<PAGE>
===============================================================================
As filed with the Securities and Exchange Commission on April 25, 1996
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GEOTEK COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
22-2358635
(I.R.S. Employer Identification Number)
20 Craig Road
Montvale, New Jersey 07645
(201) 930-9305
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
--------------------
Robert Vecsler, Esq.
General Counsel and Secretary
Geotek Communications, Inc.
20 Craig Road
Montvale, New Jersey 07645
(201) 930-9305
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With a copy to:
Stephen T. Burdumy, Esq.
Todd L. Silverberg, Esq.
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
(215) 568-6060
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
------------------------------
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, check the following box: / /
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, other than securities offered only in connection with dividend or interest
investment plans. 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, please 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. / /
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================================================
Proposed Proposed
Maximum Maximum Amount of
Title of each class of securities to be Amount to be Aggregate Price Aggregate Registration
registered registered Per Unit Offering Price Fee
=============================================================================================================================
<C> <C> <C> <C> <C>
12% Senior Subordinated Convertible Notes $75,000,000 100% $75,000,000 $25,862.07
Due 2001
=============================================================================================================================
Common Stock, par value $ .01 per share, $75,000,000(1) -- -- --
issuable upon conversion of the Notes
=============================================================================================================================
Common Stock, par value $ .01 per share 10,116,963 $9.875(2) $99,905,009(2) $34,450.00
=============================================================================================================================
</TABLE>
(1) No additional consideration will be received by the Registrant for this
Common Stock. Therefore, pursuant to Rule 457(i) under the Securities Act
of 1933, as amended (the "Securities Act"), no additional fee is payable
for the registration of such Common Stock.
(2) Based on the closing sale price of the Registrant's Common Stock as
reported on The NASDAQ National Market ("NNM") on April 24, 1996.
Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) of the Securities Act.
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 of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
===============================================================================
<PAGE>
GEOTEK COMMUNICATIONS, INC.
$75,000,000 Aggregate Principal Amount 12% Senior Subordinated
Convertible Notes due 2001
$75,000,000 of Common Stock
10,116,963 Shares of Common Stock
This prospectus concerns the offer and sale by certain Selling
Shareholders (as described herein), from time to time, of $75.0 million
aggregate principal amount of 12% Senior Subordinated Convertible Notes due 2001
(the "Notes") and up to an aggregate of $75.0 million of the common stock, par
value $. 01 per share ("Common Stock"), issuable upon conversion of the Notes,
(the "Note Shares") of Geotek Communications, Inc., a Delaware Corporation (the
"Company"). This prospectus also covers the issuance and sale to holders of the
Notes of the Note Shares upon conversion of the Notes.
The Notes were issued and sold on March 5, 1996 and March 20, 1996 in
transactions exempt from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"). The Notes represent all of the Notes
issuable under an indenture (the "Indenture") dated March 5, 1996 between the
Company and The Bank of New York, as trustee (in such capacity, the "Trustee").
Each Note is in the principal amount of $1,000 and, beginning on the first
anniversary of the issuance date of the Notes, is convertible into shares of the
Company's common stock, par value $.01 per share ("Common Stock"), at a
conversion price equal to the lower of (i) $9.50 per share and (ii) the weighted
average market price of a share of Common Stock for the ten Trading Day (as
defined herein) period immediately following the 90th day after the issuance
date of the Notes, but shall in no event be less than $8.25 per share. The
conversion price is subject to adjustment under certain circumstances as set
forth herein. Cash interest on the Notes is payable semiannually on February 15
and August 15, commencing August 15, 1996. The Notes mature on February 15, 2001
and are redeemable prior to February 15, 1999. On or after February 15, 1999,
the Notes are redeemable at the Company's option, in whole or in part, at the
price set forth herein plus accrued and unpaid interest, if any, to the
redemption date. In addition, at any time on or after September 1, 1997, the
Company may, at its option, require the conversion of all, but not less than
all, of the then outstanding Notes into Common Stock at the conversion price
then in effect if the Closing Price (as defined herein) of the Common Stock for
20 of the 30 Trading Days (as defined herein) and for the five Trading Days
immediately preceding the expiration of a Mandatory Conversion Calculation
Period (as defined herein) equals or exceeds 160% of the conversion price then
in effect. In the event of a Change of Control (as defined herein), each holder
of a Note may require the Company to repurchase all of such holder's Notes at a
price equal to 101% (or 100% in the case of certain Changes of Control) of the
principal amount thereof plus accrued and unpaid interest, if any, to the
purchase date, although there can be no assurance that the Company will have
sufficient resources to effect such a repurchase.
(continued on next page)
This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. These documents are available upon
request from General Counsel, Geotek Communications, Inc., 20 Craig Road,
Montvale, New Jersey 07645, (201) 930-9305.
SEE "RISK FACTORS" FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
----------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE
-----------------------------
The date of this Prospectus is __________________ ___, 1996.
<PAGE>
The Notes are unsecured senior subordinated obligations of the Company
that rank senior in right of payment to all subordinated indebtedness of the
Company. The Notes will rank pari passu in right of payment to all existing and
future senior subordinated indebtedness of the Company and subordinate in right
of payment to all existing and future Senior Indebtedness (as defined herein) of
the Company. The Indenture under which the Notes were issued permits the Company
and its subsidiaries to incur additional indebtedness under certain
circumstances. See "Description of the Notes."
The Notes are a new issue of securities, have no established trading
market and may not be widely distributed. Smith Barney Inc. (the "Initial
Purchaser") has advised the Company that it may, from time to time, act as a
broker or dealer with respect to trading of the Notes; however, it is not
obligated to so do and any such activity may be discontinued at any time.
Therefore, there can be no assurance that an active market for the Notes will
develop. If such a trading market develops for the Notes, future trading prices
will depend on many factors, including, among other things, prevailing interest
rates, the Company's results of operations and the market for similar
securities. Depending on such factors, the Notes may trade at a discount from
their face value. See "Risk Factors-Lack of Public Market for Notes; Liquidity."
The Notes may be sold by the Selling Securityholders from time to time directly
to purchasers or through agents, underwriters or dealers. See "Plan of
Distribution." If required, the names of any such agents or underwriters
involved in the sale of the Notes in respect of which this Prospectus is being
delivered and the applicable agent's commission, dealer's purchase price or
underwriter's discount, if any, will be set forth in an accompanying supplement
to this Prospectus (the "Prospectus Supplement"). The Selling Securityholders
will receive all of the net proceeds from the sale of the Notes and will pay all
underwriting discounts and selling commissions, if any, applicable to the sale
of the Notes. The Company is responsible for payment of all other expenses
incident to the offer and sale of the Notes. The Selling Securityholders and any
broker-dealers, agents or underwriters which participate in the distribution of
the Offered Notes may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commission received by them or purchase by them of the
Notes at a price less than the initial price to the public may be deemed to be
underwriting commissions or discounts under the Securities Act. See "Plan of
Distribution" for a description of indemnification arrangements.
This Prospectus also concerns the offer and sale by certain Selling
Shareholders, from time to time, of an aggregate of 9,285,500 shares of Common
Stock (the "Vanguard Shares"). Of such 9,285,500 shares: (i) 2,500,000 shares of
Common Stock were issued by the Company on February 23, 1994 to Vanguard
Cellular Systems, Inc. ("Vanguard"); (ii) 300,000 shares of Common Stock were
issued by the Company on each of February 23, 1995 and February 23, 1996 to
Vanguard pursuant to the terms of a Management Consulting Agreement (the
"Management Agreement");(iii) an additional 300,000 shares of Common Stock are
issuable by the Company to Vanguard pursuant to the Management Agreement on each
of February 23, 1997, 1998 and 1999; and (iv) an aggregate of 5,285,500 shares
of Common Stock are issuable by the Company to Vanguard upon the exercise of
options granted to Vanguard on February 23, 1994 (the "Vanguard Options"). The
Vanguard Options contain the following terms: (i) the Series A Vanguard Option
entitles Vanguard to purchase an aggregate of 1,000,000 shares of Common Stock
and is exercisable, at any time and from time to time, prior to September 1,
1996 (the "Series A Expiration Date") at an exercise price of $15.00 per share,
subject to adjustments; (ii) the Series B Vanguard Option entitles Vanguard to
purchase an aggregate of 1,714,200 shares of Common Stock and is exercisable, at
any time and from time to time, prior to September 1, 1996 (the "Series B
Expiration Date") at an exercise price of $17.00 per share, subject to
adjustments, provided, however, that Vanguard in its sole discretion has the
right, at any time prior to the Series B Expiration Date, to extend such
expiration date to March 1, 1997, subject to an adjustment of the then
applicable exercise price; and (iii) the Series C Vanguard Option entitles
Vanguard to purchase an aggregate of 2,571,300 shares of Common Stock and is
exercisable at any time and from time to time, prior to the earlier of the (a)
first anniversary of the Series B Expiration Date as the same may have been
extended, (b) if the Series A Option shall expire without being exercised in
full, the Series A Expiration Date and (c) if the Series B Option shall expire
without being exercised in full, the Series B Expiration Date, as the same may
have been extended (the "Series C Expiration Date") at an exercise price of
$17.00 per share, subject to adjustment, provided, however, that Vanguard in its
sole discretion has the right, at any time prior to the Series C Expiration
Date, to extend such expiration date by six months, subject to an increase in
the then applicable exercise price. The Vanguard Options are exercisable, at the
election of Vanguard, either in full or from time to time in part prior to the
applicable expiration date; provided, however, that (i) if the Series A Option
is not exercised in full prior to the Series A Expiration Date, then the Series
B Option and Series C Option shall immediately terminate and (ii) if the Series
B Option is not exercised in full prior to the Series B Expiration Date (as the
same may have been extended) the Series C Option shall immediately terminate.
If Vanguard fails to exercise any of the Vanguard Options, then the Management
Agreement will immediately terminate. If Vanguard exercises the Series C Option
in full prior to February 23, 1998, then the 300,000 shares to be issued
pursuant to the Management Agreement on February 23, 1999 will be issued on
February 23, 1998.
This Prospectus also concerns the offer and sale by Vanguard, from time
to time, of an aggregate of 531,463 shares of Common Stock issuable upon the
conversion of 531,463 shares of the Company's Series L Cumulative Convertible
Preferred Stock, par value $.01 per share (the "Series L Preferred Stock"). The
Series L Preferred Stock was issued by the Company on May 25, 1995. Each share
of Series L Preferred Stock is immediately convertible into the number of shares
of Common Stock as is determined by dividing (i) the sum of the $9.408 stated
value per share of the Series L Preferred Stock plus all unpaid dividends
accrued and deemed to have accrued, if any, with respect to such shares of
Series L Preferred Stock through the last dividend payment date by (ii) a
conversion price of $9.408 per share, subject to certain adjustments. Assuming
there are no accrued and unpaid dividends on the Series L Preferred Stock at the
time of conversion, the Series L Preferred Stock is convertible into an
aggregate of 531,463 shares of Common Stock. The shares of Common Stock issuable
upon conversion of the Series L Preferred Stock are hereinafter referred to as
the "Series L Shares."
2
<PAGE>
This Prospectus also concerns the offer and sale by certain Selling
Shareholders, from time to time, of $2.0 million of Common Stock issuable to
such Selling Shareholders on April 26, 1996 (the "MacDermott Shares"). The Note
Shares, Vanguard Shares, Series L Shares and MacDermott Shares are hereinafter
collectively referred to as the "Shares." The Shares and the Notes are
hereinafter collectively referred to as the "Securities."
The Company's Common Stock is listed on The NASDAQ National Market
("NNM") under the symbol "GOTK" and on the Pacific Stock Exchange ("PSE") under
the symbol "GEO." On April 24,1996, the closing sale price for the Company's
Common Stock, as quoted on the NNM, was $9.875 per share.
Pursuant to this Registration Statement, the Shares may be sold by the
Selling Shareholders, from time to time while this Registration Statement is
effective, on the PSE, NNM or otherwise at prices and terms prevailing at the
time of sale, at prices and terms related to such prevailing prices and terms,
in negotiated transactions or at fixed prices. Although none of the Selling
Shareholders has advised the Company that it currently intends to sell the
Shares pursuant to this Registration Statement, any Selling Shareholder may
choose to sell all or a portion of their respective Shares from time to time
in any manner described herein. The methods by which the Shares may be sold
by the Selling Shareholders include: (i) ordinary brokerage transactions, (ii)
transactions which involve crosses or block trades or any other transactions
permitted by the PSE or NNM, (iii) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus,
(iv) "at the market" to or through market makers or into an existing market for
the Shares, (v) in other ways not involving market makers or established
trading markets, including direct sales to purchasers or sales effected
through agents, (vi) through transactions in options (whether exchange-listed
or otherwise) or (vii) any combinations of any such methods of sale. In
effecting sales, brokers and dealers engaged by the Selling Shareholders may
arrange for other brokers or dealers to participate. Brokers or dealers may
receive commissions or discounts from the Selling Shareholders to sell a
specified number of shares at a stipulated price per share, and, to the extent
such a broker or dealer is unable to do so acting as agent for the Selling
Shareholders, may purchase as principal any unsold shares at the price required
to fulfill such broker or dealer commitment to the Selling Shareholders.
Brokers or dealers who acquire shares as principals may thereafter resell such
shares from time to time in transactions (which may involve crosses and book
transactions and which may involve sales to and through other brokers or
dealers, including transactions, of the nature described above) in the over-the-
counter market, in negotiated transactions or otherwise, at market prices and
terms prevailing at the time of sale, at prices and terms related to such
prevailing prices and terms, in negotiated transactions or at fixed prices, and
in connection with the methods as described above. The Shares held by the
Selling Shareholders may also be sold hereunder by brokers, dealers, banks or
other persons or entities who receive such Shares as a pledgee of the Selling
Shareholders. The Selling Shareholders and brokers and dealers participating in
sales of Shares may be deemed to be "underwriters," as defined under the
Securities Act of 1933 (the "Securities Act"). Any profits realized by them in
connection with the sale of the Shares may be considered to be underwriting
compensation.
The Registration Rights Agreements pursuant to which the Notes, Note
Shares, Vanguard Shares and Series L Shares are being registered for issuance or
resale, as the case may be, provide that the Company will indemnify any such
person deemed an underwriter and the Selling Securityholders (other than the
MacDermott Shareholders (as defined herein) against certain liabilities,
including civil liabilities under the Securities Act, or will contribute to
payments such underwriters or Selling Securityholders may be required to make
in respect thereof.
<TABLE>
<CAPTION>
=============================================================================================================================
Price Underwriting Discounts Proceeds to Proceeds to the
to Public and Commissions the Company Selling Shareholders
=============================================================================================================================
<S> <C> <C> <C> <C>
Per Share............... $(1)(2) $(1)(2) $0(3) $(1)(4)
Total................... $(1)(2) $(1)(2) $0(3) $(1)(4)
=============================================================================================================================
</TABLE>
(1) It is anticipated that the Notes registered for resale hereunder will
be sold by the Selling Shareholders in transactions not involving
established trading markets at negotiated prices, from time to time.
The Note Shares registered for issuance and sale hereunder will be
issued and sold to the Selling Shareholders upon conversion of the
Notes at a conversion price equal to the lower of (i) $9.50 per share
and (ii) the weighted average market price of a share of Common Stock
for the ten Trading Day period immediately following the 90th day after
issuance date of the Notes, but shall in no event be less than $8.25
per share. It is anticipated that the Shares registered for resale
hereunder will be sold by the Selling Shareholders in market or private
transactions at prevailing prices, from time to time.
(2) No underwriting discounts or commissions are payable in connection
with the issuance of the Note Shares.
(3) The Company will not receive any proceeds from the resale of the Notes
or Shares by the Selling Shareholders. Upon the issuance and sale of
the Note Shares, an aggregate of $75,000,000 principal amount of the
Company's indebtedness will be retired.
(4) The Company will pay all expenses of the offering of the Securities to
which this Prospectus relates, other than, in connection with the
resales thereof by the Selling Shareholders, any underwriting or
broker-dealer discounts or commissions agreed to be paid by the Selling
Shareholders.
--------
3
<PAGE>
ADDITIONAL INFORMATION
The Company has filed a registration statement on Form S-3 (together
with any amendments thereto, the "Registration Statement") with the Commission
under the Securities Act with respect to the Securities. This Prospectus, which
constitutes a part of the Registration Statement, omits certain information
contained in the Registration Statement and reference is made to the
Registration Statement and the exhibits and schedules thereto for further
information with respect to the Company and the Securities offered hereby.
Statements contained in this Prospectus as to the contents of certain documents
filed with, or incorporated by reference in the Registration Statement are not
necessarily complete, and in each instance reference is made to such document,
each such statement being qualified in all respects by such reference.
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"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices located at 7 World Trade Center, New York, NY 10048, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can also be obtained at prescribed rates
from the Public Reference Section of the Commission, Washington, D.C. 20549. The
Company's Common Stock is listed on both the NNM and the PSE and such reports,
proxy statements and other information filed with the Commission should also be
available for inspection at the offices of the National Association of
Securities Dealers, Inc., Report Section, 1735 K Street, N.W., Washington, D.C.
20006, and at the PSE facilities located at 115 Sansome Street, San Francisco,
California.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company incorporates by reference into this Prospectus the
documents listed below:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1995; and
(2) The Company's Current Reports on Form 8-K, dated June 18, 1993 (as
amended on Form 8-K/A filed on or about July 12, 1993), June 8, 1994 (as amended
on Form 8-K/A filed on or about June 27, 1995), July 5, 1994 (as amended on Form
8-K/A filed on or about September 14, 1994), August 2, 1994 (as amended on Form
8-K/A filed on or about October 13, 1994 and Form 8- K/A filed on or about May
25, 1995) and March 4, 1996.
(3) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A, dated December 15, 1992.
All reports and other documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the filing of a post-effective amendment to the
Registration Statement which indicates that all securities offered hereby have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of the filing of such reports and documents. Any statement contained in a
document incorporated by reference herein shall be deemed to be modified or
superseded for all purposes to the extent that a statement contained herein or
in any other subsequently filed document which also is incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide, without charge, to each
person to whom a copy of this Prospectus has been delivered, upon the written or
oral request of such person, a copy of all documents incorporated by reference
in this Prospectus, other than exhibits to such documents unless such exhibits
are specifically incorporated by reference herein. Requests for such copies
should be directed to Corporate Secretary, Geotek Communications, Inc., 20 Craig
Road, Montvale, New Jersey 07645; telephone number (201) 930-9305.
The Company will furnish its shareholders with annual reports
containing audited financial statements and reports by independent accountants.
In addition, the Company will distribute unaudited quarterly reports to its
shareholders for the first three quarters of each fiscal year.
4
<PAGE>
ADDRESS AND TELEPHONE NUMBER
The mailing address and telephone number of the Company's
principal executive offices are as follows:
Geotek Communications, Inc.
20 Craig Road
Montvale, New Jersey 07645
Telephone Number: (201) 930-9305
5
<PAGE>
RISK FACTORS
The securities described herein involve a substantial degree of risk.
Prospective purchasers should consider, among other things, the following:
Commercial Implementation of GEONET(TM)
The Company's current business plan contemplates the commercial
implementation of its integrated digital voice and data wireless communications
network ("GEONET") in 12 U.S. target markets by the end of 1996 and in 36 U.S.
target markets by the end of 1997. In each of these markets, the Company expects
to gradually add subscribers and increase its service offerings. The Company
expects to continue to generate negative cash flow in each of its target markets
until it achieves an adequate subscriber base in such market.
The successful and timely implementation of GEONET will depend upon a
number of factors, many of which are beyond the control of the Company,
including, but not limited to, the timely and cost-effective manufacture,
construction and integration of the system infrastructure and software, the
acquisition and control of additional radio spectrum, the procurement and
preparation of base station and remote sites, the receipt of all necessary
regulatory approvals and the need for substantial additional financing. See "-
Dependence on Third Party Providers," "- Need for Spectrum; Need for
Transmission Sites," "- Government Regulation" and "- Need for Additional
Financing." The Company has experienced delays in its roll-out schedule related
primarily to the development of its subscriber unit from its preproduction form
to a full production unit. The Geotek subscriber units are currently being
manufactured in their full production form and the Company does not expect to
experience additional delays as a result of the production of its current
subscriber units. However, there can be no assurances in this regard and the
failure or delay with respect to any of the aforementioned items could adversely
affect the timing of the implementation of GEONET in one or more of the
Company's U.S. target markets, which could have a material adverse effect on the
Company.
The Company will make continuing hardware and software modifications to
GEONET prior to, during and after the system's commercial roll-out. For example,
the Company must integrate the initial GEONET data applications, which are
expected to be completed in the first half of 1996, with the initial GEONET
voice applications. Subsequent applications also will need to be integrated with
existing GEONET applications. There can be no assurance that the Company will be
able to satisfactorily complete such modifications and/or integration efforts,
or that they will be able to be completed in a manner that enables the Company
to offer its GEONET services on a profitable basis. A failure by the Company to
satisfactorily complete any such modifications or integration efforts or to
complete them on a cost-effective basis could have a material adverse effect on
the Company.
To date, no other wireless service provider has been successful at
providing the level of integrated voice and data services contemplated by the
Company. Accordingly, in implementing GEONET, the Company may encounter
unforeseen technical issues. In addition, each of the Company's U.S. target
markets is expected to present unique technical issues to the Company due to
differences in geography and the level of local development. Technical
difficulties in the operation and/or performance of GEONET also may be
experienced as additional subscribers are added to the system in a given market
or as the coverage area in any market is increased. There can be no assurance
that the Company will be able to adequately address any such issues in any given
market or that such issues will be able to be addressed in a cost-effective
manner. Any failure by the Company to adequately address such issues or to
address them in a cost-effective manner could have a material adverse effect on
the Company.
Limited Operating History; Management of Growth
The Company entered the wireless communications industry in 1992 and,
therefore, has limited experience in developing, establishing and operating
wireless communications systems. To date, most of the Company's wireless
communications services experience has been in foreign markets and has involved
different technology than that to be employed by the Company in its U.S. target
markets. In addition, the Company's only experience to date in the United States
with respect to its digital wireless communications services has been testing
GEONET in Philadelphia and providing wireless communication services to
customers in Philadelphia (begining in January 1996) and Washington, Baltimore
and New York (begining in March 1996). Prospective investors, therefore, have
limited historical financial information about the Company on which to make a
determination as to the prospects for the Company's U.S. wireless communications
operations or financial condition and as to an investment in the Securities
offered hereby.
Although the Company has added experienced senior management and has
filled a substantial number of sales and field service positions during the last
year, the Company will need to rapidly and significantly increase the number of
technical and sales personnel that it employs in its target markets as the
6
<PAGE>
roll-out of GEONET progresses. The Company's success will depend upon its
ability to continue to attract, motivate, train and manage additional employees.
Management's ability to manage the Company's growth effectively also will
require it to significantly expand its operational, financial and management
systems. The failure of the Company to manage its growth effectively would have
a material adverse effect on the Company's future operations.
Need for Spectrum; Need for Transmission Sites
The Company requires additional spectrum to add capacity and to service
anticipated demand in certain of its target markets, including in certain of its
1996 U.S. target markets. The Company also requires additional spectrum to
initiate services in certain of its 1997 target markets. Moreover, a significant
portion of the Company's existing radio spectrum in Philadelphia, New York City,
Washington, Chicago, Dallas, Miami and Houston is subject to management
agreements pursuant to which Motorola, Inc. ("Motorola") is licensed to use the
radio spectrum. The Company cannot utilize this radio spectrum for GEONET
services until such management agreements are terminated. In November 1994,
Motorola and NEXTEL Communications, Inc. ("NEXTEL") entered into a consent
decree with the federal government pursuant to which NEXTEL and Motorola agreed,
upon effectiveness of the consent decree, to take steps to reduce their
ownership and management of radio spectrum in certain U.S. markets including
each of the above-referenced markets, so that they collectively own and/or
manage no more than thirty 900 MHz channels in such markets. The consent decree
became effective on July 25, 1995. On January 12, 1996, the Company entered into
an agreement with Motorola pursuant to which Motorola, among other things,
vacated all of these channels on April 1, 1996.
Certain agreements pursuant to which the Company has the right to
acquire spectrum are subject to regulatory approval. Although the Company
believes that such approval will be forthcoming prior to its expected roll-out
in each such market, there can be no assurance that such approvals will be
received on a timely basis or at all. The failure by the Company to obtain any
such approvals could have a material adverse effect on the Company.
In an effort to acquire sufficient spectrum in each of its target
markets in which it does not have sufficient spectrum to initiate service and to
add additional capacity in certain of its other U.S. target markets, the Company
participated in the Federal Communication Comission's (the "FCC") 900 MHz
spectrum auctions which ended on April 15, 1996. The Company was the successful
bidder on 181 10-channel blocks in 42 regional service areas known as Market
Trading Areas ("MTA") within the United States. Its successful bids for these
frequency blocks total $30,965,290. Upon award of these MTA licenses, the
Company can greatly expand its coverage area. As an MTA licensee in a service
area, the Company will be permitted to operate throughout the MTA on its
designated frequencies except where an incumbent licensee is already operating.
In many markets, the Company was the successful bidder on frequency blocks where
it is already the incumbent licensee. In certain MTAs, the frequency block on
which the Company was the successful bidder is encumbered by an existing
licensee. In such an event, the Company will seek to acquire access to the
encumbered spectrum through cooperative or management agreements or may seek to
acquire the incumbent license from its licensee, although there can be no
assurances it will be able to do so. In some markets, other entities secured an
MTA license surrounding an area where the Company is licensed on a site specific
basis. In these circumstances, the Company may either attempt to acquire the MTA
license from the winning bidder, or remain as the incumbent, but in such an
event will be required to construct the facilities in accordance with the
Company's Rule Waiver (as defined under "- Government Regulation"). Failure to
construct pursuant to the Rule Waiver in these instances will result in
cancellation of the Company's license. In addition, there can be no assurance
that any licenses currently owned or acquired in the future by the Company will
be renewed. The failure of the Company to renew existing or future Specialized
Mobile Radio ("SMR") licenses could have a material adverse effect on the
Company. A failure by the Company to obtain sufficient radio spectrum on
commercially acceptable terms could have a material adverse effect on the
Company. See "- Commercial Implementation of GEONET."
There are only a limited number of existing communications towers
capable of providing the Company with optimal coverage area for its radio
transmissions and that are capable of supporting the Company's transmission
equipment. In the event the Company cannot obtain leases for existing towers, it
may be required to purchase sites, obtain necessary permits and build such
towers, a process which the Company estimates could take up to one year to
complete for each tower. If the Company is required to build new towers, the
roll-out of GEONET in one or more target markets could be delayed, which could
have a material adverse effect on the Company.
Deficiency of Earnings; Net Losses; Substantial Indebtedness
On a consolidated basis, the Company experienced net losses from
continuing operations of $50.4 million, $42.4 million and $87.2 million for the
years ended December 31, 1993, December 31, 1994 and December 31, 1995,
respectively. In addition, the Company had a deficiency of earnings before
interest, taxes, depreciation and amortization ("EBITDA") of $15.2 million,
$34.2 million and $63.3 million for the years ended December 31, 1993, December
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31, 1994 and December 31, 1995, respectively. The Company anticipates that its
net operating losses from operations and its EBITDA deficiency will increase
significantly during the roll-out of GEONET. There can be no assurance that the
Company will ever operate at profitable levels or have positive EBITDA. Until
sufficient cash flow is generated from operations, the Company will have to
utilize its capital resources or external sources of funding to satisfy its
working capital needs. In the event the Company cannot achieve profitability or
have positive EBITDA, it may not be able to make required payments on the Notes.
The Company has significant indebtedness, a substantial portion of
which is represented by its 15% Senior Secured Discount Notes due 2005 (the
"Senior Discount Notes") which have an aggregate principal amount at maturity of
$227.7 million and are senior in right of payment to the Notes. Although no
payments of interest or principal are due on the Senior Discount Notes in the
immediate future, the Company will have significant debt service obligations
beginning in July 2000. See "- No Security for Notes; Subordination."
In addition, on December 21, 1995, Geotek Financing Corporation
("GFC"), a newly incorporated wholly owned subsidiary of the Company, entered
into a loan agreement with Hughes Network Systems, Inc. ("HNS"). Pursuant to
such agreement, HNS has agreed to provide GFC with up to $24.5 million of
financing, in the form of a convertible note bearing interest at a rate of 12%
per annum (the "HNS Note"), for use in connection with the purchase of
additional 900 MHz licenses to be utilized in the commercial implementation of
GEONET (the "HNS Licenses"). The HNS Note matures two years from the date of the
initial drawdown. The HNS Note is collateralized by a pledge of the stock of the
subsidiary holding the HNS Licenses and a guarantee by the Company. The
Company's guarantee of the HNS Note shall constitute Senior Indebtedness. See "-
No Security for Notes; Subordination" and "Description of the Notes -
Subordination." The HNS Note is convertible, at the option of HNS, into shares
of Common Stock during the eighteen month period beginning six months after the
initial drawdown at an exercise price equal to the lesser of 90% of the market
price per share of Common Stock at the time of conversion and $9.75 per share.
The Company anticipates borrowing the full amount of the HNS Note by June 30,
1996.
In addition, on April 5, 1996, the Company and S-C Rig Investments -
III, L.P. ("S-C Rig") entered into a Senior Loan Agreement pursuant to which S-C
Rig will make a $40.0 million unsecured credit facility available to the Company
(the "S-C Rig Credit Facility"). All borrowings under the S-C Rig Credit
Facility are required to be made on or prior to April 5, 1998, accrue interest
at a rate of 10% per annum and mature four years from the date of the final
borrowing thereunder. The Company is obligated to pay S-C Rig a fee equal to 3%
of each borrowing under the S-C Rig Credit Facility at the time of such
borrowing. Borrowings under the S-C Rig Credit Facility will constitute Senior
Indebtedness of the Company. In connection with the establishment of the S-C Rig
Credit Facility, the Company issued to S-C Rig a five-year warrant to purchase
approximately 4.2 million shares of Common Stock, subject to adjustment in
certain circumstances (the "S-C Rig Warrant Shares"), at an exercise price of
$9.50 per share, subject to adjustment in certain circumstances. Such warrant is
exercisable at any time and from time to time after such date that the Company
amends its articles of incorporation to allow for the reservation of the S-C Rig
Warrant Shares.
The Company also anticipates seeking additional financing which may
impose additional and earlier debt service obligations on the Company. See "--
Need for Additional Financing." The degree to which the Company is leveraged may
impair the ability of the Company to obtain additional financing in the future
for working capital, capital expenditures, acquisitions or other general
corporate purposes. In addition, the indenture governing the Senior Discount
Notes and certain documents executed in connection therewith (collectively, the
"Senior Notes Indenture") impose significant operating and financial
restrictions on the Company, affecting, among other things, the ability of the
Company to incur indebtedness, make prepayments of certain indebtedness, pay
common stock dividends, make investments, engage in transactions with
stockholders and affiliates, issue capital stock of its subsidiaries, create
liens, sell assets and engage in mergers and acquisitions. Although the Senior
Notes Indenture contains various exceptions that are generally designed to allow
the Company to operate its business without undue restraint, these restrictions,
in combination with the leveraged nature of the Company, could limit the ability
of the Company to effect future financings, respond to changing market
conditions and otherwise may restrict corporate activities.
The Company's business plan assumes the roll-out of GEONET in each of
its U.S. target markets and substantial growth in the Company's subscriber base.
There can be no assurance that the Company will be able to achieve the growth
contemplated by its business plan. If such growth is not achieved, the Company
may not be able to make required payments on the Notes and may have to refinance
the Notes in order to repay these obligations. No assurance can be given that
the Company would be able to refinance the Notes.
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Need for Additional Financing
The Company's existing cash on hand and expected cash flow from
operations will not be sufficient to fund the Company's full roll-out of GEONET.
The Company estimates that it will need additional financing in an aggregate
amount of approximately $200.0 million for the full roll-out of GEONET in all of
its 36 target markets through 1997. In the event the Company is unable to raise
such financing on a timely basis, it may be required to adjust its roll-out
schedule and may experience delays in initiating or expanding its service in
certain markets. The Company believes that the macrocellular architecture of
GEONET will allow the Company to adjust its aggregate cash expenditures by
focusing its activities in certain markets while reducing its planned
investments in other markets.
The Company's need for additional financing will increase if the
Company experiences delays in the commercial implementation of GEONET, cost
overruns or unanticipated cash needs. In this regard, the Company has
experienced certain delays in its roll-out schedule in the past. See " -
Commercial Implementation of GEONET." Moreover, additional financing may be
necessary to satisfy the terms of certain financing transactions, including, but
not limited to, possible redemption obligations of the Company in connection
with the Company's preferred stock. Additional financing also may be required to
fund acquisitions of additional spectrum and businesses. The amount of
additional funding required will depend upon the timing of such expenditures,
the availability of cash flow from operations and, to the extent applicable, the
availability of lease and vendor financing. It is presently anticipated that
additional financing, if obtained, would be obtained from one or more sources,
including, but not limited to, equity or debt financing (whether through public
or private offerings), strategic partners, joint ventures, vender financing,
leasing arrangements or a combination thereof. The Senior Notes Indenture limits
the ability of the Company to incur additional indebtedness and engage in
certain other financing transactions. There can be no assurance that additional
financing will be available to the Company on terms desirable to the Company or
at all.
Competition
Although the Company believes that the quality, array and flexibility
of services to be offered by the Company through GEONET will meaningfully
differentiate such services from those offered by other wireless communications
providers in the Company's target markets, the Company will face significant
competition from such other providers. The Company expects to experience
competition for each type of service it intends to offer from existing dispatch,
cellular telephony, paging and public data service providers. In addition, the
Company expects to experience competition from manufacturers of Private Mobile
Radio ("PMR") equipment, which target existing private network operators and SMR
customers and urge them to build or upgrade their own private networks rather
than utilize SMR service providers. Many of these providers and manufacturers
are larger, more established, have more experience in the telecommunications
industry, have greater name recognition, have larger sales staffs and/or have
greater financial resources than the Company.
NEXTEL has announced plans to construct a nationwide digital Enhanced
Specialized Mobile Radio ("ESMR") network and is offering services in several
cities. NEXTEL has also secured a significant number of 800 MHz SMR channels in
most U.S. markets. In addition, to the extent that Motorola is the largest
provider of PMR equipment, Motorola may be deemed to be an indirect competitor
of the Company. Moreover, recent regulatory changes may permit the Bell
Operating Company's ("BOCs") to enter the Commercial Mobile Radio Service
("CMRS") marketplace. See " - Governmental Regulation."
The Company also may face competition from technologies and services
introduced in the future. In March 1995, the FCC completed auctions for wideband
Personal Communications Services ("PCS") licenses on a MTA basis. The wideband
PCS auction winners have already begun to provide service. In December 1995, the
FCC commenced its auction of 493 broadband basic trading area PCS licenses. In
addition, the Commission has also licensed national and regional narrowband PCS
licenses. Additional narrowband PCS licenses on an MTA basis will be issued
under government regulation in the future. Narrowband PCS service will be
similar to paging services already offered and may compete with the Company's
SMR proposed service. The FCC also intends to license additional spectrum for
other wireless services. It is also possible that satellite technology
ultimately could be developed to permit urban use equal to or superior to that
available through SMR systems, which would result in increased competition for
the Company's services. The commercialization or further development of any such
technologies could have a material adverse effect on the Company.
See "- Rapid Technological Changes."
Many of the target customers for GEONET currently use other wireless
communications services. In order to be successful, the Company will need to
migrate a portion of its target customers from their existing services to those
provided by the Company over GEONET. The Company's ability to migrate its target
customers over to its services will be highly dependent on the perceived utility
of the Company's services to its target customers as compared to the services
currently utilized by such customers. Because there currently is no integrated
wireless communications network commercially available that is comparable to
that expected to be offered by the Company over GEONET, the extent of the demand
for the Company's wireless communication services cannot be predicted with any
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degree of certainty. The demand for the Company's digital wireless
communications services also could be affected by other matters beyond its
control, such as the future cost of subscriber equipment, marketing and pricing
strategies of competitors and general economic conditions.
The Company also expects to experience competition for radio spectrum
from existing and future providers of wireless communications services and for
communications tower space. See "- Need for Spectrum; Need for Transmission
Sites."
The Company also experiences competition for each of its products and
services other than GEONET in the markets in which it sells such products and
services. Such competition is expected to remain strong for the foreseeable
future.
Government Regulation
The licensing, construction, operation and acquisition of SMR systems
in the United States is regulated by the FCC under the Communications Act of
1934, as amended (the "Communications Act"). During 1994, the FCC initiated
several regulatory proceedings with wide-ranging implications for the wireless
telecommunications industry. A primary intent of these amendments was to
encourage competition among mobile communications service providers by removing
regulatory distinctions between common carriers such as cellular telephone
companies and private carriers such as SMR service providers. These regulations
may materially impact the Company's operations in the future. For example, the
Company will be required to provide services on a "nondiscriminatory basis" and
on terms that are not "unjust and unreasonable," as such terms are defined by
the Communications Act. In addition, the FCC may, in the future, require that
the Company provide equal access to its wireless services to other wireless and
wireline communications providers and interconnection to wireline and wireless
entities. The FCC may, in the future, specify by rule other common carrier
regulations that would apply to commercial mobile services providers such as the
Company. Moreover, the FCC did not delay the effective date of the applicability
of its rules concerning the 25% limitation on foreign investment in any entity
holding an FCC license. These limitations may affect the Company's ability to
secure foreign financing through the sale of shares of Common Stock or Common
Stock equivalents and to issue Common Stock in the acquisition of foreign
subsidiaries. In a recent decision, the Commission revised standards for
regulating entry of foreign carriers and their affiliates into the U.S. market
for international telecommunications services. The FCC will apply these
standards in the application process for foreign entry, principally by taking
into consideration whether "effective competitive opportunities" exist for U.S.
carriers in the destination markets of foreign carriers seeking to enter the
U.S. international services market. In addition, and of specific impact for the
Company, the FCC determined that it will examine reciprocal foreign market
competitive opportunities in considering requests by CMRS providers to exceed
foreign investment in excess of the existing 25% benchmark. The Company cannot
predict the effect of any of these regulations or any future regulation adopted
by the FCC on the Company's operations. Moreover, there has been little
experience in the interpretation and implementation of these regulations. Future
interpretations or practices with respect to such regulations could have a
material adverse effect on the Company.
The FCC granted the Company a waiver (the "Rule Waiver") which
permitted the Company to construct and activate certain systems it acquired on a
longer schedule than would otherwise be permitted under applicable FCC
regulations. In the event the Company fails to construct or activate such
systems in accordance with the dates set forth in the Rule Waiver, the FCC could
revoke the Rule Waiver and the Company would consequently lose all of the
frequencies covered by such waiver which have not been constructed or activated.
The Rule Waiver is currently subject to a pending challenge that was filed by a
third party with whom the Company failed to negotiate a satisfactory management
agreement. The Company believes that this challenge is without merit and is
vigorously opposing it. A loss of the frequencies covered by the Rule Waiver
that have not been constructed or activated would have a material adverse effect
on the Company. The Rule Waiver will not be necessary for any additional
spectrum which the Company acquired through the FCC's 900 MHz spectrum auctions
described below, although the Rule Wavier will continue to be necessary in
certain circumstances for licenses acquired by the Company prior to such
auctions.
The Company participated in the FCC's 900 MHz spectrum auctions which
ended on April 15, 1996. The Company was the successful bidder on 181 10 channel
blocks in 42 MTA service areas, and its successful bids for these frequency
blocks total $30,965,290. Upon award of these MTA licenses, the Company can
greatly expand its coverage area. As an MTA licensee in a service area, the
Company will be permitted to operate throughout the MTA on its designated
frequencies except where an incumbent licensee is already operating. In many
markets, the Company was the successful bidder on frequency blocks where it is
already the incumbent licensee. In certain MTAs, the frequency block on which
the Company was the successful bidder is encumbered by an existing licensee. In
such an event, the Company will seek to acquire access to the encumbered
spectrum through cooperative or management agreements or may seek to acquire the
incumbent license from its licensee, although there can be no assurances it will
be able to do so. See "-Need for Spectrum; Need for Transmission Sites." In some
markets, other entities secured an MTA license surrounding an area where the
Company is licensed on a site specific basis. In these circumstances, the
Company may either attempt to acquire the MTA license from the winning bidder,
or remain as the incumbent, but in such an event will be required to construct
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the facilities in accordance with its Rule Waiver. Failure to construct pursuant
to the Rule Waiver in these instances will result in cancellation of the
Company's license. In addition, there can be no assurance that any licenses
currently owned or acquired in the future by the Company will be renewed. The
failure of the Company to renew existing or future SMR licenses could have a
material adverse effect on the Company. See "Need for Spectrum; Need for
Transmission Sites."
All of the equipment utilizing the Company's technology, to the extent
it is used to send or receive signals, must meet FCC criteria. Although GEONET
base stations and current subscriber units have received such approval, there
can be no assurance that the future generations of subscriber units will meet
such criteria. A failure of such subscriber units or any of the Company's other
equipment to meet FCC standards could have a material adverse effect on the
Company.
Early this year, the President of the United States signed into law the
Telecommunications Act of 1996 (the "Telecommunications Act") which imposes
sweeping reform of telecommunications policy. Although the majority of the
Telecommunications Act's measures will directly impact large common carriers,
cable and broadcast operators, and internet service providers, many of the
Telecommunications Act's provisions will have an effect upon the CMRS
marketplace, and upon the Company. In particular, the Telecommunications Act
may: (i) require CMRS providers to offer unblocked access to telephone toll
services; (ii) require the Company to contribute to a Universal Service Fund;
(iii) require local exchange (telephone) carriers ("LECs") to establish
reciprocal compensation arrangements for CMRS providers for the origination and
termination of calls; and (iv) require the Company to ensure that its equipment
is accessible to persons with disabilities. All of these provisions of the
Telecommunications Act which may have an effect upon the Company will be the
subject of FCC rule making proceedings during the next 15 months. The FCC has
been granted authority to forbear some of these requirements where appropriate.
Accordingly, it is currently difficult to predict if and how the provisions of
the Act will impact upon the Company, although such impact could be materially
adverse to the Company.
Future changes in regulation or legislation affecting digital wireless
telecommunications service or the allocation by the FCC or Congress of
additional spectrum for services that compete with such service could adversely
affect the Company's business. See "- Competition."
Dependence on Third Party Providers
The Company's digital wireless telecommunications system is being
enhanced and commercialized by its subsidiary, PowerSpectrum, Ltd. ("PST").
However, the development by PST of the technology and systems is dependent in
large part upon the efforts of Rafael Armament Development Authority ("Rafael"),
a PST contractor, to adapt frequency hopping from a military to a commercial
application, to integrate the frequency hopping technology with other digital
technologies required for optimal commercial deployment of GEONET and, as
discussed below, for the cost-effective manufacture of the base station
hardware. In this regard, approximately 90 employees of Rafael are presently
engaged on a full-time subcontract basis in the further development of FHMA.
Rafael's employees are represented by a labor union, and, from time to time,
there have been labor disputes between Rafael and its employees which have
resulted in slow-downs. To date, these slow-downs have not had a material effect
upon the Company's business. There can be no assurance, however, that any future
disputes will not have a material adverse effect on the development or
introduction of GEONET services by the Company in its U.S. target markets. In
addition, if Rafael reduces its commitment to PST or continuing development
efforts are not successful, the Company's prospects could be materially
adversely affected.
Neither the Company nor PST manufacture the system architecture,
hardware and mobile subscriber units necessary for the commercial implementation
of GEONET. Rafael entered into contracts with PST pursuant to which Rafael will
manufacture the system hardware for GEONET on a schedule which is intended to
enable the Company to meet its projected roll-out. Third parties, including
Mitsubishi Consumer Electronics America ("Mitsubishi"), HNS, a unit of GM Hughes
Electronics, and Kenwood Corporation of Japan ("Kenwood"), will manufacture
subscriber units and certain other components of the system hardware for GEONET
on a schedule based upon the Company's projected roll-out. There can be no
assurance that such third parties will deliver such equipment on a timely basis
or that the Company will be able to successfully integrate such components and
hardware in a cost effective system on a timely basis, if at all. The Company
has only a single manufacturing source for certain of the components of the
GEONET system hardware, including the base stations and subscriber units.
Although the Company believes that it can obtain all components necessary to
build GEONET from other sources, delays may be encountered in the event of a
component shortage because of the time it may take to identify substitute
sources and manufacture substitute components. A failure by the Company to
obtain hardware components on a timely basis or at satisfactory prices could
adversely affect the ability of the Company to roll-out and market GEONET, which
could have a material adverse effect on the Company. See "- Commercial
Implementation of GEONET."
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The Company has entered into an agreement with IBM Corporation ("IBM")
to manage the construction of the GEONET stations and the installation of FHMA
equipment in the Company's U.S. target markets. The Company has also engaged,
and intends to engage, other third party contractors to manage all or certain
aspects of such construction or installation in certain of its U.S. target
markets. A failure by IBM or such other contractors to properly manage the
preparation and construction of the Company's base stations and remote sites
could have a material adverse effect on the Company. See "- Commercial
Implementation of GEONET".
Rapid Technological Changes
The telecommunications industry is subject to rapid and significant
changes in technology which could lead to new products and services that compete
with those offered by the Company or could lower the cost of current competing
products and services to the point where the Company's products and services
could become non-competitive and the Company could be required to reduce the
prices of its services. While the Company is not aware of any proposed changes
that will materially affect the attractiveness of its product and service
offerings, the effect of technological changes on the businesses of the Company
cannot be determined. In the future, the Company expects to experience
competition from new technologies such as ESMR networks, PCS and possibly
satellite technology, as well as from advances with respect to existing
technologies such as cellular, paging and mobile data transmission. See "-
Competition."
No Security for Notes; Subordination
The Notes represent general unsecured obligations of the Company and
are subordinate in right of payment to the prior payment in full of all Senior
Indebtedness of the Company, whether outstanding on the date of the Indenture or
thereafter incurred (including all indebtedness outstanding under the Senior
Discount Notes, the $24.5 million HNS Note and the $40.0 million S-C Rig Credit
Facility. Although the Senior Notes Indenture restricts the total indebtedness
that may be incurred by the Company, such restrictions are subject to
significant limitations and there is no limitation on the amount of such
indebtedness that may be incurred as Senior Indebtedness. As a result of the
Company's holding company structure, the Notes are also effectively subordinate
to all existing and future liabilities of the Company's subsidiaries. See "-
Holding Company Structure." At December 31, 1995, assuming that the $24.5
million HNS Note and the $40.0 million S-C Rig Credit Facility had been in place
and fully borrowed against on that date, the aggregate amount of Senior
Indebtedness was approximately $179.0 million.
The Company may not make any payment on account of the principal of,
premium, if any, or interest on any Notes or on account of the purchase or
redemption or other acquisition of the Notes, if a default in the payment of
principal of (or premium, if any) or interest on any Senior Indebtedness has
occurred and is continuing or if any event of default with respect to any Senior
Indebtedness has occurred and is continuing and has resulted in the acceleration
of the maturity thereof. Upon any payment or distribution of assets of the
Company upon liquidation, dissolution, reorganization or any similar proceeding,
the holders of Senior Indebtedness will be entitled to receive payment in full
before the holders of the Notes are entitled to receive any payment. By reason
of such subordination, in the event of the Company's insolvency, creditors of
the Company who are not holders of the Notes may recover more, ratably, than the
holders of the Notes. Moreover, any holder of indebtedness of the Company
secured by assets of the Company will be entitled to payment of its indebtedness
out of the proceeds of its collateral prior to the holders of the Notes. It is
possible that there would be no assets remaining after satisfaction of secured
and unsubordinated claims from which claims of the holders of Notes could be
satisfied, or if any assets remain, such assets may be insufficient to satisfy
fully such claims. See "Description of Notes - Subordination."
Holding Company Structure
The Notes are obligations exclusively of the Company, which is a
holding company. Since the operations of the Company currently are conducted
entirely through subsidiaries, the cash flow of the Company and its ability to
service its debt, including the Notes, are dependent upon the cash flows of such
subsidiaries and the distribution of those cash flows to the Company, or upon
loans or other payments of funds by such subsidiaries to the Company. The
Company's subsidiaries are separate and distinct legal entities and have no
obligation, contingent or otherwise, to pay any amounts due pursuant to the
Notes or to make any funds available therefor, whether by dividends, loans or
other payments. In addition, the payment of dividends and certain loans and
advances to the Company by such subsidiaries may be subject to certain statutory
or contractual restrictions, are contingent upon the earnings of such
subsidiaries and are subject to various business considerations. The Notes are
effectively subordinate to all indebtedness and other liabilities and
commitments (including trade payables and lease obligations) of the Company's
subsidiaries. Any right of the Company to receive assets of any such subsidiary
upon the liquidation or reorganization of any such subsidiary (and the
consequent right of the holders of the Notes to participate in those assets)
will be effectively subordinated to the claims of that subsidiary's creditors,
except to the extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinate
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to any security in the assets of such subsidiary and any indebtedness of such
subsidiary senior to that held by the Company. As of December 31, 1995, the
Company's subsidiaries had approximately $52.2 million of liabilities (excluding
intercompany indebtedness and excluding any such indebtedness guaranteed by the
Company which constitutes Senior Indebtedness).
Certain of the Company's subsidiaries are not wholly-owned and certain
subsidiaries are indirectly owned by the Company as a result of its majority
ownership of other entities. Although the Company has a sufficient interest in
its subsidiaries to be able to exercise control over them, the Company may owe a
fiduciary duty to the holders of various minority interests in its subsidiaries.
Accordingly, the Company may not be able to exercise unfettered control over
such subsidiaries and may be required to deal with such subsidiaries on terms no
less favorable to such subsidiaries than could be obtained from unaffiliated
third parties. In addition, dividends or other distribution paid or made by such
subsidiaries must be paid or made on a pro rata basis to all stockholders.
Dependence on Key Personnel
The success of the Company will depend greatly upon the active
participation and the experience of its management. The loss of the services of
Yaron Eitan, the Company's President and Chief Executive Officer, could
adversely affect the conduct of the Company's business. In addition, the
successful implementation of the Company's business plan will depend, to a large
extent, upon the ability of the Company's and its subsidiaries' engineers and
scientific personnel to perfect and improve upon existing and proposed products.
The loss of some or all of such personnel, or the inability of the Company to
attract additional personnel, or the inability of such persons to design such
systems or to continue product enhancement will directly inhibit the ability of
the Company to sell its products and services and to operate profitably.
Uncertain Value of FCC Licenses
A significant portion of the Company's assets consist of intangible
assets, principally FCC licenses and agreements to acquire and/or use FCC
licenses held by others, the value of which will depend significantly upon the
success of the Company's business, the growth of the wireless communications
industry in general, FCC actions and a variety of other factors. Such intangible
assets constitute a significant portion of the collateral securing the Senior
Discount Notes. Moreover, any transfer of a FCC license is subject to the
approval of the FCC, which approval may be withheld for a variety of reasons. In
the event of a default on the Notes or liquidation of the Company, there can be
no assurance that the future fair value of these assets would be sufficient to
satisfy the Company's obligations under the Notes, after the satisfaction of the
Company's obligations to the holders of Senior Indebtedness.
Risks of International Business
The Company operates in and sells products and services to clients in
various countries and certain of its products and components are manufactured
abroad. The Company's research and development activities are reliant upon
foreign providers. Accordingly, the Company is subject to the risks inherent in
conducting business across national boundaries, including, but not limited to,
currency exchange rate fluctuations, international incidents, military
outbreaks, economic downturns, government instability, nationalization of
foreign assets, government protectionism and changes in governmental policy, any
of which risks could have a material adverse impact on the Company.
Influence by Significant Stockholders; Preemptive Rights
As of March 31, 1996, approximately 25% of the total voting power of
the Company's Common Stock (on a fully diluted basis, but without giving effect
to the exercise of the options held by Vanguard and the exercise of the warrants
held by S-C Rig, were beneficially owned by the directors and executive officers
of the Company and their affiliates. Vanguard holds the Vanguard Options to
purchase approximately 5.3 million shares of Common Stock and S-C Rig holds
warrants to purchase approximately 4.8 million shares of Common Stock. The
exerciseablity of the warrants held by S-C Rig is subject to the Company's
stockholders approving an amendment to the Company's Certificate of
Incorporation to increase the authorized shares of Common Stock. Consequently,
the Company's directors and executive officers will be able to exert significant
influence with respect to all matters upon which stockholder approval is
required. Certain decisions concerning the operations of financial structure of
the Company may present conflicts of interest between the owners of the
Company's capital stock and the holders of the Notes. For example, if the
Company encounters financial difficulties or is unable to pay its debts as they
mature the interests of the Company's equity holders might conflict with those
of the holders of the Notes. In addition, the equity investors may have an
interest in pursuing acquisitions, divestitures, financings or other
transactions that, in their judgment, could enhance their equity investment,
even though such transactions might involve risk to the holders of the Notes.
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Pursuant to certain agreements among them, certain of the principal
stockholders of the Company have the right to require the other stockholders to
cause (to the extent permitted by law and to the extent within such other
stockholders' control) the directors of the Company to vote, or refrain from
voting, in accordance with such stockholders' direction with respect to the
election of directors. In addition, S-C Rig and Vanguard have preemptive rights
with respect to certain issuances of voting securities by the Company which
permit them to purchase voting securities of the Company at the same price and
on the same terms as the Company may offer to third parties, in an amount
sufficient to maintain their respective percentage interests in the voting
securities of the Company on a fully-diluted basis. The Company also has granted
to S-C Rig, Vanguard and certain other holders of preferred stock the right to
elect additional directors to the Board of Directors of the Company upon the
occurrence of certain events of default under certain series of the Company's
outstanding preferred stock. The operation of such provisions could result in
such stockholders exerting significant influence over the Board of Directors of
the Company.
Transactions with Affiliates
During the period since its inception, the Company has undertaken a
wide variety of financing and merger/acquisition activity which has resulted in
its present corporate and financial structure. Included in such activity have
been transactions which have involved persons who now serve, or who did serve at
the time, as directors and officers of the Company or persons or entities
related to such persons. In every instance where such transactions have involved
any such persons or entities, the specific transaction has been approved
unanimously by directors of the Company, including all disinterested and outside
directors, with the affected parties abstaining. It is the Company's view that
each such transaction has been on terms no less favorable to the Company than
other similar transactions available to the Company with unaffiliated parties,
if available at all. In most of such instances, such transactions have been the
Company's only recourse to meet financing needs and/or business goals. Despite
the foregoing, prospective purchasers may wish to consider the circumstances in
which such transactions were made, the terms of such transactions and the
Company's possible alternative courses of action. The Company may enter into
transactions in the future with affiliates in order to meet its financing needs
and/or business goals.
Patent Issues
The Company protects its proprietary information by way of
confidentiality and non-disclosure agreements with employees and third parties
who may have access to such information. The Company continually reviews its
technology developments in order to file patent applications and has filed
patent applications with respect to certain aspects of its FHMA technology and
GEONET in Israel and the United States and expects to file additional patent
applications in Israel and the United States. Generally, the Company intends to
file all patent applications in the United States and Israel and in such other
countries as it deems appropriate. There can be no assurance that any such
applications will be granted. There can be no assurance that any patents issued
will afford meaningful protection against competitors with similar technology or
that any patents issued will not be challenged by third parties. There also can
be no assurance that others will not independently develop similar technologies,
duplicate the Company's technologies or design around the patented aspects of
any technologies developed by the Company. Many patents and patent applications
have been filed by third parties with respect to wireless communications
technology. The Company does not believe that its technology infringes on the
patent rights of third parties. However, there can be no assurance that certain
aspects of the Company's technology will not be challenged by the holders of
such patents or that the Company will not be required to license or otherwise
acquire from third parties the right to use certain technology. The failure to
overcome such challenges or obtain such licenses or rights could have a material
adverse effect on the Company's operations.
Lack of Public Market for the Notes; Liquidity
The Notes are a new issue of securities, have no established trading
market and may not be widely distributed. The Company has been advised by the
Initial Purchaser that it may, from time to time, act as a broker or dealer with
respect to trading of the Notes; however, it is not obligated to do so and any
such activity may be discontinued at any time without notice. The Company does
not intend to list any of the Notes on any exchange and there can be no
assurance as to the development of any market or the liquidity of any market
that may develop for any of the Notes. Moreover, if a market for any of the
Notes does develop, such Notes could trade at a substantial discount from their
issue price. If a market for the Notes does not develop, purchasers may be
unable to resell such Notes for an extended period of time, if at all. Future
trading prices of the Notes will depend upon many factors, including among other
things, prevailing interest rates, the Company's consolidated operating results
and the market for similar securities, which market is subject to various
pressures, including, but not limited to, fluctuating interest rates.
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Dividends on Common Stock Not Likely
The Company has not declared or paid any cash dividends on its Common
Stock since commencing operations and does not anticipate paying any dividends
on its Common Stock in the foreseeable future. At present, the Company is
obligated to pay, for a five-year period following the issuance of the Company's
Series H Cumulative Convertible Preferred Stock, cumulative dividends of
$2,000,000 per year on the Series H Cumulative Convertible Preferred Stock, in
cash, and, for a five-year period following the issuance of the Company's Series
I Cumulative Convertible Preferred Stock and Series K Cumulative Convertible
Preferred Stock, respectively, cumulative dividends equaling $700,000 per year
on the Series I Cumulative Convertible Preferred Stock and $700,000 per year on
the Series K Cumulative Convertible Preferred Stock, in cash or shares of Common
Stock of the Company, before any cash dividends may be paid on its Common Stock.
In addition, the Company is presently obligated to pay cumulative annual
dividends of $750,000 per year on the Company's Series L Cumulative Convertible
Preferred Stock, and cumulative annual dividends of $988,125 per year on the
Company's Series M Cumulative Convertible Preferred Stock, in cash or shares of
Common Stock, before any cash dividends may be paid on its Common Stock. At
present, the Company is current in payment of all required dividends on its
outstanding preferred stock. In addition, the terms of certain indebtedness of
the Company prohibit, during the term of such indebtedness, the declaration or
payment of any dividend on the Company's Common Stock (other than in shares of
Common Stock).
Shares of Common Stock Reserved For Issuance; Shares of Common Stock Eligible
for Sale; Dilution.
As of March 31, 1996, the Company has an aggregate of approximately
56,900,000 issued and outstanding shares of Common Stock. In addition, the
Company presently has reserved for issuance an aggregate of approximately
49,000,000 shares of Common Stock issuable pursuant to (i) outstanding vested
and non-vested options, warrants and similar rights; (ii) conversion of
outstanding convertible securities of the Company (including shares issuable
upon conversion of the Company's preferred stock and the Note Shares); and (c)
contingent obligations to issue additional shares. Subject to certain
limitations, the persons holding options and convertible securities may obtain
the shares of Common Stock underlying such options, warrants and convertible
securities at any time. The issuance of a large number of shares of Common Stock
would dilute the percentage interest of other existing stockholders of the
Company.
Pursuant to the Company's Restated Certificate of Incorporation, the
Company currently has 99 million authorized shares of Common Stock. In order to
ensure that the Company had the sufficient amount of Common Stock reserved for
the issuance of the Note Shares, Vanguard and certain officers of the Company
waived their respective rights to receive an aggregate of 7,435,500 shares of
the Company's Common Stock pursuant to certain options and other agreements. The
Company intends to seek stockholder approval to amend its Restated Certificate
of Incorporation to increase its number of authorized shares of Common Stock to
an amount in excess of the amount which will be required to allow the Company to
reserve for issuance (i) the full number of the waived shares and (ii) the S-C
Rig Warrant Shares. The waived shares include 900,000 shares of Common Stock
issuable to Vanguard during the next three years pursuant to the Management
Agreement and 5,285,500 shares issuable upon the exercise of the Vanguard
Options (collectively, the "Waived Shares"). In the event the Company does not
reserve by August 30, 1996 a sufficient number of the shares of Common Stock to
allow the issuance of all of the Waived Shares, none of the Waived Shares will
be issuable and in lieu of such issuance, the Company will be required to pay
Vanguard, as liquidated damages, an amount equal to the fair market value of the
Waived Shares.
The Company has in the past registered for offer and sale under the
Securities Act certain of the issued and outstanding shares of Common Stock and
certain of the shares of Common Stock issuable upon the exercise or conversion,
as applicable, of outstanding options, warrants and convertible securities held
by the Company's stockholders, including certain officers, directors, employees
and "affiliates" of the Company (as such term is defined pursuant to the
Exchange Act). The sale of such shares would have been subject to substantial
limitations in the absence of such registration. A substantial number of such
shares may still be held by the registered holders thereof and available for
resale under currently effective registration statements. In addition, certain
stockholders of the Company hold the right (subject to certain conditions) to
require that the Company register for offer and sale issued and outstanding
shares of Common Stock and/or shares of Common Stock issuable upon the exercise
or conversion, as applicable, of options, warrants and convertible securities.
Sales of substantial amounts of such shares could adversely affect the market
value of the Common Stock and, in the case of convertible securities, may effect
a dilution of the book value per share of Common Stock, depending upon the
timing of any such sales.
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BUSINESS
The Company is a provider of wireless communications services for
mobile business users. Since 1992, the Company has devoted substantial financial
and management resources to the development of GEONET, its a low cost, high
quality integrated digital voice and data wireless communications network. The
Company started providing commercial services in Philadelphia in January 1996
and in Washington, Baltimore and New York in March 1996. In addition, on April
23, 1996, the Company announced the initiation of commercial services on GEONET
in Boston. The Company intends to offer GEONET in a number of other cities in
the northeastern United States, including Miami and Dallas by the Summer of 1996
and in a total of 36 markets by the end of 1997. Each market will consist of a
major United States city and its surrounding area. In certain markets, the
Company may also offer its services regionally.
The Company, through operating subsidiaries, also provides analog
wireless mobile communications services to approximately 70,000 business
subscribers in the United Kingdom and Germany. The Company is also engaged in
the manufacture and sale of (i) telephone and facsimile peripherals and sound
and communications equipment through Bogen Communications International, Inc.
and (ii) equipment for the mobile data market through GMSI, Inc. These
operations currently generate substantially all of the Company's operating
revenues.
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DESCRIPTION OF THE NOTES
The Notes were issued under an indenture dated as of March 5, 1996 (the
"Indenture") between the Company and The Bank of New York, as trustee (the
"Trustee"). The following summary of the material provisions of the Indenture
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, the provisions of the Indenture, including the definitions of
certain terms contained therein and those terms made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "TIA"). The
definitions of certain capitalized terms used in the following summary are set
forth below under "- Certain Definitions." References in this "Description of
the Notes" to the "Company" mean the Company, but not any subsidiary of the
Company, until a successor replaces the Company (or any previous successor)
pursuant to the Indenture and, thereafter, means such successor.
General
The Notes are unsecured senior subordinated obligations of the Company,
limited to $75,000,000 aggregate principal amount. The Notes are subordinate in
right of payment to all Senior Indebtedness of the Company, as described under
"- Subordination" below. The Notes are issued only in registered form, without
interest coupons, in denominations of $1,000 principal amount and integral
multiples thereof. Principal of, premium, if any, and interest on the Notes is
payable, and the Notes are transferable, at the office of the Company's agent in
the City of New York located at the corporate trust office of the Trustee. In
addition, interest may be paid, at the option of the Company, by check mailed to
the person entitled thereto as shown on the security register. No service charge
will be made for any transfer, exchange or redemption of Notes, except in
certain circumstances for any tax or other governmental charge that may be
imposed in connection therewith.
Maturity, Interest and Principal
The Notes will mature on February 15, 2001. From and after March 5,
1996, the Notes will bear interest at the rate of 12% per annum (subject to
adjustment) and will be payable on each February 15th and August 15th, accruing
from the most recent Interest Payment Date to which interest has been paid or
duly provided for or, if no interest has been paid, from March 5, 1996. Interest
will be calculated on the basis of a 360-day year comprised of twelve 30-day
months.
The Notes are not entitled to the benefit of any mandatory sinking
fund.
Conversion
Conversion Rights. Beginning on March 5, 1997, the Notes are
convertible into Common Stock at any time prior to the close of business on the
Business Day next preceding the Stated Maturity of principal at a conversion
price equal to the lower of (i) $9.50 per share of Common Stock and (ii) the
weighted average market price of a share of Common Stock for the 10 Trading Day
period immediately following June 3, 1996 but in no event less than $8.25 per
share. The conversion price is subject to adjustment as described below. The
right to convert Notes which have been called for redemption will terminate at
the close of business on the Business Day next preceding the Redemption Date.
See "- Optional Redemption" below.
The conversion price is subject to adjustment upon the occurrence of
certain events, including: (a) the payment of dividends and other distributions
in Common Stock, (b) the issuance to all holders of Common Stock of rights,
options or warrants entitling them to subscribe for or purchase Common Stock or
securities convertible into or exchangeable for shares of Common Stock at a
price per share less than the current market price per share (determined as
provided in the Indenture) to the extent that the below market portion of such
issuances (together with the below market or above market portions (as the case
may be) of all other below market issuances and all above market tender or
exchange offers) is greater than 2.0% of the Company's total market
capitalization (as determined pursuant to the Indenture) of the Common Stock ,
(c) subdivisions and combinations of Common Stock, (d) distributions to all
holders of Common Stock of evidences of the Company's indebtedness, shares of
any class of its Capital Stock, cash or other assets (including securities, but
excluding any dividend or distribution referred to in clause (a) or (c), any
rights, options or warrants referred to in clause (b) and any non-extraordinary
cash dividends), (e) the issuance of shares of Common Stock or securities
convertible into or exchangeable for Common Stock for a consideration per share
less than the current market price per share (determined as provided in the
Indenture) to the extent that the below market portion of such issuances
(together with the below market or above market portions (as the case may be) of
all other below market issuances and above market tender or exchange offers) is
greater than 2.0% of the Company's total market capitalization (as determined
pursuant to the Indenture) of the Common Stock, (f) distributions consisting
exclusively of cash to all holders of Common Stock in an aggregate amount that,
together with (i) other all-cash distributions made within the preceding 12
months to all holders of Common Stock and (ii) the aggregate of any cash and the
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fair market value of other consideration paid in respect of any tender offer by
the Company or any Subsidiary for the Common Stock and any purchase by the
Company of shares of Common Stock in the open market consummated within the
preceding 12 months, exceeds 12.5% of the Company's current market
capitalization, (g) the consummation of a tender or exchange offer made by the
Company or any Subsidiary for the Common Stock or the purchase by the Company of
shares of Common Stock in the open market to the extent the above market portion
of such tender or exchange offers (together with the below market or above
market portions (as the case may be) of all other above market tender or
exchange offers and all below market issuances) is greater than 2.0% of the
Company's total market capitalization (as determined pursuant to the Indenture),
(h) certain reclassifications and (i) certain other events that could have the
effect of depriving holders of the Notes of the benefit of all or a portion of
the conversion rights in respect of any Note. The events described in clause (e)
are subject to certain exceptions described in the Indenture, including, without
limitation, (A) certain bona fide public offerings and private placements and
(B) Common Stock (and options exercisable therefor) issued to the Company's
directors, officer and employees under bona fide employee benefit plans in an
aggregate amount not to exceed 1.0% of the Common Stock outstanding at the time
of issuance.
No adjustment in the conversion price will be required unless such
adjustment would require an increase or decrease of at least one percent (1%) in
the conversion price; provided, however, that any adjustment which is not made
will be carried forward and taken into account in any subsequent adjustment.
Moreover, no adjustment in the conversion price shall be required for any
transaction in which holders of Notes are to participate on a basis and with
notice that the Company's Board of Directors determines to be fair and
appropriate in light of the basis and notice on which holders of Common Stock
participate in the transaction.
In addition to the foregoing adjustments, the Company, at its option,
will be permitted to make such reductions in the conversion price as it
considers 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 case of certain consolidations or mergers of the Company or the
sale or all or substantially all of the assets of the Company, each Note then
outstanding shall thereafter be convertible only into the kind and amount of
shares of stock or other securities or property receivable upon such
consolidation, merger or sale by a holder of the number of shares of Common
Stock into which such Note might have been converted immediately prior thereto
(assuming such holder of Common Stock failed to exercise any rights of election
and received per share the kind and amount received per share by a plurality of
non-electing shares).
No fractional shares of Common Stock will be issued upon conversion of
the Notes. Instead of any fractional share which would otherwise be issuable
upon conversion of any Note (or specified portion thereof), the Company will pay
a cash adjustment in an amount equal to such fraction multiplied by the Closing
Price at the close of business on the day of conversion (or if such day is not a
Trading Day, on the day immediately preceding such day). In the case of any Note
which is surrendered for conversion during the period from the close of business
on any regular record date through and including the next succeeding Interest
Payment Date (other than any Note whose Maturity Date is prior to such Interest
Payment Date), interest whose Stated Maturity is on such Interest Payment Date
shall be payable on such Interest Payment Date notwithstanding such conversion
and such interest shall be paid to the person in whose name such Note is
registered at the close of business on such regular record date; provided,
however, that Notes so surrendered for conversion shall (except in the case of
Notes or portions thereof which have been called for redemption on a Redemption
Date within such period) be accompanied by payment of an amount equal to the
interest thereon. Except as described above, no interest on converted Notes will
be payable by the Company on any Interest Payment Date subsequent to the date of
conversion. No other payment or adjustment for interest or dividends is to be
made upon conversion.
Mandatory Conversion. The Notes are convertible, at the Company's
option, from and after September 1, 1997, on the Business Day immediately
following a Mandatory Conversion Calculation Period upon not less than five and
not more than 10 Business Days notice in accordance with the Indenture to each
holder of Notes at its address appearing in the security register. "Mandatory
Conversion Calculation Period" is defined in the Indenture to mean any period
during which (i) for twenty of the thirty immediately preceding Trading Days,
the Closing Price of the Common Stock equaled or exceeded 160% of the conversion
price and (ii) for the five immediately preceding Trading Days, the Closing
Price of the Common Stock equaled or exceeded 160% of the conversion price.
Subordination
The indebtedness represented by the Notes and the payment of the
principal of and premium, if any, and interest on the Notes, and the amount, if
any, of the repurchase price payable in respect of the Notes under "- Change of
Control" is, to the extent set forth in the Indenture, subordinate in right of
payment to the prior payment in full of all Senior Indebtedness. Upon any
liquidation, dissolution, winding up, assignment for the benefit of creditors,
marshaling of assets or any bankruptcy, insolvency or similar proceedings of the
Company, the holders of all Senior Indebtedness will be first entitled to
receive payment in full of all amounts due or to become due thereon before the
holder of the Notes will be entitled to receive any payment for the principal
of, premium, if any, or interest on the Notes, or the amount, if any, of the
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repurchase price payable in respect of the Notes under "-Change of Control." No
payment on account of the principal of, premium, if any, or interest on the
Notes, or on account of the purchase, redemption or other acquisition of the
Notes shall be made in the event that there has occurred and is continuing a
default in the payment of the principal of, premium, if any, or interest on any
Senior Indebtedness or an event of default with respect to any Senior
Indebtedness resulting in the acceleration of the maturity thereof. In the event
that, notwithstanding the foregoing, the Company shall make any payment to the
Trustee or any holder of any Note prohibited by the foregoing and such fact
shall at or prior to the time of such payment have been made known to the
Trustee or such holder, as the case may be, such payment will be paid over and
delivered to the Company or in the case of any liquidation, dissolution, winding
up, assignment for the benefit of creditors, marshaling of assets or any
bankruptcy, insolvency or similar proceedings of the Company, to the trustee in
bankruptcy, receiver or other person making payment or distribution of the
assets of the Company. For purposes of the subordination provisions, (a) the
issuance and delivery of junior securities upon the conversion of the Notes
shall not be deemed to constitute a payment or distribution on account of the
principal of, premium, if any, or interest on the Notes or on account of the
purchase or other acquisitions of the Notes, and (b) the payment, issuance or
delivery of cash, property or securities (other than junior securities) upon
conversion of a Note will be deemed to constitute payment on account of the
principal of such Note. The term "junior securities" is defined in the Indenture
to mean (i) shares of any class of Capital Stock of the Company and (ii)
securities of the Company which are subordinated in right of payment to all
Senior Indebtedness which may be outstanding at the time of issuance or delivery
of such securities to substantially the same extent as, or to a greater extent
than, the Notes are so subordinated as provided in the Indenture.
No provision contained in the Indenture or the Notes is intended to or
shall (a) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the holders of the Notes, the obligation of the Company,
which is absolute and unconditional, to pay, when due and payable, the principal
of, premium, if any, and interest on the Notes to the holders thereof, (b)
affect the relative rights against the Company of the holders of the Notes other
than the holders of Senior Indebtedness, or (c) prevent the Trustee or the
holder of any Note from exercising all remedies otherwise permitted by
applicable law upon default under the Indenture, subject to the rights, if any,
under the Indenture, of the holders of Senior Indebtedness to receive cash,
property and securities otherwise payable or deliverable to the Trustee or such
holder of Notes.
As a result of the subordination provisions of the Indenture and the
Notes, in the event of liquidation or insolvency, (a) creditors of the Company
who are holders of Senior Indebtedness may recover more ratably than the holders
of the Notes and funds which would be otherwise payable to the holders of the
Notes will be paid to the holders of the Senior Indebtedness to the extent
necessary to pay the Senior Indebtedness in full, and (b) the Company may be
unable to meet its obligations fully with respect to the Notes.
"Senior Indebtedness" is defined in the Indenture to mean the principal
of and premium, if any, and interest on (a) all indebtedness of the Company for
money borrowed, other than the Notes, whether outstanding on the date of
execution of the Indenture or thereafter created, incurred or assumed, except
indebtedness that by the terms of the instrument or instruments (as such
instrument or instruments may be amended from time to time pursuant to the terms
thereof) by which such indebtedness was created or incurred expressly provides
that it (i) is junior in right of payment to the Notes or (ii) ranks pari passu
with the Notes, and (b) amendments, renewals, extensions, modifications,
refinancings and refundings of any such indebtedness. For the purposes of this
definition, "indebtedness for money borrowed" when used with respect to the
Company means (w) any obligation of, or any obligation guaranteed by, the
Company for the repayment of borrowed money, whether or not evidenced by bonds,
debentures, notes or other written instruments, (x) any deferred payment
obligation of, or any such obligation guaranteed by, the Company for the payment
of the purchase price of property or assets evidenced by a note or similar
instrument, (y) any obligation of, or any such obligation guaranteed by, the
Company for the payment of rent or other amounts under a lease of property or
assets which obligation is required to be classified and accounted for as a
capitalized lease on the balance sheet of the Company under GAAP and (z) any
reimbursement obligation under bank letters of credit.
The Indenture does not limit or prohibit the incurrence of additional
Senior Indebtedness. The Company expects from time to time to incur additional
Senior Indebtedness.
Optional Redemption
The Notes are redeemable at the option of the Company, in whole or in
part, in principal amounts of $1,000 or any integral multiple of $1,000, at any
time on or after February 15, 1999 upon not less than 30 nor more than 60 days'
prior notice at the following Redemption Prices (expressed as percentages of the
principal amount) plus accrued and unpaid interest, if any, to the Redemption
Date, if redeemed during the 12-month period beginning February 15 of the years
indicated below:
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Year Redemption Price
---- ----------------
1999 110.000%
2000 105.000%
Any Notes called for redemption, unless surrendered for conversion by
the close of business on the Business Day immediately preceding the date fixed
for redemption, are subject to being purchased from the holder of such Notes at
the redemption price by one or more investment banking firms or other purchasers
who may agree with the Company to purchase such Notes and convert them into
Common Stock.
Registration Rights
In connection with the initial sale of the Notes, the Company entered
into the Notes Registration Rights Agreement. Pursuant to the Notes Registration
Rights Agreement, the Company agreed for the benefit of the holders of the
Notes, that (i) it would, at its expense prior to May 5, 1996, file a shelf
registration statement (the "Shelf Registration Statement") with the Commission
with respect to resales of the Notes, (ii) prior to July 4, 1996, such Shelf
Registration Statement would be declared effective by the Commission and (iii)
the Company would maintain such Shelf Registration Statement continuously
effective under the Securities Act until the last date on which any of the Notes
constitute Registrable Securities as defined in the Notes Registration Rights
Agreement. If the Company had failed to comply with clause (i) above then, at
such time, the per annum interest rate on the Offered Notes would have increased
by 50 basis points. Such increase would have remained in effect until the date
on which such Shelf Registration Statement was filed, on which date the interest
rate on the Offered Notes would have reverted to the interest rate originally
borne by the Offered Notes plus any increase in such interest rate pursuant to
the following sentence. If the Shelf Registration Statement had not been
declared effective as provided in clause (ii) above, then, at such time, the per
annum interest rate on the Offered Notes (which interest rate will be the
original interest rate on the Offered Notes plus any increase on increases in
such interest pursuing to the preceding sentence and this sentence) would have
increased by an additional 50 basis points; provided that the interest rate
would not have increased by more than 100 basis points pursuant to this
sentence. Such increase or increases would have remained in effect until the
date the interest rate on the Offered Notes would have reverted to the interest
rate originally borne by the Offered Notes. The Company has satisfied its
obligations under clauses (i) and (ii) by filing, and causing the Commission to
declare effective, the Registration Statement of which this Prospectus is a part
within the specified time periods. Pursuant to clause (iii) above, however, if
the Company fails to keep the Shelf Registration Statement continuously
effective for the period specified above and fails to cause such Registration
Statement to again become effective within 90 days of such suspension event,
then for the first 60 days following the day the Shelf Registration Statement is
no longer effective the per annum interest rate on the Offered Notes will
increase by 50 basis points per day and on each date thereafter that is the
successive 60th day subsequent to such date the per annum interest rate on the
Offered Notes will increase by 25 basis points per day and until the earlier of
(i) the date that the Shelf Registration Statement is again deemed effective or
(ii) the last date on which any of the Notes constitute Registrable Securities
as defined in the Notes Registration Rights Agreement; provided, however, that
the interest rate will not increase by more than 100 basis points pursuant to
this sentence.
The Company will provide to each holder of the Notes, copies of the
prospectus, which will be part of such Shelf Registration Statement, notify each
such holder when such Shelf Registration Statement for the Notes has become
effective and take certain other actions as are required to permit unrestricted
resales of the Notes. A holder that sells such Notes pursuant to a Shelf
Registration Statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Notes Registration Rights Agreement which are applicable to
such a holder (including certain indemnification and contribution rights and
obligations).
Certain Covenants
Change of Control. Upon the occurrence of a Change of Control, the
Company shall be obligated to make an offer to purchase (a "Change of Control
Offer"), and shall purchase, on a Business Day (the "Change of Control Purchase
Date") not more than 60 nor less than 30 days following the occurrence of the
Change of Control, all of the then outstanding Notes tendered by holders
pursuant to such offer at a purchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the Change of Control
Purchase Date. The Company shall be required to purchase all Notes properly
tendered into the Change of Control Offer and not withdrawn. The Change of
Control Offer is required to remain open for at least 20 business days and until
the close of business on the Change of Control Purchase Date; provided, however,
that upon the occurrence of a Change of Control of the type specified in
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clause (d) of the definition of a "Change of Control," the purchase price shall
be equal to 100% of the principal amount thereof plus accrued and unpaid
interest to the Change of Control Purchase Date.
In order to effect such Change of Control Offer, the Company shall, not
later than the 30th day after the occurrence of the Change of Control, mail to
each holder of Notes notice of the Change of Control Offer, which notice shall
govern the terms of the Change of Control Offer and shall state, among other
things, the procedures that holders of Notes must follow to accept the Change of
Control Offer.
The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in the event that a Change of Control occurs and the
Company is required to purchase Notes as described above.
Reporting Requirements. The Company will file with the Commission the
annual reports, quarterly reports and other documents required to be filed with
the Commission pursuant to Sections 13 and 15 of the Exchange Act, whether or
not the Company has a class of securities registered under the Exchange Act. The
Company will be required to file with the Trustee and provide to each holder of
Notes within 15 days after it files them with the Commission (or if any such
filing is not permitted under the Exchange Act, 15 days after the Company would
have been required to make such filing) copies of such reports and documents.
Anti-Layering. The Company shall not incur or suffer to exist any
indebtedness that is senior in right of payment to the Notes and subordinate in
right of payment to any other indebtedness of the Company.
Merger, Sale of Assets, Etc.
The Company will not, in any transaction or series of transactions,
merge or consolidate with or into, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets as an
entirety to, any person or persons, and the Company will not permit any of its
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in a
sale, assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company or the Company and
its Subsidiaries, taken as a whole, to any other person or persons, unless at
the time of and after giving effect thereto (a) either (i) if the transaction or
series of transactions is a merger or consolidation, the Company shall be the
surviving person of such merger or consolidation, or (ii) the person formed by
such consolidation or into which the Company or such Subsidiary is merged or to
which the properties and assets of the Company or such Subsidiary, as the case
may be, are transferred (any such surviving person or transferee person being
the "Surviving Entity") (A) shall be a corporation organized and existing under
the laws of the United States of America, any state thereof or the District of
Columbia, (B) shall expressly assume by a supplemental indenture executed and
delivered to the Trustee, in form reasonably satisfactory to the Trustee, all
the obligations of the Company under the Notes and the Indenture and (C) shall
have provided for conversion rights described under "--Conversion--Conversion
Rights"; and (b) immediately before and immediately after giving effect to such
transaction or series of transactions, no Default or Event of Default shall have
occurred and be continuing.
In connection with any consolidation, merger, transfer, lease,
assignment or other disposition contemplated hereby, the Company shall deliver,
or cause to be delivered, to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an officer's certificate and an opinion of counsel,
each stating that such consolidation, merger, transfer, lease, assignment or
other disposition and the supplemental indenture in respect thereof comply with
the requirements under the Indenture.
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with the foregoing
in which the Company is not the continuing corporation, the successor
corporation formed by such a consolidation or into which the Company is merged
or to which such transfer is made shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture with the
same effect as if such successor corporation had been named as the Company
therein.
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Events of Default
The following will be "Events of Default" under the Indenture:
(a) a default by the Company in the payment of the principal
of or premium, if any, on any Note when the same becomes due and payable (upon
Stated Maturity, acceleration, optional redemption, required purchase, scheduled
principal payment or otherwise); or
(b) a default by the Company in the payment of an installment
of interest on any of the Notes, when the same becomes due and payable, which
default continues for a period of 30 days; or
(c) a failure of the Company to perform or observe any other
term, covenant or agreement contained in the Notes or the Indenture (other than
a default specified in clause (a) or (b) above) which failure continues for a
period of 30 days after written notice thereof requiring the Company to remedy
the same shall have been given (i) to the Company by the Trustee or (ii) to the
Company and the Trustee by holders of at least 25% in aggregate principal amount
of the Notes then outstanding; or
(d) a default or defaults by the Company or any Subsidiary of
the Company under one or more agreements, instruments, mortgages, bonds,
debentures or other evidences of indebtedness under which the Company or any
Subsidiary of the Company then has outstanding indebtedness in excess of
$5,000,000, individually or in the aggregate, and either (i) such indebtedness
is already due and payable in full other than by reason of an acceleration or
(ii) such default or defaults have resulted in the acceleration of the maturity
of such indebtedness; or
(e) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the payment of
money in excess of $5,000,000, either individually or in the aggregate, shall be
entered against the Company or any Subsidiary of the Company or any of their
respective properties and shall not be discharged or fully bonded and there
shall have been a period of 60 days after the date on which any period for
appeal has expired and during which a stay of enforcement of such judgment,
order or decree shall not be in effect; or
(f) certain events of bankruptcy, insolvency or reorganization
with respect to the Company or any Significant Subsidiary of the Company shall
have occurred.
If an Event of Default (other than as specified in clause (f) above)
shall occur and be continuing, the Trustee, by notice to the Company, or the
holders of at least 25% in aggregate principal amount of the Notes then
outstanding, by notice to the Trustee and the Company, may declare the principal
of, premium, if any, and accrued and unpaid interest, if any, on all of the
outstanding Notes due and payable immediately, upon which declaration, all
amounts payable in respect of the Notes shall be immediately due and payable. If
an Event of Default specified in clause (f) above occurs and is continuing, then
the principal of, premium, if any, and accrued and unpaid interest, if any, on
all of the outstanding Notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder of Notes.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may rescind
such declaration if (a) the Company has paid or deposited with the Trustee a sum
sufficient to pay (i) all amounts due the Trustee under the Indenture and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, (ii) all overdue interest on all Notes, (iii) the
principal of and premium, if any, on any Notes which have become due otherwise
than by such declaration of acceleration and interest thereon at the rate borne
by the Notes, and (iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Notes which has become
due otherwise than by such declaration of acceleration; (b) the rescission would
not conflict with any judgment or decree of a court of competent jurisdiction;
and (c) all Events of Default, other than the non-payment of principal of,
premium, if any, and interest on the Notes that have become due solely by such
declaration of acceleration, have been cured or waived pursuant to the terms of
the Indenture.
The holders of not less than a majority in aggregate principal amount
of the outstanding Notes may on behalf of the holders of all the Notes waive any
existing defaults under the Indenture, except a default in the payment of the
principal of, premium, if any, or interest on any Note, or in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding.
No holder of any of the Notes has any right to institute any proceeding
with respect to the Indenture or the Notes or any remedy thereunder, unless the
holders of at least 25% in aggregate principal amount of the outstanding Notes
have made written request, and offered reasonable indemnity, to the Trustee to
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institute such proceeding as Trustee under the Notes and the Indenture, the
Trustee has failed to institute such proceeding within 60 days after receipt of
such notice and the Trustee, within such 60 day period, has not received
directions inconsistent with such written request by holders of a majority in
aggregate principal amount of the outstanding Notes. Such limitations do not
apply, however, to a suit instituted by a holder of a Note for the enforcement
of the payment of the principal of, premium, if any, or interest on such Note on
or after the respective due dates expressed in such Note, subject to applicable
grace periods.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, whether or not an Event of Default shall occur and be continuing, the
Trustee under the Indenture is not under any obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
holders unless such holders shall have offered to the Trustee reasonable
security or indemnity. Subject to certain provisions concerning the rights of
the Trustee, the holders of not less than a majority in aggregate principal
amount of the outstanding Notes have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee under the Indenture.
If a Default or an Event of Default occurs and is continuing and is
known to the Trustee, the Trustee shall mail to each holder of the Notes notice
of the Default or Event of Default within 30 days after obtaining knowledge
thereof. Except in the case of a Default or an Event of Default in payment of
principal of, premium, if any, or interest on any Notes, the Trustee may
withhold the notice to the holders of such Notes if a committee of its trust
officers in good faith determines that withholding the notice is in the interest
of the holders of the Notes.
The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company of its obligations under the
Indenture and as to any Default or Event of Default in such performance. The
Company also is required to notify the Trustee within ten days of the occurrence
of any Default or Event of Default.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
upon the mandatory conversion thereof or when (a) either (i) all the Notes
theretofore authenticated and delivered (except lost, stolen or destroyed Notes
which have been replaced or repaid and Notes for whose payment money has
theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust) have
been delivered to the Trustee for cancellation or (ii) all Notes not theretofore
delivered to the Trustee for cancellation (except lost, stolen or destroyed
Notes which have been replaced or paid) (A) have become due and payable, (B)
will become due and payable at their Stated Maturity within one year, (C) are to
be called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company, or (D) are delivered to the Trustee for
conversion in accordance with the Indenture, and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (b)
the Company has paid all other sums payable under the Indenture by the Company;
(c) no Default or Event of Default under the Indenture or the Notes shall have
occurred and be continuing on the date of such deposit or shall occur as a
result thereof; and (d) the Company has delivered to the Trustee an officers'
certificate and an opinion of counsel stating that all conditions precedent
under the Indenture relating to the satisfaction and discharge of the Indenture
have been complied with.
Amendments and Waivers
From time to time, the Company, when authorized by a resolution of its
Board of Directors, and the Trustee may, without the consent of the holders of
any outstanding Notes, amend, waive or supplement the Indenture or the Notes for
certain specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies, qualifying, or maintaining the qualification of, the
Indenture under the TIA, making provision with respect to the conversion rights
of holders of Notes in the event of certain consolidations or mergers of the
Company or the sale or all or substantially all of the assets of the Company or
making any other change that does not adversely affect the rights of any holder
of Notes, provided that the Company has delivered to the Trustee an opinion of
counsel stating that such change does not adversely affect the rights of any
holder of Notes. Other amendments and modifications of the Indenture or the
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Notes may be made by the Company and the Trustee with the consent of the holders
of not less than a majority of the aggregate principal amount of the outstanding
Notes; provided, however, that no such modification or amendment may, without
the consent of the holder of each outstanding Note affected thereby, (a) reduce
the principal amount of, extend the fixed maturity of or alter the redemption
provisions of, the Notes, (b) change the currency in which any Notes or any
premium or the interest thereon is payable or make the principal of, premium, if
any, or interest on any Note payable in money other than that stated in the
Note, (c) reduce the percentage in principal amount of outstanding Notes that
must consent to an amendment, supplement or waiver or consent to take any action
under the Indenture or the Notes, (d) impair the right to institute suit for the
enforcement of any payment on or with respect to the Notes, (e) waive a default
in payment with respect to the Notes, (f) reduce or change the rate or time for
payment of interest on the Notes, (g) adversely affect the right to convert (but
not to make an adjustment to the conversion price of) any Note (other than to
make provision with respect to the conversion rights of holders of Notes in the
event of certain consolidations or mergers of the Company or the sale or all or
substantially all of the assets of the Company), or (h) modify or change any
provision of the Indenture with respect to the subordination of the Notes in a
manner adverse to the holders of the Notes.
The Trustee
The Indenture provides that, except during the continuance of an Event
of Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred and
is continuing, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise as
a prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indenture and provisions of the TIA incorporated by reference
therein contain limitations on the rights of the Trustee thereunder, should it
become a creditor of the Company, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claims,
as security or otherwise. The Trustee is permitted to engage in other
transactions; provided, however, that if it acquires any conflicting interest
(as defined in the TIA) it must eliminate such conflict or resign.
Governing Law
The Indenture and the Notes will be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed in the State of New York.
Certain Definitions
"Board of Directors" means the board of directors of the Company or any
duly authorized committee of such board.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York,
State of New York, are authorized or obligated by law, regulation or executive
order to close.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Change of Control" means the occurrence of any of the following
events: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), is or becomes the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time, upon the happening of an event or otherwise), directly or
indirectly, of more than 50% of the total Voting Stock of the Company; (b) the
Company consolidates with, or merges with or into, another person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person, or any person consolidates with,
or merges with or into, the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Stock of the Company is converted
into or exchanged for (A) Voting Stock (other than Redeemable Capital Stock) of
the surviving or transferee corporation or (B) cash, securities and other
property in an amount which could then be paid by the Company as a "Restricted
Payment" under the Indenture pertaining to the Company's 15% Senior Secured
Discount Notes due 2005, or a combination thereof, and (ii) immediately after
such transaction, the persons who, immediately prior to such transaction,
beneficially owned the Voting Stock of the Company, beneficially own, in the
aggregate, more than 50% of the total Voting Stock of the surviving or
transferee corporation ("beneficially owned" shall have a meaning correlative to
that of "beneficial owner" as defined in Rules 13d-3 and 13d-5 under the
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Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time, upon
the happening of an event or otherwise), provided, however, that no Change of
Control will be deemed to occur pursuant to this clause (b) if (i) the surviving
or transferee corporation has outstanding debt securities having a maturity at
original issuance of at least one year and if such debt securities are rated
Investment Grade by S&P or Moody's for a period of at least 90 consecutive days,
beginning on the date of such event (which period will be extended up to 90
additional days to the extent that the rating of such debt securities is under
publicly announced consideration for possible downgrading by the applicable
rating agency), or (ii) the surviving or transferee corporation (A) does not
have any outstanding debt securities that are rated by S&P, Moody's or any other
rating agency of national standing at any time during a period of 90 consecutive
days beginning on the date of such event (which period will be extended up to 90
additional days to the extent that any such rating agency has publicly announced
that such corporation or debt thereof will be rated), after such date but during
such period debt securities of such corporation having a maturity at original
issuance of at least one year are rated Investment Grade by S&P or Moody's and
remain so rated for the remainder of the period referred to in clause (i) of
this proviso, and (B) as of the Trading Day immediately before and the Trading
Day immediately after the date of such event, has Total Common Equity of at
least $10,000,000,000 (provided that, solely for the purpose of calculating
Total Common Equity as of such later Trading Day, the average Closing Price of
Common Stock of such corporation will be deemed to equal the Closing Price of
such Common Stock on such later Trading Day, subject to the last sentence of the
definition of "Total Common Equity"); (c) at any time during any consecutive
two-year period, individuals who at the beginning of such period constituted the
Board of Directors (together with any new directors whose election by the Board
of Directors or whose nomination for election by the stockholders of the Company
was approved by a vote of at least 66-2/3% of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office; or (d) the
Common Stock of the Company shall be neither listed on any national securities
exchange nor authorized to be quoted on an inter-dealer quotation system of any
registered national securities association.
"Closing Price" on any Trading Day with respect to the per share price
of any shares of Capital Stock means the last reported sale price regular way
or, in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on The Nasdaq
National Market or, if such shares are not listed or admitted to trading on any
national securities exchange or quoted on such automated quotation system but
the issuer is a Foreign Issuer (as defined in Rule 3b-4(b) under the Exchange
Act) and the principal securities exchange on which such shares are listed or
admitted to trading is a Designated Offshore Securities Market (as defined in
Rule 902(a) under the Securities Act), the average of the reported closing bid
and asked prices regular way on such principal exchange, or, if such shares are
not listed or admitted to trading on any national securities exchange or quoted
on such automated quotation system and the issuer and principal securities
exchange do not meet such requirements, the average of the closing bid and asked
prices in the over-the-counter market as furnished by any New York Stock
Exchange member firm that is selected from time to time by the Company for that
purpose and is reasonably acceptable to the Trustee.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable from time to
time.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Notes, as set forth therein.
"Maturity Date" means, with respect to any Note, the date on which any
principal of such Note becomes due and payable as therein or herein provided,
whether at the Stated Maturity with respect to such principal or by declaration
of acceleration, call for redemption or purchase or otherwise.
"Redeemable Capital Stock" means, with respect to any person, any
shares of any class or series of Capital Stock that, either by the terms
thereof, by the terms of any security into which it is convertible or
exchangeable or by contract or otherwise, is, or upon the happening of an event
or passage of time would be, required to be redeemed for cash or other assets
(other than Capital Stock) prior to the Stated Maturity with respect to the
principal of any Note or is redeemable at the option of the holder thereof at
any time prior to any such Stated Maturity, or is convertible into or
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exchangeable for debt securities at any time prior to any such Stated Maturity;
provided, however, that any Capital Stock that would not constitute Redeemable
Capital Stock but for provisions thereof giving holders thereof the right to
require the repurchase or redemption of such Capital Stock upon the occurrence
of a change in control or an event of default occurring prior to the final
maturity of the Notes shall not constitute Redeemable Capital Stock if such
Capital Stock specifically provides that the issuer thereof will not repurchase
or redeem any such stock pursuant to such provisions prior to the repurchase of
the Notes as are required to be purchased under "- Change of Control" or the
payment of the Notes as may be required under "- Events of Default."
"Redemption Date" means, with respect to any Note to be redeemed, the
date fixed by the Company for such redemption pursuant to the Indenture and the
Notes.
"Redemption Price" means, with respect to any Note to be redeemed, the
price fixed for such redemption pursuant to the terms of the Indenture and the
Notes.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Significant Subsidiary" shall have the same meaning as in Rule 1.02(v)
of Regulation S-X under the Securities Act.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and when used with respect to any other indebtedness (including
Redeemable Capital Stock), means the date specified in the instrument governing
such indebtedness as the fixed date on which the principal of such indebtedness,
or any installment of interest thereon, is due and payable (or, in the case of
Redeemable Capital Stock, the first date on which such Redeemable Capital Stock
is required to be redeemed).
"Subsidiary" means, with respect to any person, a corporation 50% or
more of whose Voting Stock is at the time, directly or indirectly, owned by such
person, by one or more Subsidiaries of such person or by such person and one or
more Subsidiaries thereof and over which such person exercises control, directly
or indirectly, through one or more Subsidiaries. For purposes of this
definition, any directors' qualifying shares or investments by foreign nationals
mandated by applicable law shall be disregarded in determining the ownership of
a Subsidiary.
"Total Common Equity" of any person means, as of any day of
determination (and as modified for purposes of the definition of "Change of
Control"), the product of (a) the aggregate number of outstanding primary shares
of Common Stock of such person on such day (which shall not include any options
or warrants on, or securities convertible or exchangeable into, shares of Common
Stock of such person) and (b) the average Closing Price of such Common Stock
over the 20 consecutive Trading Days immediately preceding such day. If no such
Closing Price exists with respect to shares of any such class, the value of such
shares for purposes of clause (b) of the preceding sentence shall be determined
by the Board of Directors in good faith and evidenced by a written opinion as to
such value issued by an investment banking firm of recognized national standing.
"Trading Day" means, with respect to a securities exchange or automated
quotation system, a day on which such exchange or system is open for a full day
of trading.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power (either separately or
together with any other class or classes of Capital Stock) under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any person (irrespective of whether or not, at the time, Capital
Stock of any other class or classes shall have, or might have, voting power by
reason of the happening of any contingency).
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SELLING SECURITYHOLDERS
The Notes were originally issued by the Company and sold by the Initial
Purchaser in transactions exempt from the registration requirements of the
Securities Act to certain Selling Securityholders hereunder each of which is an
institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act). Such Selling Securityholders (which term includes
their transferees, pledgees, donees or their successors) may from time to time
offer and sell pursuant to this Prospectus any or all of the Notes and/or Note
Shares.
On February 23, 1994, the Company completed a private transaction
pursuant to which it issued and sold to Vanguard, who is a Selling Shareholder
hereunder, 2,500,000 shares of Common Stock. The aggregate gross proceeds to the
Company from the issuance and sale of such Common Stock was $30,000,000. In
connection with such transaction, the Company entered into the Management
Agreement pursuant to which the Company is obligated to issue to Vanguard
300,000 shares of Common Stock per year for a five year period in exchange for
certain consulting services provided to the Company by Vanguard. Of the
1,500,000 shares of Common Stock issuable to Vanguard pursuant to the Management
Agreement, 600,000 of such shares have been issued to date. Also in connection
with such transaction, the Company granted Vanguard the Vanguard Options to
acquire an aggregate of 5,285,500 shares of Common Stock. The Vanguard Options
carry the following terms: (i) the Series A Vanguard Option entitles Vanguard to
purchase an aggregate of 1,000,000 shares of Common Stock and is exercisable, at
any time and from time to time, prior to September 1, 1996 (the "Series A
Expiration Date") at an exercise price of $15.00 per share, subject to
adjustments; (ii) the Series B Vanguard Option entitles Vanguard to purchase an
aggregate of 1,714,200 shares of Common Stock and is exercisable, at any time
and from time to time, prior to September 1, 1996 (the "Series B Expiration
Date") at an exercise price of $17.00 per share, subject to adjustments,
provided, however, that Vanguard in its sole discretion has the right, at any
time prior to the Series B Expiration Date, to extend such expiration date to
March 1, 1997, subject to an adjustment of the then applicable exercise price;
and (iii) the Series C Vanguard Option entitles Vanguard to purchase an
aggregate of 2,571,300 shares of Common Stock and is exercisable at any time and
from time to time, prior to the earlier of the (a) first anniversary of the
Series B Expiration Date as the same may have been extended, (b) if the Series A
Option shall expire without being exercised in full, the Series A Expiration
Date and (c) if the Series B Option shall expire without being exercised in
full, the Series B Expiration Date, as the same may have been extended (the
"Series C Expiration Date") at an exercise price of $17.00 per share, subject to
adjustment, provided, however, that Vanguard in its sole discretion has the
right, at any time prior to the Series C Expiration Date, to extend such
expiration date by six months, subject to an increase in the then applicable
exercise price. The Vanguard Options are exercisable, at the election of
Vanguard, either in full or from time to time in part prior to the applicable
expiration date; provided, however, that (i) if the Series A Option is not
exercised in full prior to the Series A Expiration Date, then the Series B
Option and Series C Option shall immediately terminate and (ii) if the Series B
Option is not exercised in full prior to the Series B Expiration Date (as the
same may have been extended) the Series C Option shall immediately terminate.
If Vanguard fails to exercise any of the Vanguard Options, then the
Management Agreement will immediately terminate. If Vanguard exercises the
Series C Option in full prior to February 23, 1998, then the 300,000 shares to
be issued pursuant to the Management Agreement on February 23, 1999 will be
issued on February 23, 1998.
On May 25, 1995, the Company completed a private transaction pursuant
to which it issued and sold to Vanguard 531,463 shares of Series L Preferred
Stock. The aggregate gross proceeds to the Company for the issuance and sale of
such Series L Preferred Stock was approximately $5,000,000. The shares of Series
L Preferred Stock issued and sold to Vanguard are immediately convertible into
the number of shares of Common Stock as is determined by dividing (i) the sum of
the $9.408 stated value per share of the Series L Preferred Stock plus all
unpaid dividends accrued and deemed to have accrued, if any, with respect to
such shares of Series L Preferred Stock through the last dividend payment date
by (ii) a conversion price of $9.408 per share, subject to certain adjustments.
The Company expects to complete a private transaction on April 26,
1996, pursuant to which the Company will issue to William MacDermott, Hugh P.
Taylor, William Zimsky and Judy C. Cohen (collectively, the "MacDermott
Shareholders"), each of whom is a Selling Shareholder hereunder, $2.0 million
of Common Stock in exchange for 100% of the issued and outstanding stock of
MacDermott Communications, Inc.
The Selling Shareholders are listed below. Included below concerning
each Selling Shareholder beneficially owning Notes or Shares, as applicable, is
(i) a table showing the total amount and percentage of the Notes beneficially
owned by such person, the amount subject to sale hereunder and the resulting
amount and percentage if all Notes offered hereby which are owned by such person
are sold, and (ii) a table showing the total amount and percentage of the Shares
beneficially owned by such person, the amount subject to sale hereunder, and the
resulting amount and percentage if all Shares offered hereby which are owned by
such person are sold.
None of the Selling Securityholders has, or within the past three years
has had, any position, office or other material relationship with the Company or
any of its predecessors or affiliates, except as noted below. The Selling
Securityholders identified below may have sold, transferred or otherwise
disposed of all or a portion of their Securities since the date of this
prospectus in transactions exempt from the registration requirements of the
Securities Act.
27
<PAGE>
<TABLE>
<CAPTION>
NOTES
Pre-Offering (1) Post Offering (2)
---------------------------------------------------- --------------------------------------
Principal Amount Principal Amount Principal Amount
at Maturity of At Maturity of at Maturity of
Selling Notes Percentage Notes Notes Percentage
Securityholder Beneficially Owned of Class (3) Being Sold Beneficially Owned of Class (3)
- -------------- ------------------ ------------ -------------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Halifax Fund L.P. $500,000 * $500,000 0 0%
Wrapone & Co.,
nominee for IDS
Life Managed
Portfolio(4) $250,000 * $250,000 0 0%
Salkeld & Co.,
nominee for IDS
Extra Income
Fund, Inc.(5) $5,000,000 6.7% $5,000,000 0 0%
Cockatoo & Co.,
nominee for IDS
Managed
Retirement Fund,
Inc.(5) $3,000,000 4.0% $3,000,000 0 0%
Wrapfour & Co.,
nominee for IDS
Life Special
Income Fund,
Inc.(5) $5,000,000 6.7% $5,000,000 0 0%
Wraptwo & Co.,
nominee for IDS
Life Managed
Fund, Inc.(5) $2,000,000 2.7% $2,000,000 0 0%
Salkeld & Co.,
nominee for IDS
Bond Fund, Inc.(5) $5,000,000 6.7% $5,000,000 0 0%
Hare & Co.,
nominee for
Oppenheimer
Champion Income
Fund(6) $2,000,000 2.7% $2,000,000 0 0%
Hare & Co.,
nominee for
Oppenheimer
Strategic Income
Fund(6) $750,000 1.0% $750,000 0 0%
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Pre-Offering (1)
---------------------------------------------------- --------------------------------------
Principal Amount Principal Amount Principal Amount
at Maturity of At Maturity of at Maturity of
Selling Notes Percentage Notes Notes Percentage
Securityholder Beneficially Owned of Class (3) Being Sold Beneficially Owned of Class (3)
- -------------- ------------------ ------------ -------------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Hare & Co.,
nominee for
Oppenheimer
Strategic Bond
Fund(6) $250,000 * $250,000 0 0%
BEA Associates(7) $6,000,000 8.0% $6,000,000 0 0%
Northstar
Investment
Management
Corp.(8) $3,000,000 4.0% $3,000,000 0 0%
CIP Capital,
L.P.(9) $1,000,000 1.3% $1,000,000 0 0%
GIBCO, nominee
for The Prudential
Series Fund, Inc.,
High Yield Bond
Portfolio (10) $2,000,000 2.7% $2,000,000 0 0%
Deerway & Co.,
nominee for The
High Yield Income
Fund, Inc. (10) $1,000,000 1.3% $1,000,000 0 0%
Gimlet & Co.,
nominee for
Prudential High
Yield Fund (10) $12,000,000 16.0% $12,000,000 0 0%
Merrill Lynch
Global Allocation
Fund, Inc. $20,750,000 27.7% $20,750,000 0 0%
The Nicollet
Fund L.P. $1,500,000 2.0% $1,500,000 0 0%
Global Bermuda
Limited Partnership $3,000,000 4.0% $3,000,000 0 0%
Lakeshore
International Limited $1,000,000 1.3% $1,000,000 0 0%
</TABLE>
- ------------------
*Less than 1%
(1) Assumes none of the Notes offered by this Prospectus have been converted
into Note Shares.
(2) Assumes the sale of all of the Notes offered by this Prospectus by the
Selling Securityholders to third parties unaffiliated with the Selling
Securityholders.
(3) These percentages are calculated in accordance with Section 13(d) of the
Securities Act and the rules promulgated thereunder.
(4) IDS Life Managed Portfolio is a portfolio in the IDS Life Series Fund,
Inc., (the "Insurance Life Fund") which is an investment company registered
under the Investment Company Act of 1940, as amended. American Express
Financial Corporation ("AEFC"), an investment adviser registered under the
Investment Advisers Act of 1940, as amended, provides investment advisory
services to the Insurance Life Fund and to certain other registered
investment companies. AEFC is a wholly-owned subsidiary of American Express
Company. The information set forth in the table with respect to IDS Life
Managed Portfolio and the information set forth in this footnote was
provided by AEFC.
(5) IDS Bond Fund, Inc., IDS Extra Income Fund, Inc,, IDS Managed Retirement
Fund, Inc., IDS Life Special Income Fund, Inc., and IDS Life Managed Fund,
Inc. are investment companies registered under the Investment Company Act
of 1940, as amended, and are funds in the IDS Mutual Fund Group
(collectively, the "IDS Funds"). AEFC provides investment advisory services
to each of the IDS Funds and to certain other registered investment
companies. The information set forth in the table with respect to each IDS
Fund and the information set forth in this footnote was provided by AEFC.
(6) Oppenheimer Funds, Inc., an investment advisor, provides investment
advisory services to each of Oppenheimer Champion Income Fund, Oppenheimer
Strategic Income Fund and Oppenheimer Strategic Bond Fund (collectively,
the "Oppenheimer Funds"). The information set forth in the table with
respect to the Oppenheimer Funds and the information set forth in this
footnote was provided by Oppenheimer Funds, Inc.
29
<PAGE>
(7) BEA Associates, an investment advisor, is the beneficial owner of such
securities which it holds for the following entities: The Common Fund,
Connecticut Mutual Dimension Fund, BEA Income Fund, Inc. (formerly CSFB
Income Fund), General Retirement System of the City of Detroit, Omaha
Public School Employee Retirement System, BEA High Yield Portfolio, RJR
Nabisco Domestic High Yield, SEI Institutional Managed Trust and VAIL. The
information set forth in the table with respect to BEA Associates and the
information set forth in this footnote was provided by BEA Associates.
(8) Northstar Investment Management Corp., an investment advisor, is the
beneficial owner of such securities which it holds for Northstar Advantage
High Total Return Fund, Northstar High Yield Annuity Fund and Northstar
Multi-Sector Annuity Fund and the sub-advisor for the TD Partners Account.
The information set forth in the table with respect to Northstar Investment
Management Corp. and the information set forth in this footnote was
provided by Northstar Investment Management Corp.
(9) Winston J. Churchill, principal of CIP Capital Management, the General
Partner of CIP Capital, L.P., is a Director of the Company and Chairman of
the Company's Board of Directors.
(10) The Prudential Investment Corporation, an investment advisor, provides
investment advisory services to each of The Prudential Series Fund, Inc.,
High Yield Bond Portfolio, The High Yield Income Fund, Inc. and Prudential
High Yield Fund (collectively, the "Prudential Funds"). The information set
forth in the table with respect to the Prudential Funds and the information
set forth in this footnote was provided by The Prudential Investment
Corporation.
SHARES
<TABLE>
<CAPTION>
Pre-Offering (1) Post Offering (2)
---------------------------------------------------- -------------------------------------
Amount of Amount of Amount of
Selling Shares Percentage Shares Shares Percentage
Securityholder Beneficially Owned of Class (3) Being Sold Beneficially Owned of Class (3)
- -------------- ------------------ ------------ ---------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Halifax Fund,
L.P. 60,606(4) * 60,606 0 0%
Wrapone & Co.,
nominee for IDS
Life Managed
Portfolio(5) 30,303(4) * 30,303 0 0%
Salkeld & Co.,
nominee for IDS
Extra Income
Fund, Inc.(6) 1,378,560(7) 2.4% 606,060 772,500 1.3%
Cockatoo & Co.,
nominee for IDS
Managed
Retirement Fund,
Inc.(6) 363,636(4) * 363,636 0 0%
Wrapfour & Co.,
nominee for IDS
Life Special
Income Fund,
Inc.(6) 856,060(8) 1.5% 606,060 250,000 *
Wraptwo & Co.,
nominee for IDS
Life Managed
Fund, Inc.(6) 242,424(4) * 242,424 0 0%
Salkeld & Co.,
nominee for IDS
Bond Fund, Inc.(6) 606,060(4) 1.1% 606,060 0 0%
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Pre-Offering (1) Post Offering (2)
---------------------------------------------------- -------------------------------------
Amount of Amount of Amount of
Selling Shares Percentage Shares Shares Percentage
Securityholder Beneficially Owned of Class (3) Being Sold Beneficially Owned of Class (3)
- -------------- ------------------ ------------ ---------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Hare & Co.,
nominee for
Oppenheimer
Champion Income
Fund(9) 242,424(4) * 242,424 0 0%
Hare & Co.,
nominee for
Oppenheimer
Strategic Income
Fund(9) 780,909(10) 1.4% 90,909 690,000 1.2%
Hare & Co.,
nominee for
Oppenheimer
Strategic Bond
Fund(9) 37,803(11) * 30,303 7,500 *
BEA Associates(12) 1,898,324(13) 3.2% 727,272 1,171,052 2.0%
Northstar
Investment
Management
Corp.(14) 686,136(15) 1.2% 363,636 322,500 *
CIP Capital
L.P.(16) 779,638(17) 1.4% 121,212 658,426 1.2%
GIBCO, nominee
for the Prudential
Series Fund, Inc.,
High Yield Bond
Portfolio(18) 242,424(4) * 242,424 0 0%
Deerway & Co.,
nominee for the
High Yield Income
Fund, Inc.(18) 121,212(4) * 121,212 0 0%
Gimlet & Co.,
nominee for
Prudential High
Yield Fund(18) 1,454,545(4) 2.5% 1,454,545 0 0%
Merrill Lynch
Global Allocation
Fund, Inc. 5,515,151(19) 8.8% 2,515,151 3,000,000 4.8%
The Nicollet
Fund L.P. 181,818(4) * 181,818 0 0%
Global Bermuda
Limited Partnership 363,636(4) * 363,636 0 0%
Lakeside
International Limited 121,212(4) * 121,212 0 0%
Vanguard Cellular
Systems, Inc.(20) 9,816,963(21) 14.7% 9,816,963 0 0%
William
MacDermott 153,000(22) * 153,000 0 0%
Hugh P. Taylor 73,500(22) * 73,500 0 0%
Judy Cohen 36,750(22) * 36,750 0 0%
Bill Zimsky 36,750(22) * 36,750 0 0%
</TABLE>
- ------------------
* Less than 1%
31
<PAGE>
(1) Assumes all of the Notes offered by this Prospectus have been converted
into Note Shares at a conversion price of $8.25 per share.
(2) Assumes the sale of all Shares offered by this Prospectus by the Selling
Securityholders to third parties unaffiliated with the Selling
Securityholders.
(3) These percentages are calculated in accordance with Section 13(d) of the
Securities Act and the rules promulgated thereunder, without giving effect
to the 60 day limitation regarding conversion of exercise of convertible
securities or warrants.
(4) Consists entirely of Note Shares.
(5) IDS Life Managed Portfolio is a portfolio in the IDS Life Series Fund,
Inc., (the "Insurance Life Fund") which is an investment company registered
under the Investment Company Act of 1940, as amended. American Express
Financial Corporation ("AEFC"), an investment adviser registered under the
Investment Advisers Act of 1940, as amended, provides investment advisory
services to the Insurance Life Fund and to certain other registered
investment companies. AEFC is a wholly-owned subsidiary of American Express
Company. The information set forth in the table with respect to IDS Life
Managed Portfolio and the information set forth in this footnote was
provided by AEFC.
(6) IDS Bond Fund, Inc., IDS Extra Income Fund, Inc,, IDS Managed Retirement
Fund, Inc., IDS Life Special Income Fund, Inc., and IDS Life Managed Fund,
Inc. are investment companies registered under the Investment Company Act
of 1940, as amended, and are funds in the IDS Mutual Fund Group
(collectively, the "IDS Funds"). AEFC provides investment advisory services
to each of the IDS Funds and to certain other registered investment
companies. The information set forth in the table with respect to each IDS
Fund and the information set forth in this footnote was provided by AEFC.
(7) Consists of 606,060 Note Shares and 772,500 shares of Common Stock issuable
upon the exercise of certain warrants exercisable at any time and from time
to time prior to July 15, 2005 at an exercise price of $9.90 per share,
subject to adjustments ("$9.90 Warrant Shares").
(8) Consists of 606,060 Notes Shares and 250,000 $9.90 Warrant Shares.
(9) Oppenheimer Funds, Inc., an investment advisor, provides investment
advisory services to each of Oppenheimer Champion Income Fund, Oppenheimer
Strategic Income Fund and Oppenheimer Strategic Bond Fund (collectively,
the "Oppenheimer Funds"). Oppenheimer Funds, Inc. also provides investment
advisory services to Oppenheimer High Income Fund which holds warrants to
acquire 52,500 shares of Common Stock. The information set forth in the
table with respect to the Oppenheimer Funds and the information set forth
in this footnote was provided by Oppenheimer Funds, Inc.
(10) Consists of 90,909 Note Shares and 690,000 $9.90 Warrant Shares.
(11) Consists of 30,303 Note Shares and 7,500 $9.90 Warrant Shares.
(12) BEA Associates, an investment advisor, is the beneficial owner of such
securities which it holds for the following entities: The Common Fund,
Connecticut Mutual Dimension Fund, BEA Income Fund, Inc. (formerly CSFB
Income Fund), General Retirement System of the City of Detroit, Omaha
Public School Employee Retirement System, BEA High Yield Portfolio, RJR
Nabisco Domestic High Yield, SEI Institutional Managed Trust and VAIL. The
information set forth in the table with respect to BEA Associates and the
information set forth in this footnote was provided by BEA Associates.
(13) Consists of 727,272 Notes Shares and 1,171,052 shares of Common Stock
issuable upon conversion of the Company's Series M Cumulative Convertible
Preferred Stock.
(14) Northstar Investment Management Corp., an investment advisor, is the
beneficial owner of such securities which it holds for Northstar Advantage
High Total Return Fund, Northstar High Yield Annuity Fund and Northstar
Multi-Sector Annuity Fund and the sub-advisor for the TD Partners Account.
The information set forth in the table with respect to Northstar Investment
Management Corp. and the information set forth in this footnote was
provided by Northstar Investment Management Corp.
(15) Consists of 363,636 Note Shares and 322,500 $9.90 Warrant Shares.
(16) Winston J. Churchill principal of CIP Capital Management, the General
Partner of CIP Capital, L.P., is a Director of the Company and Chairman of
the Company's Board of Directors. Mr. Churchill owns 375,704 shares of
Common Stock and options which are currently exercisable to obtain 186,667
shares of Common Stock. In addition, Mr. Churchill disclaims beneficial
ownership of 155,134 shares of Common Stock held by a trust for the benefit
of Mr. Churchill's son.
(17) Consists of 121,212 Notes Shares, 647,626 shares of Common Stock and 10,800
shares of Common Stock issuable upon the exercise of certain outstanding
options.
32
<PAGE>
(18) The Prudential Investment Corporation, an investment advisor, provides
investment advisory services to each of The Prudential Series Fund, Inc.,
High Yield Bond Portfolio, The High Yield Income Fund, Inc. and Prudential
High Yield Fund (collectively, the "Prudential Funds"). The Prudential
Investment Corporation also provides investment management services to
General Motors Retirement Program for Salaried Employees High Yield Account
which holds 90,000 $9.90 Warrant Shares. The information set forth in the
table with respect to The Prudential Funds and the information set forth in
this footnote was provided by The Prudential Investment Corporation.
(19) Consists of 2,515,151 Note Shares and 3,000,000 $9.90 Warrant Shares.
(20) Haynes T. Griffin, the President of Vanguard, is a Director of the Company,
Mr. Griffin holds options which are currently exercisable to purchase
20,000 shares of Common Stock.
(21) Consists of 2,500,000 shares of Common Stock, 1,500,000 Shares of Common
Stock issued or issuable pursuant to the Management Agreement, 5,285,500
shares of Common Stock issuable upon exercise of the Vanguard Options and
531,463 Series L Shares.
(22) Consists entirely of MacDermott Shares.
33
<PAGE>
PLAN OF DISTRIBUTION
The Notes are being registered to permit public secondary trading of
the Notes by the holders thereof from time to time after the date of this
Prospectus. The Company has agreed, among other things, to bear all expenses
(other than underwriting discounts, selling commissions and fees and expenses of
counsel and other advisors to holders of the Notes) in connection with the
registration and sale of the Notes covered by this prospectus.
The Company will not receive any of the proceeds from the offering of
Notes by the Selling Securityholders. The Company has been advised by the
Selling Securityholders that the Selling Securityholders may sell all or a
portion of the Notes on terms to be determined at the times of such sales. The
Selling Securityholders may also make private sales directly or through a broker
or brokers. Alternatively, any of the Selling Securityholders may from time to
time offer the Notes beneficially owned by them through underwriters, dealers or
agents, who may receive compensation in the form of underwriting discounts,
commissions or concessions from the Selling Securityholders and the purchasers
of the Notes from whom they may act as agent. The aggregate proceeds to the
Selling Securityholders from the sale of the Notes offered by them hereby will
be the purchase price of such Notes less discounts and commissions, if any.
The Notes may be sold from time to time in one or more transactions at
fixed offering prices, which may be changed, or at varying prices determined at
the time of sale or at negotiated prices. Such prices will be determined by the
holders of such securities or by agreement between such holders and underwriters
or dealers who may receive fees or commission in connection therewith.
The Initial Purchaser has advised the Company that it may, from time to
time, act as a broker or dealer with respect to trading of the Notes; however,
it is not obligated to do so and any such activity may be discontinued at any
time without notice, in the sole discretion of the Initial Purchaser.
Accordingly, no assurance can be given as to the development of liquidity of any
trading market that may develop for the Notes. See "Risk Factors - Lack of
Public Market for the Notes; Liquidity."
In order to comply with the securities laws of certain states, if
applicable, the Notes will be sold in such jurisdictions only through registered
or licensed brokers or dealers. In addition, in certain states the Notes may not
be sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
The Selling Securityholders and any broker-dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Notes may be deemed to be "underwriters" within the meaning
of the Securities Act, in which event any commissions received by such
broker-dealers, agents or underwriters and any profit on the resale of the Notes
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
The Shares are being registered to permit public resale of the Shares
by the Selling Shareholders from time to time after the date of this Prospectus.
The Company has agreed, among other things, to bear all expenses (other than
underwriting discounts, selling commissions and fees and expenses of counsel and
other advisors to holders of the Shares) in connection with the registration and
sale of the Shares covered by this Prospectus. The Company will not receive any
of the proceeds from the sale of the Shares by the Selling Shareholders.
Pursuant to this Registration Statement, the Shares may be sold by the
Selling Shareholders, from time to time while this Registration Statement is
effective, on the PSE, NNM or otherwise at prices and terms prevailing at the
time of sale, at prices and terms related to such prevailing prices and terms,
in negotiated transactions or at fixed prices. Although none of the Selling
Shareholders has advised the Company that it currently intends to sell the
Shares pursuant to this Registration Statement, any Selling Shareholder may
choose to sell all or a portion of their respective Shares from time to time
in any manner described herein. The methods by which the Shares may be sold
by the Selling Shareholders include: (i) ordinary brokerage transactions, (ii)
transactions which involve crosses or block trades or any other transactions
permitted by the PSE or NNM, (iii) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus,
(iv) "at the market" to or through market makers or into an existing market for
the Shares, (v) in other ways not involving market makers or established
trading markets, including direct sales to purchasers or sales effected
through agents, (vi) through transactions in options (whether exchange-listed
or otherwise) or (vii) any combinations of any such methods of sale. In
effecting sales, brokers and dealers engaged by the Selling Shareholders may
arrange for other brokers or dealers to participate. Brokers or dealers may
receive commissions or discounts from the Selling Shareholders to sell a
specified number of shares at a stipulated price per share, and, to the extent
such a broker or dealer is unable to do so acting as agent for the Selling
Shareholders, may purchase as principal any unsold shares at the price required
to fulfill such broker or dealer commitment to the Selling Shareholders.
Brokers or dealers who acquire shares as principals may thereafter resell such
shares from time to time in transactions (which may involve crosses and book
transactions and which may involve sales to and through other brokers or
dealers, including transactions, of the nature described above) in the over-the-
counter market, in negotiated transactions or otherwise, at market prices and
34
<PAGE>
terms prevailing at the time of sale, at prices and terms related to such
prevailing prices and terms, in negotiated transactions or at fixed prices, and
in connection with the methods as described above. The Shares held by the
Selling Shareholders may also be sold hereunder by brokers, dealers, banks or
other persons or entities who receive such Shares as a pledgee of the Selling
Shareholders. The Selling Shareholders and brokers and dealers participating in
sales of Shares may be deemed to be "underwriters," as defined under the
Securities Act. Any profits realized by them in connection with the sale of the
Shares may be considered to be underwriting compensation.
The Registration Rights Agreements pursuant to which the Notes, Note
Shares, Vanguard Shares and Series L Shares are being registered for issuance or
resale, as the case may be, provide that the Company will indemnify any such
person deemed an underwriter and the Selling Securityholders (other than the
MacDermott Shareholders) against certain liabilities, including civil
liabilities under the Securities Act, or will contribute to payments such
underwriters or Selling Securityholders may be required to make in respect
thereof.
LEGAL MATTERS
The validity of the Notes and the Indenture will be passed upon by
Robert Vecsler, Esquire, General Counsel of the Company.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1995
and 1994 and the consolidated statements of operations, shareholders' equity,
and cash flows for the years ended December 31, 1995, 1994 and 1993,
incorporated by reference in this Prospectus, have been incorporated by
reference herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing. In such report, Coopers & Lybrand L.L.P. states, that
with respect to certain affiliated companies, their opinions are based upon the
reports of other independent accountants.
35
<PAGE>
==============================================================================
No person is authorized to give any information or to make any
representations not contained or incorporated by reference in this Prospectus,
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than the securities to which it relates or an offer to sell or a
solicitation of an offer to buy such securities in any circumstances or in any
jurisdiction in which such offer or solicitation is unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that there has not been any change in the
affairs of the Company since the date hereof or that the information contained
herein is correct as of any time subsequent to its date.
--------
TABLE OF CONTENTS
Page
----
Additional Information............................................... 4
Incorporation of Certain Information by Reference.................... 4
Address and Telephone Number......................................... 5
Risk Factors......................................................... 6
Business............................................................. 16
Description of the Notes............................................. 17
Selling Securityholders.............................................. 27
Plan of Distribution................................................. 34
Legal Matters........................................................ 35
Experts.............................................................. 35
GEOTEK
COMMUNICATIONS, INC.
$75,000,000 aggregate principal amount of
12% Senior Subordinated
Convertible Notes due 2001
$75,000,000 of Common Stock
10,116,963 shares of Common Stock
-----------
PROSPECTUS
Dated: ___________ ___, 1996
-----------
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is an itemized statement of the estimated amounts of all
expenses payable by the Registrant in connection with the registration of the
Offered Notes offered hereby, other than underwriting discounts and commissions:
Registration Fee--Securities and Exchange Commission....... $ 60,312.07
*Blue Sky fees and expenses................................. $ 5,000.00
*Accountants' fees and expenses............................. $ 5,000.00
*Legal fees and expenses.................................... $ 10,000.00
*Printing and engraving expenses............................ $ 5,000.00
*Miscellaneous.............................................. $ 2,500.00
-----------
Total.............................................. $ 87,812,07
===========
- ------------------
* Estimate
Item 15. Indemnification of Directors and Officers.
A. The Delaware Corporation Law provides that, to the extent that any
director, officer, employee or agent of the Company has been successful on the
merits or otherwise in defense of any action, suit or proceeding, whether civil,
criminal, administrative or investigative (including an action by or in the
right of the Company) which he was a party to by reason of the fact that he is
or was a director, officer, employee or agent of the Company or is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
the Company shall indemnify any such person against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
B. In addition, the Company has the power to indemnify any of the
persons referred to above in connection with any such actions against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with any such actions, suit or
proceeding, if such person acted in good faith and in a manner he reasonably
believed to be or not opposed to the best interests of the Company, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful.
Notwithstanding the foregoing, in connection with any action or suit by
or in the right of the Company to procure a judgment in its favor, the Company
shall not make any indemnification as described above in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the Company unless or only to the extent that the Court of Chancery (in the
State of Delaware) or the court in which such action or suit was brought shall
determine, upon application, that, despite adjudication of liability but in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
C. The Company also has the power, under the Delaware Corporation Law,
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
other liability asserted against him and incurred by him in any such capacity,
II-1
<PAGE>
or arising out of his status as such, whether or not the Company would have the
power to indemnify him against such liability under the provisions of this
Section.
D. The indemnification provided by or allowable pursuant to the
Delaware Corporation Law shall or may, as applicable, continue as to a person
who has ceased to be a director, officer, employee or agent of the Company and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
Item 16. Exhibits and Financial Statement Schedules.
(a) Schedule of Exhibits.
Exhibit
Number Exhibit
------ -------
4.1 Indenture, dated as of March 5, 1995, by and between the
Company and the Trustee (the "Indenture"). (1)
4.2 Form of Senior Note is included as an exhibit to the
Indenture.
4.3 Registration Rights Agreement, dated March 5, 1996, by and
between the Company and Smith Barney Inc. (1)
5 Opinion and consent of Robert Vecsler, Esquire.
12 Computation of the Ratio of Earnings to Fixed Charges.
23.1 Consent of Coopers & Lybrand L.L.P. - Geotek Communications,
Inc.
23.2 Consent of Shachak Peer Reznick & Co. - PowerSpectrum
Technology Ltd.
23.3 Consent of Coopers & Lybrand - National Band Three Limited.
23.4 Consent of Coopers & Lybrand L.L.P. -- Bogen Communications
International, Inc.
23.5 Consent of KPMG - Band Three Radio Limited.
23.6 Consent of Coopers & Lybrand GmbH - Preussag Bundelfunk
GmbH.
23.7 Consent of Dusseldorfer Treuhand-Gesellschaft Altenburg &
Tewes AG - DBF Bundelfunk GmbH & Co. Betriebs-KG.
23.8 Consent of Deloitte & Touche - National Band Three Limited
23.9 The consent of Robert Vecsler, Esquire to all references
made to him in the Prospectus contained in this Registration
Statement is included in his opinion filed as Exhibit 5 to
this Registration Statement.
24 The powers of attorney contained on the signature pages of
this Registration Statement are hereby incorporated by
reference.
- -----------
(1) Incorporated by reference from the Company's Current Report on Form
8-K dated March 4, 1996.
II-2
<PAGE>
Item 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. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective 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 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.
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 Act
and is, therefore, unenforceable. In the event that a claim for indemnification
II-3
<PAGE>
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 Act and will be governed by the final adjudication of
such issue.
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 that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-4
<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 form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Montvale, New Jersey, on April 24, 1996.
GEOTEK COMMUNICATIONS, INC.
By: /s/ Yaron I. Eitan
-------------------------------------------------
Yaron I. Eitan
President, Chief Executive Officer and Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Yaron Eitan, President, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and his name, place and stead, in any and all
capacities, to sign any or all amendments, including any post-effective
amendments, to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities 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 in and about the above premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or either of them or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney may be executed in multiple counterparts, each of
which shall be deemed an original, but which taken together shall constitute one
instrument.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been duly signed below by the following persons in
the capacities indicated on April 24, 1996.
Signatures Title
- ---------- -----
/s/ Winston J. Churchill Chairman of the Board;
- ------------------------------- Director
Winston J. Churchill
/s/ Yaron I. Eitan President and Chief
- ------------------------------- Executive Officer
Yaron I. Eitan (Principal Executive
Officer); Director
/s/ Walter E. Auch Director
- -------------------------------
Walter E. Auch
<PAGE>
Signatures Title
- ---------- -----
/s/ George Calhoun Director
- -------------------------------
George Calhoun
/s/ Purnendu Chatterjee Director
- -------------------------------
Purnendu Chatterjee
/s/ Haynes G. Griffin Director
- -------------------------------
Haynes G. Griffin
/s/ Richard Krants Director
- -------------------------------
Richard Krants
/s/ Richard T. Liebhaber Director
- -------------------------------
Richard T. Liebhaber
/s/ Haim Rosen Director
- -------------------------------
Haim Rosen
/s/ Kevin W. Sharer Director
- -------------------------------
Kevin W. Sharer
/s/ William Spier Director
- -------------------------------
William Spier
/s/ Michael McCoy Chief Financial Officer
- ------------------------------- (Principal Financial
Michael McCoy Officer)
/s/ Michael Carus Chief Accounting Officer
- ------------------------------- (Principal Accounting
Michael Carus Officer)
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit
- ------- -------
5 Opinion and Consent.
12 Computation of the Ratio of Earnings to Fixed Charges.
23.1 Consent of Coopers & Lybrand L.L.P. - Geotek Communications,
Inc.
23.2 Consent of Shachak Peer Reznick & Co. - PowerSpectrum
Technology Ltd.
23.3 Consent of Coopers & Lybrand - National Band Three Limited.
23.4 Consent of Coopers & Lybrand L.L.P. -- Bogen Communications
International, Inc.
23.5 Consent of KPMG - Band Three Radio Limited.
23.6 Consent of Coopers & Lybrand GmbH - Preussag Bundelfunk GmbH.
23.7 Consent of Dusseldorfer Treuhand-Gesellschaft Altenburg &
Tewes AG - DBF Bundelfunk GmbH & Co. Betriebs-KG.
23.8 Consent Of Deloitte & Touche - National Band Three Limited.
<PAGE>
Exhibit 5
---------
[GEOTEK LETTERHEAD]
April 24, 1996
Geotek Communications, Inc.
20 Craig Road
Montvale, New Jersey 07645
Gentlemen:
I am general counsel to Geotek Communications, Inc., a Delaware
corporation (the "Company"), and have served in such capacity in connection with
the preparation of the Company's Registration Statement on Form S-3 which the
Company intends to file with the Securities and Exchange Commission (the "SEC")
on or about April 25, 1996 under the Securities Act of 1933, as amended (the
Registration Statement as amended at the time it became effective being referred
to herein as the "Registration Statement"). The Registration Statement relates
to, among other things, the offer and sale of an aggregate of $75,000,000
principal amount of the Company's 12% Senior Subordinated Convertible Notes due
2001 (the "Notes"). The Notes were issued under an Indenture dated as of March
5, 1996 (the "Indenture"), between the Company and The Bank of New York (the
"Trustee").
I have examined, among other things, the Certificate of Incorporation
and the Bylaws of the Company, the Indenture and the form of Note. I also have
examined originals or copies, certified or otherwise identified to my
satisfaction, of such corporate records of the Company and other instruments and
documents and statutory and other materials as I have deemed necessary as a
basis for the opinions hereinafter expressed.
In rendering the opinion below, I have assumed, without any independent
investigation or verification of any kind: (i) the genuineness of all signatures
on, and the authenticity and completeness of, all documents submitted to me as
originals and the conformity to original documents and completeness of all
documents submitted to me as certified, conformed or photostatic copies; (ii)
that the Indenture has been duly authorized, executed and delivered by the
Trustee; and (iii) that the Notes have been duly authenticated by the Trustee.
Based on and subject to the foregoing and subject to the qualifications,
limitations and exceptions contained below, I am of the opinion that the Notes
have been duly authorized, executed and delivered by the Company and are
entitled to the benefits of the Indenture and are valid and legally binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, receivership, moratorium, fraudulent transfer and conveyance
laws and other similar laws of general application now or thereafter in effect
relating to or affecting the rights and remedies of creditors generally, (ii) as
limited by general principles of equity, whether enforcement is considered in a
proceeding in equity or at law, and the discretion of the court before which any
proceeding therefor may be brought, (iii) the enforceability under certain
circumstance under law or court decisions of provisions providing for the
indemnification of or contribution to a party with respect to a liability where
such indemnification or contribution is contrary to public policy, and (iv) I
express no opinion concerning the enforceability of the waiver of rights or
defenses contained in Section 4.07 of the Indenture.
The opinions expressed herein are limited to the laws of the State of
New York, the General Corporation Law of the State of Delaware and United States
Federal law. No opinion is expressed on any matters other than those expressly
referred herein. The opinions set forth herein are as of the date of this letter
and I do not render any opinion as to the effect of any matter which may occur
subsequent to the date hereof.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under "Legal Matters" in the
Prospectus forming a part of the Registration Statement. In giving such consent,
I do not admit hereby that I come within the category of persons whose consent
is required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the SEC promulgated thereunder.
Very truly yours,
/s/Robert Vecsler
-----------------------
Robert Vecsler
<PAGE>
Exhibit 12
----------
GEOTEK COMMUNICATIONS, INC.
COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
(Unaudited)
For the Year Ended December 31,
-------------------------------
1995 1994 1993 1992 1991
Earnings (Loss) Before
Income Taxes ..............(89,949) (41,574) (51,896) (2,381) (941)
Add Fixed Charges............ 23,313 7,300 3,529 2,126 3,103
Less Preferred Dividends..... (4,132) (2,066) (246) (777) (1,155)
------- ------- ------- ------ ------
Total Earnings.............(65,768) (36,340) (48,613) (1,032) (1,007)
======== ======== ======= ====== ======
Fixed Charges
Total Interest Expenses
Interest................... 16,714 3,101 2,591 1,099 1,712
Interest Portion of
Rental Expenses............ 2,467 2,133 692 250 236
Preferred Dividends.......... 4,132 2,066 246 777 1,155
------ ----- ----- ----- -----
Total Fixed Charges........ 23,313 7,300 3,529 2,126 3,103
====== ===== ===== ===== =====
Ratio of Earnings to
Fixed Charges.............. * * * * .32
* There was an earnings deficiency of $89,081, $43,640, $52,142 and $3,154 for
the years ended 1995, 1994, 1993 and 1992, respectively.
<PAGE>
Exhibit 23.1
------------
[LETTERHEAD OF COOPERS & LYBRAND L.L.P]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
Geotek Communications, Inc. (the "Company") on Form S-3 of our report, which
includes a reference to the report of other auditors, dated March 26, 1996, on
our audits of the consolidated financial statements and consolidated financial
statement schedule of Geotek Communications, Inc. and Subsidiaries as of
December 31, 1995 and 1994, and for the years ended December 31, 1995, 1994 and
1993, which report is included in the Company's Annual Report on Form 10-K. We
also consent to the reference to our firm under the caption "Experts" in this
registration statement.
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
COOPERS & LYBRAND L.L.P.
New York, New York
April 24, 1996
<PAGE>
Exhibit 23.2
------------
[LETTERHEAD OF SHACHAK PEER REZNICK & CO.]
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of Geotek Communications, Inc. (the
"Company") on Form S-3 of our report, dated March 26, 1996, with respect to the
financial statements of PowerSpectrum Technology Ltd. ("PST") as of December 31,
1995 and 1994, and for the years ended December 31, 1995 and 1994 and the
fifteen month period ended December 31, 1993, which report is included in the
annual report of the Company on Form 10-K for the fiscal year ended December 31,
1995.
/s/ Shachak Peer Reznick & Co.
- ------------------------------------
Shachak Peer Reznick & Co.
Certified Public Accountants (Isr.)
April 24, 1996
Tel Aviv, Israel
<PAGE>
Exhibit 23.3
------------
[LETTERHEAD OF COOPERS & LYBRAND]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement on
Form S-3 of Geotek Communications, Inc. (the "Company") of our report dated
March 27, 1996 on our audits of the financial statements of National Band Three
Limited as of December 31, 1995 and 1994, and for the years ended December 31,
1995 and 1994, which report is included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995.
.
/s/ Coopers & Lybrand
- ---------------------
Coopers & Lybrand
London, United Kingdom
April 24, 1996
<PAGE>
Exhibit 23.4
------------
[LETTERHEAD OF COOPERS & LYBRAND L.L.P.]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement on
Form S-3 of Geotek Communications, Inc. (the "Company") of our reports dated
March 21, 1996 with respect to the consolidated financial statements of Bogen
Communications International, Inc. (formerly European Gateway Acquisition Corp.)
as of December 31, 1995 and 1994, and for each of the three years in the period
ended December 31, 1995, which reports are included in the annual report of the
Company on Form 10-K for the fiscal year ended December 31, 1995.
Coopers & Lybrand L.L.P.
New York, New York
April 22, 1996
<PAGE>
Exhibit 23.5
------------
[LETTERHEAD OF KPMG]
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Band Three Radio Limited
We consent to the incorporation by reference in this Registration Statement on
Form S-3 of Geotek Communications, Inc. (the "Company") of our report dated 15
July 1991, relating to the Band Three Radio Limited statements of the net loss
and cash flows for the year ended 31 March 1991, which report was included in
the Current Report on Form 8- K/A of the Company, dated June 18, 1993.
/s/ KPMG
- ---------
KPMG
Reading, England
April 24, 1996
<PAGE>
Exhibit 23.6
------------
[LETTERHEAD OF COOPERS & LYBRAND GmbH]
CONSENT OF INDEPENDENT AUDITORS RELATING TO
PREUSSAG BUNDELFUNK GMBH, SALZGITTER/GERMANY
-------------------
As independent auditors, we hereby consent to the incorporation by reference in
this Registration Statement of Geotek Communications, Inc. (the "Company") on
Form S-3 of our report, dated August 30, 1994, relating to the balance sheet of
Preussag Bundelfunk GmbH as of September 30, 1993 and the related statement of
operations, shareholders' equity and cash flow for the year then ended, which
report was included in the Current Report on Form 8-K of the Company, dated July
5, 1994, as amended.
Hannover,
April 24, 1996
/s/ Coopers & Lybrand GmbH
-------------------------------
Coopers & Lybrand GmbH
Wirtschaftsprufungsgesellschaft
<PAGE>
Exhibit 23.7
------------
[LETTERHEAD OF
ALTENBURG & TEWES AG]
Consent of Independent Accountants
We consent to the incorporation by reference in this Registration Statement on
Form S-3 of Geotek Communications, Inc. (the "Company") of our report dated
September 6, 1994, on our audit of the financial statements of DBF Bundelfunk
GmbH & Co. Betriebs-KG as of December 31, 1993, and for the year ended December
31, 1993, which report appears in the Company's Current Report on Form 8-K dated
August 2, 1994, as amended.
Wuppertal, April 24, 1996
ALTENBURG & TEWES AG
WIRTSCHAFTSPRUFUNGSGESELLSCHAFT
former
DUSSELDORFER TREUHAND-GESELLSCHAFT
ALTENBURG & TEWES AG
WIRTSCHAFTSPRUFUNGSGESELLSCHAFT
STEUERBERATUNGSGESELLSCHAFT
/s/ Berg
- --------------------
Berg
Wirtschaftsprufer
/s/ Spielberg
- --------------------
Spielberg
Wirtschaftsprufer
4408-V3/243/3029-103
<PAGE>
Exhibit 23.8
------------
[LETTERHEAD OF DELOITTE & TOUCHE]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement on
Form S-3 of Geotek Communications, Inc. (the "Company") of (i) our report dated
June 10, 1993 with respect to the financial statements of National Band Three
Limited (ii) our report dated November 24, 1992 with respect to the financial
statements of GEC-Marconi Communications Networks Limited and (iii) our report
dated January 27, 1993 with respect to the financial statements of Vodanet
Limited, each appearing in the Current Report on Form 8K/A of the Company, dated
June 18, 1993.
/s/ Deloitte & Touche
- ---------------------
Deloitte & Touche
London, England
April 25, 1996
