PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424(b)(5)
(TO PROSPECTUS DATED MAY 20, 2003) Registration Statement on Form S-3
(File No. 333-64344)
$175,000,000
[SIRIUS LOGO]
3 1/2% CONVERTIBLE NOTES DUE 2008
-------------------
Interest payable on June 1 and December 1
HOLDERS MAY CONVERT THE NOTES INTO SHARES OF OUR COMMON STOCK AT A CONVERSION
RATE OF 724.6377 SHARES PER $1,000 PRINCIPAL AMOUNT OF NOTES, SUBJECT TO
ADJUSTMENT, BEFORE CLOSE OF BUSINESS ON JUNE 1, 2008.
WE MAY NOT REDEEM ANY OF THE NOTES PRIOR TO MATURITY.
THE NOTES ARE OUR SENIOR UNSECURED DEBT AND WILL RANK ON A PARITY WITH ALL OF
OUR OTHER EXISTING AND FUTURE SENIOR UNSECURED DEBT AND PRIOR TO ALL
SUBORDINATED DEBT.
FOR A MORE DETAILED DESCRIPTION OF THE NOTES, SEE 'DESCRIPTION OF NOTES'
BEGINNING ON PAGE S-9.
OUR COMMON STOCK IS QUOTED ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL
'SIRI.' ON MAY 20, 2003, THE LAST REPORTED SALE PRICE OF THE COMMON STOCK ON THE
NASDAQ NATIONAL MARKET WAS $1.13 PER SHARE.
INVESTING IN THE NOTES INVOLVES RISKS. SEE 'RISK FACTORS' BEGINNING ON
PAGE S-5.
-------------------
PRICE 100% AND ACCRUED INTEREST, IF ANY
-------------------
PER NOTE TOTAL
-------- -----
Price to Public............................................. 100.0% $175,000,000
Underwriting Discounts and Commissions...................... 3.5% $ 6,125,000
Proceeds to Company......................................... 96.5% $168,875,000
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
We have granted the underwriters the right to purchase up to an additional
$26.25 million principal amount of notes.
Morgan Stanley & Co. Incorporated expects to deliver the notes to purchasers on
May 23, 2003.
-------------------
MORGAN STANLEY UBS WARBURG
May 20, 2003
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Special Note Regarding Forward-Looking
Statements.......................... ii
Summary............................... S-1
Selected Consolidated Financial
Data................................ S-3
Risk Factors.......................... S-5
Use of Proceeds....................... S-7
Price Range of Common Stock........... S-7
Dividend Policy....................... S-7
Capitalization........................ S-8
Description of Notes.................. S-9
Certain Federal Income Tax
Considerations...................... S-17
Underwriting.......................... S-19
Legal Matters......................... S-20
PROSPECTUS
Special Note Regarding Forward-Looking
Statements.......................... 2
About This Prospectus................. 3
About Sirius.......................... 3
Risk Factors.......................... 4
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends........................... 5
Use of Proceeds....................... 5
Description of Debt Securities........ 5
Description of Capital Stock.......... 18
Description of Warrants............... 22
Plan of Distribution.................. 26
Legal Matters......................... 27
Experts............................... 27
Incorporation by Reference............ 28
Where You May Find Additional
Available Information About Us...... 28
-------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE RELATED PROSPECTUS OR TO WHICH WE HAVE REFERRED YOU. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS
PROSPECTUS SUPPLEMENT AND THE RELATED PROSPECTUS MAY ONLY BE USED WHERE IT IS
LEGAL TO SELL THESE SECURITIES. THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT
AND THE RELATED PROSPECTUS MAY ONLY BE ACCURATE ON THE DATE OF THIS PROSPECTUS
SUPPLEMENT.
-------------------
As used in this prospectus supplement, 'Sirius,' 'company,' 'we,' 'our,'
'ours' and 'us' refer to Sirius Satellite Radio Inc., except where the context
otherwise requires or as otherwise indicated.
i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The following cautionary statements identify important factors that could
cause our actual results to differ materially from those projected in the
forward looking statements made in this prospectus supplement and the related
prospectus. Any statements about our expectations, beliefs, plans, objectives,
assumptions or future events or performance are not historical facts and may be
forward looking. These statements are often, but not always, made through the
use of words or phrases such as 'will likely result,' 'are expected to,' 'will
continue,' 'is anticipated,' 'estimated,' 'intends,' 'plans,' 'projection' and
'outlook.' Accordingly, these statements involve estimates, assumptions and
uncertainties which could cause actual results to differ materially from those
expressed in them. Any forward-looking statements are qualified in their
entirety by reference to the factors discussed throughout this prospectus
supplement and the related prospectus. Among the significant factors that have a
direct bearing on our results of operations are:
if the offering of the notes is not completed, our need for
substantial additional financing by early 2004, even
following our recently completed recapitalization;
our competitive position, as XM Satellite Radio, the other
satellite radio service provider in the United States, began
offering its service before us, has substantially more
subscribers than us and may have certain competitive
advantages;
our dependence upon third parties to manufacture,
distribute, market and sell SIRIUS radios and components for
those radios;
the unproven market for our service; and
the useful life of our satellites, which have experienced
circuit failures on their solar arrays and may not be
covered by insurance. The circuit failures our satellites
have experienced to date are not expected to limit the power
of our broadcast signal, reduce the expected useful life of
our satellites or otherwise affect our operations.
These and other factors are discussed in 'Risk Factors' in the related
prospectus and elsewhere in this prospectus supplement and in the documents
incorporated herein by reference.
Because the risk factors referred to above could cause actual results or
outcomes to differ materially from those expressed in any forward-looking
statements made by us or on our behalf, you should not place undue reliance on
any of these forward-looking statements. Further, any forward-looking statement
speaks only as of the date on which it is made, and we undertake no obligation
to update any forward-looking statement or statements to reflect events or
circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events. New factors emerge from time to time, and it
is not possible for us to predict which will arise. In addition, we cannot
assess with any precision the impact of each factor on our business or the
extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking statements.
ii
SUMMARY
This summary highlights information contained elsewhere, or incorporated by
reference, in this prospectus supplement and the related prospectus. Because it
is a summary, it may not contain all of the information that is important to
you. To understand this offering fully, you should read this entire prospectus
supplement and the related prospectus carefully, including the financial
statements and the documents incorporated by reference herein.
ABOUT SIRIUS
From our three orbiting satellites, we directly broadcast more than 100
channels, which we call 'streams,' of digital-quality audio throughout the
continental United States for a monthly subscription fee of $12.95. We deliver
60 streams of 100% commercial-free music in virtually every genre, and over 40
streams of news, sports, weather, talk, comedy, public radio and children's
programming. Our broad and deep range of music as well as our news, sports and
entertainment programming is not available on conventional radio in any market
in the United States. We hold one of only two licenses issued by the Federal
Communications Commission to operate a national satellite radio system.
On February 14, 2002, we launched our service in select markets and on July
1, 2002, we launched our service nationwide. Our primary source of revenues is
subscription and activation fees. In addition, we derive revenues from selling
limited advertising on our non-music streams.
We have agreements with Ford Motor Company, DaimlerChrysler Corporation, BMW
of North America, LLC, Nissan North America, Inc. and Volkswagen of America,
Inc. that contemplate the manufacture and sale of vehicles that include SIRIUS
radios. These alliances cover all major brands and affiliates of these
automakers, including Ford, Lincoln, Mercury, Jaguar, Land Rover, Chrysler,
Mercedes, BMW, MINI, Mazda, Dodge, Jeep, Volvo, Nissan, Infiniti, Volkswagen,
Audi and Freightliner and Sterling heavy trucks. Ford, DaimlerChrysler, BMW,
Nissan and Volkswagen are not required to manufacture or sell vehicles that
include SIRIUS radios pursuant to these agreements.
In the autosound aftermarket, SIRIUS radios are available for sale at
various national and regional retailers, such as Best Buy, Circuit City,
Ultimate Electronics, Tweeter Home Entertainment Group, Crutchfield and Good
Guys. On December 31, 2002, SIRIUS radios were available at approximately 5,500
retail locations.
On March 7, 2003, we completed a restructuring of our debt and equity
capitalization. As part of this restructuring, we issued shares of our common
stock in exchange for (i) 91% of our outstanding debt and (ii) all of our then
outstanding convertible preferred stock. We also raised an additional $200
million in gross proceeds from the sale of our common stock for cash. Additional
information regarding this restructuring is contained in our Annual Report on
Form 10-K for the year ended December 31, 2002.
Our principal executive offices are located at 1221 Avenue of the Americas,
New York, New York 10020. Our telephone number is (212) 584-5100. Our internet
address is sirius.com. Sirius.com is an inactive textual reference only, meaning
that the information contained on the website is not part of this prospectus
supplement and is not incorporated by reference herein.
RISK FACTORS
Investing in the notes involves risk, including the risks described in this
prospectus supplement and the documents incorporated by reference herein. You
should carefully consider the risk factors before investing in the notes. These
risk factors are set forth in our Annual Report on Form 10-K for the year ended
December 31, 2002 and in filings made by us with the Securities and Exchange
Commission after the date of this prospectus supplement pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934.
S-1
THE OFFERING
Securities Offered........................... $175,000,000 principal amount of 3 1/2% Convertible
Notes due 2008 (plus up to an additional $26.25
million principal amount available for purchase by
the underwriters).
Maturity Date................................ June 1, 2008
Interest..................................... 3 1/2% per annum on the principal amount, payable
semiannually in arrears in cash on June 1 and
December 1 of each year, commencing December 1,
2003.
Denominations................................ The notes will be issued in denominations of $1,000
principal amount and integral multiples thereof.
Conversion Rights............................ You may convert the notes into shares of our common
stock at a conversion rate of 724.6377 shares per
$1,000 principal amount of notes, subject to
adjustment, prior to the close of business on
June 1, 2008.
Redemption................................... We may not redeem any of the notes prior to maturity.
Fundamental Change........................... If a fundamental change (as described under
'Description of Notes -- Repurchase at Option of the
Holder') occurs prior to maturity, you may require us
to purchase all or part of your notes at a price
equal to 100% of their principal amount, plus accrued
and unpaid interest.
Use of Proceeds.............................. We intend to use the net proceeds of this offering
for general corporate purposes, including the
marketing of our satellite radio service.
DTC Eligibility.............................. Except as hereinafter described, notes will be issued
in fully registered book-entry form and will be
represented by one or more permanent global notes
without coupons deposited with a custodian for and
registered in the name of a nominee of The Depository
Trust Company, which we refer to as DTC, in New York,
New York. Beneficial interests in any such global
note will be shown on, and transfers thereof will be
effected only through, records maintained by DTC and
its direct and indirect participants and any such
interest may not be exchanged for certificated notes,
except in limited circumstances described herein.
Settlement and all secondary market trading activity
for the notes will be in same day funds. See
'Description of Notes -- Form, Denomination and
Registration.'
Trading...................................... We can provide no assurance as to the liquidity of or
trading markets for the notes. Our common stock is
listed on the Nasdaq National Market under the symbol
'SIRI.'
S-2
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated historical financial data shown below as of and
for the years ended December 31, 1998, 1999, 2000, 2001 and 2002 are derived
from our respective audited consolidated financial statements. The selected
consolidated historical financial data shown below as of and for the three
months ended March 31, 2002 and 2003 are derived from our unaudited consolidated
financial statements. In the opinion of management, our unaudited selected
consolidated financial statements include all adjustments, consisting of normal
recurring adjustments that are necessary for a fair presentation of our
consolidated financial position and results of operations for these periods. The
selected consolidated historical financial data include certain
reclassifications to conform to our current presentation. The selected
consolidated historical data should be read together with 'Management's
Discussion and Analysis of Financial Condition and Results of Operations' and
the consolidated financial statements and related notes from our Annual Report
on Form 10-K for the year ended December 31, 2002 and our Quarterly Report on
Form 10-Q for the quarter ended March 31, 2003, both incorporated by reference
herein.
THREE MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------------ -----------------------
1998 1999 2000 2001 2002 2002 2003
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Operating revenues(1)........... $ -- $ -- $ -- $ -- $ 805 $ 33 $ 1,591
Operating expenses(2)........... (39,079) (63,518) (125,634) (168,456) (313,932) (50,751) (100,719)
Operating loss.................. (39,079) (63,518) (125,634) (168,456) (313,127) (50,718) (99,128)
Net (loss)/income(3)(4)......... (48,396) (62,822) (134,744) (235,763) (422,481) (78,911) 140,088
Preferred stock dividends....... (19,380) (30,321) (39,811) (41,476) (45,300) (11,042) (8,574)
Preferred stock deemed
dividends(5)................... (11,676) (3,535) (8,260) (680) (685) (171) (79,634)
Accretion of dividends in
connection with the issuance of
warrants on preferred stock.... (6,501) (303) (900) -- -- -- --
Net (loss)/income applicable to
common stockholders............ (85,953) (96,981) (183,715) (277,919) (468,466) (90,124) 51,880
Net (loss)/income per share
applicable to common
stockholders................... $ (4.79) $ (3.96) $ (4.72) $ (5.30) $ (6.13) $ (1.22) $ 0.16
Weighted average common shares
outstanding
Basic........................ 17,932 24,470 38,889 52,427 76,394 73,861 327,785
Diluted...................... 17,932 24,470 38,889 52,427 76,394 73,861 327,872
BALANCE SHEET DATA (END OF
PERIOD):
Cash and cash equivalents....... $150,190 $ 81,809 $ 14,397 $ 4,726 $ 18,375 $ 22,947 $ 254,180
Marketable securities(6)........ 115,433 317,810 121,862 304,218 155,327 378,311 35,562
Restricted investments(7)....... -- 67,454 48,801 21,998 7,200 7,200 7,200
Working capital................. 180,996 303,865 143,981 275,732 151,289 356,840 263,268
Total assets.................... 643,880 1,206,612 1,323,582 1,527,605 1,340,940 1,613,370 1,420,985
Short-term notes payable........ 70,863 114,075 -- -- -- -- --
Current portion of long-term
debt........................... -- -- -- 15,000 -- 22,500 --
Long-term debt.................. 183,573 538,690 522,602 639,990 670,357 614,594 58,205
Accrued interest, net of current
portion........................ 784 5,140 10,881 17,201 46,914 18,859 --
10 1/2% Series C Preferred
Stock.......................... 156,755 149,285 -- -- -- --
9.2% Series A Junior Cumulative
Convertible Preferred Stock.... 137,755 148,894 162,380 177,120 193,230 181,046 --
9.2% Series B Junior Cumulative
Convertible Preferred Stock.... -- 64,238 70,507 77,338 84,781 79,153 --
9.2% Series D Junior Cumulative
Convertible Preferred Stock.... -- -- 210,125 230,710 253,142 236,182 --
Accumulated deficit............. (71,669) (134,491) (269,235) (504,998) (927,479) (583,909) (787,391)
Stockholders' equity............ 77,953 134,179 290,483 322,649 36,846 411,684 1,303,241
---------
(1) We were a development stage company until we entered
commercial operations on February 14, 2002.
(footnotes continued on next page)
S-3
(footnotes continued from previous page)
(2) Operating expenses include non-cash stock compensation
expense/(benefit) of $104, $1,206, $7,178, $14,044,
$(7,867), $(9,024) and $559 for the years ended
December 31, 1998, 1999, 2000, 2001 and 2002, and for the
three months ended March 31, 2002 and 2003, respectively.
(3) Included in the net loss of $48,396 for the year ended
December 31, 1998 is $25,682 of special charges related
primarily to the termination of launch and orbit related
contracts required when we decided to enhance our satellite
delivery system to include a third in-orbit satellite.
(4) Included in the net income of $140,088 for the quarter ended
March 31, 2003 is other income of $256,538 related to our
debt restructuring.
(5) The deemed dividend for the year ended December 31, 1998
relates primarily to the conversion feature associated with
our 9.2% Series A Junior Cumulative Convertible Preferred
Stock. We computed these deemed dividends in accordance with
the SEC's position on accounting for preferred stock which
is convertible at a discount to the market price. The deemed
dividends for the years ended December 31, 1999 and 2000
relate primarily to the conversions of our 10 1/2% Series C
Convertible Preferred Stock for shares of our common stock.
The deemed dividend for the quarter ended March 31, 2003
relates primarily to the exchange of our preferred stock for
shares of our common stock and warrants to purchase our
common stock.
(6) Marketable securities are stated at market and consist of
fixed income securities with a maturity at the time of
purchase of greater than three months.
(7) Restricted investments are stated at amortized cost and
include securities held by the trustee of our senior secured
notes to pay interest in full on those notes through
May 15, 2002 and certificates of deposit pledged to secure
or reimbursement obligations under letters of credit
required by lessors and other creditors.
S-4
RISK FACTORS
In addition to the other information in this prospectus supplement, in the
related prospectus and incorporated by reference herein, the following risk
factors should be considered carefully in evaluating us and our business and in
deciding whether to invest in the notes.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.
Sales of a substantial number of shares of our common stock in the public
market or otherwise, by the company or a major stockholder, could depress the
market price of the notes or our common stock, or both, and impair our ability
to raise capital through the sale of additional equity securities. Other than
certain executive officers, who have agreed not to sell shares of our common
stock for 90 days following this offering except with the consent of Morgan
Stanley & Co. Incorporated, none of our existing stockholders or directors have
agreed to refrain from making sales of our common stock following this offering.
WE MAY ISSUE ADDITIONAL EQUITY SECURITIES, WHICH WOULD LEAD TO DILUTION OF OUR
ISSUED AND OUTSTANDING STOCK.
The issuance of additional equity securities or securities convertible into
equity securities would result in dilution of existing stockholders' equity
interest in us. We are authorized to issue, without stockholder approval,
50,000,000 shares of preferred stock, $.001 par value per share, in one or more
series, which may give other stockholders dividend, conversion, voting, and
liquidation rights, among other rights, which may be superior to the rights of
holders of our common stock. Our board of directors has no present intention of
issuing any such preferred series, but reserves the right to do so in the
future. In addition, we are authorized to issue, without stockholder approval,
up to approximately 1,500,000,000 additional shares of common stock, $.001 par
value per share. We are also authorized to issue, without stockholder approval,
securities convertible into either common stock or preferred stock.
THE MARKET PRICE OF THE NOTES COULD BE SIGNIFICANTLY AFFECTED BY THE MARKET
PRICE OF OUR COMMON STOCK AND OTHER FACTORS.
We expect that the market price of the notes will be significantly affected
by the market price of our common stock. This may result in greater volatility
in the market price of the notes than would be expected for nonconvertible debt
securities. The market price of our common stock will likely continue to
fluctuate in response to factors, including the factors discussed in the
documents incorporated by reference, many of which are beyond our control.
THE NOTES ARE NOT PROTECTED BY RESTRICTIVE COVENANTS.
The indenture governing the notes does not contain any financial or
operating covenants or restrictions on the payments of dividends, the incurrence
of indebtedness or the issuance or repurchase of securities by us or our
subsidiary. The indenture contains no covenants or other provisions to afford
protection to holders of the notes in the event of a fundamental change
involving us except to the extent described under 'Description of
Notes -- Repurchase at Option of the Holder.' The indenture contains no
covenants or other provisions to afford protection to holders of the notes in
the event our common stock is delisted by the Nasdaq National Market.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO PURCHASE THE NOTES
UPON A FUNDAMENTAL CHANGE AS REQUIRED BY THE INDENTURE GOVERNING THE NOTES.
Holders may require us to purchase their notes upon a fundamental change as
described under 'Description of Notes -- Repurchase at Option of the Holder.' A
fundamental change may also constitute an event of default, and result in the
acceleration of the maturity of our then-existing indebtedness, under another
indenture or other agreement. We cannot assure you that we would have sufficient
financial resources, or would be able to arrange financing, to pay in cash the
S-5
purchase price for the notes tendered by the holders. Failure by us to purchase
the notes when required will result in an event of default with respect to the
notes.
WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE NOTES.
Prior to this offering there has been no trading market for the notes. We
have been informed by the underwriters that they intend to make a market in the
notes after the offering is completed. However, the underwriters may cease their
market-making at any time. In addition, the liquidity of the trading market in
the notes, and the market price quoted for the notes, may be adversely affected
by changes in the overall market for this type of security and by changes in our
financial performance or prospects or in the prospects for companies in our
industry. In addition, such market-making activities will be subject to limits
imposed by the Securities Act of 1933 and the Securities Exchange Act of 1934,
and may be limited during the pendency of any shelf registration statement. As a
result, we cannot assure you that an active trading market will develop for the
notes.
S-6
USE OF PROCEEDS
We will receive net proceeds from the sale of the notes of approximately
$168,875,000 ($194,206,250 if the underwriters exercise their option in full).
We intend to use the net proceeds from the sale of the notes for general
corporate purposes, including the marketing of our satellite radio service.
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the Nasdaq National Market under the symbol
'SIRI.' The following table sets forth the high and low closing bid price for
our common stock, as reported by Nasdaq, for the periods indicated below:
HIGH LOW
---- ---
Year ended December 31, 2001
First Quarter........................................... $35.00 $12.44
Second Quarter.......................................... 18.34 6.91
Third Quarter........................................... 10.81 3.34
Fourth Quarter.......................................... 11.63 2.30
Year ended December 31, 2002
First Quarter........................................... 10.88 4.14
Second Quarter.......................................... 5.78 3.28
Third Quarter........................................... 3.77 0.76
Fourth Quarter.......................................... 1.32 0.52
Year ending December 31, 2003
First Quarter........................................... 1.36 0.41
Second Quarter (through May 20, 2003)................... 1.40 0.63
On May 20, 2003, the closing bid price of our common stock on the Nasdaq
National Market was $1.13 per share. On May 20, 2003, there were approximately
75,000 beneficial holders of our common stock.
DIVIDEND POLICY
We have never paid cash dividends on our capital stock. We currently intend
to retain earnings, if any, for use in our business and do not anticipate paying
any cash dividends in the foreseeable future.
S-7
CAPITALIZATION
The following table sets forth our cash, restricted investments and
capitalization as of March 31, 2003 (1) on an actual basis and (2) as adjusted
for this offering, after deducting estimated discounts, commissions and other
expenses.
AS OF MARCH 31, 2003
------------------------
ACTUAL AS ADJUSTED
------ -----------
(UNAUDITED)
(IN THOUSANDS)
Cash, cash equivalents and marketable securities(1)......... $ 289,742 $ 457,942
---------- ----------
---------- ----------
Restricted investments(2)................................... $ 7,200 $ 7,200
---------- ----------
---------- ----------
Debt securities:
15% Senior Secured Discount Notes due 2007.............. $ 29,200 $ 29,200
14 1/2% Senior Secured Notes due 2009................... 27,261 27,261
3 1/2% Convertible Notes due 2008....................... -- 175,000
8 3/4% Convertible Subordinated Notes due 2009.......... 1,744 1,744
---------- ----------
Total debt securities............................... 58,205 233,205
---------- ----------
Stockholders' equity:
Common stock, at par value, $0.001 per share(3)......... 912 912
Additional paid-in capital(3)........................... 2,089,551 2,089,551
Accumulated other comprehensive income.................. 169 169
Accumulated deficit..................................... (787,391) (787,391)
---------- ----------
Total capitalization................................ $1,361,446 $1,536,446
---------- ----------
---------- ----------
---------
(1) Marketable securities are stated at market value and consist
of fixed income securities with a maturity at the time of
purchase of greater than three months.
(2) Restricted investments include certificates of deposit
pledged to secure our reimbursement obligations under
letters of credit required by lessors and other creditors.
(3) Excludes: (a) 12,944,936 shares of comon stock issuable upon
the exercise of outstanding and unexercised options as of
March 31, 2003, (b) 8,000,000 shares of common stock
issuable upon the exercise of warrants held by Ford Motor
Company and DaimlerChrysler Corporation, (c) 2,100,000
shares of common stock issuable upon the exercise of
warrants held by Lehman Commercial Paper Inc.,
(d) 4,233,389 shares of common stock issuable upon the
exercise of other warrants, (e) 61,274 shares of common
stock issuable upon the conversion of our 8 3/4% Convertible
Subordinated Notes due 2009 and (f) 87,577,114 shares
issuable upon exercise of warrants held by affiliates of
Apollo Management, L.P. and The Blackstone Group L.P.
S-8
DESCRIPTION OF NOTES
The notes are to be issued under an indenture dated as of May 23, 2003, as
supplemented by a supplemental indenture dated as of May 23, 2003, between us
and The Bank of New York, as trustee. A copy of the form of indenture will be
made available to prospective investors in the notes upon request to us, and
will be available for inspection during normal business hours at the corporate
trust office of the trustee.
The following summaries of certain provisions of the notes and the indenture
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all of the provisions of the notes and the indenture,
including the definitions therein of certain terms which are not otherwise
defined in this prospectus supplement. Wherever particular provisions or defined
terms of the indenture (or of the form of note which is a part thereof) are
referred to, such provisions or defined terms are incorporated herein by
reference.
GENERAL
The notes will be senior unsecured debt and will rank on a parity with all
of our other existing and future senior unsecured debt and prior to all of our
subordinated debt. The notes will be convertible into common stock as described
under 'Conversion of Notes.'
The notes will be limited to $175 million aggregate principal amount, or
$201.25 million aggregate principal amount if the underwriters' option is fully
exercised. The notes will be issued only in denominations of $1,000 and
multiples of $1,000. The notes will mature on June 1, 2008 unless earlier
converted or repurchased pursuant to a fundamental change.
Neither we nor our subsidiary will be subject to any financial covenants
under the indenture. In addition, neither we nor our subsidiary is restricted
under the indenture from paying dividends, incurring debt, or issuing or
repurchasing our securities.
You are not afforded protection under the indenture in the event of a highly
leveraged transaction or a change in control of us except to the extent
described below under 'Repurchase at Option of the Holder.'
We will pay interest on June 1 and December 1 of each year, beginning
December 1, 2003, to record holders at the close of business on the preceding
May 15 and November 15, as the case may be, except interest payable upon
redemption or repurchase will be paid to the person to whom principal is
payable, unless the redemption date or repurchase date, as the case may be, is
an interest payment date.
We will maintain an office in the Borough of Manhattan, The City of New
York, for the payment of interest, which shall initially be an office or agency
of the trustee. We may pay interest either:
by check mailed to your address as it appears in the note
register, provided that if you are a holder with an
aggregate principal amount in excess of $2 million, you
shall be paid, at your written election, by wire transfer in
immediately available funds; or
by transfer to an account maintained by you in the United
States.
However, payments to The Depository Trust Company, New York, New York, which
we refer to as DTC, will be made by wire transfer of immediately available funds
to the account of DTC or its nominee. Interest will be computed on the basis of
a 360-day year composed of twelve 30-day months.
CONVERSION OF NOTES
You may convert any of your notes, in whole or in part, into common stock
prior to the close of business on the final maturity date of the notes, subject
to prior redemption or repurchase of the notes.
The number of shares of common stock you will receive upon conversion of
your notes will be determined by multiplying the number of $1,000 principal
amount notes you convert by the
S-9
conversion rate on the date of conversion. You may convert your notes in part so
long as such part is $1,000 principal amount or an integral multiple of $1,000.
If you have submitted your notes for repurchase upon a fundamental change,
you may convert your notes only if you withdraw your repurchase election. Upon
conversion of notes, a holder will not receive any cash payment of interest
(unless such conversion occurs between a regular record date and the interest
payment date to which it relates). Our delivery to the holder of the full number
of shares of our common stock into which the note is convertible, together with
any cash payment for such holder's fractional shares, or cash or a combination
of cash and shares of our common stock in lieu thereof, will be deemed to
satisfy our obligation to pay:
the principal amount of the note; and
accrued but unpaid interest attributable to the period from
the most recent interest payment date to the conversion
date.
As a result, accrued but unpaid interest to the conversion date is deemed to be
paid in full rather than cancelled, extinguished or forfeited.
Notwithstanding the preceding paragraph, if notes are converted after a
record date but prior to the next succeeding interest payment date, holders of
such notes at the close of business on the record date will receive the interest
payable on such notes on the corresponding interest payment date notwithstanding
the conversion. Such notes, upon surrender for conversion, must be accompanied
by funds equal to the amount of interest payable on the notes so converted;
provided that no such payment need be made if (1) we have specified a purchase
date following a fundamental change that is during such period or (2) only to
the extent of overdue interest, any overdue interest exists at the time of
conversion with respect to such note.
The initial conversion rate for the notes is 724.6377 shares of common stock
per $1,000 principal amount of notes, subject to adjustment as described below.
We will not issue fractional shares of common stock upon conversion of notes.
Instead, we will pay cash equal to the closing price of the common stock on the
trading day prior to the conversion date. Except as described below, you will
not receive any accrued interest or dividends upon conversion.
To convert your note into common stock you must:
complete and manually sign the conversion notice on the back
of the note or facsimile of the conversion notice and
deliver this notice to the conversion agent;
surrender the note to the conversion agent;
if required, furnish appropriate endorsements and transfer
documents;
if required, pay all transfer or similar taxes; and
if required, pay funds equal to interest payable on the next
interest payment date.
The date you comply with these requirements is the conversion date under the
indenture.
We will adjust the conversion rate if any of the following events occurs:
we issue common stock as a dividend or distribution on our
common stock;
we issue to all holders of common stock certain rights or
warrants to purchase our common stock;
we subdivide or combine our common stock;
we distribute to all holders of our common stock, shares of
our capital stock, evidences of indebtedness or assets,
including securities but excluding:
- rights or warrants specified above;
- dividends or distributions specified above; and
- cash distributions;
if we distribute capital stock of, or similar equity
interests in, a subsidiary or other business unit of ours,
the conversion rate will be adjusted based on the market value
of the
S-10
securities so distributed relative to the market value of our
common stock, in each case based on the average closing sales prices
of those securities for the ten trading days commencing on and
including the fifth trading day after the date on which 'ex-dividend
trading' commences for such distribution on the NASDAQ National Market
or such other national or regional exchange or market on which the
securities are then listed or quoted;
we distribute cash, excluding any dividend or distribution in
connection with our liquidation, dissolution or winding up or any
quarterly cash dividend on our common stock to the extent that the
aggregate cash dividend per share of common stock in any quarter
does not exceed 1.25% of the average of the last reported sale price
of the common stock during the ten trading days immediately prior to
the declaration date of the dividend;
if an adjustment is required to be made under this clause as a
result of a distribution that is a quarterly dividend, the adjustment
would be based upon the amount by which the distribution exceeds the
amount of the quarterly cash dividend permitted to be excluded
pursuant to this clause. If an adjustment is required to be made
under this clause as a result of a distribution that is not a
quarterly dividend, the adjustment would be based upon the full
amount of the distribution;
we or our subsidiary makes a payment in respect of a tender
offer or exchange offer for our common stock to the extent
that the cash and value of any other consideration included
in the payment per share of common stock exceeds the current
market price per share of common stock on the trading day
next succeeding the last date on which tenders or exchanges
may be made pursuant to such tender or exchange offer; and
someone, other than us or our subsidiary, makes a payment in
respect of a tender offer or exchange offer in which, as of
the closing date of the offer, our board of directors is not
recommending rejection of the offer. The adjustment referred
to in this clause will only be made if:
- the tender offer or exchange offer is for an amount that
increases the offeror's ownership of common stock to more
than 25% of the total shares of common stock outstanding;
and
- the cash and value of any other consideration included in
the payment per share of common stock exceeds the current
market price per share of common stock on the business day
next succeeding the last date on which tenders or exchanges
may be made pursuant to the tender or exchange offer;
however, the adjustment referred to in this clause will generally not
be made if as of the closing of the offer, the offering documents
disclose a plan or an intention to cause us to engage in a
consolidation or merger or a sale of all or substantially all of our
assets.
To the extent that we have a rights plan in effect upon conversion of the
notes into common stock, you will receive, in addition to the common stock, the
rights under the rights plan unless the rights have separated from the common
stock at the time of conversion, in which case the conversion rate will be
adjusted as if we distributed to all holders of our common stock, shares of our
capital stock, evidences of indebtedness or assets as described above, subject
to readjustment in the event of the expiration, termination or redemption of
such rights.
In the event of:
any reclassification of our common stock;
a consolidation, merger or combination involving us; or
a sale or conveyance to another person or entity of all or
substantially all of our property and assets;
in which holders of our common stock would be entitled to receive stock, other
securities, other property, assets or cash for their common stock, upon
conversion of your notes you will be entitled to receive the same type of
consideration which you would have been entitled to receive if you had converted
the notes into our common stock immediately prior to any of these events.
S-11
You may in certain situations be deemed to have received a distribution
subject to United States federal income tax as a dividend in the event of any
taxable distribution to holders of common stock or in certain other situations
requiring a conversion rate adjustment. See 'Certain Federal Income Tax
Considerations.'
We may, from time to time, increase the conversion rate if our board of
directors has made a determination that this increase would be in our best
interests. Any such determination by our board will be conclusive. In addition,
we may increase the conversion rate if our board of directors deems it advisable
to avoid or diminish any income tax to holders of common stock resulting from
any stock or rights distribution. See 'Certain Federal Income Tax
Considerations.'
We will not be required to make an adjustment in the conversion rate unless
the adjustment would require a change of at least 1% in the conversion rate.
However, we will carry forward any adjustments that are less than 1% of the
conversion rate. Except as described above in this section, we will not adjust
the conversion rate for any issuance of our common stock or convertible or
exchangeable securities or rights to purchase our common stock or convertible or
exchangeable securities.
OPTIONAL REDEMPTION BY US
We may not redeem the notes in whole or in part at our option prior to
maturity.
REPURCHASE AT OPTION OF THE HOLDER
If a fundamental change of the company occurs at any time prior to the
maturity of the notes you may require us to repurchase your notes, in whole or
in part, on a date that is 30 days after the date of our notice of the
fundamental change. The notes will be repurchased only in integral multiples of
$1,000 principal amount.
We will repurchase the notes at a price equal to 100% of the principal
amount to be repurchased, plus accrued interest to, but excluding, the
repurchase date. If the repurchase date is after a record date and prior to or
on the related interest payment date, we will pay interest on the interest
payment date to the record holder on the relevant record date.
We will mail to all record holders a notice of a fundamental change within
10 days after it has occurred. We are also required to deliver to the trustee a
copy of the fundamental change notice. If you elect to require us to repurchase
your notes, you must deliver to us or our designated agent, on or before the
30th day after the date of our fundamental change notice, your repurchase notice
and any notes to be repurchased, duly endorsed for transfer. We will promptly
pay the repurchase price for notes surrendered for repurchase following the
repurchase date.
A 'fundamental change' is any transaction or event (whether by means of an
exchange offer, liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise) in connection with which all or
substantially all of our common stock is exchanged for, converted into, acquired
for or constitutes solely the right to receive, consideration which is not all
or substantially all common stock that:
is listed on, or immediately after the transaction or event
will be listed on, a United States national securities
exchange, or
is approved, or immediately after the transaction or event
will be approved, for quotation on the NASDAQ National
Market or any similar United States system of automated
dissemination of quotations of securities prices.
We will comply with any applicable provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act in the event of a fundamental change.
These fundamental change repurchase rights could discourage a potential
acquirer. However, this fundamental change repurchase feature is not the result
of management's knowledge of any specific effort to obtain control of us by
means of a merger, tender offer or solicitation, or part of a plan by management
to adopt a series of anti-takeover provisions. The term 'fundamental
S-12
change' is limited to specified transactions and may not include other events
that might adversely affect our financial condition or business operations. Our
obligation to offer to repurchase the notes upon a fundamental change would not
necessarily afford you protection in the event of a highly leveraged
transaction, reorganization, merger or similar transaction involving us.
We may be unable to repurchase the notes in the event of a fundamental
change. If a fundamental change were to occur, we may not have enough funds to
pay the repurchase price for all tendered notes. Any future credit agreements or
other agreements relating to our indebtedness may contain provisions prohibiting
repurchase of the notes under certain circumstances, or expressly prohibit our
repurchase of the notes upon a fundamental change or may provide that a
fundamental change constitutes an event of default under that agreement. If a
fundamental change occurs at a time when we are prohibited from repurchasing
notes, we could seek the consent of our lenders to repurchase the notes or
attempt to refinance this debt. If we do not obtain consent, we would not be
permitted to repurchase the notes. Our failure to repurchase tendered notes
would constitute an event of default under the indenture, which might constitute
a default under the terms of our other indebtedness.
MERGER AND SALE OF ASSETS BY US
The indenture provides that we may not consolidate with or merge with or
into any other person or convey, transfer or lease our properties and assets
substantially as an entirety to another person, unless among other items:
we are the surviving person, or the resulting, surviving or
transferee person, if other than us is organized and
existing under the laws of the United States, any state
thereof or the District of Columbia;
the successor person assumes all of our obligations under
the notes and the indenture; and
we or such successor person will not be in default under the
indenture immediately after the transaction.
When such a person assumes our obligations in such circumstances, subject to
certain exceptions, we shall be discharged from all obligations under the notes
and the indenture.
EVENTS OF DEFAULT; NOTICE AND WAIVER
The following will be events of default under the indenture:
we fail to pay principal when due on the notes;
we fail to pay any interest on the notes when due and such
failure continues for a period of 30 days;
we fail to perform or observe any of the covenants in the
indenture for 60 days after notice; or
certain events involving our bankruptcy, insolvency or
reorganization.
The trustee may withhold notice to the holders of the notes of any default,
except defaults in payment of principal or interest on the notes. However, the
trustee must consider it to be in the interest of the holders of the notes to
withhold this notice.
If an event of default occurs and continues, the trustee or the holders of
at least 25% in principal amount of the outstanding notes may declare the
principal and accrued interest on the outstanding notes to be immediately due
and payable. In case of certain events of bankruptcy or insolvency involving us,
the principal and accrued interest on the notes will automatically become due
and payable. However, if we cure all defaults, except the nonpayment of
principal or interest that became due as a result of the acceleration, and meet
certain other conditions, with certain exceptions, this declaration may be
cancelled and the holders of a majority of the principal amount of outstanding
notes may waive these past defaults.
S-13
Payments of principal or interest on the notes that are not made when due
will accrue interest at the annual rate of 1% above the then applicable interest
rate from the required payment date.
The holders of a majority of outstanding notes will have the right to direct
the time, method and place of any proceedings for any remedy available to the
trustee, subject to limitations specified in the indenture.
No holder of the notes may pursue any remedy under the indenture, except in
the case of a default in the payment of principal or interest on the notes,
unless:
the holder has given the trustee written notice of an event
of default;
the holders of at least 25% in principal amount of
outstanding notes make a written request, and offer
reasonable indemnity, to the trustee to pursue the remedy;
the trustee does not receive an inconsistent direction from
the holders of a majority in principal amount of the notes;
and
the trustee fails to comply with the request within 60 days
after receipt.
MODIFICATION AND WAIVER
The consent of the holders of a majority in principal amount of the
outstanding notes is required to modify or amend the indenture. However, a
modification or amendment requires the consent of the holder of each outstanding
note affected if it would:
extend the fixed maturity of such note;
reduce the rate or extend the time for payment of interest
of such note;
reduce the principal amount of such note;
reduce any amount payable upon repurchase of such note;
change in any manner adverse to the holders our obligation
to repurchase such note upon a fundamental change;
impair the right of a holder to institute suit for payment
on such note;
change the currency in which any such note is payable;
impair the right of a holder to convert such note;
reduce the quorum or voting requirements under the
indenture;
change any obligation of ours to maintain an office or
agency in the places and for the purposes specified in the
indenture;
subject to specified exceptions, modify certain of the
provisions of the indenture relating to modification or
waiver of provisions of the indenture; or
reduce the percentage of notes required for consent to any
modification of the indenture.
We are permitted to modify certain provisions of the indenture without the
consent of the holders of the notes.
FORM, DENOMINATION AND REGISTRATION
The notes will be issued:
in fully registered form;
without interest coupons; and
in denominations of $1,000 principal amount and integral
multiples of $1,000.
The notes will be evidenced by one or more global notes. We will deposit the
global note or notes with DTC and register the global notes in the name of Cede
& Co. as DTC's nominee. Except as set forth below, a global note may be
transferred, in whole or in part, only to another nominee of DTC or to a
successor of DTC or its nominee.
S-14
Holders may hold their interests in a global note directly through DTC if
such holder is a participant in DTC, or indirectly through organizations that
are participants in DTC (called 'participants'). Transfers between participants
will be effected in the ordinary way in accordance with DTC rules and will be
settled in clearing house funds. The laws of some states require that certain
persons take physical delivery of securities in definitive form. As a result,
the ability to transfer beneficial interests in the global note to such persons
may be limited.
Holders who are not participants may beneficially own interests in a global
note held by DTC only through participants, or certain banks, brokers, dealers,
trust companies and other parties that clear through or maintain a custodial
relationship with a participant, either directly or indirectly (called 'indirect
participants'). So long as Cede & Co., as the nominee of DTC, is the registered
owner of a global note, Cede & Co. for all purposes will be considered the sole
holder of such global note. Except as provided below, owners of beneficial
interests in a global note will:
not be entitled to have certificates registered in their
names;
not receive physical delivery of certificates in definitive
registered form; and
not be considered holders of the global note.
We will pay interest on and the repurchase price of a global note to Cede &
Co., as the registered owner of the global note, by wire transfer of immediately
available funds on each interest payment date or the repurchase date, as the
case may be. Neither we, the trustee nor any paying agent will be responsible or
liable:
for the records relating to, or payments made on account of,
beneficial ownership interests in a global note; or
for maintaining, supervising or reviewing any records
relating to the beneficial ownership interests.
We have been informed that DTC's practice is to credit participants'
accounts on that payment date with payments in amounts proportionate to their
respective beneficial interests in the principal amount represented by a global
note as shown in the records of DTC, unless DTC has reason to believe that it
will not receive payment on that payment date. Payments by participants to
owners of beneficial interests in the principal amount represented by a global
note held through participants will be the responsibility of the participants,
as is now the case with securities held for the accounts of customers registered
in 'street name.'
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants, the ability of a person having a beneficial
interest in the principal amount represented by the global note to pledge such
interest to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interest, may be affected by the lack
of a physical certificate evidencing its interest.
Neither we, the trustee, registrar, paying agent nor conversion agent will
have any responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations. DTC has advised us that it will take any
action permitted to be taken by a holder of notes, including the presentation of
notes for exchange, only at the direction of one or more participants to whose
account with DTC interests in the global note are credited, and only in respect
of the principal amount of the notes represented by the global note as to which
the participant or participants has or have given such direction.
DTC has advised us that it is:
a limited purpose trust company organized under the laws of
the State of New York, and a member of the Federal Reserve
System;
a 'clearing corporation' within the meaning of the Uniform
Commercial Code; and
a 'clearing agency' registered pursuant to the provisions of
Section 17A of the Exchange Act.
S-15
DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between participants
through electronic book-entry changes to the accounts of its participants.
Participants include securities brokers, dealers, banks, trust companies and
clearing corporations and other organizations. Some of the participants or their
representatives, together with other entities, own DTC. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
DTC has agreed to the foregoing procedures to facilitate transfers of
interests in a global note among participants. However, DTC is under no
obligation to perform or continue to perform these procedures, and may
discontinue these procedures at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
us within 90 days, we will issue notes in certificated form in exchange for
global notes.
INFORMATION CONCERNING THE TRUSTEE
We have appointed The Bank of New York, the trustee under the indenture, as
paying agent, conversion agent, note registrar and custodian for the notes. The
trustee or its affiliates provide banking and other services to us in the
ordinary course of their business.
The indenture contains certain limitations on the rights of the trustee, if
it or any of its affiliates is then our creditor, to obtain payment of claims in
certain cases or to realize on certain property received on any claim as
security or otherwise. The trustee and its affiliates will be permitted to
engage in other transactions with us. However, if the trustee or any affiliate
continues to have any conflicting interest and a default occurs with respect to
the notes, the trustee must eliminate such conflict or resign.
S-16
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary discusses the material U.S. federal income tax
considerations relating to the purchase, ownership and disposition of the notes,
and the conversion of the notes into shares of our common stock, by U.S. holders
(as defined below). Except where noted, this summary deals only with notes held
as capital assets and is applicable only to initial purchasers of notes who
purchased the notes at their initial offering price. Additionally, this summary
does not deal with special situations. For example, this summary does not
address:
tax consequences to holders who may be subject to special
tax treatment, such as dealers in securities or currencies,
financial institutions, real estate investment trusts,
regulated investment companies, tax-exempt entities, traders
in securities that elect to use a mark-to- market method of
accounting for their securities holdings or insurance
companies;
tax consequences to persons holding notes as part of a
hedging, integrated, constructive sale, or conversion
transaction or a straddle;
tax consequences to U.S. holders of notes whose 'functional
currency' is not the U.S. dollar;
alternative minimum tax consequences, if any; or
any state, local or foreign tax consequences.
The discussion below is based upon the provisions of the Internal Revenue
Code of 1986, as amended (the 'Code'), and regulations, rulings and judicial
decisions as of the date hereof. Those authorities may be changed, perhaps
retroactively, so as to result in U.S. federal income tax consequences different
from those discussed below.
If a partnership holds our notes the tax treatment of a partner in the
partnership will generally depend upon the status of the partner and the
activities of the partnership. If you are a partner of a partnership holding our
notes, you should consult your tax advisor.
IF YOU ARE CONSIDERING THE PURCHASE OF NOTES, YOU SHOULD CONSULT YOUR OWN
TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES TO YOU AND ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING
JURISDICTION.
For purposes of this discussion, a 'U.S. holder' means a beneficial owner of
a note that is for U.S. federal income tax purposes:
a citizen or resident of the United States;
a corporation or partnership created or organized in or
under the laws of the United States or any political
subdivision of the United States;
an estate the income of which is subject to U.S. federal
income taxation regardless of its source; or
a trust if (1) it is subject to the primary supervision of a
court within the United States and one or more United States
persons have the authority to control all substantial
decisions of the trust, or (2) it has a valid election in
effect under applicable U.S. Treasury regulations to be
treated as a United States person.
PAYMENTS OF INTEREST ON THE NOTES
Stated interest on the notes will generally be taxable to you as ordinary
income at the time it is paid or accrues in accordance with your method of
accounting for tax purposes.
CONSTRUCTIVE DISTRIBUTIONS
The conversion rate of the notes will be adjusted in certain circumstances.
Under Section 305(c) of the Code, adjustments (or failures to make adjustments)
that have the effect of increasing your proportionate interest in our assets or
earnings may in some circumstances result in a deemed distribution to you. Any
deemed distributions will be taxable as a dividend, return of capital or capital
gain in accordance with the earnings and profits rules under the Code.
S-17
SALE, EXCHANGE, PURCHASE AND REDEMPTION OF NOTES
Except as otherwise provided below under ' -- Conversion of Notes into
Common Stock', you will generally recognize gain or loss upon the sale,
exchange, purchase, redemption or other disposition of a note equal to the
difference between the amount realized upon the sale, exchange, purchase,
redemption or other disposition (less an amount equal to any accrued but unpaid
interest not previously included in income, which will be taxable as interest
income) and your adjusted tax basis in the note. Your adjusted tax basis in a
note will generally be equal to the amount you paid for the note. Any gain or
loss recognized on a disposition of the note will be capital gain or loss. If
you are an individual and have held the note for more than one year, such
capital gain will be subject to tax at a maximum rate of 20%. The deductibility
of net capital losses by individuals and corporations is subject to limitations.
CONVERSION OF NOTES INTO COMMON STOCK
You will not recognize gain or loss on the conversion of your notes into
common stock except to the extent of cash received in lieu of a fractional share
of common stock. Cash received in lieu of a fractional share of common stock
generally should be treated as a payment in exchange for such fractional share.
The amount of gain or loss recognized on the deemed sale of such fractional
share will be equal to the difference between the amount of cash you receive in
respect of the fractional share, and the portion of your adjusted tax basis in
the note that is allocable to the fractional share.
The tax basis of the shares of common stock received upon a conversion will
equal the adjusted tax basis of the note that was converted, reduced by the
portion of adjusted tax basis allocated to any fractional share of common stock
deemed exchanged for cash. Your holding period for shares of common stock will
include the period during which you held the notes.
You should contact your tax advisors concerning the ownership of common
stock.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a note, payments of actual or
constructive dividends on common stock, and payment of the proceeds of the sale
of a note or common stock to certain non-corporate, not otherwise exempt
holders, and a 30% backup withholding tax may apply to such payments if the
holder (i) fails to furnish or certify its correct taxpayer identification
number to the payor in the manner required, (ii) is notified by the Internal
Revenue Service that it has failed to report payments of interest and dividends
properly, or (iii) under certain circumstances, fails to certify, under
penalties of perjury, that it has not been notified by the Internal Revenue
Service that it is subject to backup withholding for failure to report interest
and dividend payments. Any amounts withheld under the backup withholding rules
from a payment to a holder will be allowed as a credit against such holder's
United States federal income tax liability and may entitle the holder to a
refund.
S-18
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus supplement, Morgan Stanley & Co.
Incorporated and UBS Warburg LLC have severally agreed to purchase and we have
agreed to sell to them, severally, $175 million principal amount of notes, as
indicated below:
AMOUNT
NAME OF NOTES
---- --------
Morgan Stanley & Co. Incorporated........................... $140,000,000
UBS Warburg LLC............................................. 35,000,000
------------
Total................................................... $175,000,000
------------
------------
The underwriting agreement provides that the obligations of the underwriters
to pay for and accept delivery of the notes offered by this prospectus
supplement and the accompanying prospectus are subject to the approval of
certain legal matters by its counsel and to certain other conditions. The
underwriters are obligated to take and pay for all of the notes offered by this
prospectus supplement and the accompanying prospectus if any notes are taken.
However, the underwriters are not required to take or pay for any notes covered
by the option of the underwriters to purchase additional notes as described
below.
The underwriters initially propose to offer part of the notes directly to
the public at the public offering price listed on the cover page of this
prospectus supplement and part to certain dealers at a price that represents a
concession not in excess of $21.00 per note under the public offering price.
After the notes are released to the public, the offering price and other selling
terms may from time to time be varied by the underwriters.
We have granted to the underwriters an option (exercisable for 30 days from
the date of this prospectus supplement) to purchase, in the event the
underwriters sell more than $175 million principal amount of notes, up to an
additional $26.25 million aggregate principal amount of notes at the public
offering price set forth on the cover page of this prospectus supplement, less
underwriting discounts and commissions.
The following table shows the total underwriting discounts and commissions
to be paid to the underwriters by us for the notes. These amounts are shown
assuming both no exercise and full exercise of the option of the underwriters to
purchase up to $26.25 million additional principal amount of notes.
UNDERWRITING DISCOUNTS AND COMMISSIONS PAID BY US NO EXERCISE FULL EXERCISE
------------------------------------------------- ----------- -------------
Per $1,000 principal amount of notes................ $ 35 $ 35
---------- ----------
Total........................................... $6,125,000 $7,043,750
---------- ----------
---------- ----------
The notes are a new issue of securities with no established trading market.
The underwriters have advised us that they presently intend to make a market in
the notes as permitted by applicable laws and regulations. The underwriters are
not obligated, however, to make a market in the notes and any such market-making
activity may be discontinued at any time at the sole discretion of the
underwriters. Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the notes.
We and certain of our executive officers have agreed, without the prior
written consent of Morgan Stanley & Co. Incorporated, not to, during the period
ending 90 days after the date of this prospectus supplement:
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend or otherwise transfer or dispose of directly
or indirectly, any shares of our common stock or any securities convertible
into or exercisable or exchangeable for our common stock; or
enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of our
common stock;
S-19
whether any transaction described above is to be settled by delivery of our
common stock or such other securities, in cash or otherwise.
The restrictions described in the preceding paragraph do not apply to:
the issuance and sale of the notes offered by this prospectus supplement;
the issuance of shares of common stock upon conversion of the notes;
the issuance of our common stock upon the exercise of options, warrants or
other rights exercisable for or the conversion of securities convertible
into our common stock outstanding as of the date of this prospectus
supplement of which Morgan Stanley & Co. Incorporated has been advised in
writing;
the issuance by us of additional options under our existing stock option
plans, provided that such options are not exercisable during such 90-day
period;
transactions by any person other than us relating to shares of common stock
or other securities acquired in open market transactions after the
completion of the offering of the notes; and
transfers by any person other than us as a bona fide gift, provided that
the transferee agrees to be bound by such restrictions.
In order to facilitate the offering of the notes, the underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
the notes. Specifically, the underwriters may sell a greater principal amount of
notes than they are obligated to purchase under the underwriting agreement,
creating a short position. A short sale is covered if the short position is no
greater than the principal amount of notes available for purchase by the
underwriters under their option to purchase additional notes. An underwriter can
close out a covered short sale by exercising its option to purchase additional
notes or purchasing the notes in the open market. In determining the source of
notes to close out a covered short sale, an underwriter will consider, among
other things, the open market price of notes compared to the price available
under the over-allotment option. The underwriters may also sell notes in excess
of the over-allotment option, creating a naked short position. The underwriters
must close out any naked short position by purchasing notes in the open market.
A naked short position is more likely to be created if an underwriter is
concerned that there may be downward pressure on the price of the notes in the
open market after pricing that could adversely affect investors who purchase in
the offering. As an additional means of facilitating the offering, the
underwriters may bid for, and purchase, notes in the open market to stabilize
the price of the notes. These activities may raise or maintain the market price
of the notes above independent market levels or prevent or retard a decline in
the market price of the notes. The underwriters are not required to engage in
these activities, and may end any of these activities at any time.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act.
From time to time, Morgan Stanley & Co. Incorporated and UBS Warburg LLC
have provided, and may provide, investment banking service to us. In addition,
UBS Warburg LLC acted as our financial advisor in connection with our recent
recapitalization, which was completed on March 7, 2003.
LEGAL MATTERS
The validity under state law of the notes offered hereby has been passed
upon for us by Simpson Thacher & Bartlett, New York, New York. From time to
time, Simpson Thacher & Bartlett represents The Blackstone Group L.P. on various
matters in the regular course of business. Affiliates of Blackstone hold shares
of our common stock. Certain partners of Simpson Thacher & Bartlett, members of
their families, and related persons, have an indirect interest, through limited
partnerships, in less than 1% of our common stock through a fund affiliated with
Blackstone. Cravath, Swaine & Moore LLP, New York, New York, has represented the
underwriters.
S-20
PROSPECTUS
$500,000,000
[SIRIUS LOGO]
DEBT SECURITIES, PREFERRED STOCK,
COMMON STOCK AND WARRANTS
We from time to time may offer:
secured or unsecured debt securities in one or more series;
shares of preferred stock in one or more series;
shares of common stock;
warrants or other rights to purchase debt securities, preferred stock or
common stock or any combination of securities; and
any combination of debt securities, preferred stock, common stock or warrants,
at an aggregate initial public offering price not to exceed $500,000,000.
The number, amount, prices, net proceeds to Sirius Satellite Radio Inc. and
specific terms of the securities will be determined at or before the time of
sale and will be set forth in an accompanying prospectus supplement.
The net proceeds to us from the sale of the securities will be the initial
public offering price or the purchase price of those securities less any
applicable commission or discount, and less any other expenses we incur in
connection with the issuance and distribution of those securities.
If any agents or any underwriters are involved in the sale of the foregoing
securities, their names and any applicable commission or discount will be set
forth in the accompanying prospectus supplement.
This prospectus may not be used for the sale of any securities unless it is
accompanied by a prospectus supplement. The accompanying prospectus supplement
may modify or supersede any statement in this prospectus.
Nasdaq National Market trading symbol: 'SIRI.'
INVESTING IN OUR SECURITIES INVOLVES RISK, INCLUDING THE RISKS DESCRIBED IN
THE DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROSPECTUS. YOU SHOULD CAREFULLY
CONSIDER THE IMPORTANT RISK FACTORS SET FORTH IN THE DOCUMENTS INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND IN THE ACCOMPANYING PROSPECTUS SUPPLEMENT
BEFORE INVESTING IN OUR SECURITIES.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
----------------------------
The date of this prospectus is May 20, 2003.
TABLE OF CONTENTS
PAGE
----
Special Note Regarding Forward-Looking Statements........... 2
About This Prospectus....................................... 3
About Sirius................................................ 3
Risk Factors................................................ 4
Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends........................................... 5
Use of Proceeds............................................. 5
Description of Debt Securities.............................. 5
Description of Capital Stock................................ 18
Description of Warrants..................................... 22
Plan of Distribution........................................ 26
Legal Matters............................................... 27
Experts..................................................... 27
Incorporation by Reference.................................. 28
Where You May Find Additional Available Information About
Us........................................................ 28
-------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS AND THE
OTHER DOCUMENTS TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS MAY ONLY BE USED
WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE INFORMATION IN THIS PROSPECTUS
MAY ONLY BE ACCURATE ON THE DATE OF THIS PROSPECTUS.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The following cautionary statements identify important factors that could
cause our actual results to differ materially from those projected in the
forward-looking statements made in this prospectus. Any statements about our
beliefs, plans, objectives, expectations, assumptions or future events or
performance are not historical facts and may be forward-looking. These
statements are often, but not always, made through the use of words or phrases
such as 'will likely result,' 'are expected to,' 'will continue,' 'is
anticipated,' 'estimated,' 'intends,' 'plans,' 'projection' and 'outlook.' Any
forward-looking statements are qualified in their entirety by reference to the
factors discussed throughout this prospectus, and particularly the risk factors
described under 'Risk Factors' in this prospectus. Among the significant factors
that could cause our actual results to differ materially from those expressed in
the forward-looking statements are:
our need for substantial additional financing by early 2004, even following
our recently completed recapitalization;
our competitive position, as XM Satellite Radio, the other satellite radio
service provider in the United States, began offering its service before
us, has substantially more subscribers than us and may have certain
competitive advantages;
our dependence upon third parties to manufacture, distribute, market and
sell SIRIUS radios and components for those radios;
the unproven market for our service; and
the useful life of our satellites, which have experienced circuit failures
on their solar arrays and may not be covered by insurance. The circuit
failures our satellites have experienced to date are not expected to limit
the power of our broadcast signal, reduce the expected useful life of our
satellites or otherwise affect our operations.
The risk factors referred to above could cause actual results or outcomes to
differ materially from those expressed in any forward-looking statements made by
us or on our behalf. Accordingly, you should not place undue reliance on any of
these forward-looking statements. In addition, any forward-looking statement
speaks only as of the date on which it is made, and we undertake no obligation
to update any forward-looking statement or statements to reflect events or
circumstances after the date on which the statement is made, to reflect the
occurrence of unanticipated events or otherwise. New factors emerge from time to
time, and it is not possible for us to predict which will arise or to assess
with any precision the impact of each factor on our business or the extent to
which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.
2
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a 'shelf' registration process. Under
this shelf process, we may sell any combination of the securities described in
this prospectus in one or more offerings up to a total dollar amount of
$500,000,000. This prospectus provides you with a general description of the
securities we may offer. Each time we sell securities, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with the additional information described
under the heading 'Where You May Find Additional Available Information About
Us.'
ABOUT SIRIUS
From our three orbiting satellites, we directly broadcast more than 100
channels, which we call 'streams', of digital-quality audio throughout the
continental United States for a monthly subscription fee of $12.95. We deliver
60 streams of 100% commercial-free music in virtually every genre, and over 40
streams of news, sports, weather, talk, comedy, public radio and children's
programming. Our broad and deep range of music as well as our news, sports and
entertainment programming is not available on conventional radio in any market
in the United States. We hold one of only two licenses issued by the Federal
Communications Commission to operate a national satellite radio system.
On February 14, 2002, we launched our service in select markets and on July
1, 2002, we launched our service nationwide. Our primary source of revenues is
subscription and activation fees. In addition, we derive revenues from selling
limited advertising on our non-music streams.
We have agreements with Ford Motor Company, DaimlerChrysler Corporation, BMW
of North America, LLC, Nissan North America, Inc. and Volkswagen of America,
Inc. that contemplate the manufacture and sale of vehicles that include SIRIUS
radios. These alliances cover all major brands and affiliates of these
automakers, including Ford, Lincoln, Mercury, Jaguar, Land Rover, Chrysler,
Mercedes, BMW, MINI, Jaguar, Mazda, Dodge, Jeep, Volvo, Nissan, Infiniti,
Volkswagen, Audi and Freightliner and Sterling heavy trucks. Ford,
DaimlerChrysler, BMW, Nissan and Volkswagen are not required to manufacture or
sell vehicles that include SIRIUS radios pursuant to these agreements.
In the autosound aftermarket, SIRIUS radios are available for sale at
various national and regional retailers, such as Best Buy, Circuit City,
Ultimate Electronics, Tweeter Home Entertainment Group, Crutchfield and Good
Guys. On December 31, 2002, SIRIUS radios were available at approximately 5,500
retail locations.
On March 7, 2003, we completed a restructuring of our debt and equity
capitalization. As part of this restructuring, we issued shares of our common
stock in exchange (i) for 91% of our outstanding debt and (ii) all of our then
outstanding convertible preferred stock. We also raised an additional $200
million in gross proceeds from the sale of our common stock for cash. Additional
information regarding this restructuring is contained in our Annual Report on
Form 10-K for the year ended December 31, 2002.
Sirius Satellite Radio Inc. was incorporated in the State of Delaware as
Satellite CD Radio, Inc. on May 17, 1990. On December 7, 1992, we changed our
name to CD Radio Inc., and we formed a wholly owned subsidiary, Satellite CD
Radio, Inc., that is the holder of our FCC license. On November 18, 1999, we
changed our name again to Sirius Satellite Radio Inc. Our executive offices are
located at 1221 Avenue of the Americas, New York, New York 10020, our telephone
number is (212) 584-5100 and our internet address is sirius.com. Sirius.com is
an inactive text reference only, meaning that the information contained on the
website is not part of this prospectus and is not incorporated in this
prospectus by reference.
3
RISK FACTORS
Investing in our securities involves risk, including the risks described in
the accompanying prospectus supplement and in the documents incorporated by
reference in this prospectus, including our Annual Report on Form 10-K for the
year ended December 31, 2002, our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2003, our Current Reports on Form 8-K dated May 1, 2003 and
May 14, 2003, and in any filings made with the Securities and Exchange
Commission after the date of this prospectus pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act. You should carefully consider the
risk factors before investing in our securities.
4
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth our ratio of earnings to combined fixed
charges and preferred stock dividends for the periods indicated.
FOR THE
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------------------------------- MARCH 31,
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
Ratio of earnings to fixed
charges(1)....................... -- -- -- -- -- 8.3(2)
Ratio of earnings to combined fixed
charges and preferred stock
dividends(1)..................... -- -- -- -- -- 1.5(3)
---------
(1) No figure is provided for any period during which the
applicable ratio was less than 1.00.
(2) Includes the effects of other income of $256.5 million
associated with our debt restructuring.
(3) Includes the effects of a $79.5 million deemed dividend
associated with the exchange of our preferred stock for
common stock and warrants.
The ratio of earnings to fixed charges is computed by dividing our earnings,
which include income before taxes (excluding the cumulative and transition
effects of accounting changes) and fixed charges, by fixed charges. The ratio of
earnings to combined fixed charges and preferred stock dividends is computed by
dividing earnings by the sum of fixed charges and dividends on preferred stock.
'Fixed charges' consist of interest on debt and a portion of rentals determined
to be representative of interest. For the years ended December 31, 1998, 1999,
2000, 2001 and 2002, our earnings were insufficient to cover our fixed charges
by approximately $62.3 million, $119.4 million, $198.5 million, $255.0 million,
and $420.8 million, respectively. Earnings were also inadequate to cover our
combined fixed charges and preferred stock dividends over the same time periods
by approximately $99.9 million, $153.5 million, $247.4 million, $297.2 million
and $466.7 million, respectively. In connection with our recent restructuring,
most of our debt and all of our outstanding preferred stock was retired and
cancelled on March 7, 2003.
USE OF PROCEEDS
Unless otherwise indicated in the applicable prospectus supplement, we will
use the net proceeds from the sale of the offered securities for general
corporate purposes, including capital expenditures, the reduction of
indebtedness and other purposes. We may invest funds not required immediately
for such purposes in short-term obligations or we may use them to reduce the
future level of our indebtedness.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the debt securities sets forth
certain general terms that may apply to the debt securities. The particular
terms of any debt securities will be described in the prospectus supplement
relating to those debt securities. For purposes of this 'Description of Debt
Securities,' the term 'Sirius' refers to our company but not to any of its
subsidiaries.
Any senior debt securities will be issued in one or more series under an
indenture, as supplemented or amended from time to time, between us and an
institution that we will name in the related prospectus supplement, as trustee.
Any subordinate debt securities will be issued in one or more series under an
indenture, as supplemented or amended from time to time, between us and an
institution that we will name in the related prospectus supplement, as trustee.
For ease of reference, we will refer to the indenture relating to any senior
debt securities as the senior indenture and to the indenture relating to any
subordinate debt securities as the subordinate indenture.
5
This summary of the terms and provisions of the debt securities and the
indentures is not necessarily complete, and we refer you to the copy of the
forms of the indentures which are filed as exhibits to the registration
statement of which this prospectus forms a part. Whenever we refer to particular
defined terms of the indentures in this section or in a prospectus supplement,
we are incorporating these definitions into this prospectus or the prospectus
supplement.
GENERAL
The debt securities will be issuable in one or more series in accordance
with an indenture supplemental to the applicable indenture or a resolution of
our board of directors or a committee of the board. Unless otherwise specified
in a prospectus supplement, each series of senior debt securities will rank
equally in right of payment with all of our other senior obligations. Each
series of subordinate debt securities will be subordinated and junior in right
of payment to the extent and in the manner described in the subordinate
indenture and any supplemental indenture relating to the subordinate debt
securities. Except as otherwise provided in a prospectus supplement, the
indentures do not limit our ability to incur other secured or unsecured debt,
whether under the indentures, any other indenture that we may enter into in the
future or otherwise. For more information, you should read the prospectus
supplement relating to a particular offering of securities.
The applicable prospectus supplement will describe the following terms of
the series of debt securities with respect to which this prospectus is being
delivered:
the title of the debt securities of the series and whether such series
constitutes senior debt securities or subordinated debt securities;
any limit on the aggregate principal amount of the debt securities;
the person to whom any interest on a debt security shall be payable, if
other than the person in whose name that debt security is registered on the
regular record date;
the date or dates on which the principal and premium, if any, of the debt
securities of the series are payable or the method of that determination or
the right to defer any interest payments;
the rate or rates (which may be fixed or variable) at which the debt
securities will bear interest, if any, or the method of determining the
rate or rates, the date or dates from which such interest will accrue, the
interest payment dates on which any such interest will be payable or the
method by which the dates will be determined, the regular record date for
any interest payable on any interest payment date and the basis upon which
interest will be calculated if other than that of a 360-day year of twelve
30-day months;
the place or places where the principal of and any premium and any interest
on the debt securities of the series will be payable, if other than the
Borough of Manhattan, The City of New York;
the period or periods within which, the date or dates on which, the price
or prices at which and the terms and conditions upon which the debt
securities of the series may be redeemed, in whole or in part, at our
option or otherwise;
our obligation, if any, to redeem, purchase or repay the debt securities of
the series pursuant to any sinking fund or analogous provisions or at the
option of the holders and the period or periods within which, the price or
prices at which, the currency or currencies including currency unit or
units in which and the terms and conditions upon which, the debt securities
shall be redeemed, purchased or repaid, in whole or in part;
the terms, if any, upon which the debt securities of the series may be
convertible into or exchanged for other debt securities, preferred stock or
common stock of Sirius and the terms and conditions upon which the
conversion or exchange shall be effected, including the initial conversion
or exchange price or rate, the conversion or exchange period and any other
additional provisions;
6
the denominations in which any debt securities will be issuable, if other
than denominations of $1,000 and any integral multiple thereof;
the currency, currencies or currency units in which payment of principal of
and any premium and interest on debt securities of the series shall be
payable, if other than United States dollars;
any index, formula or other method used to determine the amount of payments
of principal of and any premium and interest on the debt securities;
if the principal amount payable at the stated maturity of debt securities
of the series will not be determinable as of any one or more dates before
the stated maturity, the amount that will be deemed to be the principal
amount as of any date for any purpose, including the principal amount
thereof which will be due and payable upon any maturity other than the
stated maturity or which will be deemed to be outstanding as of any date
(or, in any such case, the manner in which the deemed principal amount is
to be determined), and if necessary, the manner of determining the
equivalent thereof in United States currency;
if the principal of or any premium or interest on any debt securities is to
be payable, at our election or the election of the holders, in one or more
currencies or currency units other than that or those in which such debt
securities are stated to be payable, the currency, currencies or currency
units in which payment of the principal of and any premium and interest on
such debt securities shall be payable, and the periods within which and the
terms and conditions upon which such election is to be made;
if other than the principal amount thereof, the portion of the principal
amount of the debt securities which will be payable upon declaration of the
acceleration of the maturity thereof or provable in bankruptcy;
the applicability of, and any addition to or change in, the covenants and
definitions then set forth in the applicable indenture or in the terms then
set forth in such indenture relating to permitted consolidations, mergers
or sales of assets;
any changes or additions to the provisions of the applicable indenture
dealing with defeasance, including the addition of additional covenants
that may be subject to our covenant defeasance option;
whether any of the debt securities are to be issuable in permanent global
form and, if so, the depositary or depositaries for such global security
and the terms and conditions, if any, upon which interests in such debt
securities in global form may be exchanged, in whole or in part, for the
individual debt securities represented thereby in definitive registered
form, and the form of any legend or legends to be borne by the global
security in addition to or in lieu of the legend referred to in the
applicable indenture;
the appointment of any trustee, any authenticating or paying agents,
transfer agent or registrars;
the terms, if any, of any guarantee of the payment of principal, premium
and interest with respect to debt securities of the series and any
corresponding changes to the provisions of the applicable indenture as then
in effect;
the terms, if any, of the transfer, mortgage, pledge or assignment as
security for the debt securities of the series of any properties, assets,
moneys, proceeds, securities or other collateral, including whether certain
provisions of the Trust Indenture Act are applicable and any corresponding
changes to provisions of the applicable indenture as then in effect;
any addition to or change in the events of default with respect to the debt
securities of the series and any change in the right of the trustee or the
holders to declare the principal, premium and interest with respect to the
debt securities due and payable;
any applicable subordination provisions in addition to those set forth
herein with respect to subordinated debt securities;
7
if the securities of the series are to be secured, the property covered by
the security interest, the priority of the security interest, the method of
perfecting the security interest and any escrow arrangements related to the
security interest; and
any other terms of the debt securities not inconsistent with the provisions
of the applicable indenture.
We may sell debt securities at a substantial discount below their stated
principal amount or debt securities that bear no interest or bear interest at a
rate which at the time of issuance is below market rates. We will describe the
material United States federal income tax consequences, accounting and other
special considerations applicable to the debt securities in the applicable
prospectus supplement.
If the purchase price of any of the debt securities is payable in one or
more foreign currencies or currency units or if any debt securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any debt securities is
payable in one or more foreign currencies or currency units, we will set forth
the restrictions, elections, specific terms and other information with respect
to such issue of debt securities and such foreign currency or currency units in
the applicable prospectus supplement.
EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT
Unless otherwise indicated in the applicable prospectus supplement,
principal, premium, if any, and interest, if any, on the debt securities will be
payable, without coupons, and the exchange of and the transfer of debt
securities will be registrable, at our office or agency maintained for such
purpose in the Borough of Manhattan, The City of New York and at any other
office or agency maintained for such purpose. Unless otherwise indicated in the
applicable prospectus supplement, the debt securities will be issued in
denominations of $1,000 and any integral multiples thereof.
Holders may present each series of debt securities for exchange as provided
above, and for registration of transfer, with the form of transfer endorsed
thereon, or with a satisfactory written instrument of transfer, duly executed,
at the office of the appropriate securities registrar or at the office of any
transfer agent designated by us for such purpose and referred to in the
applicable prospectus supplement, without service charge and upon payment of any
taxes and other governmental charges as described in the indenture. We will
appoint the trustee of each series of debt securities as securities registrar
for such series under the indenture. If the applicable prospectus supplement
refers to any transfer agents, in addition to the securities registrar initially
designated by us with respect to any series, we may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, provided that we maintain a transfer
agent in each place of payment for the series. We may at any time designate
additional transfer agents with respect to any series of debt securities.
All moneys paid by us to a paying agent for the payment of principal,
premium, if any, or interest, if any, on any debt security which remain
unclaimed for two years after such principal, premium or interest has become due
and payable may be repaid to us, and after such time, the holder of such debt
security may look only to us for payment.
In the event of any redemption, we shall not be required to (a) issue,
register the transfer of or exchange debt securities of any series during a
period beginning at the opening of business 15 days before the day of the
mailing of a notice of redemption of debt securities of that series to be
redeemed and ending at the close of business on the day of such mailing or (b)
register the transfer of or exchange any debt security called for redemption,
except, in the case of any debt securities being redeemed in part, any portion
not being redeemed.
BOOK-ENTRY SYSTEM
The provisions set forth below in this section headed 'Book-Entry System'
will apply to the debt securities of any series if the prospectus supplement
relating to such series so indicates.
8
Unless otherwise indicated in the applicable prospectus supplement, the debt
securities of such series will be represented by one or more global securities
registered with a depositary named in the prospectus supplement relating to such
series. Except as set forth below, a global security may be transferred, in
whole but not in part, only to the depositary or another nominee of the
depositary.
The specific terms of the depositary arrangement with respect to a series of
debt securities will be described in the prospectus supplement relating to the
series. We anticipate that the following provisions will generally apply to
depositary arrangements.
Upon the issuance of a global security, the depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the debt securities represented by such global security to the accounts of
institutions or persons, commonly known as participants, that have accounts with
the depositary or its nominee. The accounts to be credited will be designated by
the underwriters, dealers or agents. Ownership of beneficial interests in a
global security will be limited to participants or persons that may hold
interests through participants. Ownership of interests in such global security
will be shown on, and the transfer of those ownership interests will be effected
only through, records maintained by the depositary (with respect to
participants' interests) and such participants (with respect to the owners of
beneficial interests in such global security). The laws of some jurisdictions
may require that certain purchasers of securities take physical delivery of the
securities in definitive form. These limits and laws may impair the ability to
transfer beneficial interests in a global security.
So long as the depositary, or its nominee, is the registered holder and
owner of such global security, the depositary or such nominee, as the case may
be, will be considered the sole owner and holder for all purposes of the debt
securities and for all purposes under the applicable indenture. Except as set
forth below or as otherwise provided in the applicable prospectus supplement,
owners of beneficial interests in a global security will not be entitled to have
the debt securities represented by such global security registered in their
names, will not receive or be entitled to receive physical delivery of debt
securities in definitive form and will not be considered to be the owners or
holders of any debt securities under the applicable indenture or such global
security. Accordingly, each person owning a beneficial interest in a global
security must rely on the procedures of the depositary and, if such person is
not a participant, on the procedures of the participant through which such
person owns its interest, to exercise any rights of a holder of debt securities
under the applicable indenture of such global security. We understand that under
existing industry practice, in the event we request any action of holders of
debt securities or if an owner of a beneficial interest in a global security
desires to take any action that the depositary, as the holder of such global
security is entitled to take, the depositary would authorize the participants to
take such action, and that the participants would authorize beneficial owners
owning through such participants to take such actions or would otherwise act
upon the instructions of beneficial owners owning through them.
Payments of principal of and premium, if any, and interest, if any, on debt
securities represented by a global security will be made to the depositary or
its nominee, as the case may be, as the registered owner and holder of such
global security, against surrender of the debt securities at the principal
corporate trust office of the trustee. Interest payments will be made at the
principal corporate trust office of the trustee or by a check mailed to the
holder at its registered address. Payment in any other manner will be specified
in the prospectus supplement.
We expect that the depositary, upon receipt of any payment of principal,
premium, if any, of interest, if any, in respect of a global security, will
credit immediately participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of such global
security as shown on the records of the depositary. We expect that payments by
participants to owners of beneficial interests in a global security held through
such participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of customers
in bearer form or registered in 'street name,' and will be the responsibility of
such participant. Neither Sirius nor the trustee nor any agent of Sirius or the
trustee will have any responsibility or liability for any aspect of the records
relating to, or
9
payments made on account of, beneficial ownership interests in a global security
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests or for any other aspect of the relationship
between the depositary and its participants or the relationship between such
participants and the owners of beneficial interests in such global security
owning through such participants.
Unless and until it is exchanged in whole or in part for debt securities in
definitive form, a global security may not be transferred except as a whole by
the depositary to a nominee of such depositary or by a nominee of such
depositary to such depositary or another nominee of such depositary.
Unless otherwise provided in the applicable prospectus supplement, debt
securities represented by a global security will be exchangeable for debt
securities in definitive form of like tenor as such global security in
denominations of $1,000 and in any greater amount that is an integral multiple
thereof if:
the depositary notifies us and the trustee that it is unwilling or unable
to continue as depositary for such global security or if at any time the
depositary ceases to be a clearing agency registered under the Exchange Act
and a successor depositary is not appointed by us within 90 days;
we, in our sole discretion, determine not to have all of the debt
securities represented by a global security and notify the trustee thereof;
or
there shall have occurred and be continuing an event of default or an event
which, with the giving of notice or lapse of time, or both, would
constitute an event of default with respect to the debt securities.
Any debt security that is exchangeable pursuant to the preceding sentence is
exchangeable for debt securities registered in such names as the depositary
shall instruct the trustee. It is expected that such instructions may be based
upon directions received by the depositary from its participants with respect to
ownership of beneficial interests in such global security. Subject to the
foregoing, a global security is not exchangeable except for a global security or
global securities of the same aggregate denominations to be registered in the
name of the depositary or its nominee.
OPTION TO DEFER INTEREST PAYMENTS OR TO PAY-IN-KIND
If so described in the applicable prospectus supplement, we will have the
right, at any time and from time to time during the term of any series of debt
securities, to defer the payment of interest for such number of consecutive
interest payment periods as may be specified in the applicable prospectus
supplement, subject to the terms, conditions and covenants, if any, specified in
such prospectus supplement, provided that an extension period may not extend
beyond the stated maturity of the final installment of principal of the series
of debt securities. If provided in the applicable prospectus supplement, we will
have the right, at any time and from time to time during the term of any series
of debt securities, to make payments of interest by delivering additional debt
securities of the same series.
COVENANTS
The covenants, if any, that will apply to a particular series of debt
securities will be set forth in the indenture relating to such series of debt
securities. Except as otherwise specified in the applicable prospectus
supplement with respect to any series of debt securities, we may remove or add
covenants without the consent of holders of the securities.
DEFEASANCE AND COVENANT DEFEASANCE
We may be discharged from our obligations on the debt securities of any
series that have matured or will mature or be redeemed within one year if we
deposit with the trustee enough cash to pay all the principal, interest and any
premium due to the stated maturity date or
10
redemption date of the debt securities and comply with certain other conditions
set forth in the applicable indenture.
Each indenture contains a provision that permits us to elect either:
to be discharged after 90 days from all of our obligations (subject to
limited exceptions) with respect to any series of debt securities then
outstanding ('defeasance'); and/or
to be released from our obligations under certain covenants and from the
consequences of an event of default resulting from a breach of those
covenants or cross-default ('covenant defeasance').
To make either of the above elections, we must deposit in trust with the trustee
money and/or U.S. Government Obligations, if the debt securities are denominated
in U.S. dollars, and/or Foreign Government Securities, if the debt securities
are denominated in a foreign currency, which through the payment of principal
and interest under their terms will provide sufficient money, without
reinvestment, to repay in full those senior or subordinate debt securities. As a
condition to defeasance or covenant defeasance, we must deliver to the trustee
an opinion of counsel that the holders of the debt securities will not recognize
income, gain or loss for federal income tax purposes as a result of the
defeasance.
If either of the above events occur, the holders of the debt securities of
the series will not be entitled to the benefits of the indenture, except for
registration of transfer and exchange of debt securities and replacement of
lost, stolen or mutilated debt securities.
EVENTS OF DEFAULT
The following events are defined in the indentures as 'Events of Default'
with respect to a series of debt securities (unless such event is specifically
inapplicable to a particular series as described in the applicable prospectus
supplement):
failure to pay any interest on any debt security of that series when due,
which failure continues for 30 days;
failure to pay principal of or any premium on any debt security of that
series when due;
failure to deposit any sinking fund payment, within 30 days of when due, in
respect of any debt security of that series;
with respect to each series of debt securities, failure to perform any
other of our covenants applicable to that series, which failure continues
for 90 days after written notice to us by the trustee or to us and the
trustee by the holders of at least 25% in principal amount of the
outstanding debt securities of that series specifying such failure,
requiring it to be remedied and stating that such notice is a 'Notice of
Default';
certain events of bankruptcy, insolvency or reorganization involving us;
and
any other Event of Default provided with respect to debt securities of that
series.
If an Event of Default for any series of debt securities occurs and
continues, the trustee or holders of at least 25% in principal amount of the
debt securities of that series may declare the entire principal amount of all
the debt securities of that series to be due and payable immediately. Subject to
certain conditions, the declaration may be annulled and past defaults (except
uncured payment defaults and certain other specified defaults) may be waived by
the holders of a majority of the principal amount of the outstanding debt
securities of that series.
An Event of Default for a particular series of debt securities does not
necessarily constitute an event of default for any other series of debt
securities issued under an indenture.
Each indenture will require the trustee, within 90 days after the occurrence
of a default known to it with respect to any outstanding series of debt
securities, to give the holders of that series notice of the default if uncured
or not waived. However, the trustee may withhold this notice if it determines in
good faith that the withholding of this notice is in the interest of those
holders, except that the trustee may not withhold this notice in the case of a
payment default. The
11
term 'default' for the purpose of this provision means any event that is, or
after notice or lapse of time or both would become, an Event of Default with
respect to debt securities of that series.
Other than the duty to act with the required standard of care during an
Event of Default, a trustee is not obligated to exercise any of its rights or
powers under the applicable indenture at the request or direction of any of the
holders of debt securities, unless the holders have offered to the trustee
reasonable indemnification. Each indenture provides that the holders of a
majority in principal amount of outstanding debt securities of any series may in
certain circumstances direct the time, method and place of conducting any
proceeding for any remedy available to the trustee, or exercising any trust or
other power conferred on the trustee.
The senior indenture will include a covenant that we will file annually with
the trustee a certificate of no default, or specifying any default that exists.
MODIFICATION, WAIVER AND MEETINGS
We and the trustee may enter into supplemental indentures without the
consent of the holders of debt securities for one or more of the following
purposes:
to evidence the succession of another person to us pursuant to the
provisions of the applicable indenture relating to consolidations, mergers
and sales of assets and the assumption by the successor of our covenants,
agreements and obligations in the applicable indenture and in the debt
securities;
to surrender any right or power conferred upon us by the applicable
indenture, to add to our covenants such further covenants, restrictions,
conditions or provisions for the protection of the holders of all or any
series of debt securities as our board of directors shall consider to be
for the protection of the holders of the debt securities, and to make the
occurrence, or the occurrence and continuance, of a default in any of the
additional covenants, restrictions, conditions or provisions a default or
an Event of Default under the applicable indenture (provided, however, that
with respect to any such additional covenant, restriction, condition or
provision, the supplemental indenture may provide for a period of grace
after default, which may be shorter or longer than that allowed in the case
of other defaults, may provide for an immediate enforcement upon the
default, may limit the remedies available to the trustee upon the default,
or may limit the right of holders of a majority in aggregate principal
amount of any or all series of debt securities to waive the default);
to cure any ambiguity or omission or to correct or supplement any provision
contained in the applicable indenture, in any supplemental indenture or in
any debt securities that may be defective or inconsistent with any other
provision contained therein, to convey, transfer, assign, mortgage or
pledge any property to or with the trustee, or to make such other
provisions in regard to matters or questions arising under the applicable
indenture, in each case as shall not adversely affect the interests of any
holders of debt securities of any series in any material respect;
to modify or amend the applicable indenture to permit the qualification of
such indenture or any supplemental indenture under the Trust Indenture Act
as then in effect;
to add guarantees with respect to any or all of the debt securities or to
secure any or all of the debt securities;
to add to, change or eliminate any of the provisions of the applicable
indenture with respect to one or more series of debt securities; so long as
any such addition, change or elimination not otherwise permitted under the
applicable indenture shall (1) neither apply to any debt security of any
series created before the execution of the supplemental indenture and
entitled to the benefit of the provision nor modify the rights of the
holders of any debt security with respect to the provision, or (2) become
effective only when there is no such debt security outstanding;
to evidence and provide for the acceptance of appointment by a successor or
separate trustee with respect to the debt securities of one or more series
and to add to or change
12
any of the provisions of the applicable indenture as shall be necessary to
provide for or facilitate the administration of such indenture by more than
one trustee;
to establish the form or terms of debt securities of any series;
to provide for uncertificated debt securities in addition to or in place of
certificated debt securities (provided that the uncertificated debt
securities are issued in registered form for purposes of Section 163(f) of
the Internal Revenue Code or in a manner such that the uncertificated debt
securities are described in Section 163(f)(2)(B) of such Code); and
to make any change that does not adversely affect the rights of any holder.
Modifications and amendments of the applicable indenture may be made by us
and the trustee with the consent of the holders of a majority in principal
amount of the outstanding debt securities of each series affected by such
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the holder of each outstanding debt
security affected thereby:
change the stated maturity of the principal of, or any installment of
principal of or interest on, any debt security;
reduce the principal amount of, rate of interest on or any premium payable
upon the redemption of any debt security;
reduce the amount of principal of an original issue discount security
payable upon acceleration of the maturity thereof;
change the place of payment where, or the coin or currency in which, any
debt security or any premium or interest thereon is payable;
impair the right to institute suit for the enforcement of any payment on or
with respect to any debt security after the stated maturity, redemption
date or repayment date;
reduce the percentage in principal amount of outstanding debt securities of
any series, the consent of whose holders is required for modification or
amendment of the applicable indenture or for waiver of compliance with
certain provisions of such indenture or for waiver of certain defaults;
change the optional redemption or repurchase provisions in a manner adverse
to any holder; or
modify any of the provisions set forth in this paragraph, except to
increase the percentage of holders whose consent is required for
modifications and amendments of the applicable indenture or to provide that
certain other provisions of the applicable indenture may not be modified or
waived without the consent of the holder of each outstanding debt security
affected thereby.
The holders of a majority in principal amount of the outstanding debt
securities of each series may, on behalf of the holders of all the debt
securities of that series, waive, insofar as that series is concerned,
compliance by us with certain restrictive provisions of the applicable
indenture. The holders of a majority in principal amount of the outstanding debt
securities of each series may, on behalf of all holders of debt securities of
that series and any coupons relating to such series, waive any past default
under the applicable indenture with respect to debt securities of the series,
except a default (a) in the payment of principal of or any premium or interest
on any debt security of such series or (b) in respect of a covenant or provision
of the applicable indenture which cannot be modified or amended without the
consent of each holder of outstanding debt securities of the affected series.
The indentures provide that in determining whether the holders of the
requisite principal amount of the outstanding debt securities have given any
request, demand, authorization, direction,
13
notice, consent or waiver thereunder or whether a quorum is present at a meeting
of holders of debt securities:
the principal amount of an original issue discount security that shall be
deemed to be outstanding shall be the amount of the principal thereof that
would be due and payable as of the date of such determination upon
acceleration of the maturity thereof;
the principal amount of a debt security denominated in other than U.S.
dollars shall be the U.S. dollar equivalent, determined on the date of
original issuance of such debt security, of the principal amount of such
debt security (or, in the case of an original issue discount security, the
U.S. dollar equivalent on the date of original issuance of such debt
security of the amount determined (as provided above) of such debt
security); and
debt securities owned by us or any subsidiary of ours shall be disregarded
and deemed not to be outstanding.
In addition, we and the trustees may execute, without the consent of any
holder of the debt securities, any supplemental indenture for the purpose of
creating any new series of debt securities.
SUBORDINATION
Except as set forth in the applicable prospectus supplement, the subordinate
indenture provides that the subordinate debt securities are subordinate and
junior in right of payment to all of our senior indebtedness.
If an Event of Default occurs with respect to any senior indebtedness
permitting the holders thereof to accelerate the maturity thereof and the
default is the subject of judicial proceedings or written notice of such Event
of Default, requesting that payments on subordinate debt securities cease, is
given to us by the holders of senior indebtedness, then unless and until
(1) the default in payment or Event of Default shall have been cured or waived
or (2) 120 days shall have passed after written notice is given and the default
is not the subject of judicial proceedings, no direct or indirect payment, in
cash, property or securities, by set-off or otherwise, will be made or agreed to
be made on account of the subordinate debt securities or interest thereon or in
respect of any repayment, redemption, retirement, purchase or other acquisition
of subordinate debt securities.
Except as set forth in the applicable prospectus supplement, the subordinate
indenture provides that in the event of:
any insolvency, bankruptcy, receivership, reorganization or other similar
proceeding relating to us, our creditors or our property; or
any proceeding for the liquidation or dissolution of Sirius,
all present and future senior indebtedness, including interest accruing after
the commencement of the proceeding, will first be paid in full before any
payment or distribution, whether in cash, securities or other property, will be
made by us on account of subordinate debt securities. In that event, any payment
or distribution, whether in cash, securities or other property, other than
securities of Sirius or any other corporation provided for by a plan of
reorganization or a readjustment, the payment of which is subordinate, at least
to the extent provided in the subordination provisions of the indenture, to the
payment of all senior indebtedness at the time outstanding and to any securities
issued in respect thereof under any such plan of reorganization or readjustment
and other than payments made from any trust described in the 'Defeasance and
Covenant Defeasance' above, which would otherwise but for the subordination
provisions be payable or deliverable in respect of subordinate debt securities,
including any such payment or distribution which may be payable or deliverable
by reason of the payment of any other indebtedness of ours being subordinate to
the payment of subordinated debt securities, will be paid or delivered directly
to the holders of senior indebtedness or to their representative or trustee, in
accordance with the priorities then existing among such holders, until all
senior indebtedness shall have been paid in full. No present or future holder of
any senior indebtedness will be prejudiced in the right to enforce subordination
of the indebtedness evidenced by subordinate debt securities by any act or
failure to act on our part.
14
The term 'Senior Indebtedness' means:
(1) the principal, premium, if any, interest and all other amounts owed
in respect of all our (A) indebtedness for money borrowed and (B)
indebtedness evidenced by securities, debentures, bonds or other similar
instruments;
(2) all our capital lease obligations;
(3) all our obligations issued or assumed as the deferred purchase price
of property, all our conditional sale obligations and all our obligations
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business);
(4) all our obligations for the reimbursement of any letter of credit,
banker's acceptance, security purchase facility or similar credit
transaction;
(5) all obligations of the type referred to in clauses (1) through (4)
above of other persons for the payment of which we are responsible or liable
as obligor, guarantor or otherwise; and
(6) all obligations of the type referred to in clauses (1) through (5)
above of other persons secured by any lien on any property or asset of ours
(whether or not such obligation is assumed by us),
except for in all such cases (x) any such indebtedness that is by its
terms subordinated to or pari passu with the subordinate debt securities and
(y) any indebtedness between or among us or our affiliates, including all
other debt securities and guarantees in respect of those debt securities
issued to any trust, or trustee of such trust, partnership or other entity
affiliated with us that is, directly or indirectly, a financing vehicle of
ours (a 'Financing Entity') in connection with the issuance by such
Financing Entity of preferred securities or other securities that rank pari
passu with, or junior to, the subordinate debt securities.
Except as provided in the applicable prospectus supplement, the subordinate
indenture for a series of subordinated debt does not limit the aggregate amount
of senior indebtedness that may be issued by us. The subordinate debt securities
are effectively subordinated to all existing and future liabilities of our
subsidiaries.
By reason of such subordination, in the event of a distribution of assets
upon insolvency, some of our general creditors may recover more, ratably, than
holders of the subordinated debt securities.
A subordinate indenture may provide that the subordination provisions
thereof will not apply to money and securities held in trust pursuant to the
satisfaction and discharge and the legal defeasance provisions of the
subordinate indenture.
If this prospectus is being delivered in connection with the offering of a
series of subordinated debt securities, the accompanying prospectus supplement
or the information incorporated by reference therein will set forth the
approximate amount of senior indebtedness outstanding as of a recent date.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Except as may otherwise be provided in the prospectus supplement, each
indenture provides that we may not consolidate with or merge with or into any
person, or convey, transfer or lease all or substantially all of our assets, or
permit any person to consolidate with or merge into us, unless the following
conditions have been satisfied:
(a) either (1) we shall be the continuing person in the case of a merger or
(2) the resulting, surviving or transferee person, if other than us (the
'Successor Company'), shall be a corporation organized and existing
under the laws of the United States, any State or the District of
Columbia and shall expressly assume all our obligations under the debt
securities and the applicable indenture;
(b) immediately after giving effect to the transaction (and treating any
indebtedness that becomes an obligation of the Successor Company or any
subsidiary of ours as a result of
15
the transaction as having been incurred by the Successor Company or the
subsidiary at the time of the transaction), no default, Event of Default
or event that, after notice or lapse of time, would become an Event of
Default under the applicable indenture shall have occurred and be
continuing; and
(c) we shall have delivered to the trustee under each indenture an officers'
certificate and an opinion of counsel, each stating that the
consolidation, merger, transfer or lease complies with the provisions of
the applicable indenture.
Upon completion of any such transaction, the Successor Company resulting
from such consolidation or into which we are merged or the transferee or lessee
to which such conveyance, transfer or lease is made, will succeed to, and be
substituted for, and may exercise every right and power of, us under each
indenture, and thereafter, except in the case of a lease, the predecessor (if
still in existence) will be released from its obligations and covenants under
each indenture and all outstanding debt securities.
NOTICES
Except as otherwise provided in the indentures, notices to holders of debt
securities will be given by mail to the addresses of such holders as they appear
in the Security Register.
CONVERSION OR EXCHANGE
If and to the extent indicated in the applicable prospectus supplement, the
debt securities of any series may be convertible or exchangeable into other
securities. The specific terms on which debt securities of any series may be so
converted or exchanged will be set forth in the applicable prospectus
supplement. These terms may include provisions for conversion or exchange,
either mandatory, at the option of the holder, or at our option, in which case
the number of shares of other securities to be received by the holders of debt
securities would be calculated as of a time and in the manner stated in the
applicable prospectus supplement.
TITLE
Before due presentment of a debt security for registration of transfer, we,
the trustee and any agent of ours or the trustee may treat the person in whose
name such debt security is registered as the owner of such debt security for the
purpose of receiving payment of principal of and any premium and any interest
(other than defaulted interest or as otherwise provided in the applicable
prospectus supplement) on such debt security and for all other purposes
whatsoever, whether or not such debt security be overdue, and neither Sirius,
the trustee nor any agent of ours or the trustee shall be affected by notice to
the contrary.
REPLACEMENT OF DEBT SECURITIES
Any mutilated debt security will be replaced by us at the expense of the
holder upon surrender of such debt security to the trustee. Debt securities that
become destroyed, stolen or lost will be replaced by us at the expense of the
holder upon delivery to the trustee of the debt security or evidence of the
destruction, loss or theft thereof satisfactory to us and the trustee. In the
case of a destroyed, lost or stolen debt security, an indemnity satisfactory to
the trustee and us may be required at the expense of the holder of such debt
security before a replacement debt security will be issued.
GOVERNING LAW
The indentures and the debt securities will be governed by, and construed in
accordance with, the laws of the State of New York.
REGARDING THE TRUSTEE
We may appoint a separate trustee for any series of debt securities. As used
herein in the description of a series of debt securities, the term 'trustee'
refers to the trustee appointed with respect to the series of debt securities.
16
The indentures contain certain limitations on the right of the trustee,
should it become a creditor of ours, to obtain payment of claims in certain
cases or to realize for its own account on certain property received in respect
of any such claim as security or otherwise. The trustee will be permitted to
engage in certain other transactions; however, if it acquires any conflicting
interest and there is a default under the debt securities of any series for
which the trustee serves as trustee, the trustee must eliminate such conflict or
resign.
The trustee or its affiliate may provide certain banking and financial
services to us in the ordinary course of business.
17
DESCRIPTION OF CAPITAL STOCK
Our amended and restated certificate of incorporation provides for
authorized capital of 2,550,000,000 shares, consisting of 2,500,000,000 shares
of common stock, par value $0.001 per share, and 50,000,000 shares of preferred
stock, par value $0.001 per share.
The following description sets forth the terms and provisions of our common
stock and preferred stock. The terms of any shares of our capital stock offered
by any prospectus supplement, but not set forth below, will be described in the
prospectus supplement relating to such shares of capital stock.
COMMON STOCK
As of March 31, 2003, we had 911,666,616 shares of common stock outstanding
beneficially held by approximately 75,000 persons, and had reserved for issuance
252,821,439 shares of common stock with respect to incentive stock plans and
outstanding common stock purchase warrants.
Holders of our common stock are entitled to cast one vote for each share
held of record on all matters acted upon at any stockholder's meeting and to
receive dividends if, as and when declared by our board of directors out of
funds legally available therefor. There are no cumulative voting rights. If
there is any liquidation, dissolution or winding-up of our company, each holder
of our common stock will be entitled to participate, taking into account the
rights of any outstanding preferred stock, ratably in all of our assets
remaining after payment of liabilities. Holders of our common stock have no
preemptive or conversion rights. All outstanding shares of our common stock,
including shares of common stock issued upon the exercise of the common stock
warrants, will be fully paid and non-assessable.
Our common stock is quoted on the Nasdaq National Market under the symbol
'SIRI.'
If the minimum bid price of our common stock closes below $1.00 per share
for 30 or more consecutive trading days and we are unable to cure such defect,
Nasdaq may delist our common stock from the Nasdaq National Market. On
March 20, 2003, Nasdaq informed us that the minimum bid price of our common
stock had closed below $1.00 for more than 30 consecutive trading days and that
we had until September 16, 2003 to cure the defect. If our common stock fails to
close above $1.00 for ten consecutive days prior to September 16, 2003, we have
the right to request a hearing prior to delisting by Nasdaq. We intend to
maintain the listing of our common stock on the Nasdaq National Market and
expect to take all reasonable steps to preserve that listing.
PREFERRED STOCK
Our board of directors is authorized, subject to any limitations prescribed
by law, without further stockholder approval, to issue from time to time up to
an aggregate of 50,000,000 shares of our preferred stock, in one or more series.
Each such series of preferred stock will have such number of shares,
designations, preferences, powers, qualifications and special or relative rights
or privileges as will be determined by our board of directors, which may
include, among others, dividend rights, voting rights, redemption and sinking
fund provisions, liquidation preferences, conversion rights and preemptive
rights. The rights of the holders of our common stock will be subject to the
rights of holders of any preferred stock issued in the future. The issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of our outstanding voting stock.
In connection with our recent restructuring, all of our then outstanding
preferred stock was retired and cancelled as of March 7, 2003.
The specific terms of any preferred stock being offered will be described in
the prospectus supplement relating to that preferred stock. The following
summaries of the provisions of the preferred stock are subject to, and are
qualified in their entirety by reference to, the certificate of
18
designation relating to the particular class or series of preferred stock.
Reference is made to the prospectus supplement relating to the preferred stock
offered with that prospectus for specific terms, including:
the designation of the preferred stock;
the number of shares of the preferred stock offered, the liquidation
preference per share and the initial offering price of the preferred stock;
the dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculating these items applicable to the preferred stock;
the date from which dividends on the preferred stock will accumulate, if
applicable;
the procedures for any auction and remarketing of the preferred stock;
the provision of a sinking fund, if any, for the preferred stock;
the provision for redemption, if applicable, of the preferred stock;
any listing of the preferred stock on any securities exchange;
the terms and conditions, if applicable, upon which the preferred stock
will be convertible into or exchangeable for common stock, and whether at
our option or the option of the holder;
whether the preferred stock will rank senior or junior to or on a parity
with any other class or series of preferred stock;
the voting rights, if any, of the preferred stock;
any other specific terms, preference, rights, limitations or restrictions
of the preferred stock; and
a discussion of United States federal income tax considerations applicable
to the preferred stock.
PREFERRED STOCK PURCHASE RIGHTS
On October 22, 1997, our board of directors adopted a stockholders rights
plan and, in connection with the adoption of this plan, declared a dividend
distribution of one 'Right' for each outstanding share of common stock to
stockholders of record at the close of business on November 3, 1997 (the 'Rights
Record Date'). Except as described below, each Right entitles the registered
holder of the Right to purchase from us one-hundredth of a share of Series B
Preferred Stock, par value $0.001 per share (the 'Series B Shares'), at a
purchase price of $115.00 (the 'Purchase Price'), which may be adjusted. The
Purchase Price shall be paid in cash. The description and terms of the Rights
are set forth in a Rights Agreement, dated October 22, 1997 (the 'Rights
Agreement'), by and between us and The Bank of New York (the successor to
Continental Stock Transfer & Trust Company), as Rights Agent, and in amendments
to the Rights Agreement dated October 13, 1998, November 13, 1998, December 22,
1998, June 11, 1999, September 29, 1999, December 23, 1999, January 28, 2000,
August 7, 2000, January 8, 2002, October 2002, March 6, 2003 and March 31, 2003.
On March 6, 2003, we amended the Rights Agreement to (1) render the Rights
Agreement inapplicable to the issuance of common stock to Lehman Commercial
Paper Inc. in the restructuring transactions and to permit Lehman to acquire up
to an additional 1% of the outstanding shares of common stock, without Lehman
becoming an 'Acquiring Person' within the meaning of the Rights Agreement and
(2) permit each of OppenheimerFunds, Inc., Apollo Management, L.P., The
Blackstone Group L.P. and their respective affiliates and affiliated investment
funds to acquire up to 25% of the outstanding shares of common stock, without
becoming 'Acquiring Persons' within the meaning of the Rights Agreement.
Initially, no separate Right certificates were distributed and the Rights
were evidenced, with respect to any shares of common stock outstanding on the
Rights Record Date, by the certificates representing the shares of common stock.
Until the Rights Separation Date (as defined below), the
19
Rights will be transferred with, and only with, certificates for shares of
common stock. Until the earlier of the Rights Separation Date and the redemption
or expiration of the Rights, new certificates for shares of common stock issued
after the Rights Record Date will contain a notation incorporating the Rights
Agreement by reference. The Rights are not exercisable until the earlier to
occur of (1) 10 business days following a public announcement that a person or
group of affiliated or associated persons (an 'Acquiring Person') has acquired,
or obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding shares of common stock (except by reason of (a) exercise by this
person of stock options granted to this person by us under any of our stock
option or similar plans (b) the exercise of conversion rights contained in
specified classes of Preferred Stock, or (c) the exercise of warrants owned on
the date of the Rights Agreement, which include warrants to acquire 1,740,000
shares of common stock issued to an affiliate of Everest Capital Fund, Ltd. or
(2) 15 business days following the commencement of a tender offer or exchange
offer by any person (other than Sirius, any subsidiary of Sirius or any employee
benefit plan of Sirius) if, upon the completion of this tender offer or exchange
offer, this person or group would be the beneficial owner of 15% or more of the
outstanding shares of common stock (the earlier of these dates being called the
'Rights Separation Date'), and will expire on August 1, 2003, unless earlier
extended or redeemed by us as described below. As soon as practicable following
the Rights Separation Date, separate certificates evidencing the Rights will be
mailed to holders of record of the shares of common stock as of the close of
business on the Rights Separation Date and, thereafter, the separate Rights
certificates alone will evidence the Rights. A holder of 15% or more of the
common stock as of the date of the Rights Agreement will be excluded from the
definition of 'Acquiring Person' unless the holder increases the aggregate
percentage of its and its affiliates' beneficial ownership interest in us by an
additional 1%.
If, at any time following the Rights Separation Date, (1) we are the
surviving corporation in a merger with an Acquiring Person and our shares of
common stock are not changed or exchanged, (2) a person (other than Sirius, any
subsidiary of Sirius or any employee benefit plan of Sirius), together with its
Affiliates and Associates (as defined in the Rights Agreement), becomes an
Acquiring Person (in any manner, except by (a) the exercise of stock options
granted under our existing and future stock option plans, (b) the exercise of
conversion rights contained in specified preferred stock issues, (c) the
exercise of warrants specified in the Rights Agreement or (d) a tender offer for
any and all outstanding shares of common stock made as provided by applicable
laws, which remains open for at least 40 Business Days (as defined in the Rights
Agreement) and into which holders of 80% or more of our outstanding shares of
common stock tender their shares), (3) an Acquiring Person engages in one or
more 'self-dealing' transactions as described in the Rights Agreement or
(4) during the time when there is an Acquiring Person, an event occurs (e.g., a
reverse stock split), that results in the Acquiring Person's ownership interest
being increased by more than one percent, the Rights Agreement provides that
proper provision shall be made so that each holder of a Right will thereafter be
entitled to receive, upon the exercise of the Right at the then current exercise
price of the Right, shares of common stock (or, in some circumstances, cash,
property or other securities of ours) having a value equal to two times the
exercise price of the Right.
If, at any time following the first date of public announcement by us or an
Acquiring Person indicating that this Acquiring Person has become an Acquiring
Person (the 'Shares Acquisition Date'), (1) we consolidate or merge with another
person and we are not the surviving corporation, (2) we consolidate or merge
with another person and are the surviving corporation, but in the transaction
our shares of common stock are changed or exchanged or (3) 50% or more of our
assets or earning power is sold or transferred, the Rights Agreement provides
that proper provision shall be made so that each holder of a Right shall
thereafter have the right to receive, upon the exercise of the Right at the then
current exercise price of the Right, shares of common stock of the acquiring
company having a value equal to two times the exercise price of the Right.
Our board of directors may, at its option, at any time after the right of
the board to redeem the Rights has expired or terminated (with some exceptions),
exchange all or part of the then outstanding and exercisable Rights (other than
those held by the Acquiring Person and Affiliates
20
and Associates of the Acquiring Person) for shares of common stock at a ratio of
one share of common stock per Right, as adjusted; provided, however, that the
Right cannot be exercised once a person, together with the person's Affiliates
and Associates, becomes the beneficial owner of 50% or more of the shares of
common stock then outstanding. If our board of directors authorizes this
exchange, the Rights will immediately cease to be exercisable.
Notwithstanding any of the foregoing, following the occurrence of any of the
events described in the fourth and fifth paragraphs of this section, any Rights
that are, or (under some circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person or Affiliate or Associate of an
Acquiring Person shall immediately become null and void. The Rights Agreement
contains provisions intended to prevent the utilization of voting trusts or
similar arrangements that could have the effect of rendering ineffective or
circumventing the beneficial ownership rules described in the Rights Agreement.
The Purchase Price payable, and the number of Series B Shares or other
securities or property issuable, upon exercise of the Rights may be adjusted
from time to time to prevent dilution (1) in the event of a dividend of
Series B Shares on, or a subdivision, combination or reclassification of, the
Series B Shares, (2) upon the grant to holders of the Series B Shares of
specific rights or warrants to subscribe for Series B Shares or securities
convertible into Series B Shares at less than the current market price of the
Series B Shares or (3) upon the distribution to holders of the Series B Shares
of debt securities or assets (excluding regular quarterly cash dividends and
dividends payable in Series B Shares) or of subscription rights or warrants
(other than those referred to above).
At any time after the date of the Rights Agreement until ten Business Days
(a period that can be extended) following the Shares Acquisition Date, the board
of directors, with the concurrence of a majority of the independent directors
(those members of our board who are not officers or employees of ours or of any
subsidiary of ours and who are not Acquiring Persons or their Affiliates,
Associates, nominees or representatives, and who either (1) were members of the
board before the adoption of the Rights Plan or (2) were subsequently elected to
our board and were recommended for election or approved by a majority of the
independent directors then on our board), may redeem the Rights, in whole but
not in part, at a price of $0.01 per Right, which may be adjusted. Thereafter,
our board of directors may redeem the Rights only in specified circumstances
including in connection with specific events not involving an Acquiring Person
or an Affiliate or Associate of an Acquiring Person. In addition, our right of
redemption may be reinstated if (1) an Acquiring Person reduces its beneficial
ownership to 10% or less of the outstanding shares of common stock in a
transaction or series of transactions not involving us and (2) there is at the
time no other Acquiring Person. The Rights Agreement may also be amended, as
described below, to extend the period of redemption.
Until a Right is exercised, the holder of the Right, as such, will have no
rights as a stockholder, including the right to vote or to receive dividends.
While the distribution of the Rights will not be taxable to stockholders or to
us, stockholders may, depending upon the circumstances, recognize taxable income
if the Rights become exercisable for shares of our common stock (or other
consideration) or for shares of common stock of the Acquiring Person.
Other than those provisions relating to the principal economic terms of the
Rights or imposing limitations on the right to amend the Rights Agreement, any
of the provisions of the Rights Agreement may be amended by our board of
directors with the concurrence of a majority of the independent directors or by
special approval of our stockholders before the Rights Separation Date.
Thereafter, the period during which the Rights may be redeemed may be extended
(by action of our board of directors, with the concurrence of a majority of the
independent directors or by special approval of our stockholders), and other
provisions of the Rights Agreement may be amended by action of our board of
directors with the concurrence of a majority of the independent directors or by
special approval of our stockholders; provided, however, that (a) this amendment
will not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person) and (b) no amendment shall be made at a time
when the Rights are no
21
longer redeemable (except for the possibility of the right of redemption being
reinstated as described above).
DELAWARE ANTI-TAKEOVER LAW AND PROVISIONS IN OUR CHARTER
Section 203 of the Delaware General Corporation Law ('Section 203')
generally provides that a stockholder acquiring more than 15% of the outstanding
voting stock of a corporation subject to the statute (an 'Interested
Stockholder') but less than 85% of this stock may not engage in some types of
Business Combinations (as defined in Section 203) with the corporation for a
period of three years after the time the stockholder became an Interested
Stockholder. The prohibition of Section 203 does not apply under the following
circumstances:
before the time of the acquisition, the corporation's board of directors
approved either the Business Combination or the transaction in which the
stockholder became an Interested Stockholder; or
the Business Combination is approved by the corporation's board of
directors and authorized at a stockholders' meeting by a vote of at least
two-thirds of the corporation's outstanding voting stock not owned by the
Interested Stockholder.
Under Section 203, these restrictions will not apply to specific Business
Combinations proposed by an Interested Stockholder following the earlier of the
announcement or notification of specific extraordinary transactions involving
the corporation and a person who was not an Interested Stockholder during the
previous three years, who became an Interested Stockholder with the approval of
the corporation's board of directors or who became an Interested Stockholder at
a time when the restrictions contained in Section 203 did not apply for reasons
specified in Section 203. The above exception applies if the extraordinary
transaction is approved or not opposed by a majority of the directors who were
directors prior to the person becoming an Interested Stockholder during the
previous three years or were recommended for election or elected to succeed
those directors by a majority of those directors.
Section 203 defines the term 'Business Combination' to encompass a wide
variety of transactions with or caused by an Interested Stockholder. These
include transactions in which the Interested Stockholder receives or could
receive a benefit on other than a pro rata basis with other stockholders,
transactions with the corporation which increase the proportionate interest in
the corporation directly or indirectly owned by the Interested Stockholder or
transactions in which the Interested Stockholder receives other benefits.
The provisions of Section 203, coupled with our board of directors'
authority to issue preferred stock without further stockholder action, could
delay or frustrate the removal of incumbent directors or a change in our
control. The provisions could also discourage, impede or prevent a merger,
tender offer or proxy contest, even if the event would be favorable to the
interests of stockholders. Our stockholders, by adopting an amendment to our
amended and restated certificate of incorporation, may elect not to be governed
by Section 203 effective 12 months after the adoption. Neither our certificate
of incorporation nor our by-laws exclude us from the restrictions imposed by
Section 203.
DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of debt securities, preferred stock,
common stock or any combination thereof. Warrants may be issued independently or
together with any other securities offered in an applicable prospectus
supplement and may be attached to or separate from such securities. Warrants may
be issued under warrant agreements (each, a 'warrant agreement') to be entered
into between us and a warrant agent specified in the applicable prospectus
supplement. The warrant agent will act solely as our agent in connection with
the warrants of a particular series and will not assume any obligation or
relationship of agency or trust for or with any holders or beneficial owners of
warrants. The following sets forth certain general terms and provisions of
warrants which may be offered. Further terms of the warrants and the applicable
warrant agreement will be set forth in an applicable prospectus supplement.
22
DEBT WARRANTS
The prospectus supplement relating to a particular issue of warrants for the
purchase of debt securities ('debt warrants') will describe the terms of the
debt warrants, including the following:
the title of the debt warrants;
the offering price for the debt warrants, if any;
the aggregate number of the debt warrants;
the designation and terms of the debt securities purchasable upon exercise
of the debt warrants;
if applicable, the designation and terms of the debt securities that the
debt warrants are issued with and the number of debt warrants issued with
each debt security;
if applicable, the date from and after which the debt warrants and any debt
securities issued with them will be separately transferable;
the principal amount of debt securities that may be purchased upon exercise
of a debt warrant and the price at which the debt securities may be
purchased upon exercise (which may be payable in cash, securities or other
property);
the dates on which the right to exercise the debt warrants will commence
and expire;
if applicable, the minimum or maximum amount of the debt warrants that may
be exercised at any one time;
information with respect to book-entry procedures, if any;
the currency or currency units in which the offering price, if any, and the
exercise price are payable;
if applicable, a discussion of material United States federal income tax
considerations;
the antidilution provisions of the debt warrants, if any;
the redemption or call provisions, if any, applicable to the debt warrants;
and
any additional terms of the debt warrants, including terms, procedures, and
limitations relating to the exchange and exercise of the debt warrants.
STOCK WARRANTS
The prospectus supplement relating to a particular issue of warrants for the
purchase of common stock or preferred stock will describe the terms of the
warrants, including the following:
the title of the warrants;
the offering price for the warrants, if any;
the aggregate number of the warrants;
the designation and terms of the common stock or preferred stock that may
be purchased upon exercise of the warrants;
if applicable, the designation and terms of the securities that the
warrants are issued with and the number of warrants issued with each
security;
if applicable, the date from and after which the warrants and any
securities issued with the warrants will be separately transferable;
the number of shares of common stock or preferred stock that may be
purchased upon exercise of a warrant and the price at which such shares may
be purchased upon exercise;
the dates on which the right to exercise the warrants will commence and
expire;
if applicable, the minimum or maximum amount of the warrants that may be
exercised at any one time;
the currency or currency units in which the offering price, if any, and the
exercise price are payable;
23
if applicable, a discussion of material United States federal income tax
considerations;
the antidilution provisions of the warrants, if any;
the redemption or call provisions, if any, applicable to the warrants; and
any additional terms of the warrants, including terms, procedures, and
limitations relating to the exchange and exercise of the warrants.
EXERCISE OF WARRANTS
Each warrant will entitle the holder of warrants to purchase for cash the
amount of shares of preferred stock, shares of common stock or debt securities
at the exercise price as shall in each case be set forth in, or be determinable
as set forth in, the prospectus supplement relating to the warrants offered
thereby. Warrants may be exercised at any time up to the close of business on
the expiration date set forth in the prospectus supplement relating to the
warrants offered thereby. After the close of business on the expiration date,
unexercised warrants will become void.
Warrants may be exercised as set forth in the prospectus supplement relating
to the warrants offered thereby. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office
of the warrant agent or any other office indicated in the prospectus supplement,
we will, as soon as practicable, forward the shares of preferred stock, shares
of common stock or debt securities purchasable upon such exercise. If less than
all of the warrants represented by the warrant certificate are exercised, a new
warrant certificate will be issued for the remaining warrants.
THE UNIT OFFERING WARRANTS
On May 18, 1999, we issued units composed of our 14 1/2% Senior Secured
Notes due 2009 and warrants to purchase an aggregate of 2,368,200 shares of
common stock at a price of $26.45 per share. These warrants were issued under a
warrant agreement, dated as of May 15, 1999, between us, as issuer, and United
States Trust Company of New York, as warrant agent. The number of shares of
common stock to be issued under these warrants will be adjusted in some cases if
we issue additional shares of common stock, options, warrants or convertible
securities and in some other events. These warrants expire on May 15, 2009. As
of March 31, 2003, there were such warrants outstanding to purchase 2,425,389
shares of common stock at a price of $24.92.
THE FORD WARRANT
On October 7, 2002, we canceled an existing warrant previously issued to
Ford and issued a new warrant to Ford which entitles Ford to purchase up to
4,000,000 shares of our common stock at a purchase price of $3.00 per share.
Ford's right to exercise this warrant vests:
with respect to 200,000 shares of our common stock, on the
date the first Ford vehicle with a Sirius radio installed by
Ford or one of its dealers (each, a 'Ford Enabled Vehicle')
is activated by us for a bona fide customer;
with respect to 200,000 shares of our common stock, on the
date the first Ford Enabled Vehicle that has a
factory-installed Sirius radio is activated by us for a bona
fide customer;
with respect to 200,000 shares of our common stock, on the
date that Ford and us jointly launch a national advertising
campaign promoting our satellite radio service in Ford
vehicles;
with respect to 100,000 shares of our common stock, on each
date that a Sirius radio is first available to be ordered by
a bona fide customer as an original equipment option on a
Ford vehicle line; provided that in no event will more than
1,400,000 shares of our common stock vest and become
exercisable pursuant to this provision;
with respect to one share of our common stock, upon the
manufacture by Ford of each of the first 375,000 Ford
Enabled Vehicles;
24
with respect to 625,000 shares of our common stock, on the
date that Ford has manufactured an aggregate of 375,000 Ford
Enabled Vehicles;
with respect to 500,000 shares of our common stock, on the
date that Ford has manufactured an aggregate of 750,000 Ford
Enabled Vehicles; and
with respect to 500,000 shares of our common stock, on the
date that Ford has manufactured an aggregate of 1,500,000
Ford Enabled Vehicles.
If Ford terminates the exclusivity provisions contained in our agreement, we
may reduce by one-half the number of shares granted and the number of shares of
our common stock that vest and become exercisable under this warrant.
The number of shares of common stock to be issued under this warrant will be
adjusted in some cases if we issue stock dividends, combine stock, reorganize or
reclassify capital stock, merge, sell all of our assets and in some other
events. This warrant will expire on the earlier of October 6, 2012 and the date
of termination or expiration of the agreement, dated October 7, 2002, between us
and Ford.
We are required to give Ford notice of adjustments in the number of shares
issuable under this warrant and of extraordinary corporate events.
THE DAIMLERCHRYSLER WARRANT
On October 25, 2002, we canceled an existing warrant previously issued to
DaimlerChrysler and issued a new warrant to DaimlerChrysler which entitles
DaimlerChrysler to purchase up to 4,000,000 shares of our common stock at a
purchase price of $3.00 per share.
DaimlerChrysler's right to exercise this warrant vests:
with respect to 1,000,000 shares of common stock, on the
date that DaimlerChrysler and its affiliates have
manufactured 250,000 new vehicles containing Sirius radios
('DaimlerChrysler Enabled Vehicles');
with respect to an additional 500,000 shares of common
stock, on the date that DaimlerChrysler and its affiliates
have manufactured an aggregate of 800,000 DaimlerChrysler
Enabled Vehicles;
with respect to an additional 500,000 shares of common
stock, on the date that DaimlerChrysler and its affiliates
have manufactured an aggregate of 1,600,000 DaimlerChrysler
Enabled Vehicles;
with respect to an additional 1,000,000 shares of common
stock, on the date that DaimlerChrysler and its affiliates
have manufactured an aggregate of 2,400,000 DaimlerChrysler
Enabled Vehicles; and
with respect to an additional 1,000,000 shares of common
stock, on the date that DaimlerChrysler and its affiliates
have manufactured an aggregate of 3,200,000 DaimlerChrysler
Enabled Vehicles.
The number of shares of common stock to be issued under this warrant will be
adjusted in some cases if we issue stock dividends, combine stock, reorganize or
reclassify capital stock, merge, sell all of our assets and in some other
events. This warrant will expire on the date of termination or expiration of the
agreement, dated October 25, 2002, among us, DaimlerChrysler Corporation,
Freightliner Corporation and Mercedes-Benz USA, Inc.
We are required to give DaimlerChrysler notice of adjustments in the number
of shares issuable under this warrant and of extraordinary corporate events.
THE LEHMAN WARRANTS
We have issued to Lehman warrants to purchase up to 2,100,000 shares of our
common stock at a purchase price of $15.00 per share. All of these warrants have
vested.
525,000 of these warrants expire on December 27, 2010, 1,050,000 of these
warrants expire on March 7, 2011 and 525,000 warrants expire on April 4, 2011.
The number of shares of common
25
stock to be issued under these warrants and the exercise price of the warrants
will be adjusted in some cases if we issue stock dividends, subdivide or combine
stock, reorganize or reclassify capital stock, distribute cash dividends, issue
common stock or other securities convertible into common stock (other than in a
bona fide underwritten public offering) and in certain other events. We are also
required to give Lehman notice of adjustments in the number of shares issuable
under these warrants and of extraordinary corporate events.
THE SERIES A WARRANTS AND SERIES B WARRANTS
In connection with our recent recapitalization, we issued (i) to affiliates
of Blackstone (a) Series A warrants to purchase up to 25,296,255 shares of our
common stock at a purchase price of $1.04 per share and (b) Series B warrants to
purchase up to 16,864,169 shares of our common stock at a purchase price of
$0.92 per share and (ii) to affiliates of Apollo (a) Series A warrants to
purchase up to 27,250,013 shares of our common stock at a purchase price of
$1.04 per share and (b) Series B warrants to purchase up to 18,166,677 shares of
our common stock at a purchase price of $0.92 per share.
All of these warrants are currently exercisable and expire on March 7, 2005.
The number of shares of common stock to be issued under these warrants and the
exercise price of the warrants will be adjusted in some cases if we issue stock
dividends, subdivide or combine stock, reorganize or reclassify capital stock,
distribute cash dividends, issue common stock or other securities convertible
into common stock (other than in a bona fide underwritten public offering) and
in certain other events. We are also required to give the warrantholders notice
of adjustments in the number of shares issuable under these warrants and of
extraordinary corporate events.
PLAN OF DISTRIBUTION
We may sell the securities:
to one or more underwriters or dealers for public offering and sale by
them; and
to investors directly or through agents.
The distribution of securities may be effected from time to time in one or
more transactions at a fixed price or prices (which may be changed from time to
time), at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. Each prospectus
supplement will describe:
the method of distribution of the securities offered thereby;
the purchase price and the proceeds we will receive from the sale; and
any securities exchanges on which the securities of such series may be
listed.
In connection with the sale of the securities, underwriters, dealers or
agents may receive compensation from us or from purchasers of the securities for
whom they may act as agents, in the form of discounts, concessions or
commissions. The underwriters, dealers or agents that participate in the
distribution of the securities may be deemed to be underwriters under the
Securities Act and any discounts or commissions received by them and any profit
on the resale of the securities received by them may be deemed to be
underwriting discounts and commissions thereunder. Any such underwriter, dealer
or agent will be identified and any such compensation received from us will be
described in the applicable prospectus supplement. Any initial public offering
price and any discounts or concessions allowed or paid to dealers may be changed
from time to time.
Under the agreements that may be entered into with us, underwriters, dealers
and agents may be entitled to indemnification by us against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which the underwriters, dealers or agents may be
required to make in respect thereof.
Each underwriter, dealer and agent participating in the distribution of any
securities that are issuable in bearer form will agree that it will not offer,
sell, resell or deliver, directly or indirectly, securities in bearer form to
persons located in the United States or to United States persons
26
(other than qualifying financial institutions), in connection with the original
issuance of the securities.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with and perform services for us in the ordinary
course of business.
Certain persons participating in an offering may engage in transactions that
stabilize, maintain or otherwise affect the price of the securities, including
over-allotment, stabilizing and short-covering transactions in such securities,
the imposition of a penalty bid, and bidding for and purchasing shares of our
common stock in the open market during and after an offering.
LEGAL MATTERS
Simpson Thacher & Bartlett, New York, New York, will pass upon specific
legal matters under state law with respect to the securities. From time to time,
Simpson Thacher & Bartlett represents The Blackstone Group L.P. on various
matters in the regular course of business. Affiliates of Blackstone hold shares
of our common stock. Certain partners of Simpson Thacher & Bartlett, members of
their families, and related persons, have an indirect interest, through limited
partnerships, in less than 1% of our common stock through a fund affiliated with
Blackstone.
EXPERTS
Our audited consolidated financial statements appearing in our Annual Report
on Form 10-K as of December 31, 2002 and for the year then ended have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on authority of such firm as experts in accounting and auditing.
Our audited consolidated financial statements appearing in our Annual Report
on Form 10-K as of December 31, 2001 and for each of the two years in the period
ended December 31, 2001 have been audited by Arthur Andersen LLP, independent
public accountants, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
Section 11(a) of the Securities Act provides that if a registration
statement at the time it becomes effective contains an untrue statement of a
material fact, or omits a material fact required to be stated therein or
necessary to make the statements therein not misleading, any person acquiring a
security pursuant to such registration statement (unless it is proven that at
the time of such acquisition such person knew of such untruth or omission) may
assert a claim against, among others, an accountant who has consented to be
named as having certified any part of the registration statement or as having
prepared any report for use in connection with the registration statement.
On April 11, 2002, we dismissed Arthur Andersen LLP as our independent
auditors and appointed Ernst & Young LLP. Prior to the date of this prospectus,
the Arthur Andersen partner responsible for the audit of our most recent audited
financial statements as of and for the year ended December 31, 2001 resigned
from Arthur Andersen LLP. As a result, after reasonable efforts, we have been
unable to obtain Arthur Andersen's written consent to the incorporation by
reference into this prospectus of its audit reports with respect to our
consolidated financial statements as of December 31, 2001 and for each of the
two years in the period ended December 31, 2001. Under these circumstances,
Rule 437a under the Securities Act permits us to file this prospectus without a
written consent from Arthur Andersen LLP. However, as a result, Arthur Andersen
LLP will not have any liability under Section 11(a) of the Securities Act for
any untrue statements of a material fact contained in the consolidated financial
statements audited by Arthur Andersen LLP or any omissions of a material fact
required to be stated therein. Accordingly, you will be unable to assert a claim
against Arthur Andersen LLP under Section 11(a) of the Securities Act because it
has not consented to the incorporation by reference of its previously issued
report into this prospectus.
27
INCORPORATION BY REFERENCE
The SEC allows us to 'incorporate by reference' in this prospectus other
information we file with them, which means that we can disclose important
information to you by referring you to those documents. This prospectus
incorporates important business and financial information about us that is not
included in or delivered with this prospectus. The information we file later
with the SEC will automatically update and supersede the information included in
and incorporated by reference in this prospectus. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act until we sell all the
securities covered by this prospectus.
1. Our Annual Report on Form 10-K for the year ended December 31, 2002.
2. Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2003.
3. Our Current Reports on Form 8-K dated May 1, 2003 and May 14, 2003.
4. The description of our common stock contained in our Registration
Statement on Form 8-A filed pursuant to Section 12(b) of the Exchange Act.
We have filed each of these documents with the SEC and they are available
from the SEC's internet site and public reference rooms described under 'Where
You May Find Additional Available Information About Us' in this prospectus. You
may also request a copy of these filings, at no cost, by writing or calling us
at the following address or telephone number:
Patrick L. Donnelly
Executive Vice President, General Counsel and Secretary
Sirius Satellite Radio Inc.
1221 Avenue of the Americas, 36th Floor
New York, New York 10020
(212) 584-5100
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information.
WHERE YOU MAY FIND ADDITIONAL AVAILABLE INFORMATION ABOUT US
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any of these reports, statements
or other information at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549 or at its regional offices. You can request copies
of those documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public at the SEC's
internet site at http://www.sec.gov.
28
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
[SIRIUS LOGO]