<PAGE>
As filed with the Securities and Exchange Commission on June 4, 1996
Registration No. 333-02849
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
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>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
Title of each class of securities to be Amount to be Proposed Proposed Amount of
registered registered Maximum Maximum Registration
Aggregate Price Aggregate Fee
Per Unit Offering Price
===================================================================================================================================
<S> <C> <C> <C> <C>
12% Senior Subordinated Convertible Notes $75,000,000 100% $75,000,000 $25,862.07(1)
Due 2001
===================================================================================================================================
Common Stock, par value $ .01 per share, $75,000,000(2) -- -- --
issuable upon conversion of the Notes (3)
===================================================================================================================================
Common Stock, par value $ .01 per share 15,303,461(3) $13.25(4) $168,626,107.50 $58,146.93(6)
(5)
===================================================================================================================================
</TABLE>
(1) Previously paid at the time of the original filing of this Registration
Statement.
(2) 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.
(3) Pursuant to Rule 416 of the Securities Act, this Registration Statement
also registers any and all shares of Common Stock issued with respect
to such securities as a result of stock splits, stock dividends and
anti-dilution provisions.
(4) Based on the closing sale price of the Registrant's Common Stock as
reported on The NASDAQ National Market ("NNM") on May 29, 1996.
Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) of the Securities Act.
(5) Based on the sale of (i) 10,116,963 shares of the Registrant's Common
Stock at $9.875 (the closing sale price of the Registrant's Common
Stock as reported on NNM on April 24, 1996 which was utilized in
connection with the original filing of this Registration Statement) and
(ii) 5,186,498 shares of the Registrant's Common Stock at $13.25 (the
closing sale price of the Registrant's Common Stock as reported on NNM
on May 29, 1996 utilized in connection with the filing of this
Amendment No. 1 to the Registration Statement). Estimated solely for
the purpose of calculating the registration fee in accordance with Rule
457(c) of the Securities Act.
(6) $34,450.00 of such fee was previously paid at the time of the original
filing of this Registration Statement.
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
15,303,461 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 June 4, 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 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 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 $16.00 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
2
<PAGE>
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."
This Prospectus also concerns the offer and sale by S-C Rig
Investments - III, L.P. ("S-C Rig"), from time to time, of an aggregate of
4,444,450 shares of Common Stock issuable upon the conversion of 444,445
shares of the Company's Series H Cumulative Convertible Preferred Stock, par
value $.01 per share (the "Series H Preferred Stock"). The Series H Preferred
Stock was issued by the Company in December 1993. Each share of Series H
Preferred Stock is immediately convertible into the number of shares of Common
Stock as is determined by dividing (i) the sum of the $90.00 stated value per
share of the Series H Preferred Stock plus all unpaid dividends accrued and
deemed to have accrued, if any, with respect to such shares of Series H
Preferred Stock through the last dividend payment date by (ii) a conversion
price of $9.00 per share, subject to certain adjustments. Assuming there are
no accrued and unpaid dividends on the Series H Preferred Stock at the time of
conversion, the Series H Preferred Stock is convertible into an aggregate of
4,444,450 shares of Common Stock. The shares of Common Stock issuable upon
conversion of the Series H Preferred Stock are hereinafter referred to as the
"Series H Shares."
This Prospectus also concerns the offer and sale by S-C Rig, from
time to time, of an aggregate of 851,060 shares of Common Stock issuable upon
the conversion of 20 shares of the Company's Series I Cumulative Convertible
Preferred Stock, par value $.01 per share (the "Series I Preferred Stock").
The Series I Preferred Stock was issued by the Company on December 1, 1994.
Each share of Series I Preferred Stock is immediately convertible into the
number of shares of Common Stock as is determined by dividing (i) the sum of
the $500,000.00 stated value per share of the Series I Preferred Stock plus
all unpaid dividends accrued and deemed to have accrued, if any, with respect
to such shares of Series I Preferred Stock through the last dividend payment
date by (ii) a conversion price of $11.75 per share, subject to certain
adjustments. Assuming there are no accrued and unpaid dividends on the Series
I Preferred Stock at the time of conversion, the Series I Preferred Stock is
convertible into an aggregate of 851,060 shares of Common Stock. The shares of
Common Stock issuable upon conversion of the Series I Preferred Stock are
hereinafter referred to as the "Series I Shares."
This Prospectus also concerns the offer and sale by certain Selling
Shareholders, from time to time, of an aggregate of 190,988 shares of Common
Stock issued to such Selling Shareholders on April 26, 1996 (the "MacDermott
Shares"). The Note Shares, Vanguard Shares, Series L Shares, Series H Shares,
Series I 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."
This Prospectus also concerns, pursuant to Rule 416 of the Securities
Act, the offer and sale by the Selling Securityholdrs of any and all shares of
Common Stock issued with respect to the Securities as a result of
stock-splits, stock dividends and anti-dilution provisions.
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 May 29,1996, the closing sale price for the
Company's Common Stock, as quoted on the NNM, was $13.25 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
3
<PAGE>
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 through whom sales of Shares may
be effected may be deemed to be "underwriters", as defined under the
Securities Act of 1933, as amended (the "Securities Act"), and 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, Series L Shares, Series H Shares and Series I 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.
-----------------------------
4
<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), October 3, 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.
5
<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
6
<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 at least 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 or soon thereafter,
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 (beginning in January 1996);
Washington, Baltimore and New York (beginning in March 1996); Boston
(beginning in April 1996); and Miami (beginning in May 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.
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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 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 Commission'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.
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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, $87.2 million and $26.4
million for the years ended December 31, 1993, December 31, 1994 and December
31, 1995, and the three month period ended March 31, 1996, respectively. In
addition, the Company had a deficiency of earnings before interest, taxes,
depreciation and amortization ("EBITDA") of $15.2 million, $34.2 million,
$63.3 million and $ 16.8 million for the years ended December 31, 1993,
December 31, 1994 and December 31, 1995 and for the three month period ended
March 31, 1996, 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 (the "HNS Loan Agreement") with Hughes Network Systems,
Inc. ("HNS"). Pursuant to the HNS Loan 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 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"), together with the HNS Loan
Agreement and S-C Rig Credit Facility, 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 these loan agreements contain 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.
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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.
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 $150.0 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, the HNS Loan Agreement and the S-C Rig Credit Facility
limit 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
10
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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 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 Waiver will continue
to be necessary in certain circumstances for licenses acquired by the Company
prior to such auctions.
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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 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
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("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."
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, HNS Loan Agreement
and S-C Rig Credit Facility restrict 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 March 31, 1996, 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 $251.4 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
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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 to any security in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by the Company. As of
March 31, 1996, the Company's subsidiaries had approximately $51.5 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
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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.
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
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The Notes have no established trading market and are not 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.
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. The Series N Stock (as defined
under "Business - Recent Events"), upon issuance, will prohibit the
declaration or payment of any dividend on the Company's Common Stock (other
than in shares of Common Stock) without the consent of the Series N Investors
(as defined under "Business - Recent Events"), provided such investors hold
$25,000,000 of the stated value of such Series N Common Stock then
outstanding. 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 April 30, 1996, the Company has an aggregate of approximately
57,300,000 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, (ii) the S-C Rig Warrant Shares and (iii) the Series N
Shares (as defined under "Business - Recent Events"). 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
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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.
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; Washington, Baltimore and New York in March 1996; Boston in
April 1996; and Miami in May 1996. 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.
Recent Events
On May 29, 1996, the Company entered into a Subscription Agreement
with Renaissance Fund LDC and the Charles Bronfman Family Trust (collectively
and together with their permitted assigns, the "Series N Investors") pursuant
to which the Company agreed to sell and the Investors agreed to purchase
45,000 units (the "Units") for an aggregate purchase price of $45.0 million
dollars. Each Unit consists of (i) one share of the Company's Series N
Cumulative Convertible Preferred Stock (the "Series N Stock") and (ii)
warrants (the "Series N Warrants") to purchase thirty (30) shares of Common
Stock. Pursuant to the Subscription Agreement, the Company may offer an
additional 10,000 Units to the Series N Investors or to certain current
stockholders of the Company.
The Series N Stock being sold will be convertible at any time by the
holder thereof into shares of Common Stock at a price of $11.00 per share of
Common Stock. The Company will be able, at its option, to call the Series N
Stock for mandatory conversion at any time after the second anniversary of the
date of issuance of the Series N Stock in the event the average closing price
of the Common Stock is greater than $17.75 (subject to certain adjustments for
the number of shares outstanding) for any twenty consecutive trading days. In
addition, annual dividends on the Series N Stock shall accrue at the rate of
10% and will be payable quarterly in shares of Common Stock until all the
shares of Series N Stock have been converted. Each share of Series N Stock
will entitle the holder thereof to certain voting rights, including the right
to vote on all matters voted on by holders of Common Stock as if such Series N
Stock had already been converted. The Series N Warrants will be exercisable at
any time before the fifth anniversary of their issuance to purchase shares of
Common Stock at an exercise price of $11 per share. The Series N Investors
will have certain registration rights with respect to the shares of Common
Stock issuable (i) with respect to dividends payable on the Series N Stock
("Dividend Shares"), (ii) upon conversion of the Series N Stock ("Conversion
Shares"), and (iii) upon exercise of the Series N Warrants (the "Series N
Warrant Shares" and collectively with the Conversion Shares and the Dividend
Shares, the "Series N Shares").
Consummation of the transactions contemplated by the Subscription
Agreement is subject to (i) the approval by the Company's stockholders of an
amendment to the Company's Restated Certificate of Incorporation to increase
its number of authorized shares of Common Stock. There can be no assurance
that the transactions contemplated by the Subscription Agreement will be
consummated, or if consummated, as to the ultimate number of shares of Series
N Stock and Warrants that will be issued.
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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, interest on the Notes accrues at the rate of 12% per annum (subject to
adjustment) is 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 is
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 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
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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,
is 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
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
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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.
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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:
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
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Purchase Date; provided, however, that upon the occurrence of a Change of
Control of the type specified in 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.
Events of Default
The following will be "Events of Default" under the Indenture:
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(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 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
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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 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
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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 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
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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
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
26
<PAGE>
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).
27
<PAGE>
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 $16.00 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.
In December, 1993, the Company completed a private transaction
pursuant to which it issued and sold to S-C Rig 444,445 shares of Series H
Preferred Stock. The aggregate gross proceeds to the Company for the issuance
and sale of such Series H Preferred Stock was approximately $40,000,000. The
shares of Series H Preferred Stock issued and sold to S-C Rig are immediately
convertible into the number of shares of Common Stock as is determined by
dividing (i) the sum of the $90.00 stated value per share of the Series H
Preferred Stock plus all unpaid dividends accrued and deemed to have accrued,
if any, with respect to such shares of Series H Preferred Stock through the
last dividend payment date by (ii) a conversion price of $9.00 per share,
subject to certain adjustments.
On December 1, 1994, the Company completed a private transaction
pursuant to which it issued and sold to S-C Rig 20 shares of Series I
Preferred Stock. The aggregate gross proceeds to the Company for the issuance
and sale of such Series I Preferred Stock was approximately $10,000,000.00.
The shares of Series I Preferred Stock issued and sold to S-C Rig are
convertible into the number of shares of Common Stock as is determined by
dividing (i) the sum of the $500,000.00 stated value per share of the Series I
Preferred
28
<PAGE>
Stock plus all unpaid dividends accrued and deemed to have accrued, if any,
with respect to such shares of Series I Preferred Stock through the last
dividend payment date by (ii) a conversion price of $11.75 per share, subject
to certain adjustments.
On April 26, 1996, the Company completed a private transaction
pursuant to which the Company issued to William MacDermott, Hugh P. Taylor,
William Zimsky and Judy C. Cohen (collectively, the "MacDermott
Shareholders"), each of whom is a Selling Shareholder hereunder, an aggregate
of 190,988 shares of Common Stock in exchange for 100% of the issued and
outstanding stock of MacDermott Communications, Inc.
This Prospectus also concerns, pursuant to Rule 416 of the Securities
Act, the offer and sale by the Selling Securityholders of any and all shares
of Common Stock issued with respect to the Securities as a result of
stock-splits, stock dividends and anti-dilution provisions.
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.
<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>
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%
29
<PAGE>
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 Incom
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%
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%
30
</TABLE>
<PAGE>
- ------------------
*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.
(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.
<TABLE>
<CAPTION>
SHARES
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%
31
<PAGE>
Salkeld & Co.,
nominee for IDS
Extra Income
Fund, Inc.(6) 1,378,560(7) 2.3% 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) 1.0% 606,060 0 0%
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) 1.3% 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) 1.3% 121,212 658,426 1.1%
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%
32
<PAGE>
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) 14.6% 9,816,963 0 0%
S-C Rig
Investments-III,
L.P.(22) 10,127,036(23) 15.0% 5,295,510 4,831,526 7.2%
William 97,404(24) * 97,404 0 0%
MacDermott
Hugh P. Taylor 46,792(24) * 46,792 0 0%
Judy Cohen 23,396(24) * 23,396 0 0%
Bill Zimsky 23,396(24) * 23,396 0 0%
</TABLE>
- ------------------
* Less than 1%
(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
33
<PAGE>
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.
(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) Purnendu Chatterjee, an affiliate of S-C Rig, is a Director of the
Company. Dr. Chatterjee holds options which are currently accessible
to purchase 20,000 shares of Common Stock. Dr. Chatterjee is also
deemed to beneficially own options to purchase 400,000 shares of
Common Stock held by one of his affiliates, Xtec International, Inc.
(23) Consists of 4,444,450 Series H Shares, 851,060 Series I Shares, 621,000
$9.90 Warrant Shares and 4,210,526 S-C Rig Warrant Shares.
(24) Consists entirely of MacDermott Shares.
34
<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
35
<PAGE>
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 through whom sales of Shares may be effected may be
deemed to be "underwriters", as defined under the Securities Act, and 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, Series L Shares, Series H Shares and Series I 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 liabilites, 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.
36
<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................................................... 5
Incorporation of Certain Information by Reference........................ 5
Address and Telephone Number............................................. 6
Risk Factors............................................................. 7
Business................................................................ 17
Description of the Notes................................................ 18
Selling Securityholders................................................. 28
Plan of Distribution.................................................... 35
Legal Matters........................................................... 36
Experts................................................................. 36
===============================================================================
<PAGE>
===============================================================================
GEOTEK
COMMUNICATIONS, INC.
$75,000,000 aggregate principal amount of
12% Senior Subordinated
Convertible Notes due 2001
$75,000,000 of Common Stock
15,412,473 shares of Common Stock
------------
PROSPECTUS
Dated: June 4, 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.... $ 84,009.00
*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........................................... $111,509.00
==========
- ------------------
* 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.
II-2
<PAGE>
25 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 on Form T-1.
- ------------------
* Previously filed.
(1) Incorporated by reference from the Company's Current Report on
Form 8-K dated March 4, 1996.
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 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
II-3
<PAGE>
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 May 31, 1996.
GEOTEK COMMUNICATIONS, INC.
By: /s/ Yaron I. Eitan
-----------------------------------------------
Yaron I. Eitan
President, Chief Executive Officer and Director
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 May 31, 1996.
Signatures Title
- ---------- -----
- --------------------------* Chairman of the Board; Director
Winston J. Churchill
- --------------------------* President and Chief Executive Officer
Yaron I. Eitan (Principal Executive Officer); Director
- --------------------------* Director
Walter E. Auch
- --------------------------* Director
George Calhoun
- --------------------------* Director
Purnendu Chatterjee
- --------------------------* Director
Haynes G. Griffin
- --------------------------* Director
Richard Krants
<PAGE>
Signatures Title
- ---------- -----
- --------------------------* Director
Richard T. Liebhaber
- --------------------------* Director
Haim Rosen
- --------------------------* Director
Kevin W. Sharer
- --------------------------* Director
William Spier
- --------------------------* Chief Financial Officer
Michael McCoy (Principal Financial Officer)
- --------------------------* Chief Accounting Officer
Michael Carus (Principal Accounting Officer)
* Attorney-in-fact pursuant to power of attorney filed as part of this
Registration Statement
/s/ Yaron I. Eitan
- ----------------------
Yaron I. Eitan
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit
- ------- -------
12 Computations 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.
25 Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 on Form T-1.
<PAGE>
Exhibit 12
GEOTEK COMMUNICATIONS, INC.
COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Three
Months Ended For the Year Ended December 31,
March 31 1996 1995 1994 1993 1992 1991
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings (Loss) Before
Income Taxes .............. (25,526) (89,949) (41,574) (51,896) (2,381) (941)
Add Fixed Charges............ 8,750 23,313 7,300 3,529 2,126 3,103
Less Preferred Dividends (1,278) (4,132) (2,066) (246) (777) (1,155))
------- ------- ------- ------- ------ --------
Total Earnings............. 18,054 (65,768) (36,340) (48,613) (1,032) (1,007))
====== ======== ======== ======== ======= ========
Fixed Charges
Total Interest Expenses
Interest................... 6,672 16,714 3,101 2,591 1,099 1,712
Interest Portion of
Rental Expenses............ 800 2,467 2,133 692 250 236
Preferred Dividends.......... 1,278 4,132 2,066 246 777 1,155
----- ----- ------ ------ ------ -----
Total Fixed Charges 8,750 23,313 7,300 3,529 2,126 3,103
===== ====== ====== ====== ====== =====
Ratio of Earnings to
Fixed Charges.............. * * * * * .32
* There was an earnings deficiency of $26,804 for the three months ended
March 31, 1996 and $89,081, $43,640, $52,142 and $3,154 for the
years ended 1995, 1994, 1993 and 1992, respectively.
</TABLE>
<PAGE>
Exhibit 23.1
[LETTERHEAD OF COOPERS & LYBRAND L.L.P]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement of Geotek Communications, Inc. (the "Company") on Form
S-3 (Reg. No. 333-02849) 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
May 31, 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 Amendment No. 1 to the Registration Statement of Geotek
Communications, Inc. (the "Company") on Form S-3 (Reg. No. 333-02849) 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.)
May 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 Amendment No. 1 to the
Registration Statement on Form S-3 (Reg. No. 333-02849) 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
May 31, 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 Amendment No. 1 to the
Registration Statement on Form S-3 (Reg. No. 333-02849) 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
May 31, 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 Amendment No. 1 to the
Registration Statement on Form S-3 (Reg. No. 333-02849) 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
May 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 Amendment No. 1 to the Registration Statement of Geotek
Communications, Inc. (the "Company") on Form S-3 (Reg. No. 333-02849) 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,
May 31, 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 Amendment No. 1 to the
Registration Statement on Form S-3 (Reg. No. 333-02849) 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, May 24, 1996
ALTENBURG & TEWES AG
WIRTSCHAFTSPRUFUNGSGESELLSCHAFT
former
DUSSELDORFER TREUHAND-GESELLSCHAFT
ALTENBURG & TEWES AG
WIRTSCHAFTSPRUFUNGSGESELLSCHAFT
STEUERBERATUNGSGESELLSCHAFT
/s/ Berg
- ---------------------------
Berg
Wirtschaftsprufer
/s/ Spielberg
- ---------------------------
Spielberg
Wirtschaftsprufer
<PAGE>
Exhibit 23.8
[LETTERHEAD OF DELOITTE & TOUCHE]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement on Form S-3 (Reg. No. 333-02849) 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
June 3, 1996
<PAGE>
Exhibit 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2)
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THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, New York 10286
(Address of principal executive offices) (Zip Code)
GEOTEK COMMUNICATIONS, INC.
(Exact name of obligor as specified in its charter)
Delaware 22-2358635
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
20 Craig Road
Montvale, New Jersey 07645
(Address of principal executive offices) (Zip Code)
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12% Senior Subordinated Convertible Notes Due 2001
(Title of the indenture securities)
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GENERAL
ITEM 1. General Information.
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Superintendent of Banks 2 Rector Street,
of the State of New York New York, N.Y. 10006
and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza,
New York, N.Y. 10045-001
Federal Deposit Insurance Corporation Washington, D.C. 20549
New York Clearing House Association 100 Broad Street
New York, N.Y. 10004
(b) Whether it is authorized to exercise corporate trust powers:
Yes.
ITEM 2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such affiliation.
None. (See Note on page 3.)
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ITEM 16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29
under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the
Commission's Rules of Practice.
99.1. A copy of the Organization Certificate of The Bank of New York (formerly
Irving Trust Company) as now in effect, which contains the authority
to commence business and a grant of powers to exercise corporate trust
powers. (See Exhibit 1 to Amendment No. 1 to Form T-1 filed with
Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1
filed with Registration Statement No. 33-21672 and Exhibit 1 to
Form T-1 filed with Registration Statement No. 33-29637.)
99.4. A copy of the existing By-laws of the Trustee. (See Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
99.6. The consent of the Trustee required by Section 321(b) of the Act.
(See Exhibit 6 to Form T-1, Registration Statement No. 33-44051.)
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99.7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee
of all facts on which to base a responsive answer to Item 2, the answer to
said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an amendment
to this Form T-1.
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SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a
corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by
the undersigned, thereunto duly authorized, all in the City of New York, and
State of New York, on the 15th day of May, 1996.
The Bank of New York
By: /s/ Mary Jane Morrissey
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Name: Mary Jane Morrissey
Title: Vice President
<PAGE>
EXHIBIT INDEX
Description Number
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Latest report of condition of 99.7
the Trustee published pursuant to
law or to the requirements of its
supervising or examining authority.
<PAGE>
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of
business December 31, 1995, published in accordance with a
call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depository institutions:
Noninterest-bearing balances and111
currency and coin.................................$4,500,312
Interest-bearing balances..................................643,938
Securities:
Held-to-maturity securities..................................806,221
Available-for-sale securitie...............................2,036,768
Federal funds sold in domestic offices
of the bank............................................4,166,720
Securities purchased under agreements
to resell.................................................50,413
Loans and lease financing receivables:
Loans and leases, net of unearned
income............................................27,068,535
Less Allowance for loan and lease
losses...............................................520,024
Less allocated transfer risk
reserve................................................1,000
Loans and leases, net of unearned
income, allowance, and reserve....................26,547,511
Assets held in trading accounts................................758,462
Premises and fixed assets (including
capitalized leases)......................................615,330
Other real estate owned.........................................63,769
Investments in unconsolidated subsidiaries
and associated companies.................................223,174
Customers' liability to this bank on
acceptances outstanding..................................900,795
Intangible assets..........................................212,220
Other assets.............................................1,186,274
Total assets...........................................$42,711,907
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<PAGE>
LIABILITIES
Deposits
In domestic offices......................................$21,248,127
Noninterest-bearing........................................9,172,079
Interest-bearing..........................................12,076,048
In foreign offices, Edge and Agreement
subsidiaries, and IBFs ..................................9,535,088
Noninterest-bearing...........................................64,417
Interest-bearing...........................................9,470,671
Federal funds purchased and securities
sold under agreements to repurchase in
domestic offices of the bank and of its
Edge and Agreement subsidiaries, and in
IBFs:
Federal funds purchased....................................2,095,668
Securities sold under agreements to
repurchase..................................................69,212
Demand notes issued to the U.S. Treasury.......................107,340
Trading Liabilities............................................615,718
Other borrowed money:
With original maturity of
one year or less.........................................1,638,744
With original maturity of
more than one year.........................................120,863
Bank's liability on acceptances executed
and outstanding..............................................909,527
Subordinated notes and debentures............................1,047,860
Other liabilities............................................1,836,573
Total liabilities...........................................39,224,720
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EQUITY CAPITAL
Common stock...................................................942,284
Surplus........................................................525,666
Undivided profits and capital reserves.......................1,995,316
Net unrealized holding gains (losses)
on available-for-sale securities..............................29,668
Cumulative foreign currency translation
adjustments..................................................(5,747)
Total equity capital.........................................3,487,187
Total liabilities and equity capital.......................$42,711,907
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I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
/s/Robert E. Keilman
We, the undersigned directors attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
/s/ J. Carter Bacot, Director
/s/Thomas A. Renyi, Director
/s/Alan R. Griffith, Director
