SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________________ to ________________
Commission file number 0-17581
GEOTEK COMMUNICATIONS, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-2358635
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(State of Incorporation) (I.R.S. Employer Identification No.)
102 Chestnut Ridge Road, Montvale, New Jersey 07645
- --------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (201) 930-9305
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 Par Value
-----------------------------
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES _X_ . NO ____.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Registration S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or amendment
to this Form 10-K. [X]
Based on the closing sale price for the Registrant's Common Stock as of
March 24, 1997, the aggregate market value of the voting stock held by
non-affiliates of the Registrant as of such date was approximately $280,303,000.
As of April 15, 1997, the number of outstanding shares of the
Registrant's Common Stock was approximately 60,666,000.
DOCUMENTS INCORPORATED BY REFERENCE
None.
The Registrant hereby amends Part III of its Annual Report on Form 10-K
for the year ended December 31, 1996 (the "Annual Report") as set forth in the
pages attached hereto. Capitalized terms used herein and not otherwise defined,
have the meanings ascribed to such terms in the Annual Report.
<PAGE>
GEOTEK COMMUNICATIONS, INC.
FORM 10-K/A
TABLE OF CONTENTS
PAGE
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PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............. 1
Item 11. EXECUTIVE COMPENSATION.......................................... 3
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT..................................................... 9
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................. 12
<PAGE>
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As of the date hereof, the directors and executive officers of the
Company are:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Yaron I. Eitan 40 Chairman of the Board, Chief Executive Officer and Director
Walter E. Auch 76 Director
George Calhoun 44 Vice Chairman of Strategy and Technology and Director
Purnendu Chatterjee 47 Director
Winston J. Churchill 56 Director
Jonathan C. Crane 47 President, Chief Operating Officer and Director
Haynes G. Griffin 50 Director
Richard Krants 53 Director
Richard T. Liebhaber 61 Director
Kevin W. Sharer 49 Director
William Spier 62 Director
Yoram Bibring 39 President and Chief Executive Officer - Geotek International
Networks, Inc.
Michael McCoy 44 President and Chief Executive Officer - Geotek U.S. Network
John Egidio 48 Executive Vice President, Corporate Operations
William A. Opet 39 Senior Vice President, Business Development
Michael H. Carus 31 Vice President, Acting Chief Financial Officer, Chief Accounting
Officer & Corporate Controller
Robert Vecsler 32 General Counsel and Secretary
- ------------------------------------------------------------------------------------------------------
</TABLE>
Mr. Eitan has served as Chief Executive Officer and a Director of the
Company since March 1989 and as Chairman of the Board since October 1996. From
March 1989 until October 1996, Mr. Eitan also served as President of the
Company. Mr. Eitan is also Chairman of the Board of Bogen and a director of
Geotek Technologies Israel Ltd. ("GTIL"), formerly PowerSpectrum Technology,
Ltd., GMSI, Inc. and NB3, subsidiaries of the Company.
Mr. Auch has been a Director of the Company since 1989. Mr. Auch was
the Chairman and Chief Executive Officer of the Chicago Board of Options
Exchange, Chicago, IL (securities exchange), from August 1979 until December
1996. Presently, Mr. Auch is a director of Smith Barney Trak Fund, New York, NY
(investment fund), Smith Barney Concert Fund, New York, NY (investment fund),
Banyan Funds, Chicago, IL (real estate company), Pimco Advisors, L.P., Stamford,
CT (asset management company), Brinson Funds, Chicago, IL (investment funds) and
Nicholas/Applegate, San Diego, CA (investment funds).
Mr. Calhoun was appointed a Director of the Company in July 1993, when
he became President of the Company's wireless communications group. In October
1996, he was appointed the Vice Chairman of Strategy & Technology of the
Company. Mr. Calhoun joined the Company in June 1992 as President, Chief
Operating Officer and a director of GTIL. He is also a director of NB3. Mr.
Calhoun previously served in various positions with InterDigital Communications
Corporation (formerly International Mobile Machines Corporation), a corporation
co-founded by Mr. Calhoun and engaged in the development of digital radio
technology, most recently as General Manager of the Intellectual Property
Licensing Division, which position he held until June 1992.
Dr. Chatterjee has been a Director of the Company since 1993. Dr
Chatterjee is a Director and President of S-C Rig Co., New York, NY (general
partner of S-C Rig, a Delaware limited partnership, the sole business of which
is to make investments and the sole limited partner of which is a charitable
trust created by Mr. George Soros), and an investor in public and private
companies. Dr. Chatterjee has been associated with the George Soros organization
for approximately ten years. Dr. Chatterjee is presently a director of Falcon
Drilling Company, Inc., Houston, TX (oil and gas) and Viatel, Inc., New York, NY
(international voice long distance telecommunications services).
1
<PAGE>
Mr. Churchill has served as a Director and the Chairman of the
Executive Committee since 1991. From 1991 until October 1996, Mr. Churchill
served as the Chairman of the Board. Mr. Churchill is a principal of CIP Capital
Management, Inc., Wayne, PA, a private investment firm formed in 1989. Mr.
Churchill practiced law with and served as Chairman of the Banking and Financial
Institutions Department and the Finance Committee of Saul, Ewing, Remick & Saul,
Philadelphia, PA, for 16 years prior thereto. Mr. Churchill is a Director of
Central Sprinkler Corp., Lansdale, PA (sprinkler systems) since 1984 and of
IBAH, Inc., Blue Bell, PA (biotechnology company).
Mr. Crane joined the Company as President & Chief Executive Officer -
Geotek U.S. Network in October 1995, a position he held until October 1996, when
he became the President and Chief Operating Officer of the Company. Mr. Crane
has served as a Director of the Company since June 1996. Prior to joining
Geotek, from January 1994 through January 1995, Mr. Crane was President & Chief
Executive Officer of LightStream Corporation, a start-up ATM switch company. In
January 1995, LightStream was purchased. From May 1985 through January 1994, Mr.
Crane served in various executive capacities at MCI Communications Corporation
("MCI"), where he most recently served as Executive Vice President -
Multinational Accounts.
Mr. Griffin has been a Director of the Company since 1994. Mr. Griffin
has been the President, Chief Executive Officer and Director of Vanguard
Cellular Systems, Inc. ("Vanguard"), Greensboro, NC (cellular telecommunications
carrier), since 1984. In 1993, Mr. Griffin was appointed to the United States
Advisory Council on the National Information Infrastructure. Presently, Mr.
Griffin is a Director of Lexington Global Asset Managers, Inc., Saddle Brook, NJ
(diversified financial services holding company) and InterAct Systems,
Incorporated, Norwalk, CT (interactive multimedia company specializing in
in-store electronic marketing) and Chairman of the Board of Directors of
International Wireless Communications Holdings, Inc., San Mateo, CA (interactive
wireless communications).
Mr. Krants has served as a Director of the Company since 1994. Mr.
Krants is the President of Mobile Message Service of N.Y., Inc., Plainview, NY
(antenna site management). From October 1990 until January 1994, Mr. Krants was
the President and Chief Executive Officer of Metro Net, Plainview, NY. Mr.
Krants was the Vice President of Famous Make Communications, Inc., Plainview, NY
(communications equipment), from December 1979 to October 1993.
Mr. Liebhaber has been a Director of the Company since 1995. Mr.
Liebhaber is currently a Director of Precision Systems, Inc., St. Petersburg,
Florida (telecommunications) and Alcatel, Richardson, TX (manufacturing
communications). From 1986 until June 1995, Mr. Liebhaber was an Executive Vice
President of MCI and, from June 1992 to June 1995, served as a Director of MCI.
Mr. Sharer has served as a Director of the Company since 1994. Mr.
Sharer has been the President and Chief Operating Officer and a Director of
Amgen, Inc., Thousand Oaks, CA (biotechnology) since October 1992. From April
1989 until November 1990, Mr. Sharer was an Executive Vice President of Sales
and Marketing at MCI and, from November 1990 until October 1992, was an
Executive Vice President and the President Business Markets Division of MCI.
Mr. Spier has served as a Director of the Company since 1990. Mr. Spier
served as the Chairman of the Board of the Company from August 1991 to May 1992.
Mr. Spier is currently a Director of USI Venture Corp. ("USI"), New York, NY
(holding company). Mr. Spier was the Chairman of the Board and CEO of DeSoto
Corp., Joliet, IL (detergent and household cleaning products manufacturer), from
May 1991 until September 1996 and has been a Director of Video Lottery
Technologies, Inc., Bozeman, MT (video technology), since 1992, Keystone
Consolidated Industries, Inc., Dallas, TX (steel and wire rod products
manufacturer), since September 1996, Integrated Technology USA, Inc., Teaneck,
NJ (computer peripheral/telecommunications device manufacturer), since 1996,
and EA Industries, Inc., West Long Branch, NJ (electronics contracting
manufacturer) since 1995.
Mr. Bibring joined the Company as Chief Financial Officer in February
1990, a position he held until September 1995. He served as Executive Vice
President and Chief Operating Officer of the Company from June 1993 until March
1996, when he was appointed President and Chief Executive Officer -
International Networks Division of the Company. He is also a director of Bogen.
He served as Vice President of Aryt Optronics Industries, Ltd. from December
1990 to April 1991. From November 1986 to January 1990, Mr. Bibring was a Senior
Auditor at Shachak & Company, a public accounting firm in Israel.
2
<PAGE>
Mr. McCoy was appointed President and Chief Executive Officer of
Geotek's U.S Network in February 1997. Mr. McCoy served as Senior Vice President
and Chief Financial Officer of the Company from September 1995 through February
1997. From November 1994 through September 1995, Mr. McCoy was the Company's
Vice President of the North East Region. Prior to joining the Company, from
September 1992 through November 1994, Mr. McCoy was President of Greenlake
Associates, Inc. a high technology consulting company. From November 1988
through September 1992, Mr. McCoy was a member of the Office of the Chairman and
Senior Vice President of Business Development for LCI International, Inc., a
facilities based long distance telecommunications company.
Mr. Egidio became Senior Vice President of the Company in October 1993
and has served as Executive Vice President-Corporate Operations since February
1997. From December 1991 to November 1992, he was President and Chief Executive
Officer of Metagram America, Inc., a company engaged in the provision of
alphanumeric messaging services. From February 1985 to April 1990, Mr. Egidio
was President and Chief Executive Officer of MobileMedia Communications, Inc.
(formerly Metromedia Paging), a subsidiary of Southwestern Bell engaged in
wireless communications.
Mr. Opet joined the Company in April 1994 and has been Senior Vice
President of Business Development since February 1996. Prior to this appointment
he served as Vice President of Marketing and Senior Vice President, Marketing
and Sales. From June 1990 to March 1994, he served as Vice President of
Marketing for LIN Broadcasting ("LIN"), a 52% owned subsidiary of McCaw
Cellular, where he worked extensively on the introduction of digital cellular
systems. From May 1986 to June 1990, Mr. Opet was Vice President of Marketing
and Sales for LIN's Philadelphia cellular operations.
Mr. Carus was appointed Acting Chief Financial Officer of the Company
in February 1997. Mr. Carus has served as Chief Accounting Officer and Corporate
Controller of the Company since June 1995. Mr. Carus is a Certified Public
Accountant and, from August 1988 to June 1995, was, most recently, a Business
Assurance Manager in the communications team at Coopers & Lybrand L.L.P., a
public accounting firm.
Mr. Vecsler has served as General Counsel and Secretary of the Company
since March 1996. From May 1995 through March 1996, he served as Corporate
Counsel for the Company. Prior to joining the Company, from August 1994 until
April 1995, Mr. Vecsler served as Assistant General Counsel at Enviro Source,
Inc. From April 1993 until July 1994, he served as Counsel to Fletcher Asset
Management, Inc. Mr. Vecsler practiced law at Kelly, Drye & Warren from
September 1988 until March 1993.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act ("Section 16") requires the Company's
officers and directors and persons who own more than ten percent of a registered
class of the Company's equity securities (collectively, the "Reporting Persons")
to file reports of ownership and changes in ownership with the Commission and to
furnish the Company with copies of these reports.
Based on the Company's review of the copies of these reports received
by it, the Company believes that all Section 16 filings required to be made by
the Reporting Persons for the period January 1, 1996 through December 31, 1996
were made on a timely basis.
Item 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all cash and non-cash compensation for
each of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the other executive officers required to be reported
pursuant to Item 402(a)(3) of Regulation S-K promulgated under the Exchange Act
for all services performed by such executive officers for the Company or its
affiliates, whether paid by the Company, its affiliates or a third party. Except
as set forth herein, none of the named executive officers received during the
last three fiscal years any perquisites or other personal benefits, securities
3
<PAGE>
or property which had an aggregate value of greater than the lower of $50,000 or
10% of the total salary and bonus reported for such executive officer.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation (1)
-------------------- --------------------------------------
Name & Principal Securities All Other
Position Fiscal Year Salary Bonus Underlying Options Compensation
---------------- ----------- -------- -------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Yaron I. Eitan 1996 $268,269 $145,000 10,000 $145,762(2)
Chairman and Chief 1995 249,982 100,000 10,000 142,862(2)
Executive Officer 1994 224,025 125,000 960,000 36,919(2)
Jonathan Crane(3) 1996 $253,942 $50,000 210,000 $ 26,645(4)
President and Chief 1995 56,741 -- 300,000 2,250
Operating Officer
George Calhoun 1996 $175,000 $35,000 10,000 $ 27,998(5)
Vice Chairman - Strategy 1995 175,000 30,000 10,000 --
and Technology 1994 173,543 35,000 10,000 --
Yoram Bibring 1996 $170,461 $35,000 60,000 $ 39,474(6)
President and Chief Executive 1995 154,897 35,000 15,000 10,656(6)
Officer - Geotek International 1994 131,910 35,000 -- 8,557(6)
Networks
Michael McCoy(7) 1996 $159,519 $35,000 20,000 $ 66,242(8)
President and Chief Executive 1995 132,488 30,000 30,000 8,806(8)
Officer - Geotek U.S. 1994 14,536 -- 30,000 --
Operations
</TABLE>
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(1) Pursuant to SEC rules, columns (e), (f) and (h) have been omitted
because none of the named executive officers received such form of
compensation for the periods reported.
(2) Consists primarily of life insurance premiums and disability insurance
premiums paid by the Company for Mr. Eitan aggregating $43,056 and $0,
respectively, in 1996; $28,960 and $3,977, respectively, in 1995; and
$28,960 and $3,699, respectively, in 1994; contributions by the Company
to the Company's 401(k) plan on behalf to Mr. Eitan of $4,750 in 1996,
$4,620 in 1995 and $4,260 in 1994; and forgiveness of indebtedness
payable by Mr. Eitan to the Company of $91,405 in 1996 and $100,000 in
1995. See " - Compensation Committee Interlocks and Insider
Participation."
(3) Mr. Crane joined the Company in October 1995.
(4) Consists primarily of relocation expense reimbursement of $17,183.
(5) Consists primarily of the forgiveness of indebtedness payable by Mr.
Calhoun to the Company of $25,000.
(6) Consists primarily of life insurance premiums and disability insurance
premiums paid by the Company for Mr. Bibring aggregating $6,500 and $0,
respectively, in 1996, $6,500 and $2,211, respectively, in 1995, and
$6,500 and $2,057, respectively, in 1994; and $30,288 of unused earned
vacation time paid to Mr. Bibring in 1995.
(7) Mr. McCoy joined the Company in November 1994.
(8) Consists primarily of living allowance and relocation expense
reimbursement of $22,400 and $43,411, respectively in 1996; and living
allowance of $5,200 in 1995.
4
<PAGE>
Options
The following tables contain information concerning option grants to, and
option exercises by, the executive officers named in the Summary Compensation
Table during fiscal 1996 and the value of the options held by such persons at
the end of fiscal 1996.
<TABLE>
<CAPTION>
Potential Realizable Value at
Number % of Total Assumed Rates of Stock
of Securities Options Appreciation for Option
Underlying Granted Exercise or Term(1)
Options to Employees Base Price Expiration -----------------------------
Name Granted (#) In Fiscal Year ($/Sh) (2) Date 5%($) 10%($)
---- -------------- -------------- ------------ ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Yaron I. Eitan 10,000(3) 0.8% $9.50 9/19/2006 $59,745 $151,405
Jonathan Crane 200,000(4) 15.8% $8.00 11/1/2006 $843,342 $2,290,613
10,000(3) 0.8% $9.50 9/19/2006 $59,745 $151,405
George Calhoun 10,000(3) 0.8% $9.50 9/19/2006 $59,745 $151,405
Yoram Bibring 60,000(5) 4.4% $10.00 3/21/2006 $475,070 $1,111,870
Michael McCoy 20,000(6) 1.6% $13.00 6/2/2006 $187,826 $452,907
</TABLE>
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(1) In accordance with the rules of the Commission, "Potential Realizable
Value" has been calculated assuming an aggregate ten-year appreciation
of the fair market value of the Company's common stock, $.01 par value
per share ("Common Stock"), on the date of grant, at annual compounded
rates of 5% and 10%, respectively.
(2) The exercise price of each option reported hereunder was equal to or
greater than the fair market value of the Company's Common Stock on the
date such option was granted.
(3) These options became exercisable on the date of grant.
(4) These options vest ratably over a five-year period, beginning in
November 1997.
(5) These options vest as follows: options to purchase 12,000 shares of
Common Stock became exercisable in March 1997, options to purchase
12,000 shares of Common Stock become exercisable in March 1988 and
options to purchase 36,000 shares of Common Stock become exercisable in
March 1999.
(6) These options vest ratably over a five-year period, beginning in June
1997.
5
<PAGE>
Aggregate Option Exercises in Last Fiscal Year and FY-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at FY-End(#) Options at FY-End ($)(1)
Shares Acquired Value ---------------------------- -----------------------------
Name on Exercise(#) Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Yaron Eitan 0 0 1,307,295 675,000 $4,736,963 0
Jonathan Crane 0 0 70,000 440,000 0 0
George Calhoun 75,000 $704,250 186,780 $ 957,005
Yoram Bibring 25,000 $152,250 63,000 72,000 $ 67,800 0
Michael McCoy 0 0 26,000 54,000 0 0
</TABLE>
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(1) Value based on market value of the Company's Common Stock on December
31, 1996, or $7.125 per share, minus the exercise price.
Employment Agreements and Other Matters
In March 1995, the Company and Mr. Churchill entered into an agreement
pursuant to which Mr. Churchill agreed to serve as the Chairman of the Board of
the Company and Chairman of the Executive Committee through March 31, 1998. In
October 1996, this agreement was amended to provide that Mr. Churchill would
continue to serve as the Chairman of the Executive Committee, but not as the
Chairman of the Board of Directors. Under the agreement, Mr. Churchill is paid
compensation of $50,000 per year and is eligible to receive bonuses at the
discretion of the Compensation Committee. In addition, Mr. Churchill, was
granted options to purchase 250,000 shares of Common Stock at prices ranging
from $8.00 to $14.00 per share. The options became exercisable with respect to
83,333 shares upon issuance, an additional 83,333 shares on March 31, 1996 and
an additional 83,333 shares on March 31, 1997.
In March 1995, the Company entered into an agreement with Mr. Eitan
pursuant to which he agreed to serve as the President and Chief Executive
Officer of the Company through March 31, 1998. In October 1996, Mr. Eitan
assumed the role of Chairman of the Board while continuing to serve as Chief
Executive Officer. Under the agreement, Mr. Eitan is paid a base salary of
$250,000 during the first year thereof, $275,000 per year during the second year
thereof and $300,000 per year during the third year thereof. Mr. Eitan was also
granted options to purchase an aggregate of 750,000 shares of the Company's
Common Stock at prices ranging from $8.00 to $14.00 per share. These options
vest over a three year period, with an exercise price for a substantial portion
of the options at a price well above the market price of the Common Stock on the
date of grant. In addition, Mr. Eitan is eligible to receive option grants at
the discretion of the Compensation Committee. Mr. Eitan is also entitled to
receive an annual cash bonus in an amount equal to three percent of the
Company's consolidated pre-tax income for each fiscal year in which such
agreement is in effect, as reported in the Company's financial statements
audited by the Company's independent accountants. Mr. Eitan is eligible to
receive such additional bonuses (including stock grant awards and options) as is
determined by the Committee, whose determination is not required to be based on
specific performance goals. The Compensation Committee of the Board of Directors
awarded Mr. Eitan a bonus of $145,000 for the fiscal year ended December 31,
1996. See " - Committee Interlocks and Insider Participation."
Pursuant to Mr. Eitan's agreement, the Company provides Mr. Eitan with
health, accident and individual disability insurance as well as a life insurance
policy with benefits aggregating $1,500,000, with the beneficiaries thereunder
to be named by him. Mr. Eitan also is reimbursed for out-of-pocket expenses
incurred in connection with the performance of his duties. Mr. Eitan also
receives the use of an automobile supplied by the Company, of value and quality
acceptable to him. The Company is responsible for all expenses and maintenance
costs attributed thereto as well as for the costs of insuring such vehicle.
There is no specific limit in Mr. Eitan's agreement as to the amount to be
expended by the Company for the use and maintenance of such automobile. The
Company has also agreed to use its best efforts to have Mr. Eitan elected as a
member of the Board of Directors of the Company during the term of his
employment agreement.
6
<PAGE>
In the event Mr. Eitan's employment with the Company is terminated for
any reason other than his voluntary resignation, including a Change of Control,
Mr. Eitan will be entitled to a payment in an amount equal to his then current
annual base salary and the continuation of his health, disability and life
insurance benefits then in effect for one year. In addition, all stock options
granted to Mr. Eitan will immediately vest upon any such termination.
The Company and Mr. Crane are currently negotiating the terms of an
employment agreement pursuant to which Mr. Crane will continue to serve as
President and Chief Operating Officer of the Company. Mr. Crane is presently
paid an annual base salary of $275,000 and is afforded all employee benefits
offered to senior executives and key management employees, including, without
limitation, disability insurance, hospitalization insurance, major medical
insurance, medical reimbursement, survivor income, life insurance and any other
benefit plan or arrangement. Mr. Crane is reimbursed for all out-of-pocket
expenses reasonably and necessarily incurred in the performance of his duties.
Mr. Crane is also provided with an automobile and an allowance to cover all
expenses and maintenance costs attributed thereto, as well as the cost of
insuring such vehicle.
In February 1997, the Company entered into an employment agreement with
Michael McCoy pursuant to which he serves as President and Chief Executive
Officer of Geotek USA, Inc., a wholly-owned subsidiary of the Company. Mr.
McCoy's employment agreement provides for automatic one year extensions and will
continue to be so automatically extended for additional one year periods unless
the Company or Mr. McCoy provides the other party with ninety days' notice of
its or his intention to terminate the employment relationship. Mr. McCoy is
presently paid an annual base salary of $250,000, subject to annual reviews and
adjustments, and is eligible to receive an annual bonus of up to $100,000 based
upon his performance and the financial position of the Company. Mr. McCoy's
employment agreement also provides for grants of options to purchase up to
80,000 shares of Common Stock. In addition, Mr. McCoy is entitled to receive
additional option grants at the discretion of the Compensation Committee. Mr.
McCoy is entitled to receive all employee benefits offered to senior executives
and key management employees, including, without limitation, disability
insurance, hospitalization insurance, major medical insurance, medical
reimbursement, survivor income, life insurance and any other benefit plan or
arrangement. Mr. McCoy is entitled to be reimbursed for all out-of-pocket
expenses reasonably and necessarily incurred in the performance of his duties.
Mr. McCoy is also entitled to the use of an automobile and an allowance to cover
all expenses and maintenance costs attributed thereto, as well as the cost of
insuring such vehicle. In certain instances, upon a Change of Control (as
defined in his employment agreement), Mr. McCoy is entitled to receive as
termination pay, an amount equal to six times his average monthly compensation
during the twelve months prior to such Change in Control, which amount
shall be increased to provide for the payment of federal, state and local taxes.
Mr. McCoy is also entitled to immediate vesting of all stock options which he
holds in the event of a Change in Control. The Company may terminate the
employment agreement with Mr. McCoy for "cause" (as defined in his employment
agreement) or in the event of the death or incapacity of Mr. McCoy. In the event
the Company terminates Mr. McCoy for another reason, he will generally be
entitled to an amount equal to twelve months salary.
Mr. Calhoun serves as the Vice Chairman - Strategy and Technology of
the Company. Mr. Calhoun is presently paid a base salary at the rate of $200,000
per year, subject to annual adjustments. Mr. Calhoun is entitled to receive all
employee benefits offered to senior executives and key management employees,
including without limitation, disability insurance, hospitalization insurance,
major medical insurance, medical reimbursement, survivor income, life insurance
and any other benefit plan or arrangement. Mr. Calhoun is entitled to be
reimbursed for all out-of-pocket expenses reasonably and necessarily incurred in
the performance of his duties. Mr. Calhoun also receives the use of an
automobile and an allowance to cover all expenses and maintenance costs
attributed thereto, as well as the cost of insuring such vehicle. The Company
may terminate the employment agreement with Mr. Calhoun for "cause" (as defined
in Mr. Calhoun's employment agreement). In the event Mr. Calhoun becomes
disabled and the employment agreement terminates, Mr. Calhoun will be entitled
to a payment equal to one year of base salary and the immediate vesting of all
stock options granted to Mr. Calhoun. Upon certain "changes of control" (as
defined in Mr. Calhoun's employment agreement) of the Company, Mr. Calhoun will
be entitled to an amount equal to two years of his base salary and the immediate
vesting of all options granted to Mr. Calhoun.
In June 1994, the Company entered into a one year employment agreement
with Mr. Bibring. The term of this agreement automatically extends for
additional one year periods and will continue to be so automatically extended
unless the Company or Mr. Bibring provides the other sixty days' advance notice
of its or his desire to terminate the employment relationship. Pursuant to the
agreement, the Company is obligated to pay Mr. Bibring a base salary at least
equal to the base salary such executive received during 1994. The actual
compensation payable to Mr. Bibring shall be determined by the Compensation
Committee. Mr. Bibring is also eligible to receive an annual bonus in an amount
determined by the
7
<PAGE>
Compensation Committee based upon Mr. Bibring's performance and the operating
results and financial condition of the Company. In addition, Mr. Bibring is
entitled to participate in all employee benefit plans and arrangements which are
generally available to the Company's executive officers. The Company may
terminate the employment agreement with Mr. Bibring for "cause" (as defined in
Mr. Bibring's employment agreement) or in the event of the death or incapacity
of Mr. Bibring. In the event the Company terminates Mr. Bibring for another
reason, Mr. Bibring will generally be entitled to six months salary. Upon
certain "changes of control" (as defined in Mr. Bibring's employment agreement)
of the Company, Mr. Bibring will be entitled to an amount equal to six times his
average monthly compensation for the twelve month period preceding the change of
control plus an amount sufficient to reimburse him for tax liabilities incurred
as a result of such change of control payments. In addition, all stock options
granted to Mr. Bibring will vest upon certain changes of control. In all
instances, Mr. Bibring will be entitled to receive deferred compensation upon
his termination in an amount equal to his current monthly salary multiplied by
the number of years (or partial years) he was employed by the Company since
January 1, 1990.
Messrs. Eitan, Crane, Calhoun, Bibring and McCoy are each bound by
their current or prior employment agreements to treat confidentially all
proprietary information learned by them during the course of their employment
with the Company for the term of each agreement and for three years thereafter.
Each such officer has also agreed to refrain from competing, in any state of the
United States (and in Israel with respect to Mr. Eitan), with the Company or any
of its subsidiaries during the term of his agreement and for a period of three
years thereafter. Each has also agreed to refrain from soliciting the Company's
employees or officers following the termination of his employment.
Compensation of Directors
All directors receive only options as compensation for acting as
directors of the Company. During 1996, Mr. Churchill received $50,000 in
compensation for serving as Chairman of the Board and Chairman of the Executive
Committee. During 1996, each director (including Messrs. Calhoun, Churchill,
Crane and Eitan) of the Company received 10,000 options with an exercise price
equal to the fair market value of the Common Stock on the date of grant.
Directors are reimbursed for expenses related to their attendance at Board of
Directors meetings. All options granted to directors expire ten years from the
date of grant.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Exchange Act that might incorporate future filings including this Annual Report
in whole or in part, the following Performance Graph and the Committee Report on
Executive Compensation shall not be incorporated by reference into any such
filings.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Auch, Churchill, Griffin
and Eitan. Mr. Eitan is the Company's Chairman and Chief Executive Officer. The
16b-3 Committee consists of Messrs. Auch and Griffin.
In October 1992, Mr. Eitan purchased from the Company 100,000 shares of
Common Stock and 100,000 warrants to purchase Common Stock, at an exercise price
of $3.10 per share, for an aggregate purchase price of $185,000. Of such
purchase price, $30,000 was paid in cash and the remainder was loaned by the
Company to Mr. Eitan at an interest rate of prime plus 1%, to be paid within 12
months of the date of purchase (which date was subsequently extended). The
Company forgave the repayment of a portion of this loan in 1995 and forgave the
repayment of the balance of this loan in early 1996. The largest aggregate
amount outstanding on this loan during 1996 was $91,405.
On February 23, 1994, in connection with an investment in the Company
by Vanguard, for which Mr. Griffin serves as President, the Company entered into
a five-year management consulting agreement with Vanguard, pursuant to which
Vanguard provided operational and marketing support to the Company for an
aggregate of 300,000 shares of Common Stock per annum. The agreement was
terminated in September 1996 and, in February 1997, the Company issued 156,985
shares of Common Stock to Vanguard in satisfaction of its remaining obligations
under the Management Consulting Agreement.
In March 1996, the Company issued and sold to certain affiliates of Mr.
Churchill, $1.0 million principal amount of 12% Senior Subordinated Convertible
Notes of the Company due 2001 (the "Convertible Notes") for an aggregate
purchase price of $1.0 million. See "Security Ownership of Certain Beneficial
Owners and Management."
8
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership (as determined in accordance with Rule 13d-3 promulgated under the
Exchange Act) of the Common and Preferred Stock as of April 15, 1997, for (a)
directors and executive officers of the Company, (b) all directors and executive
officers of the Company, as a group, and (c) each person who is known by the
Company to own beneficially 5% or more of the Company's Common Stock. Certain of
the information set forth below is derived, without independent investigation on
the part of the Company, from filings made by such persons on Schedule 13D and
Schedule 13G pursuant to Rule 13d-3. No director or executive officer of the
Company beneficially owns any of the Company's Series K Preferred Stock, Series
M Preferred Stock or Series O Preferred Stock. Except as otherwise noted, each
person listed below has sole voting and dispositive power with respect to the
shares of Common Stock listed next to such person's name.
9
<PAGE>
<TABLE>
<CAPTION>
Total Number of
Shares of
Common Stock
Directors Beneficially
and Executive Officers Common Series H Series I Series L Series N Series P Owned(1)
---------------------- ------ -------- -------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Walter E. Auch (3) 23,394 0 0 0 0 0 118,394
Yoram Bibring(4) 153,356 0 0 0 0 0 228,356
George Calhoun(5) 213,794 0 0 0 0 0 481,574
Purnendu Chatterjee(6) 0 444,445 20 0 5,000 500 13,107,381
Winston Churchill(7) 1,023,330 0 0 0 0 0 1,348,137
Jonathan C. Crane(8) 0 0 0 0 0 0 70,000
Yaron Eitan(9) 497,970 0 0 0 0 0 1,840,599
Haynes G. Griffin(10) 3,856,986 0 0 531,463 0 0 4,418,449
Richard Krants(11) 400,573 0 0 0 0 0 505,573
Richard T. Liebhaber(12) 10,000 0 0 0 0 0 56,666
Michael McCoy(8) 0 0 0 0 0 0 26,000
Kevin W. Sharer(8) 0 0 0 0 0 0 56,666
William Spier(13) 721,353 0 0 0 0 0 761,353
All directors and executive officers 6,903,656 444,445 20 531,463 5,000 500 23,173,048
as a group (17 persons)(14)
Other Beneficial Owners
- -----------------------
Hughes Network Systems, Inc.(15) 0 0 0 0 0 0 7,025,090
Merrill Lynch & Co., Inc.(16) 2,038,000 0 0 0 0 0 5,090,500
S-C Rig Investments-III(17) 0 444,445 20 0 5,000 500 13,107,381
Vanguard Cellular Systems, Inc.(18) 3,856,986 0 0 531,463 0 0 4,418,449
<CAPTION>
Percentage Percentage Percentage Percentage Percentage
of Class of of Class of of Class of of Class of of Class of Percentage of
Common Series H Series I Series L Series N Class of Series
Stock Stock Stock Stock Stock P Stock
Beneficially Beneficially Beneficially Beneficially Beneficially Beneficially
Owned(2) Owned Owned Owned Owned Owned
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Walter E. Auch (3) * 0 0 0 0 0
Yoram Bibring(4) * 0 0 0 0 0
George Calhoun(5) * 0 0 0 0 0
Purnendu Chatterjee(6) 17.77% 100% 100% 0 9.1% 100%
Winston Churchill(7) 2.21% 0 0 0 0 0
Jonathan C. Crane(8) * 0 0 0 0 0
Yaron Eitan(9) 2.97% 0 0 0 0 0
Haynes G. Griffin(10) 7.21% 0 0 50% 0 0
Richard Krants(11) * 0 0 0 0 0
Richard T. Liebhaber(12) * 0 0 0 0 0
Michael McCoy(8) * 0 0 0 0 0
Kevin W. Sharer(8) * 0 0 0 0 0
William Spier(13) 1.25% 0 0 0 0 0
All directors and executive officers 30.12% 100% 100% 50% 9.1% 100%
as a group (17 persons)(14)
Other Beneficial Owners
- -----------------------
Hughes Network Systems, Inc.(15) 10.38% 0 0 0 0 0
Merrill Lynch & Co., Inc.(16) 8.43% 0 0 0 0 0
S-C Rig Investments-III(17) 17.77% 100% 100% 0 9.1% 100%
Vanguard Cellular Systems, Inc.(18) 7.25% 0 0 50% 0 0
</TABLE>
- -----------------------
*Less than 1%
10
<PAGE>
(1) The Series H Preferred Stock is, under certain circumstances, convertible
into Common Stock by dividing (x) the sum of the $90.00 per share stated
value and any dividend arrearage by (y) $9.00 per share (as adjusted from
time to time for certain events of dilution). As of April 15, 1997, each
share of Series H Preferred Stock was convertible into ten shares of Common
Stock. The Series I Preferred Stock is, under certain circumstances,
convertible into Common Stock by dividing (x) the sum of $500,000 per share
stated value and any dividend arrearage by (y) $11.75 per share (as
adjusted from time to time for certain events of dilution). As of April 15,
1997, the Series I Preferred Stock was convertible into 42,553 shares of
Common Stock. The Series L Preferred Stock is, under certain circumstances,
convertible into Common Stock by dividing (x) the sum of $9.408 per share
stated value and any dividend arrearage by (y) 9.408 per share (as adjusted
from time to time for certain events of dilution). As of April 15, 1997,
each shares of Series L Preferred Stock was convertible into one share of
Common Stock. The Series N Preferred Stock is, under certain circumstances,
convertible into Common Stock by dividing (x) the sum of the $1,000 per
share stated value and any dividend arrearage by (y) $11.00 per share (as
adjusted from time to time for certain events of dilution). As of April 15,
1997, each share of Series N Preferred Stock was convertible into 91 shares
of Common Stock. The Series P Preferred Stock is convertible into the
number of shares of Common Stock as is determined by dividing (i) the sum
of the $50,000 stated value per share of Series P Preferred Stock plus all
unpaid dividends accrued and deemed to have accrued, if any, with respect
to such shares of Series P Preferred Stock through the last dividend
payment date by (ii) the lowest daily volume-weighted average price of the
Company's Common Stock during the four (4) business days immediately
preceding conversion multiplied by a conversion discount of (i) 100% for
conversions prior to June 29, 1997, (ii) 95% for conversions after June 29,
1997 but prior to December 31, 1997, (iii) 90% for conversions after
December 31, 1997 but prior to June 29, 1998, and (iv) 88% for conversions
after June 29, 1998. The Series P Preferred Stock becomes convertible into
Common Stock in stages during the fifteen (15) month period beginning April
1997 and remains convertible until December 31, 2001. As of April 15, 1997,
twenty percent (20%) of the shares of Series P Preferred Stock were
convertible within sixty (60) days into shares of Common Stock, with each
such share of Series P Preferred Stock convertible into 12,958 shares of
Common Stock. The number of shares indicated in each column refers only to
issued and outstanding shares of such class or series.
(2) The percentage column represents the percentage of Common Stock
beneficially owned, calculated in accordance with the Exchange Act, whether
presently issued and outstanding or reserved for issuance pursuant to
conversion or exercise of acquisition rights.
(3) Mr. Auch holds 95,000 options which are currently exercisable.
(4) Mr. Bibring holds 75,000 options which are currently exercisable.
(5) Mr. Calhoun holds 267,780 options which are currently exercisable.
(6) Dr. Chatterjee is an affiliate of S-C Rig and, as such, may be deemed to
beneficially own those securities held by S-C Rig. S-C Rig and certain of
its affiliates are the record owners of 444,445 shares of Series H
Preferred Stock which are convertible into 4,444,450 shares of Common
Stock, 20 shares of Series I Preferred Stock which are convertible into
851,060 shares of Common Stock, 5,000 shares of Series N Preferred Stock
which are convertible into 454,545 shares of common Stock, 500 shares of
Series P Preferred Stock which are convertible within sixty (60) days of
April 15, 1997 into 1,295,800 shares of Common Stock, and warrants to
purchase 5,831,526 shares of Common Stock. Dr. Chatterjee is also deemed to
beneficially own options to purchase 200,000 shares of Common Stock held by
one of his affiliates, XTec International, Inc. Dr. Chatterjee also holds
30,000 options which are immediately exercisable. Mr. Chatterjee's address
is 888 7th Avenue, Suite 3300, New York, New York 10106.
(7) Mr. Churchill is principal of CIP Capital Management, Inc., the general
partner of CIP Capital, L.P. ("CIP"), and, as such, may be deemed to
beneficially own those securities held by CIP. CIP is the record holder of
636,826 shares of Common Stock and 10,800 options. Mr. Churchill also holds
206,667 options which are currently exercisable. Does not include 155,134
shares of Common Stock held by a trust for the benefit of Mr. Churchill's
son, of which shares Mr. Churchill disclaims beneficial ownership. In
addition, certain affiliates of Mr. Churchill own $1,000,000 principal
amount of Convertible Notes, which are convertible into shares of Common
Stock at
11
<PAGE>
a conversion price equal to $9.50 per share. As of April 15, 1997, the
Convertible Notes and accrued and unpaid interest thereon were
convertible into 107,340 shares of Common Stock.
(8) Consists of shares of Common Stock issuable upon exercise of options which
are currently exercisable.
(9) Mr. Eitan currently holds 1,342,629 options which are currently
exercisable.
(10) Mr. Griffin is President of Vanguard and, as such, may be deemed to
beneficially own these securities held by Vanguard. Vanguard is the record
owner of 3,856,986 shares of Common Stock and 531,463 shares of Series L
Preferred Stock, which are convertible into 531,463 shares of Common Stock.
Mr. Griffin also holds 30,000 options which are currently exercisable. Mr.
Griffin's address is 2002 Pisgah Church Road, Suite 300, Greensboro, North
Carolina 27455.
(11) Includes 105,000 options which are currently exercisable and 2,700 shares
held by Mr. Krants' children.
(12) Mr. Liebhaber holds 46,666 options which are currently exercisable.
(13) Mr. Spier holds 40,000 options which are currently exercisable.
(14) Includes 15,752,726 shares of Common Stock issuable upon the conversion of
Series H Preferred Stock, Series I Preferred Stock, Series L Preferred
Stock, Series N Preferred Stock, Series P Preferred Stock and the exercise
of currently exercisable warrants and options.
(15) Consists of shares of Common Stock issuable upon conversion of the HNS Note
(as defined below). See "Certain Relationships and Related Transactions."
(16) Based on information contained in a Schedule 13G filed on February 14, 1997
on behalf of Merrill, Lynch & Co. Inc., Merrill Lynch Asset Management,
L.P., Merrill Lynch Global Allocation Fund, Inc., Merrill Lynch Group, Inc.
and Princeton Services, Inc. Includes warrants to purchase 3,052,500 shares
of Common Stock. Merrill Lynch & Co.'s address is World Financial Center,
North Tower, 250 Vesey Street, New York, New York 10281.
(17) S-C Rig holds, or may be deemed to beneficially own, 444,445 shares of
Series H Preferred Stock, 20 shares of Series I Preferred Stock, 5,000
shares of Series N Preferred Stock and 500 shares of Series P Preferred
Stock, convertible in accordance with the Certificate of Designation of
each such series into 4,444,450 shares of Common Stock, 851,060 shares of
Common Stock, 454,545 shares of Common Stock and, within sixty (60) days of
April 15, 1997, 1,295,800 shares of Common Stock, respectively, and
warrants to purchase 5,831,526 shares of Common Stock. Certain of the
shares of Series N Preferred Stock and Series P Preferred Stock are held of
record by Winston Partners II, LDC, Winston Partners II, LLC and Winston
Partners L.P., affiliates of S-C Rig. S-C Rig also may be deemed to
beneficially own 230,000 options which are currently exercisable and are
held by affiliates of S-C Rig. S-C Rig's address is 888 7th Avenue, New
York, NY 10106.
(18) Vanguard is the record owner of 3,856,986 shares of Common Stock and
531,463 shares of Series L Preferred Stock, which are convertible into
531,463 shares of Common Stock. In addition, Vanguard may be deemed to
beneficially own 30,000 options which are currently exercisable and are
held by Mr. Griffin, Vanguard's President. Vanguard's address is 2002
Pisgah Church Road, Suite 300, Greensboro, NC 27455.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is a description concerning transactions which may not
otherwise be described herein by and between the Company and/or its affiliates
and other persons or entities affiliated with the Company or its affiliates. The
Company is of the view that each of such transactions was on terms no less
favorable to the Company than would otherwise have been available to the Company
in transactions with unaffiliated third parties, if available at all.
12
<PAGE>
S-C Rig/Chatterjee Group
On December 15, 1993, the Company sold 444,445 shares of Series H
Preferred Stock to S-C Rig, an entity affiliated with Messrs. George Soros and
Purnendu Chatterjee, a director of the Company, for an aggregate consideration
of $40,050,000. In connection with this transaction, the Company entered into a
consulting agreement with The Chatterjee Group, an affiliate of S-C Rig
("Chatterjee Group"), pursuant to which Chatterjee Group provides certain
advisory services for a fee of $25,000 per month. The agreement terminates on
the earlier to occur of December 15, 2000 and such date that S-C Rig or one of
its affiliates no longer beneficially owns 50% of the shares of the Common Stock
into which the Series H Preferred Stock is convertible (calculated on a fully
diluted basis).
On April 5, 1996, the Company and S-C Rig entered into an agreement
pursuant to which S-C Rig made a $40.0 million unsecured senior credit facility
available to the Company. All borrowings under the credit facility were required
to be made prior to April 5, 1998, were to accrue interest at a rate of 10% per
annum and were to 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 credit facility at the time of any such borrowing. In
connection with the establishment of the credit facility, the Company issued to
S-C Rig a five-year warrant to purchase 4,210,526 million shares of Common Stock
(subject to adjustment in certain circumstances) at an exercise price of $9.50
per share (subject to adjustment in certain circumstances). On April 22, 1997,
the Company and S-C Rig entered into an agreement to permit the Company to
borrow funds under this credit facility until April 4, 1999 and to allow the
Company five years from the date of its last such borrowing to repay the
principal amount owed with respect thereto, at an interest rate of eight percent
(8%) per annum. In addition, the Company agreed to extend, until April 2003, the
expiration date of the warrants and to reset the exercise price thereof to $6.00
per share. At December 31, 1996, there were no borrowings under this credit
facility.
On June 20, 1996, the Company issued and sold to S-C Rig and certain of
its affiliates 5,000 shares of Series N Preferred Stock and warrants to purchase
150,000 shares of Common Stock for an aggregate purchase price of $5.0 million.
Further, on January 23, 1997, the Company issued and sold to S-C Rig and certain
of its affiliates 500 shares of Series P Preferred Stock and warrants to
purchase 850,000 shares of Common Stock for an aggregate purchase price of $5.0
million.
Metro Net
On January 27, 1994, pursuant to an Agreement and Plan of Merger (the
"Metro Net Agreement") with Metro Net and Metro Net's shareholders dated
December 9, 1993, the Company issued 3,112,500 shares of Common Stock to the
shareholders of Metro Net upon the merger of Metro Net into a newly formed
wholly-owned subsidiary of the Company (the "Merger"). Pursuant to the terms of
the Metro Net Agreement, Richard Krants, the President and Chief Executive
Officer of Metro Net prior to the transaction, was appointed to the Company's
Board of Directors at the effective time of the Merger. In connection with this
transaction, the Company entered into a consulting agreement with Mr. Krants
pursuant to which he agreed to provide consulting services related to the
management and construction of the Company's Specialized Mobile Radio networks
in exchange for annual consideration of $75,000 and an option to purchase 75,000
shares of Common Stock at a price of $9.50 per share vesting over three years.
This consulting agreement was renewed for one year in December 1996, and
provides for annual consideration of $75,000 payable to Mr. Krants.
HNS
In December 1995, Geotek Financing Corporation, a wholly-owned subsidiary
of the Company ("GFC") and the Company entered into a loan agreement with HNS
(as amended, the "HNS Loan Agreement") pursuant to which HNS agreed to provide
to GFC up to $24.5 million of financing in the form of the HNS Note for use in
connection with the purchase of licenses from the Federal Communications
Commission. In October 1996, GFC borrowed all of the funds available under the
HNS Loan Agreement. The HNS Note is convertible through October 1998, at the
option of HNS, into shares of Common Stock at an exercise price equal to the
lesser of 90% of the market price per share of Common Stock at the time of
conversion or $9.75 per share. Based on a fair market value of $3.875 per share
(the closing price of the Common Stock on April 15, 1997), the full principal
amount on the HNS Note would be convertible into 7,025,090 shares of Common
Stock.
13
<PAGE>
In September 1996, the Company and GFC entered into a vendor credit
financing agreement (the "HNS Financing Agreement") and a manufacturing
agreement (the "HNS Manufacturing Agreement") with HNS pursuant to which HNS
agreed to manufacture certain of the components ("BSE") required for the
construction of the Company's 900 MHz FHMA network equipment and to provide up
to $100.0 million of financing to GFC for up to ninety percent (90%) of the
purchase price of such portion of the BSE which are scheduled for delivery to
the Company prior to June 30, 1999. Pursuant to the HNS Manufacturing Agreement,
GFC is obligated to purchase at least fifty percent (50%) of the Company's
domestic and international 900 MHz BSE requirements from HNS so long as GFC is
permitted to finance such purchases under the HNS Finance Agreement. All
borrowings under the HNS Financing Agreement accrue interest at a rate of eleven
percent (11%) per annum and are required to be repaid in ten (10) equal
semi-annual payments beginning on July 10, 1999. HNS will be granted a security
interest in the BSE manufactured by HNS under the HNS Manufacturing Agreement
and financed by HNS under the HNS Financing Agreement as security for GFC's
obligations under the HNS Finance Agreement. As further security for GFC's
obligations under the HNS Financing Agreement and the HNS Loan Agreement, GFC
has pledged to HNS a $24.5 million intercompany note of Geotek License Holdings,
Inc., a wholly-owned subsidiary of GFC and the capital stock of such subsidiary.
In addition, the Company has guaranteed GFC's obligations under the HNS
Financing Agreement.
In connection with the execution of the HNS Financing Agreement, the
Company issued to HNS warrants to purchase an aggregate of 2,500,000 shares of
the Company's Common Stock (the "HNS Warrants") at exercise prices ranging from
$8.6250 to $12.9375 per share. Subject to certain limitations, the HNS Warrants
are exercisable at any time on or after the earlier of September 27, 1997 and
the occurrence of a change in control of the Company. Unless exercised, the HNS
Warrants automatically expire on September 27, 2003. The Company may, at its
sole discretion, require the holders of the HNS Warrants to exercise the HNS
Warrants following any period occurring after September 27, 2000, during which
for ten (10) consecutive trading days the closing price of the Company's Common
Stock equals or exceeds one hundred fifty percent (150%) (ranging from $12.9375
to $19.4063 per share) of the initial exercise price of the HNS Warrants.
All financial terms of the transactions described above resulted from
negotiations between the parties. All future transactions between the Company
and affiliates of the Company will be on terms intended to be no less favorable
to the Company than could have been realized in an arm's-length transaction with
unaffiliated parties and will be approved by a majority of the disinterested
directors.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GEOTEK COMMUNICATIONS, INC.
By: /s/ Yaron I. Eitan
---------------------------------
Yaron I. Eitan, Chairman of the Board,
Director and Chief Executive Officer
Date: April 30, 1997
15
<PAGE>
