CD RADIO INC.
(a Delaware Corporation)
$125,000,000 aggregate principal amount of 8 3/4%
Convertible Subordinated Notes due 2009
TERMS AGREEMENT
---------------
September 23, 1999
To: CD Radio Inc.
1221 Avenue of the Americas, 36th Fl.
New York, NY 10020
Ladies and Gentlemen:
This is a Terms Agreement referenced in the Form Underwriting Agreement,
filed as an Exhibit to Registration Statement No. 333-86003, the terms of which
are hereby incorporated herein. We understand that CD Radio Inc., a Delaware
corporation (the "Company"), proposes to issue and sell $125,000,000 aggregate
principal amount of its 8 3/4% convertible subordinated debt securities (the
"Underwritten Securities"). Subject to the terms and conditions set forth or
incorporated by reference herein, we the underwriters named below (the
"Underwriters") offer to purchase, severally and not jointly, the principal
amount of Underwritten Securities opposite our names set forth below at the
purchase price set forth below, and a proportionate share of Option Underwritten
Securities set forth below, to the extent any Underwritten Securities or Option
Underwritten Securities are purchased.
2
Principal Amount
of Underwritten
Underwriter Securities
- ----------- ----------------
Merrill Lynch, Pierce, Fenner & Smith Incorporated....................... $ 62,500,000
Lehman Brothers Inc...................................................... 25,000,000
Banc of America Securities LLC........................................... 17,188,000
Bear, Stearns & Co. Inc.................................................. 20,312,000
---------------
Total......................................... $125,000,000
===============
The Underwritten Securities shall have the following terms:
Debt Securities
---------------
Title: Convertible Subordinated Notes due 2009
Rank: The Notes will be unsecured obligations of CD Radio and will be
subordinated to existing and future senior indebtedness. The
Notes will be effectively subordinated to the indebtedness and
other obligations of the Company's subsidiaries.
Rating: CCC-
Aggregate principal amount: $125,000,000
Principal amount of Option
Underwritten Securities: The Underwriters have an option to purchase up to an additional
$18,750,000 aggregate principal amount of the Underwritten
Securities (the "Option Underwritten Securities") at the
public offering price, less underwriting discount, within 30
days from September 23, 1999 to cover over-allotments.
Denominations: $1,000 principal amount and integral multiples thereof
Currency of payment: US dollars
Interest rate or formula: 8.75%
Interest payment dates: payable semiannually in arrears on March 29 and September 29
of each year commencing March 29, 2000
Regular record dates: March 14 and September 14
Stated maturity date: September 29, 2009
Redemption provisions: The Company may not redeem the Notes prior to September 29, 2002.
On or after such date, the Notes are redeemable for cash at any
time at the Company's option, in whole or in part, at redemption
prices set forth below, plus accrued and unpaid interest to the
date of redemption. Notwithstanding the above, the Company will
not be entitled to redeem the Notes after September 29, 2002,
unless the last reported sale price for the Company's common
stock is at least 150% of the conversion price set
3
forth below for at least 20 trading days within a period of 30
consecutive days ending within five trading days of the call
for redemption.
The table below shows redemption prices of a Note during each
twelve-month period set forth below:
Period Redemption Price
------ ----------------
September 29, 2002 through September 28, 2003......... 106.125%
September 29, 2003 through September 28, 2004.......... 105.250%
September 29, 2004 through September 28, 2005.......... 104.375%
September 29, 2005 through September 28, 2006.......... 103.500%
September 29, 2006 through September 28, 2007.......... 102.625%
September 29, 2007 through September 28, 2008.......... 101.750%
Thereafter............................................. 100.875%
Sinking fund requirements: None
Conversion provisions: Each Note will be convertible, at the option of the holder, at any
time on or prior to maturity, unless previously redeemed or
otherwise purchased, into shares of the Company's common stock
at a conversion rate of 35.134 shares per $1,000 principal amount
of Notes, or a conversion price of $28.4625 per share of common
stock. The conversion rate will be subject to adjustment upon the
occurrence of certain events affecting the Company's common
stock. Subject to certain exceptions, upon conversion, the holder
will not receive any cash payment representing any further
interest; such accrued cash interest will be deemed paid by the
shares of common stock received by the holder on conversion.
Listing requirements: None
Black-out provisions: None
Fixed or Variable Price
Offering: Fixed Price Offering
If Fixed Price Offering, initial public offering price per
$1,000 principal amount: 100% of the principal amount,
plus accrued interest, if any, from September 29, 1999.
Purchase price per Note: 97% of principal amount, plus accrued interest, if any, from
September 29, 1999.
Form: The Notes will initially be issued in fully registered book-
entry form and will be represented by one or more permanent
global Notes without coupons deposited with a custodian for
and registered in the name of a nominee of The Depository
Trust Company ("DTC") in New York, New York.
Other terms and conditions: All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices
to the Underwriters shall be directed to the Underwriters at
Merrill Lynch & Co., North Tower, World Financial Center, New
York, New York 10281, attention of Robert Kramer; notices to
the Company shall be directed to the Company at 1221 Avenue
of the Americas, 36th Floor, New York, New York 10020,
4
attention of Patrick L. Donnelly, Senior Vice President, General
Counsel and Secretary.
Closing date and location: September 29, 1999
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
5
Please accept this offer by signing a copy of this Terms Agreement in the
space set forth below and returning the signed copy to us.
Very truly yours,
MERRILL, LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By /s/ Marilyn J. Pugliese
---------------------------------
Name: Marilyn J. Pugliese
Title: Authorized Signatory
Acting on behalf of itself and the other
named Underwriters.
Accepted:
CD RADIO INC.
By /s/ Patrick L. Donnelly
-----------------------------
Name: Patrick L. Donnelly
Title: Senior Vice President,
General Counsel and
Secretary