EXHIBIT B
---------
CD RADIO INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF
9.2% SERIES B JUNIOR CUMULATIVE CONVERTIBLE PREFERRED STOCK
------------------
PURSUANT TO SECTION 151(G) OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
------------------
CD Radio Inc. (the "Corporation"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify
that pursuant to the provisions of Section 151 of the General Corporation Law of
the State of Delaware, the Board of Directors of the Corporation (the "Board of
Directors"), in a duly convened meeting thereof on November 11, 1998, adopted
the following resolution, which resolution remains in full force and effect as
of the date hereof:
WHEREAS, the Board of Directors is authorized, within the limitations
and restrictions stated in the Certificate of Incorporation of the Corporation,
to fix by resolution or resolutions the designation of each series of Preferred
Stock of the Corporation (the "Preferred Stock") and the powers, preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereof, including, without limiting
the generality of the foregoing, such provisions as may be desired concerning
voting, redemption, dividends, dissolution or distribution of assets, conversion
or exchange, and such other subjects or matters as may be fixed by resolutions
of the Board of Directors under the General Corporation Law of the State of
Delaware; and
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to its authority as aforesaid, to authorize and fix the terms of a
series of Preferred Stock and the number of shares constituting such series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized such
series of Preferred Stock on the terms and with the provisions herein set forth:
1. Number of Shares; Designation. A total of 2,100,000 shares of
Preferred Stock of the Corporation are hereby designated as 9.2% Series B Junior
Cumulative Convertible Preferred Stock (the "Series B Preferred Stock").
2
2. Rank. The Series B Preferred Stock shall, with respect to
payment of dividends, redemption payments and rights upon liquidation,
dissolution or winding up of the affairs of the Corporation, (x) rank senior and
prior to the Common Stock, par value $.001 per share, of the Corporation (the
"Common Stock") and any other class or series of capital stock of the
Corporation that by its terms ranks junior to the Series B Preferred Stock as to
payment of dividends, redemption payments and rights upon liquidation,
dissolution or winding up of the affairs of the Corporation, (y) rank on a
parity with the Corporation's 9.2% Series A Junior Cumulative Convertible
Preferred Stock (the "Series A Preferred Stock") and all Parity Dividend Stock
(as defined in Section 3(a)) and all Parity Liquidation Stock (as defined in
Section 5(b)), and (z) rank junior to the Corporation's 10 1/2% Series C
Convertible Preferred Stock ("Series C Preferred Stock") and all Senior Dividend
Stock (as defined in Section 3(c)), all Senior Liquidation Stock (as defined in
Section 5(b)) and to any class or series of capital stock of the Corporation
(other than the Common Stock), whether currently issued or issued in the future,
that does not by its terms expressly provide that it ranks on a parity with or
junior to the Series B Preferred Stock as to dividends and rights upon
liquidation, dissolution or winding-up of the Corporation (which shall include,
for purposes of the foregoing, any entity with which the Corporation may be
merged or consolidated or to which all or substantially all the assets of the
Corporation may be transferred or which transfers all or substantially all of
its assets to the Corporation).
3. Dividends. (a)(1) The holders of the issued and outstanding
shares of the Series B Preferred Stock shall be entitled to receive, as and when
declared by the Board of Directors, out of funds legally available therefor in
the case of dividends paid in cash, cumulative dividends at the annual rate per
share of 9.2% of the sum of (x) the Liquidation Preference (defined in Section 5
hereof) and (y) all unpaid dividends, if any, whether or not declared, from the
date of issuance of the shares of Series B Preferred Stock (the "Closing Date")
to the applicable dividend payment date. Dividends on shares of Series B
Preferred Stock shall be payable annually initially on November 15, 1999 and
each November 15 thereafter (each, a "Dividend Payment Date"), except that if
any Dividend Payment Date is not a business day then the Dividend Payment Date
shall be on the first immediately succeeding business day (as used herein, the
term "business day" shall mean any day except a Saturday, Sunday or day on which
banking institutions are legally authorized to close in The City of New York).
(2) If any Dividend payable on any Dividend Payment Date is not
declared or paid on such Dividend Payment Date, as provided in Section 3(a)(1),
in full in cash or in additional shares of Series B Preferred Stock, then the
amount of such unpaid dividend ("Default Dividends") shall be accumulated. Any
Default Dividends shall, from the Dividend Payment Date on which such dividends
accrued, accrue dividends until paid, compounded annually, at a rate equal to
15% per annum. Default Dividends shall be payable in shares of Series B
Preferred Stock, but not in cash.
3
(3) Dividends on the Series B Preferred Stock may be paid, in the
sole discretion of the Board of Directors, either in (i) cash, (ii) shares of
Series B Preferred Stock or (iii) any combination of cash or shares of Series B
Preferred Stock, and the issuance of the requisite number of such shares of
Series B Preferred Stock (such number determined as provided in the next
sentence) pursuant to (ii) or (iii) shall constitute full payment of any such
dividend. Series B Preferred Stock issued to pay dividends shall be valued at
their Liquidation Preference. All dividend payments paid with respect to shares
of Series B Preferred Stock shall be paid pro rata to the holders entitled
thereto. All shares of Series B Preferred Stock issued as a dividend with
respect to shares of Series B Preferred Stock shall thereupon be duly
authorized, validly issued, fully paid and non-assessable. In no event shall an
election by the Board of Directors to pay dividends, in full or in part, in cash
or in shares of Series B Preferred Stock in lieu of payment, in full or in part,
in cash preclude the Board of Directors from electing any such alternative in
respect of all or any portion of any subsequent dividend. The Corporation shall
not issue fractional shares of Series B Preferred Stock upon payment of any
dividends in shares of Series B Preferred Stock and any amount of fractional
shares of Series B Preferred Stock otherwise issuable upon the payment of any
dividend in shares of Series B Preferred Stock shall be paid in cash.
(4) Dividends to be paid on a Dividend Payment Date shall be paid
to the holders of record of shares of the Series B Preferred Stock as they
appear on the stock register of the Corporation at the close of business on such
record dates (each, a "Dividend Payment Record Date"), which shall be not more
than 40 days nor fewer than 10 days preceding each Dividend Payment Date
thereof, as shall be fixed by the Board of Directors of the Corporation. Default
Dividends shall be declared and paid at any time as of which funds legally
available therefor are available to the Corporation, without reference to any
regular Dividend Payment Date, to the holders of record on such date, not
exceeding 40 days nor fewer than 10 days preceding the date on which dividends
in arrears will be paid, as may be fixed by the Board of Directors of the
Corporation. Holders of shares of the Series B Preferred Stock shall be entitled
to receive dividends in preference to and in priority over dividends upon the
Common Stock and any other series or class of the Corporation's capital stock
that ranks junior as to dividends to the Series B Preferred Stock ("Junior
Dividend Stock") and shall be on a parity as to dividends with the Series A
Preferred Stock and any series or class of the Corporation's capital stock that
does not rank senior or junior as to dividends with the Series B Preferred Stock
(together with the Series A Preferred Stock, "Parity Dividend Stock"). The
holders of shares of the Series B Preferred Stock shall not be entitled to any
dividends in excess of full cumulative dividends (including Default Dividends),
as herein provided.
(b) No dividends, other than dividends payable solely in
Common Stock, Junior Dividend Stock, or warrants or other rights to acquire such
Common Stock or Junior Dividend Stock, shall be paid or declared and set apart
for payment on, and no purchase, redemption or other acquisition shall be made
by the Corporation or entity directly or
4
indirectly controlled by the Corporation of, any Common Stock or Junior Dividend
Stock unless and until (i) all accrued and unpaid dividends on the Series B
Preferred Stock shall have been paid and (ii) proper provision shall have been
made such that holders of shares of Series A Preferred Stock are offered the
opportunity to elect (each, a "Payout Election"), in lieu of the Conversion
Price adjustment referred to in Section 6(f)(ii), Section 6(f)(iii) or Section
6(f)(iv), as the case may be, to participate in such dividend, purchase,
redemption or other acquisition pro rata with the holders of Common Stock or
Junior Dividend Stock, as the case may be, as if each share of Series A
Preferred Stock had been converted as of the record date for such dividend or
immediately prior to such purchase, redemption or other acquisition, as the case
may be, at the Conversion Price then in effect (without any requirement that any
such shares of Series A Preferred Stock actually be so converted). Each Payout
Election shall be made upon the affirmative vote or consent of holders of a
majority of the total number of shares of Series A Preferred Stock then
outstanding and shall be effective as to and binding upon all such shares. So
long as a sufficient amount of cash, assets, evidences of indebtedness or
securities are set aside for payment to the holders of Series A Preferred Stock
as of the payment date for such dividend or the date for such purchase,
redemption or acquisition, payment need not be made to the holders of Series A
Preferred Stock on such date but may be made at any time up to the tenth
Business Day following such date.
(c) If at any time the Corporation issues any class or series
of capital stock ranking senior and prior to the Series B Preferred Stock with
respect to the payment of dividends ("Senior Dividend Stock") and fails to pay
or declare and set apart for payment accrued and unpaid dividends on such Senior
Dividend Stock, in whole or in part, then (except to the extent allowed by the
terms of the Senior Dividend Stock) no dividend paid in cash shall be paid or
declared and set apart for payment on the Series B Preferred Stock unless and
until all accrued and unpaid dividends with respect to the Senior Dividend Stock
shall have been paid or declared and set apart for payment, without interest.
Except as provided in Section 3(d) below, no dividends paid in cash shall be
paid or declared and set apart for payment on any Parity Dividend Stock for any
period unless the Corporation has paid or declared and set apart for payment, or
contemporaneously pays or declares and sets apart for payment, on the Series B
Preferred Stock all accrued and unpaid dividends for all dividend payment
periods terminating on or prior to the date of payment of such dividends. Except
as provided in Section 3(d) below, no dividends paid in cash shall be paid or
declared and set apart for payment on the Series B Preferred Stock for any
period unless the Corporation has paid or declared and set apart for payment, or
contemporaneously pays or declares and sets apart for such payment, on any
Parity Dividend Stock all accrued and unpaid dividends for all dividend payment
periods terminating on or prior to the date of payment of such dividends.
5
(d) If at any time the Corporation has failed to pay accrued
dividends on any shares of Series B Preferred Stock on any Dividend Payment Date
or any Parity Dividend Stock on a stated payment date, as the case may be, the
Corporation shall not:
(i) purchase any shares of the Series B Preferred
Stock or Parity Dividend Stock (except for a consideration
payable in Common Stock or Junior Dividend Stock) or redeem
fewer than all of the shares of the Series B Preferred Stock
and Parity Dividend Stock then outstanding except for (x) the
repurchase or redemption of shares of the Series B Preferred
Stock made pro rata among the holders of the shares of the
Series B Preferred Stock then outstanding and (y) the
repurchase or redemption made pro rata with respect to all
shares of the Series B Preferred Stock and Parity Dividend
Stock then outstanding so that the amounts repurchased or
redeemed shall in all cases bear to each other the same ratio
that, at the time of the repurchase or redemption, the
required redemption payments on the shares of the Series B
Preferred Stock and the other Parity Dividend Stock then
outstanding, respectively, bear to each other, or
(ii) permit any corporation or other entity directly
or indirectly controlled by the Corporation to purchase any
Common Stock, Junior Dividend Stock, shares of the Series B
Preferred Stock or Parity Dividend Stock, except to the same
extent that the Corporation could purchase such shares.
Unless and until all dividends unpaid in respect of prior
dividend payment periods on shares of the Series B Preferred Stock and any
Parity Dividend Stock at the time outstanding have been paid in full or a sum
sufficient for such payment is declared and set apart, as provided in the
paragraph (c), all dividends accrued by the Corporation upon shares of the
Series B Preferred Stock or Parity Dividend Stock shall be declared pro rata
with respect to all shares of the Series B Preferred Stock and Parity Dividend
Stock then outstanding, so that the amounts of any dividends declared on shares
of the Series B Preferred Stock and on the Parity Dividend Stock shall in all
cases bear to each other the same ratio that, at the time of the declaration,
all unpaid dividends in respect of prior dividend payment periods on shares of
the Series B Preferred Stock and the other Parity Dividend Stock, respectively,
bear to each other.
4. Redemption. (a)(1) Optional Redemption. Except as provided in
subsection (a)(2) of this Section 4 or in Section 9, shares of the Series B
Preferred Stock shall not be redeemable prior to November 15, 2003. From and
after November 15, 2003, subject to the restrictions in Section 3 above, the
Corporation may redeem shares of Series B Preferred Stock, in whole or in part,
at the option of the Corporation, to the extent it has funds legally
6
available therefor at a redemption price of 100% of the Liquidation Preference
thereof plus accrued and unpaid dividends, if any, whether or not declared, to
the date of redemption.
(2) Special Redemption From and after November 15, 2001 and
prior to November 15, 2003, the Corporation, at its option, may redeem shares of
Series B Preferred Stock, in whole or in part, in the sole discretion of the
Board of Directors, to the extent it has funds legally available therefor, at
the redemption price of 100% of the Liquidation Preference thereof, plus an
amount equal to the dividends unpaid thereon, if any, whether or not declared,
to the redemption date, if the Current Market Price of the Common Stock on the
date of the notice of redemption (described below) equals or exceeds $60.00 per
share. As used herein, the "Current Market Price" for a given date shall mean
the average Closing Price of the Common Stock as reported in The Wall Street
Journal or, at the election of the Corporation, other reputable financial news
source, for the 20 consecutive trading days immediately preceding such date. The
$60.00 per share benchmark shall be subject to adjustment upon the occurrence of
certain events in the same manner as the Conversion Price (defined herein) shall
be subject to adjustment as set forth in Section 6(f) hereof. For purposes of
this paragraph, the Current Market Price shall be deemed to be less than $60 per
share at any time during which the Common Stock is not listed, quoted or
admitted to trading on either the New York Stock Exchange, Inc. (the "NYSE"),
the American Stock Exchange ("AMEX") or The Nasdaq Stock Market, Inc.'s National
Market ("Nasdaq"). As used herein, the "Closing Price" of any security on any
day means the last reported sale price regular way on such day or, in the case
no such sale takes place on such day, the average of the reported closing bid
and asked prices regular way of the Common Stock, in each case on the NYSE or,
if not listed or admitted to trading on such exchange, as quoted on AMEX or
Nasdaq.
(3) Mandatory Redemption. On November 15, 2011, the
Corporation shall redeem all outstanding shares of Series A Preferred Stock, to
the extent it has funds legally available therefor, at the redemption price of
100% of the Liquidation Preference thereof, plus an amount equal to the
dividends unpaid thereon, if any, whether or not declared, to the redemption
date.
(4) Payment of Redemption Price. (a) The amount of the
redemption price on any shares of Series B Preferred Stock redeemed, on any
redemption set forth herein, that is allocable to the Liquidation Preference
thereon shall be paid in cash (to the extent funds are legally available
therefor) and any unpaid dividends to be paid on the shares of Series B
Preferred Stock redeemed on such redemption date may be paid in cash (to the
extent funds are legally available therefor) or shares of Series B Preferred
Stock, or any combination thereof, in the sole discretion of the Board of
Directors as provided in Section 3(a)(3) hereof.
7
(b) Not less than 15 days nor more than 45 days (such date as
fixed by the Board of Directors of the Corporation is referred to herein as the
"Redemption Record Date") prior to the date fixed for any redemption of shares
of the Series B Preferred Stock pursuant to this Section 4, a notice specifying
the time and place of the redemption and the number of shares to be redeemed
shall be given by first class mail, postage prepaid, to the holders of record on
the Redemption Record Date of the shares of the Series B Preferred Stock to be
redeemed at their respective addresses as the same shall appear on the books of
the Corporation, calling upon each holder of record to surrender to the
Corporation on the redemption date at the place designated in the notice such
holder's certificate or certificates representing the number of shares specified
in the notice of redemption. Neither failure to mail such notice, nor any defect
therein or in the mailing thereof, to any particular holder shall affect the
sufficiency of the notice or the validity of the proceedings for redemption with
respect to the other holders. Any notice mailed in the manner herein provided
shall be conclusively presumed to have been duly given whether or not the holder
receives the notice. On or after the redemption date, each holder of shares of
Series B Preferred Stock to be redeemed shall present and surrender such
holder's certificate or certificates for such shares to the Corporation at the
place designated in the redemption notice and thereupon the redemption price of
the shares, and any unpaid dividends thereon to the redemption date, shall be
paid to or on the order of the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
canceled. In case fewer than all the shares represented by any such certificate
are redeemed, a new certificate shall be issued representing the unredeemed
shares.
(c) If a notice of redemption has been given pursuant to this
Section 4 and if, on or before the redemption date, the funds (or shares of
Series B Preferred Stock if any dividends are to be paid in shares of Series B
Preferred Stock), necessary for such redemption (including all dividends on the
shares of Series B Preferred Stock to be redeemed that will accrue to the
redemption date) shall have been set aside by the Corporation, separate and
apart from its other funds (or reserved and authorized for issuance if any
dividends are to be paid in shares of Series B Preferred Stock), in trust for
the pro rata benefit of the holders of the shares of Series B Preferred Stock so
called for redemption, then, notwithstanding that any certificates for such
shares of Series B Preferred Stock have not been surrendered for cancellation,
on the redemption date dividends shall cease to accrue on the shares of the
Series B Preferred Stock to be redeemed, and at the close of business on the
date on which such funds have been segregated and set aside by the Corporation
as provided in this Section 4(c), the holders of such shares shall cease to be
stockholders with respect to those shares, shall have no interest in or claims
against the Corporation by virtue thereof and shall have no voting or other
rights with respect thereto, except the conversion rights provided in subsection
(d) of this Section 4 and Section 6 below and the right to receive the moneys
payable (or shares of Series B Preferred Stock issued if any dividends are to be
paid in shares of Series B Preferred Stock) upon such redemption, without
interest thereon, upon surrender (and endorsement, if required by the
Corporation) of their
8
certificates, and the shares of Series B Preferred Stock evidenced thereby shall
no longer be outstanding. Subject to applicable escheat laws, any moneys so set
aside (or shares of Series B Preferred Stock authorized and reserved if any
dividends are to be paid in shares of Series B Preferred Stock) by the
Corporation and unclaimed at the end of two years from the redemption date shall
revert to the general funds of the Corporation (or be released from the
reservation thereof in the case of shares of Series B Preferred Stock), after
which reversion the holders of such shares so called for redemption shall look
only to the general funds of the Corporation for the payment of the redemption
price, without interest. Any interest accrued on funds so deposited shall belong
to the Corporation and be paid thereto from time to time.
(d) If a notice of redemption has been given pursuant to this
Section 4 and any holder of shares of Series B Preferred Stock shall, prior to
the close of business on the business day immediately preceding the redemption
date, give written notice to the Corporation pursuant to Section 6 below of the
conversion of any or all of the shares to be redeemed held by the holder
(accompanied by a certificate or certificates for such shares, duly endorsed or
assigned to the Corporation, and any necessary transfer tax payment, as required
by Section 6 below), then such redemption shall not become effective as to such
shares to be converted and such conversion shall become effective as provided in
Section 6 below, whereupon any funds deposited by the Corporation for the
redemption of such shares shall (subject to any right of the holder of such
shares to receive the dividend payable thereon as provided in Section 6 below)
immediately upon such conversion be returned to the Corporation or, if then held
in trust by the Corporation, shall automatically and without further corporate
action or notice be discharged from the trust.
(e) In every case of redemption of fewer than all of the
outstanding shares of the Series B Preferred Stock pursuant to this Section 4,
the shares to be redeemed shall be selected pro rata, provided that only whole
shares shall be selected for redemption.
5. Liquidation. (a) In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, the holders of the
Series B Preferred Stock shall be entitled to receive $100.00 per share (the
"Liquidation Preference"), plus an amount equal to the accrued and unpaid
dividends thereon, if any, whether or not declared, to the payment date.
(b) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, the holders of shares of Series B
Preferred Stock (i) shall not be entitled to receive the Liquidation Preference
of the shares held by them until payment in full or provision has been made for
the payment of all claims of creditors of the Corporation and the liquidation
preference of any class or series of capital stock ranking senior to the Series
B Preferred Stock with respect to redemption rights and rights upon liquidation,
dissolution or winding up of the affairs of the Corporation ("Senior Liquidation
Stock" and together with the Senior Dividend Stock, the "Senior Stock"), plus
accrued and unpaid
9
dividends thereon, if any, whether or not declared, to the payment date, shall
have been paid in full and (ii) shall be entitled to receive the Liquidation
Preference of such shares held by them, plus accrued and unpaid dividends
thereon, if any, whether or not declared, to the payment date, in preference to
and in priority over any distributions upon the Common Stock and any other
series or class of the Corporation's capital stock that ranks junior to the
Series B Preferred Stock as to redemption rights and rights upon liquidation,
dissolution or winding up of the affairs of the Corporation ("Junior Liquidation
Stock" and together with the Junior Dividend Stock, the "Junior Stock"). Upon
payment in full of the Liquidation Preference to which the holders of shares of
the Series B Preferred Stock are entitled, the holders of shares of the Series B
Preferred Stock shall not be entitled to any further participation in any
distribution of assets by the Corporation. Subject to clause (i) above, if the
assets of the Corporation are not sufficient to pay in full the Liquidation
Preference payable to the holders of shares of the Series B Preferred Stock and
the liquidation preference payable to the holders of any series or class of the
Corporation's capital stock, outstanding on the date hereof or hereafter issued,
that ranks on a parity with the Series B Preferred Stock as to redemption rights
and rights upon liquidation, dissolution or winding up of the affairs of the
Corporation ("Parity Liquidation Stock" and together with the Parity Dividend
Stock, the "Parity Stock"), the holders of all such shares shall share ratably
in proportion to the full respective preferential amounts payable on such shares
in any distribution.
(c) For the purposes of this Section 5, neither the sale of
all or substantially all of the assets of the Corporation nor the consolidation
or merger of the Corporation with or into any other entity shall be deemed to be
a voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation, unless such sale, consolidation or merger shall be in connection
with a plan of liquidation, dissolution or winding up of the Corporation.
6. Optional Conversion. (a) Holders of shares of Series B
Preferred Stock may, at any time, convert shares of Series B Preferred Stock,
unless previously redeemed, into a number of shares of Common Stock calculated
by dividing the Liquidation Preference (without unpaid dividends) by $30.00,
subject to adjustment as described below in Section 6(f) (the "Conversion
Price"). If more than one share of Series B Preferred Stock shall be surrendered
for conversion at one time by the same record holder, the number of full shares
of Common Stock issuable upon conversion thereof shall be computed on the basis
of the aggregate number of shares of Series B Preferred Stock so surrendered. In
the case of shares of Series B Preferred Stock called for redemption, conversion
rights shall expire at the close of business on the business day immediately
preceding the redemption date. The holders of shares of Series B Preferred Stock
that convert such shares into shares of Common Stock shall be entitled to
receive any unpaid dividends thereon, if any, whether or not declared, and such
dividends shall be payable in cash or shares of Common Stock, or any combination
thereof, in the sole discretion of the Board of Directors.
10
(b) Any holder of shares of Series B Preferred Stock electing
to convert the shares or any portion thereof in accordance with Section 6(a)
above shall give written notice to the Corporation (which notice may be given by
facsimile transmission) that such holder elects to convert the same and shall
state therein the number of shares of Series B Preferred Stock to be converted
and the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. Promptly thereafter, the
holder shall surrender the certificate or certificates of shares of Series B
Preferred Stock to be converted, duly endorsed, at the office of the Corporation
or any transfer agent for such shares, or at such other place designated by the
Corporation, provided that the Corporation shall at all times maintain an office
or agency in The City of New York for such purposes. The Corporation shall,
immediately upon receipt of such notice, issue and deliver to or upon the order
of such holder, against delivery of the certificates representing the shares of
Series B Preferred Stock that have been converted, a certificate or certificates
for the number of shares of Common Stock to which such holder shall be entitled
(in the number(s) and denomination(s) designated by such holder), and the
Corporation shall deliver to such holder a certificate or certificates for the
number of shares of Series B Preferred Stock that such holder has not elected to
convert. The conversion right with respect to any shares of Series B Preferred
Stock shall be deemed to have been exercised at the date upon which the
certificates therefor (and the payment required by Section 6(d), if applicable),
shall have been so delivered, and the person or persons entitled to receive the
Common Stock issuable upon conversion shall be treated for all purposes as the
record holder or holders of such Common Stock upon that date.
(c) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series B Preferred Stock. Instead of any fractional
share of Common Stock otherwise issuable upon conversion of any shares of Series
B Preferred Stock, the Corporation shall pay a cash adjustment in respect of
such fraction in an amount equal to the same fraction of the Closing Price of
the Common Stock at the close of business on the day of conversion. In the
absence of a Closing Price, the Board of Directors shall in good faith determine
the current market price on such basis as it reasonably considers appropriate
and such current market price shall be used to calculate the cash adjustment;
provided that in no case shall the Closing Price be less than the Conversion
Price then in effect.
(d) If a holder converts shares of Series B Preferred Stock,
the Corporation shall pay any documentary, stamp or similar issue or transfer
tax due on the issue of Common Stock upon the conversion or due upon the
issuance of a new certificate or certificates for any shares of Series B
Preferred Stock not converted. The holder, however, shall pay any such tax that
is due because any such shares of the Common Stock or of the Series B Preferred
Stock are issued in a name other than the name of the holder.
(e) The Corporation shall reserve out of its authorized but
unissued Common Stock held in treasury enough shares of Common Stock to permit
the conversion of
11
all of the then-outstanding shares of Series B Preferred Stock. For the purposes
of this Section 6(e), the full number of shares of Common Stock then issuable
upon the conversion of all then-outstanding shares of Series B Preferred Stock
shall be computed as if at the time of computation all outstanding shares of
Series B Preferred Stock were held by a single holder. The Corporation shall
from time to time, in accordance with the laws of the State of Delaware and its
certificate of incorporation, increase the authorized amount of its Common Stock
if at any time the authorized amount of its Common Stock remaining unissued
shall not be sufficient to permit the conversion of all shares of Series B
Preferred Stock at the time outstanding. All shares of Common Stock issued upon
conversion of the shares of Series B Preferred Stock shall be validly issued,
fully paid and nonassessable.
(f) The Conversion Price shall be subject to adjustment as
follows:
(i) In case the Corporation shall (A) pay a dividend
on any class of its capital stock in shares of its Common
Stock, (B) subdivide its outstanding shares of Common Stock
into a greater number of shares or (C) combine its outstanding
shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior thereto shall be
adjusted (as provided below) so that the holders of any shares
of Series B Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares
of Common Stock which such holder would have owned or have
been entitled to receive immediately following such action had
such shares of Series B Preferred Stock been converted
immediately prior to such time. The Conversion Price as
adjusted shall be determined by multiplying the Conversion
Price at which the shares of Series B Preferred Stock were
theretofore convertible by a fraction of which the denominator
shall be the number of shares of Common Stock outstanding
immediately following such action and of which the numerator
shall be the number of shares of Common Stock outstanding
immediately prior thereto. Such adjustment shall be made
whenever any event listed above shall occur and shall become
effective retroactively immediately after the record date in
the case of a dividend and immediately after the effective
date in the case of a subdivision or combination.
(ii) In case the Corporation shall issue rights or
warrants to any Person (including holders of its Common Stock)
entitling such Person or Persons to subscribe for or purchase
shares of Common Stock at a price per share less than the
Current Market Price per share of Common Stock at the record
date therefor, or in case the Corporation shall issue to any
Person (including holders of its Common Stock) other
securities convertible into or exchangeable for Common Stock
for a consideration per share of Common Stock deliverable upon
conversion or exchange thereof less than the Current
12
Market Price at the record date therefore, then the Conversion
Price in effect immediately prior thereto shall be adjusted as
provided below so that the Conversion Price therefor shall be
equal to the price determined by multiplying (A) the
Conversion Price at which shares of Series B Preferred Stock
were theretofore convertible by (B) a fraction of which (x)
the denominator shall be the sum of (1) the number of shares
of Common Stock outstanding on the date of issuance of the
convertible or exchangeable securities, rights or warrants and
(2) the number of additional shares of Common Stock offered
for subscription or purchase, or issuable upon such conversion
or exchange, and (y) the numerator shall be the sum of (1) the
number of shares of Common Stock outstanding on the date of
issuance of such convertible or exchangeable securities,
rights or warrants and (2) the number of additional shares of
Common Stock which the aggregate offering price of the number
of shares of Common Stock so offered would purchase at the
Current Market Price per share of Common Stock. Such
adjustment shall be made whenever such convertible or
exchangeable securities, rights or warrants are issued, and
shall become effective immediately after the record date for
the determination of stockholders entitled to receive such
securities. However, upon the expiration of any right or
warrant to purchase Common Stock, the issuance of which
resulted in an adjustment in the Conversion Price pursuant to
this Section 6(f)(ii), if any such right or warrant shall
expire and shall not have been exercised, the Conversion Price
shall be recomputed immediately upon such expiration and
effective immediately upon such expiration shall be increased
to the price it would have been (but reflecting any other
adjustments to the Conversion Price made pursuant to the
provisions of this Section 6(f) after the issuance of such
rights or warrants) had the adjustment of the Conversion Price
made upon the issuance of such rights or warrants been made on
the basis of offering for subscription or purchase only that
number of shares of Common Stock actually purchased upon the
exercise of such rights or warrants. No further adjustment
shall be made upon exercise of any right, warrant, convertible
security or exchangeable security if any adjustment shall have
been made upon issuance of such security. The foregoing
notwithstanding, no adjustment shall be made pursuant to this
subparagraph (ii) with respect to any particular dividend or
other event with respect to which a Payout Election is made.
(iii) In case the Corporation shall pay a dividend to
all holders of its Common Stock (including any dividend paid
in connection with a consolidation or merger in which the
Corporation is the continuing corporation) of any shares of
capital stock of the Corporation or its subsidiaries (other
than Common Stock) or evidences of its indebtedness or assets
or cash (excluding dividends or distributions in connection
with the liquidation, dissolution or
13
winding up of the Corporation) or rights or warrants to
subscribe for or purchase any of its securities or those of
its subsidiaries or securities convertible or exchangeable for
Common Stock (excluding those securities referred to in
Section 6(f)(ii) above), then in each such case the Conversion
Price in effect immediately prior thereto shall be adjusted as
provided below so that the Conversion Price thereafter shall
be equal to the price determined by multiplying (A) the
Conversion Price in effect on the record date mentioned below
by (B) a fraction, the numerator of which shall be the Current
Market Price per share of Common Stock on the record date
mentioned below less the then fair market value (as determined
by the Board of Directors, whose good faith determination
shall be conclusive) as of such record date of the cash,
assets, evidences of indebtedness or securities so paid with
respect to one share of Common Stock, and the denominator of
which shall be the Current Market Price per share of Common
Stock on such record date; provided, however, that in the
event the then fair market value (as so determined) so paid
with respect to one share of Common Stock is equal to or
greater than the Current Market Price per share of Common
Stock on the record date mentioned above, in lieu of the
foregoing adjustment, adequate provision shall be made so that
each holder of shares of the Series B Preferred Stock shall
have the right to receive the amount and kind of assets,
evidences of indebtedness, or securities such holder would
have received had such holder converted each such share of
Series B Preferred Stock immediately prior to the record date
for such dividend. Such adjustment shall be made whenever any
such payment is made, and shall become effective retroactively
immediately after the record date for the determination of
stockholders entitled to receive the payment. The foregoing
notwithstanding, no adjustment shall be made pursuant to this
subparagraph (iii) with respect to any particular dividend or
other event with respect to which a Payout Election is made.
(iv) In case the Corporation shall purchase, redeem
or otherwise acquire any shares of Common Stock at a price per
share greater than the Current Market Price per share of
Common Stock on the date of such event, or in case the
Corporation shall purchase, redeem or otherwise acquire other
securities convertible into or exchangeable for Common Stock
for a consideration per share of Common Stock into which such
security is convertible or exchangeable greater than the per
share Current Market Price on the date of such event, then the
Conversion Price in effect immediately prior thereto shall be
adjusted as provided below so that the Conversion Price
therefor shall be equal to the price determined by multiplying
(A) the Conversion Price at which shares of Series A Preferred
Stock were theretofore convertible by (B) a fraction of which
(x) the denominator shall be the Current Market Price per
share on the date of such event, and (y) the numerator shall
14
be the Current Market Price per share on the date of such
event less the difference between (1) the consideration paid
by the Corporation per share of Common Stock (or, in the case
of securities convertible into or exchangeable for Common
Stock, the consideration per share of Common Stock into which
such security is convertible or exchangeable) purchased,
redeemed or acquired in such event and (2) the Current Market
Price per share on the date of such event. Such adjustment
shall be made whenever such Common Stock is issued or sold,
and shall become effective immediately after the issuance or
sale of such securities. The foregoing notwithstanding, no
adjustment shall be made pursuant to this subparagraph (iv)
with respect to any particular purchase, redemption or
acquisition with respect to which a Payout Election is made.
(v) In case the Corporation shall issue or sell any
shares of Common Stock at a price per share more than 15%
below (or, in the case of any issuance or sale to an affiliate
(as defined in the rules of the Securities and Exchange
Commission promulgated under the Securities Exchange Act of
1934, as amended) of the Corporation, any amount below) the
Current Market Price per share of Common Stock on the date the
Corporation commits or agrees to such sale or issuance, then
the Conversion Price in effect immediately prior thereto shall
be adjusted as provided below so that the Conversion Price
therefor shall be equal to the price determined by multiplying
(A) the Conversion Price at which shares of Series A Preferred
Stock were theretofore convertible by (B) a fraction of which
(x) the denominator shall be the sum of (1) the number of
shares of Common Stock outstanding on the date of issuance or
sale of such shares of Common Stock and (2) the number of
additional shares of Common Stock offered for sale or subject
to issuance, and (y) the numerator shall be the sum of (1) the
number of shares of Common Stock outstanding on the date of
issuance or sale of such shares of Common Stock and (2) the
number of additional shares of Common Stock which the
aggregate offering price of the number of shares of Common
Stock so offered or issued would purchase at the Current
Market Price per share of Common Stock. Such adjustment shall
be made whenever such Common Stock is issued or sold, and
shall become effective immediately after the issuance or sale
of such securities; provided, however, that the provisions of
this subparagraph shall not apply to (1) shares of Common
Stock issued upon conversion of shares of Series A Preferred
Stock or Series B Preferred Stock, or (2) shares of Common
Stock issued upon conversion, exercise or exchange of any
security with respect to which an adjustment to the Conversion
Price was made in accordance with clause (ii) above at the
time of issuance of such security, or (3) shares of Common
Stock issued in a bona fide public offering to or through a
nationally recognized investment banking firm in which
affiliates (as defined in the rules of the Securities and
Exchange Commission promulgated
15
under the Securities Exchange Act of 1934, as amended) of the
Corporation purchase less than 25% of the shares in such
offering.
(vi) No adjustment in the Conversion Price shall be
required unless the adjustment would require an increase or
decrease of at least 1% in the Conversion Price then in
effect; provided, however, that any adjustments that by reason
of this Section 6(f)(vi) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 6(f) shall be
made to the nearest cent.
(vii) In the event that, at any time as a result of
an adjustment made pursuant to Section 6(f)(i) through
6(f)(vi) above, the holder of any share of Series B Preferred
Stock thereafter surrendered for conversion shall become
entitled to receive any shares of the Corporation other than
shares of the Common Stock, thereafter the number of such
other shares so receivable upon conversion of any share of
Series B Preferred Stock shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock
contained in Section 6(f)(i) through 6(f)(vi) above, and the
other provisions of this Section 6 with respect to the Common
Stock shall apply on like terms to any such other shares.
(viii) Whenever the Conversion Price is adjusted, as
herein provided, the Corporation shall promptly file with the
transfer agent for the Series B Preferred Stock, or, if there
is no transfer agent, the Corporation shall promptly send to
each holder of record by first class mail, postage pre-paid, a
certificate of an officer of the Corporation setting forth the
Conversion Price after the adjustment and setting forth a
brief statement of the facts requiring such adjustment and a
computation thereof. The certificate shall be conclusive
evidence of the correctness of the adjustment. The Corporation
shall promptly cause a notice of the adjusted Conversion Price
to be mailed to each registered holder of shares of Series B
Preferred Stock.
(ix) In case of any reclassification of the Common
Stock, any consolidation of the Corporation with, or merger of
the Corporation into, any other entity, any merger of another
entity into the Corporation (other than a merger that does not
result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the
Corporation), any sale or transfer of all or substantially all
of the assets of the Corporation or any compulsory share
exchange pursuant to which share exchange the Common Stock is
converted into other securities, cash or other property, then
lawful provision shall be made as part of the terms of such
transaction
16
whereby the holder of each share of Series B Preferred Stock
then outstanding shall have the right thereafter, during the
period such share of Series B Preferred Stock shall be
convertible, to convert such share only into the kind and
amount of securities, cash and other property receivable upon
the reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Common
Stock of the Corporation into which a share of Series B
Preferred Stock would have been convertible immediately prior
to the reclassification, consolidation, merger, sale, transfer
or share exchange. The Corporation, the person formed by the
consolidation or resulting from the merger or which acquires
such assets or which acquires the Corporation's shares, as the
case may be, shall make provisions in its certificate or
articles of incorporation or other constituent document to
establish such rights and such rights shall be clearly
provided for in the definitive transaction documents relating
to such transaction. The certificate or articles of
incorporation or other constituent document shall provide for
adjustments, which, for events subsequent to the effective
date of the certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 6.
The provisions of this Section 6(f)(ix) shall similarly apply
to successive reclassifications, consolidations, mergers,
sales, transfers or share exchanges.
(g) The Corporation from time to time may reduce the
Conversion Price by any amount for any period of time if the period is at least
20 days and if the reduction is irrevocable during the period. Whenever the
Conversion Price is so reduced, the Corporation shall mail to holders of record
of the Series B Preferred Stock a notice of the reduction at least 15 days
before the date the reduced Conversion Price takes effect, stating the reduced
Conversion Price and the period it will be in effect. A voluntary reduction of
the Conversion Price does not change or adjust the Conversion Price otherwise in
effect for purposes of paragraph 6(f) above.
7. Status of Shares. All shares of the Series B Preferred Stock
that are at any time redeemed pursuant to Section 4 above or converted or
exchanged pursuant to Section 6 above and all shares of the Series B Preferred
Stock that are otherwise reacquired by the Corporation and subsequently canceled
by the Board of Directors of the Corporation shall have the status of authorized
but unissued shares of Preferred Stock, without designation as to series,
subject to reissuance by the Board of Directors of the Corporation as shares of
any one or more other series.
8. Voting Rights. Except as set forth below or otherwise required
by law, holders of shares of the Series B Preferred Stock shall have no voting
rights.
17
(a) So long as any shares of the Series B Preferred Stock are
outstanding, each share of Series B Preferred Stock shall entitle the holder
thereof to notice of and to vote, in person or by proxy, at any special or
annual meeting of stockholders, on all matters entitled to be voted on by
holders of Common Stock and any other series or class of Voting Stock voting
together as a single class with all other shares entitled to vote thereon. With
respect to any such vote, each share of Series B Preferred Stock shall entitle
the holder thereof to cast that number of votes per share as is equal to the
number of votes that such holder would be entitled to cast had such holder
converted its shares of Series B Preferred Stock into shares of Common Stock as
of the record date for determining the stockholders of the Corporation eligible
to vote on any such matters.
(b) So long as any shares of the Series B Preferred Stock are
outstanding, in addition to any vote or consent of stockholders required by law
or by the Corporation's Certificate of Incorporation, the affirmative vote or
consent of the holders of at least a majority of the shares of Series B
Preferred Stock at any time issued and outstanding, acting as a single class,
given in person or by proxy at any meeting called for such purpose, shall be
necessary for effecting or validating
(i) any reclassification of the Series B Preferred
Stock or any amendment, alteration or repeal (including as a result of
a merger or consolidation involving the Corporation or otherwise by
operation of law) of any of the provisions of the Certificate of
Incorporation or By-laws of the Corporation which adversely affects the
voting powers, rights or preferences of the holders of the shares of
Series B Preferred Stock; provided that the consent of the holders of
at least a majority of the shares of Series B Preferred Stock and
Series A Preferred Stock at the time issued and outstanding, acting as
a single class, given in person or by proxy by vote at any meeting
called for such purpose, shall be necessary for effecting or validating
any reclassification or any amendment, alteration or repeal of any of
the provisions of the Corporation's Certificate of Incorporation or
By-laws of the Corporation which affects adversely the voting powers,
rights or preferences of the holders of the shares of Series B
Preferred Stock and Series A Preferred Stock; and provided, further,
that any amendment of the provisions of the Corporation's Certificate
of Incorporation so as to authorize or create, or to increase the
authorized amount of, the Junior Stock shall not be deemed to affect
adversely the voting powers, rights or preferences of the holders of
shares of Series B Preferred Stock or Series A Preferred Stock;
(ii) the authorization or creation of, or the
increase in the authorized amount of, or the issuance of any shares of
any class or series of Senior Stock or any security convertible into
shares of any class or series of Senior Stock;
(iii) the authorization or creation of, or the
increase in the authorized amount of, or the issuance of any shares of
any class or series of stock or any
18
security convertible into shares of any class or series of Parity Stock
such that the aggregate liquidation preference of all outstanding
shares of Parity Stock (other than (x) shares of Series B Preferred
Stock or Series A Preferred Stock issued pursuant to the Stock Purchase
Agreement, dated as of November 13, 1998, by and among Apollo
Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P. and the
Corporation (the "Stock Purchase Agreement") and (y) any shares of
Series B Preferred Stock or Series A Preferred Stock issued as a
dividend in respect of shares referred to in clause (x) or in respect
of shares referred to in this clause (y)) would exceed the sum of (1)
$135,000,000 and (2) the aggregate liquidation preference of the shares
of Series B Preferred Stock issued at the Option Closing (as such term
is defined in the Stock Purchase Agreement), if any;
(iv) the merger or consolidation of the Corporation
with or into any other entity, unless the resulting corporation will
thereafter have no class or series of shares and no other securities
either authorized or outstanding ranking prior to, or on a parity with,
shares of Series B Preferred Stock in the payment of dividends or the
distribution of its assets on liquidation, dissolution or winding up;
provided, however, that no such vote or consent of the holders of
Series B Preferred Stock shall be required if prior to the time when
such merger or consolidation is to take effect, and regardless of
whether such merger or consolidation would constitute a Change of
Control (as defined in Section 9), a Change of Control Offer (as
defined in Section 9) is made for all shares of Series B Preferred
Stock at the time outstanding in accordance with Section 9; and
(v) the application of any funds, property or assets
of the Corporation or any of its subsidiaries to the purchase,
redemption, sinking fund or other retirement of any shares of any class
of Junior Stock, or the declaration, payment or making of any dividend
or distribution (in cash, property or obligations) on any shares of any
class of Junior Stock, other than a dividend or dividends payable
solely in Common Stock or Junior Stock, unless the holders of Series B
Preferred Stock shall have been offered the opportunity to make a
Payout Election with respect to such event.
In connection with any right to vote pursuant to Section 8(b), each holder of
shares of Series B Preferred Stock shall have one vote for each share held. The
above notwithstanding, and subject to Section 8(a), no consent of holders of
Series B Preferred Stock or Series A Preferred Stock shall be required for the
creation of any indebtedness of any kind of the Corporation.
(c) The term "Voting Stock" means any class or classes of
capital stock, or securities convertible into or exchangeable for any class of
capital stock, of the Corporation pursuant to which the holders thereof have the
general power under ordinary circumstances
19
to vote with respect to the election of at least a majority of the Board of
Directors of the Corporation, irrespective of whether or not, at the time, stock
of any other class or classes shall have, or might have, voting power by reason
of the happening of any contingency.
9. Change of Control. (a) In the event of a Change of Control
(the date of such event being the "Change of Control Date"), the Corporation
shall notify the holders of the Series B Preferred Stock in writing of such
event promptly upon the Corporation becoming aware that a Change of Control is
expected to occur or has occurred and shall, pursuant to Section 9(b), make an
offer to purchase (the "Change of Control Offer") all of the then outstanding
shares of Series B Preferred Stock at a purchase price of 101% of the
Liquidation Preference thereof, payable in cash, plus any unpaid dividends
thereon, if any, whether or not declared, to the date such shares are purchased,
payable in cash.
(b) Subject to the provisions of Section 9(e), within 30 days
following the Change of Control Date, the Corporation shall send, by first class
mail, postage prepaid, a notice to each holder of Series B Preferred Stock at
such holder's address as it appears on the stock books of the Corporation, which
notice shall govern the terms of the Change of Control Offer. The notice to the
holders shall contain all instructions and materials necessary to enable such
holders to tender their shares of Series B Preferred Stock pursuant to the
Change of Control Offer. Such notice shall state:
(i) that a Change of Control has occurred, that the
Change of Control Offer is being made pursuant to this Section 9 and
that all shares of Series B Preferred Stock validly tendered and not
withdrawn will be accepted for payment;
(ii) the purchase price (plus the amount of unpaid
dividends, if any) and the purchase date (the "Change of Control
Payment Date") which shall be a date no earlier than 30 days nor later
than 60 days from the date such notice is mailed, other than as may be
required by law (the "Initial Date") or, if any of the Corporation's
15% Senior Secured Discount Notes due 2007 ("Senior Secured Notes")
remain outstanding, the later of the Initial Date and a date that is
not more than 30 days following the date the Corporation sends notice
pursuant to Section 9(e) that it has satisfied all of the Senior
Obligations;
(iii) that any shares of Series B Preferred Stock not
tendered will remain outstanding on the same terms and will continue to
accrue dividends;
(iv) that, unless the Corporation defaults in making
payment therefor, any share of Series B Preferred Stock tendered and
accepted for payment pursuant to the Change of Control Offer shall
cease to accrue dividends after the Change of Control Payment Date;
20
(v) that holders electing to have any shares of
Series B Preferred Stock purchased pursuant to a Change of Control
Offer will be required to surrender the certificate or certificates
representing such shares, properly endorsed for transfer together with
such customary documents as the Corporation and the transfer agent may
reasonably require, in the manner and at the place specified in the
notice prior to the close of business on the business day prior to the
Change of Control Payment Date;
(vi) that holders shall be entitled to withdraw their
election if the Corporation receives, not later than five business days
prior to the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the holder,
the number of shares of Series B Preferred Stock the holder delivered
for purchase and a statement that such holder is withdrawing his
election to have such shares of Series B Preferred Stock purchased;
(vii) that holders whose shares of Series B Preferred
Stock are purchased only in part will be issued a new certificate
representing the unpurchased shares of Series B Preferred Stock; and
(viii) the circumstances and relevant facts regarding
such Change of Control.
(c) The Corporation shall comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
repurchase of the Series B Preferred Stock in connection with a Change of
Control Offer.
(d) On the Change of Control Payment Date, the Corporation
shall (x) accept for payment the shares of Series B Preferred Stock validly
tendered pursuant to the Change of Control Offer, (y) pay to the holders of
shares so accepted the purchase price therefor (plus the amount of unpaid
dividends, if any) and (z) cancel and retire each surrendered certificate
(subject to issuing a new certificate representing the unpurchased shares of
Series B Preferred Stock). Unless the Corporation defaults in the payment for
the shares of Series B Preferred Stock tendered pursuant to the Change of
Control Offer, dividends shall cease to accrue with respect to the shares of
Series B Preferred Stock tendered and all rights of holders of such tendered
shares shall terminate, except for the right to receive payment therefor, on the
Change of Control Payment Date.
(e) If the purchase of Series B Preferred Stock under this
Section 9 would violate or constitute a default under (i) the Senior Secured
Notes or the indenture relating thereto (the "Indenture"), or (ii) the indenture
or indentures or other agreement or agreements under which there may be issued
or outstanding from time to time other indebtedness of the Company ("Other
Agreements") in an aggregate principal amount not
21
exceeding $450 million (less the amount, if any, of indebtedness issued to
replace, refinance or refund the Senior Secured Notes) because the Corporation
has not satisfied all of its obligations under such Other Agreements arising
from the Change of Control (collectively, "Senior Obligations"), then,
notwithstanding anything to the contrary contained above, prior to complying
with the foregoing provisions, the Corporation shall use its best efforts to
satisfy the Senior Obligations as promptly as possible or to obtain the
requisite consents under the Indenture necessary to permit the repurchase of the
Series B Preferred Stock required by this Section 9. Until the requirements of
the immediately preceding sentence are satisfied, the Corporation shall not be
obligated to make any Change of Control Offer. Within 15 days following the date
the Corporation has satisfied all of the Senior Obligations or obtained such
requisite consents or waivers, the Corporation shall send, by first class mail,
postage prepaid, a notice to each holder of Series B Preferred Stock at such
holder's address as it appears on the stock books of the Corporation that the
Corporation has satisfied all of the Senior Obligations or obtained such
requisite consents or waivers, and such notice shall state the date the Senior
Obligations were satisfied or waived and the Change of Control Payment Date.
(f) For the purposes of this Section 9, "Change of Control"
means the occurrence of any of the following events: (i) any "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934 (the "Exchange Act")) is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person
shall be deemed to have "beneficial ownership" of all securities that such
person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of more than 40% of
the total outstanding Voting Stock of the Corporation; (ii) the Corporation
consolidates with or merges with or into another person or conveys, transfers,
leases or otherwise disposes of all or substantially all of its assets to any
person, or any person consolidates with or merges with or into the Corporation,
in any such event, pursuant to a transaction in which the outstanding voting
stock of the Corporation is converted into or exchanged for cash, securities or
other property, other than, at all times when the Senior Secured Notes are
outstanding, those transactions that are not deemed a "Change of Control" under
the terms of the Indenture; (iii) during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of the Corporation (together with any new directors whose election to
such Board of Directors, or whose nomination for election by the stockholders of
the Corporation, was approved by a vote of 662/3% of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Corporation
then in office; or (iv) the Corporation is liquidated or dissolved or a special
resolution is passed by the stockholders of the Corporation approving the plan
of liquidation or dissolution, other than, at all times when the Senior Secured
Notes are outstanding, those transactions that are not deemed a "Change of
Control" under the terms of the Indenture; provided, however, that no
transaction or event shall be deemed to be a "Change of Control" for purposes of
this Section 9 if (1) all of the
22
outstanding shares of Common Stock are to be converted pursuant thereto solely
into the right to receive, for each share of Common Stock so converted, cash
and/or shares of Qualifying Acquiror Common Stock (as defined below) (valued at
its Current Market Price) together having a value in excess of $30.30, (2) the
Corporation shall have declared and paid all dividends on the Series B Preferred
Stock and Series A Preferred Stock, whether or not theretofore declared or
undeclared, to the date of the Change of Control and the holders thereof shall
have been given reasonable opportunity to convert, prior to such Change of
Control, any shares of Series B Preferred Stock or Series A Preferred Stock so
issued as a dividend, and (3) immediately following such event the number of
shares of Qualifying Acquiror Common Stock into which shares of Series B
Preferred Stock and Series A Preferred Stock shall have been converted (together
with, if shares of Series B Preferred Stock and/or Series A Preferred Stock are
to remain outstanding, any shares of Qualifying Acquiror Common Stock into which
all outstanding Shares of Series B Preferred Stock and Series A Preferred Stock
would be convertible) would represent both (A) less than 5% of the total number
of shares of Qualifying Acquiror Common Stock outstanding immediately after such
event and (B) less than one third of the number of shares of Qualifying Acquiror
Common Stock that would be Publicly Traded immediately after such event. For
purposes of this Section 9, the term "Qualifying Acquiror Common Stock" means
the common stock of any corporation if listed on or admitted to trading on the
NYSE, AMEX or Nasdaq, and the term "Publicly Traded" means shares of such
Qualifying Acquiror Common Stock that are both (1) held by persons who are
neither officers, directors or Affiliates of such corporation nor the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of 5% or more of the total number of shares
then issued and outstanding, and (2) not "restricted securities" (as such term
is defined in Rule 144 of the Securities Act of 1933, as amended).
(g) The Corporation shall not engage in any transaction of the
type referred to in clause (ii) of paragraph (f) above (other than one which is
not a "Change of Control" by virtue of application of the proviso to paragraph
(f) above) unless (i) if the Corporation shall be the surviving or continuing
entity of such transaction, the Corporation shall, after consummation thereof,
have sufficient funds to perform its obligations under this Section 9, and (ii)
if the Corporation shall not be the surviving or continuing entity of such
transaction, proper and adequate provision shall be made, in the definitive
documentation providing for such transaction or otherwise, to ensure that the
surviving or continuing corporation of such transaction shall expressly assume
the Corporation's obligations under this Section 9 and shall have sufficient
funds to perform its obligations under this Section 9.
10. Sinking Fund Redemption. The shares of the Series B Preferred
Stock are not subject to sinking fund requirements.
11. Exchange. (a) Shares of Series B Preferred Stock shall be
exchangeable for Convertible Debt, in whole or in part, out of surplus of the
Corporation legally available for such exchange, at any time and from time to
time at the option of the Corporation. All accrued and unpaid dividends on the
shares of Series A Preferred Stock, including Default
23
Dividends and dividends accrued from the last preceding Dividend Payment Date
through the date fixed for such exchange, shall be declared and paid prior to or
on the same date as the date of any exchange pursuant to this Section 11. The
Corporation shall cause the Convertible Debt to be issued on and dated the date
which coincides with the date of exchange of the Series A Preferred Stock.
(b) Any notice of any exchange of the Series A Preferred Stock
given by the Corporation shall be mailed to each holder of shares of Series A
Preferred Stock to be exchanged at such Holder's address as it appears on the
books of the Corporation. Such notice shall set forth the procedures for
exchanging certificates representing Series A Preferred Stock for Convertible
Debt with a principal amount equal to 100% of the aggregate Liquidation
Preference of the shares of Series A Preferred Stock being exchanged. The
Corporation shall as promptly as practicable thereafter mail to each such holder
a notice setting forth the procedures for exchanging certificates representing
Series A Preferred Stock for Convertible Debt. Upon such exchange, the rights of
the holders of Series A Preferred Stock to be exchanged as stockholders of the
Corporation shall cease, and the person or persons entitled to receive the
Convertible Debt issuable upon such exchange shall be treated for all purposes
as the registered holder or holders of such Convertible Debt.
(c) The shares of Series A Preferred Stock which have been
exchanged shall no longer be deemed to be outstanding and shall be retired and
all rights with respect to such shares, including, without limitation, the
rights, if any, to receive dividends (and interest thereon) and to receive
notices and to vote or consent (except for the right of the holders to receive
accrued and unpaid dividends, if any, and Convertible Debt and Common Stock, as
provided herein, in exchange therefor) shall forthwith cease.
(d) Upon any exchange of shares of Series A Preferred Stock
into Convertible Debt, as provided herein, in accordance with this Section 11,
the Corporation will pay any documentary, stamp or similar issue or transfer
taxes which may be due with respect to the transfer and exchange of such
exchanged shares, if any; provided, however, that if the Convertible Debt into
which the shares of Series A Preferred Stock is exchangeable pursuant to this
Section 11 is to be issued in the name of any person other than the holder of
the shares of Series A Preferred Stock to be so exchanged, the amount of any
transfer taxes (whether imposed on the Corporation, the holder or such other
person) payable on account of the transfer to such person will be payable by the
holder.
(e) Unless otherwise agreed by the Corporation and each holder
of shares of Series A Preferred Stock, any shares exchanged at the Corporation's
election shall be called for exchange on a pro rata basis from all holders of
Series A Preferred Stock. Any exchange for which shares are called for exchange
on a pro rata basis (whether or not some of such shares so called are
subsequently converted pursuant to Section 11) shall comply with this Section
11. Any fractional share of Series A Preferred Stock which would otherwise be
issuable as a result of any exchange of less than all shares held shall be
included in the shares exchanged.
24
(f) The Convertible Debt shall have a maturity date 13 years
following the Closing Date; a principal amount a described in Section 11(a)
thereof (and a proportionate principal amount for any fractional share
exchanged); and shall provide for payment of interest at the rate of 9.2% per
annum, payable annually in cash; shall be convertible and redeemable on terms
substantially the same as those of the Series A Preferred Stock; in each case,
on the terms and conditions set forth in the Convertible Debt Indenture and
shall otherwise be on the terms set forth in the Convertible Debt Indenture.
(g) Definitions. (i) "Convertible Debt" means the 9.2%
Convertible Debentures of the Corporation issued pursuant to the Convertible
Debt Indenture, as amended, modified, supplemented, restructured, replaced,
extended or refinanced from time to time in accordance with the terms hereof and
thereof.
(ii) "Convertible Debt Indenture" means the indenture
pursuant to which the Convertible Debt is to be issued, in the form
attached as Exhibit D to that certain Stock Purchase Agreement, dated
as of November 13, 1998, among the Corporation and the Purchasers prior
to the Closing (as defined therein), or, if no such form is agreed upon
as of the Closing, in form and substance acceptable to holders of a
majority of Series A Preferred Stock immediately prior to the
effectiveness of such indenture.
25
IN WITNESS WHEREOF, CD Radio Inc. has caused this Certificate to be
duly executed on its behalf by its undersigned duly authorized officer this
___th day of ___________, 199_.
CD RADIO INC.
By:
-----------------------
Name: Patrick L. Donnelly
Title: Secretary