, conversion rights shall expire
at the close of business on the business day immediately preceding the
redemption date. The holders of shares of Series C Preferred Stock that convert
such shares into shares of Common Stock on
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or after the First Scheduled Dividend Payment Date shall be entitled to receive
any accrued and unpaid dividends thereon, if any, whether or not declared,
payable in cash or shares of Common Stock, or any combination thereof, in the
sole discretion of the Board of Directors. The holders of Series C Preferred
Stock shall not be entitled to receive any dividends on any shares of Series C
Preferred Stock that are converted into shares of Common Stock prior to the
First Scheduled Dividend Payment Date unless such shares of Series C Preferred
Stock are converted on or prior to a redemption date by holders of Series C
Preferred Stock electing to convert such shares after having received a notice
of redemption pursuant to Section 4 hereof.
(b) Any holder of shares of Series C Preferred Stock electing to
convert the shares or any portion thereof in accordance with Section 6(a) above
shall give written notice to the Corporation (which notice may be given by
facsimile transmission) that such holder elects to convert the same and shall
state therein the number of shares of Series C Preferred Stock to be converted
and the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. Promptly thereafter, the
holder shall surrender the certificate or certificates of shares of Series C
Preferred Stock to be converted, duly endorsed, at the office of the Corporation
or any transfer agent for such shares, or at such other place designated by the
Corporation, provided that the Corporation shall at all times maintain an office
or agency in The City of New York for such purposes. The Corporation shall,
immediately upon receipt of such notice, issue and deliver to or upon the order
of such holder, against delivery of the certificates representing the shares of
Series C Preferred Stock that have been converted, a certificate or certificates
for the number of shares of Common Stock to which such holder shall be entitled
(in the number(s) and denomination(s) designated by such holder), and the
Corporation shall deliver to such holder a certificate or certificates for the
number of shares of Series C Preferred Stock that such holder has not elected to
convert. The conversion right with respect to any shares of Series C Preferred
Stock shall be deemed to have been exercised at the date upon which the
certificates therefor (and the payment required by Section 6(d), if applicable),
shall have been so delivered, and the person or persons entitled to receive the
Common Stock issuable upon conversion shall be treated for all purposes as the
record holder or holders of such Common Stock upon that date.
(c) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series C Preferred Stock. Instead of any fractional
share of Common Stock otherwise issuable upon conversion of any shares of Series
C Preferred Stock, the Corporation shall pay a cash adjustment in respect of
such fraction in an amount equal to the same fraction of the Sale Price of the
Common Stock at the close of business on the day of conversion. As used herein,
"Sale Price" means the closing sales price of the Common Stock as reported in
The Wall Street Journal. In the absence of a Sale Price, the Board of Directors
shall in good faith determine the current market price on such basis as it
considers appropriate and such current market price shall be used to calculate
the cash adjustment.
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(d) If a holder converts shares of Series C Preferred Stock, the
Corporation shall pay any documentary, stamp or similar issue or transfer tax
due on the issue of Common Stock upon the conversion or due upon the issuance of
a new certificate or certificates for any shares of Series C Preferred Stock not
converted. The holder, however, shall pay any such tax that is due because any
such shares of the Common Stock or of the Series C Preferred Stock are issued in
a name other than the name of the holder.
(e) The Corporation shall reserve out of its authorized but
unissued Common Stock held in treasury enough shares of Common Stock to permit
the conversion of all of the then-outstanding shares of Series C Preferred
Stock. For the purposes of this Section 6(e), the full number of shares of
Common Stock then issuable upon the conversion of all then-outstanding shares of
Series C Preferred Stock shall be computed as if at the time of computation all
outstanding shares of Series C Preferred Stock were held by a single holder. The
Corporation shall from time to time, in accordance with the laws of the State of
Delaware and its certificate of incorporation, increase the authorized amount of
its Common Stock if at any time the authorized amount of its Common Stock
remaining unissued shall not be sufficient to permit the conversion of all
shares of Series C Preferred Stock at the time outstanding. If any shares of
Common Stock required to be reserved for issuance upon conversion of shares of
Series C Preferred Stock hereunder require registration with or approval of any
governmental authority under any federal or state law before the shares may be
issued upon conversion, the Corporation shall in good faith and as expeditiously
as possible endeavor to cause the shares to be so registered or approved. All
shares of Common Stock issued upon conversion of the shares of Series C
Preferred Stock shall be validly issued, fully paid and nonassessable.
(f) The Conversion Price shall be subject to adjustment as
follows:
(i) In case the Corporation shall (A) pay a dividend on
any class of its capital stock in shares of its Common Stock, (B)
subdivide its outstanding shares of Common Stock into a greater
number of shares or (C) combine its outstanding shares of Common
Stock into a smaller number of shares, the Conversion Price in
effect immediately prior thereto shall be adjusted (as provided
below) so that the holders of any shares of Series C Preferred
Stock thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock which such holder
would have owned or have been entitled to receive immediately
following such action had such shares of Series C Preferred Stock
been converted immediately prior to such time. The Conversion
Price as adjusted shall be determined by multiplying the
Conversion Price at which the shares of Series C Preferred Stock
were theretofore convertible by a fraction of which the
denominator shall be the number of shares of Common Stock
outstanding immediately following such action and of which the
numerator shall be the number of
12
shares of Common Stock outstanding immediately prior thereto.
Such adjustment shall be made whenever any event listed above
shall occur and shall become effective retroactively immediately
after the record date in the case of a dividend and immediately
after the effective date in the case of a subdivision or
combination.
(ii) In case the Corporation shall issue rights or
warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per
share less than the Current Market Price per share of Common
Stock at the record date therefor, or in case the Corporation
shall issue to all holders of its Common Stock other securities
convertible into or exchangeable for Common Stock for a
consideration per share of Common Stock deliverable upon
conversion or exchange thereof less than the Current Market
Price, then the Conversion Price in effect immediately prior
thereto shall be adjusted as provided below so that the
Conversion Price therefor shall be equal to the price determined
by multiplying (A) the Conversion Price at which shares of Series
C Preferred Stock were theretofore convertible by (B) a fraction
of which the denominator shall be the sum of (1) the number of
shares of Common Stock outstanding on the date of issuance of the
convertible or exchangeable securities, rights or warrants and
(2) the number of additional shares of Common Stock offered for
subscription or purchase, or issuable upon such conversion or
exchange, and of which the numerator shall be the sum of (1) the
number of shares of Common Stock outstanding on the date of
issuance of such convertible or exchangeable securities, rights
or warrants and (2) the number of additional shares of Common
Stock which the aggregate offering price of the number of shares
of Common Stock so offered would purchase at the Current Market
Price per share of Common Stock. Such adjustment shall be made
whenever such convertible or exchangeable securities, rights or
warrants are issued, and shall become effective immediately after
the record date for the determination of stockholders entitled to
receive such securities. However, upon the expiration of any
right or warrant to purchase Common Stock, the issuance of which
resulted in an adjustment in the Conversion Price pursuant to
this Section 6(f)(ii), if any such right or warrant shall expire
and shall not have been exercised, the Conversion Price shall be
recomputed immediately upon such expiration and effective
immediately upon such expiration shall be increased to the price
it would have been (but reflecting any other adjustments to the
Conversion Price made pursuant to the provisions of this Section
6(f) after the issuance of such rights or warrants) had the
adjustment of the Conversion Price made upon the issuance of such
rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common
Stock actually purchased upon the exercise of such rights or
warrants. No further adjustment
13
shall be made upon exercise of any right, warrant, convertible
security or exchangeable security if any adjustment shall have
been made upon issuance of such security.
(iii) In case the Corporation shall pay a dividend to all
holders of its Common Stock (including any dividend paid in
connection with a consolidation or merger in which the
Corporation is the continuing corporation) of any shares of
capital stock of the Corporation or its subsidiaries (other than
Common Stock) or evidences of its indebtedness or assets
(excluding cash dividends payable solely in cash that may from
time to time be fixed by the Board of Directors, or dividends or
distributions in connection with the liquidation, dissolution or
winding up of the Corporation) or rights or warrants to subscribe
for or purchase any of its securities or those of its
subsidiaries or securities convertible or exchangeable for Common
Stock (excluding those securities referred to in Section 6(f)(ii)
above), then in each such case the Conversion Price in effect
immediately prior thereto shall be adjusted as provided below so
that the Conversion Price thereafter shall be equal to the price
determined by multiplying (A) the Conversion Price in effect on
the record date mentioned below by (B) a fraction, the numerator
of which shall be the Current Market Price per share of Common
Stock on the record date mentioned below less the then fair
market value (as determined by the Board of Directors, whose good
faith determination shall be conclusive) as of such record date
of the assets, evidences of indebtedness or securities so paid
with respect to one share of Common Stock, and the denominator of
which shall be the Current Market Price per share of Common Stock
on such record date; provided, however, that in the event the
then fair market value (as so determined) so paid with respect to
one share of Common Stock is equal to or greater than the Current
Market Price per share of Common Stock on the record date
mentioned above, in lieu of the foregoing adjustment, adequate
provision shall be made so that each holder of shares of the
Series C Preferred Stock shall have the right to receive the
amount and kind of assets, evidences of indebtedness, or
securities such holder would have received had such holder
converted each such share of Series C Preferred Stock immediately
prior to the record date for such dividend. Such adjustment shall
be made whenever any such payment is made, and shall become
effective retroactively immediately after the record date for the
determination of stockholders entitled to receive the payment.
(iv) No adjustment in the Conversion Price shall be
required unless the adjustment would require an increase or
decrease of at least 1% in the Conversion Price then in effect;
provided, however, that any adjustments that by reason of this
Section 6(f)(iv) are not required to be made shall be carried
14
forward and taken into account in any subsequent adjustment. All
calculations under this Section 6(f) shall be made to the nearest
cent.
(v) In the event that, at any time as a result of an
adjustment made pursuant to Section 6(f)(i) or 6(f)(iii) above,
the holder of any share of Series C Preferred Stock thereafter
surrendered for conversion shall become entitled to receive any
shares of the Corporation other than shares of the Common Stock,
thereafter the number of such other shares so receivable upon
conversion of any share of Series C Preferred Stock shall be
subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Section 6(f)(i) through
6(f)(iv) above, and the other provisions of this Section 6 with
respect to the Common Stock shall apply on like terms to any such
other shares.
(vi) Whenever the Conversion Price is adjusted, as herein
provided, the Corporation shall promptly file with the transfer
agent for the Series C Preferred Stock a certificate of an
officer of the Corporation setting forth the Conversion Price
after the adjustment and setting forth a brief statement of the
facts requiring such adjustment and a computation thereof. The
certificate shall be conclusive evidence of the correctness of
the adjustment. The Corporation shall promptly cause a notice of
the adjusted Conversion Price to be mailed to each registered
holder of shares of Series C Preferred Stock.
(vii) In case of any reclassification of the Common Stock,
any consolidation of the Corporation with, or merger of the
Corporation into, any other entity, any merger of another entity
into the Corporation (other than a merger that does not result in
any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Corporation), any sale
or transfer of all or substantially all of the assets of the
Corporation or any compulsory share exchange pursuant to which
share exchange the Common Stock is converted into other
securities, cash or other property, then lawful provision shall
be made as part of the terms of such transaction whereby the
holder of each share of Series C Preferred Stock then outstanding
shall have the right thereafter, during the period such share
shall be convertible, to convert such share only into the kind
and amount of securities, cash and other property receivable upon
the reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Common
Stock of the Corporation into which a share of Series C Preferred
Stock would have been convertible immediately prior to the
reclassification, consolidation, merger, sale, transfer or share
exchange. The Corporation, the person formed by the consolidation
or resulting from the merger or which
15
acquires such assets or which acquires the Corporation's shares,
as the case may be, shall make provisions in its certificate or
articles of incorporation or other constituent document to
establish such rights. The certificate or articles of
incorporation or other constituent document shall provide for
adjustments, which, for events subsequent to the effective date
of the certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 6.
The provisions of this Section 6(f)(vii) shall similarly apply to
successive reclassifications, consolidations, mergers, sales,
transfers or share exchanges.
(g) The Corporation from time to time may reduce the Conversion
Price by any amount for any period of time if the period is at least 20 days and
if the reduction is irrevocable during the period. Whenever the Conversion Price
is so reduced, the Corporation shall mail to holders of record of the Series C
Preferred Stock a notice of the reduction at least 15 days before the date the
reduced Conversion Price takes effect, stating the reduced Conversion Price and
the period it will be in effect. A voluntary reduction of the Conversion Price
does not change or adjust the Conversion Price otherwise in effect for purposes
of paragraph 6(f) above.
(h) Automatic Exchange. (1) If the Corporation has not
consummated a Qualifying Public Offering (defined below) by May 15, 1998 (the
"Automatic Exchange Date"), then all shares of Series C Convertible Stock shall
be automatically exchanged (the "Automatic Exchange") for shares of the
Corporation's Series D Convertible Preferred Stock (the "Series D Preferred
Stock") on the Automatic Exchange Date at a rate of one share of Series D
Preferred Stock, with an initial liquidation preference of $102.50 for each $100
in Automatic Exchange Rate Liquidation Preference represented by shares of
Series C Preferred Stock held by a holder. The Automatic Exchange Rate
Liquidation Preference for the Series C Preferred Stock shall be $69.6145
per share (the amount determined by multiplying (x) the liquidation preference
of the Series C Preferred Stock being exchanged, (without accrued and unpaid
dividends thereon) by (y) 0.696145). As used herein, a "Qualifying Public
Offering" means the sale of any equity or debt securities by the Corporation
in one or more offerings occurring after the date of the initial issuance of the
5% Delayed Convertible Preferred Stock yielding gross proceeds in an aggregate
cash amount of not less than $100 million.
(2) In the event of an Automatic Exchange, the Corporation shall
give written notice to the holders of Series C Preferred Stock of record on the
Automatic Exchange Date (which notice shall be given by first class mail,
postage prepaid) that the shares of Series C Preferred Stock have been
automatically exchanged into shares of Series D Preferred Stock pursuant to this
Section 6(h), stating therein the number of shares of Series D Preferred Stock
into which the holder's shares of Series C Preferred Stock have been
automatically exchanged. Promptly thereafter, the holder shall surrender the
certificate or
16
certificates of shares of Series C Preferred Stock exchanged (together with
payment of any taxes, if any, to be paid by the holders described below) at the
office of the Corporation or any transfer agent for such shares, or at such
other place designated by the Corporation, provided that the Corporation shall
at all times maintain an office or agency in The City of New York for such
purposes. The Corporation shall, immediately upon receipt of such shares of
Series C Preferred Stock (together with payment of any taxes, if any, to be paid
by the holders described below), issue and deliver to or upon the order of such
holder, against delivery of the certificates representing the shares of Series C
Preferred Stock that have been exchanged, a certificate for the number of shares
of Series D Preferred Stock to which such holder shall be entitled. The holders
of the Series C Preferred of record on the Automatic Exchange Date shall be
treated for all purposes as the record holder or holders of the Series D
Preferred Stock into which the Series C Preferred Stock have been exchanged.
(3) No fractional shares of Series D Preferred Stock shall be
issued upon automatic exchange of shares of Series C Preferred Stock. Instead of
issuing any fractional shares of Series D Preferred Stock otherwise issuable
upon automatic exchange of the shares of Series C Preferred Stock, the
Corporation shall pay a cash adjustment to holders in respect of such fraction
in an amount equal to the amount of Automatic Exchange Rate Liquidation
Preference represented by shares of Series C Preferred Stock held by a holder
which are not exchanged.
(4) The Corporation shall pay any documentary, stamp or similar
issue or transfer tax due on the issue of Series D Preferred Stock upon the
automatic exchange. The holder, however, shall pay any such tax that is due
because any such shares of the Series D Preferred Stock that are issued in a
name other than the name of the holder, as requested by such holder.
(5) The Corporation shall reserve out of its authorized but
unissued Series D Preferred Stock held in treasury enough shares of Series D
Preferred Stock to permit the Automatic Exchange of all of the then-outstanding
shares of Series C Preferred Stock. For the purposes of this Section 6(h), the
full number of shares of Series D Preferred Stock then issuable upon the
Automatic Exchange of all then-outstanding shares of Series C Preferred Stock
shall be computed as if at the time of computation all outstanding shares of
Series C Preferred Stock were held by a single holder. The Corporation shall
from time to time, in accordance with the laws of the State of Delaware and its
certificate of incorporation, increase the authorized amount of its Series D
Preferred Stock if at any time the authorized amount of its Series D Preferred
Stock remaining unissued shall not be sufficient to permit the Automatic
Exchange of all shares of Series C Preferred Stock at the time outstanding. If
any shares of Series D Preferred Stock required to be reserved for issuance upon
the Automatic Exchange of shares of Series C Preferred Stock hereunder require
registration with or approval of any governmental authority under any federal or
state law before the shares of Series D Preferred Stock may be issued upon
exchange, the Corporation shall in good faith and as expeditiously as possible
endeavor to cause such shares to be so registered
17
or approved. All shares of Series D Preferred Stock issued upon the Automatic
Exchange of the shares of Series C Preferred Stock shall be validly issued,
fully paid and nonassessable.
7. Status of Shares. All shares of the Series C Preferred Stock that are
at any time redeemed pursuant to Section 4 above or converted or exchanged
pursuant to Section 6 above and all shares of the Series C Preferred Stock that
are otherwise reacquired by the Corporation and subsequently canceled by the
Board of Directors of the Corporation shall have the status of authorized but
unissued shares of Preferred Stock, without designation as to series, subject to
reissuance by the Board of Directors of the Corporation as shares of any one or
more other series.
8. Voting Rights. Except as set forth below or otherwise required by
law, holders of shares of the Series C Preferred Stock shall have no voting
rights. In connection with any right to vote, each holder of shares of Series C
Preferred Stock shall have one vote for each share held.
(a) Dividend and Other Defaults.
(i) If (A) the Corporation fails to redeem all of the outstanding
shares of Series C Preferred Stock on the Mandatory Redemption Date
pursuant to Section 4(a)(3) hereof, (B) the Corporation fails to make a
Change of Control Offer (defined herein) pursuant to Section 9 hereof in
the event of a Change of Control (defined herein), or (C) at any time or
times after the First Scheduled Dividend Payment Date, dividends payable
on the shares of Series C Preferred Stock at the time outstanding shall
be in arrears in an aggregate amount equal to at least six quarterly
dividend payments, then the holders of shares of Series C Preferred
Stock, voting separately as a class, shall have the right to elect (i)
one director in the event that there are seven or less directors on the
Board of Directors at such time or (ii) two directors in the event that
there are eight or more directors on the Board of Directors at such
time, by a vote of the holders of a majority of shares of Series C
Preferred Stock in person or by proxy at the Corporation's next annual
meeting of stockholders and at each subsequent annual meeting of
stockholders; provided, however, that if such voting rights shall become
vested more than 90 days or less than 20 days before the date prescribed
for the annual meeting of stockholders, the holders of Series C
Preferred Stock shall be entitled to exercise their voting rights at a
special meeting of the holders of shares of Series C Preferred Stock as
set forth in Section 8(a)(ii) hereof. Upon the vesting of such voting
rights, the maximum authorized number of members of the Board of
Directors of the Corporation shall automatically be increased by the
number of directors for which the holders of Series C Preferred Stock
shall be entitled to elect, as provided above, and the vacancies so
created shall be filled by a vote of the holders of the shares of Series
C Preferred Stock, as provided above. The right of holders of Series C
Preferred Stock to elect members of the Board of
18
Directors of the Corporation as aforesaid shall continue until such time
as (A) all of the shares of Series C Preferred Stock are redeemed,
converted or are otherwise no longer outstanding, (B) the Corporation
has made a Change of Control Offer in accordance with Section 9 hereof
or (C) all dividends accumulated on the Series C Preferred Stock shall
have been paid in full or declared and set aside for payment in full, as
the case may be, at which time such right immediately shall terminate
subject to revesting in the event of each and every subsequent default
of the character above mentioned.
(ii) At any time when such voting right shall have vested in the
holders of shares of Series C Preferred Stock entitled to vote thereon,
and if such right shall not already have been initially exercised, an
officer of the Corporation shall, upon the written request of holders of
record of 10% of the voting power represented by the shares of such
Series C Preferred Stock then outstanding, addressed to the Secretary of
the Corporation, call a special meeting of holders of shares of such
Series C Preferred Stock. Such meeting shall be held at the earliest
practicable date upon the notice required for annual meetings of
stockholders at the place for holding annual meetings of stockholders of
the Corporation or, if none, at a place designated by the Secretary of
the Corporation. If such meeting shall not be called by the proper
officers of the Corporation within 30 days after the personal service of
such written request upon the Secretary of the Corporation, or within 30
days after mailing the same within the United States, by registered
mail, addressed to the Secretary of the Corporation at its principal
office (such mailing to be evidenced by the registry receipt issued by
the postal authorities), then the holders of record of 10% of the voting
power represented by the shares of Series C Preferred Stock then
outstanding may designate in writing any person to call such meeting at
the expense of the Corporation, and such meeting may be called by such
person so designated upon the notice required for annual meetings of
stockholders and shall be held at the same place as is elsewhere
provided in this Section. Any holder of shares of Series C Preferred
Stock then outstanding that would be entitled to vote at such meeting
shall have access to the stock books of the Corporation for the purpose
of causing a meeting of stockholders to be called pursuant to the
provisions of this Section. Notwithstanding the provisions of this
Section, however, no such special meeting shall be called or held during
a period within 45 days immediately preceding the date fixed for the
next annual meeting of stockholders.
(iii) So long as any shares of Series C Preferred Stock are
outstanding, the By-laws shall contain no provisions that would restrict
the exercise, by the holders of Series C Preferred Stock, of the right
to elect directors under the circumstances provided in Section 8(a)(i)
above.
19
(iv) Directors elected pursuant to Section 8(a)(i) shall serve
until the earlier of (A) the next annual meeting of the stockholders of
the Corporation and the election by the holders of Series C Preferred
Stock and qualification of their respective successors, (B) the date on
which all of the shares of Series C Preferred Stock are redeemed or
converted and are no long outstanding or (C) the date upon which the
defaults set forth in Section 8(a)(i) have been remedied, at which time
the number of directors constituting the Board of Directors shall,
without further action, be reduced by the number of directors whose term
shall so terminate, subject to any subsequent increase in the number of
directors pursuant to Section 8(a)(1). If, prior to the end of the term
of any director elected as aforesaid, a vacancy in the office of that
director shall occur during the continuation of a default described in
Section 8(a)(1) by reason of death, resignation or disability, the
vacancy shall be filled for the unexpired term by the appointment by the
remaining director elected as aforesaid of a new director for the
unexpired term of the former director.
(b) Miscellaneous. So long as any shares of the Series C
Preferred Stock are outstanding, in addition to any vote or consent of
stockholders required by law or by the Corporation's Certificate of
Incorporation, the consent of the holders of at least a majority of the shares
of Series C Preferred Stock at the time issued and outstanding, acting as a
single class, given in person or by proxy by vote at any meeting called for such
purpose, shall be necessary for effecting or validating:
(i) any amendment, alteration or repeal of any of the provisions
of the Corporation's Certificate of Incorporation or By-laws which
affects adversely the voting powers, rights or preferences of the
holders of the shares of Series C Preferred Stock; provided, however,
that any amendment of the provisions of the Corporation's Certificate of
Incorporation so as to authorize or create, or to increase the
authorized amount of, any of the Corporation's Junior Stock, shall not
be deemed to affect adversely the voting powers, rights or preferences
of the holders of shares of Series C Preferred Stock;
(ii) the authorization or creation of, or the increase in the
authorized amount of, any shares of any class or series of stock or any
security convertible into shares of any class or series of Senior Stock
or Parity Stock; or
(iii) the merger or consolidation of the Corporation with or into
any other entity, unless the resulting corporation will thereafter have
no class or series of shares and no other securities either authorized
or outstanding ranking prior to, or on a parity with, shares of Series C
Preferred Stock in the payment of dividends or the distribution of its
assets on liquidation, dissolution or winding up;
20
provided, however, that no such consent of the holders of Series C Preferred
Stock shall be required if, at or prior to the time when such amendment,
alteration, merger, consolidation or repeal is to take effect or when the
issuance of any such senior shares or convertible securities is to be made, as
the case may be, provision is made for the redemption of all shares of Series C
Preferred Stock at the time outstanding in accordance with Section 4 hereof. The
above notwithstanding, no consent of holders of Series C Preferred Stock shall
be required for the creation of any indebtedness of any kind of the Corporation.
9. Change of Control. (a) In the event of a Change of Control (the date
of such occurrence being the "Change of Control Date"), the Corporation shall
notify the holders of the Series C Preferred Stock in writing of such occurrence
and shall make an offer to purchase (the "Change of Control Offer") all of the
then outstanding shares of Series C Preferred Stock at a purchase price of 101%
of the Liquidation Preference thereof, payable in cash, plus any accrued and
unpaid dividends thereon, if any, whether or not declared, payable in cash,
shares of Common Stock or any combination thereof in the sole discretion of the
Board of Directors as provided in Section 3(a)(3) hereof.
(b) Within 30 days following the Change of Control Date, the
Corporation shall send, by first class mail, postage prepaid, a notice to each
holder of Series C Preferred Stock at such holder's address as it appears on the
stock books of the Corporation, which notice shall govern the terms of the
Change of Control Offer. The notice to the holders shall contain all
instructions and materials necessary to enable such holders to tender their
shares of Series C Preferred Stock pursuant to the Change of Control Offer. Such
notice shall state:
(i) that a Change of Control has occurred, that the Change
of Control Offer is being made pursuant to this Section 9 and that all
shares of Series C Preferred Stock validly tendered and not withdrawn
will be accepted for payment;
(ii) the purchase price (plus the amount of accrued
dividends, if any) and the purchase date (which shall be no earlier than
30 days nor later than 60 days from the date such notice is mailed,
other than as may be required by law) (the "Change of Control Payment
Date");
(iii) that any shares of Series C Preferred Stock not
tendered will continue to accrue dividends;
(iv) that, unless the Corporation defaults in making
payment therefor, any share of Series C Preferred Stock tendered and
accepted for payment pursuant to the Change of Control Offer shall cease
to accrue dividends after the Change of Control Payment Date;
21
(v) that holders electing to have any shares of Series C
Preferred Stock purchased pursuant to a Change of Control Offer will be
required to surrender the certificate or certificates representing such
shares, properly endorsed for transfer together with such customary
documents as the Corporation and the transfer agent may reasonably
require, in the manner and at the place specified in the notice prior to
the close of business on the business day prior to the Change of Control
Payment Date;
(vi) that holders shall be entitled to withdraw their
election if the Corporation receives, not later than five business days
prior to the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the holder,
the number of shares of Series C Preferred Stock the holder delivered
for purchase and a statement that such holder is withdrawing his
election to have such shares of Series C Preferred Stock purchased;
(vii) that holders whose shares of Series C Preferred
Stock are purchased only in part will be issued a new certificate
representing the unpurchased shares of Series C Preferred Stock; and
(viii) the circumstances and relevant facts regarding
such Change of Control.
(c) The Corporation shall comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
repurchase of the Series C Preferred Stock in connection with a Change of
Control Offer.
(d) On the Change of Control Payment Date the Corporation shall
(x) accept for payment the shares of Series C Preferred Stock validly tendered
pursuant to the Change of Control Offer, (y) pay to the holders of shares so
accepted the purchase price therefor (plus the amount of accrued and unpaid
dividends, if any) and (z) cancel and retire each surrendered certificate.
Unless the Corporation defaults in the payment for the shares of Series C
Preferred Stock tendered pursuant to the Change of Control Offer, dividends
shall cease to accrue with respect to the shares of Series C Preferred Stock
tendered and all rights of holders of such tendered shares shall terminate,
except for the right to receive payment therefor, on the Change of Control
Payment Date.
(e) If the purchase of the Series C Preferred Stock would violate
or constitute a default under indebtedness of the Corporation, then,
notwithstanding anything to the contrary contained above, prior to complying
with the foregoing provisions, but in any event within 30 days following the
Change of Control Date, the Corporation shall either (A) repay in full all such
indebtedness or (B) obtain the requisite consents, if any under such
indebtedness required to permit the repurchase of Series C Preferred Stock
required by this
22
Section 9. Until the requirements of the immediately preceding sentence are
satisfied, the Corporation shall not make, and shall not be obligated to make,
any Change of Control Offer.
"Change of Control" means the occurrence of any of the following
events: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other
than a Permitted Holder (as defined herein) is or becomes the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
Person shall be deemed to have "beneficial ownership" of all securities that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 40% of the total outstanding Voting Stock (as defined herein) of the
Corporation; (b) the Corporation consolidates with or merges with or into
another Person or conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with
or merges with or into the Corporation, in any such event, pursuant to a
transaction in which the outstanding Voting Stock of the Corporation is
converted into or exchanged for cash securities or other property, other than,
at all times when the Corporation's Senior Discount Notes due 2007 (the "Notes")
are outstanding, those transactions that are not deemed a "Change of Control"
under the terms of the indenture under which such Notes are issued (the
"Indenture"); (c) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Corporation
(together with any new directors whose election to such Board of Directors, or
whose nomination for election by the stockholders of the Corporation, was
approved by a vote of 66 2/3% of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Corporation then in office; or (d) the
Corporation is liquidated or dissolved or a special resolution is passed by the
shareholders of the Corporation approving the plan of liquidation or
dissolution, other than, at all times when the Notes are outstanding, those
transactions that are not deemed a "Change of Control" under the terms of the
Indenture.
"Permitted Holder" means Loral Space & Communications Ltd.,
David Margolese and Arianespace S.A.
"Person" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Voting Stock" means any class or classes of capital stock, or
securities convertible into or exchangeable into any class of capital stock, of
the Corporation pursuant to which the holders thereof have the general voting
power under ordinary circumstances to elect at least a majority of the board of
directors of the Corporation, irrespective of whether
23
or not, at the time, stock of any other class or classes shall have, or might
have, voting power by reason of the happening of any contingency.
10. Sinking Fund Redemption. The shares of the Series C Preferred Stock
are not subject to sinking fund requirements.
11. Restrictions on Transfer. The holders of the Series C Preferred
Stock shall not transfer any shares of Series C Preferred Stock until the later
to occur of (i) the 181st day following the closing date of the first
underwritten public offering of the Common Stock occurring after the initial
issuance of shares of Series C Preferred Stock or (ii) the 181st day following
the consummation of offering by the Corporation to the holder's of the
Corporation's 5% Delayed Convertible Preferred Stock to exchange shares of the
Series C Preferred Stock for shares of the 5% Delayed Convertible Preferred
Stock (the "Lock-up Expiration Date"); provided, however, that if a holder is
prevented by applicable law from owning assets subject to such restrictions
on transfer, such restrictions shall be inapplicable to such holder and the
Company will have a right of first refusal with respect to all shares of
Series C Preferred Stock held by such holder that is exercisable for a period
of 90 days from the date an agreement to sell shares of Series C Preferred Stock
is reached with a potential buyer at any time on or prior to the Lock-Up
Expiration Date. In addition, the holders of any Common Stock issued upon the
conversion of any shares of Series C Preferred Stock shall not transfer any
such shares of Common Stock until the Lock-Up Expiration Date.
IN WITNESS WHEREOF, CD Radio Inc. has caused this Certificate to be duly
executed on its behalf by its undersigned duly authorized officer this 15th
day of October, 1997.
CD RADIO INC.
By: /s/ Lawrence Gilberti
_____________________________
Name: Lawrence Gilberti
Title: Secretary