CD RADIO INC. 
PREFERRED STOCK INVESTMENT AGREEMENT

PREFERRED STOCK INVESTMENT AGREEMENT ("AGREEMENT") dated as of October 23, 1996 between CD Radio Inc., a Delaware corporation ("CDRD"), and each entity listed as an investor on Schedule I attached to this Agreement (each individually an "INVESTOR" and collectively the "INVESTORS").

WITNESSETH:

WHEREAS, CDRD desires to sell and issue to the Investors, and the Investors wish to purchase from CDRD, up to an aggregate of 2,500,000shares of CDRD's 5% Delayed Convertible Preferred Stock having the rights, designations and preferences set forth in the Certificate of Designations of CDRD (the "CERTIFICATE OF DESIGNATIONS") in the identical form and substance of Exhibit 1 attached to this Agreement (the "PREFERRED SHARES"), on the terms and conditions set forth in this Agreement;

WHEREAS, CDRD initially desires to sell to the Investors up to 1,250,000 of the Preferred Shares ("FIRST CLOSING SHARES") in the event that it, or its subsidiary, receives notice with respect to the authority to provide satellite digital audio radio services ("SATELLITE DARS LICENSE") that either: (i) the Federal Communications Commission ("FCC") has issued an order stating that CDRD has been chosen to receive a Satellite DARS License by virtue of its having been designated a pioneer and will not need to participate in competitive bidding for such license (the "PIONEER'S PREFERENCE ORDER"); or (ii) it is the winning bidder for a Satellite DARS License at the conclusion of an auction for Satellite DARS Licenses (a "WINNING BID"), all on the terms and conditions set forth in this Agreement;

WHEREAS, CDRD will have the option to sell to the Investors a number of Preferred Shares equal to the number of First Closing Shares ("SECONDCLOSING SHARSES") after the First Closing Shares have been sold, subject to the terms and conditions set forth in this Agreement;

WHEREAS, the Preferred Shares will be convertible into shares of common stock, par value$.001, of CDRD ("COMMON SHARES") and the Investors will have registration rights with respect to such Common Shares issuable upon conversion, and the Preferred Shares will be subject to certain rights of redemption of CDRD;

NOW, THEREFORE, in consideration of the foregoing premises and the covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I 
PURCHASE AND SALE OF PREFERRED SHARES

Section 1.1 Purchase and Sale of Preferred Shares. Upon the following terms and conditions, CDRD shall issue and sell to each Investor severally, and each Investor severally shall purchase from CDRD, the number of First Closing Shares and Second Closing Shares indicated next to such Investor's name on Schedule I attached hereto.

Section 1.2 Purchase Price. The purchase price for the Preferred Shares (the "PURCHASE PRICE") shall be$25 per share; provided, however, that if any Warrants (as defined below) are issued pursuant to Section 3.2, the Purchase Price shall be allocated between the Preferred Shares and the Warrants such that the Warrants (or fraction thereof) issuable to Investors for each Preferred Share shall be deemed to have a purchase price of$0.05.

Section 1.3 The First Closing.

(a) The closing of the purchase and sale of the First Closing Shares (the "FIRST CLOSING"), shall take place at the offices of the Investors' counsel:

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