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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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OMNIPOINT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
3 BETHESDA METRO CENTER, SUITE 400
BETHESDA, MD 20814
(301) 951-2500
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
DELAWARE 4812 04-2969720
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR
ORGANIZATION)
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
(IRS EMPLOYER IDENTIFICATION NUMBER)
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DOUGLAS G. SMITH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
OMNIPOINT CORPORATION
3 BETHESDA METRO CENTER, SUITE 400
BETHESDA, MARYLAND 20814
(301) 951-2500
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE
OF AGENT FOR SERVICE)
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Copies to:
EDWIN M. MARTIN, JR., ESQUIRE
JAY G. FINKELSTEIN, ESQUIRE
JANE K. P. TAM, ESQUIRE
PIPER & MARBURY L.L.P.
1200 19TH STREET, N.W.
WASHINGTON, D.C. 20036
(202) 861-3900
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Depositary Shares each
representing 1/20 of a
share of 7% Cumulative
Convertible Preferred
Stock (liquidation
preference $50 per
share) 6,500,000 $46.75(1) $303,875,000 $89,643
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7% Cumulative Convert-
ible Preferred Stock
(liquidation prefer-
ence $1,000 per share) 325,000 N/A N/A (2)
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Common Stock, par value
$.01 per share, issua-
ble upon conversion of
the Depositary Shares
or 7% Cumulative Con-
vertible Preferred
Stock 10,445,123(3) N/A N/A (2)
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Common Stock, par value
$.01 per share, issua-
ble as dividends on
the 7% Cumulative Con-
vertible Preferred
Stock 1,000,000 $21.0(4) $21,000,000 $6,195
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TOTAL $95,838
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</TABLE>
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(1) Based on the average of the bid and asked prices on June 23, 1998,
pursuant to Rule 457(c).
(2) Pursuant to Rule 457(i), no additional registration fee is required in
connection with the registration of the Registrant's 7% Cumulative
Convertible Preferred Stock (the "Preferred Stock") or the Common Stock
issuable upon conversion of the Depositary Shares or the Preferred Stock.
(3) An indeterminate number of additional shares of Common Stock are
registered hereunder which may be issued in the event that fractional
shares of Depositary Shares or shares of the Preferred Stock are rounded
up to the nearest whole share in connection with the conversion of the
Depositary Shares or shares of the Preferred Stock.
(4) Based on the average of the high and low sales price on June 23, 1998, as
reported with Nasdaq National Market pursuant to Rule 457(c).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED JUNE 30, 1998
PROSPECTUS
, 1998
[LOGO OF OMNIPOINT (R) APPEARS HERE]
6,500,000 DEPOSITARY SHARES EACH REPRESENTING 1/20 OF A SHARE OF 7%
CUMULATIVE CONVERTIBLE PREFERRED STOCK, 325,000 SHARES OF 7% CUMULATIVE
CONVERTIBLE PREFERRED STOCK, 11,445,123 SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION OF, OR PAYABLE AS DIVIDENDS ON, THE DEPOSITARY SHARES OR THE 7%
CUMULATIVE CONVERTIBLE PREFERRED STOCK.
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This Prospectus is being used in connection with the offering from time to
time by certain holders (the "Selling Stockholders") of (i) up to 6,500,000
depositary shares (the "Depositary Shares") each representing 1/20 of a share
of the 7% Cumulative Convertible Preferred Stock, par value $0.01 per share
(the "Preferred Stock"), liquidation preference $1,000 per share of Preferred
Stock (equivalent to $50 per Depositary Share, the "Liquidation Preference"),
of Omnipoint Corporation (the "Company"), (ii) up to 325,000 shares of
Preferred Stock, and (iii) up to 11,445,123 shares of the Company's Common
Stock, $0.01 par value per share (the "Common Stock") issuable upon conversion
of, or payable as dividends on, the Depositary Shares or the Preferred Stock.
The Depositary Shares, the Preferred Stock, and the Common Stock are
collectively referred to as the "Securities."
Holders of the Depositary Shares are entitled to all proportional rights and
preferences of the Preferred Stock (including dividend, voting, conversion,
redemption and liquidation rights and preferences). The Preferred Stock are
convertible at the option of the holders thereof into shares of Common Stock,
at any time unless previously redeemed, at a conversion price of $31.115 per
Depositary Share subject to adjustment under certain circumstances. Dividends
on the Depositary Shares accrue from May 2, 2001, and holders are entitled to
receive cumulative dividends at an annual rate of 7% of the Liquidation
Preference per Depositary Share, payable quarterly in arrears on February 1,
May 1, August 1, and November 1 of each year, commencing August 1, 2001.
Dividends may, at the option of the Company, be paid in cash, by delivery of
fully paid and nonassessable shares of Common Stock, or a combination thereof.
On May 6, 1998, Initial Purchasers of the Depositary Shares (as defined)
have deposited approximately $62.8 million into an account (the "Deposit
Account"). Holders of the Depositary Shares are entitled to a quarterly cash
payment from the Deposit Account in an amount equal to $0.875 per Depositary
Share (the "Quarterly Return Amount"), commencing August 1, 1998 and
continuing until May 1, 2001. After such date, dividends will begin to
accumulate on the Depositary Shares. The Company may, prior to the date on
which any Quarterly Return Amount would otherwise be payable, deliver notice
instructing the deposit agent, The First National Bank of Maryland, (i) to
purchase from the Company, for transfer to each holder of the Depositary
Shares, in lieu of the Quarterly Return Amount, that number of whole shares of
Common Stock, determined by dividing the Quarterly Return Amount by 95% of the
Market Value (as defined) of the Common Stock as of the date of such notice,
or (ii) to defer delivery of the Quarterly Return Amount to holders of the
Depositary Shares on such quarterly payment date until the next quarterly
payment date or any subsequent payment date. However, no later than May 1,
2001 (the "Deposit Expiration Date"), any amounts remaining in the Deposit
Account, as of such date, or which have previously been deferred, will be (i)
paid to the holders of the Depositary Shares, or (ii) at the Company's option,
used to purchase from the Company for delivery to each holder of Depositary
Shares that number of whole shares of Common Stock determined by dividing each
holder's pro rata share of the balance remaining in the Deposit Account by 95%
of the Market Value of the Common Stock as of the date of the Company's
notice. Under certain circumstances, the Company may elect early termination
of the Deposit Account and commence paying dividends. See "Description of the
Preferred Stock--Deposit Account." For a discussion of Federal tax treatment
of Deposit Account and payments therefrom, see "Certain United States Federal
Income Tax Consequences."
The Depositary Shares are redeemable at any time on or after May 1, 2001 in
whole or in part, at the option of the Company, in cash, by delivery of fully
paid and nonassessable shares of Common Stock, or a combination thereof,
initially at a price of $52 per Depositary Share and thereafter at prices
declining to $50 per Depositary Share on or after May 1, 2005, plus in each
case all accumulated and unpaid dividends to the redemption date. Upon any
Change of Control (as defined), holders of the Depositary Shares will, in the
event that the Market Value at such time is less than the Conversion Price (as
defined), have a one time option to convert all of their outstanding shares
into shares of Common Stock at an adjusted conversion price equal to the
greater of (i) the Market Value as of the Change of Control Date (as defined)
and (ii) 66.67% of the Market Value as of May 1, 1998. In lieu of issuing the
shares of Common Stock issuable upon conversion in the event of a Change of
Control, the Company may, at its option, make a cash payment equal to the
Market Value of the Common Stock otherwise issuable.
The Common Stock is traded on the Nasdaq National Market under the symbol
"OMPT". On June 26, 1998, the last reported sale price of the Common Stock was
$22.6875 per share. The Depositary Shares are traded in the Private Offerings,
Resales and Trading Through Automated Linkages ("PORTAL"). On June 26, 1998,
the average of the bid and asked prices of the Depositary Shares was $47.75.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Any reports and other
information filed by the Company with the Commission may be inspected and
copied at the public reference facilities maintained in the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices in New York, 7 World Trade Center, 13th
Floor, New York, NY 10048, and in Chicago, 500 West Madison Street, Suite
1400, Chicago, IL 60661. Copies of such material may also be obtained by mail
from the Public Reference Section of the Commission at the Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission also maintains a web site that contains reports, proxy statements
and other information regarding registrants, including the Company, that file
such information electronically with the Commission. The address of the
Commission's web site is http://www.sec.gov. The Company's Common Stock is
quoted on the Nasdaq National Market ("OMPT"), and such reports, proxy
statements and other information concerning the Company can also be inspected
at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C.
20006.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all exhibits, schedules, amendments, and supplements
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act") with respect to the Securities offered by this
Prospectus. This Prospectus, which forms a part of the Registration Statement,
does not contain all the information set forth in the Registration Statement
(certain parts of which have been omitted in accordance with the rules and
regulations of the Commission). For further information with respect to the
Company and the Securities, reference is made to the Registration Statement.
Statements contained in this Prospectus as to the contents of any contract,
agreement, or other document are not necessarily complete, and in each
instance, reference is made to the copy of the document filed as an exhibit to
the Registration Statement, each such statement being qualified in all
respects by reference to such exhibit. The Registration Statement may be
inspected and copied at the public reference facilities at the Commission's
offices at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the Commission's regional offices in Chicago and New York. Copies of all or
any part thereof may be obtained from such office upon payment of prescribed
fees.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(1) The Company's Quarterly Report on Form 10-Q (File No.: 0-27442) for its
fiscal quarter ended March 31, 1998 as filed with the Commission on May
15, 1998.
(2) The Company's Annual Report on Form 10-K for its fiscal year ended
December 31, 1997 as filed with the Commission on March 31, 1998.
(3) The Company's definitive Proxy Statement filed with the Commission on May
1, 1998 for the 1998 Annual Meeting of Stockholders held on May 27, 1998.
(4) The Company's Current Report on Form 8-K filed with the Commission on
March 26, 1998.
(5) The description of Common Stock contained in the Company's Registration
Statement on Form S-1, filed May 14, 1996.
(6) All documents subsequently filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to
the termination of this offering shall be deemed to be incorporated by
reference in this Prospectus. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein, modified or supersedes such
statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
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The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any or all of the documents
that have been incorporated by reference herein, other than exhibits to such
documents (unless such exhibits are specifically incorporated by reference
therein). Requests for such copies should be directed to: Investor Relations,
Omnipoint Corporation, 3 Bethesda Metro Center, Suite 400, Bethesda, MD 20814,
telephone number (301) 951-2500.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS: ALL STATEMENTS OTHER THAN
STATEMENTS OF HISTORICAL FACT CONTAINED IN THIS PROSPECTUS INCLUDING WITHOUT
LIMITATION CERTAIN STATEMENTS IN "THE COMPANY" CONCERNING THE COMPANY'S
BUSINESS AND FINANCIAL PLANS, RESULTS OF OPERATIONS, AND OTHER MATTERS, ARE
FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS
GENERALLY ARE ACCOMPANIED BY WORDS SUCH AS "ANTICIPATE," "BELIEVE," "ESTIMATE"
OR "EXPECT" OR SIMILAR STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE
EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, NO
ASSURANCE CAN BE GIVEN THAT SUCH EXPECTATIONS WILL PROVE CORRECT. FACTORS THAT
COULD CAUSE THE COMPANY'S RESULTS TO DIFFER MATERIALLY FROM THE RESULTS
DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS ARE DISCLOSED IN THIS PROSPECTUS
AND UNDER "RISK FACTORS." ALL FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS
ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS IN THIS
PARAGRAPH.
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RISK FACTORS
In addition to the other information contained and incorporated by reference
in this Prospectus, the following risk factors should be considered carefully
in evaluating the Company and its business before purchasing the Securities.
This Prospectus contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act,
including, without limitation, statements as to expectations, beliefs and
strategies regarding the future, which involve risks and uncertainties. Actual
results could differ materially from those projected or contemplated in the
forward-looking statements or historical results due to a number of factors,
including, among other things, the risk factors set forth below and those
incorporated by reference in this Prospectus.
LIMITED OPERATING HISTORY; PAST AND CURRENT LOSSES; UNCERTAINTY OF FUTURE
OPERATING RESULTS
The Company was founded in 1987 and has incurred cumulative net losses from
inception through March 31, 1998 of approximately $632.2 million and expects
such losses to continue for several years. The continuation of losses will
depend in part on the timing and amount of revenues generated from the
operation of the Company's networks and sales of the Company's equipment, as
well as other factors. The Company is also in the design, engineering and
construction phase for the buildout of certain major markets that are not yet
providing commercial service. Due to the Company's limited operating history
with respect to sale of PCS services, no assurance can be given regarding its
future performance.
The Company believes that its future operating results over both the short
and long term will be subject to annual and quarterly fluctuations due to
several factors, some of which are outside the control of the Company. These
factors include the cost of buildout of the networks (including any
unanticipated costs associated therewith), fluctuating market demand for the
Company's services and equipment, pricing, competitive services, delays in the
introduction of the Company's equipment, competitive equipment introductions,
changes in the regulatory environment, the cost and availability of equipment
components and general economic conditions.
EMERGING MARKET FOR PCS SERVICE
The Company's success in the implementation and operation of its networks is
subject to certain factors beyond the Company's control. These factors
include, without limitation, changes in the general and local economic
conditions, availability of equipment, changes in communication service rates
charged by others, changes in the supply and demand for PCS and the commercial
viability of PCS systems as a result of competition from wireline and wireless
operators in the same geographic region, changes in the federal and state
regulatory schemes affecting the operation of PCS systems (including the
enactment of new statutes and the promulgation of changes in the
interpretation or enforcement of existing or new rules and regulations) and
changes in technology that have the potential of rendering obsolete the
Company's GSM system as well as other systems planned for deployment. In
addition, the extent of the potential demand for PCS in the Company's markets
cannot be estimated with any degree of certainty. There can be no assurance
that one or more of these factors will not have an adverse effect on the
Company's financial condition and results of operations.
CONTINUED BUILDOUT OF OMNIPOINT PCS MARKETS
The Company anticipates that it will take several years to substantially
complete the Company's targeted buildout in its PCS markets. The buildout of
the network in each market is subject to successful completion of network
design, site and facility acquisitions, purchase and installation of network
equipment, network testing and satisfactory accommodation of microwave users
currently using the Company's spectrum. Delays in any of these areas might
have a material and adverse effect on the Company's ability to complete the
buildout in a timely manner. Failure or delay to complete the buildout of the
network in the surrounding areas might also have a material and adverse effect
on the Company's ability to market its PCS services in the licensed areas.
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The capital cost of completing the Company's buildout could vary materially
from the Company's current estimates. If adequate funds are not available from
its existing capital resources, the Company may be required to curtail its
buildout or to obtain additional funds on terms less favorable than those
contained in the Company's current arrangements.
To secure a sufficient amount of unencumbered spectrum to operate its PCS
system efficiently, the Company must negotiate with incumbent microwave
operators to relocate their operations. There can be no assurance that the
Company will be successful in reaching timely agreements with the existing
microwave licensees or that such agreements will be on terms favorable to the
Company. Delay in the relocation of such licenses may adversely affect the
Company's ability to commence timely commercial operations in the markets
where service has yet to be launched.
HIGH LEVERAGE; ABILITY TO SERVICE DEBT; RESTRICTIVE COVENANTS
The Company is, and will continue to be, highly leveraged and subject to
significant financial restrictions and limitations. As of March 31, 1998, the
Company's total long-term indebtedness was $1,908.9 million. There can be no
assurance that the Company will generate sufficient cash flow from operating
activities and other sources to meet its working capital requirements and debt
service obligations.
The degree to which the Company is leveraged could have important
consequences to the holders of the Preferred Stock, including but not limited
to, the following: (i) increasing the Company's vulnerability to adverse
changes in market conditions; (ii) limiting the Company's ability to obtain
additional financing for working capital, capital expenditures, acquisitions,
general corporate purposes, including the buildout of the networks; (iii)
requiring a substantial portion of the Company's cash flow from operations to
be dedicated to debt service requirements, thereby reducing the funds
available for operations and future business opportunities; and (iv)
increasing the Company's exposure to increases in interest rates given that
certain of the Company's borrowings are at variable rates of interest.
Further, the Company may under certain circumstances be obligated to offer to
repurchase its outstanding debt securities prior to maturity and there can be
no assurance that the Company will have the financial resources necessary or
otherwise be able to repurchase these securities in such circumstances.
DEPENDENCE UPON CASH FLOW FROM SUBSIDIARIES; SUBORDINATION TO SUBSIDIARY
LIABILITIES
The Company conducts most of its operations through its direct and indirect
subsidiaries. The Company holds only its investments in and advances to its
subsidiaries and is dependent upon receipt of sufficient funds from its
subsidiaries to meet its own payment obligations. The ability of the Company
and holders of the Preferred Stock to benefit in the distribution of assets of
any of the Company's subsidiaries upon any liquidation of any such subsidiary
will be subject to the prior claims of the subsidiary's creditors and, to the
extent that such subsidiary is not directly owned by the Company, to the prior
claims of any other persons directly or indirectly owning such subsidiary. The
ability of the Company to pay cash dividends on the Preferred Stock will be
dependent upon the cash flows of its subsidiaries and the payment of funds by
those subsidiaries to the Company in the form of repayment of loans, dividends
or otherwise.
In light of the Company's strategy of continued growth, and related capital
requirements, the Company and its subsidiaries may incur substantial
indebtedness in the future. A substantial portion of the Company's and its
subsidiaries' existing and future indebtedness has been secured and is
expected to be secured by liens on the assets of the Company's subsidiaries
and the shares of the Company's subsidiaries. In addition, the ability of the
Company and holders of the Preferred Stock to benefit from distributions of
assets of the Company's subsidiaries may be limited to the extent that
distributions are restricted under subsidiary loan agreements, and that the
outstanding shares of any of its subsidiaries are pledged to secure other debt
of the Company or its subsidiaries. The principal fixed assets of the
Company's subsidiaries are highly specialized for the PCS industry and, taken
individually, can be expected to have limited marketability. Consequently, in
the event that secured creditors seek to realize on the collateral securing
debt of the Company's subsidiaries, these creditors would be likely to
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seek to sell the business as a going concern (possibly through a sale of
pledged shares of subsidiaries), either in its entirety, or by franchise or
other business unit, in order to maximize the proceeds realized.
Therefore, for the reasons described above, there can be no assurance that
the Company will be able to receive any cash flow from its subsidiaries in a
timely manner or at all.
SIGNIFICANT CAPITAL REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FINANCING
The Company's highest priority is to continue to build out its markets in
the Northeast, southeast Florida, and the Midwest. The Company believes that
cash and cash equivalents on hand, anticipated revenues, vendor financing, and
current and potential strategic partnerships, together with the proceeds from
the sale of the Depository Shares in May 1998, will be adequate to fund its
operations and its network buildout through the end of 1998. There can be no
assurance, however, that the Company will not require additional financing
during such period to fund its operation. To the extent that the buildout of
the networks is faster than expected, the maintenance and replacement costs of
equipment (as a result of malfunction or obsolescence) are greater than
anticipated or the Company takes advantage of other opportunities that require
a significant investment of capital, the Company may require additional
funding to implement its business strategy. The Company's future capital
requirements will also depend on many other factors, including the successful
development of new products, the extent and timing of acceptance of the
Company's equipment in the market, requirements to maintain adequate
manufacturing facilities, the progress of the Company's research and
development efforts, expansion of the Company's marketing and sales efforts,
the Company's results of operations and the status of its competitive
products. The Company believes that it will require substantial amounts of
additional capital over the next several years. No assurance can be given that
the Company will be able to obtain additional financing on acceptable terms
and in adequate amounts to accomplish its objectives, if at all.
CONTROL GROUP REQUIREMENT
The Company qualified as an Entrepreneur and a Small Business, as such terms
are defined by the FCC rules and regulations, for participation in the
Entrepreneurs' Band auction and payment for its Entrepreneurs' Band licenses.
To retain its Entrepreneurs' Band licenses and its favorable government
financing, the Company must maintain such status (the "Designated Entity
Status"). It may also assign or transfer its licenses to another entity
qualifying for Designated Entity Status, subject to prior FCC approval. To
maintain all of the benefits of its Designated Entity Status, the Company's
control group and qualifying investors must retain certain minimum stock
ownership and voting stock of the Company as well as de jure and de facto
control of the Company for 10 years from the date of grant of its C Block and
F Block PCS licenses. The FCC has indicated that it will not rely solely on de
jure control in determining whether the control group and its qualifying
investors are truly in control of an entity. Even if the control group and the
qualifying investors hold the requisite percentages of equity and voting
control, the FCC may still engage in a fact-specific inquiry to determine
whether actual control exists.
The Company believes it has taken steps to comply with and prevent violation
of such regulatory requirements, but there can be no assurance that the
Company's ownership and control structure will not be challenged. If such
challenges are successful, the Company could be required to restructure or
recapitalize, and possibly forfeit its C Block and F Block PCS licenses.
Failure by the Company to maintain its Designated Entity Status could result
in the imposition of less favorable schedules for or the acceleration of
payments due under the government financing or revocation of its licenses. The
inability of non-control group stockholders to gain control of the Company
could negatively impact the Company's ability to attract additional capital.
This control requirement may also discourage certain transactions involving an
actual or potential change of control of the Company.
GENERAL OPERATING RISKS
The Company's results of operations are dependent upon the ability to
attract and maintain subscribers to its PCS service, and the Company's ability
to control overall operating expenses. The ability to attract and
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retain subscribers is dependent on, among other things, the general economic
conditions in each of its PCS markets, the relative popularity of PCS service,
the demographic characteristics of the potential subscribers to PCS service,
the technical attractiveness to customers of the equipment and service of PCS
systems, the capabilities of the billing system, the ability of the customer
care operations to satisfy the customers' demands, the ability to successfully
attract prepaid subscribers who would otherwise not use PCS service, the
performance of resellers, the activities of competitors, the use of incentives
to attract customers and other factors which may be outside of the Company's
control.
COMPETITION--SERVICE BUSINESS
PCS is a relatively new technology and service. Currently, cellular
communication is the closest comparable service to PCS available. In
development of the PCS market, the Company and other PCS licensees will be
competing with the more established cellular industry, as well as other
wireless communications technologies, existing and future, with similar
applications. In order to gain early market penetration and compensate for
initially limited network footprints, PCS operators typically have been
aggressive in terms of pricing their service. PCS providers have also
attracted subscribers by not requiring subscribers to sign minimum service
contracts and offering lower per minute incoming calling rates. Many of the
Company's PCS and cellular telephone competitors, including joint ventures
involving some of the nation's largest regional and long distance telephone
carriers, have substantially greater access to capital than the Company,
substantially greater technical, marketing, sales and distribution resources
than those of the Company and significantly greater experience than the
Company in providing wireless services.
The success of the Company's PCS service business will depend upon its
ability to compete with cellular operators, other PCS licensees and potential
future wireless communications providers. For example, Bell Atlantic and AT&T
Wireless currently provide cellular services in the New York MSA and
surrounding areas. Sprint PCS was the winner of the B Block New York MTA PCS
license. NextWave was the successful bidder in the Entrepreneurs' Band auction
for the New York BTA PCS license but has not yet begun commercial operation.
The Company's other networks will face similar PCS, cellular and Enhanced
Specialized Mobile Radio ("ESMR") competition including competition in certain
BTAs from AT&T Wireless, Sprint PCS, Cellular One, COMCAST, Metrophone,
Nextel, and PrimeCo, among others. In the future, PCS could potentially
compete more directly with traditional landline telephone service providers
and other technologies including mobile satellite systems.
COMPETITION--TECHNOLOGY BUSINESS
Competition in the wireless telecommunications equipment industry is
intense. The industry consists of major domestic and international companies,
including those companies currently providing equipment to cellular providers,
most of which have substantially greater financial, technical, marketing,
sales, manufacturing, distribution and other resources than those of the
Company. Given the rapid advances in the wireless telecommunications industry,
there can be no assurance that the Company will be able to develop, produce or
market products that will be competitive in the marketplace.
EVOLVING REGULATORY ENVIRONMENT
The licensing, construction, operation, sale and interconnection
arrangements of wireless telecommunications systems are regulated to varying
degrees by the FCC and, depending on the jurisdiction, also may be regulated
by state regulatory agencies. State agencies having jurisdiction over the
Company's license areas have generally not sought to regulate PCS to date, but
do regulate interconnection arrangements for PCS with landline networks. There
can be no assurance that either the FCC or such state agencies will not adopt
6
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regulations or take other actions that would adversely affect the business of
the Company. In addition, FCC licenses to provide cellular and PCS services
are subject to renewal and revocation. The New York MTA license will expire in
December 2004 and Entrepreneurs' Band C Block PCS licenses will expire in
2006. The D, E and F Block licenses will expire in 2007. There may be
petitions to deny renewal of the Company's PCS licenses, and there can be no
assurance that the licenses will be renewed.
In addition, the FCC has placed certain conditions on Omnipoint's New York
MTA License. Some of these conditions will also apply to the Company's other
licenses. The conditions include the requirement that the Company construct
network facilities that offer coverage to at least one-third of the population
in the particular MTA or C Block BTA service area within five years of the
grant of the license (the "Five-Year Buildout Requirement"), to at least two-
thirds of the population within 10 years (the "10-Year Buildout Requirement")
and to one-quarter of the population of D, E, and F Block BTA service areas
within five years. Violations of any of these conditions could result in
license revocations, forfeitures or fines.
In the case of the New York MTA License, the Five-Year Buildout Requirement
must be met by December 1999 and the 10-Year Buildout Requirement by December
2004. The Company believes it has already achieved the Five-Year Buildout
Requirement in its NY MTA as well as the Five-Year Buildout Requirement in the
Philadelphia, Atlantic City and Wichita BTAs. Licensees that fail to meet
their respective coverage requirements may be subject to forfeiture of the
license.
The Communications Act of 1934, as amended (the "Communication Act")
requires the FCC's prior approval of the assignment or transfer of control of
a PCS license. Furthermore, the FCC has established transfer disclosure
requirements that require licensees who transfer control of or assign a PCS
license within the first three years to file associated contracts for sale,
option agreements, management agreements or other documents disclosing the
total consideration that the applicant would receive in return for the
transfer or assignment of its license. Non-controlling interests in an entity
that holds a PCS license or PCS system generally may be bought or sold without
prior FCC approval.
The Entrepreneurs' Band licensees are prohibited from voluntarily assigning
or transferring control of their licenses for five years after grant date
except to assignees or transferees that satisfy the financial criteria
established for the Entrepreneurs' Band. Any transfers or assignments during
the 10-year initial license term are subject to unjust enrichment penalties
including the forfeiture of any bidding credits and the acceleration of any
installment payment plans if the assignee or transferee does not qualify for
the same benefits. In addition, licensees must maintain their Entrepreneurs'
Band eligibility for five years from the date of initial license grant. In
that regard, however, increased gross revenues, increased total assets from
non-attributable equity investments, debt financing, and revenue from
operations, business development or expanded service are not considered by the
FCC. In addition, to maintain all of the benefits of its Designated Entity
Status, the Company's control group and qualifying investors must retain
certain minimum stock ownership and voting stock of the Company and meet
certain other criteria. The FCC has announced that it may conduct audits to
ensure compliance with all license conditions.
On June 8, 1998, the Company exercised certain options offered by the FCC in
order to reduce its debt with respect to its C Block licenses. The Company
notes that these options may be affected by further reconsideration of the
order by the FCC, litigation regarding the order, or other government actions.
Accordingly, there can be no assurance that the Company will be able to
realize all the assumed benefits from its elections.
The New York MTA License contains a condition that requires the Company to
construct a PCS system that "substantially uses" the design and technology
upon which the Pioneer's Preference award was based. The condition expires
upon the system providing coverage for one-third of the population of the MTA.
The FCC has never specifically defined the phrase "substantial use." In
January 1996, Wireless Communications Council ("WCC"), a trade association
with only one disclosed member, who is a proponent of IS-95 CDMA technology,
filed a petition with the FCC seeking clarification of the phrase. In August
1996, the FCC denied the petition
7
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noting that (a) using tests required by federal court, WCC lacked standing, (b)
the petition was premature because the Company's compliance with the five-year
buildout condition should not be evaluated until December 1999, and (c)
compliance with the condition would involve consideration of several complex
factors. Although there can be no assurance as to whether or how the FCC will
in the future construe the phrase "substantial use," the Company believes, on
the basis of prior FCC pronouncements, that its buildout plan in connection
with the New York MTA will satisfy the "substantial use" condition. None of the
Company's other licenses contain a similar condition.
The PCS industry is subject to continually evolving regulation. There are a
number of issues on which various parties have or may in the future suggest
regulation. These include the effect of cellular and digital wireless telephony
on hearing aids, electromagnetic interference and cancer, as well as
interference between types of wireless systems. As new regulations are
promulgated on these subjects or other subjects, the Company may be required to
modify its business plans or operations in order to comply with any such
regulations. There can be no assurance that the Company will be able to do so
in a cost effective manner, if at all. See "--Radio Frequency Emission
Concerns; Medical Device Interference."
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent upon the technical and management skills of
its key employees, especially Douglas G. Smith, Chairman and CEO, George F.
Schmitt, President of OCI and Executive Vice President of the Company, and
Kjell S. Andersson, President of Omnipoint Technology Inc. and Executive Vice
President of the Company. The Company has an employment agreement with each of
Messrs. Schmitt and Andersson, but not with Mr. Smith. The loss of the services
of any key employee could adversely affect the Company's financial condition
and results of operations. There can be no assurance that the Company will be
successful in retaining its key employees or that it can attract or retain
additional skilled personnel. The Company maintains key man life insurance on
the lives of Messrs. Smith, Schmitt and Andersson.
The Company's growth causes a significant strain on its management,
operational and financial resources. The Company's ability to manage its growth
effectively will require it to continue to implement and improve its
operational and financial systems. The Company's success also depends in large
part on a limited number of key technical, marketing and sales employees and on
the Company's ability to continue to attract and retain additional highly
talented personnel. Competition for qualified personnel in the PCS equipment
and service industries is intense. The failure of the Company's management team
to effectively manage growth could have a materially adverse impact on the
Company's financial condition and results of operations.
RADIO FREQUENCY EMISSION CONCERNS; MEDICAL DEVICE INTERFERENCE
Media reports have suggested that certain radio frequency ("RF") emissions
from wireless handsets may be linked to various health concerns, including
cancer, and may interfere with various electronic medical devices, including
hearing aids and pacemakers. Concerns over RF emissions may have the effect of
discouraging the use of wireless handsets, which could have an adverse effect
on the Company's results of operations. In 1996, the FCC adopted rules which
update the guidelines and methods it uses for evaluating RF emissions from
radio equipment, including wireless handsets. While the adopted rules impose
more restrictive standards on RF emissions from lower power devices such as
wireless handsets, it is believed that all wireless handsets to be marketed and
to be used by the Company's subscribers, comply with such standards.
Certain interest groups have requested that the FCC investigate claims that
the GSM technology poses health concerns and causes interference with hearing
aids and other medical devices. The Center for the Study of Electromagnetic
Compatibility at the University of Oklahoma, which was founded in 1994 with
funds from the wireless industry, is studying this issue. In addition, the
Personal Communications Industry Association ("PCIA") announced in 1995 that it
was undertaking an industry-wide study to gather information on possible PCS
interference with medical devices for all PCS standards. There can be no
assurance that the findings of such studies or any governmental regulations
that may result therefrom will not have an adverse effect on the Company's
business.
8
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UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS
The Company's technology business relies on a combination of patents,
trademarks, and nondisclosures and development agreements in order to
establish and protect its proprietary rights. The Company has filed and
intends to continue to file applications as appropriate for patents covering
its technology and products. There can be no assurance that additional patents
will be issued, that the existing patents and such additional patents allowed
will be sufficiently broad to protect the Company's technology or that the
confidentiality agreements and other methods on which the Company relies to
protect its trade secrets and proprietary information will be adequate. As of
March 31, 1998, the Company has received 38 U.S. patents and one foreign
patent on its technology, has 20 U.S. patent applications which have been
allowed, and has 45 U.S. and 131 foreign patent applications pending. The
issued patents will expire between 2009 and 2015. In addition, there can be no
assurance that any patents issued to the Company will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will
provide proprietary protection to the Company. Litigation to defend and
enforce the Company's intellectual property rights could result in substantial
costs and diversion of resources and could have a materially adverse effect on
the Company's financial condition and results of operations regardless of the
final outcome of such litigation. Despite the Company's efforts to safeguard
and maintain its proprietary rights, there can be no assurance that the
Company will be successful in doing so or that the Company's competitors will
not independently develop or patent technologies that are substantially
equivalent or superior to the Company's technologies.
If existing or future patents containing broad claims are upheld by the
courts, the holders of such patents might be in a position to require
companies to obtain licenses. There can be no assurances that licenses which
might be required for the Company's products would be available on reasonable
terms, if at all. To the extent that licenses are unavailable, or not
available on acceptable terms, no assurance can be made that the failure to
obtain a license would not adversely affect the Company.
EFFECT OF CERTAIN CHARTER PROVISIONS AND STATUTORY PROVISIONS
Under Delaware law, dividends on capital stock may only be paid from
"surplus" or if there is no surplus, from the corporation's net profits for
the then-current or the preceding fiscal year. In addition, a corporation may
repurchase or redeem shares of capital stock only if it has sufficient funds
legally available to effect such repurchase or redemption, so that the
corporation's capital is not "impaired" by such repurchase or redemption. Any
repurchase or redemption of capital stock requiring more than the amount of
"surplus" would result in an impairment of capital under Delaware law. The
Company does not anticipate having net profits for the foreseeable future and
its ability to pay cash dividends on and to redeem shares of Preferred Stock
will require the availability of adequate "surplus," which is defined as the
excess, if any, of the Company's net assets (total assets less total
liabilities) over its capital (generally the par value of its issued capital
stock). As a result, there can be no assurance that adequate surplus will be
available to pay cash dividends on or to acquire shares of Preferred Stock,
including upon a Change of Control.
Further, certain provisions of the Company's Amended and Restated
Certificate of Incorporation and Bylaws and of Delaware law could delay or
make more difficult a merger, tender offer or proxy contest involving the
Company. The Company is subject to the anti-takeover provisions of Section 203
of the Delaware General Corporation Law. In general, the statute prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless
the business combination is approved in a prescribed manner. See "Description
of the Preferred Stock."
POSSIBLE VOLATILITY OF STOCK PRICE
There may be significant volatility in the market price for the Common
Stock. Quarterly operating results of the Company, changes in general
conditions of the economy, the financial markets, competition and changes in
the number of subscribers, regulatory changes, and delay or failure of
buildout of networks, could cause the market price of the Common Stock and the
Preferred Stock to fluctuate substantially. In addition, price and volume
fluctuations in the stock markets may affect the market price of the Common
Stock and the Preferred Stock for reasons unrelated to the Company's operating
performance.
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ABSENCE OF PUBLIC MARKET FOR THE DEPOSITARY SHARES
The Depositary Shares and the Preferred Stock were issued in May 1998 to a
small number of institutional buyers. The Depositary Shares issued in reliance
on Rule 144A of the Securities Act are now being traded on PORTAL. The
Registration Statement of which this Prospectus forms a part is filed pursuant
to a certain Registration Agreement, which does not obligate the Company to
keep the Registration Statement effective two years after the date when the
Registration Statement is declared effective by the Commission or, if earlier,
the date when all the Securities covered by the Registration Statement have
been sold pursuant to the Registration Statement or may be resold without
registration by persons that are not affiliates of the Company pursuant to
Rule 144(k) of the Securities Act. The Company does not expect that there will
be any trading market for the Preferred Stock except as represented by the
Depositary Shares. Although the Initial Purchasers of the Depositary Shares
have informed the Company that they intend to make a market in the Depositary
Shares, they are not obligated to do so and any such market-making activities
may be discontinued at any time without notice. There can be no assurance as
to (i) the liquidity of any such market that may develop, (ii) the ability of
the holders of the Depositary Shares to sell their Depositary Shares, or (iii)
the price at which the holders of the Depositary Shares to sell their
Depositary Shares. If such a market were to develop, the Depositary Shares
could trade at prices that may be higher or lower that their purchase price,
depending on many factors, including prevailing interest rates, the market for
similar securities and the financial performance of the Company. Accordingly,
there can be no assurance as to the developmetn or liquidity of the trading
market for the Depositary Shares and the Preferred Stock.
LIMITATIONS ON ABILITY TO PAY DIVIDENDS; RANKING
The Company has never paid or declared any cash dividends on its Common
Stock and does not expect to pay cash dividends on its Common Stock in the
foreseeable future. The Company is subject to certain restrictive covenants
with respect to its various debt obligations which restrict the ability of the
Company to pay dividends on its capital stock, either in cash or in stock,
except, in certain circumstances, upon meeting certain threshold standards
with respect to the Company's leverage ratio, which the Company does not
currently meet. Although (i) certain of the debt obligations containing such
restrictions will mature and, it is anticipated, be repaid prior to May 1,
2001, and (ii) the Company will use its best efforts to obtain amendments to
the remaining debt obligations to facilitate the payment of dividends on the
Preferred Stock, there can be no assurances that the maturing debt obligations
will be repaid, that the requested amendments will be obtained, or that
sufficient improvement in the leverage ratio will be realized so that the
Company will be permitted to pay dividends on the Preferred Stock. If the
Company's debt obligations preclude the payment of dividends on the Preferred
Stock for a period of six consecutive quarters, the holders of the Preferred
Stock will be entitled to vote as a class to elect two directors to the
Company's board of directors. See "Description of the Preferred Stock--
Dividends."
While any shares of Preferred Stock are outstanding, the Company may not
authorize, create or increase the authorized amount of any class or series of
stock that ranks senior to the Preferred Stock with respect to the payment of
dividends or amounts upon liquidation, dissolution or winding up without the
consent of the holders of 66 2/3% of the outstanding shares of Preferred
Stock. However, the Company may create additional classes of stock, increase
the authorized number of shares of preferred stock or issue series of
preferred stock ranking on a parity with the Preferred Stock with respect, in
each case, to the payment of dividends and amounts upon liquidation,
dissolution and winding up without the consent of any holder of Preferred
Stock. See "Description of the Preferred Stock--Voting Rights."
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THE COMPANY
As used herein, unless otherwise indicated, the terms "Company" and
"Omnipoint" refer to Omnipoint Corporation and its subsidiaries, and "OCI"
refers to Omnipoint Communications Inc. The term population equivalents
("POPs") means the Paul Kagan Associates 1995 PCS Atlas & Databook estimate of
the 1995 population of a particular Major Trading Area ("MTA") or Basic
Trading Area ("BTA") or the total U.S.
Omnipoint is a leader in commercializing personal communications services
("PCS"). Omnipoint has licenses to provide such services in areas covering
approximately 96.5 million POPs, of which approximately 60% are located in a
contiguous region of the northeast U.S. from Maine to Virginia. In addition,
Omnipoint has licenses in southeast Florida and the Midwest. As of March 31,
1998, Omnipoint marketed wireless communications services to over 25 million
POPs covered by networks throughout the northeast region of the U.S.,
primarily in the metropolitan areas of New York, Boston, Philadelphia and
Providence, and in the greater Miami area. The Company has under construction
an additional 25 million POPs that would bring planned coverage by late 1998
or early 1999 to approximately 50 million POPs. Based on POPs, Omnipoint is
the fourth largest PCS licensee in the U.S., and its licenses cover six of the
top 12 and nine of the top 20 cities in the U.S. In total, Omnipoint has
licenses for 23 of the top 50 BTAs. The Company currently has over 200,000
subscribers.
Omnipoint was incorporated in Delaware in June 1987, to design, develop,
manufacture and market wireless digital communications products and services.
From inception in 1987 to 1992, Omnipoint developed several working prototypes
for various wireless voice, data and other digital communication transmission
projects. Omnipoint's success in developing its proprietary technology for the
first digital PCS system at 1.9 GHz during 1991 and 1992 was instrumental in
the Federal Communications Commission ("FCC") awarding Omnipoint one of three
Pioneer's Preferences in 1993. One Omnipoint system was officially designated
as IS-661 by the Joint Technical Committee on Wireless Access. As a result of
the Pioneer's Preference, the FCC issued to Omnipoint in December 1994 a 30
MHz "Pioneer's Preference" PCS license to provide PCS services in the New York
MTA (the "New York MTA License"), which is the largest MTA in the U.S. with
approximately 27 million POPs.
In September 1996, the FCC granted Omnipoint 18 Entrepreneurs' Band C Block
PCS licenses, which cover approximately 13.3 million POPs, including
Philadelphia and Atlantic City. In January 1997, Omnipoint won 109 licenses in
the D and E Block and the Entrepreneurs' Band F Block auctions. These licenses
cover approximately 76.6 million POPs (of which 56.4 million do not overlap
with previously acquired licenses), including Detroit, Washington, D.C.,
Boston, and Miami, each of which is among the twelve largest markets in the
U.S. Omnipoint also won a license for an additional 10 MHz of frequency in the
New York BTA, making Omnipoint the only 40 MHz license holder in New York.
Also, in 1997, Omnipoint became the first PCS operator in the U.S. to launch
international roaming and as of March 31, 1998, had signed international
roaming agreements with 74 PCS service providers in 46 countries.
Omnipoint Communications Inc., an indirect 95.6% owned subsidiary of
Omnipoint Corporation, has committed to pay $347.5 million for the New York
MTA License. It is required to pay the principal balance and interest thereon
during the period April 1998 to March 2001.
With respect to Omnipoint's C Block PCS licenses, the total purchase price
after discount is approximately $509.1 million. Omnipoint has made a 10% down
payment, or approximately $51.0 million to the FCC for these licenses, and
will pay interest only until 2003. The remaining principal balance on all of
Omnipoint's C Block licenses is approximately $458.2 million, which would be
payable, with remaining interest, during the period 2003 to 2006.
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Omnipoint has paid to the FCC the entire $106.9 million related to its D and
E Block licenses. With respect to Omnipoint's F Block licenses, Omnipoint made
a 20% down payment, or approximately $14.8 million in 1997. Omnipoint will
make interest-only payments on the remaining F Block obligation until 1999 and
will pay the principal balance of approximately $59.4 million and remaining
interest over the period from 1999 to 2007.
In 1997, the FCC suspended all interest payments on the Entrepreneurs' Band
C Block and F Block licenses and since then has offered the C Block licensees
various options for reducing their debt by returning all or portions of their
spectrum. These options include, without limitation, (i) amnesty and (ii)
disaggregation. Under the FCC's amnesty option, a licensee can return a
license and either (a) rebid on it in the reauction, foregoing the original
10% deposit or (b) forego the right to rebid on the license in the reauction
(or to otherwise acquire it for two years) in exchange for receiving a 70%
credit of the original 10% deposit which can then be applied to payment for
licenses retained by the Company. Under the FCC's disaggregation option, a
licensee can retain 15 MHz of its bandwidth and return 15 MHz (which it cannot
rebid for in the reauction or otherwise acquire for two years), extinguishing
50% of the outstanding debt on those licenses.
On June 8, 1998, the Company elected a combination of C Block options. The
Company elected disaggregation for four of its licenses (Philadelphia, PA,
Atlantic City, NJ, Reading, PA and Dover, DE), and elected amnesty for all
other C Block licenses. The FCC has currently estimated that the reauction of
all returned Entrepreneurs' Band spectrum will begin in the first quarter of
1999. Omnipoint's election would reduce the Company's reported debt and
accrued interest by approximately $282 million, while reducing the Company's
owned POPs, net of the additional licenses referred to below, by approximately
four percent. Omnipoint's election decisions may be affected by any further
reconsideration of the order by the FCC, litigation regarding the order, or
other government actions.
In certain BTAs where the Company returned C Block spectrum, the Company (i)
obtained D and E Block PCS licenses for Springfield, MA and Pittsfield, MA,
among a total of nine New England area licenses to be acquired from Atlantic
Cellular Corporation, and (ii) already holds F Block licenses in Wichita, KS
and Rochester, NY. The Company's buildout plans and services in markets where
it elected disaggregation will not be adversely affected.
Omnipoint's strategy for its PCS service business is to become a leading
provider of wireless services in its markets. The Company launched its first
PCS service in the New York City area with a soft launch in November 1996 and
a hard launch with multi-media advertising beginning in February 1997. The
Company launched service in Philadelphia, Atlantic City and Wichita in
September 1997 and in the Boston/Providence and Miami metropolitan areas in
March 1998. The Company is also in the design, engineering and construction
phase for the buildout of other major markets, including Detroit and
Indianapolis. As its highest immediate priority, Omnipoint will continue to
build out its licenses in the Northeast, southeast Florida and the Midwest,
focusing initially on the most densely populated portions of these areas and
on major commuting corridors. Omnipoint believes that existing analog cellular
systems in the most densely populated areas, particularly within the New York
City metropolitan area, provide inadequate capacity and that service during
peak hours for current cellular users is poor, with the anticipated growth in
wireless demand adding to this problem.
Omnipoint's strategy for its technology development and equipment business
is to apply its proprietary common air interface systems to selected
commercial opportunities and to introduce new architectures for targeted
applications. During 1996, a pilot IS-661 network was successfully tested. In
November 1997, Omnipoint began testing the first commercial version of
proprietary Omnipoint base stations integrated with a Northern Telecom Global
System for Mobile Communications network in the New York MTA. Omnipoint's IS-
661 system and subsequent architectures designed by Omnipoint are targeted for
Wireless Local Loop services.
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Omnipoint plans to focus its domestic WLL activities on providing wireless
Competitive Access Provider services on a limited basis in the New York MTA to
small and medium size businesses where capacity requirements do not justify
the expense of alternative bypass technologies, such as leased line, fiber or
microwave technologies. In addition, Omnipoint intends to access international
markets through sales of equipment (i) to service providers for WLL
applications as an alternative to expanding fixed wireline services in
countries where telephone services have not been well developed, and (ii) as
an adjunct to GSM networks in the more than 110 countries where GSM has been
deployed or selected for deployment.
Omnipoint, Northern Telecom, Inc. and Ericsson Inc. have agreements
involving (i) the purchase and sale of infrastructure equipment and handsets
for Omnipoint's PCS networks, and (ii) a licensing and OEM arrangement
relating to IS-661. In addition, in the U.S., each of Pacific Bell Mobile
Services, Inc., BellSouth Personal Communications, Inc., Western Wireless
Corporation, Powertel, Inc., American Personal Communications, Inc., and
Aerial Communications, Inc. has a separate arrangement with Omnipoint to
provide subscribers with roaming capabilities. These arrangements are with
companies whose licenses, together with Omnipoint's, cover 94% of the U.S.
population. Omnipoint has also signed international roaming agreements with 74
GSM PCS service providers in 46 countries, 42 of which are operational in 30
countries.
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USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Securities. The Securities are being sold by the Selling Stockholders. All of
the expenses incurred in connection with the registration of the Securities
offered hereby will be paid by the Company, except for selling commission and
underwriting discounts.
RATIO OF EARNINGS TO FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
Earnings were inadequate to cover fixed charges for each of the five years
in the period ended December 31, 1997 and for the three month period ended
March 31, 1998. The following table sets forth these deficiencies.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
FOR THE THREE
MONTHS ENDED
1993 1994 1995 1996 1997 MARCH 31, 1998
---- ------ ------ ------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Earnings deficiency.......... $233 $1,519 $1,493 $54,648 $146,052 $42,211
</TABLE>
Dividends on the Preferred Stock will be payable no earlier than August 1,
2001.
SELLING STOCKHOLDERS
The Company issued and sold 6,500,000 Depositary Shares (equivalent to
325,000 shares of 7% Cumulative Convertible Preferred Stock to Donaldson,
Lufkin & Jenrette Securities Corporation, BancAmerica Robertson Stephens,
Bear, Stearns & Co. In. and Smith Barney Inc. (the "Initial Purchasers") on
May 6, 1998 at a purchase price of $50 per Depositary Share ($1,000 per share
of Preferred Stock). The Depositary Shares were sold by the Initial Purchasers
in transactions exempt from the registration requirements of the Securities
Act, to persons reasonably believed by such Initial Purchasers to be
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act).
The Registration Statement of which the Prospectus is a part has been filed
pursuant to Rule 415 under the Securities Act to afford the Selling
Stockholders the opportunity to sell their Securities in public transactions
rather than pursuant to an exemption from the registration and prospectus
delivery requirements of the Securities Act. In order to avail itself of that
opportunity, a Selling Stockholder must notify the Company of its intention to
sell Securities and provide such other information concerning the Selling
Stockholder and the Securities to be sold as may then be required by the
Securities Act and the rules and regulations thereunder, as applicable. No
offer or sale pursuant to this Prospectus may be made by any Selling
Stockholder until such a request has been made and until any supplement for
the Prospectus has been filed or an amendment to the Registration Statement of
which this Prospectus is a part has become effective. Additional Selling
Stockholders will be added to the Prospectus upon such Selling Stockholder's
request and provision of the requested information to the Company. The Company
will from time to time supplement or amend the Prospectus to the Registration
Statement, as applicable, to add additional Selling Stockholders and to
reflect the required information concerning such Selling Stockholders. The
Selling Stockholders may from time to time offer and sell pursuant to this
Prospectus any or all of the Depositary Shares, the Preferred Stock and any
Common Stock issued upon conversion of, or as payment of dividends on, the
Depositary Shares or the Preferred Stock.
The following table sets forth information with respect to certain Selling
Stockholders which have requested to be included in this Prospectus as of the
date of this Prospectus. The Selling Stockholders may, from time to time, also
receive shares of Common Stock in the event payment of dividends on the
Depositary Shares or the Preferred Stock is made with shares of Common Stock
which may also be offered and sold pursuant to this Prospectus. Such
information set forth in the following table has been obtained from the
respective Selling Stockholders identified in such table. No Selling
Stockholder has held any position, office or had any other material
relationship with the Company, its predecessor or affiliates during the past
three years. All Depositary Shares are registered in the name of "Cede & Co."
on the books of the transfer agent for the Depositary Shares.
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<TABLE>
<CAPTION>
DEPOSITARY SHARES OF
SHARES OWNED PREFERRED STOCK
AND OFFERED OWNED AND
NAME OF SELLING STOCKHOLDER HEREBY OFFERED HEREBY
--------------------------- ------------ ---------------
<S> <C> <C>
American High-Income Trust........................ 185,000 0
American Travellers Life Insurance Co.--Convert-
ible............................................. 24,000 0
American Variable Insurance Series--Asset Alloca-
tion Fund........................................ 40,000 0
American Variable Insurance Series--High-Yield
Bond Fund........................................ 62,000 0
BT Holdings (New York) Inc........................ 85,000 0
Banc America Robertson Stephens................... 27,500 0
Bank of America Pension Plan...................... 43,100 0
Baptist Health.................................... 1,700 0
Boston Museum of Fine Art......................... 800 0
Capitol American Life Insurance Co.--Convertible.. 24,000 0
Commonwealth Life Insurance Company (Teamsters-
Camden Non-Enhanced)............................. 65,900 0
Credit Suisse First Boston Corporation............ 120,000 0
Deeprock & Co..................................... 43,200 0
Donaldson, Lufkin & Jenrette Securities Corpora-
tion............................................. 922,700 0
Engineers Joint Pension Fund...................... 3,100 0
Forest Alternative Strategies Fund II L.P. Series
A5............................................... 31,250 0
Forest Alternative Strategies Fund II L.P. Series
A5M.............................................. 1,500 0
Forest Alternative Strategies Fund II L.P. A5I.... 3,000 0
Forest Global Convertible Fund Series A1.......... 500 0
Forest Global Convertible Fund Series A5.......... 36,500 0
Great American Reserve Insurance Co.--Convert-
ible............................................. 12,000 0
HSBC Securities Inc............................... 70,000 0
Highbridge Capital Corporation.................... 50,000 0
IDS Life Managed Fund, Inc........................ 240,000 0
IDS Utilities Income Fund, Inc.................... 100,000 0
JMG Convertible Investments, L.P.................. 62,500 0
KA Management L.P................................. 122,375 0
KA Trading L.P.................................... 60,225 0
Laterman & Co..................................... 12,200 0
Laterman Strategies 90's LLC...................... 26,400 0
Lincoln National Convertible Securities Fund...... 40,705 0
LLT Limited....................................... 6,000 0
Merrill Lynch International Ltd................... 12,500 0
Merrill Lynch Pierce Fenner & Smith............... 146,400 0
Millennium Trading Co., L.P....................... 83,000 0
NationsBanc Montgomery Securities LLC............. 205,000 0
Nicholas Applegate Income & Growth Fund........... 29,300 0
Offshore Strategies Ltd........................... 26,400 0
Phoenix Capital Offshore Fund Ltd................. 4,000 0
Providan Life & Health............................ 138,400 0
Retail Clerks Pension Plan........................ 59,400 0
San Diego City Retirement......................... 8,300 0
San Diego County Convertible...................... 25,300 0
Southport Management Partners L.P................. 15,000 0
Southport Partners International Ltd.............. 35,000 0
TQA Leverage Fund L.P............................. 20,000 0
TQA Vantage Fund, Ltd............................. 40,000 0
TQA Vantage Plus, Ltd............................. 10,000 0
The Bond Fund of America, Inc..................... 120,000 0
The Northwestern Mutual Life Insurance Company.... 30,000 0
Triton Capital Investments, Ltd................... 62,500 0
Wake Forest University............................ 6,500 0
Weirton Trust..................................... 13,995 0
Walker Art Center................................. 5,300 0
Any other holder of Securities or future trans-
feree from any such holder....................... 2,880,550 0
--------- ---
TOTAL 6,500,000 0
</TABLE>
15
<PAGE>
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from the sale of the
Securities offered hereby. The Securities may be sold from time to time to
purchasers directly by the Selling Stockholders. Alternatively, the Selling
Stockholders may from time to time offer the Securities through brokers,
dealers or agents who may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders and/or the purchasers
of the Securities for whom they may act as agents. The Selling Stockholders
and any such brokers, dealers or agents who participate in the distribution of
the Securities may be deemed to be "underwriters" within the meaning of the
Securities Act and any profit on the sale of the Securities by them and any
discounts, commissions, concessions or other compensation received by any such
brokers, dealers or agents may be deemed to be underwriting discounts and
commissions under the Securities Act. To the extent the Selling Stockholders
may be deemed to be underwriters, the Selling Stockholders may be subject to
certain statutory liabilities of the Securities Act, including, but not
limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under
the Exchange Act.
The Securities offered hereby may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. The
Securities may be sold in different ways, including, without limitation, by
one or more of the following methods: (a) a block trade in which the broker or
dealer so engaged will attempt to sell the Securities as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer from its account pursuant to this Prospectus; (c)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers; (d) an exchange distribution in accordance with the rules of such
exchange; (e) face-to-face transactions between sellers and purchasers without
a broker-dealer; and (f) through the writing of options. At any time a
particular offer of the Securities is made, a revised Prospectus or Prospectus
Supplement, if required, will be distributed which will set forth the
aggregate amount and type of Securities being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents,
any discounts, commissions and other items constituting compensation from the
Selling Stockholders and any discounts, commissions or concessions allowed or
reallowed or paid to dealers. Registration Statement of which this Prospectus
is a part, will be filed with the Commission to reflect the disclosure of
additional information with respect to the distribution of the Securities. In
addition, the Securities covered by this Prospectus may be sold in private
transactions or under Rule 144 rather than pursuant to this Prospectus.
To the best knowledge of the Company, there are currently no plans,
arrangements or understandings between any Selling Stockholders and any
broker, dealer, agent or underwriter regarding the sale of the Securities by
the Selling Stockholders. There is no assurance that any Selling Stockholder
will sell any or all of the Securities offered by it hereunder or that any
such Selling Stockholder will not transfer, devise or gift such Securities by
other means not described herein.
The Selling Stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation,
Regulation M, which may limit the timing of purchases and sales of any of the
Securities by the Selling Stockholders and any other such person. Furthermore,
under Regulation M of the Exchange Act, any person engaged in the distribution
of the Securities may not simultaneously engage in market-making activities
with respect to the particular Securities being distributed for certain
periods prior to the commencement of or during such distribution. All of the
foregoing may affect the marketability of the Securities and the ability of
any person or entity to engage in market-making activities with respect to the
Securities.
Pursuant to a registration rights agreement entered into in connection with
the offer and sale of the Securities by the Company, each of the Company and
the applicable Selling Stockholders will be indemnified by the other against
certain liabilities , including certain liabilities under the Securities Act,
or will be entitled to contribution in connection therewith. The Company has
agreed to pay all of the expenses incidental to the registration of the
Securities.
16
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 200,000,000 shares of
Common Stock, $.01 par value per share, and 10,000,000 shares of Preferred
Stock, $.01 par value per share. The following summary of certain provisions
of the Common Stock and the Preferred Stock of the Company does not purport to
be complete and is subject to, and qualified in its entirety by, the Amended
and Restated Certificate of Incorporation, as amended, the Certificate of
Designations and Bylaws of the Company, and the provisions of applicable law.
COMMON STOCK
As of June , 1998, there were shares of Common Stock outstanding and held of
record by approximately stockholders. Each holder of Common Stock is entitled
to one vote for each share held. The holders of Common Stock, voting as a
single class, are entitled to elect all of the directors of the Company.
Matters submitted to stockholder approval generally require a majority vote.
Holders of Common Stock are entitled to receive ratably such dividends as
may be allowed under the various financing agreements of the Company and as
declared by the Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of the Company, holders
of the Common Stock would be entitled to share in the Company's assets
remaining after the payment of liabilities. Holders of Common Stock have no
preemptive or other subscription rights. The shares of Common Stock are not
convertible into any other security. The outstanding shares of Common Stock
are fully paid and nonassessable.
PREFERRED STOCK
There are 10,000,000 shares of preferred stock authorized. The Company has
designated 325,000 shares of preferred stock as 7% Cumulative Convertible
Preferred Stock. The Preferred Stock is convertible at the option of the
holders into shares of Common Stock, at any time unless previously redeemed,
at a Conversion Price of $31.115 per share of Preferred Stock subject to
adjustment under certain circumstances. Dividends accrue at an annual rate of
7% of the liquidation preference thereof of $1,000 per share and are payable
quarterly in arrears, commencing August 1, 2001, unless the Company elects the
early termination of the Deposit Account, in which case, payment of dividends
will commence on the dividend payment date immediately following the date of
such early termination. Dividends may, at the option of the Company, be paid
in cash, by delivery of fully paid and nonassessable shares of Common Stock,
or a combination thereof. The Preferred Stock is redeemable at any time on or
after May 1, 2001 in whole or in part, at the option of the Company, in cash,
by delivery of fully paid and nonassessable shares of Common Stock, or a
combination thereof. The Company issued and sold 325,000 shares of the
Preferred Stock in the form of 6,500,000 Depositary Shares (at $50 per share).
See "Description of the Preferred Stock."
The Board of Directors of the Company has the authority to issue the
preferred stock in one or more series and to fix the price, rights,
preferences, privileges and restrictions thereof, including dividend rights,
dividend rates, conversion rights, terms of redemption, redemption prices,
liquidation preferences, voting rights and the number of shares consisting of
any series or the designation of such series without further vote or action by
the stockholders. The issuance of the preferred stock (or the ability of the
Board of Directors to issue the preferred stock) may have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the stockholders and may adversely affect the voting and
other rights of the holders of Common Stock. The issuance of preferred stock
with voting or conversion rights may adversely affect the voting power of the
holders of Common Stock.
17
<PAGE>
DESCRIPTION OF THE DEPOSITARY SHARES
The summary contained herein of the terms of the shares of Depositary Shares
does not purport to be complete and is subject to and qualified in its
entirety by reference to all of the provisions of the Deposit Agreement and
the Depositary Receipts, copies of which may be obtained from the Company or
the Depositary at the principal office of the Depositary at which at any
particular time its depositary business shall be administered upon request.
GENERAL
Each Depositary Share represents one-twentieth of a share of Preferred Stock
deposited under the Deposit Agreement, dated as of May 6, 1998 (the "Deposit
Agreement"), among the Company, Marine Midland Bank as depositary (the
"Depositary"), and all holders from time to time of depositary receipts issued
thereunder (the "Depositary Receipts"). Subject to the terms of the Deposit
Agreement, each owner of a Depositary Share will be entitled, in proportion to
the applicable fraction of a share of Preferred Stock represented by such
Depositary Share, to all the rights and preferences of the Preferred Stock
represented thereby (including dividend, voting, redemption, conversion and
liquidation rights) and subject, proportionately to all of the limitations of
the Preferred Stock represented thereby, contained in the Certificate of
Designation summarized under "Description of the Preferred Stock."
The Depositary Shares are evidenced by Depositary Receipts issued pursuant
to the Deposit Agreement. Immediately following the issuance and delivery of
the Preferred Stock by the Depositary to the Initial Purchasers as
contemplated herein, the Initial Purchasers have deposited the Preferred Stock
with the Depositary, which has issued the Depositary Shares to the Initial
Purchasers. Depositary Receipts have been issued evidencing only whole
Depositary Shares. The DTC has accepted the Depositary Receipts for its book-
entry settlement system.
QUARTERLY RETURN AMOUNTS, DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash and Common Stock distributions and
other distributions received in respect of the Preferred Stock for dividends,
Quarterly Return Amounts and otherwise to the record holders of Depositary
Shares in proportion to the number of such Depositary Shares owned by such
holders.
In the event of a distribution other than in cash or Common Stock, the
Depositary will distribute property received by it to the record holders of
Depositary Shares entitled thereto, unless the Depositary determines that it
is not feasible to make such distribution, in which case the Depositary may,
with the approval of the Company, sell such property and distribute the net
proceeds from such sale to such holders.
RECORD DATE
Whenever (i) any cash dividend, Quarterly Return Amount, or other cash
distribution becomes payable, any distribution other than cash is made, or any
rights, preferences or privileges are at any time offered with respect to the
Preferred Stock, or (ii) the Depositary receives notice of any meeting at
which holders of Preferred Stock are entitled to vote or of which holders of
Preferred Stock are entitled to notice or any solicitation of consents in
respect of the Preferred Stock, or any call of any Preferred Stock, or if at
any time the Depositary and the Company otherwise deem it appropriate, the
Depositary will in each such instance fix a record date (which shall be the
same date as the record date for the Preferred Stock) for the determination of
the holders of Depositary Receipts who are entitled to (a) receive such
dividend, distribution, rights, preferences or privileges or the net
18
<PAGE>
proceeds of the sale thereof, (b) receive notice of, and give instructions for
the exercise of voting rights at any such meeting or (c) receive notice of any
such call, subject to the provisions of the Deposit Agreement.
WITHDRAWAL OF PREFERRED STOCK
Upon surrender of the Depositary Receipts at the corporate trust office of
the Depositary, or such other office as the Depositary may designate, unless
the related Depositary Shares have been previously called for redemption, the
holder of the Depositary Shares evidenced thereby is entitled to delivery at
such office to or upon his order of the number of whole shares of Preferred
Stock and any money or other property represented by such Depositary Shares.
Holders of Depositary Shares are entitled to receive whole shares of Preferred
Stock on the basis of one share of Preferred Stock for each 20 Depositary
Shares, but holders of such whole shares of Preferred Stock are not thereafter
entitled to receive Depositary Shares in exchange therefor. If the Depositary
Receipts delivered by the holder evidence a number of Depositary Shares in
excess of the number of Depositary Shares representing the number of whole
shares of Preferred Stock to be withdrawn, the Depositary will deliver to such
holder at the same time a new Depositary Receipt evidencing such excess number
of Depositary Shares. The Company does not expect that there will be any
public trading market for the Preferred Stock except as represented by the
Depositary Shares.
REDEMPTION OR CONVERSION OF DEPOSITARY SHARES
As described under "Description of the Preferred Stock--Optional Redemption"
and "--Conversion Rights," the Preferred Stock is subject to the Company's
right to redeem the Preferred Stock for Common Stock at any time on or after
May 1, 2001 and the holder's right at any time to convert the Preferred Stock
into Common Stock at its option. The Depositary Shares are subject to
redemption or conversion upon the same terms and conditions (including as to
notice to the owners of Depositary Shares and as to selection of Depositary
Shares to be called if fewer than all of the outstanding Depositary Shares are
to be called) as the Preferred Stock held by the Depositary using the Common
Stock received by the Depositary, except that the number of shares of Common
Stock received upon conversion of each Depositary Share will be equal to one-
twentieth of the number of shares of Common Stock received upon conversion of
each of the Preferred Stock. To effect an optional conversion, a holder of
Depositary Shares must deliver Depositary Receipts evidencing the Depositary
Shares to be converted, together with written notice of conversion and a
proper assignment of the Depositary Receipts to the Company, to any transfer
agent for the Depositary Shares, or in blank, to the Depositary or its agent.
Each optional conversion of Depositary Shares shall be deemed to have been
effected immediately prior to the close of business on the date on which the
foregoing requirements have been satisfied. To the extent that Depositary
Shares are converted into shares of Common Stock and all such shares of Common
Stock cannot be distributed to the record holders of Depositary Receipts
without creating fractional interests in such shares, the Company will cause
the Depositary to distribute cash to holders in lieu of fractional shares as
provided above under "Description of the Preferred Stock--Conversion Rights."
The amount distributed in the foregoing case will be reduced by any amount
required to be withheld by the Company or the Depositary on account of taxes
or otherwise required pursuant to law, regulation or court process.
PAYMENT AND CONVERSION
All amounts payable in cash with respect to the Depositary Shares will be
payable in United States dollars at the office or agency of the Company
maintained for such purpose with the City of New York or, at the option of the
Company, payment of dividends, Quarterly Return Amounts and Liquidated Damages
(if any) may be made by check mailed to the holders of the Depositary Shares
at their respective addresses set forth in the register of holders of the
Depositary Shares maintained by the Transfer Agent, provided that all cash
payments with respect to Depositary Shares in global form or the holders of
which have given wire transfer instructions to the Company will be required to
be made by wire transfer in immediately available funds to the accounts
specified by the holders thereof.
19
<PAGE>
Any payment on the Depositary Shares due on any day that is not a Business
Day need not be made on such day, but may be made on the succeeding Business
Day with the same force and effect as if made on such due date.
VOTING OF PREFERRED STOCK
Upon receipt of notice of any meeting at which holders of Preferred Stock
are entitled to vote, the Depositary will mail the information contained in
such notice of meeting to the record holders of the Depositary Shares relating
to Preferred Stock. Each record holder of such Depositary Shares on the record
date (which will be the same date as the record date of the Preferred Stock)
will be entitled to instruct the Depositary as to the exercise of the voting
rights pertaining to the amount of shares of Preferred Stock represented by
such holder's Depositary Shares. The Depositary will use best efforts insofar
as practicable, to vote the amount of shares of Preferred Stock represented by
such Depositary Shares in accordance with such instructions and the Company
will agree to take all reasonable action which may be deemed necessary by the
Depositary in order to enable the Depositary to do so. The Depositary will
abstain from voting Preferred Stock to the extent it does not receive specific
instructions from the holders of Depositary Shares representing Preferred
Stock.
Each Depositary Share shall entitle the holder thereof to instruct the
Depositary to cast one-twentieth of a share of Preferred Stock vote on each
matter submitted to a vote of the stockholders of the Company. See
"Description of the Preferred Stock--Voting Rights."
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary. However, any amendment which
materially and adversely alters the rights of the holders of Depositary Shares
(or, which relates to or affects rights to receive dividends or distributions,
or voting or redemption rights) will not be effective unless such amendment
has been approved by the holders of at least 66 2/3% of the Depositary Shares
then outstanding. In no event may any amendment impair the right of any holder
of Depositary Receipts, subject to the conditions specified in the Deposit
Agreement, upon such surrender of the Depositary Receipts evidencing such
Depositary Shares, to receive shares of Preferred Stock or upon conversion of
the Preferred Stock represented by the Depositary Receipts, to receive shares
of Common Stock, and in each case any money or other property represented
thereby, except in order to comply with mandatory provision of applicable law.
Every holder of Depositary Receipts at the time any such amendment becomes
effective shall be deemed to consent and agree to such amendment and to be
bound by the Deposit Agreement.
The Deposit Agreement may be terminated by the Company or the Depositary
only if (i) all outstanding Depositary Shares have been redeemed or converted,
(ii) there has been a final distribution in respect of the Preferred Stock in
connection with any liquidation, dissolution or winding up of the Company and
such distribution has been distributed to the holders of Depositary Receipts
or (iii) upon consent of holders of Depositary Receipts representing not less
than 66 2/3% of the Depositary Shares then outstanding.
Whenever the Deposit Agreement has been terminated pursuant to clause (iii)
of the preceding paragraph the Depositary will mail notice of such termination
to the record holders of all Depositary Receipts then outstanding at least 30
days prior to the date fixed in such notice for such termination. The
Depositary may likewise terminate the Deposit Agreement if at any time 90 days
shall have expired after the Depositary shall have delivered to the Company a
written notice of its election to resign and a successor depositary shall not
have been appointed and accepted its appointment. If any Depositary Receipts
remain outstanding after the date of termination, the Depositary thereafter
will discontinue the transfer of Depositary Receipts, will suspend the
distribution of dividends to the holders thereof, and will not give any
further notices (other than notices of such termination) or perform any
further acts under the Deposit Agreement except as provided below and except
that the Depositary will continue to (i) collect dividends on the Preferred
Stock and any other distributions with respect thereto and (ii) deliver the
Preferred Stock together with such dividends and distributions and the net
20
<PAGE>
proceeds of any sales of rights, preferences, privileges or other property,
without liability for interest thereon, in exchange for Depositary Receipts
surrendered. At any time after the expiration of three years from the date of
termination, the Depositary may sell the Preferred Stock then held by it at
public or private sales, at such place or places and upon such terms as it
deems proper and may thereafter hold the net proceeds of any such sale,
together with any money and other property then held by it, without liability
for interest thereon, for the pro rata benefit of the holders of Depositary
Receipts which have not been surrendered. The Company does not intend to
terminate the Deposit Agreement or to permit the resignation of the Depositary
without appointing a successor Depositary.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other governmental charges arising
solely from the existence of the depositary arrangements. The Company will pay
charges of the Depositary in connection with the initial deposit of the
Preferred Stock, and any redemption of such Preferred Stock. Holders of
Depositary Receipts will pay transfer and other taxes and governmental charges
and such other charges as are expressly provided in the Deposit Agreement to
be for their accounts. The Depositary may refuse to effect any transfer of a
Depositary Receipt or any withdrawal of Preferred Stock evidenced thereby
until all such taxes and charges with respect to such Depositary Receipt or
such Preferred Stock are paid by the holder thereof.
MISCELLANEOUS
The Depositary will forward to holders of Preferred Stock all reports and
communications from the Company which are delivered to the Depositary and
which the Company is required to furnish to the holders of Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstances beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and
the Depositary under the Deposit Agreement will be limited to performance in
good faith of their duties thereunder and the Company and the Depositary will
not be obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares or Preferred Stock unless satisfactory indemnity is
furnished. They may rely on written advice of counsel or accountants, or
information provided by persons presenting Preferred Stock for deposit,
holders of Depositary Shares or other persons believed to be competent and on
documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to the Company notice of
its election to do so, and the Company may at any time remove the Depositary.
Any such resignation or removal of the Depositary will take effect upon the
appointment of a successor Depositary, which successor Depositary must be
appointed within 45 days after delivery of the notice of resignation or
removal and must be a bank or trust company having its principal office in the
United States and having a combined capital and surplus of at least
$50,000,000.
BOOK ENTRY; THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depository for
the Depositary Shares offered hereby. The Depositary Shares will be issued
only as fully-registered securities registered in the name of Cede & Co. (as
nominee for DTC). One or more fully-registered global securities will be
issued, representing in the aggregate the total number of shares of Depositary
Shares, and will be deposited with DTC (collectively, the "Global
Securities").
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in Depositary Shares represented
by a Global Securities.
21
<PAGE>
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the DTC system is also available to
others such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants").
Purchasers of Depositary Shares within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Depositary
Shares on DTC's records. The ownership interest of each actual purchaser of a
Depositary Share ("Beneficial Owner") is in turn to be recorded on the Direct
or Indirect Participant's records. Beneficial Owners will not receive written
confirmation from DTC of their purchases, but Beneficial Owners are expected
to receive written confirmations providing details of the transactions, as
well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased the Depositary
Shares. Transfers of ownership interests in the Depositary Shares are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in the Depositary Shares, except upon a
resignation of DTC or upon a decision by the Company to discontinue the book-
entry system of the Depositary Shares.
To facilitate subsequent transfers, all the Depositary Shares deposited by
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of the Depositary Shares with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Depositary Shares; DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Depositary Shares are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices with respect to the Depositary Shares shall be sent to
Cede & Co. If less than all of the Depositary Shares are being redeemed, DTC's
practice is to determine by lot the amount on the interest of each Direct
Participant in such securities to be redeemed.
Although voting with respect to the Depositary Shares is limited, in those
cases where a vote is required, neither DTC nor Cede & Co. will itself consent
or vote with respect to the Depositary Shares. Under its usual procedures, DTC
would mail an "Omnibus Proxy" (i.e., a proxy conferring on Direct Participants
the right to vote as their interests appear) to the Direct Participants as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Depositary Shares are credited on the record date (identified in a listing
attached to the Omnibus Proxy). The Company believes that the arrangements
among DTC, Direct and Indirect Participants and Beneficial Owners will enable
the Beneficial Owners to exercise rights equivalent in substance to the rights
that can be directly exercised by a Direct Participant.
22
<PAGE>
Cash distribution payments and distribution payments in shares of Common
Stock on the shares of Preferred Stock represented by the Depositary Shares
will be made to DTC. DTC's practice is to credit Direct Participants' accounts
on the relevant payment date in accordance with their respective holdings
shown on DTC's records unless DTC has reason to believe that it will not
receive payments on such payment date. Payments by Participants to Beneficial
Owners will be governed by standing instructions and customary practices, as
is the case with securities held for the account of customers in bearer form
or registered in "street name," and will be the responsibility of such
Participant and not of DTC or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
distributions to DTC is the responsibility of the Company, disbursement of
such payments to Direct Participants is the responsibility of DTC and
disbursement of such payments to the Beneficial Owners is the responsibility
of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in the Global Securities will
not be entitled to receive physical delivery of the Depositary Shares.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Depositary Shares, including elections as to
form of payment.
DTC may discontinue providing its services as securities depositary with
respect to the Depositary Shares at any time by giving reasonable notice to
the Company. Under such circumstances, in the event that a successor
securities depositary is not obtained, certificates representing the
Depositary Shares will be printed and delivered. If the Company decides to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary), certificates representing the Depositary Shares will be
printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
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<PAGE>
DESCRIPTION OF THE PREFERRED STOCK
GENERAL
Each Depositary Share represents 1/20 of a share of Preferred Stock. The
holders of the Preferred Stock will have no preemptive rights with respect to
any shares of capital stock of the Company or any other securities of the
Company convertible into or carrying rights or options to purchase any such
shares. The Preferred Stock will, when issued, be fully paid and
nonassessable.
The Initial Purchasers of the Depositary Shares have deposited approximately
$62.8 million into the Deposit Account, and will be entitled to a Quarterly
Return Amount from the Deposit Account in an amount equal to $0.875 per
Depositary Share (equivalent to $17.50 per share of Preferred Stock),
commencing August 1, 1998 and continuing until May 1, 2001. After such date,
dividends will begin to accumulate on the Preferred Stock. The Company may,
prior to the date on which any Quarterly Return Amount would otherwise be
payable, deliver notice instructing the deposit agent (i) to purchase from the
Company, for transfer to each holder of Depositary Shares, in lieu of the
Quarterly Return Amount, that number of whole shares of Common Stock
determined by dividing the Quarterly Return Amount by 95% of the Market Value
(as defined) of the Common Stock as of the date of such notice or (ii) to
defer delivery of the Quarterly Return Amount to holders of Depositary Shares
on such quarterly payment date until the next quarterly payment date or any
subsequent payment date. However, no later than May 1, 2001 (the "Deposit
Expiration Date"), any amounts remaining in the Deposit Account, as of such
date, or which have previously been deferred, will be (i) paid to the holders
of the Depositary Shares or (ii) at the Company's option, used to purchase
from the Company for delivery to each holder of Depositary Shares that number
of whole shares of Common Stock determined by dividing such holder's pro rata
share of the balance remaining in the Deposit Account by 95% of the Market
Value of the Common Stock as of the date of the Direction Notice (as defined).
For a discussion of Federal tax treatment of Deposit Account, and payments
therefrom, see "Certain United States Federal Income Tax Consequences."
The transfer agent, registrar, redemption, conversion and dividend
disbursing agent for shares of the Preferred Stock will initially be Marine
Midland Bank (the "Transfer Agent"). The Transfer Agent will send notices to
stockholders of any special meetings at which holders of the Preferred Stock
have the right to vote. See "--Voting Rights" below.
Set forth below is a description of the terms of the Preferred Stock and the
Deposit Account and the circumstances under which holders of shares of
Preferred Stock may be expected to receive payments from the Deposit Account.
The following summaries of the Preferred Stock and the Deposit Account do not
purport to be complete and are subject to, and qualified in their entirety by
reference to, the provisions of the Amended and Restated Certificate of
Incorporation, as amended, and the Deposit Account Agreement (as defined
below).
RANKING
The Preferred Stock ranks senior to the Company's Common Stock and senior to
or pari passu with other future offerings of preferred stock.
The Certificate of Designation provides that the Company may not, without
the consent of the holders of at least 66 2/3% of the outstanding shares of
Preferred Stock, authorize, create (by way of reclassification or otherwise)
or issue any class or series of capital stock of the Company ranking senior to
the Preferred Stock ("Senior Securities") or any obligation or security
convertible or exchangeable into or evidencing a right to purchase shares of
any class or series of Senior Securities.
DEPOSIT ACCOUNT
The funds deposited in the Deposit Account has been invested in U.S.
government obligations or U.S. government guaranteed obligations, which,
together with the earnings thereon will be sufficient to pay the aggregate
Quarterly Return Amount through the Deposit Expiration Date. See "Certain
United States Federal Income Tax Consequences."
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<PAGE>
Unless on or prior to the Notice Date (as defined), the Company shall have
delivered to the Deposit Agent a Direction Notice (as defined), the Deposit
Agent will deliver to each holder of Depositary Shares the Quarterly Return
Amount on February 1, May 1, August 1 and November 1 of each year (each such
date being a "Deposit Payment Date"), commencing August 1, 1998 and continuing
until the Deposit Expiration Date. If the Company shall have delivered a
Direction Notice to the Deposit Agent on or prior to the Notice Date, the
Deposit Agent shall, as instructed by the Company in such Direction Notice,
(i) purchase from the Company, for delivery to each holder of Depositary
Shares in lieu of all or a portion of the Quarterly Return Amount or any
deferred Quarterly Return Amount (which has not been previously paid in cash
or shares of Common Stock) on the next Deposit Payment Date, that number of
whole shares of Common Stock determined by dividing such Quarterly Return
Amount or deferred Quarterly Return Amount by 95% of the Market Value of the
Common Stock as of the Notice Date or (ii) defer payment of any Quarterly
Return Amount until the next Deposit Payment Date or any subsequent Deposit
Payment Date. At the written request of the Deposit Agent, the Company has
agreed under the terms of the deposit agreement governing the Deposit Account
(the "Deposit Account Agreement") to deliver, for and on behalf of the Deposit
Agent, the shares of Common Stock acquired by the Deposit Agent directly to
holders of Depositary Shares. The Deposit Account Agreement further provides
that the Deposit Agent's obligations to purchase shares of Common Stock from
the Company is secured by the funds in the Deposit Account.
In the event of any conversion of the Depositary Shares prior to the Deposit
Expiration Date, the Company shall immediately after such conversion be paid
any funds remaining in the Deposit Account allocable to the Depositary Shares
so converted. Such allocation shall be made pro rata based upon the number of
Depositary Shares so converted. The cumulative amount to the date of
conversion of any Quarterly Return Amounts, including any deferred Quarterly
Return Amounts, at the time of such conversion, shall be paid to the holders
of Depositary Shares who are converting their Depositary Shares at the time of
such conversion. The Deposit Agent shall make any such payment in cash unless,
prior thereto, the Company delivers a Direction Notice to the Deposit Agent
requiring the Deposit Agent to purchase from the Company for transfer to
holders who are converting their Depositary Shares that number of whole shares
of Common Stock determined by dividing the allocable deferred Quarterly Return
Amounts by 95% of the Market Value of the Common Stock as of the date of the
Direction Notice.
On the Deposit Expiration Date, the Deposit Account Agreement requires the
Deposit Agent to deliver to the holders of Depositary Shares any cash
remaining in the Deposit Account on such date unless, prior thereto, the
Company delivers a Direction Notice to the Deposit Agent requiring the Deposit
Agent to purchase from the Company for delivery to holders who are entitled to
the proceeds from the Deposit Account that number of whole shares of Common
Stock determined by dividing the deferred Quarterly Return Amounts by 95% of
the Market Value of the Common Stock as of the date of the Direction Notice.
As a result of the foregoing, holders of Preferred Stock who have not
converted their Preferred Stock as of the Deposit Expiration Date will receive
through, and including such Deposit Expiration Date, cash distributions or
shares of Common Stock or a combination thereof in an aggregate amount or
value equal to $10.50 for each Depositary Share ($210.00 per share of
Preferred Stock) held by such holder, unless the Deposit Account is terminated
as discussed below.
Notwithstanding the foregoing, if the Company obtains any required
amendments to the covenants under its various debt obligations in order to
permit the Company to pay dividends on the Preferred Stock prior to the
Deposit Expiration Date, the Company may thereafter elect early termination of
the Deposit Account by instructing the Deposit Agent in writing immediately
(i) to pay to each holder of Depositary Shares any deferred Quarterly Return
Amount held in the Deposit Account, either in cash or, if so specified in the
notice from the Company, in that number of whole shares of Common Stock, to be
purchased from the Company for transfer to the holders of Depositary Shares,
determined by dividing the deferred Quarterly Return Amount by 95% of the
Market Value (as defined) of the Common Stock as of the date of such notice,
and (ii) to distribute the remaining balance of the Deposit Account to the
Company. If the Company elects early termination of the Deposit Account, the
Preferred Stock will begin to accumulate dividends from the last Deposit
Payment Date.
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<PAGE>
The term "Notice Date" means the tenth day prior to the applicable Deposit
Payment Date or Deposit Expiration Date, as the case may be. The term "Market
Value" means, as of any date, the average of the daily closing price for the
five consecutive trading days ending on such date. The closing price for each
day shall be the last sales price or in case no such reported sales take place
on such day, the average of the last reported bid and asked price, in either
case on the principal national securities exchange on which the shares of
Common Stock are admitted to trading or listed, or if not listed or admitted
to trading on such exchange, the representative closing bid price as reported
by the Nasdaq National Market, or other similar organization if the Nasdaq
National Market is no longer reporting such information, or if not so
available, the fair market price as determined, in good faith, by the Board of
Directors of the Company.
DIVIDENDS
Holders of the Preferred Stock will be entitled to receive cumulative
dividends at an annual rate of 7% of the Liquidation Preference (equivalent to
$0.875 per Depositary Share and $17.50 per share of Preferred Stock), payable
quarterly out of assets legally available therefor on February 1, May 1,
August 1 and November 1 of each year, when, as and if declared by the Board of
Directors, commencing August 1, 2001, unless the Company elects early
termination of the Deposit Account. If the Company elects the early
termination of the Deposit Account, dividends will commence to accumulate from
the day after the Deposit Payment Date immediately preceding the date of early
termination of the Deposit Account, and shall be payable commencing on the
Deposit Payment Date which would have immediately followed the date of such
early termination of the Deposit Account. If the Company does not elect the
early termination of the Deposit Account, dividends will accumulate from May
2, 2001. Dividends, to the extent declared by the Company's Board, may, at the
option of the Company, be paid in cash, by delivery of fully paid and
nonassessable shares of the Company's Common Stock or a combination thereof.
Dividends will be payable to holders of record as they appear on the Company's
stock register on such record dates, not more than 60 days or less than 10
days preceding the payment dates thereof, as shall be fixed by the Company's
Board of Directors. Dividends payable on the Preferred Stock (and the
corresponding Depositary Shares) for each full dividend period will be
computed by dividing the annual dividend rate by four; dividends for any
period less than a full dividend period will be computed on the basis of a
360-day year consisting of twelve 30-day months. The Preferred Stock (and the
corresponding Depositary Shares) will not be entitled to any dividends,
whether payable in cash, property or securities, in excess of the full
cumulative dividends. No interest, or sum of money in lieu of interest, will
be payable in respect of any accumulated and unpaid dividends.
If the Company elects to pay dividends in shares of Common Stock, the number
of shares of Common Stock to be distributed will be calculated by dividing
such payment by 95% of the Market Value as of the dividend payment record
date.
No dividends or distributions (other than a dividend or distribution in
stock of the Company ranking junior to the Preferred Stock as to dividends and
upon liquidation, dissolution or winding up) may be declared, made or paid or
set apart for payment upon any stock of the Company ranking junior to or pari
passu with the Preferred Stock as to dividends, nor may any stock of the
Company ranking junior to or pari passu with the Preferred Stock as to
dividends or upon liquidation be redeemed, purchased or otherwise acquired for
any consideration (or any monies paid to or made available for a sinking fund
for the redemption of any shares of any such stock) by the Company (except by
conversion into or exchange for stock of the Company ranking junior to the
Preferred Stock as to dividends and upon liquidation and in the case that
monies for such dividends, distributions, redemptions, purchases, or other
acquisitions are derived directly or indirectly from the proceeds of the
offering of such securities or a concurrent offering of related securities)
unless full cumulative dividends have been or contemporaneously are paid or
declared and a sum sufficient for the payment thereof is set apart for such
payment on the Preferred Stock for all dividend payment periods terminating on
or prior to the date of such declaration, payment, redemption, purchasing or
acquisition.
Notwithstanding the foregoing, if full dividends have not been declared and
paid or set apart on the Preferred Stock and any other preferred stock ranking
pari passu with the Preferred Stock as to dividends,
26
<PAGE>
dividends may be declared and paid on the Preferred Stock and such other pari
passu preferred stock so long as the dividends are declared and paid pro rata
so that the amounts of dividends declared per share on the Preferred Stock and
such other pari passu preferred stock will in all cases bear to each other the
same ratio that accrued and unpaid dividends per share on the shares of the
Preferred Stock and such other preferred stock bear to each other; provided,
that if such dividends are paid in cash on the other pari passu preferred
stock, dividends will also be paid in cash on the Preferred Stock.
The holders of shares of Preferred Stock (and the corresponding Depositary
Shares) at the close of business on a dividend payment record date will be
entitled to receive the dividend payment on those shares (except that holders
of shares called for redemption on a redemption date between the record date
and the dividend payment date will be entitled to receive such dividend on
such redemption date as indicated under "--Optional Redemption") on the
corresponding dividend payment date notwithstanding the subsequent conversion
thereof or the Company's default in payment of the dividend due on the
dividend payment date. Except as provided in the immediately preceding
sentence, the Company shall make no payment or allowance for unpaid dividends,
whether or not in arrears, on converted shares or for dividends on the shares
of Common Stock issued upon conversion.
The Company's ability to declare and pay cash dividends and make other
distributions with respect to its capital stock, including the Preferred Stock
(and the corresponding Depositary Shares), is limited by provisions contained
in various financing agreements which restrict dividend payments to the
Company by its subsidiaries and which restrict the payment of cash dividends
by the Company or any of its subsidiaries on their respective equity
securities. Similarly, the Company's ability to declare and pay dividends may
be limited by applicable Delaware law.
LIQUIDATION PREFERENCE
The shares of Preferred Stock will be issued with a liquidation preference
(the "Liquidation Preference") equal to $1,000 per share (equivalent to a
Liquidation Preference of $50 per Depositary Share). See also "Certain United
States Federal Income Tax Consequences."
If upon any voluntary or involuntary dissolution, liquidation or winding up
of the Company, the amounts payable with respect to the liquidation preference
of the Preferred Stock and any other shares of the Company ranking as to any
such distribution pari passu with the Preferred Stock are not paid in full,
the holders of the Preferred Stock (and corresponding Depositary Shares) and
of such other shares will share pro rata in proportion to the full
distributable amounts to which they are entitled. After payment of the full
amount of the liquidating distribution to which they are entitled, the holders
of the Preferred Stock (and corresponding Depositary Shares) will have no
right or claim to any of the remaining assets of the Company. Neither the sale
of all or substantially all of the property or business of the Company (other
than in connection with the winding up of its business), nor the merger or
consolidation of the Company into or with any other corporation, will be
deemed to be dissolution, liquidation or winding up of the Company. In the
event of any voluntary or involuntary dissolution, liquidation or winding up
of the Company, the Deposit Agent will be required to return to the holders of
the Preferred Stock (and corresponding Depositary Shares) any funds at the
time remaining in the Deposit Account.
OPTIONAL REDEMPTION
The Preferred Stock (and corresponding Depositary Shares) are not subject to
any sinking fund or other similar provisions. The Preferred Stock (and
corresponding Depositary Shares) may not be redeemed prior to May 1, 2001. On
or after May 1, 2001, the Preferred Stock (and corresponding Depositary
Shares) may be redeemed, in whole or in part, at the option of the Company, in
cash, by delivery of fully paid and nonassessable shares of Common Stock or
any combination thereof, upon not less than 20 days' notice nor more than 60
days'
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<PAGE>
notice, during the twelve-month periods commencing on May 1 of the years
indicated below, at the following redemption prices per Depositary Share, plus
in each case all accumulated and unpaid dividends to the redemption date:
<TABLE>
<CAPTION>
REDEMPTION PRICE
YEAR PER DEPOSITARY SHARE
<S> <C>
2001.................................................. $52.00
2002.................................................. 51.50
2003.................................................. 51.00
2004.................................................. 50.50
2005 and thereafter................................... 50.00
</TABLE>
In the event that fewer than all the outstanding shares of the Preferred
Stock (and corresponding Depositary Shares) are to be redeemed, the shares to
be redeemed will be determined pro rata or by lot. If the Company elects to
make redemption payments in shares of Common Stock, the number of shares of
Common Stock to be distributed will be calculated by dividing such payment by
95% of the Market Value as of the redemption notice date.
From and after the applicable redemption date (unless the Company shall be
in default of payment of the redemption price), dividends on the shares of the
Preferred Stock (and corresponding Depositary Shares) to be redeemed on such
redemption date shall cease to accumulate, such shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as
stockholders of the Company (except the right to receive the redemption price)
will cease.
If any dividends on the Preferred Stock are in arrears, no shares of the
Preferred Stock (and corresponding Depositary Shares) will be redeemed unless
all outstanding shares of the Preferred Stock (and corresponding Depositary
Shares) are simultaneously redeemed.
VOTING RIGHTS
Except as required by law, holders of the Preferred Stock (and corresponding
Depositary Shares) will have no voting rights except as set forth below. Under
Delaware law, holders of the Preferred Stock will be entitled to vote as a
class upon a proposed amendment to the Certificate of Designation, whether or
not entitled to vote thereon by the Certificate of Designation, if the
amendment would increase or decrease the aggregate number of authorized shares
of such class, increase or decrease the par value of the shares of such class,
or alter or change the powers, preferences, or special rights of the shares of
such class so as to affect them adversely. If the dividends payable on the
Preferred Stock are in arrears for six quarterly periods, the holders of the
Preferred Stock voting separately as a class with the shares of any other
preferred stock or preference securities having similar voting rights will be
entitled at the next regular or special meeting of stockholders of the Company
to elect two directors of the Company (such voting rights will continue only
until such time as the dividend arrearage on the Preferred Stock has been paid
in full).
The affirmative vote or consent of the holders of at least 66 2/3% of the
outstanding Preferred Stock will be required for the issuance of any class or
series of stock (or security convertible into stock or evidencing a right to
purchase any shares of any class or series of stock) of the Company ranking
senior to the Preferred Stock as to dividends, liquidation rights or voting
rights and for amendments to the Company's Amended and Restated Certificate of
Incorporation that would affect adversely the rights of holders of the
Preferred Stock, including, without limitation, (i) any increase in the
authorized number of shares of Preferred Stock in excess of 10,000,000 shares
and (ii) the issuance of any shares of Preferred Stock in excess of the number
of shares of such stock authorized in the Certificate of Designation thereof
as of the date of the original issuance of the Preferred Stock. In all such
cases each share of Preferred Stock shall be entitled to one vote. Holders of
Depositary Shares are entitled to direct voting of the shares of Preferred
Stock represented thereby.
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<PAGE>
CONVERSION RIGHTS
Each outstanding share of the Preferred Stock (and corresponding Depositary
Shares) is convertible at any time at the option of the holder thereof into
such number of whole shares of Common Stock as is equal to the Liquidation
Preference divided by an initial conversion price of $31.115, subject to
adjustment as described below (such price or adjusted price being referered to
as the "Conversion Price"). The Company may elect to pay all unpaid dividends
on the Preferred Stock which have accumulated since the Deposit Expiration
Date to the date of conversion in cash or by issuing that whole number of
shares of Common Stock, equal to the amount of accumulated and unpaid
dividends divided by 95% of the Market Value as of the conversion date. A
share of Preferred Stock called for redemption will be convertible into shares
of Common Stock up to and including but not after the close of business on the
second business day prior to the date fixed for redemption unless the Company
defaults in the payment of the amount payable upon redemption.
In the Company's discretion, no fractional shares of Common Stock or
securities representing fractional shares of Common Stock will be issued upon
conversion. Any fractional interest in a share of Common Stock resulting from
conversion will be paid in cash based on the last reported sale price of the
Common Stock on the Nasdaq National Market (or any national securities
exchange or authorized quotation system on which the Common Stock is then
listed) at the close of business on the trading day next preceding the date of
conversion or such later time as the Company is legally and contractually able
to purchase such fractional shares.
The Conversion Price is subject to adjustment (in accordance with formulas
set forth in the Certificate of Designation) in certain events, including (i)
any redemption payment or payment of a dividend (or other distribution)
payable in shares of Common Stock to all holders of any class of capital stock
of the Company (other than the issuance of shares of Common Stock in
connection with the payment in redemption for, of dividends on or the
conversion of the Preferred Stock), (ii) any issuance to all holders of shares
of Common Stock of rights, options or warrants entitling them to subscribe for
or purchase shares of Common Stock of the Company or securities convertible
into or exchangeable for shares of Common Stock of the Company at less than
Market Value as of the date of conversion or exchange; provided, however, that
no adjustment shall be made with respect to such a distribution if the holder
of shares of Preferred Stock would be entitled to receive such rights, option
or warrants upon conversion at any time of shares of Preferred Stock into
Common Stock and provided further, that if such options or warrants are only
exercisable upon the occurrence of certain triggering events, then the
Conversion Price will not be adjusted until such triggering events occur,
(iii) any subdivision, combination or reclassification of any class of Common
Stock of the Company, (iv) any distribution consisting exclusively of cash
(excluding any cash distribution upon a merger or consolidation to which the
second succeeding paragraph applies) to all holders of shares of Common Stock
of the Company in an aggregate amount that, combined together with (a) all
other such all-cash distributions made within the then-preceding 12-months in
respect of which no adjustment has been made and (b) any cash and the fair
market value of other consideration paid or payable in respect of any tender
offer by the Company or any of its subsidiaries for shares of Common Stock of
the Company concluded within the then-preceding 12-months in respect of which
no adjustment has been made, exceeds 15% of the Company's market
capitalization (defined as the product of the then-current market price of the
Common Stock times the number of shares of Common Stock then outstanding) on
the record date of such distribution, (v) the completion of a tender or
exchange offer made by the Company or any of its subdidiaries for shares of
any class of Common Stock of the Company that involves an aggregate
consideration that, together with (a) any cash and other consideration payable
in a tender or exchange offer by the Company or any of its subsidiaries for
shares of any class of Common Stock of the Company expiring within the then-
preceding 12-months in respect of which no adjustments have been made, and (b)
the aggregate amount of any such all-cash distributions referred to in (iv)
above to all holders of shares of Common Stock of the Company within the
preceding 12-months in respect of which no adjustments have been made, exceeds
15% of the Company's market capitalization just prior to the expiration of
such tender offer or (vi) a distribution to all holders of Common Stock of the
Company consisting of evidences of indebtedness, shares of capital stock other
than Common Stock of the Company or assets (including securities, but
excluding those dividends, rights, options, warrants and distributions
referred to above). No adjustment of the Conversion Price will be required to
be made until the cumulative adjustments (whether or not made) amount of 1.0%
or more of the Conversion
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<PAGE>
Price as last adjusted. The Company reserves the right to make such reductions
in the Conversion Price in addition to those required in the foregoing
provisions as it considers to be advisable in order that any event treated for
Federal income tax purposes as a dividend of stock or stock rights will not be
taxable to the recipients. In the event the Company elects to make such a
reduction in the Conversion Price, the Company will comply with the
requirements of Rule 14e-1 under the Exchange Act, and any other securities
laws and regulations thereunder if and to the extent that such laws and
regulations are applicable in connection with the reduction of the Conversion
Price.
In the event that the Company distributes rights or warrants (other than
those referred to in (ii) in the preceding paragraph) pro rata to all holders
of Common Stock of the Company, so long as any such rights or warrants have
not expired or been redeemed by the Company, the holder of any Preferred Stock
surrendered for conversion will be entitled to receive upon such conversion,
in addition to the shares of Common Stock then issuable upon such conversion
(the "Conversion Shares"), a number of rights or warrants to be determined as
follows: (i) if such conversion occurs on or prior to the date for the
distribution to the holders of rights or warrants of separate certificates
evidencing such (the "Distribution Date"), the same number of rights or
warrants to which a holder of a number of shares of Common Stock of the
Company equal to the number of Conversion Shares is entitled at the time of
such conversion in accordance with the terms and provisions applicable to the
rights or warrants and (ii) if such conversion occurs after such Distribution
Date, the same number of rights or warrants to which a holder of the number of
shares of Common Stock of the Company into which such Preferred Stock was
convertible immediately prior to such Distribution Date would have been
entitled on such Distribution Date in accordance with the terms and provisions
of and applicable to the rights or warrants. In the event the holders of the
Preferred Stock are not entitled to receive such rights or warrants, the
Conversion Price will be subject to adjustment upon any declaration or
distribution of such rights or warrants.
In case of any reclassification, consolidation or merger of the Company with
or into another person or any merger of another person with or into the
Company (with certain exceptions), or in case of any sale, transfer or
conveyance of all or substantially all of the assets of the Company (computed
on a consolidated basis), each share of Preferred Stock then outstanding will,
without the consent of any holder of Preferred Stock, become convertible only
into the kind and amount of securities, cash and other property receivable
upon such reclassification, consolidation, merger, sale, transfer or
conveyance by a holder of the number of shares of Common Stock into which such
Preferred Stock was convertible immediately prior thereto, after giving effect
to any adjustment event.
In the case of any distribution by the Company to its stockholders of
substantially all of its assets, each holder of Preferred Stock (and
corresponding Depositary Shares) will participate pro rata in such
distribution based on the number of shares of Common Stock into which such
holders' shares of Preferred Stock would have been convertible immediately
prior to such distribution, unless the amount of such distribution would
result in a payment less than the Liquidation Preference, in which case the
Liquidation Preference shall be paid.
CHANGE OF CONTROL
Notwithstanding the foregoing, upon a Change of Control (as defined below),
holders of Preferred Stock (and corresponding Depositary Shares) shall, if the
Market Value at such time is less than the Conversion Price, have a one time
option, upon not less than 30 days' notice nor more than 60 days' notice, to
convert all of their outstanding shares of Preferred Stock (and corresponding
Depositary Shares) into shares of Common Stock at an adjusted Conversion Price
equal to the greater of (i) the Market Value on the date on which a Change of
Control event occurs and (ii) 66.67% of the Market Value as of the date of
this Offering Memorandum. In lieu of issuing the shares of Common Stock
issuable upon conversion in the event of a Change of Control, the Company may,
at its option, make a cash payment equal to the Market Value of such shares of
Common Stock otherwise issuable.
The Company's Certificate of Designation defines "Change of Control" as any
of the following events: (a) the sale, lease, transfer, conveyance or other
disposition of all or substantially all of the assets of the Company
30
<PAGE>
to any "person" or "group" (within the meaning of Sections 13(d)(3) and
14(d)(2) of the Exchange Act or any successor provision to either of the
foregoing, including any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act) other than Existing Shareholders (except in connection with a
liquidation or dissolution of the Company that does not constitute a Change of
Control under clause (b) below), (b) the approval by the requisite
shareholders of the Company of a plan of liquidation or statutory dissolution
(which shall not be construed to include a plan of merger or consolidation) of
the Company, unless Existing Shareholders "beneficially own" (as defined in
Rule 13d-3 under the Exchange Act) at least the same percentage of voting
power after the consummation of such plan as before or otherwise retain the
right or ability, by voting power, to control the Person that acquires the
proceeds of such liquidation or dissolution, (c) any "person" or "group"
(within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or
any successor provision to either of the foregoing, including any group acting
for the purpose of acquiring, holding or disposing of securities within the
meaning of Rule 13d-5(b)(1) under the Exchange Act), other than Existing
Shareholders, becomes the "beneficial owner" (as so defined) of more than 35%
of the total voting power of all classes of the Voting Stock of the Company or
a successor and/or warrants or options to acquire such Voting Stock,
calculated on a fully diluted basis, provided that Existing Shareholders
"beneficially own" (as so defined) in the aggregate a percentage of such
Voting Stock or warrants having a lesser percentage of voting power than such
other "person" or "group" and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority of
the Company's Board of Directors, or (d) during any period of two consecutive
years, individuals who at the beginning of such period constituted the
Company's Board of Directors (together with any new directors whose election
or appointment by such board or whose nomination for election by the
stockholders of the Company was approved by a vote of the Existing
Shareholders or a majority of the directors then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Company's Board of Directors then in office.
Notwithstanding clause (c) above, (i) the acquisition by a Qualified Investor
of 49% or less of the Voting Stock of the Company shall not constitute a
Change of Control, and (ii) a merger or consolidation that would otherwise
constitute a Change of Control hereunder shall not constitute a Change of
Control if at least 90% of the consideration consists of common stock that is,
or upon issuance, will be traded on a United States national securities
exchange or quoted on the Nasdaq National Market. "Existing Shareholders"
means Douglas G. Smith, Madison Dearborn Capital Partners, L.P. and Allen &
Company Incorporated and their respective affiliates at the Closing Date.
"Qualified Investor" means an investment grade debt issuer approved by the
Board of Directors of the Company, which either (i) is in the
telecommunications industry or (ii) engages in a business which will benefit
from strategic synergies from an investment in the Company.
The phrase "all or substantially all" of the assets of the Company is likely
to be interpreted by reference to applicable state law at the relevant time,
and will be dependent on the facts and circumstances existing at such time. As
a result, there may be a degree of uncertainty in ascertaining whether a sale
or transfer is of "all or substantially all" of the assets of the Company.
AMENDMENT, SUPPLEMENT AND WAIVER
Without the consent of any holder of Preferred Stock, the Company may amend
or supplement the Certificate of Designation to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Preferred Stock in addition to or
in place of certificated Preferred Stock, to provide for assumption of the
Company's obligations to holders of the Preferred Stock in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the holders of the Preferred Stock or that does not
adversely affect the legal rights under the Certificate of Designation of any
such holder.
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<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion of certain of the United States Federal income tax
consequences of the purchase, ownership, and disposition of the Preferred
Stock is based upon the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations promulgated thereunder, and
administrative rulings and judicial decisions now in effect, all of which are
subject to change (possibly with retroactive effect) or different
interpretations. This summary does not purport to deal with all aspects of
United States Federal income taxation that may be relevant to an investor's
decision to purchase shares of Preferred Stock, nor any tax consequences
arising under the laws of any state, locality or foreign jurisdiction. This
summary is not intended to be applicable to all categories of investors, such
as dealers in securities, banks, insurance companies, tax-exempt
organizations, foreign persons, persons that hold the Preferred Stock or
Common Stock as part of a straddle or conversion transaction, or holders
subject to the alternative minimum tax, which may be subject to special rules.
In addition, this discussion is limited to persons who hold the Preferred
Stock or Common Stock as capital assets within the meaning of Section 1221 of
the Code. Holders of Depositary Shares will be treated for United States
Federal income tax purposes as if they were the owners of the Preferred Stock
by holding such Depositary Shares. Accordingly, references in this "Certain
United States Federal Income Tax Consequences" section to holders of the
Preferred Stock will mean both holders of shares of Preferred Stock and
holders of Depositary Shares representing shares of Preferred Stock, and
references to shares of Preferred Stock will mean both shares of Preferred
Stock and Depositary Shares. ALL PROSPECTIVE PURCHASERS OF PREFERRED STOCK ARE
ADVISED TO CONSULT THEIR OWN TAX ADVISERS REGARDING THE FEDERAL, STATE, LOCAL,
AND FOREIGN TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP, AND DISPOSITION OF
PREFERRED STOCK.
For purposes of this discussion a "U.S. Holder" means a beneficial owner of
Preferred Stock or Common Stock that for Federal income tax purposes is (i)
citizen or resident of the United States, (ii) a corporation, partnership or
entity created or organized in or under the laws of the United States or any
political subdivision thereof, (iii) an estate or trust described in Section
7701(a)(30) of the Code, or (iv) in certain circumstances, a former citizen or
resident of the United States. For purposes of this discussion, a "Non U.S.
Holder" means any person or entity that is not a U.S. Holder.
U.S. HOLDERS
INCLUSION IN INCOME
The Liquidation Preference with respect to each share of Preferred Stock
will exceed the amount the Company receives upon the issuance of the Preferred
Stock and the Preferred Stock will pay no dividends until August 1, 2001. The
precise treatment of preferred stock with these terms is not entirely clear.
However, the Company intends to treat the Preferred Stock as if it were
purchased at a discount from its Liquidation Preference and provided for
accretion in its Liquidation Preference equal to $0.875 per share on each
Deposit Payment Date, so long as the Preferred Stock remains outstanding.
Under Section 305(b)(4) of the Code, the accretion in the Liquidation
Preference of the Preferred Stock on each Deposit Payment Date should be
treated as a dividend taxable as ordinary income to U.S. Holders of the
Preferred Stock, to the extent of the Company's current and accumulated
earnings and profits as determined under U.S. Federal income tax principles.
The annual amount of the distribution on each share of Preferred Stock
resulting from the accretion will be determined under principles similar to
those applicable to original issue discount on debt obligations. To the extent
that the amount of the distribution attributable to the accretion in
Liquidation Preference on the Preferred Stock exceeds the Company's current
and accumulated earnings and profits, such accretion will be treated as
nontaxable return of capital and will reduce the adjusted tax basis of such
Preferred Stock in the hands of each U.S. Holder (but not below zero).
However, any such reduction should be offset by an increase in basis resulting
from the holder's receipt of the additional Liquidation Preference. If the
amount of the distribution attributable to any accretion in Liquidation
Preference exceeds the adjusted tax basis of the Preferred Stock in the hands
of the U.S. Holder, such excess will be treated as capital gain and will be
long-term capital gain if such U.S. Holder's holding period for the Preferred
Stock exceeds one year.
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On and after the Deposit Expiration Date, a U.S. Holder of Preferred Stock
will be entitled to receive dividends at an annual rate of 7% of the
Liquidation Preference in cash, or at the option of the Company, in the
Company's Common Stock. In the event the Company exercises its rights to pay
dividends in Common Stock, the number of shares of such Common Stock to be
distributed shall be determined by dividing the amount of cash that would be
paid by 95% of the Market Value of the Common Stock. A holder of Preferred
Stock must include in income as ordinary income the amount of any such cash
distributions and the fair market value of any Common Stock distributions to
the extent that the Company has current and accumulated earnings and profits.
To the extent that the distribution exceeds current or accumulated earnings
and profits, any distributions are first treated as a return of capital to the
extent of the U.S. Holder's basis, and thereafter as capital gain.
The Company presently does not have any current or accumulated earnings and
profits as determined under United States Federal income tax principles and it
is unlikely to have current or accumulated earnings and profits in the
foreseeable future. As a result, until such time as the Company has earnings
and profits, an increase in the Liquidation Preference on a distribution will
reduce the adjusted tax basis (but not below zero) in the hands of each U.S.
Holder of the shares of Preferred Stock. The basis reduction should be offset
for each share of Preferred Stock by a corresponding increase in tax basis for
such holder resulting from the accretion in the Liquidation Preference.
Further, until the Company has current or accumulated earnings and profits,
any accretion in the Liquidation Preference or other distributions with
respect to the Preferred Stock will not be treated as dividends for United
States Federal income tax purposes and, thus, will not qualify for any
dividends received deduction as described below. U.S. Holders would recognize
capital gain to the extent that any distribution were to exceed current and
accumulated earnings and profits and basis in their shares of Preferred Stock.
Under the Deposit Agreement, if the Company obtains the consent of certain
lenders to the Company to permit current payment of dividends on the Preferred
Stock, the Company may elect by giving notice to the Deposit Agent to have the
Deposit Account paid to the Company. In such case the Deposit Expiration Date
shall be deemed to have occurred so that the Holders of the Preferred Stock
will be entitled to receive cumulative dividends as of the date of the payment
of the Deposit Account to the Company, and the Liquidation Preference shall be
increased to equal the latest Liquidation Preference plus the amount of the
Deposit Account paid to the Company. The U.S. Holder will not recognize any
income as a consequence of this election. The tax basis of the shares of
Preferred Stock of each U.S. Holder will be increased by his share of the
Deposit Account paid to the Company.
DIVIDENDS TO CORPORATE SHAREHOLDERS
In general, a distribution that is treated as a dividend for Federal income
tax purposes and that is made to a corporate shareholder with respect to the
Preferred Stock or Common Stock will qualify for the 70% dividends-received
deduction under Section 243 of the Code, to the extent certain holding period
and other requirement are met. U.S. Holders should note, however, that there
can be no assurance that the Company will have current or accumulated earnings
and profits in the future. Accordingly, there can be no assurance that the
dividends-received deduction will apply to distributions on the Preferred
Stock or Common Stock.
COMMON STOCK--HOLDING PERIOD
A U.S. Holder's holding period for shares of Common Stock received in lieu
of cash dividends and in connection with the Company's rights to transfer
shares of Common Stock under the Deposit Agreement will commence on the day
following the date of transfer and will not include such holding period for
the shares of Preferred Stock with respect to which the shares of Common Stock
were distributed. However, a U.S. Holders holding period for Common Stock
received on conversion of the Preferred Stock will include the stockholder's
holding period for the Preferred Stock.
SALE OR REDEMPTION
Upon a sale or other taxable disposition (other than a redemption, to the
extent described in the next paragraph) of Preferred Stock or Common Stock, a
U.S. Holder will generally recognize capital gain or loss equal
33
<PAGE>
to the difference between the amount of cash and the fair market value of
property received by such holder in such sale or other taxable disposition and
such holder's adjusted tax basis in such shares. Such gain or loss will be
long-term capital gain or loss if such holder's holding period for such
Preferred Stock or Common Stock is more than one year. Capital gain on the
sale or other taxable disposition of Preferred Stock or Common Stock held by
non-corporate holders for (i) more than one year but not more than 18 months
shall be subject to a maximum tax rate of 28 percent and (ii) more than 18
months shall be subject to a maximum tax rate of 20 percent.
Any gain or loss recognized by a U.S. Holder upon redemption of the
Preferred Stock will be treated as gain or loss from the sale or other taxable
disposition of Preferred Stock, if, taking into account stock that is actually
or constructively owned as determined under Section 318 of the Code, (i) such
holder's interest in the Company's Common and Preferred Stock is completely
terminated as a result of the redemption, (ii) such holder's percentage
ownership in the Company's voting stock and Common Stock immediately after the
redemption is less than 80% of such percentage ownership immediately before
such redemption, or (iii) the redemption is "not essentially equivalent to a
dividend" (within the meaning of Section 302 of the Code). Sales and
acquisitions of Company stock occurring contemporaneously with a redemption of
Preferred Stock, which are made pursuant to an integrated plan on the part of
the U.S. Holder, may be considered for purposes of determining whether the
preceding tests are met. If a redemption of the Preferred Stock is treated as
a distribution that is taxable as a dividend, to the extent of applicable
earnings and profits, the U.S. Holder will be taxed on the payment received in
the same manner as described above, to the extent of the Holders ratable share
of earnings and profits and such holder's adjusted tax basis in the redeemed
Preferred Stock will be transferred to any remaining shares held by such
holder in the Company.
CONVERSION OF PREFERRED STOCK
A U.S. Holder of Preferred Stock will generally not recognize gain or loss
by reason of receiving Common Stock in exchange for Preferred Stock upon the
redemption or conversion of the Preferred Stock, except that gain or loss will
be recognized with respect to any cash received in lieu of fractional shares,
and the fair market value of any shares of Common Stock attributable to
dividend arrearages will be treated as a constructive distribution as
described above.
ADJUSTMENT OF CONVERSION PRICE
If at any time the Company makes a distribution of property to holders of
Common Stock that would be taxable to such stockholders as a dividend for
Federal income tax purposes and, in accordance with the antidilution
provisions, the Conversion Price of the Preferred Stock is decreased, the
amount of such decrease may be deemed to be the payment of a taxable dividend
to U.S. Holders of Preferred Stock. For example, a decrease in the Conversion
Price in the event of distributions of indebtedness or assets of the Company
will generally result in deemed dividend treatment to U.S. Holders of the
Preferred Stock to the extent of applicable earnings and profits, but
generally, a decrease in the event of stock dividends or the distribution of
rights to subscribe for the Common Stock will not result in a taxable stock
dividend.
DEPOSIT ACCOUNT
Pursuant to the terms of the Deposit Agreement, each U.S. Holder of
Preferred Stock will be treated as owning a pro-rata portion of the cash
deposited in the Deposit Account. Although there is no authority directly on
point with respect to the treatment of the Deposit Account, the Company
believes that the intended treatment is appropriate, because (1) such cash is
not subject to the claims of the Company's creditors, (2) except in the event
that the Company elects to sell additional shares of Common Stock to the
holders of the Preferred Stock in exchange for the cash in the Deposit
Account, or the Company obtains the consent of certain of its lenders to
permit payment of dividends currently on the Preferred Stock, the Company will
under no circumstances be entitled to receive the cash in the Deposit Account,
and (3) the holders are entitled to distributions of all earnings generated by
the cash held in the Deposit Account.
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<PAGE>
Cash distributions of $0.875 per share of Preferred Stock on each Deposit
Payment Date should be treated as withdrawals by the holders of the Preferred
Stock of amounts deposited in the Deposit Account. Income earned on the cash
deposited in the Deposit Account, if any, will be included in income by each
U.S. Holder of shares of Preferred Stock pro rata in proportion of the number
of shares of Preferred Stock held by such holder. Each U.S. Holder will
include such amounts in income in the same manner as though the holder
directly owned a pro rata share of the cash in the Deposit Account.
Distributions of Common Stock by the Deposit Agent to the U.S. Holders of
the Preferred Stock following an election by the Company to transfer Common
Stock to the Deposit Agent should be treated as a purchase by each holder of
Preferred Stock of such Common Stock for an amount equal to such holder's
share of the cash deposited in the Deposit Account allocated to such purchase.
To the extent that the fair market value of the Common Stock exceeds the
amount paid for such Common Stock, the excess will be treated as a
distribution on the Preferred Stock.
In the event that the Company exercises its right to have the Deposit
Account paid to the Company, the U.S. Holders of the Preferred Stock will be
treated as having made an additional payment to the Company with respect to
their Preferred Stock, and accordingly, will receive an increase in the tax
basis of their Preferred Stock.
CONSEQUENCES TO NON U.S. HOLDERS OF PREFERRED STOCK
The following is a general discussion of certain United States Federal
income and estate tax consequences of the ownership and disposition of the
Preferred Stock or Common Stock by a person who is a Non-U.S. Holder.
DIVIDENDS
Generally, dividends paid to a Non-U.S. Holder are subject to United States
withholding tax either at a rate of 30% of the gross amount of the dividend or
such lower rate as may be specified by an applicable tax treaty. Although
there is no authority on point with respect to the application of the
withholding tax to stock similar to the Preferred Stock which provides for an
accreting liquidation preference, the Company intends to treat the accretion
of the Liquidation Preference to Non-U.S. Holders in a manner analogous to
original issue discount notes. Accordingly, although the accretion in the
Liquidation Preference of the Preferred Stock on each Deposit Payment Date
will be subject to United States tax at a rate of 30% of the fair market value
of the accretion in the Liquidation Preference, or such lower rate as may be
specified by an applicable tax treaty, such tax will be collected by
withholding only when amounts are actually paid by the Company (or its agent)
to such Non-U.S. Holder.
On and after the Deposit Expiration Date, dividends paid in cash or Common
Stock will be subject to withholding at the rate of 30% (or lower treaty
rate). To the extent the Company elects to make dividend payments in Common
Stock, the Company intends to withhold a number of shares of Common Stock with
a fair market value equal to the withholding tax. Cash dividends paid to a
Non-U.S. Holder with respect to Common Stock also will be subject to
withholding at 30% or lower treaty rate.
Dividends that are effectively connected with the conduct of a trade or
business by the Non-U.S. Holder within the United States and, where a tax
treaty applies, are attributable to a United States permanent establishment of
the Non-U.S. Holder, are not subject to the withholding tax (provided the Non-
U.S. Holder files appropriate documentation, including, under current law,
Form 4224, with the Company or its agent), but instead are subject to United
States Federal income tax on a net income basis at applicable graduated
individual or corporate rates. Any such effectively connected dividends
received by a Non-U.S. Holder that is a corporation may, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate
or such lower rate as may be specified by an applicable income tax treaty.
In order to claim the benefit of an applicable tax treaty, the Company (or
its agent) may require a Non-U.S. Holder of Common Stock or Preferred Stock to
provide the Company or its agent an exemption or reduced treaty rate
certificate or letter in accordance with the terms of the treaty. In addition,
backup withholding, as discussed below, may apply in certain circumstances if
applicable certificate and other requirements are not met.
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<PAGE>
A Non-U.S. Holder of Preferred Stock or Common Stock eligible for a reduced
rate of United States withholding tax pursuant to an income tax treaty may
obtain a refund of any excess amounts withheld by filing an appropriate claim
for refund with the Internal Revenue Service.
Non-U.S. Holders should be aware that distributions in excess of current and
accumulated earnings and profits have generally been treated as dividends for
purposes of the foregoing discussion. However, recent promulgated Treasury
regulations allow corporations, in certain circumstances, to treat payments
with respect to stock as distributions other than dividends subject to
withholding to the extent of insufficient earnings and profits. Holders should
consult their own tax advisors regarding such regulations.
SALE
A Non-U.S. Holder will not be subject to United States Federal income tax on
any gain realized upon the sale of the Preferred Stock or Common Stock if such
holder has no connection with the United States other than holding the
Preferred Stock or Common Stock and in particular (i) such gain is not
effectively connected with a trade or business in the United States of the
Non-U.S. Holder, and (ii) in the case of a Non-U.S. Holder who is an
individual that has a "tax home" (as defined in Section 911(d)(3) of the Code)
in the United States, such Non-U.S. Holder is not present in the United States
for 183 days of more in the taxable year of such disposition.
A Non-U.S. Holder engaged in a trade or business in the United States whose
income from the Preferred Stock or Common Stock (including gain from the sale
thereof) is effectively connected with the conduct of such trade or business
will generally be subject to regular United States Federal income tax on such
income in the same manner as if it were a U.S. Person. Any such effectively
connected dividends received by a Non-U.S. Holder that is a corporation may,
under certain circumstances, be subject to an additional "branch profits tax"
at a 30% rate or such lower rate as may be specified by an applicable income
tax treaty.
DEPOSIT ACCOUNT
Because the Company will treat cash distributions from the Deposit Account
as non-taxable withdrawals, a Non-U.S. Holder generally will not be subject to
United states tax on such distributions. Distributions from the Deposit
Account attributable to interest earned on amounts held in the Deposit Account
and invested in United States government obligations also should be exempt
from United States withholding tax as portfolio interest provided that the
Non-U.S. Holder provides a properly completed Internal Revenue Service Form W-
8.
FEDERAL ESTATE TAX
An individual Non-U.S. Holder who is treated as the owner of the Preferred
Stock or Common Stock at the time of such individual's death or has made
certain lifetime transfers of an interest in the Preferred Stock or Common
Stock will be required to include the value of such Preferred Stock or Common
Stock in such individual's gross estate for United States Federal estate tax
purposes and may be subject to United States Federal estate tax, unless an
applicable tax treaty provides otherwise.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under certain circumstances, "information reporting" and "backup
withholding" at a rate of 31% with respect to payments of dividends and
interest is required. Non-U.S. Holders generally would be exempt from
reporting requirements and United States backup withholding with respect to
dividends payable on the Preferred Stock or Common Stock. A Non-U.S. Holder of
Preferred Stock or Common Stock that fails to certify its Non-U.S. Holder
status in accordance with the requirements of the proposed regulations, would
under certain circumstances be subject to United States backup withholding at
a rate of 31% on payments of dividends. The application for exemption is
available by providing a properly completed Internal Revenue Service Form W-8.
The payment of the proceeds of the disposition of the Preferred Stock or
Common Stock by a Non-U.S. Holder to or through the United States office of a
broker or through a non-United States branch of a United
36
<PAGE>
States broker generally will be subject to information reporting and backup
withholding at a rate of 31% unless the holder either certifies its status as
a Non-U.S. Holder under penalties of perjury or otherwise establishes an
exemption. The payment of the proceeds of the disposition by a Non-U.S. Holder
or Preferred Stock or Common Stock to or through a non-United States office of
a non-United States broker will not be subject to backup withholding or
information reporting unless the non-United States broker as certain United
States relationship.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be refunded (or credited against the holder's United
States Federal income tax liability, if any) provided that the required
information is furnished to the Internal Revenue Service.
NEW REGULATIONS
Recent Treasury regulations provide for certain new information reporting
and withholding rules with respect to Non-U.S. Holders. In general, these
regulations are effective after December 31, 1999 (subject to transition
rules). Non-U.S. Holders should consult their own tax attorneys regarding the
effect of such regulations.
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LEGAL MATTERS
The legality of the Depositary Shares, Preferred Stock and underlying Common
Stock offered hereby is being passed upon for the Company by Piper & Marbury
L.L.P., Washington, D.C., counsel for the Company.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1996 and
1997 and the consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 1997 have been audited by Coopers & Lybrand L.L.P., independent
accountants, as set forth in their report thereon and incorporated by
reference herein. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND ANY ACCOMPANYING PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE
OFFERING DESCRIBED HEREIN AND THEREIN, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE SELLING STOCKHOLDERS. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS
SUPPLEMENT SHALL CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL FOR SUCH PERSON TO MAKE AN OFFERING OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR OF SUCH PROSPECTUS SUPPLEMENT.
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TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................................................. 1
Documents Incorporated by Reference................................... 1
Risk Factors.......................................................... 3
The Company........................................................... 11
Use of Proceeds....................................................... 14
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends...... 14
Selling Stockholders.................................................. 14
Plan of Distribution.................................................. 16
Description of Capital Stock.......................................... 17
Description of the Depositary Shares.................................. 18
Description of the Preferred Stock.................................... 24
Certain United States Federal Income Tax Consequences................. 32
Legal Matters......................................................... 38
Experts............................................................... 38
</TABLE>
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[OMNIPOINT LOGO APPEARS HERE]
6,500,000 DEPOSITARY SHARES EACH REPRESENTING 1/20 OF A SHARE OF 7% CUMULATIVE
CONVERTIBLE PREFERRED STOCK, 325,000 SHARES OF 7% CUMULATIVE CONVERTIBLE
PREFERRED STOCK, 11,445,123 SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF,
OR PAYABLE AS DIVIDENDS ON, THE DEPOSITARY SHARES OR THE 7% CUMULATIVE
CONVERTIBLE PREFERRED STOCK
----------------
PROSPECTUS
----------------
, 1998
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses and costs expected to be
incurred in connection with the sale and distribution of the securities
offered hereby, other than underwriting discounts and commissions. All of the
amounts shown are estimated except the Securities and Exchange Commission
registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee................... $ 98,838
Printing expenses............................................... 75,000
Legal fees and expenses......................................... 35,000
Accounting fees and expenses.................................... 5,000
Transfer agent and registrar fees............................... 3,500
Miscellaneous expenses.......................................... 3,000
--------
Total........................................................... $220,338
========
</TABLE>
All expenses will be borne by Omnipoint Corporation.
15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law ("Section 145") permits
indemnification of directors, officers, agents and controlling persons of a
corporation under certain conditions and subject to certain limitations. The
Registrant's Bylaws include provisions to require the Registrant to indemnify
its directors and officers to the fullest extent permitted by Section 145,
including circumstances in which indemnification is otherwise discretionary.
Section 145 also empowers the Registrant to purchase and maintain insurance
that protects its officers, directors, employees and agents against any
liabilities incurred in connection with their service in such positions.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may
result in claims for indemnification by any officer or director.
16. EXHIBITS
<TABLE>
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the Registrant
(incorporated herein by reference to Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1995).
3.2 Certificate of Amendment to the Amended and Restated Certificate of
Incorporation.
3.3 Amended and Restated Bylaws of the Registrant (incorporated herein by
reference to the Company's Registration Statement on Form S-4, No. 333-
19895).
4.2 See Exhibit 3.1 and 3.2.
4.3* Certificate of Designation establishing the Voting Powers, Designations,
Preferences, Limitations, Restrictions and Relative Rights of 7%
Cumulative Convertible Preferred Stock.
4.4* Registration Rights Agreement by and among the Company, Donaldson, Lufkin
& Jenrette Securities Corporation, BancAmeric Robertson Stephens, Bear,
Stearns & Co. Inc. and Smith Barney Inc., dated May 6, 1998
4.5* Form of Depositary Share.
5.1 Opinion of Piper & Marbury L.L.P. regarding legality of the securities
being registered.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
10.1@ Registrant's Amended and Restated 1990 Stock Option Plan.
10.2@ Form of Incentive Stock Option Agreement under Registrant's 1990 Stock
Option Plan.
10.3@ Form of Stock Option Agreement under Registrant's 1990 Stock Option
Plan for non-qualified options.
10.4@ Form of Stock Option Agreement outside scope of Registrant's 1990 Stock
Option Plan for non-qualified options.
10.5@ Warrant Certificate, dated August 2, 1991, by and between the
Registrant and Allen & Company Incorporated.
10.6@ Warrant Certificate, dated August 2, 1991, by and between the
Registrant and Allen & Company Incorporated.
10.7@ Letter agreement, dated June 29, 1995, by and between the Registrant
and Allen & Company Incorporated (relating to Exhibit 10.6).
10.8 Letter Agreement of Warrant Extension, dated November 1, 1996, by and
between the Registrant and Allen & Company Incorporated (relating to
Exhibit 10.6).
10.9@ Common Stock Purchase Warrant issued March 10, 1995, granted to Madison
Dearborn Capital Partners, L.P.
10.10@ Common Stock Purchase Warrant issued March 10, 1995, granted to Madison
Dearborn Capital Partners, L.P.
10.11@ Employment Agreement, effective October 1, 1995, by and between the
Registrant, Omnipoint Communications Inc. and George F. Schmitt.
10.12@ Promissory Note, dated October 1, 1995, by George F. Schmitt.
10.13@ Stock Restriction Agreement, dated October 1, 1995, by and between the
Registrant and George F. Schmitt.
10.14@ Employment Agreement, dated April 17, 1995, by and between the
Registrant and Bradley E. Sparks.
10.15@ Promissory Note, dated April 17, 1995, by Bradley E. Sparks.
10.16@ Stock Restriction Agreement, dated April 17, 1995, by and between the
Registrant and Bradley E. Sparks.
10.17 Employment Agreement, dated November 3, 1996, by and between the
Registrant and Kjell S. Andersson (incorporated herein by reference to
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996).
10.18 Promissory Note, dated February 24, 1997, by Kjell S. Andersson
(incorporated herein by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996).
10.19 Stock Restriction Agreement, dated February 24, 1997, by and between
the Registrant and Kjell S. Andersson (incorporated herein by
reference to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996).
10.20@ Series B Convertible Preferred Stock Purchase Agreement, dated August
9, 1993, by and among the Registrant and Madison Dearborn Capital
Partners, L.P.
10.21@ Amendment No. 1 to Series B Convertible Preferred Stock Purchase
Agreement, dated June 29, 1995, by and between the Registrant and
Madison Dearborn Capital Partners, L.P.
10.22@ Series C Convertible Preferred Stock Purchase Agreement, dated June 29,
1995, by and among the Registrant and the other parties named therein.
10.23@ Amended and Restated Registration Rights Agreement, dated June 29,
1995, by and among the Registrant and the parties named therein.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.24@ First Amended and Restated Voting Agreement, dated June 29, 1995, by
and among the Registrant and the other parties named therein.
10.25@ OEM Supply Agreement for Omnipoint PCS (Personal Communication
Systems) Products, dated September 22, 1994, by and between the
Registrant and Northern Telecom Inc.
10.26@ Manufacturing License and Escrow Agreement for Personal Communication
Service Products, dated February 28, 1995, by and between the
Registrant and Northern Telecom Inc.
10.27@ Collaborative Development Agreement, dated March 1, 1995, by and
between the Registrant and Northern Telecom Inc.
10.28@ Reciprocal OEM Agreement Memorandum of Understanding, dated March 30,
1995, by and between the Registrant and Northern Telecom Inc.
10.29@ Supply Agreement, dated September 22, 1994, by and between Omnipoint
Communications Inc. and Northern Telecom Inc.
10.30@ Amendment No. 1 to Supply Agreement, dated July 21, 1995, by and
between Omnipoint Communications Inc. and Northern Telecom Inc.
10.31++ Amendment No. 2 to Supply Agreement, dated March 21, 1997, by and
between Omnipoint Communications Inc. and Northern Telecom Inc.
10.32++ Amended and Restated Loan Agreement, dated August 7, 1996, by and
between Omnipoint Communications Inc. and Northern Telecom Inc.
(incorporated herein by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996).
10.33++ Loan Agreement, dated August 7, 1996, by and between Omnipoint
Communications Inc. and Ericsson Inc., as amended (incorporated
herein by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996).
10.34@ Memorandum of Understanding, dated April 21, 1995, by and between the
Registrant and Pacific Bell Mobile Services.
10.35@ Note and Warrant Purchase Agreement dated November 22, 1995, between
the Registrant and the purchasers named therein.
10.36@ Senior Note Due 2000 issued by the Registrant on November 22, 1995 to
the holder identified therein.
10.37@ Senior Note Due 2000 issued by the Registrant on November 22, 1995 to
the holder identified therein.
10.38@+ Memorandum of Understanding, dated November 22, 1995, by and between
the Registrant and Ericsson Inc.
10.39@ Letter Agreement, dated January 24, 1996, by and between the
Registrant and Ericsson Inc.
10.40@ Letter of Intent, dated October 26, 1995, by and between the
Registrant and BellSouth Personal Communications, Inc.
10.41@ Contract for Sale of Real Estate, dated August 30, 1995, by and
between F&R Bari Realty, Ltd., Inc. and Omnipoint Communications Inc.
10.42@ Lease Agreement, dated October 15, 1995, by and between the Registrant
and Baetis Properties, Inc.
10.43++ Acquisition Agreement for Ericsson CMS 40 Personal Communications
Systems (PCS) Infrastructure Equipment, dated as of April 16, 1996,
by and between Ericsson Inc. and Omnipoint Communications
(incorporated herein by reference to the Company's Current Report on
Form 8-K, filed July 18, 1996).
10.44++ Acquisition Supply and License Agreement for Omnipoint Personal
Communications Systems (PCS) Infrastructure Equipment, dated as of
April 16, 1996, by and between Ericsson Inc. and the Registrant
(incorporated herein by reference to the Company's Current Report on
Form 8-K, filed July 18, 1996).
10.45+ Agreement for Purchase and Sale of Ericsson Inc. Masko Terminal Units,
dated as of April 16, 1996, by and between Ericsson, Inc. and
Omnipoint Communications Inc. (incorporated herein by reference to
the Company's Current Report on Form 8-K, filed July 18, 1996).
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.46++ Memorandum of Understanding, dated April 2, 1996, by and between
Orbitel Mobile Communications Inc. and the Registrant (incorporated
herein by reference to the Company's Current Report on Form 8-K,
filed July 18, 1996).
10.47@@ Letter of Intent, dated November 20, 1995, by and between the
Registrant and Western Wireless Corporation
10.48@@ Letter of Intent, dated February 26, 1996, by and between Omnipoint
Communications Inc. and American Portable Telecom, Inc.
10.49@@ Letter of Intent, dated March 22, 1996, by and between Omnipoint
Communications Inc. and American Personal Communications.
10.50@@ Letter of Intent, dated May 13, 1996, by and between the Registrant
and InterCel, Inc.
10.51@@ License Agreement, dated March 22, 1996, by and between the Registrant
and Bender & Company, Inc.
10.52@@ Second License Agreement, dated April 17, 1996, by and between
Registrant and Bender & Company, Inc.
10.53@@ Lease Agreement, dated March 1, 1996, by and between Omniset
Corporation and Roots Stone Limited Partnership.
10.54 Agreement dated as of February 24, 1997 between the Registrant and
Kjell S. Andersson, amending Employment Agreement dated November 3,
1996 (incorporated herein by reference to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996).
10.55++ Loan Agreement by and among Omnipoint MB Holdings, Inc., Ericsson Inc.
and certain other lenders named therein, dated July 25, 1997
(incorporated herein by reference to the Company's Current Report on
Form 8-K, filed August 27, 1997).
10.56++ Loan Agreement by and among OPCS Philadelphia Holdings, Inc., Ericsson
Inc. and certain other lenders named therein, dated July 25, 1997
(incorporated herein by reference to the Company's Current Report on
Form 8-K, filed March 26, 1998).
10.57++ Loan Agreement by and among Omnipoint Midwest Holdings, LLC, Northern
Telecom Inc. and certain other lenders named therein, dated January
30, 1998 (incorporated herein by reference to the Company's Current
Report on Form 8-K, filed March 26, 1998)
10.58++ Loan Agreement by and among Omnipoint Corporation, Omnipoint
Communications Inc., DLJ Capital Funding Inc. and certain other
lenders named therein, dated February 17, 1998 (incorporated herein
by reference to the Company's Current Report on Form 8-K, filed on
10.59++ Note Purchase Agreement by and among Omnipoint Corporation, Omnipoint
Communications Inc., IBJ Schroder Bank & Trust Company and certain
other purchasers named therein, dated February 17, 1998 (incorporated
herein by reference to the Company's Current Report on Form 8-K,
filed March 26, 1998).
10.60* Purchase Agreement by and among the Company, Donaldson, Lufkin and
Jenrette, Securities Corporation, BancAmeric Robertson Stephens,
Bear, Stearns & Co. Inc. and Smith Barney Inc., dated May 1, 1998.
10.61* Deposit Agreement by and among the Company, Marine Midland Bank, and
the holders from time to time of the Depositary Shares, dated May 6,
1998.
10.62* Deposit Account Agreement by and between the Company and The First
National Bank of Maryland, dated May 6, 1998.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Piper & Marbury L.L.P. (to be included in Exhibit 5.1
hereto).
24.1 Power of Attorney (included in signature pages).
</TABLE>
- --------
@ Incorporated herein by reference to the Company's Registration Statement on
Form S-1, No. 33-98360.
@@ Incorporated herein by reference to the Company's Registration Statement on
Form S-1, No. 33-03739.
* Incorporated herein by reference to Company's Quarterly Report on Form 10-Q
for the quarter year ended March 31, 1998.
+ Portions of this Exhibit were omitted and have been filed separately with
the Secretary of the Commission pursuant to the Registrant's Application
Requesting Confidential Treatment under Rule 406 of the Act, which
application was granted by the Commission.
++ Portions of this Exhibit were omitted and filed separately with the
Secretary of the Commission pursuant to the Registrant's Application
Requesting Confidential Treatment under Rule 24b-2 under the Exchange Act
of 1934.
II-4
<PAGE>
17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1993 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Bethesda, State of Maryland, on June
30, 1998.
OMNIPOINT CORPORATION
By: /s/ Douglas G. Smith
-----------------------------
Douglas G. Smith
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Edwin M. Martin, Jr., Secretary of the
registrant, his or her true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, from such person and in each
person's name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this registration
statement, any registration statement relating to this registration statement
under Rule 462 and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said attorney-
in-fact and agent may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Douglas G. Smith President, Chief June 30, 1998
- ------------------------------------- Executive Officer,
DOUGLAS G. SMITH Chairman of the Board
and Director
/s/ George F. Schmitt Executive Vice President June 30, 1998
- ------------------------------------- and Director, President
GEORGE F. SCHMITT of Omnipoint
Communications
Services, LLC
/s/ Bradley E. Sparks Chief Financial Officer June 30, 1998
- -------------------------------------
BRADLEY E. SPARKS
/s/ Evelyn Goldfine Chief Administrative June 30, 1998
- ------------------------------------- Officer and Director
EVELYN GOLDFINE
</TABLE>
S-1
<PAGE>
<TABLE>
<S> <C> <C>
/s/ James J. Ross Director and Vice June 30, 1998
- ------------------------------------- Chairman of the Board
JAMES J. ROSS
/s/ Richard L. Fields Director June 30, 1998
- -------------------------------------
RICHARD L. FIELDS
/s/ Paul J. Finnegan Director June 30, 1998
- -------------------------------------
PAUL J. FINNEGAN
/s/ James N. Perry, Jr. Director June 30, 1998
- -------------------------------------
JAMES N. PERRY, JR.
/s/ Arjun Gupta Director June 30, 1998
- -------------------------------------
ARJUN GUPTA
</TABLE>
S-2
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
OMNIPOINT COPRORATION
Pursuant to Section 242 of the General Corporation Law of the State of
Delaware
Omnipoint Corporation (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
FIRST: In accordance Section 141(f) of the General Corporation Law of the
State of Delaware, the Board of Directors of the Corporation adopted
resolutions pursuant to Section 242 of the General Corporation Law of the
State of Delaware, setting forth an amendment to the Certificate of
Incorporation of the Corporation and declaring said amendment to be advisable.
The stockholders of the Corporation, duly approved the proposed amendment by
the affirmative vote of the holders of at least a majority of the Common Stock
at the Annual Meeting of Stockholders in accordance with Sections 211 and 242
of the General Corporation Law of the State of Delaware. The resolution
setting forth the amendment is as follows:
RESOLVED: That paragraph A. of Article FOURTH of the Amended and Restated
Certificate of Incorporation of the Corporation be deleted in its entirety and
the following paragraph shall be inserted in lieu thereof:
Authorized Capital. The total number of shares of stock which the
Corporation shall have authority to issue is (i) 200,000,000 shares of
Common Stock, $0.01 par value per share and (ii) 10,000,000 shares of
Preferred Stock, $0.01 par value per share.
SECOND: This amendment to the Amended and Restated Certificate of
Incorporation shall be effective as of the date set forth below.
THIRD: The foregoing amendment to the Amended and Restated Certificate of
Incorporation has been advised by the Board and approved by the holders of at
least a majority of the outstanding capital stock of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed
by Douglas G. Smith, President, this 27th day of May, 1998.
/s/ Douglas G. Smith
-------------------------------------
Douglas G. Smith, President
<PAGE>
[LETTERHEAD OF PIPER & MARBURY APPEARS HERE]
June 30, 1998
Omnipoint Corporation
3 Bethesda Metro Center
Bethesda, MD 20814
Gentlemen:
We have acted as counsel to Omnipoint Corporation, a Delaware corporation
(the "Company"), in connection with the registration under the Securities Act
of 1933, as amended (the "1933 Act"), relating to the offering from time to
time by certain holders of (i) 6,500,000 depositary shares (the "Depositary
Shares"), each representing 1/20 of a share of the Company's 7% Cumulative
Convertible Preferred Stock, $.01 par value per share (the "Preferred Stock"),
(ii) 325,000 shares of the Preferred Stock, (iii) 10,445,123 shares (the
"Conversion Shares") of the Company's Common Stock, $.01 par value per share
(the "Common Stock") which may be issued upon conversion of the Depositary
Shares or Preferred Stock, and (iv) up to 1,000,000 shares (the "Dividend
Shares") of Common Stock issuable as payment of dividends on the Preferred
Stock. This opinion is rendered to you in connection with the Registration
Statement on Form S-3, including all pre-effective and post-effective
amendments thereto (the "Registration Statement"), for the aforementioned
sale, filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act.
In rendering this opinion, we have examined the Company's Certificate of
Incorporation and By-Laws, the proceedings of the Board of Directors of the
Company relating to the issuance of the securities aforementioned and such
other documents, instruments and matters of law as we have deemed necessary to
the rendering of this opinion. In such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to
us as originals, and the conformity with originals of all documents submitted
to us as copies.
Based upon the foregoing, we are of the opinion that:
1. The Preferred Stock (which are represented by Depositary Shares) are duly
authorized, validly issued, fully paid and nonassessable. The Dividend Shares,
when authorized by the Company's Board of Directors as payment of dividends
with respect to the outstanding Preferred Stock in accordance with the
Certificate of Designation in connection with the Preferred Stock (the
"Certificate of Designation"), will be duly authorized, validly issued, fully
paid and non-assessable.
2. The Conversion Shares initially issuable upon conversion of the Preferred
Stock pursuant to the Certificate of Designation, have been duly and validly
authorized and reserved for issuance, and will be duly and validly issued,
fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving our consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of
the 1933 Act or the Rules and Regulations of the Commission thereunder.
Very truly yours,
/s/ PIPER & MARBURY L.L.P.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-3 of
our report dated March 30, 1998, on our audits of the financial statements and
financial statement schedule of Omnipoint Corporation. We also consent to the
references to our firm under the captions "Experts".
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
June 30, 1998
