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CD RADIO INC.
(a Delaware corporation)
Units Consisting of
15% Senior Secured Discount Notes due 2007
and Warrants to Purchase 15% Senior Secured Discount Notes due 2007
PURCHASE AGREEMENT
Dated: November 20, 1997
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Table of Contents
PURCHASE AGREEMENT.......................................................................................... 1
SECTION 1. Representations and Warranties*.................................................... 3
(a) Representations and Warranties by the Company...................................... 3
(i) Compliance with Registration Requirements.............................. 3
(ii) Incorporated Documents................................................. 4
(iii) Independent Accountants................................................ 4
(iv) Financial Statements................................................... 4
(v) No Material Adverse Change in Business................................. 5
(vi) Good Standing of the Company........................................... 5
(vii) Good Standing of the Subsidiary........................................ 5
(viii) Capitalization......................................................... 6
(ix) Authorization of Agreement............................................. 6
(x) Authorization of the Indenture......................................... 6
(xi) Authorization of the Notes............................................. 6
(xii) Description of the Indenture and the Warrant
Agreement.............................................................. 7
(xiii) Authorization of the Warrant Agreement................................. 7
(xiv) Authorization of the Warrants.......................................... 7
(xv) Authorization of the Warrant Securities................................ 7
(xvi) Description of the Securities. ....................................... 7
(xvii) Authorization of the Pledge Agreement.................................. 8
(xviii) Description of the Pledge Agreement.................................... 8
(xix) Absence of Defaults and Conflicts...................................... 8
(xxxvi) Pledged Collateral........................................................ 13
(b) Officer's Certificates............................................................. 13
SECTION 2. Sale and Delivery to Underwriters; Closing......................................... 13
(a) Securities......................................................................... 13
(b) Payment............................................................................ 13
(c) Denominations; Registration........................................................ 14
SECTION 3. Covenants of the Company........................................................... 14
(a) Compliance with Securities Regulations and Commission
Requests........................................................................... 14
(b) Filing of Amendments............................................................... 14
(c) Delivery of Registration Statements................................................ 15
(d) Delivery of Prospectuses........................................................... 15
(e) Continued Compliance with Securities Laws.......................................... 15
(f) Blue Sky Qualifications............................................................ 16
(g) Rule 158........................................................................... 16
(h) Use of Proceeds.................................................................... 16
(i) Listing............................................................................ 16
(j) Restriction on Sale of Securities.................................................. 16
(k) Reporting Requirements............................................................. 17
SECTION 4. Payment of Expenses................................................................ 17
(a) Expenses........................................................................... 17
(b) Termination of Agreement........................................................... 17
SECTION 5. Conditions of Underwriters' Obligations............................................ 17
(a) Effectiveness of Registration Statement............................................ 18
(b) Opinion of Counsel for Company..................................................... 18
(c) Opinion of Regulatory Counsel for Company.......................................... 18
(d) Opinion of Patent Counsel for Company.............................................. 18
(e) Opinion of Intellectual Property Counsel for Company............................... 18
(f) Opinion of Counsel for Underwriters................................................ 19
(g) Officers' Certificate.............................................................. 19
(h) Accountants' Comfort Letter........................................................ 19
(i) Bring-down Comfort Letter.......................................................... 19
(j) Approval of Listing................................................................ 20
(k) No Objection....................................................................... 20
(l) Consummation of the Exchange Offer................................................. 20
(m) Additional Documents............................................................... 20
(n) Termination of Agreement........................................................... 20
SECTION 6. Indemnification.................................................................... 20
(a) Indemnification of Underwriters.................................................... 20
(b) Indemnification of Company, Directors and Officers................................. 22
(c) Actions against Parties; Notification.............................................. 22
(d) Settlement without Consent if Failure to Reimburse................................. 22
SECTION 7. Contribution....................................................................... 23
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery........................................................................... 24
SECTION 9. Termination of Agreement........................................................... 24
(a) Termination; General............................................................... 24
(b) Liabilities........................................................................ 25
SECTION 10. Default by One or More of the Underwriters......................................... 25
SECTION 11. Notices............................................................................ 26
SECTION 12. Parties............................................................................ 26
SECTION 13. GOVERNING LAW AND TIME............................................................. 26
SECTION 14. Effect of Headings................................................................. 26
SCHEDULES
Schedule A - List of Underwriters............................................................. Sch A-1
Schedule B - Pricing Information.............................................................. Sch B-1
EXHIBITS
Exhibit A - Form of Opinion of Company's Counsel.............................................. A-1
Exhibit B - Form of Opinion of Regulatory Counsel for the Company............................. B-1
Exhibit C - Form of Opinion of Patent Counsel for the Company................................. C-1
Exhibit D - Form of Opinion of Intellectual Property Counsel for the
Company Counsel........................................................... D-1
ii
CD RADIO INC.
(a Delaware corporation)
12,910 Units Consisting of $258,200,000
Aggregate Principal Amount at Maturity 15% Senior Secured
Discount Notes due 2007 and 12,910 Warrants to Acquire
an Aggregate $38,730,000 Principal Amount as Maturity
15% Senior Secured Discount Notes due 2007
PURCHASE AGREEMENT
November 20, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Lehman Brothers Inc.
Libra Investments Inc.
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281
Ladies and Gentlemen:
CD Radio Inc., a Delaware corporation (the "Company"), confirms its
agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and each of the other Underwriters named in
Schedule A hereto (collectively, the "Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch, Lehman Brothers Inc. and Libra Investments,
Inc. are acting as representatives (in such capacity, the "Representatives"),
with respect to the issue and sale by the Company and the purchase by the
Underwriters, acting severally and not jointly, of the respective number of the
Company's Units (the "Units" or the "Securities"), each Unit consisting of
$20,000 aggregate principal amount at maturity of the Company's 15% Senior
Secured Discount Notes due 2007 (the "Notes") and one Warrant
(the "Warrants"), each Warrant entitling the holder thereof to acquire $3,000
principal amount at maturity of Notes. The Notes are to be issued pursuant to an
indenture dated as of the Closing Time (the "Indenture") between the Company and
IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"), and the Warrants
are to be issued pursuant to a warrant agreement dated as of the Closing Time
(the "Warrant Agreement") between the Company and IBJ Schroder Bank & Trust
Company, as warrant agent (the "Warrant Agent").
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
this Agreement has been executed and delivered and the Indenture has been
qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act").
The Company has also made an exchange offer (the "Exchange Offer") for
its outstanding 5% Delayed Convertible Preferred Stock ("5% Preferred Stock")
pursuant to a registration statement on Form S-4 (No. 333-34761) (the "Exchange
Offer Registration Statement") and is undertaking a public offering of Common
Stock (the "Stock Offerings"), pursuant to a registration statement on Form S-3
(No. 333-34769).
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-34769) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectus.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations, (ii) if the Company has elected to rely upon Rule 434
("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a "Term
Sheet") in accordance with the provisions of Rule 434 and Rule 424(b) or (iii)
prepare and file, prior to the effective date of such registration statement, an
amendment to such registration statement, including a final prospectus. The
information included in such prospectus or in such Term Sheet, as the case may
be, that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Each prospectus used before such
registration statement became effective, and any prospectus that omitted, if
applicable, the Rule 430A Information or the Rule 434 Information, that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto, schedules thereto, if any, and the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, at the time it became effective and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term
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"Registration Statement" shall include the Rule 462(b) Registration Statement.
The final prospectus, including the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the 1933 Act, included in the Registration
Statement at the time it becomes effective is herein called the "Prospectus",
except that, if the Company has relied upon Rule 430A, the prospectus in the
form first furnished to the Underwriters for use in connection with the offering
of the Securities is herein called the "Prospectus." If Rule 434 is relied on,
the term "Prospectus" shall refer to the preliminary prospectus dated October
30, 1997 together with the Term Sheet and all references in this Agreement to
the date of the Prospectus shall mean the date of the Term Sheet. For purposes
of this Agreement, all references to the Registration Statement, any preliminary
prospectus, the Prospectus or any Term Sheet or any amendment or supplement to
any of the foregoing shall be deemed to include the copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR").
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934 (the "1934 Act") which is
incorporated by reference in the Registration Statement, such preliminary
prospectus or the Prospectus, as the case may be.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(b) hereof, and agrees with each
Underwriter, as follows:
(i) Compliance with Registration Requirements. Pursuant to an
oral waiver granted to the Company by the Commission, the Company is
permitted to use Form S-3 under the 1933 Act in connection with the
Stock Offerings. Each of the Registration Statement and any Rule 462(b)
Registration Statement has become effective under the 1933 Act and no
stop order suspending the effectiveness of the Registration Statement
or any Rule 462(b) Registration Statement has been issued under the
1933 Act and no proceedings for that purpose have been instituted or
are pending or, to the knowledge of the Company, are contemplated by
the Commission, and any request on the part of the Commission for
additional information has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective
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and at the Closing Time, the Registration Statement, the Rule 462(b)
Registration Statement and any amendments and supplements thereto
complied and will comply in all material respects with the requirements
of the 1933 Act and the 1933 Act Regulations and did not and will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. Neither of the Prospectus nor any
amendments or supplements thereto, at the time the Prospectus or any
amendments or supplements thereto were issued and at the Closing Time,
included or will include an untrue statement of a material fact or
omitted or will omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. If Rule 434 is used, the Company
will comply with the requirements of Rule 434. The representations and
warranties in this subsection shall not apply to statements in or
omissions from the Registration Statement or the Prospectus made in
reliance upon and in conformity with information furnished to the
Company in writing by any Underwriter through the Representatives
expressly for use in the Registration Statement or the Prospectus.
Each preliminary prospectus and the prospectuses filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectus
delivered to the Underwriters for use in connection with this offering
was identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted
by Regulation S-T.
(ii) Incorporated Documents. The documents incorporated or
deemed to be incorporated by reference in the Registration Statement
and the Prospectus, at the time they were or hereafter are filed with
the Commission, complied and will comply in all material respects with
the requirements of the 1934 Act, and, when read together with the
other information in the Prospectus, at the time the Registration
Statement became effective, at the time the Prospectus was issued and
at the Closing Time, did not and will not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(iii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required
by the 1933 Act.
(iv) Financial Statements. The financial statements and the
related notes of the Company included in the Registration Statement and
the Prospectus present fairly in accordance with generally accepted
accounting principles ("GAAP") the financial position of the Company
and its consolidated subsidiary as of the dates indicated and the
statement of operations, stockholders' equity and cash flows of the
Company and
4
its consolidated subsidiary for the periods specified. Such financial
statements have been prepared in conformity with GAAP applied on a
consistent basis throughout the periods involved. The selected
financial data and the summary financial information included in the
Registration Statement and the Prospectus present fairly in accordance
with GAAP the information shown therein and have been compiled on a
basis consistent with that of the audited financial statements of the
Company for each of the years in the five-year period ended December
31, 1996.
(v) No Material Adverse Charge in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated therein or
contemplated thereby, there has not been (A) any material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its
subsidiary considered as one enterprise, whether or not arising in the
ordinary course of business (a "Material Adverse Effect"), (B) any
transaction entered into by the Company or its subsidiary, other than
in the ordinary course of business, that is material with respect to
the Company and its subsidiary considered as one enterprise, or (C) any
dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.
(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus, to enter into and perform its
obligations under this Agreement and to consummate the Stock Offerings;
the Company is duly qualified as a foreign corporation to transact
business and is in good standing in each other jurisdiction in which
each such qualification is required, whether by reason of the ownership
or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect.
(vii) Good Standing of the Subsidiary. Satellite CD Radio,
Inc. has been duly organized and is validly existing as a corporation
in good standing under the laws of the State of Delaware and has
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect. All of the
issued and outstanding capital stock of Satellite CD Radio, Inc. has
been duly authorized and validly issued, is fully paid and
non-assessable and is owned by the Company free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none of the outstanding shares of capital stock of Satellite CD
Radio, Inc. was issued in violation of the preemptive
5
or similar rights of any securityholder of Satellite CD Radio, Inc.
Satellite CD Radio, Inc. is the only subsidiary of the Company.
(viii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to reservations, agreements or
employee benefit plans referred to in the Prospectus, pursuant to the
Exchange Offer or the Stock Offerings or pursuant to the exercise of
convertible securities, warrants or options referred to in the
Prospectus). The shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully paid
and non-assessable; none of the outstanding shares of capital stock of
the Company was issued in violation of the preemptive or other similar
rights of any securityholder of the Company.
(ix) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
(x) Authorization of the Indenture. The Indenture has been
duly authorized by the Company and duly qualified under the 1939 Act
and, at the Closing Time, will have been duly executed and delivered by
the Company and, when duly executed and delivered by the Trustee, will
constitute a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law).
(xi) Authorization of the Notes. The Notes have been duly
authorized and, at the Closing Time, will have been duly executed by
the Company and, when authenticated, issued and delivered in the manner
provided for in the Indenture and delivered against payment of the
purchase price therefor as provided in this Agreement, will constitute
valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors' rights
generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law), and will be in the form
contemplated by, and entitled to the benefits of, the Indenture.
(xii) Description of the Indenture and the Warrant Agreement.
The Indenture and the Warrant Agreement will conform in all material
respects to the respective statements relating thereto contained in the
Prospectus and will be in
6
substantially the respective forms filed or incorporated by reference,
as the case may be, as exhibits to the Registration Statement.
(xiii) Authorization of the Warrant Agreement. The Warrant
Agreement has been duly authorized by the Company and, at the Closing
Time, will have been duly executed and delivered by the Company and,
when duly executed and delivered by the Warrant Agent, will constitute
a valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as the enforcement thereof
may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors' rights
generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).
(xiv) Authorization of the Warrants. The Warrants have been
duly authorized and, at the Closing Time, will have been duly executed
by the Company and, when executed, issued and delivered in the manner
provided for in the Warrant Agreement and delivered against payment of
the purchase price therefor as provided in this Agreement, will
constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law),
and will be in the form contemplated by, and entitled to the benefits
of, the Warrant Agreement.
(xv) Authorization of the Warrant Securities. The Notes
issuable upon exercise of the Warrants (the "Warrant Securities") have
been duly authorized and reserved by the Company and, when issued and
delivered upon exercise of the Warrants in accordance with the terms of
the Warrants and the Warrant Agreement, will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting enforcement of creditors' rights generally and
except as enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a proceeding
in equity or at law), and will be in the form contemplated by, and
entitled to the benefits of, the Indenture.
(xvi) Description of the Securities. The Units, the Notes and
the Warrants conform to all statements relating thereto contained in
the Prospectus and such description conforms to the rights set forth in
the instruments defining the same.
7
(xvii) Authorization of the Pledge Agreement. The Pledge
Agreement has been duly authorized by the Company and, at the Closing
Time, will have been duly executed and delivered by the Company and
will constitute a valid and binding agreement of the Issuer,
enforceable against the Company in accordance with its terms, except as
enforceability thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating
to or affecting enforcement of creditors' rights generally or by
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(xviii) Description of the Pledge Agreement. The Pledge
Agreement conforms in all material respects to all statements relating
thereto contained in the Prospectus and will be in substantially the
respective forms filed or incorporated by reference, as the case may
be, as exhibits to the Registration Statement.
(xix) Absence of Defaults and Conflicts. Neither the Company
nor its subsidiary is in violation of its charter or by-laws or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or other agreement
or instrument to which the Company or its subsidiary is a party or by
which it or any of them may be bound, or to which any of the property
or assets of the Company or its subsidiary is subject (collectively,
"Agreements and Instruments") except for such defaults that would not
result in a Material Adverse Effect; and the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated in this Agreement and in the Registration Statement
(including the issuance and sale of the Securities and the use of the
proceeds from the sale of the Securities as described in the Prospectus
under the caption "Use of Proceeds") and compliance by the Company with
its obligations under this Agreement have been duly authorized by all
necessary corporate action and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or its
subsidiary pursuant to, the Agreements and Instruments (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that
would not result in a Material Adverse Effect), nor will such action
result in any violation of the provisions of the charter or by-laws of
the Company or its subsidiary or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or its subsidiary or any of their assets,
properties or operations. As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or its subsidiary.
8
(xx) Absence of Labor Dispute. No labor dispute with the
employees of the Company or its subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or its subsidiary's principal suppliers, manufacturers or contractors,
which, in either case, may reasonably be expected to result in a
Material Adverse Effect.
(xxi) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or its subsidiary, which is required to be disclosed in the
Registration Statement and the Prospectus (other than as disclosed
therein), or which might reasonably be expected to result in a Material
Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the transactions
contemplated by this Agreement or the performance by the Company of its
obligations hereunder or thereunder; all pending legal or governmental
proceedings to which the Company or its subsidiary is a party or of
which any of their respective property or assets is the subject which
are not described in the Registration Statement, including ordinary
routine litigation incidental to the business, in the aggregate could
not reasonably be expected to result in a Material Adverse Effect.
(xxii) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement, the Prospectus or the documents incorporated by reference
therein or to be filed as exhibits which have not been so described and
filed as required.
(xxiii) Possession of Intellectual Property. The Company and
its subsidiary own or possess adequate patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks, trade
names or other intellectual property (collectively, "Intellectual
Property") necessary to carry on the business now operated by them and
intended to be operated by them in the manner described in the
Registration Statement and the Prospectus, and neither the Company nor
its subsidiary has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect
to any Intellectual Property or of any facts or circumstances which
would render any Intellectual Property invalid or inadequate to protect
the interest of the Company or its subsidiary therein, and which
infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the
aggregate, would result in a Material Adverse Effect.
(xxiv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or
9
governmental authority or agency is necessary or required for the
performance by the Company of its obligations hereunder, in connection
with the offering, issuance or sale of the Securities under this
Agreement or the consummation of the transactions contemplated by this
Agreement, except such as have been already obtained or as may be
required under the 1933 Act or the 1933 Act Regulations and state
securities or blue sky laws.
(xxv) Possession of Licenses and Permits. Except as disclosed
in the Prospectus, the Company and its subsidiary possess such permits,
licenses (including, without limitation, the FCC License, as defined in
the Prospectus), approvals, consents and other authorizations
(collectively, "Governmental Licenses") issued by the appropriate
federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them or intended to
be operated by them in the manner described in the Registration
Statement and the Prospectus; the Company and its subsidiary are in
compliance with the terms and conditions of all such Governmental
Licenses, except where the failure so to comply would not, singly or in
the aggregate, have a Material Adverse Effect; all of the Governmental
Licenses are valid and in full force and effect, except when the
invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor its subsidiary has
received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xxvi) Title to Property. The Company and its subsidiary have
good and marketable title to all real property owned by the Company and
its subsidiary and good title to all other properties owned by them, in
each case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such
as (a) are described in the Prospectus or (b) do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by
the Company or its subsidiary; and all of the leases and subleases
material to the business of the Company and its subsidiary, considered
as one enterprise, and under which the Company or its subsidiary holds
properties described in the Prospectus, are in full force and effect,
and neither the Company nor its subsidiary has any notice of any
material claim of any sort that has been asserted by anyone adverse to
the rights of the Company or its subsidiary under any of the leases or
subleases mentioned above, or affecting or questioning the rights of
the Company or such subsidiary to the continued possession of the
leased or subleased premises under any such lease or sublease.
(xxvii) Investment Company Act. The Company is not, and upon
the issuance and sale of the Securities as herein contemplated, the
issuance and sale of Common Stock in connection with the Stock
Offerings, and the application of the net
10
proceeds therefrom as described in the Prospectus will not be, an
"investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of
1940, as amended (the "1940 Act").
(xxviii) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor its subsidiary is in violation of any federal, state, local or
foreign statute, law, rule, regulation, ordinance, code, policy or rule
of common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials (collectively, "Environmental
Laws"), (B) the Company and its subsidiary have all permits,
authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(C) there are no pending or threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company or its subsidiary
and (D) there are no events or circumstances that might reasonably be
expected to form the basis of an order for clean-up or remediation, or
an action, suit or proceeding by any private party or governmental body
or agency, against or affecting the Company or its subsidiary relating
to Hazardous Materials or any Environmental Laws.
(xxix) Taxes. All United States federal income tax returns of
the Company and its subsidiary required by law to be filed have been
filed and all taxes shown by such returns or otherwise assessed, which
are due and payable, have been paid, except assessments against which
appeals have been or will be promptly taken and as to which adequate
reserves have been provided. The Company and its subsidiary have filed
all other tax returns that are required to have been filed by them
pursuant to applicable foreign, state, local or other law, except
insofar as the failure to file such returns would not result in a
Material Adverse Effect, and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Company and its
subsidiary, except for such taxes, if any, as are being contested in
good faith and as to which adequate reserves have been provided.
(xxx) Internal Controls. The Company and its subsidiary
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that (A) transactions are executed in accordance
with management's general or specific authorization, (B) transactions
are recorded as necessary to permit preparation of
11
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets, (C) access to
assets is permitted only in accordance with management's general or
specific authorization and (D) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(xxxi) Registration Rights. Except as described in the
Prospectus, there are no persons with registration rights or other
similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the
1933 Act.
(xxxii) Related Parties. No relationship, direct or indirect,
exists between or among any of the Company or any affiliate of the
Company, on the one hand, and any director, officer, stockholder or
supplier of any of them, on the other hand, which is required to be
described in the Registration Statement or the Prospectus which is not
so described or is not described as required.
(xxxiii) Offering Materials. The Company has not distributed
and, prior to the Closing Time, will not distribute any Offering
Materials in connection with the offering and sale of Securities, other
than the Registration Statement, any preliminary prospectus, the
Prospectus or any other Offering Materials, if any, permitted by the
1933 Act and the 1934 Act and approved by the Representatives.
(xxxiv) Voting Trust Agreement. The Voting Trust Agreement,
dated August 26, 1997 among the Company, Darlene Friedland and David
Margolese and consented to by Robert M. Friedland has been duly
authorized, executed and delivered by the Company and, assuming due
authorization, execution and delivery thereof by the parties thereto
(other than the Company), is a valid, legal and binding obligation of
the Company and Darlene Friedland in accordance with its terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law).
(xxxv) Proposed Amendment. The Proposed Amendment (as defined
in the Exchange Offer Registration Statement) has been approved by the
Board of Directors of the Company and the stockholders of the Company
and has been validly filed with the Secretary of State of the State of
Delaware, and prior to the date hereof the Company's Articles of
Incorporation have been amended by the Proposed Amendment.
(xxxiv) Exchange Offer. Prior to the date hereof, the Exchange
Offer has been consummated, and in the Exchange Offer shares of the
Company's 10 1/2% Series
12
C Convertible Preferred Sock were exchanged for 100% of the outstanding
shares of 5% Preferred Stock.
(xxxv) Qualifying Offerings. Immediately after giving effect
to the issuance and sale of the Securities, there will have occurred
one or more Qualifying Offerings (as defined in the Certificate of
Designations for the 5% Preferred Stock) yielding gross proceeds to the
Company in an aggregate cash amount of at least $100 million.
(xxxvi) Pledged Collateral. Upon the transfer to the Trustee
of the Pledged Securities (as defined in the Pledge Agreement) and the
acquisition by the Trustee of a security entitlement thereto, in
accordance with the terms of the Pledge Agreement, the pledge of and
grant of a security interest in the Pledged Collateral (as defined in
the Pledge Agreement) securing the payment of the Obligations (as
defined in the Pledge Agreement) for the benefit of the Trustee and
holders of the Units will constitute a first priority perfected
security interest in such Pledged Collateral, enforceable as such
against all creditors of the Company (and any persons purporting to
purchase any of the Pledged Collateral from the Company).
(xxxvii) Security Interest. The Pledge Agreement and the
pledge of the Pledged Collateral pursuant hereto create a valid and
perfected first priority security interest in the Pledged Collateral in
favor of the Trustee, securing the payment of all the Obligations, and
all filings and other actions necessary or desirable as may be required
by the Trustee or the Holders to perfect and protect such security
interest have been duly taken.
(b) Officer's Certificates. Any certificate signed by any officer of
the Company delivered to the Representatives or to counsel for the Underwriters
shall be deemed a representation and warranty by the Company to each Underwriter
as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Company, at
the price set forth in Schedule B, the aggregate amount of Securities set forth
in Schedule A opposite the name of such Underwriter, plus any additional
principal amount of Securities which such Underwriter may become obligated to
purchase pursuant to the provisions of Section 10 hereof.
(b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the offices of Shearman &
Sterling, 599 Lexington Avenue, New York, New York 10022, or at such other place
as shall be agreed upon by the Representatives and the Company, at 9:00 A.M.
(Eastern time) on the third (fourth, if the
13
pricing occurs after 4:30 P.M. (Eastern time) on any given day) business day
after the date hereof (unless postponed in accordance with the provisions of
Section 10), or such other time not later than ten business days after such date
as shall be agreed upon by the Representatives and the Company (such time and
date of payment and delivery being herein called "Closing Time").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Representatives for the respective accounts of the Underwriters of
certificates for the Securities to be purchased by them. It is understood that
each Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Securities which it has agreed to purchase. Merrill Lynch, individually and not
as representative of the Underwriters, may (but shall not be obligated to) make
payment of the purchase price for the Securities to be purchased by any
Underwriter whose funds have not been received by the Closing Time, but such
payment shall not relieve such Underwriter from its obligations hereunder.
(c) Denominations; Registration. Certificates for the Units, the Notes
and the Warrants shall be in such denominations and registered in such names as
the Representatives may request in writing at least one full business day before
the Closing Time. The Units, the Notes and the Warrants will be made available
for examination and packaging by the Representatives in The City of New York not
later than 10:00 A.M. (Eastern time) on the business day prior to the Closing
Time.
SECTION 3. Covenants of the Company. The Company covenants with each
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission
Requests. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A or Rule 434, as applicable, and will notify
the Representatives immediately, and confirm the notice in writing, (i)
when any post-effective amendment to the Registration Statement shall
become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments
from the Commission, (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement
to the Prospectus or for additional information, and (iv) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing
or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering or sale
in any jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes. The Company will promptly effect
the filings necessary pursuant to Rule 424(b) and will take such steps
as it deems necessary to ascertain promptly whether the form of
prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will
promptly file such prospectus. The Company
14
will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof
at the earliest possible moment.
(b) Filing of Amendments. The Company will give the
Representatives notice of its intention to file or prepare any
amendment to the Registration Statement (including any filing under
Rule 462(b)), any Term Sheet or any amendment, supplement or revision
to either the prospectus included in the Registration Statement at the
time it became effective or to the Prospectus, whether pursuant to the
1933 Act, the 1934 Act or otherwise, will furnish the Representatives
with copies of any such documents a reasonable amount of time prior to
such proposed filing or use, as the case may be, and will not file or
use any such document to which the Representatives or counsel for the
Underwriters shall object.
(c) Delivery of Registration Statements. The Company has
furnished or will deliver to the Representatives and counsel for the
Underwriters, without charge, signed copies of the Registration
Statement as originally filed and of each amendment thereto (including
exhibits filed therewith or incorporated by reference therein and
documents incorporated or deemed to be incorporated by reference
therein) and signed copies of all consents and certificates of experts,
and will also deliver to the Representatives, without charge, a
conformed copy of the Registration Statement as originally filed and of
each amendment thereto (without exhibits) for each of the Underwriters.
The copies of the Registration Statement and each amendment thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to
each Underwriter, without charge, as many copies of each preliminary
prospectus as such Underwriter reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the
1933 Act. The Company will furnish to each Underwriter, without charge,
during the period when the Prospectus is required to be delivered under
the 1933 Act or the 1934 Act, such number of copies of the Prospectus
(as amended or supplemented) as such Underwriter may reasonably
request. The Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company
will comply with the 1933 Act and the 1933 Act Regulations, the 1934
Act and the rules and regulations of the Commission under the 1934 Act
(the "1934 Act Regulations"); and the 1939 Act and the rules and
regulations thereunder (the "1939 Act Regulations") so as to permit the
completion of the distribution of the Securities as contemplated in
this Agreement and in the Prospectus. If at any time when a
15
prospectus is required by the 1933 Act to be delivered in connection
with sales of the Securities, any event shall occur or condition shall
exist as a result of which it is necessary, in the opinion of counsel
for the Underwriters or for the Company, to amend the Registration
Statement or amend or supplement the Prospectus in order that the
Prospectus will not include any untrue statements of a material fact or
omit to state a material fact necessary in order to make the statements
therein not misleading in the light of the circumstances existing at
the time it is delivered to a purchaser, or if it shall be necessary,
in the opinion of such counsel, at any such time to amend the
Registration Statement or amend or supplement the Prospectus in order
to comply with the requirements of the 1933 Act or the 1933 Act
Regulations, the Company will promptly prepare and file with the
Commission, subject to Section 3(b), such amendment or supplement as
may be necessary to correct such statement or omission or to make the
Registration Statement or the Prospectus comply with such requirements,
and the Company will furnish to the Underwriters such number of copies
of such amendment or supplement as the Underwriters may reasonably
request.
(f) Blue Sky Qualifications. The Company will use its best
efforts, in cooperation with the Underwriters, to qualify the
Securities for offering and sale under the applicable securities laws
of such states and other jurisdictions as the Global Coordinator may
designate and to maintain such qualifications in effect for a period of
not less than one year from the later of the effective date of the
Registration Statement and any Rule 462(b) Registration Statement;
provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which
it is not so qualified or to subject itself to taxation in respect of
doing business in any jurisdiction in which it is not otherwise so
subject. In each jurisdiction in which the Securities have been so
qualified, the Company will file such statements and reports as may be
required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from the
effective date of the Registration Statement and any Rule 462(b)
Registration Statement.
(g) Rule 158. The Company will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally
available to its securityholders as soon as practicable an earnings
statement for the purposes of, and to provide the benefits contemplated
by, the last paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified
in the Prospectus under "Use of Proceeds".
(i) Listing. The Company will use its best efforts to maintain
the quotation of the Common Stock on the Nasdaq National Market and
will file with the Nasdaq National Market all documents and notices
required by the Nasdaq National
16
Market of companies that have securities that are traded on the Nasdaq
National Market and quotations for which are reported by the Nasdaq
National Market.
(j) Restriction on Sale of Securities. During a period of 180
days from the date of the Prospectus, the Company will not, without the
prior written consent of Merrill Lynch, directly or indirectly, issue,
sell, offer or contract to sell, grant any option for the sale of, or
otherwise transfer or dispose of, any debt securities of the Company or
securities of the Company that are convertible into, or exchangeable
for, the Units or such other debt securities.
(k) Reporting Requirements. The Company, during the period
when the Prospectus is required to be delivered under the 1933 Act or
the 1934 Act, will file all documents required to be filed with the
Commission pursuant to the 1934 Act within the time periods required by
the 1934 Act and the 1934 Act Regulations.
SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay all
expenses incident to the performance of its obligations under this Agreement,
including (i) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the Underwriters, (iv) the
fees and disbursements of the Company's counsel, accountants and other advisors,
(v) the qualification of the Securities under securities laws in accordance with
the provisions of Section 3(f) hereof, including filing fees and the reasonable
fees and disbursements of counsel for the Underwriters in connection therewith
and in connection with the preparation of the Blue Sky Survey and any supplement
thereto (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus, any Term Sheets and of the Prospectus and any amendments
or supplements thereto, (vii) the preparation, printing and delivery to the
Underwriters of copies of the Blue Sky Survey and any supplement thereto, (viii)
the fees and expenses of the Trustee and the Warrant Agent, including the fees
and disbursements of counsel for the Trustee in connection with the Indenture
and the Notes, and the fees and disbursements of counsel for the Warrant Agent
in connection with the Warrant Agreement and the Warrants, (ix) the filing fees
incident to, and the reasonable fees and disbursements of counsel to the
Underwriters in connection with, the review by the National Association of
Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Securities
and (x) the fees and expenses incurred in connection with the inclusion of the
Warrant Securities on the Nasdaq National Market.
(b) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
17
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or its subsidiary delivered
pursuant to the provisions hereof, to the performance by the Company of its
covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective by 10:00 A.M. New York City time on November 21, 1997, and at
Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall
have been complied with to the reasonable satisfaction of counsel to
the Underwriters. If the Company has elected to rely on Rule 430A, a
prospectus containing the Rule 430A Information shall have been filed
with the Commission in accordance with Rule 424(b) (or a post-effective
amendment providing such information shall have been filed and declared
effective in accordance with the requirements of Rule 430A) or, if the
Company has elected to rely upon Rule 434, a Term Sheet shall have been
filed with the Commission in accordance with Rule 424(b).
(b) Opinion of Counsel for Company. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Paul, Weiss, Rifkind, Wharton & Garrison, counsel for
the Company, in form and substance satisfactory to counsel for the
Underwriters, together with signed or reproduced copies of such letter
for each of the other Underwriters to the effect set forth in Exhibit A
hereto and to such further effect as counsel to the Underwriters may
reasonably request.
(c) Opinion of Regulatory Counsel for Company. At the Closing
Time, the Representatives shall have received the favorable opinion,
dated as of the Closing Time, of Wiley, Rein & Fielding, regulatory
counsel for the Company, in form and substance satisfactory to counsel
for the Underwriters to the effect set forth in Exhibit B hereto and to
such further effect as counsel for the Underwriters may reasonably
request.
(d) Opinion of Patent Counsel for Company. At the Closing
Time, the Representatives shall have received (i) the favorable
opinion, dated as of the Closing Time, of Bright & Lorig, patent
counsel for the Company, in form and substance satisfactory to counsel
for the Underwriters, together with signed or reproduced copies of such
letter for each of the other Underwriters, to the effect set forth in
Exhibit C hereto and to such further effect as counsel for the
Underwriters may reasonably request and (ii) the favorable opinion,
dated as of the Closing Time, of
18
Kenyon & Kenyon, patent counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters.
(e) Opinion of Intellectual Property Counsel for Company. At
the Closing Time, the Representatives shall have received the favorable
opinion, dated as of the Closing Time, of Marzouk & Parry, intellectual
property counsel for the Company, in form and substance satisfactory to
counsel for the Underwriters, together with signed or reproduced copies
of such letter for each of the other Underwriters, to the effect set
forth in Exhibit D hereto and to such further effect as counsel to the
Underwriters may reasonably request.
(f) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Shearman & Sterling, counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of
the other Underwriters with respect to the matters set forth in clauses
(i), (ii), (v), (vii) through (xii), (xiii) (solely as to issuance),
(xiv), (xix) (solely as to the information in the Prospectus under
"Description of Units", "Description of the Notes" and "Description of
the Warrants") and the penultimate paragraph of Exhibit A hereto. In
giving such opinion such counsel may rely, as to all matters governed
by the laws of jurisdictions other than the law of the State of New
York, the federal law of the United States and the General Corporation
Law of the State of Delaware, upon the opinions of counsel satisfactory
to the Representatives. Such counsel may also state that, insofar as
such opinion involves factual matters, they have relied, to the extent
they deem proper, upon certificates of officers of the Company and its
subsidiary and certificates of public officials.
(g) Officers' Certificate. At Closing Time, there shall not
have been, since the date hereof or since the respective dates as of
which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its
subsidiary considered as one enterprise, whether or not arising in the
ordinary course of business, and the Representatives shall have
received a certificate of the chief executive officer of the Company
and of the chief financial or chief accounting officer of the Company,
dated as of Closing Time, to the effect that (i) there has been no such
material adverse change, (ii) the representations and warranties in
Section 1(a) hereof are true and correct with the same force and effect
as though expressly made at and as of Closing Time, (iii) the Company
has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied at or prior to Closing Time, and (iv)
no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or are contemplated by the Commission.
19
(h) Accountants' Comfort Letter. At the time of the execution
of this Agreement, the Representatives shall have received from Coopers
& Lybrand L.L.P. a letter dated such date, in form and substance
satisfactory to the Representatives, together with signed or reproduced
copies of such letter for each of the other Underwriters containing
statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus.
(i) Bring-down Comfort Letter. At Closing Time, the
Representatives shall have received from Coopers & Lybrand LLP a
letter, dated as of Closing Time, to the effect that they reaffirm the
statements made in the letter furnished pursuant to subsection (h) of
this Section, except that the specified date referred to shall be a
date not more than three business days prior to Closing Time.
(j) Approval of Listing. At Closing Time, the Common Stock
shall have been approved inclusion on the NASDAQ National Market.
(k) No Objection. The NASD has confirmed that it has not
raised any objection with respect to the fairness and reasonableness of
the underwriting terms and arrangements.
(l) Consummation of the Exchange Offer. The Company shall have
consummated the Exchange Offer.
(o) Proposed Amendment. The company's Articles of
Incorporation shall have been amended by the Proposed Amendment.
(m) Additional Documents. At Closing Time, counsel for the
Underwriters shall have been furnished with such documents and opinions
as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order
to evidence the accuracy of any of the representations or warranties,
or the fulfillment of any of the conditions, herein contained; and all
proceedings taken by the Company in connection with the issuance and
sale of the Securities as herein contemplated shall be satisfactory in
form and substance to the Representatives and counsel for the
Underwriters.
(n) Termination of Agreement. If any condition specified in
this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement may be terminated by the Representatives by
notice to the Company at any time at or prior to Closing Time, and such
termination shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 1, 6, 7 and 8
shall survive any such termination and remain in full force and effect.
20
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. The Company agrees to indemnify
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 6(d) below) any such settlement is effected
with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through the Representatives expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto); and provided, further, that
the Company will not be liable to an Underwriter with respect to any preliminary
prospectus to the extent that the Company shall sustain the burden of proving
that any such loss, liability, claim, damage or expense resulted from the fact
that such
21
Underwriter, in contravention of a requirement of this Agreement or applicable
law, sold Securities to a person to whom such Underwriter failed to send or
give, at or prior to the Closing Time, a copy of the Prospectus, as then amended
or supplemented if (i) the Company has previously furnished copies thereof
(sufficiently in advance of the Closing Time to allow for distribution by the
Closing Time) to the Underwriters and the loss, liability, claim, damage or
expense of such Underwriter resulted from an untrue statement or omission or
alleged untrue statement or omission of a material fact contained in or omitted
from the preliminary prospectus which was corrected in the Prospectus as, if
applicable, amended or supplemented prior to the Closing Time and (ii) such
failure to give or send such Prospectus by the Closing Time to the party or
parties asserting such loss, liability, claim, damage or expense would have
constituted the sole defense to the claim asserted by such person.
(b) Indemnification of Company, Directors and Officers. Each
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through the Representatives expressly for use in the Registration Statement (or
any amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties,
22
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel it is entitled to
reimbursement for under this Agreement, and shall have, if requested, provided
such indemnifying party reasonably detailed information regarding such fees and
expenses (including with respect to the services performed, the rate or rates
charged and the expenses incurred) such indemnifying party agrees that it shall
be liable for any settlement of the nature contemplated by Section 6(a)(ii)
effected without its written consent if (i) such settlement is entered into more
than 45 days after receipt by such indemnifying party of the aforesaid request,
(ii) such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.
SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other hand from the offering of the Securities
pursuant to this Agreement or (ii) if the allocation provided by clause (i) is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and of the Underwriters on the
other hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company on the one hand and the
Underwriters on the other hand in connection with the offering of the Securities
pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Securities
pursuant to this Agreement (before deducting expenses) received by the Company
and the total underwriting discount received by the Underwriters, in each case
as set forth on the cover of the Prospectus, or, if Rule 434 is used, the
corresponding
23
location on the Term Sheet, bear to the aggregate initial public offering price
of the Securities as set forth on such cover.
The relative fault of the Company on the one hand and the Underwriters
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section. The aggregate amount
of losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section are several in
proportion to the amount of Securities set forth opposite their respective names
in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or its subsidiary
submitted pursuant hereto shall remain operative
24
and in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or controlling person, or by or on behalf of the
Company, and shall survive delivery of the Securities to the Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiary considered as one enterprise, whether or not arising in the ordinary
course of business, or (ii) if there has occurred any material adverse change in
the financial markets in the United States or the international financial
markets, any outbreak of hostilities or escalation thereof or other calamity or
crisis or any change or development involving a prospective change in national
or international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Representatives,
impracticable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Company has been
suspended or materially limited by the Commission or the Nasdaq National Market,
or if trading generally on the American Stock Exchange or the New York Stock
Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the National Association of Securities Dealers,
Inc. or any other governmental authority, or (iv) if a banking moratorium has
been declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at Closing Time to purchase the Securities which
it or they are obligated to purchase under this Agreement (the "Defaulted
Securities"), the Representatives shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the aggregate amount of the Securities to be purchased hereunder,
the non-defaulting Underwriters shall be obligated, each severally and
not jointly, to purchase the full
25
amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
aggregate amount of the Securities to be purchased hereunder, this
Agreement shall terminate without liability on the part of any
non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement, either the Representatives or the Company shall have the
right to postpone Closing Time for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements. As used herein, the term "Underwriter"
includes any person substituted for an Underwriter under this Section.
SECTION 11. Notices. 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 Representatives at North Tower, World
Financial Center, New York, New York 10281, attention of General Counsel; and
notices to the Company shall be directed to it at CD Radio Inc., 1001 22d St.,
N.W., Washington, D.C. 20037, attention of Chairman and Chief Executive Officer.
SECTION 12. Parties. This Agreement shall inure to the benefit of and
be binding upon the Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Underwriters and the Company and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from any Underwriter
shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS
OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
26
SECTION 14. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
27
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriters and the Company in accordance with its terms.
Very truly yours,
CD RADIO INC.
By
--------------------------------
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
LEHMAN BROTHERS INC.
LIBRA INVESTMENTS, INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
------------------------------------
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
28
SCHEDULE A
Number of
Name of Underwriter Securities
------------------- ----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................... 9,037
Lehman Brothers Inc............................................... 2,582
Libra Investments, Inc............................................ 1,291
------
Total............................................................. 12,910
======
Sch A-1
SCHEDULE B
CD RADIO INC.
12,910 Units, each Unit consisting of $20,000 aggregate principal
amount at maturity of 15% Senior Secured Discount Notes due 2007 and one
Warrant, each Warrant entitling the holder thereof to acquire $3,000 aggregate
principal amount at maturity of 15% Senior Secured Discount Notes.
1. The initial public offering price of the Units shall be $9,684.40
per Unit, plus accrued amortization of original issue discount on the Notes, if
any, from November 26, 1997.
2. The purchase price to be paid by the Underwriters for the Units
shall be $9,345.446 per Unit, plus accrued amortization of original issue
discount on the Notes, if any, from November 26, 1997.
3. The interest rate on the Notes shall be 15% per annum.
Sch B-1
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
(i) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in the District of Columbia, which is
the only jurisdiction in which the Company is required to be qualified, whether
by reason of the ownership or leasing of property or the conduct of business as
of the date hereof, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus in the column entitled "Actual" under
the caption "Capitalization" (except for subsequent issuances, if any, pursuant
to the Stock Offerings, the Exchange Offer or pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectus or pursuant
to the exercise of convertible securities or options referred to in the
Prospectus); the shares of issued and outstanding capital stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable; and none of the outstanding shares of capital stock of the
Company was issued in violation of the preemptive rights or provisions contained
in (i) the Charter Documents or (ii) the General corporation Law of the State of
Delaware (the "DGCL").
(v) The Securities to be purchased by the Underwriters from the Company
have been duly authorized for issuance and sale to the Underwriters pursuant to
the Purchase Agreement and, when issued and delivered by the Company pursuant to
the Purchase Agreement against payment of the consideration set forth in the
Purchase Agreement, will be validly issued and fully paid and non-assessable and
no holder of the Securities is or will be subject to personal liability by
reason of being such a holder.
(vi) Satellite CD Radio, Inc. has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and is
duly qualified as a foreign corporation to transact business and is in good
standing the District of Columbia, which is the only jurisdiction in which the
Company is required to be qualified, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure so to
qualify or to be in good standing would not
A-1
result in a Material Adverse Effect; all of the issued and outstanding capital
stock of Satellite CD Radio, Inc. has been duly authorized and validly issued,
is fully paid and non-assessable and, to our knowledge, is owned by the Company
free and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity; none of the outstanding shares of capital stock of Satellite CD
Radio, Inc. was issued in violation of the preemptive or similar rights of any
securityholder in (i) Satellite CD Radio Inc's certificate of incorporation or
by-laws or (ii) the DGCL.
(vii) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(viii) The Indenture has been duly authorized, executed and delivered
by the Company and (assuming the due authorization, execution and delivery
thereof by the Trustee) constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
(ix) The Notes are in the form contemplated by the Indenture, have been
duly authorized by the Company and, assuming that the Notes have been duly
authenticated by the Trustee in the manner described in its certificate
delivered to you today (which fact such counsel need not determine by an
inspection of the Notes), the Notes have been duly executed, issued and
delivered by the Company and constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law), and will be entitled to the benefits of the Indenture.
(x) The Indenture has been duly qualified under the 1939 Act.
(xi) The Warrant Agreement has been duly authorized, executed and
delivered by the Company and (assuming the due authorization, execution and
delivery thereof by the Warrant Agent) constitutes a valid and binding agreement
of the Company, enforceable against the Company in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
A-2
(xii) The Warrants are in the form contemplated by the Warrant
Agreement, have been duly authorized by the Company and, assuming that the
Warrants have been duly executed by the Warrant Agent in the manner described in
its certificate delivered to you today (which fact such counsel need not
determine by an inspection of the Warrants), the Warrants have been duly
executed, issued and delivered by the Company and constitute valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law), and will be entitled to the benefits of the
Indenture.
(xiii) The Warrant Securities issuable upon exercise of the Warrants
have been duly authorized and reserved by the Company and, when issued and
delivered upon exercise of the Warrants in accordance with the terms of the
Warrants and the Warrant Agreement, will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law), and will be in the form contemplated by, and
entitled to the benefits of, the Indenture.
(xiv) The Pledge Agreement (assuming the due authorization, execution
and delivery thereof by the Trustee) constitutes a valid and binding agreement
of the Company, enforceable against the Company in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally, or by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
(xv) The Units, the Notes, the Warrants, the Indenture, the Warrant
Agreement and the Pledge Agreement conform as to legal matters in all material
respects to the descriptions thereof contained in the Prospectus.
(xvi) The provisions of the Pledge Agreement are effective to create in
favor of the Trustee for the benefit of the holders of the Units a valid
security interest in the Pledged Collateral (as defined in the Pledge Agreement)
to secure the payment of principal of and interest on, and any other amounts
owning in respect of, the Notes. Upon delivery of the Pledged Collateral to the
Trustee, duly endorsed in blank or accompanied by stock powers duly executed in
blank, and the registration thereof in the name of the Trustee, the security
interest of the Trustee in the Pledged Collateral will be a first priority,
perfected security interest.
A-3
(xvii) The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act; any
required filing of the Prospectus pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); and, to the best of
our knowledge, no stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement has been issued under the
1933 Act and no proceedings for that purpose have been instituted or are pending
or threatened by the Commission.
(xviii) The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information and the Rule 434 Information,
as applicable, the Prospectus, excluding the documents incorporated by reference
therein, and each amendment or supplement to the Registration Statement and the
Prospectus, excluding the documents incorporated by reference therein, as of
their respective effective or issue dates (other than the financial statements
and supporting schedules included therein or omitted therefrom, as to which we
need express no opinion) complied as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations.
(xix) The documents incorporated by reference in the Prospectus (other
than the financial statements and supporting schedules included therein or
omitted therefrom, as to which we need express no opinion), when they were filed
with the Commission complied as to form in all material respects with the
requirements of the 1934 Act and the rules and regulations of the Commission
thereunder.
(xx) To our knowledge, (without having done any search of judicial
records or the records of any governmental agency or body) there is not pending
or threatened any action, suit, proceeding, inquiry or investigation, to which
the Company or its subsidiary is a party, or to which the property of the
Company or its subsidiary is subject, before or brought by any court or
governmental agency or body, domestic or foreign, which might reasonably be
expected to result in a Material Adverse Effect, or which might reasonably be
expected to materially and adversely affect the properties or assets thereof or
the consummation of the transactions contemplated in the Purchase Agreement or
the performance by the Company of its obligations thereunder (other than any
pending of threatened actions, proceedings, inquiries or investigations relating
to the Federal Communications Commission, as to which we express no opinion) .
(xxi) The information in the Prospectus under "Description of Units",
"Description of the Notes", "Description of the Warrants", "Description of
Capital Stock", "Certain United States Tax Considerations" and "Business--Legal
Proceedings" in the Registration Statement under Item 15, to the extent that it
constitutes matters of law, summaries of legal matters, the Company's charter
and by-laws or legal proceedings, or legal conclusions, has been reviewed by us
and is correct in all material respects.
(xxii) To our knowledge, there are no statutes or regulations of the
United States or the State of New York or provisions of the DGCL that are
required to be described in the Prospectus that are not described as required
(except that we express no opinion as to the
A-4
Federal Communications Act or other general statutes or regulations of the
Federal Communications Commission affecting digital radio satellite
broadcasting).
(xxiii) All descriptions in the Registration Statement of contracts and
other documents to which the Company or its subsidiary are a party are accurate
in all material respects; to our knowledge, there are no franchises, contracts,
indentures, mortgages, loan agreements, notes, leases or other instruments
required to be described or referred to in the Registration Statement or to be
filed as exhibits thereto other than those described or referred to therein or
filed or incorporated by reference as exhibits thereto.
(xxiv) To our knowledge, (a) neither the Company nor its subsidiary is
in violation of its charter or by-laws and (b) except as described in the
Registration Statement, no default by the Company or its subsidiary exists in
the due performance or observance of any material obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument that is described or
referred to in the Registration Statement or the Prospectus or filed or
incorporated by reference as an exhibit to the Registration Statement.
(xxv) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency of the State of New York or the United States (other than
under the 1933 Act and the 1933 Act, which were made, or as may be required
under the securities or blue sky laws of the various states, as to which we
express no opinion) or under the DGCL is necessary or required in connection
with the due authorization, execution and delivery of the Purchase Agreement or
for the offering, issuance, sale or delivery of the Securities.
(xxvi) The execution, delivery and performance of the Purchase
Agreement and the consummation of the transactions contemplated in the Purchase
Agreement and in the Registration Statement (including the issuance and sale of
the Securities, and the use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use Of Proceeds") and compliance
by the Company with its obligations under the Purchase Agreement do not and will
not, whether with or without the giving of notice or lapse of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined in Section 1(a)(xvii) of the Purchase Agreement) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any subsidiary pursuant to, any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or any other
agreement or instrument, filed as an exhibit or described in the Registration
Statement, to which the Company or its subsidiary is a party or by which it or
any of them may be bound, or to which any of the property or assets of the
Company or its subsidiary is subject (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not have a Material
Adverse Effect), nor will such action result in any violation of the provisions
of the charter or by-laws of the Company or its subsidiary, or any applicable
law, statute, rule, regulation, judgment, order, writ or decree, known to us, of
any government, government
A-5
instrumentality or court of the State of New York or the United States, having
jurisdiction over the Company or its subsidiary or any of their respective
properties, assets or operations.
(xxvii) The Company is not, and upon consummation of the Units Offering
and the Stock Offerings will not be, an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
Investment Companies Act of 1940, as amended..
(xxvi) The Voting Trust Agreement constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating to or
affecting enforcement of creditors' rights generally, or by general principles
of equity (regardless of whether enforcement is considered in a proceeding in
equity or at law); the provisions of the Voting Trust Agreement create a "voting
trust" as provided in Section 218 under the Delaware General Corporation Law.
In addition, although we have not undertaken to investigate or verify
independently, and are not passing upon and do not assume any responsibility
for, the accuracy, completeness or fairness of the contents of the Registration
Statement and the Prospectus (except with respect to certain matters of
corporate law, as set forth in paragraphs 5, 19 and 21 above), in connection
with the preparation of the Registration Statement and the Prospectus, we have
participated in conferences with representatives and counsel of Merrill Lynch
and with certain officers and employees of, and the counsel and independent
certified public accountants for, the Company, at which conferences the contents
of the Registration Statement, the Prospectus and related matters were
discussed, and advise you that nothing has come to our attention that would lead
us to believe that the Registration Statement or any amendment thereto,
including the Rule 430A Information and Rule 434 Information (if applicable),
(except for financial statements and schedules and other financial data included
or incorporated by reference therein or omitted therefrom, as to which we need
make no statement), at the time such Registration Statement or any such
amendment became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus or any
amendment or supplement thereto (except for financial statements and schedules
and other financial data included or incorporated by reference therein or
omitted therefrom, as to which we need make no statement), at the time the
Prospectus were issued, at the time any such amended or supplemented prospectus
was issued or at the Closing Time, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of the federal communications laws of the United
States, upon the opinion of Wiley, Rein & Fielding, special counsel to the
Company (which opinion shall be dated and furnished to Merrill Lynch at the
Closing Time, shall be satisfactory in form and substance to counsel for
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Merrill Lynch and shall expressly state that Merrill Lynch may rely on such
opinion as if it were addressed to Merrill Lynch), provided that Paul, Weiss,
Rifkind, Wharton & Garrison shall state in their opinion that they believe that
they and Merrill Lynch are justified in relying upon such opinion, and (B), as
to matters of fact (but not as to legal conclusions), to the extent they deem
proper, on certificates of responsible officers of the Company and public
officials. Such opinion shall not state that it is to be governed or qualified
by, or that it is otherwise subject to, any treatise, written policy or other
document relating to legal opinions, including, without limitation, the Legal
Opinion Accord of the ABA Section of Business Law (1991).
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Exhibit B
FORM OF OPINION OF REGULATORY COUNSEL TO THE COMPANY
(A) (1) the execution, and delivery and performance of the Purchase
Agreements and the Pledge Agreement relating to the Stock Offerings and the
Units Offering and the consummation of the transactions contemplated therein and
in the Prospectuses used in connection with the Stock Offerings and the Units
Offering, the consummation of the Stock Offerings, the Units Offering, the
Exchange Offer and the granting of a security interest in the Pledged Collateral
in accordance with the terms of the Pledge Agreement, and compliance by the
Company with its obligations thereunder do not violate (i) the Federal
Communications Act of 1934, as amended (the "Communications Act"), (ii) any
rules or regulations of the Federal Communications Commission ("FCC") applicable
to the Company or its subsidiaries, (iii) any state telecommunications law,
rules or regulations ("State Law") applicable to the Company or its
subsidiaries, and (iv) to the best of such counsel's knowledge, any decree from
any court, and (2) no consent, approval, authorization or order of or filing
with the FCC or any state authority overseeing telecommunications matters
("State Authority"), is necessary for the execution, delivery and performance of
the Purchase Agreements relating to the Stock Offerings and the Units Offering,
the consummation of the Stock Offerings, the Units Offering and Exchange Offer
and except for consents, approvals, authorizations or orders of or
qualifications as have already been obtained and except to the extent that the
failure to obtain such consents, approvals, authorizations or orders or to
qualify with the FCC or any State Authority would not, individually or in the
aggregate, have a material adverse effect on the prospects, condition (financial
or otherwise) or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole;
(B) Except as described in the Prospectuses used in connection with the
Stock Offerings and the Units Offering, (1) each of the Company and all of its
subsidiaries have made all reports and filings, and paid all fees, required by
the FCC and the State Authorities, and have all certificates, orders, permits,
licenses, authorizations, consents and approvals of and from, and have made all
filings and registrations, with the FCC and the State Authorities necessary to
own, lease, license and use its properties and assets and to conduct the
business now operated by them or intended to be operated by them in the manner
described in the Prospectuses used in connection with the Stock Offerings and
the Units Offering; and (2) neither the Company nor any of its subsidiaries has
received any notice of proceedings relating to the violation, revocation or
modification of any such certificates, orders, permits, licenses,
authorizations, consents or approvals, or the qualification or rejection of any
such filing or registration, the effect of which, singly or in the aggregate,
would have a material adverse effect on the prospects, condition, financial or
otherwise, earnings, operations or business of the Company and its subsidiaries
now operated by them or intended to be operated by them in the manner described
in the Prospectuses used in connection with the Stock Offerings and the Units
Offering, taken as a whole;
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(C) neither the Company nor any of its subsidiaries is in violation of,
or in default under the Communications Act, the telecommunications rules or
regulations of the FCC or State Law, the effect of which, singly or in the
aggregate, would have a material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries, taken as a whole;
(D) to the best of such counsel's knowledge after due inquiry (i) no
adverse judgment, decree or order of the FCC or any State Authority has been
issued against the Company or any of its subsidiaries and (ii) no litigation,
proceeding, inquiry or investigation has been commenced or threatened against
the Company or any of its subsidiaries before or by the FCC or any State
Authority which, if decided adversely to the Company's interest, would have a
material adverse effect on the Company and its subsidiaries, taken as a whole;
and
(E) the statements in the Prospectuses used in connection with the
Stock Offerings and the Units Offering under the captions "Risk Factors -
Continuing Oversight by the FCC," "Risk Factors - Application of Export Control
Regulations, "Risk Factors Competition," "Business - Competition," and "Business
- - Government Regulation,"insofar as such statements constitute a summary of the
legal matters, documents or proceedings referred to therein, fairly summarize
the matters referred to therein.
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Exhibit C
FORM OF OPINION OF PATENT COUNSEL TO THE COMPANY
(A) The Company has received the following U.S. patents: ________, and
no facts have come to the attention of such counsel that have led such counsel
to express an opinion that any of such patents is unenforceable or invalid.
(B) Such counsel is not aware of any pending or threatened action,
suit, proceeding or claim by others that the Company is infringing or otherwise
violating any patents or other proprietary information of others.
(C) Such counsel has no knowledge of any adversarial legal or
governmental proceedings or interference proceedings pending relating to patents
of the Company; and
(D) the statements in the Prospectuses used in connection with the
Stock Offerings and the Units Offering under the captions "Risk Factors--
Uncertain Protection" and "Business--Technology, Patents and Trademarks,"
insofar as such statements constitute a summary of the legal matters, documents
or proceedings referred to therein, fairly summarize the matters referred to
therein.
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Exhibit D
FORM OF OPINION OF OTHER
INTELLECTUAL PROPERTY COUNSEL TO THE COMPANY
(A) To such counsel's knowledge, the Applications are still pending and
all filings required to be made by the date of such opinion have been made.
(B) Such counsel is not aware of any pending or threatened action,
suit, proceeding or claim by others that the Company is infringing or otherwise
violating any trademarks of others.
(C) Aside from the pending Applications, we have no knowledge of any
pending or threatened adversarial legal or governmental proceedings or
interference proceedings relating to the Applications.
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