SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to __________
Commission File Number 0-17581
GEOTEK COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 22-2358635
(State or other jurisdiction (I.R.S. Employer Identification)
of incorporation or organization)
102 Chestnut Ridge Road, Montvale, New Jersey 07645
(Address of Principal Executive Office) (Zip Code)
(201) 930-9305
(Registrant's Telephone Number Including Area Code)
Indicate by check 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__
COMMON STOCK OUTSTANDING AT May 8, 1998: 119,199,303 SHARES
<PAGE>
GEOTEK COMMUNICATIONS, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I: Financial Information
Item 1: Financial Statements
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II: Other Information
Item 6: Exhibits and Report on Form 8-K
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This report contains certain "forward-looking" statements within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Securities Reform
Act"). The Company desires to take advantage of the "safe harbor" provisions of
the Securities Reform Act and is including this statement for the express
purpose of availing itself of the protections of such safe harbor with respect
to all of such forward-looking statements. When used in this document, the
words, "anticipate," "plan," "intend," "believe," "estimate" and similar
expressions are intended to identify forward-looking statements. Such statements
reflect the current view of the Company with respect to future events. Such
forward-looking statements relate to, among other things, (i) the Company's
ability to obtain the necessary financing, (ii) the Company's ability to
renegotiate certain terms and conditions of debt obligations, (iii) the
development and commercial implementation of the Driver Logistics (TM) System
and the FHMA(R) Network (as hereinafter defined) in the Company's target markets
in the United States, (iv) the procurement of radio spectrum and transmission
sites, (v) the Company's ability to compete for customers successfully, (vi) the
risks of international business, and (vii) the effect of certain legislation and
governmental regulation on the Company. The prediction of future results is
inherently subject to various risks and uncertainties, including those discussed
under "Risk Factors" and elsewhere in this report, and accordingly, actual
results may differ materially from those expressed or implied by the
forward-looking statements included in and incorporated by reference into this
Report. The Company wishes to caution each reader of this Report to consider
carefully the specific factors discussed with such forward-looking statements
and contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 as such factors in some cases have affected, and in the future
(together with other factors) could affect, the ability of the Company to
achieve its projected results and may cause actual results to differ materially
from those expressed herein.
2
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
(Unaudited)
(See Note 1)
ASSETS March 31, 1998 December 31, 1997
-------------- -----------------
Current assets:
Cash and cash equivalents $ 11,643 $ 13,393
Restricted cash 63,112 16,140
Accounts receivables trade, net 7,034 7,097
Inventories, net 22,989 21,477
Assets held for sale -- 27,121
Prepaid expenses and other
current assets 5,012 6,667
Advances to related parties 11,500 11,500
--------- ---------
Total current assets 121,290 103,395
Investments in affiliates 11,495 15,923
Property, plant and equipment, net 120,939 112,983
Intangible assets, net 77,853 80,867
Other assets, principally debt
issuance costs 19,560 18,582
--------- ---------
Total Assets $ 351,137 $ 331,750
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 30,555 $ 25,170
Accrued expenses and other 50,524 53,951
Current maturities, long-term debt 40,466 42,664
--------- ---------
Total current liabilities 121,545 121,785
--------- ---------
Long-term debt 257,419 243,422
Other non current liabilities 5,312 5,364
Commitments and contingent liabilities
Redeemable preferred stock 40,000 40,000
Shareholders' (deficit) equity:
Preferred stocks, $.01 par value: 11 11
Common stock, $.01 par value:
Authorized 200,000,000, issued 103,531,077
and 73,874,000 shares, respectively,
outstanding 103,107,077 and 73,450,000
shares, respectively 1,135 739
Capital in excess of par value 474,608 476,145
Accumulated other comprehensive income (219) (145)
Accumulated deficit (547,288) (554,185)
Treasury stock, at cost (424,000
common shares) (1,386) (1,386)
--------- ---------
Total Stockholders' equity (73,139) (78,821)
--------- ---------
Total Liabilities and Stockholders' equity $ 351,137 $ 331,750
========= =========
See notes to consolidated financial statements.
3
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
(See Note 1)
Three Months Ended
March 31,
-------------------
1998 1997
---- ----
Revenues:
Net product sales $ 2,538 $ 3,211
Service income 4,394 7,972
-------- --------
Total revenues 6,932 11,183
-------- --------
Costs and expenses:
Cost of goods sold 9,044 5,047
Cost of services 6,165 6,078
Engineering and development 6,652 7,404
Selling and marketing 8,051 5,745
General and administrative 9,248 7,305
Depreciation expense 6,046 4,491
Amortization of intangibles 2,437 1,043
Interest expense 10,034 9,274
Interest income (369) (1,576)
Equity in losses of investees 2,589 1,476
Other (income) expenses (1,306) (5)
-------- --------
Total costs and expenses 58,591 46,282
-------- --------
Loss from operations before gain
on sale of subsidiary (51,659) (35,099)
Gain on sale of subsidiary 58,638 --
-------- --------
Income (loss) from continuing
operations before taxes
on income and discontinued operations 6,979 (35,099)
Taxes on income (82) (484)
-------- --------
Income (loss) from continuing operations 6,897 (35,583)
Income from discontinued operations (net
of $0.3 million of taxes) -- 350
-------- --------
Total discontinued operations -- 350
-------- --------
Net income (loss) before preferred
stock dividends 6,897 (35,233)
Preferred stock dividends (3,803) (5,285)
-------- --------
Net income (loss) applicable to
common shares $ 3,094 $(40,518)
======== ========
Weighted average number of common
shares outstanding 105,101,876 60,255,000
=========== ==========
Basic (Loss) Earnings per Share:
Income (loss) from continuing
operations $ 0.03 $ (0.68)
Income from discontinued
operations $ -- $ .01
Net income (loss) applicable
to common shares $ 0.03 $ (.67)
Diluted Earings per share
Net income applicable to common shares $ 0.06
See notes to consolidated financial statements.
4
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' (DEFICIT) EQUITY
for the three months ended March 31, 1998
(in thousands)
(Unaudited)
(See Note 1)
<TABLE>
<CAPTION>
Accumulated
Preferred Stock Common Stock Capital in Other
----------------- -------------- Excess of Comprehensive Comprehensive Accumulated Treasury
Shares Amount Shares Amount Par Value Income Income Deficit Stock
------ ------ ------ ------ --------- ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 1,119 $11 73,874 $ 739 $476,145 $(145) $(554,185) $(1,386)
Issuance of common stock:
Issuance of common stock
for preferred dividends 1,823 18 2,250
Issuance of common
stock on conversion
of preferred stock 37,517 375 (375)
Issuance of common stock for
consulting agreement 75 1 98
Preferred stock dividends (3,803)
Comprehensive income
Net income 6,897
Other comprehensive income,
net of tax (74)
Foreign currency translation
adjustments (74)
------
Other comprehensive income (74)
Net loss 6,897
----- --- ------- ------ -------- ------ ----- --------- -------
Balance, March 31, 1998 1,119 $11 113,483 $1,135 $474,608 $6,823 $(219) $(547,288) $(1,386)
===== === ======= ====== ======== ====== ===== ========= =======
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
(See Note 1)
Three Months Ended
March 31,
------------------------
1998 1997
---- ----
Cash flows from operating activities:
Net income (loss) $ 6,897 $(35,233)
Adjustments to reconcile net loss
to net cash used
in operating activities:
Discontinued operations:
Income from operations -- (350)
Depreciation and amortization 8,483 5,534
Adjustments to inventory for
replacement cost 2,304 --
Non cash interest expense 7,616 8,283
Equity in losses of investees 2,589 1,476
Gain on sale of subsidiary (58,638) --
Issuance of stock for management
consulting fee 99 --
Other, net (1,408) 82
Changes in operating assets and
liabilities:
Decrease in accounts receivable 63 480
(Increase) in inventories (3,818) (3,648)
Decrease (increase) in prepaid
expenses and other assets 464 (6,089)
(Decrease) increase in accounts
payable and accrued expenses 1,959 (5,096)
Other, net (375) (47)
-------- --------
Net cash used in operating activities (33,765) (34,608)
-------- --------
Cash flows from investing activities:
Acquisition of, and deposits
for, spectrum licenses -- (54)
Change in restricted cash (46,893) 1,733
Proceeds from sale of subsidiaries 87,098 --
Contract deposits -other current assets 1,192 1,356
Change in cash for net assets of
discontinued operations -- (332)
Acquisitions of property, plant
and equipment (13,116) (12,576)
Capitalized interest on construction
in progress & pre-commercial
spectrum licenses (1,887) (2,176)
Proceeds from swap of spectrum licenses 2,000 --
Cash invested in unconsolidated
subsidiaries, net (170) 916
Other, net 175 164
-------- --------
Net cash provided by (used in)
investing activities 28,490 (10,969)
-------- --------
See notes to consolidated financial statements.
6
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
(Dollars in thousands)
(Unaudited)
Three Months Ended
March 31,
-------------------------
1998 1997
---- ----
Cash flows from financing activities:
Repayments under line-of-credit agreements -- (3,247)
Proceeds from issuances of convertible
preferred stock -- 25,000
Proceeds from drawdown of vendor
financing agreement 5,042 --
Payments for preferred dividends (1,265) (1,269)
Repayment of capital lease obligations (175) (34)
Proceeds from the exercise of
warrants and options -- 144
--------- ---------
Net cash provided by financing activities 3,602 20,594
--------- ---------
Effect of exchange rate changes on cash (77) (5)
--------- ---------
(Decrease) in cash and cash equivalents (1,750) (24,988)
Cash and cash equivalents, beginning of year 13,393 102,720
--------- ---------
Cash and cash equivalents, end of year $ 11,643 $ 77,732
========= =========
Supplemental cash flow information:
Interest paid in cash $ 6,683 $ 5,225
Supplemental schedule of noncash
investing and financing activities:
Summary of Bogen Communications
International ("BCI") sale:
Assets of discontinued operations -- 23,863
Liabilities, including foreign
currency, of discontinued operations -- (11,427)
Acquisition of assets under capital lease -- 275
Issuance of common shares for preferred
dividends 2,268 3,062
Deemed dividend on convertible
preferred stock -- 954
Management consulting fees paid
in common stock 99 --
See notes to consolidated financial statements.
7
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation and Summary of Significant Accounting Policies:
Basis of Presentation and Principles of Consolidation
The consolidated balance sheet of Geotek Communications, Inc. and
Subsidiaries ("the Company") as of December 31, 1997 has been derived from
the audited consolidated balance sheet contained in the Company's Form
10-K and is presented for comparative purposes. The consolidated financial
statements of the Company include all wholly-owned, majority-owned and
controlled subsidiaries. The Company accounts for 20%-50% owned entities
by the equity method. In the opinion of management, all significant
adjustments, including normal recurring adjustments necessary to present
fairly the financial position, results of operations and cash flows for
all periods presented, have been made. The results of operations for
interim periods are not necessarily indicative of the operating results
for the full year.
Certain amounts in the 1997 financial statements and notes have been
reclassified to conform to the 1998 presentation.
The consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and
liquidation of liabilities in the ordinary course of business. The
Company's existing cash resources at March 31, 1998, lines of credit
facilities and expected cash flow from operations is insufficient to fund
its current operations and the implementation of the Company's business
plan in the short and long term. The Company's short term business plan is
to add customers and customer revenues and market its Driver Logistic(TM)
System in its existing eleven markets. The Company's long term business
plan includes: the roll-out of the U.S. Network in over 40 markets; the
ongoing deployment of existing international wireless networks; the
repayment of convertible debt and redeemable preferred stock (if such are
not converted into equity); and the repayment of the Company's line of
credit and vendor credit facilities and 15% Senior Secured Discount Notes
("Discount Notes").
As discussed in the Company's 1997 Annual Report on Form 10-K, the Company
needed to raise capital beginning in the second quarter of 1998. To date
the Company has not raised significant capital. Thus, the Company is
experiencing severe cash flow problems and needs immediate access to
capital to continue funding its operations and working capital needs
including significant past due trade payables. The Company has initiated
discussions with certain of its largest debt holders and preferred equity
holders in an effort to address these concerns. While the Company
continues to seek a capital infusion from strategic partners and others as
part of an overall capital restructuring, and is continuing to negotiate
with potential investors, the Company needs immediate concessions and
funding from such debt and preferred equity holders, as well as its trade
creditors, in order to reach a satisfactory restructuring plan.
Holders of more than a majority of the Company's 15% Notes and S-C Rig,
have agreed to waive any defaults resulting from certain unpermitted liens
obtained by creditors of the Company's Israeli subsidiary for nonpayment.
As of May 15, 1998, HNS has not agreed to waive the defaults resulting
from these unpermitted liens. In the event the Company is unable to secure
such a waiver from HNS, the Company may experience an event of default
under certain agreements with HNS. Such a default could result in an
acceleration of the Company's indebtedness to HNS. However, the failure to
obtain this waiver does not preclude the Company from authorizing payment
of $16.2 million of the accreted value of the Discount Notes to the
holders thereof or from drawing down on any of the Company's other
restricted cash. There will be additional defaults in the event that
additional claims or liens are imposed by the Company's United States and
Israeli trade creditors. There can be no assurance that efforts to
restructure will result in any formal proposals, that definitive
agreements can be reached with any prospects, or that the Company's
financial creditors and preferred equity holders will approve any further
concessions or agree to provide additional financing. If the Company's
preferred equity holders and creditors do not provide the Company with the
requested concessions and financing on a timely basis, and if it cannot
conclude satisfactory arrangements with other prospects or reach
appropriate accommodations with its trade creditors, the Company will be
forced to examine other alternatives, including, but not limited to,
filing for protection from creditors under applicable bankruptcy laws.
The accompanying consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability
and classification of assets or the amounts and classification of
liabilities which might
8
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
result from this uncertainty.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the
financial statements and revenues and expenses during the period reported.
Actual results could differ from those estimates and have a material
adverse effect on the financial position of the Company. Estimates are
used for, among other things: revenue recognition, allowance for doubtful
accounts; inventory reserve for the lower of cost or market; product
warranty reserves; depreciation and amortization; and the estimated lives
of assets and recoverability of long lived assets, including intangibles.
Restricted Cash
Restricted cash includes proceeds from the sale of certain assets
including the Company's European Assets (see Note 2 below) and
compensating balances under letter of credit arrangements. These funds can
be accessed by the Company in accordance with the terms of the Indenture
governing the Discount Notes, which require the Company to make certain
certificates and requires the bondholders acceptance as evidenced by the
Trustee's approval. Subsequent to March 31, 1998, the Company withdrew
$6.6 million from the restricted cash account, $6.0 million for working
capital and $0.6 million for replacement assets as defined in the
indenture governing the Company's Discount Notes. The Company has
authorized the payment of $16.2 million of the accrued value of the
Company's Discounts Notes in accordance with the terms of the Indenture.
Earnings Per Share
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share"
("SFAS 128"). SFAS 128 simplifies the standards for computing earnings per
share. In 1997, basic and diluted loss per share are computed by dividing
the net income or loss, after preferred stock dividend requirements, by
the weighted average number of common shares outstanding during the period
as common stock equivalents are excluded since the effect would be
anti-dilutive. In 1998 and 1997, the earnings (loss) per share are
computed as follows:
Income
(Numerator) Shares Per Share
(in thousands) (Denominator) Amount
-------------- ------------- ------
March 31, 1998
Net Income $ 6,897
Less: Preferred Stock
dividends (3,803)
---------
Basic EPS
Net Income available
to common stock 3,094 105,101,876 $0.03
Effective of Dilutive
Securities
Warrnts 478 823,076
Convertible preferred stock 3,803 34,001,465
12% convertible bonds 2,250 7,894,737
12% convertible note 735 19,797,980
--------- -----------
Diluted EPS
Net Income applicable to
common shares plus
assumed conversions $ 9,881 166,796,058 $0.06
========= =========== =====
March 31, 1997
Basic and diluted EPS
net loss from continuing
operations $ (35,233)
Plus: preferred stock
dividend (5,285)
Less: Income from discontinued
operations 350
---------
Net Loss applicable to
common shares $ (40,518) 60,255,000 $0.67
========= ========== =====
Comprehensive Income
In 1998, the Company adopted the Financial Accounting Standards Board
("FASB") Statement of Financial Accounting Standards ("SFAS") SFAS No.
130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130
establishes standards for reporting and display of comprehensive income
and its components in the financial statements. The Company has displayed
comprehensive income in the Consolidated Statement of changes in
Shareholders' Equity. The adoption of SFAS No. 130 had no impact on the
Company's consolidated results of operations, financial position or cash
flows.
Segment Disclosure
In 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders.
The adoption of SFAS No. 131 will have no impact on the Company's
consolidated results of operations, financial position or cash flows of
the Company. The Company is currently assessing the disclosure
requirements.
2. Disposed of Operations and Segments and Acquisitions:
Discontinuation of Communication Products Segment / Sale of Bogen
Communications Inc. ("BCI")
On November 26, 1997, the Company disposed of its communication products
segment with the sale of its 64% interest in BCI for $18.5 million in cash
resulting in a gain of $3.8 million. In accordance with the Company's debt
covenants, at December 31, 1997, $9.1 million of the proceeds were limited
in the timing of their use and were subsequently released. The Company has
reclassified BCI in its financial statements for 1997 and has accounted
for
9
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
it as discontinued operations. The net assets of the discontinued
operations at March 31, 1997 were $12.7 million, principally consisting of
$0.5 million in cash, $6.2 million in receivables, $6.8 million in
inventory, goodwill of $8.0 million, $6.2 million in accounts payable and
accrued expenses and $4.4 million in notes payable to banks.
The table below sets forth certain information with respect to the results
of operations of BCI, as consolidated (in thousands).
For the three months
Ended March 31, 1997
--------------------
Net products sales $11,508
Cost of goods sold 6,188
Operating and other expenses 4,969
Net Income 350
Sale of European Assets/Assets Held for Sale
In connection with its strategic initiative to focus its efforts on
marketing its Driver Logistic System in the United States, on December 18,
1997, the Company entered into two definitive agreements with Telesystems
International Wireless, Inc. ("Telesystems") and affiliates to sell the
Company's interest in its German joint venture ("Terrafon") and the
Company's wholly-owned subsidiary in the United Kingdom, National Band
Three Ltd. ("NB3"). These transactions closed in February 1998.
The Company sold all of the issued and outstanding shares of capital stock
of NB3, a wholly-owned subsidiary and provider of analog public access
mobile radio ("PAMR") service in the United Kingdom, for approximately
$82.0 million in cash. Five percent of the purchase price is held in
escrow to satisfy the Company's indemnity obligations, if any, under the
agreement and will be released within six months after the closing of the
transaction. The transaction resulted in a gain of $58.6 million to the
Company. At December 31, 1997, the total assets and liabilities of NB3
were $33.8 million and $10.5 million, respectively. Assets principally
included approximately $4.5 million in cash, $3.2 million in accounts
receivable, $5.2 million in goodwill and $18.5 million in property, plant
and equipment. Liabilities consisted principally of accounts payable and
accrued expenses incurred in the ordinary course of business. The Company
consolidated the results of operations of NB3 through the date of sale and
consisted of $2.5 million in revenues and $0.3 million of net income.
The Company sold its interest in Terrafon, the Company's 50/50 joint
venture in Germany, which was formed through the merger of the Company's
German networks with RWE Telliance A.G. ("RWE"), a mobile radio network,
in December 1996, for DM7 million (approximately $3.8 million) in cash.
The investment in Terrafon at December 31, 1997 was presented as an asset
held for sale and, as such, the Company reduced the carrying value of the
investment to fair market value, resulting in a loss of $12.9 million
recognized at December 31, 1997. DM0.5 million of the purchase price is
currently being held in escrow to satisfy the Company's indemnity
obligations, if any, under the agreement and will be released within
fifteen months after the closing of the transaction.
3. Inventories:
March 31, 1998 December 31,1997
-------------- ----------------
Raw materials $ 6,262 $ 4,511
Work-in-process 796 1,199
Finished goods 19,235 16,767
------- -------
26,293 22,477
Reserve for lower of cost or market 3,304 1,000
------- -------
$22,989 $21,477
======= =======
10
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Investments in Affiliates:
In July 1997, the Company entered into a joint venture agreement with two
Canadian partners for the purpose of deploying FHMA Networks in the
provinces of Ontario, Quebec and British Columbia utilizing 900MHz
licenses previously granted to Geotek Communications Canada Inc., a
wholly-owned subsidiary of GeoNet Communications Canada Inc. ("GeoNet
Canada") by Industry Canada, the regulatory agency responsible for
spectrum allocation in Canada. The Company invested $2 million in GeoNet
Canada and the two Canadian partners invested $1 million each for a total
initial investment of $4 million. Additionally, the Company deposited $2.3
million in a restricted cash account as collateral for the Canadian
partner's investment. The parties reserved the right to withdraw from the
venture. In the first quarter of 1998, the partners notified the Company
and subsequently withdrew from the joint venture. The investors were
repaid $2.1 million representing their investment from the restricted cash
account. Subsequent to the withdrawal, $1.9 million of the cash remaining
in the joint venture was release to the Company. The withdrawal of the
Canadian partners resulted in the loss of the Canadian license although
the Company may reapply for licenses at such time that the Company obtains
sufficient financing to pursue the deployment of networks in Canada.
5. Intangible Assets, net:
In 1997, the Company entered into an agreement to swap certain 900 MHz
licenses for additional 900 MHz licenses. In connection with the
agreement, the Company will receive $9 million in cash of which $2.0
million was received in January 1998. The Company has not recorded a
receivable or gain on this transaction at March 31, 1998. The Company
anticipates this transaction will be completed during the later half of
1998.
6. Long-Term Debt:
In December 1997, the Indenture governing the Company's Discount Notes was
amended allowing the Company to utilize the net proceeds of the sale of
the stock of BCI and portions of the proceeds of the sale of the stock of
NB3 and Terrafon for working capital purposes. Specifically, the amendment
permits the Company's use of net proceeds from the sale of NB3 and
Terrafon, approximately $85.8 million, as follows: 20% to repay the
Discount Notes; 40% for working capital; and 40% for replacement assets
defined as qualifying capital expenditures.
The covenants place generally more stringent limitations, the most
restrictive of which are related to making certain investments in assets
other than telecommunications assets, incurring additional debt, use of
proceeds from possible future assets sales, and paying dividends on common
shares. In the event that the Company does not obtain additional financing
or successfully renegotiate the terms of certain indebtedness, it may be
in default of certain covenants. See Note 1 to Notes to Consolidated
Financial Statements for discussion of unpermitted liens.
In March 1998, the Company made an offer to purchase a pro-rata portion of
the accreted value of the Company's Discount Notes in the aggregate $16.2
million. In May 1998, the holders of the Discount Notes will be repaid the
pro-rata portion of the Discount Notes tendered.
In September 1996, in connection with the HNS Vendor Credit Facility, the
Company entered into an agreement with HNS, whereby HNS will manufacture
at least 50% of certain components utilized by the Company in its 900 MHz
infrastructure equipment through June 1999. During the first quarter of
1998, the Company drew $5 million and, at March 31, 1998, $15.4 million
was outstanding under the vendor credit facility.
In February 1998, the Company entered into an agreement to repay the $2.0
million note payable due July 1, 1998 plus accrued interest in shares of
the Company's Common Stock based upon the stock price at the time the
shares were registered. In April 1998, 3.0 million shares were issued upon
registration.
11
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. Commitments and Contingent Liabilities:
Manufacturing and Sales Commitments
In 1994, the Company contracted with Mitsubishi Consumer Electronics of
America ("MCEA") to manufacture mobile radios on behalf of the Company.
This agreement was terminated by MCEA in 1998 and MCEA reserved any
rights, if any, it had under the contract claiming defaults and
deficiencies by the Company.
In March 1995, the Company and HNS, a related party, formed a strategic
partnership to develop a portable unit. Under the terms of the agreement,
HNS and the Company will share equally in the cost of developing the
portable unit. During 1995, the Company included as engineering and
development expense approximately $6.0 million paid to HNS under the terms
of this development contract. Additionally, during the year ended December
31, 1997, the Company accrued $3.2 million in engineering and development
expense relative to final development costs under the contract. During
1996 the Company made advances on account of production of $11.5 million
to HNS, which is included in Advances to Related Parties. The Company has
included all advances made to HNS which will be applied against future
purchases in advances to related parties.
FCC Waiver
As permitted by the FCC, the Company subsumed its Designated Frequency
Area ("DFA") licenses which were acquired prior to the 1996 auctions with
the Company's MTA licenses so that, together, they are regulated as a
single MTA license. Under the terms of the MTA licenses the Company
acquired during the auctions, a MTA will be "constructed' if one-third of
the market's population is served within three years of the grant, August
12, 1999, and two-thirds of the population are served within five years of
the grant, August 12, 2001. As an alternative, the Company may elect for
the FCC to waive the requirements for August 12, 1999 and agree to provide
substantial service to the MTA by August 12, 2001.
Litigation
In June 1994, the Company filed a lawsuit against Harris Adacom
Corporation B.V. ("Harris"), a Dutch Corporation, to enforce the Company's
right to repayment of a $3.5 million loan made to Harris in January 1994.
In or about May 1994, creditors placed Harris into bankruptcy. In response
to the Company's lawsuit, Harris and its subsidiaries filed a lawsuit
against the Company in the courts of the State of Israel requesting a
declaratory judgment that the Company entered into a binding agreement for
the purchase by the Company of a significant interest in certain wireless
communication business assets owned by Adacom Technologies Ltd., ("ATL"),
an affiliate of Harris and an Israeli publicly traded company, and
subsequently breached such agreement. In July 1997, the plaintiffs filed a
motion with the court seeking to amend the Statement of Claim to assert a
claim for monetary damages of approximately $27 million arising out of the
same transaction. This motion is pending. In addition, the plaintiffs are
seeking to add Yaron Eitan, the Company's Chairman of the Board, and Yoram
Bibring, who, prior to the Company's reorganization in December 1997, was
President and CEO of Geotek International Networks, Inc., as party
defendants. The Company believes that the plaintiffs' claims and such
actions are primarily an attempt to delay efforts to collect Harris's debt
to the Company and the Company has meritorious defense. The Company
intends to defend this action vigorously.
The Company develops and utilizes technology for substantially all of the
services and products it offers and intends to offer and has, from time to
time, been the subject of infringement claims related thereto. It is often
difficult to predict the outcome of such litigation and the amount of
damages that may be awarded. The Company does not believe that any pending
or threatened litigation related to the Company's technology or use
thereof will have a material adverse effect on its business.
The Company also is, from time to time, a party to litigation, which may
or may not be covered by insurance, arising in the ordinary course of
business. The Company does not believe that results of such litigation,
even if the
12
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
outcome were unfavorable to the Company, would have a material adverse
effect on the financial position and results of operations.
8. Stockholders' Equity
In February 1998, the Company completed an exchange offer whereby certain
holders of the Company's Series O Cumulative Convertible Preferred Stock
("Series O Stock") and Series Q Cumulative Convertible Preferred Stock
("Series Q Stock") exchanged $22.4 million for shares of the Company's
Series R Preferred Stock ("Series R Stock") and Series S Preferred Stock
("Series S Stock"), whose conversion price is fixed at an amount above the
market price of the Company's Common Stock. The $15.9 million of Series R
Stock is convertible at $2.00 per share and the $6.5 million of Series S
Stock is convertible at $4.00 per share which is adjusted under certain
circumstance to $3.00 or at 110% of the market price. Additionally, the
Company lowered the exercise price of 3.0 million of the Series O Stock
and Series Q Stock warrants to $4.00 per share. Under the exchange, the
holders also converted $12.4 million of Series O and Q Stock into Common
Stock at $1.00 per share. Dividends paid in Common Stock on Series R Stock
and Series S Stock as of March 31, 1998 were 142,000 and 52,000,
respectively.
On May 15, 1998, the Company and the holders of its Series Q, Series R and
Series S Stock, excluding on Series Q Stock Investor, reached an agreement
pursuant to which approximately $13 million value in in the face amount of
the Series Q, R and S Stock will be converted into an aggregate of
approximately 16 million shares of Common Stock, valued at $.80 per share.
The 16 million shares of Common Stock to be issued upon such conversion
and exercise are currently covered by a registration statement that is
effective under the Securities Act of 1933, as amended. The remaining
approximately $11 million value of the Series Q, R and S Stock will be
exchanged for shares in the Company's new Preferred Stock Series T
("Series T Stock"). The Series T Stock will be convertible into Common
Stock valued at a price of $1.25 per share and will not include rights to
exchange or participate in any New Financings as provided in the Series R
and S agreements. Pursuant to the terms of the Series R and S Exchange
Agreement, the holders would have had the right on May 15, 1998 to make an
Election for the Series R and S preferred to convert into common stock at
a discount to market price at the time of conversion.
During the three months ended March 31, 1998, 418 shares of Series O
Cumulative Convertible Preferred Stock ("Series O Stock"), including
accrued dividends, were converted into 306,000 shares of Common Stock and
the Company paid dividends of approximately 69,500 shares of Common Stock
with a value of approximately $0.1 million.
During the three months ended March 31, 1998, the Company paid dividends
to the holders of Series P Cumulative Convertible Preferred Stock ("Series
P Stock") of approximately 84,000 shares of Common Stock with a value of
approximately $0.1 million. Additionally, during the first quarter of
1998, holders of the Series P Stock agreed to convert $7.5 million plus
accrued dividends into 7.5 million shares of the Company's Common Stock.
These shares were issued upon their registration.
During the three months ended March 31, the Company paid dividends to the
holders of Series Q Cumulative Convertible Preferred Stock ("Series Q
Stock") of approximately 268,000 shares of Common Stock with a value of
approximately $0.4 million, 88 shares of Series Q Stock, including accrued
dividends, were converted into 343,000 shares of Common Stock.
9. Certain Other Related Party Transactions:
The Company incurred expenses of $75,000 in the first three months of 1998
and 1997, pursuant to its consulting agreement with a company affiliated
with George Soros. Entities affiliated with George Soros also hold the
13
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Company's Series H Redeemable Preferred Shares, Series I Convertible
Preferred Shares, $5.0 million of the Company's Series N Convertible
Preferred Stock, Series P Convertible Preferred Stock, 10% of the
Company's Senior Secured Discount Notes due 2005, and S-C Rig Credit
Facility.
GTI-Israel has entered into a subcontractor agreement with Rafael under
which Rafael will partake in the development of the digital wireless
network to be deployed by the Company and its subsidiaries in the United
States and Korea. Engineering and development expense for the three months
ended March 31, 1998 includes approximately $1.2 million for research
performed by Rafael under this agreement. GTI-Israel has also entered into
agreements with Rafael under which Rafael manufactures the infrastructure
equipment to be used by the Company in its U.S. network and for the sale
of such equipment by the Company to third parties. At March 31, 1998, the
Company had an $22.1 million payable to Rafael.
10. NASDAQ
The Nasdaq Stock Market, Inc. ("NASDAQ") advised the Company that it is
reviewing the Company's eligibility for continued listing on NASDAQ,
because the Company does not currently meet certain of the requirements
for continued listing of its Common Stock. As part of NASDAQ's review
process, the Company submitted to Nasdaq a response demonstrating the
Company's plans to achieve compliance with the listing maintenance
standards. On April 23, 1998, the Company received a letter from the
Nasdaq stating that the Company's securities are scheduled to be delisted
from the NASDAQ effective with the close of business on April 30, 1998.
The Company requested a hearing on that decision, which under Nasdaq's
rules automatically will stay any delisting pending a ruling by the
hearing panel. This hearing has been scheduled for June 4, 1998. There can
be no assurance that the hearing will result in a ruling favorable to the
Company and the the Company's securities will continue to be listed on the
NASDAQ. The inability to maintain the listing could adversely affect the
liquidity of the Company's Common Stock. Although the Common Stock
continues to be listed on the Pacific Stock Exchange, in the event the
Company does not maintain the listing of the Common Stock on the NASDAQ,
it will seek approval for listing on the NASDAQ Small Cap Market or
another national securities exchange or market. However, there can be no
assurance that the Common Stock will be listed on any such other
exchanges.
11. Subsequent Events:
In April 1998, the Company entered into an agreement to repay a loan for
CD$2.0 million (USD$1.4 million), which the Company guaranteed, to the
former owner of its subsidiary in Canada, GMSI, in 1.1 million shares of
the Company's Common Stock.
In April 1998, the Company settled an action brought against the Company
by its former advisors for $0.8 million in 1.1 million shares of the
Company's Common Stock.
See Note 1 for discussion of unpermitted liens.
See Note 6 for the conversion of the Company's $2.0 million loan into
Common Stock in April 1998.
See Note 8 for agreement between the Company and the holders of Series O,
Q, R and S Stock.
12. Condensed Consolidating Financial Information For Guarantors ("Guarantor
Information"):
In July and August 1995, the Company issued, in a private offering, $227.7
million aggregate principal amount at maturity of 15% Discount Notes due
July 15, 2005 ("the Discount Notes"). In connection with the Discount Note
offering, the Company's wholly-owned U.S. Domestic Subsidiaries, including
Geotek USA, formerly PowerSpectrum Inc., and its Subsidiaries,
(collectively referred to as the "Guarantor Subsidiaries") fully and
unconditionally guarantee such Discount Notes jointly and severally. The
Guarantor Subsidiaries are wholly owned by the Company. In addition, the
Discount Notes are collateralized by a pledge of the capital stock owned
by the Company in NB3, Geotek USA, Inc. and Subsidiaries, MetroNet
Systems, Inc., Geotek GmbH Holding Corporation and BCI. As discussed in
Note 2, the Company entered into agreements to sell NB3 and BCI. The
Discount Notes include covenants that place restrictions on the Company
primarily related to making certain investments, permitting liens, paying
dividends and incurring additional debt.
The Guarantor Information of Geotek Communications, Inc. and Subsidiaries
has been presented on pages F-17 through F-22 in order to present the
Guarantor Subsidiaries pursuant to the Guarantor relationship. The
Guarantor Information is presented as management does not believe that
separate financial statements of the Guarantor Subsidiaries would be
meaningful. This Guarantor Information should be read in conjunction with
the Consolidated Financial Statements.
14
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Notes to Guarantor Information:
Basis of Presentation - To conform with the terms and conditions of the Notes,
the condensed consolidating financial information of the Guarantor Subsidiaries
are presented on the following basis:
(1) Geotek Communications, Inc. -Investments in consolidated subsidiaries are
(Parent Company) accounted for by the Parent Company on the
cost basis for purposes of the Guarantor
Information. Operating results of Subsidiaries
are therefore not reflected in the Parent's
investment accounts or earnings.
(2) Guarantor Subsidiaries -For purposes of the Guarantor Information,
Guarantor Subsidiaries includes all U.S.
wireless subsidiaries of Geotek USA combined
with Geotek Financing Corporation, Geotek
License Holding Inc., MetroNet Systems, Inc.
and ANSA Communications, Inc., all direct
wholly owned subsidiaries of the Parent
Company. For purposes of the Guarantor
Information, Geotek USA does not contain the
consolidated financial statements of GTI -
Israel, subsidiary of Geotek USA, since GTI-
Israel is not a Guarantor Subsidiary. Such
statements of GTI - Israel are included with
Non-Guarantor Subsidiaries.
(3) Non-Guarantor Subsidiaries -This includes the Company's subsidiaries that
are not Guarantor Subsidiaries, principally
GTI - Israel, and NB3 which at December 31,
1997 were reclassified to assets held for
sale.
(4) Reclassifications and -Certain reclassifications were made to conform
Eliminations all of the Guarantor Information to the
financial presentation of the Company's
consolidated financial statements. The
principal elimination entries eliminate
investments in subsidiaries and intercompany
balances and transactions.
15
<PAGE>
12. Condensed Consolidating Financial Information For Guarantors ("Guarantor
Information"): continued
CONDENSED CONSOLIDATING BALANCE SHEET
As of March 31, 1998
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Geotek
Geotek Guarantor Non-Guarantor Reclassifications Comm., Inc.
Comm. Inc Subsidiaries Subsidiaries & Eliminations & Subsidiaries
--------- ------------ ------------ -------------- --------------
(1) (2) (3) (4)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,766 $ $ 877 $ 11,643
Restricted cash 63,112 -- -- 63,112
Accounts receivables trade, net -- 3,668 3,366 7,034
Inventories, net 2,265 8,397 12,327 22,989
Prepaid expenses and other assets 1,201 1,403 2,408 5,012
Advances to related parties -- 11,500 -- 11,500
-------- -------- ------- --------
Total current assets 77,344 24,968 18,978 121,290
-------- -------- ------- --------
Inter-company account 486,006 50,225 2,443 $(538,674)
Investments in affiliates 12,747 -- -- (1,252) 11,495
Property, plant and equipment, net 3,993 131,611 3,164 (17,829) 120,939
Intangible assets, net 8,457 69,132 264 77,853
Other assets 13,860 404 6,760 (1,464) 19,560
Investments in Subsidiaries, at cost 47,893 (47,893)
-------- -------- ------- --------- --------
$650,300 $276,340 $31,609 $(607,112) $351,137
======== ======== ======= ========= ========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 6,585 $ 18,059 $30,585 $ 30,585
Accrued expenses and other 4,436 11,993 50,524 50,524
Current maturities, long-term debt 14,540 24,518 1,408 40,466
-------- -------- ------- --------
Total current liabilities 25,561 54,570 41,414 121,545
-------- -------- ------- --------
Inter-company account 461,262 77,412 (536,674)
Long-term debt 242,022 15,397 1,574 (1,574) 257,419
Other non-current liabilities 5,296 1,480 (1,464) 5,312
Redeemable preferred stock 40,000 40,000
Shareholders' equity:
Preferred stocks, $.01 par value 11 11
Common stock, $.01 par value 1,135 1,135
Capital in excess of par value 440,020 40,621 35,286 (46,319) 474,608
Foreign currency translation
adjustment (219) (219)
Accumulated deficit (102,063) (300,806) (125,338) (19,081) (547,288)
Treasury stock, at cost (1,386) (1,386)
-------- -------- ------- --------- --------
342,717 (260,185) (90,271) (65,400) (73,139)
-------- -------- ------- --------- --------
$650,300 $275,340 $31,609 $(607,112) $351,137
======== ======== ======= ========= ========
</TABLE>
16
<PAGE>
12. Condensed Consolidating Financial Information For Guarantors ("Guarantor
Information"): continued
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 1997
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Geotek
Geotek Guarantor Non-Guarantor Reclassifications Comm., Inc.
Comm. Inc Subsidiaries Subsidiaries & Eliminations & Subsidiaries
--------- ------------ ------------ -------------- --------------
(1) (2) (3) (4)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 11,413 $ 23 $ 1,957 $ 13,393
Restricted cash 16,140 16,140
Accounts receivables trade, net 2,430 4,667 7,097
Inventories, net 1,389 11,727 8,361 21,477
Assets held for sale 27,121 27,121
Prepaid expenses and other assets 1,417 2,691 2,559 6,667
Advances to related parties 11,500 11,500
-------- -------- ------- --------
Total current assets 30,359 28,371 44,665 103,395
-------- -------- ------- --------
Inter-company account 465,250 86,206 3,039 $(554,495)
Investments in affiliates 17,175 (1,252) 15,923
Property, plant and equipment, net 4,373 115,422 10,431 (17,243) 112,983
Intangible assets, net 8,742 71,118 1,007 80,867
Other assets 32,402 5,661 (17,918) (1,563) 18,582
Investments in Subsidiaries, at cost 47,893 (47,893)
-------- -------- ------- --------- --------
$606,194 $306,778 $41,224 $(622,446) $331,750
======== ======== ======= ========== ========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 3,895 $ 13,250 $ 8,025 $ 25,170
Accrued expenses and other 10,099 17,657 26,195 53,951
Current maturities, long-term debt 16,715 24,550 1,399 42,664
-------- -------- ------- --------
Total current liabilities 30,709 55,457 35,619 121,785
-------- -------- ------- --------
Inter-company account 469,157 85,338 (554,495)
Long-term debt 233,068 10,354 1,574 (1,574) 243,422
Other non-current liabilities 5,296 1,631 (1,563) 5,364
Redeemable preferred stock 40,000 40,000
Shareholders' equity:
Preferred stocks, $.01 par value 11 11
Common stock, $.01 par value 739 739
Capital in excess of par value 446,557 40,621 35,286 (46,319) 476,145
Foreign currency translation
adjustment (145) (145)
Accumulated deficit (143,504) (274,107) (118,079) (18,495) (554,185)
Treasury stock, at cost (1,386) (1,386)
-------- -------- ------- --------- --------
302,417 (233,486) (82,938) (64,814) (78,821)
-------- -------- ------- --------- --------
$606,194 $306,778 $41,224 $(622,446) $331,750
======== ======== ======= ========= ========
</TABLE>
17
<PAGE>
12. Condensed Consolidating Financial Information For Guarantors ("Guarantor
Information"): continued
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Geotek Guarantor Non-Guarantor Reclassifications Comm., Inc.
Comm. Inc. Subsidiaries Subsidiaries & Eliminations & Subsidiaries
---------- ------------ ------------ -------------- --------------
(1) (2) (3) (4)
<S> <C> <C> <C> <C> <C>
Revenues:
Net product sales $ -- $ 1,455 $ 5,179 $(4,096) $2,538
Service income -- 1,681 2,713 -- 4,394
------- -------- ------- ------- ------
Total revenues -- 3,136 7,892 (4,096) 6,932
------- -------- ------- ------- ------
Costs and expenses:
Cost of goods sold -- 8,526 3,619 (3,101) 9,044
Cost of services -- 5,158 1,007 -- 6,165
Engineering and development -- -- 6,652 -- 6,652
Marketing 75 6,026 1,950 -- 8,051
General and administrative 4,990 4,215 43 -- 9,248
Interest expense 9,658 360 81 (65) 10,034
Interest and other income (375) (1) (58) 65 (369)
Depreciation 190 5,133 1,132 (409) 6,046
Amortization of intangibles 1,846 247 344 -- 2,437
Equity in losses of investees 2,589 -- -- -- 2,589
Other expenses (income) (1,776) 171 299 -- (1,306)
------- -------- ------- ------- ------
Total costs and expenses 17,197 29,835 15,069 (3,510) 58,591
------- -------- ------- ------- ------
Loss on operations before gain
on sale of subsidiary (17,197) (26,699) (7,177) (586) (51,659)
Gain on sale of subsidiary 58,638 -- -- -- 58,638
------- -------- ------- ------- ------
Income (loss) from continuing
operations before taxes on
income and discontinued
operations 41,441 (26,699) (7,177) (586) 6,979
Taxes on income -- -- (82) -- (82)
------- -------- ------- ------- ------
Net income (loss) $41,441 $(26,699) $(7,259) $ (586) $6,897
======= ======== ======= ======= ======
</TABLE>
18
<PAGE>
12. Condensed Consolidating Financial Information For Guarantors ("Guarantor
Information"): continued
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Geotek
Geotek Guarantor Non-Guarantor Reclassifications Comm., Inc.
Comm. Inc. Subsidiaries Subsidiaries & Eliminations & Subsidiaries
---------- ------------ ------------ -------------- --------------
(1) (2) (3) (4)
<S> <C> <C> <C> <C> <C>
Revenues:
Net product sales $ -- $ 718 $10,492 $(7,999) $ 3,211
Service income -- 80 7,892 -- 7,972
------- -------- ------- ------- --------
Total revenues -- 798 18,384 (7,999) 11,183
------- -------- ------- ------- --------
Costs and expenses:
Cost of goods sold -- 2,947 8,203 (6,103) 5,047
Cost of services -- 3,574 2,804 (300) 6,078
Engineering and development -- 1,839 5,571 (6) 7,404
Marketing 75 3,963 1,707 -- 5,745
General and administrative 2,095 2,451 2,759 7,305
Interest expense 7,419 1,751 239 (135) 9,274
Interest and other income (1,338) -- (373) 135 (1,576)
Depreciation 35 2,941 1,515 -- 4,491
Amortization of intangibles 517 188 338 -- 1,043
Equity in losses of investees 399 -- 1,077 -- 1,476
Other expenses (income) (39) (13) -- 47 (5)
------- -------- ------- ------- --------
Total costs and expenses 9,163 19,641 23,840 (6,362) 46,282
------- -------- ------- ------- --------
Loss from continuing operations
before taxes on income and
discontinued operations (9,163) (18,843) (5,456) (1,637) (35,099)
Taxes on income -- -- (484) -- (484)
------- -------- ------- ------- --------
Loss from continuing operations
before discontinued operations (9,163) (18,843) (5,940) (1,637) (35,583)
Discontinued operations:
Income from discontinued
operations -- -- 350 -- 350
------- -------- ------- ------- --------
Net loss $(9,163) $(18,843) $(5,940) $(1,637) $(35,233)
======= ======== ======= ======= ========
</TABLE>
19
<PAGE>
12. Condensed Consolidating Financial Information For Guarantors ("Guarantor
Information"): continued
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Geotek
Geotek Guarantor Non-Guarantor Reclassifications Comm., Inc.
Comm. Inc. Subsidiaries Subsidiaries & Elimination's & Subsidiaries
---------- ------------ ------------ --------------- --------------
(1) (2) (3) (4)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $41,441 $(26,699) $(7,259) $(586) $ 6,897
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation & amortization 2,036 5,380 1,476 (409) 8,483
Equity in losses of investees 2,589 -- -- -- 2,589
Adjustments to inventory for replacement costs -- -- -- 2,304 2,304
Non-cash interest expense 7,616 -- -- -- 7,616
Issuance of Common Stock for management
consulting fee 99 -- -- -- 99
Gain on sale of subsidiary (58,638) -- -- -- (58,638)
Other, net (1,257) (151) -- -- (1,408)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable -- (1,238) 1,301 -- 63
(Increase) in inventories (876) 3,330 (6,272) -- (3,818)
(Increase) in prepaid expenses and other
assets 216 728 (480) -- 464
Increase in accounts payable & accrued
expenses (2,973) (855) 5,787 -- 1,959
Other, net (375) -- -- -- (375)
------- -------- ------- ----- -------
Net cash used in operating activities (10,122) (19,146) (3,143) (995) (33,765)
------- -------- ------- ----- -------
Cash flows from investing activities:
Cash invested in unconsolidated
subsidiaries, net (170) -- -- -- (170)
Proceeds from swap of licenses -- 2,000 -- -- 2,000
Acquisitions of property, plant & equipment (399) (7,135) (6,577) 995 (13,116)
Capitalized interest on construction in
progress and pre-commercial spectrum
licenses (1,877) -- -- -- --
Change in restricted cash (46,893) -- -- -- (46,893)
Contract deposits - other current assets 560 632 -- 1,192
Proceeds from sale of subsidiary 87,098 -- -- -- 87,098
Other 63 112 -- -- 175
------- -------- ------- ----- -------
Net cash provided by (used in) investing
activities 37,903 (4,463) (5,945) 995 28,490
------- -------- ------- ----- -------
Cash flows from financing activities:
Draw down of vendor financing agreements -- 5,042 -- -- 5,042
Repayment of capital lease obligation (175) -- -- -- (175)
Payment of preferred dividends (1,265) -- -- -- (1,265)
Intercompany financing (26,988) 18,903 8,085 -- --
------- -------- ------- ----- -------
Net cash provided by financing activities (28,428) 23,586 8,085 -- 3,602
------- -------- ------- ----- -------
Effect of exchange rate changes on cash -- -- (77) -- (77)
------- -------- ------- ----- -------
Increase (decrease) in cash & cash equivalents (647) (23) (1,080) -- (1,750)
------- -------- ------- ----- -------
Cash & cash equivalents, beginning of year 11,413 23 1,951 -- 13,393
------- -------- ------- ----- -------
Cash & cash equivalents, end of year $10,766 $ -- $ -- $ -- $11,643
======= ======== ======= ===== =======
</TABLE>
20
<PAGE>
12. Condensed Consolidating Financial Informatio n For Guarantors ("Guarantor
Information"): continued
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Geotek
Geotek Guarantor Non-Guarantor Reclassifications Comm., Inc.
Comm. Inc. Subsidiaries Subsidiaries & Elimination's & Subsidiaries
---------- ------------ ------------ --------------- --------------
(1) (2) (3) (4)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss $ (9,163) $ (18,843) $(5,590) $(1,637) $ (35,233)
Adjustments to reconcile net loss to net
cash used in operating activities:
Discontinued operations:
(Income) from operations -- -- (350) -- (350)
Depreciation & amortization 551 3,273 1,963 (253) 5,534
Equity in losses of investees 399 -- 1,077 -- 1,476
Non-cash interest expense 7,262 1,021 -- -- 8,283
Other, net 82 -- -- -- 82
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable -- (129) 609 -- 480
(Increase) decrease in inventories -- (3,874) 226 -- (3,648)
(Increase) in prepaid expenses & other assets (511) (761) (4,817) -- (6,089)
Increase (decrease) in accounts payable &
accrued expenses (3,108) 866 (2,854) -- (5,096)
Other, net (47) -- -- -- (47)
--------- --------- ------- ------- ---------
Net cash (used in) operating activities (4,535) (18,447) (9,736) (1,890) (34,608)
--------- --------- ------- ------- ---------
Cash flows from investing activities:
Acquisition of, and deposits for, spectrum
licenses -- (54) -- -- (54)
Acquisitions of property, plant & equipment (880) (11,551) (2,035) 1,890 (12,576)
Capitalized interest on construction in progress
& pre-commercial spectrum licenses (361) (1,815) -- -- (2,176)
Change in cash for net assets of discontinued
operations -- -- (332) -- (332)
Cash invested in unconsolidated subsidiaries, net 916 -- -- -- 916
Change in restricted cash 109 -- 1,624 -- 1,733
Contract deposits - other current assets -- -- 1,356 -- 1,356
Other - net -- 164 -- -- 164
--------- --------- ------- ------- ---------
Net cash provided by (used in) investing
activities (216) (13,256) 613 1,890 (10,969)
--------- --------- ------- ------- ---------
Cash flows from financing activities:
Proceeds from issuance of convertible preferred
stock 25,000 -- -- -- 25,000
Repayments under line of credit agreement -- -- (3,247) -- (3,247)
Repayment of capital lease obligations (34) -- -- -- (34)
Proceeds from exercise of warrants & options 144 -- -- -- 144
Payment for preferred dividends (1,269) -- -- -- (1,269)
Intercompany financing (42,766) 31,794 10,792 -- --
--------- --------- ------- ------- ---------
Net cash provided by financing activities (18,925) 31,794 7,725 -- 20,594
--------- --------- ------- ------- ---------
Effect of exchange rate changes on cash -- -- (5) -- (5)
--------- --------- ------- ------- ---------
Increase (decrease) in cash & cash equivalents (23,676) 91 (1,403) -- (24,988)
Cash & cash equivalents, beginning of year 94,218 364 8,138 -- 102,720
--------- --------- ------- ------- ---------
Cash & cash equivalents, end of year $ 70,542 $ 455 $ 6,735 $ -- $ 77,732
========= ========= ======= ======= =========
</TABLE>
21
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with, and is qualified in
its entirety by, the Consolidated Financial Statements and the notes thereto,
included elsewhere in this report and the 1997 Annual Report on Form 10-K. The
Consolidated Financial Statements have been prepared on a going concern basis
which contemplates the realization of assets and liquidation of liabilities in
the ordinary course of business. They do not include any adjustments to the
carrying value of assets and liabilities that might result from the
aforementioned uncertainty (see Note 1 to the Consolidated Financial
Statements).
Results of Operations
General
The Company is in various stages of operations of its networks in Philadelphia,
Washington DC/Baltimore, New York, Boston, Miami, Dallas, Tampa, San Antonio,
Houston and Phoenix and, as a result, has not yet generated positive cash flow.
The Company expects to incur substantial losses and have negative cash flow from
operations for the foreseeable future, attributable primarily to the operating,
sales, marketing, general and administrative expenses relating to the roll-out
of the U.S. Network as well as an ongoing investment in engineering and
development related to its wireless communications activities. There can be no
assurance that the Company will operate at profitable levels, have positive cash
flow from operations or continue to obtain financing to proceed with the
implementation of its operating plan.
The Company's existing cash resources at March 31, 1998 and expected cash flow
from operations are insufficient to fund its current operations and the full
implementation of the Company's business plan in the short and long term.
As discussed in the Company's 1997 Annual Report on Form 10-K, the Company
needed to raise capital beginning in the second quarter of 1998. To date the
Company has not raised significant capital. Thus, the Company is experiencing
severe cash flow problems and needs immediate access to capital to continue
funding its operations and working capital needs including significant past due
trade payables. The Company has initiated discussions with certain of its
largest debt holders and preferred equity holders in an effort to address these
concerns. While the Company continues to seek a capital infusion from strategic
partners and others as part of an overall capital restructuring, and is
continuing to negotiate with potential investors, the Company needs immediate
concessions and funding from such debt and preferred equity holders, as well as
its trade creditors, in order to reach a satisfactory restructuring plan.
Holders of more than a majority of the Company's 15% Notes and S-C Rig, have
agreed to waive any defaults resulting from certain unpermitted liens obtained
by creditors of the Company's Israeli subsidiary for nonpayment. As of May 15,
1998, HNS has not agreed to waive the defaults resulting from these unpermitted
liens. In the event the Company is unable to secure such a waiver from HNS, the
Company may experience an event of default under certain agreements with HNS.
Such a default could result in an acceleration of the Company's indebtedness to
HNS. However, the failure to obtain this waiver does not preclude the Company
from authorizing payment of $16.2 million of the accreted value of the Discount
Notes to the holders thereof or from drawing down on any of the Company's other
restricted cash. There will be additional defaults in the event that additional
claims or liens are imposed by the Company's United States and Israeli trade
creditors. There can be no assurance that efforts to restructure will result in
any formal proposals, that definitive agreements can be reached with any
prospects, or that the Company's financial creditors and preferred equity
holders will approve any further concessions or agree to provide additional
financing. If the Company's preferred equity holders and creditors do not
provide the Company with the requested concessions and financing on a timely
basis, and if it cannot conclude satisfactory arrangements with other prospects
or reach appropriate accommodations with its trade creditors, the Company will
be forced to examine other alternatives, including, but not limited to, filing
for protection from creditors under applicable bankruptcy laws.
The Company has historically grouped its operations into two types of
activities: wireless communications and communications products. On November 26,
1997, the Company discontinued its communication products subsidiary, with the
sale of its 64% interest in Bogen Communications International, Inc. ("BCI"),
for $18.5 million in cash (see discussion below). BCI was primarily engaged in
the development, manufacturing, and marketing of telephone peripherals and sound
and communications equipment. The Company's wireless communications subsidiaries
are currently engaged in marketing and enhancing its Driver Logistics System in
the United States. Additionally, the wireless communications subsidiaries are
involved in: enhancing the proprietary FHMA Network; selling its proprietary
22
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
digital wireless infrastructure equipment internationally; and implementing
digital wireless communications systems internationally. In December 1997, the
Company entered into two definitive agreements to sell its analog trunked mobile
radio services in the United Kingdom and Germany for approximately $82 million
and DM 7 million, respectively. These sales were consummated in February 1998
(see discussion below).
In July 1997, the Company entered into a joint venture agreement with two
Canadian partners for the purpose of deploying FHMA Networks in the provinces of
Ontario, Quebec and British Columbia utilizing 900MHz licenses previously
granted to Geotek Communications Canada Inc., a wholly-owned subsidiary of
GeoNet Communications Canada Inc. ("GeoNet Canada"), by Industry Canada, the
regulatory agency responsible for spectrum allocation in Canada. The Company
invested $2 million in GeoNet Canada and the two Canadian partners invested $1
million each for a total initial investment of $4 million. Additionally, the
Company deposited $2.3 million in a restricted cash account as collateral for
the Canadian partners' investments. The parties reserved the right to withdraw
from the venture. In the first quarter of 1998, the Canadian partners notified
the Company and subsequently withdrew from the joint venture. The Canadian
partners were repaid their investment from the restricted cash account,
approximately $2.1 million, and $1.9 million of the balance of cash in the joint
venture was released to the Company. The withdrawal of the Canadian partners
resulted in the loss of the Canadian licenses although the Company may reapply
for licenses at such time that the Company obtains sufficient financing to
pursue its deployment of the network in Canada.
The Company holds a 21% interest in Anam Telecommunications, Inc. ("Anam
Telecom"), a holder of a nationwide trunked radio system license in Korea. The
license covers a geographic area with a population of approximately 45 million
people and is based on the implementation of the Company's FHMA system on an
800MHz frequency. The Company's FHMA system operates in the 900MHz frequency
band in the United States. Anam Telecom commenced commercial operations in
November 1997 in the Seoul region of Korea. The deployment of a FHMA-based
digital system in Korea is subject, but not limited to, the same risks attendant
to the deployment of the Company's digital wireless system in the United States.
Additionally, the devaluation of the Korean Won during the fourth quarter of
1997 or any additional devaluation of the Won could result in an adverse effect
on the ability of Anam Telecom to deploy and operate the FHMA system in Korea.
In 1997, the Company, through its subsidiary Geotek Technologies, Inc. ("GTI"),
entered into contracts to provide Anam Telecom, as well as Hyundai Electronics
("HEI"), FHMA Network equipment and to supervise network construction. HEI, in
turn, will sell such equipment to the Korean regional operators. To date all
contracts have been denominated in dollars; however, the further devaluation of
the Korean Won may have an adverse effect on the Company's ability to sell
infrastructure in Korea in the future or to negotiate satisfactory agreements or
amendments to existing agreements.
The Company owns a 70% interest in Geotek Argentina S.A. which holds a
nationwide trunked radio system license in Argentina. The license was awarded in
August 1997 and covers metropolitan Buenos Aires, Cordova, Mendoza and Santa Fe.
Geotek Argentina is currently deploying a demonstration site in Buenos Aires.
The deployment of a FHMA Network in Argentina is subject, but not limited to,
the same risks attendant to the deployment of the Company's digital wireless
system in the United States.
In connection with its strategic initiative to focus its efforts on marketing
the Driver Logistics System in the U.S., in December 1997, the Company entered
into two definitive agreements to sell its European assets. The sales were
consummated in February 1998. Under the first agreement, the Company sold its
operating subsidiary, National Band Three Ltd. ("NB3"), for approximately $82.0
million in cash. NB3 provides analog Public Access Mobile Radio ("PAMR")
services to approximately 64,500 subscribers in the United Kingdom and, in 1996,
was awarded a license to operate a digital PAMR network in the United Kingdom.
Under the second agreement, the Company sold its 50/50 joint venture in Germany,
Terrafon, for approximately DM 7 million in cash. Terrafon was established in
December 1996 through a merger of the Company's German networks and RWE
Telliance A.G. ("RWE") mobile radio network and provides analog radio service to
approximately 42,700 subscribers. The use of proceeds from the sales of NB3 and
Terrafon are subject to significant limitations outlined in the Indenture
governing the Company's Discount Notes (see "Liquidity and Capital Resources").
23
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
Summary of Operations
The results of operations are presented for continuing operations of the
Company. Results of the discontinued operation, communication products, have
been reclassified.
Consolidated
Consolidated revenues from continuing operations decreased during the first
three months of 1998 compared to the same period of 1997 by 38% principally due
to the sale of NB3 which occurred in February 1998.
Consolidated operating expenses increased by 27% during the first quarter of
1998 compared to the first quarter of 1997 due primarily to increased general
and administration expenses related to the sale of the Company's European Assets
and marketing expenses to support the U.S. Network roll-out including the
deployment of a direct sales force.
Consolidated losses from continuing operations before gain on sale of subsidiary
increased by $16.4 million to $51.5 million in the first quarter of 1998.
Interest income decreased in 1998 due to a lower level of cash and cash
equivalents held during the year.
Wireless Communications Activities
As discussed previously, the Company entered into two agreements to sell its
ownership interests in its European assets in the United Kingdom and Germany.
The table below set forth certain information with respect to the results of
operations of the Company's core activities for the three months ended March 31
(dollars in thousands).
1998 1997
---- ----
Net total revenue $ 4,389 $ 3,671
Gross margin (9,961) (4,988)
(227)% (136)%
Engineering and development 6,652 7,404
General & administrative expense 8,774 6,179
Sales and marketing 7,605 4,414
Equity in loss of investees (1,306) 356
Other (income)/loss 2,589 9
Loss before interest, taxes,
depreciation & amortization (34,275) (23,350)
Depreciation & amortization 8,064 3,957
Loss before interest and taxes (42,339) (27,307)
Net loss $ (52,031) $ (34,644)
Revenues from wireless communications activities increased by $0.7 million or
20% for the quarter ended March 31, 1998 compared to the same period of 1997.
Revenues increased due to the increase in the number of customers using the U.S.
Network. The increase in negative gross profit for the Company is primarily the
result of increased direct service costs related to the digital network in
additional markets in the U.S., the cost of which are currently not covered by
revenues, and the cost of inventory of customer handsets which are marketed
under a promotion program at an amount less than cost.
Engineering and development costs related to the digital wireless system and
customer handsets decreased $0.8 million for the quarter ended March 31, 1998
due to the reduction in development activities and efforts to contain costs.
24
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
The Company's U.S. Network is in various stages of operations in 11 markets
throughout the United States and, accordingly, continues to put in place its
marketing, engineering, operations and administrative staff and systems. During
the third quarter of 1997, the Company commenced operations in Houston, Phoenix
and San Antonio. Marketing expenses in 1998 compared to 1997 increased by
approximately $3.2 million or 7.2% due to the U.S. Network marketing programs
and an increase in the direct sales force.
The increase in the Company's 1998 general and administrative expenses of $2.6
million or 42% was primarily due to transaction costs associated the sale of the
Company's European Assets.
The Company's equity in losses of less than 50% owned entities in 1998 was
primarily attributable to the results of the Company's Canadian and Korean joint
ventures. As discussed above, the Company's Canadian partners withdrew in the
first quartered 1998 and thus, the Company recognized 100% of the losses inthe
canadian venture as the Company was providing 100% of the funding. The Company's
Korean joint ventures are in the process of establishing a digital network in
Korea. It is expected that these entities will continue to generate substantial
losses in the near future.
Wireless communications activities generated a loss before interest, taxes,
amortization and depreciation of $34.3 million for the three months ended March
31, 1998 compared to $23.4 million in 1997. This increase was primarily due to
costs related to the ongoing roll-out of the digital wireless network in the
U.S. and enhancement of the digital wireless network.
As previously discussed, in December, 1997, the Company entered into two
definitive agreements to sell its analog trunked mobile radio services in the
United Kingdom and Germany for approximately $82 million and DM 7 million,
respectively. These sales were consummated in February 1998. This transaction
resulted in a gain of $58.6 million which was recognized in the first quarter of
1998. Upon the decision to sell Terrafon, the Company reduced the carrying value
of the investment to fair market value at December 31, 1997. The loss, which was
included in Equity in loss of investees at December 31, 1997, was $12.9 million.
Below is a summary of financial data related to NB3 and Terrafon (dollars in
thousands).
January 1, 1998 Three months
through date ended
of sale March 31,1997
-------------- -------------
Net total revenue $ 2,543 $ 7,514
Gross margin 1,683 5,045
66% 67%
General & administrative expense 474 1,127
Sales and marketing 446 1,331
Equity in loss of investees 0 1,119
Income before interest, taxes,
depreciation & amortization 763 1,469
Depreciation & amortization 419 1,576
Income (loss) before interest
and taxes 344 (108)
Net income (loss) $ 290 $ (588)
Discontinued Operations -- Communications Products Activities
On November 26, 1997, the Company discontinued its communication products
segment with the sale of its 64% interest in BCI for $18.5 million in cash. The
capital stock of BCI was pledged to the holders of the Company's Discount Notes.
The Company's debt covenants and amendment thereto place timing restrictions on
the Company's ability to utilize the proceeds for working capital purposes. At
December 31, 1997, the Company had received $18.5 million in proceeds; however,
$9.1 million is reflected in the 1997 consolidated balance sheet under the
caption Restricted Cash. This amount was released based upon the completion of
certain conditions during the first quarter of 1998. This transaction resulted
25
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
in a 1997 gain of approximately $3.8 million.
Liquidity and Capital Resources
The following discussion of liquidity and capital resources, among other things,
compares the Company's financial and cash position as of March 31, 1998 to the
Company's financial and cash position as of December 31, 1997 (See footnote 1 to
the Consolidated Financial Statements).
As described above in Results of Operations - General, the Company is
experiencing severe cash flow problems and needs immediate access to capital to
continue funding its operations. See also Note 1 to Notes to Consolidated
Financial Statements.
The Company has a $100.0 million vendor credit facility, the last $50 million of
which is subject to the satisfaction of certain conditions, with Hughes Network
Systems ("HNS"). The credit facility is for the purchase of infrastructure
equipment for which the Company accepted delivery of $5.0 million during the
three months ended March 31, 1998. At March 31, 1998, $15.4 million of this
facility was utilized.
Additionally, the Company entered into two agreements to sell its interests in
NB3 and Terrafon for approximately $82 million and DM 7 million, respectively.
The Company's ability to utilize the proceeds of the sales is limited in
accordance with the amended Indenture governing the Company's Discount Notes.
Under the Indenture, the Company must repay the pro-rata portion of the accreted
value of the Discount Notes in the aggregate of 20% of the net proceeds. In
addition, 40% of the net proceeds must be used for the purchase of qualifying
capital expenditures. The balance of the net proceeds, 40%, can be used for
general corporate purposes and working capital with funds accessible under
certain time restrictions beginning in February 1998.
These funds can be accessed by the Company in accordance with the terms of the
Indenture governing the Discount Notes, which require the Company to make
certain certifications and requires the holders of the Discount Notes acceptance
as evidenced by the Trustee's approval. Subsequent to March 31, 1998, the
Company withdrew $6.6 million from the restricted cash account, $6.0 million for
working capital and $0.6 million for replacement assets as defined in the
Indenture. The Company has authorized the payment of $16.2 million of the
accreted value of the Company's Discount Notes in accordance with the terms of
the Indenture.
During the three months ended March 31, 1998, cash and cash equivalents
decreased by $1.8 million to $11.6 million while working capital increased by
$18.4 million to $0.3 million.
Operating Activities
Cash utilized in connection with operating activities, for the three months
ended March 31, 1998, amounted to $33.8 million. This included changes in
operating assets and liabilities of $1.7 million. This change was primarily
related to an increase in inventory of $3.8 million and an increase in accounts
payable and accrued expenses of $2.0 million.
The Company's U.S. Network operations extended sales and marketing promotions
under which a dealer will be eligible to purchase equipment at a discount based
on achievement of sales goals. According to the Company's policy in which the
Company does not adjust inventory values for sales promotions, the Company has
neither provided an accrual nor adjusted the $8.4 million carrying value of the
U.S. Network inventory for promotions as of March 31, 1998. The results of
promotions will be recorded commensurate with the sale.
Investing Activities
Cash provided by investing activities was $28.5 million for the three months
ended March 31, 1998. In February 1998, the Company completed the sale of its
European Assets for approximately $87.1 million. In accordance with the
Indenture governing the Company's Discount Notes, the net proceeds are
restricted. During the first quarter of 1998, $33.2 million was released from
the restricted cash account in accordance with the terms of the Indenture
including $9.2 million from the sale of BCI.
In 1997, the Company entered into an agreement to swap certain 900 MHz licenses
for additional 900 MHz licenses. In connection with the agreement, the Company
will receive $9.0 million of which $2.0 million was received in January 1998.
The Company has not recorded a receivable or gain on this transaction at March
31, 1998, the Company anticipates this transaction will be completed during the
later half of 1998.
26
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
The Company expended $13.1 million to acquire equipment during 1998 and
capitalized $1.9 million in interest on construction in progress and
pre-commercial FCC licenses.
In July 1997, the Company entered into a joint venture agreement with two
Canadian partners for the purpose of deploying FHMA Networks in the provinces of
Ontario, Quebec and British Columbia utilizing 900MHz licenses previously
granted to Geotek Communications Canada Inc., a wholly-owned subsidiary of
GeoNet Communications Canada Inc. ("GeoNet Canada") by Industry Canada, the
regulatory agency responsible for spectrum allocation in Canada. The Company
invested $2 million in GeoNet Canada and the two Canadian partners invested $1
million each for a total initial investment of $4 million. Additionally, the
Company deposited $2.3 million in a restricted cash account as collateral for
the Canadian partner's investment. The parties reserved the right to withdraw
from the venture. In the first quarter of 1998, the partners notified the
Company and subsequently withdrew from the joint venture. The investors were
repaid $1.9 million representing their investment from the restricted cash
account. The withdrawal of the Canadian partners resulted in the loss of the
Canadian license although the Company may reapply for licenses at such time that
the Company obtains sufficient financing to pursue the deployment of networks in
Canada.
Financing Activities
In February 1998, the Company completed an exchange offer whereby certain
holders of the Company's Series O Cumulative Convertible Preferred Stock
("Series O Stock") and Series Q Cumulative Convertible Preferred Stock ("Series
Q Stock") exchanged $22.4 million for shares of the Company's Series R Preferred
Stock ("Series R Stock") and Series S Preferred Stock ("Series S Stock"), whose
conversion price is fixed at an amount above the market price of the Company's
Common Stock. The $15.9 million of Series R Stock is convertible at $2.00 per
share and the $6.5 million of Series S Stock is convertible at $4.00 per share
which is adjusted under certain circumstance to $3.00 or at 110% of the market
price. Additionally, the Company lowered the exercise price of 3.0 million of
the Series O Stock and Series Q Stock warrants to $4.00 per share. Under the
exchange, the holders also converted $12.4 million of Series O and Q Stock into
Common Stock at $1.00 per share.
In May 1998, the Company and the holders of its Series Q, Series R and Series S
Stock reached an agreement pursuant to which approximately $13 million value of
the Series Q, R and S Stock will be converted into an aggregate of 16 million
shares of Common Stock, valued at $.80 per share. The 16 million shares of
Common Stock to be issued upon such conversion and exercise are currently
covered by a registration statement that is effective under the Securities Act
of 1933, as amended. The remaining approximately $11 million value of the Series
Q, R and S Stock will be exchanged for shares in the Company's new Preferred
Stock Series T ("Series T Stock"). The Series T Stock will be convertible into
Common Stock valued at a price of $1.25 per share and will not include rights to
exchange or participate in any New Financings as provided in the Series R and S
agreements.
Pursuant to the terms of the Series R and S Exchange Agreement, the holders
would have had the right on May 15, 1998 to make an Election for the Series R
and S preferred to convert into common stock at a discount to market price at
the time of conversion.
During the first three months of 1998, in connection with the receipt of
infrastructure equipment from HNS, the Company drew down $5.0 million on its
$100 million vendor credit facility with HNS. At March 31, 1998, approximately
$15.4 million was drawn down and $84.6 million was available, the last $50
million of which is subject to satisfaction of certain conditions.
The Company paid cash dividends totaling approximately $1.3 million on its
outstanding preferred stocks during the three months ended March 31, 1998.
27
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 4 - Certificate of Designation of Series T
Convertible Preferred Stock of Geotek Communications,
Inc., dated May 15, 1998 (excluding any exhibits and
schedules thereto).
Exhibit 10.1 - Conversion and Exchange Agreement by and
between Geotek Communications, Inc. and certain other
parties, dated May 15, 1998 (excluding any exhibits and
schedules thereto).
Exhibit 10.2 - Registration Rights Agreement by and
between Geotek Communications, Inc. and certain other
parties, dated May 15, 1998 (excluding any exhibits and
schedules thereto).
Exhibit 12 - Computation of Earnings to Fixed Charges
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
The following reports on Form 8-K were filed by the Company in the
first quarter of 1998:
(i) Current Report on Form 8-K filed January 30, 1998,
reporting the Company entered into agreements to
exchange Series O Preferred Stock and Series Q Preferred
Stock with Series R Preferred Stock and Series S
Preferred Stock.
(ii) Current Report on Form 8-K filed February 17, 1998,
announcing the resignation of Robert Kerstein as Chief
Financial Officer and the appoint of Anne Eisele to
Senior Vice President and Chief Financial Officer, Randy
Miller to Vice President and Treasurer, and Valerie
DePiro to Vice President, Chief Accounting Officer and
Corporate Controller.
(iii) Current Report on Form 8-K filed February 19, 1998,
reporting the completion of the sale of Company's
European analog assets.
(iv) Current Report on Form 8-K filed February 26, 1998,
reporting the consummation of the exchange agreements
with the holders of Series O Preferred Stock and Series
Q Preferred Stock into Series R Preferred Stock and
Series S Preferred Stock.
(v) Current Report on Form 8-K filed March 18, 1998,
announcing an offer to purchase up to $16.2 million of
the accreted value of the Company's 15% Senior Secured
Discount Notes due 2005 for a cash value equal to the
accreted value as of May 8, 1998.
28
<PAGE>
GEOTEK COMMUNICATIONS, INC. AND SUBSIDIARIES
Pursuant to the requirements 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.
Date: May 15, 1998 /s/ Anne E. Eisele
---------------------------------
Anne E. Eisele
Senior Vice President and Chief
Financial Officer
/s/ Valerie E. DePiro
---------------------------------
Valerie E. DePiro
Vice President, Chief Accounting
Officer and Corporate Controller
29
CERTIFICATE OF DESIGNATION
of
SERIES T CONVERTIBLE PREFERRED STOCK
of
GEOTEK COMMUNICATIONS, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
Geotek Communications, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Company"), hereby
certifies that the following resolutions were adopted by the Board of Directors
of the Company pursuant to authority of the Board of Directors as required by
Section 151 of the Delaware General Corporation Law:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Company (the "Board of Directors" or the "Board") in
accordance with the provisions of its Restated Certificate of Incorporation, the
Board of Directors hereby creates a series of the Company's previously
authorized Preferred Stock, par value $.01 per share (the "Preferred Stock"),
and hereby states the designation and number of shares, and fixes the relative
rights, preferences, privileges, powers and restrictions thereof as follows:
Series T Convertible Preferred Stock:
1. Definitions. For purposes hereof the following definitions shall apply:
"Approved Underwriter" shall mean Goldman Sachs & Co.; Merrill Lynch
& Co.; Morgan Stanley & Co. Incorporated; Lehman Brothers Inc.; Smith Barney
Inc.; Salomon Brothers Inc.; J.P. Morgan & Co.; PaineWebber Incorporated;
Donaldson, Lufkin & Jenrette; Bear, Stearns & Co., Inc.; First Boston; Lazard
Freres; or any successor to or affiliate of any of them.
"Average Stock Price" shall mean, as to any date, a price equal to
the lowest daily volume-weighted average price of the Common Stock on the
principal securities exchange or interdealer quotation system on which the
Common Stock is traded during the four (4) trading days immediately preceding
such date, as calculated by Bloomberg Financial Markets through its
<PAGE>
"Volume at Price" function (or a comparable reporting service of national
reputation selected by the Corporation and reasonably acceptable to holders of a
majority of the Shares of Preferred Stock then outstanding (the "Majority
Holders") if Bloomberg Financial Markets is not then reporting average prices of
such security) (collectively, "Bloomberg"), or if the foregoing does not apply,
the last reported sale price of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no sale price is reported for such security by Bloomberg, the average of the bid
prices of all market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc. If the Average Stock Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Average Stock Price of such security on such date shall be the fair market value
as reasonably determined by an investment banking firm selected by the
Corporation and reasonably acceptable to the Majority Holders, with the costs of
such appraisal to be borne by the Corporation; provided, however, that no sales
transactions by a converting holder of the Series T Preferred Stock shall be
given effect in calculating such Average Stock Price insofar as it applies to
that holder.
"Board" shall mean the Board of Directors of the Company.
"Closing Date" shall mean the date of original issuance of the
Series T Preferred Stock.
"Common Stock" shall mean the Common Stock, $.01 par value per
share, of the Company.
"Company" shall mean this corporation.
"Conversion and Exchange Agreement" shall mean that certain
Conversion and Exchange Agreement, dated as of May 15, 1998, by and among the
Company and the other signatories thereto.
"Conversion Date Market Price" shall mean, at any Holder Conversion
Date, (i) $1.25 or (ii) if a Holder of Series R Preferred Stock shall make an
Election (as defined below) for the Series T Preferred Stock held by such Holder
only, the Average Stock Price, discounted by 10% (the "Applicable Percentage");
provided that the Applicable Percentage shall be adjusted from time to time, as
provided in the Registration Rights Agreement (as hereinafter defined).
"Conversion Default" shall have the meaning set forth in Paragraph
9(b).
"Conversion Notice" shall have the meaning set forth in Paragraph
6(d).
"Conversion Rate" shall have the meaning set forth in Paragraph
6(c).
"Designated Price" shall mean $50,000 per share, as adjusted
pursuant to the terms hereof, plus all accrued and unpaid dividends.
2
<PAGE>
"Dividend Stock Price" shall mean, as to any date, the average of
the Market Price for Shares of Common Stock for the thirty (30) consecutive
trading days commencing forty-five (45) trading days prior to the applicable
date.
"Election" shall have the meaning set forth in Paragraph 7(g)
hereof.
"Holder Conversion Date" shall have the meaning set forth in
Paragraph 6(d).
"Junior Stock" shall mean the Common Stock and, unless the holders
of Preferred Stock otherwise consent pursuant to Paragraph 5 hereof, all other
shares of any other class or series of the Company's capital stock hereafter
issued, other than (a) the Series T Preferred Stock, (b) Preferred Stock ranking
pari passu to the Series T Preferred Stock (including, without limitation, the
Company's Series O Convertible Preferred Stock, Series P Convertible Preferred
Stock, Series Q Stock, Series R Stock and Series S Convertible Preferred Stock)
as permitted below or (c) Preferred Stock ranking senior to the Series T
Preferred Stock and authorized by the holders of the Series T Preferred Stock in
accordance with Section 5 hereof; provided, however, the Company may from time
to time, without the consent of the holders of the outstanding shares of the
Series T Preferred Stock, authorize, create or issue additional series of
Preferred Stock which rank pari passu to or do not have preference over the
Series T Preferred Stock in respect of dividends, redemption or distribution
upon liquidation.
"Market Price for Shares of Common Stock" shall mean the price of
one share of Common Stock determined as follows:
(i) If the Common Stock is listed on the Nasdaq National Market, the
daily closing price on the date of valuation;
(ii) If the Common Stock is listed on a national securities
exchange, the daily closing price on the date of valuation;
(iii) If neither (i) nor (ii) apply, but the Common Stock is quoted
on the Nasdaq Small Capital Market or the over-the-counter market on the pink
sheets or bulletin board, the daily closing price thereof on the date of
valuation; and
(iv) If neither clause (i), (ii) or (iii) above applies, the market
value as determined by a nationally recognized investment banking firm or other
nationally recognized financial advisor retained by the Company for such purpose
and reasonably acceptable to the holders of Series T Preferred Stock, taking
into consideration, among other factors, the earnings history, book value and
prospects for the Company, and the prices at which shares of Common Stock
recently have been traded. Such determination shall be conclusive and binding on
all persons.
"Original Issuance Market Price" shall mean an amount equal to the
Market Price for Shares of Common Stock on the Closing Date.
3
<PAGE>
"Preferred Stock" shall mean the authorized shares of all series of
the preferred stock of the Company.
"Redemption Price" shall have the meaning set forth in Section
14(d).
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement, dated as of May 15, 1998, by and among the Company and the
other signatories thereto.
"Series T Preferred Stock" shall mean the Series T Convertible
Preferred Stock of the Company, $.01 par value per share.
"Trigger Price" shall mean $1.25 per share, as adjusted after the
original issuance date of the Series T Preferred Stock upon any stock split,
stock dividend, split up, recapitalization or other reorganization with respect
to the Common Stock.
"Underlying Stock" shall mean those shares of the Company's Common
Stock issuable upon (i) conversion of the Series T Preferred Stock and (ii)
exercise of any Warrants.
"Warrants" shall mean warrants issued by the Company in connection
with the issuance and redemption of the Series T Preferred Stock.
2. Designation and Number. The designation of the shares of Preferred
Stock authorized by these resolutions shall be "Series T Convertible Preferred
Stock" (the "Series T Preferred Stock"). The authorized number of shares
constituting the Series T Preferred Stock shall be Three Hundred (300) shares
and each share of Series T Preferred Stock shall rank equally in all respects.
3. Dividends. The Series T Preferred Stock shall accrue dividends at a
rate of ten percent (10%) per annum on the Designated Price. Dividends on the
Series T Preferred Stock shall accumulate and accrue from the date of its
original issue and shall accrue from day to day thereafter, whether or not
earned or declared. Dividends shall be payable, quarterly, in that number of
shares of Common Stock purchasable by the dollar amount of the dividend
described above, at the Dividend Stock Price as of the date such dividend is
paid. Dividends on the Series T Preferred Stock for any quarterly period shall
be declared by the Company and paid on the fifteenth (15th) day following the
end of such quarter. If the Company is prohibited from paying any dividends, or
otherwise fails to pay such dividends, for any quarterly period, the dividends
shall be deemed to have accrued on such Series T Preferred Stock, and shall be
capitalized to the Series T Preferred Stock as of the last day of the quarterly
period, as if the dividend rate had been 12% per annum for such quarterly
period, and the Designated Price for each share of Series T Preferred Stock
shall be deemed to have been increased by the amount of such capitalized
dividends. For as long as any Series T Preferred Stock is outstanding, the
Company shall pay no dividends on Junior Stock, other than in shares of Junior
Stock, without having first obtained the consent of the holder or holders of a
majority of the Series T Preferred Stock then outstanding.
4
<PAGE>
4. Liquidation Rights of Series T Preferred Stock. In the event of any
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, the holders of the Series T Preferred Stock then outstanding shall
be entitled to be paid out of the assets of the Company available for
distribution to its stockholders, whether such assets are capital, surplus, or
earnings, before any payment or declaration and setting apart for payment of any
amount shall be made in respect of any Junior Stock, an amount equal to the
Designated Price; provided, however, that upon the occurrence of any of the
events described in (i), (ii) and (iii) below, the holders of the Series T
Preferred Stock shall be entitled to an amount equal to the Redemption Price and
not to the Designated Price. If upon any liquidation, dissolution, or winding up
of the Company, whether voluntary or involuntary, the assets to be distributed
to the holders of the Series T Preferred Stock shall be insufficient to permit
the payment to such stockholders of the full preferential amounts aforesaid,
then all of the assets of the Company to be distributed shall be distributed
ratably to the holders of the Series T Preferred Stock and to any holders of any
series of Preferred Stock that ranks pari passu with the Series T Preferred
Stock, on the basis of the liquidation value of the shares of Preferred Stock
held. The Company shall promptly mail written notice of such liquidation,
dissolution or winding up (with a copy sent by facsimile), but in any event such
notice shall be given at least thirty (30) days prior to the effective date
stated therein, but in any event not prior to the public announcement thereof,
to each record holder of the Series T Preferred Stock. If the Company determines
to effect a liquidation, dissolution or winding up of the Company, then,
notwithstanding the limitations set forth in Paragraph 13 hereof, the Series T
Preferred Stock shall thereupon, at the option of a holder thereof, be
convertible in full, if so permitted by applicable law and if not otherwise in
violation of an agreement to which the Company is a party or of the Company's
Certificate of Incorporation or By-Laws. For purposes of this paragraph, (i) a
sale or other disposition of all or substantially all of the assets of the
Company, (ii) a consolidation or merger of the Company with or into any other
corporation or other entity or person (whether or not the Company is the
surviving corporation, but other than a merger or consolidation whereby the
stockholders of the Company immediately preceding the merger or consolidation
continue to own greater than fifty percent (50%) of the voting securities of the
entity surviving such merger or consolidation), (iii) any person or any "group"
(as such term is used in such Section 13(d) of the Securities Exchange Act of
1934, as amended) becomes the beneficial owner of in excess of fifty percent
(50%) of the voting power of the Company's (or any successor entity's) capital
stock (each of (i) through (iii), a "Disposition Transaction"), shall, at the
option of each holder of Series T Preferred Stock, be deemed to be a
liquidation, dissolution or winding up of the Company with respect to the shares
of Series T Preferred Stock held by such holder.
5. Voting Rights. The holders of the Series T Preferred Stock will not
have any voting rights except as set forth below or as otherwise from time to
time required by law.
The affirmative approval (by vote or written consent as permitted by
applicable law) of the holders of at least 66 2/3% of the outstanding shares of
the Series T Preferred Stock, voting separately as a class, will be required for
(i) any amendment, alteration or repeal of the Company's Certificate of
Incorporation (including any Certificate of Designation, Rights and Preferences
for any other series of Preferred Stock) if the amendment, alteration or repeal
adversely affects the powers,
5
<PAGE>
preferences or rights of the Series T Preferred Stock (including, without
limitation, by creating any class or series of equity securities having a
preference over the Series T Preferred Stock with respect to dividends,
redemption, distribution upon liquidation or in any other respect); or (ii) any
amendment to or waiver of the terms of the Series T Preferred Stock or this
Certificate of Designation, provided, however, that no such approval shall be
required for the authorization, creation or issuance of any shares of any
additional series of Preferred Stock ranking pari passu to or which do not have
any preference over the Series T Preferred Stock in respect of dividends,
redemption or distribution upon liquidation. No approval of the holders of
Series T Preferred Stock shall be required for the Company to effect a
Disposition Transaction.
To the extent that under applicable law the approval of the holders of the
Series T Preferred Stock, voting separately as a class is required to authorize
a given action of the Company, the affirmative approval (by vote or written
consent as permitted by applicable law) of the holders of a majority of the
outstanding shares of the Series T Preferred Stock shall constitute the approval
of such action by the class. To the extent that under applicable law the holders
of the Series T Preferred Stock are entitled to vote on a matter with holders of
the Common Stock, voting together as one class, each share of Series T Preferred
Stock shall be entitled to that number of votes as shall be equal to the number
of shares of Underlying Stock into which such shares could have been converted
on the record date for any meeting of stockholders or on the date of any written
consent of stockholders, as applicable. Holders of the Series T Preferred Stock
shall be entitled to notice of all shareholder meetings or written consents
(whether or not they are entitled to vote thereat), which notice will be
provided pursuant to the Company's by-laws and applicable statutes.
6. Conversion. The holders of Series T Preferred Stock shall have the
following conversion rights.
(a) Holder's Right to Convert. Subject to the restrictions set forth
in Paragraphs 13 and 14(e) of this Certificate, each share of Series T Preferred
Stock shall be convertible in whole or in part and from time to time, at the
option of the holder thereof, into fully paid and nonassessable shares of Common
Stock.
(b) Mandatory Conversion. Subject to the provisions of Paragraph
13(d) hereof, on the fifth anniversary of its issuance (the "Mandatory
Conversion Date"), each and every share of Series T Preferred Stock shall be
converted into the number of fully paid and nonassessable shares of Common Stock
which may be purchased at the Conversion Date Market Price by dividing an amount
equal to the Designated Price by such price without any action required to be
taken by the holder thereof, and a Conversion Notice shall be deemed to be given
by the holder of each share of Series T Preferred Stock on that date; provided,
however, that no such mandatory conversion shall occur if, as of the Mandatory
Conversion Date, the Company is (i) insolvent, (ii) in bankruptcy proceedings or
(iii) in material breach of any of the terms of this Certificate or of the
Conversion and Exchange Agreement or the Registration Rights Agreement.
(c) Conversion Price for Holder of Converted Shares. Each share of
the Series
6
<PAGE>
T Preferred Stock that is converted into shares of Common Stock shall be
convertible into the number of shares of Common Stock which may be purchased by
the Designated Price of such share of Series T Preferred Stock at the Conversion
Date Market Price. The number of shares of Common Stock into which each share of
Series T Preferred Stock may be converted pursuant to this paragraph is
hereafter referred to as the "Conversion Rate."
(d) Mechanics of Conversion. Unless conversion is mandatory in
accordance with Paragraph 6(b) hereof, in order to convert any or all shares of
Series T Preferred Stock into full shares of Common Stock, the holder shall
surrender the certificate or certificates therefor, duly endorsed, by either
overnight courier or two-day courier, to the principal office of the Company or
of any transfer agent for the Series T Preferred Stock, and shall give written
notice (the "Conversion Notice"), and, if an Election has been made by such
holder, such notice shall include the holder's summary of its trades on the
relevant date utilized to determine the Average Stock Price with respect to such
conversion, its calculation of the Conversion Rate and the number of shares of
Common Stock issuable upon such conversion, by facsimile (with the original of
such notice forwarded with the foregoing courier) to the Company at such office,
that he elects to convert the number of shares specified therein, which such
notice and election shall be irrevocable by the holder; provided, however, that
the Company shall not be obligated to issue certificates evidencing the shares
of the Common Stock issuable upon such conversion unless either the certificates
evidencing the shares of Series T Preferred Stock are delivered to the Company
or its transfer agent as provided above, or the holder notifies the Company that
such certificates have been lost, stolen or destroyed and promptly executes an
agreement reasonably satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such certificates.
Immediately upon receipt of the Conversion Notice the Company shall
verify the holder's calculation of the Conversion Rate as calculated by the
holder or, if the Company disagrees with the holder's calculation of the
Conversion Rate, deliver by facsimile the Company's calculation of the
Conversion Rate. The Company shall use its best efforts to issue and deliver as
soon as possible, and in any event within two (2) business days after delivery
to the Company of certificates of the Series T Preferred Stock to be converted
or after receipt of such agreement and indemnification, to such holder of Series
T Preferred Stock at the address of the holder on the stock books of the
Company, or to its designee, a certificate or certificates for the number of
shares of Common Stock to which he shall be entitled as aforesaid, together with
a certificate or certificates for the number of Series T Preferred Stock not
submitted for conversion. The date on which the Conversion Notice is given (the
"Holder Conversion Date") shall be deemed to be the date the Company received by
facsimile the Conversion Notice, provided that the original shares of Series T
Preferred Stock to be converted, or the aforesaid notice of lost, stolen or
destroyed certificates, are received by the Company or any transfer agent for
the Series T Preferred Stock within five (5) business days thereafter, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date. If the aforesaid notice of
lost, stolen or destroyed certificates is not received by the Company or any
transfer agent for the Series T Preferred Stock within five (5) business days
after the Holder Conversion Date, the Conversion Notice shall become null and
void.
7
<PAGE>
In lieu of delivering physical certificates representing the Common Stock
issuable upon conversion, provided the Company's transfer agent is participating
in the Depository Trust Company ("DTC") Fast Automated Securities Transfer
program, upon request of the Subscriber and so long as the certificates therefor
do not bear a legend and the holder thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Subscriber by crediting the account of
Holder's prime broker or nominee with DTC through its Deposit Withdrawal Agent
Commission ("DWAC") system.
(e) Issue and Franchise Taxes.The Company shall be, and the holders
of Series T Preferred Stock shall not be, liable for any and all issue and
franchise taxes payable in respect of issuance and delivery of Common Stock as
contemplated by this Certificate.
7. Adjustments; Reorganizations.
(a) Intentionally Omitted
(b) Adjustment for Stock Splits and Combinations; Adjustment for
Certain Dividends and Distributions; If the Company at any time or from time to
time after the Closing Date, during the period running from a Holder Conversion
Date up to and including the day on which the conversion has been effected,
effects a subdivision or combination of the outstanding Common Stock, the shares
of Common Stock issuable upon the conversion and the Conversion Date Market
Price in effect shall be proportionately adjusted to reflect the split or
reverse split, as the case may be. Any adjustment under this Paragraph 7(b)
shall become effective at the close of business on the date the subdivision or
combination becomes effective.
(c) Intentionally Omitted
(d) Adjustment for Reclassification, Exchange and Substitution. In
the event that at any time or from the time to time after the Closing Date, the
Common Stock issuable upon the conversion of the Series T Preferred Stock is
changed into the same or a different number of shares of any class or classes of
stock, whether by recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend or reorganization
provided for elsewhere in this Paragraph 7), then and in each such event each
holder of Series T Preferred Stock shall have the right thereafter to convert
such stock into the kind of stock receivable upon such recapitalization,
reclassification or other change by holders of shares of Common Stock, all
subject to further adjustment as provided herein. In such event, it shall be a
condition precedent to any such transactions that the formula set forth herein
for conversion shall be equitably adjusted in a manner reasonably acceptable to
the holders of Series T Preferred Stock to reflect such change in number of
shares or, if shares of a new class of stock are issued to reflect the market
price of the class of classes of stock (applying the same factors used in
determining the Market Price for Shares of Common Stock) issued in connection
with the above described transaction.
(e) Reorganization. If at any time or from time to time after the
Closing Date there is a capital reorganization of the Common Stock (other than a
recapitalization, subdivision, combination, reclassification, or exchange of
shares provided for elsewhere in this Paragraph 7), then as a part of such
reorganization, provision shall be made so that the holders of the Series T
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Series T Preferred Stock the number of shares of stock or other securities or
property to which a holder of the number of shares of common stock deliverable
upon conversion would have been entitled on such capital reorganization. In any
such case, it shall be a condition precedent to any such transactions that
appropriate adjustment be made in the application of the provisions of this
Paragraph 7 with respect to the rights of the holders of the Series T Preferred
Stock after the reorganization to the end that the provisions of this Paragraph
7 (including adjustment of the number of shares issuable upon conversion of the
Series T Preferred stock) shall be applicable after that event and be as nearly
equivalent as may be practicable, including, by way of illustration and not
limitation, by equitably adjusting in a manner reasonably acceptable to the
holders of the Series T Preferred Stock the formula set forth herein for
conversion to reflect the market price of the securities or property (applying
the same factors used in determining the Market Price for Shares of Common
Stock) issued in connection with the above described transaction.
(f) Election. If the Company (i) on or prior to July 14, 1998,
institutes bankruptcy, insolvency, reorganization or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the relief
for debtors, or (ii) fails to file the Form 8-K or Form 10-Q (each as defined in
the Conversion and Exchange Agreement) in the time period provided for in
Section 4.4 of the Conversion and Exchange Agreement, each holder of Series T
Stock shall have the right, exercisable for thirty days after the happening of
such event, by providing the Company with written notice to make an election
(the "Election").
8. Fractional Shares. No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issuable hereunder. The
number of shares of Common Stock that are issuable upon any conversion shall be
rounded up or down to the nearest whole share.
8
<PAGE>
9. Reservation of Stock Issuable Upon Conversion.
(a) Reservation Requirement. The holder hereof acknowledges that the
Company does not, as of the date of issuance hereof, have authorized but
unissued and unreserved shares of Common Stock necessary to effectuate the
conversion hereof. Accordingly, the Company will use commercially reasonable
efforts to, as promptly as practicable, submit to the Company's shareholders a
proposal to increase the number of authorized and unissued shares of Common
Stock and/or take such other as is necessary in order that, following any
approval thereof, the Company has a sufficient number of authorized and unissued
shares of Common Stock in order that the Company may effect a conversion of the
Series T Stock. Thereafter, at all times while any shares of Series T Preferred
Stock are outstanding, the Company shall reserve and keep available, free of
preemptive rights, and subject to such legal limits and rules of exchanges on
which the Common Stock may be traded, no less than one hundred five percent
(105%) and, after an Election is made, no less than two hundred percent (200%)
with respect to the shares of Preferred Stock for which an Election has been
made, of that number of shares of Common Stock for which such outstanding shares
of Series T Preferred Stock are then convertible, as equitably adjusted pursuant
to any stock splits, split ups, recapitalization or reorganization of shares of
Common Stock.
(b) Default; Cure. If the Company does not have a sufficient number
of shares of Common Stock authorized, reserved or otherwise available to satisfy
the Company's obligations to a holder of Series T Preferred Stock, after the
date on which the Company's stockholders approve the matters set forth in the
second sentence of Article 9(a), if so approved, upon receipt of a Conversion
Notice and/or holders of Warrants upon exercise thereof, or if the Company is
otherwise prohibited by applicable law or by the rules or regulations of any
stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or its securities from issuing
all of the Common Stock which is to be issued upon receipt of a Conversion
Notice (each, a "Conversion Default"), each holder of the Series T Preferred
Stock shall have the right to require the Company, if the Company is so
permitted by applicable law and if not otherwise in violation of any agreement
to which the Company is a party as of the date hereof or of the Company's
Certificate of Incorporation or By-Laws, to redeem such holder's pro rata
portion of the Series T Preferred Stock which the Company is then able to
redeem, and to implement the cure procedures set forth in Paragraph 15(c)
hereof.
10. No Reissuance of Series T Preferred Stock. No share or shares of
Series T Preferred Stock acquired by the Company by reason of redemption,
purchase, conversion or otherwise shall be reissued as Series T Preferred Stock,
and all such shares shall be retired and shall return to the status of
authorized, unissued and retired and undesignated shares of Preferred Stock. No
shares of Series T Preferred Stock shall be authorized or issued after the date
of the initial issuance of shares of Series T Preferred Stock pursuant to the
Conversion and Exchange Agreement without the consent of at least 66 2/3% in
interest of the holders of Series T Preferred Stock outstanding immediately
prior thereto.
11. No Impairment. The Company shall not intentionally take any action
which would
9
<PAGE>
impair the rights and privileges of the shares of Series T Preferred Stock set
forth herein.
12. Holder's Rights if Shares are Delisted or if Trading in Common Stock
is Suspended. In the event that at any time on or after the date the Company
receives Stockholder Approval, if so received, and prior to the fifth
anniversary of the Closing Date, trading in the shares of the Company's Common
Stock is suspended on the principal market or exchange for such shares (which
market or exchange shall be either the Nasdaq National Market, the Nasdaq
SmallCap Market. the American Stock Exchange or the New York Stock Exchange),
for a period of ten (10) consecutive trading days, other than as a result of the
suspension of trading in securities in general, or if such shares are delisted,
then, at the holder's option, the Company, if so permitted by applicable law and
if not otherwise in violation of an agreement to which the Company is a party or
of the Company's Certificate of Incorporation or By-Laws, shall redeem such
holder's shares of Series T Preferred Stock at the Redemption Price determined
as set forth in Paragraph 14(b) hereof.
13. Limitations on Holder's Right to Convert.
(a) Minimum Conversion. Holders of Series T Preferred Stock may in
no event convert less than one (1) share of Preferred Stock pursuant to a single
Conversion Notice; provided, however, that during a Conversion Restriction
Period no such minimum shall apply; provided, however, a Holder shall be
permitted to convert a fraction of a share of Series T Preferred Stock if such
Holder converts at least one share of Series T Preferred Stock.
(b) Stockholder Approval. Notwithstanding anything to the contrary
contained herein, holders of Series T Preferred Stock may not convert Series T
Preferred Stock into shares of Common Stock until after that date on which the
Company's shareholders approve, by the requisite number of votes, a proposal to
increase the number of authorized and unissued shares of Common Stock and/or
take such other action as is necessary in order that, following any approval
thereof, the Company has a sufficient number of authorized and unissued shares
of Common Stock in order that the Company may effect a conversion of the Series
T Stock
(c) Market Stand-Off. Each holder of Series T Preferred Stock, if so
requested by the Company in connection with a firmly underwritten public
offering of Common Stock managed by an Approved Underwriter pursuant to an
effective registration statement, shall not convert any Series T Preferred Stock
for sixty (60) days commencing upon the date specified by the Company (the
"Stand-Off Period"), which shall not be earlier than the date the registration
statement is filed, but in no event sooner than five (5) trading days after such
holder's receipt of the Company's request; provided, however, that:
(i) the Company may only request, and the holders of Series T
Preferred Stock shall only be subject to, one (1) Stand-Off Period during the
twenty-four (24) month period immediately following the Closing Date and one (1)
Stand-Off Period thereafter (provided that, if the Stand-Off Period terminates
pursuant to clause (ii) below on any one occasion with respect to the
twenty-four (24) month period referred to above or on any separate occasion with
respect to the
10
<PAGE>
remaining period thereafter, the Company may request and the holders will be
subject to a Stand-Off Period on one additional occasion during such period);
provided, however, the Company and the Approved Underwriter must reasonably
believe that such public offering is likely to provide the Company with and the
preliminary prospects relating to such public offering must show gross proceeds
of not less than $50,000,000 (the "Offering Size Condition"); provided, further,
however, that the Offering Size Condition shall not apply to a holder who makes
an Election;
(ii) the Market Stand-Off shall immediately terminate if the
registration statement for the underwritten public offering is not declared
effective on or before the forty-fifth (45th) business day after the Company's
requested commencement date of the Stand-Off Period; and
(iii) the Mandatory Conversion Date shall be automatically
extended by the aggregate number of days for which the restrictions imposed by
the Stand-Off Period shall be effective.
(d) Notwithstanding anything to the contrary contained herein, each
Conversion Notice shall contain a representation that, after giving effect to
the shares of the Company's Common Stock to be issued pursuant to such
Conversion Notice, the total number of shares of the Company's Common Stock
deemed beneficially owned by the holder thereof, together with all shares of the
Company's Common Stock deemed beneficially owned by such holder's "affiliates"
as defined in Rule 144 promulgated under the Securities Act of 1933, as amended,
(exclusive of shares issuable upon conversion of the unconverted portion of the
Shares of Series T Preferred Stock or the unexercised or unconverted portion of
any other securities of the Company subject to a limitation on conversion or
exercise analogous to the limitations contained herein) will not result in
beneficial ownership by the holder and its affiliates of more than 4.9% of the
outstanding shares of Common Stock. For purposes of this subparagraph,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13 D-G thereunder,
except as otherwise provided above. Any Conversion Notice which does not contain
such a representation shall be ineffective. The restriction contained in this
Section 13(d) may be waived by each holder, with respect to such holder only,
upon sixty-one (61) days advanced written notice to the Company.
14. Intentionally Omitted.
15. Mechanics of Redemption.
(a) Upon any redemption of Series T Preferred Stock, written notice
shall be given to the Company or the holders of the Series T Preferred Stock, as
applicable, for shares to be purchased or redeemed at least twenty (20) business
days prior to the date fixed for redemption. The notice shall be addressed to
the Company if applicable, or to each such holder at the address of such holder
appearing on the books of the Company, or given by such holder to the Company
for the purpose of notice, or, if no such address appears or is so given, at the
last known address of such holder. Such notice shall specify the date fixed for
redemption, shall state that shares of Series T
11
<PAGE>
Preferred Stock outstanding are to be redeemed and the number of shares of
Series T Preferred Stock to be so redeemed, and shall call upon the holder to
surrender on said date, at the place designated in the notice, the certificate
or certificates representing the shares to be redeemed (in the case of
redemptions pursuant to Section 14(d) hereof) on the date fixed for redemption
stated in such notice. The Company shall only deliver notice of a redemption to
the holders of Series T Preferred Stock if the Company, acting in good faith,
reasonably believes that it will have an amount of funds equal to the aggregate
Redemption Price payable in connection with such a redemption available for the
payment of such aggregate Redemption Price on the date fixed for such
redemption. Unless such person shall elect to convert some or all of the same
into Common Stock in accordance with Section 6 hereof, each holder of shares of
Series T Preferred Stock called for such redemption shall surrender the
certificate or certificates evidencing such shares at the place designated in
such notice and shall thereupon be entitled to receive payment of the Redemption
Price on the date fixed for redemption with respect to all unconverted shares.
(b) If, on or prior to any date fixed for redemption, the Company
deposits, with any bank or trust company in the State of New Jersey or in the
State of New York, as a trust fund, a sum (and duly executed warrants)
sufficient to redeem all shares of Series T Preferred Stock called for
redemption which have not theretofore been surrendered for conversion, with
irrevocable instructions and authority to the bank or trust company to pay and
deliver, on or after the date fixed for redemption, the Redemption Price of the
shares to their respective holders upon the surrender of their share
certificates, then from and after the date of redemption the shares to be
redeemed shall be redeemed and dividends and other distributions on those shares
shall cease to accrue after the date such shares were called for redemption. The
deposit shall constitute full payment for the shares of Series T Preferred Stock
to their holders and from and after the date of the deposit the shares of Series
T Preferred Stock shall no longer be outstanding, and the holders thereof shall
cease to be shareholders with respect to such shares, and shall have no rights
with respect thereto except the right to receive from the bank or trust company
payment of the Redemption Price of the shares without interest upon surrender of
their certificates therefor and the right to receive from the Company any
accrued dividends thereon through the date such shares were called for
redemption. Any interest accrued on any fund so deposited shall be the property
of, and paid to, the Company.
(c) The Company may cure the Conversion Default by either (i)
promptly, and in no event later than ten (10) business days after the Conversion
Default occurs, obtaining those consents of shareholders, note holders and
others, if any, as shall be required in order to effect the balance of the
conversion or redemption, as the case may be; or (ii) redeem not later than
twenty (20) business days after the Conversion Default, the excess shares of
Series T Preferred Stock and/or Warrants by paying the holders (A) cash per
share in an amount equal to one hundred ten percent (110%) of the Market Price
for Shares of Common Stock as of the Holder Conversion Date, on an as converted
basis and (B) Warrants in substantially the form attached hereto as Exhibit A,
for the purchase of an aggregate of 2,500 shares of Common Stock for each share
of Series T Preferred Stock redeemed (subject to adjustment for any stock
splits, split ups, stock dividends, recapitalization or other reorganizations
occurring after the Closing Date in accordance with the mechanisms set forth in
Section 5 (a), (b), (d) or (e) of the form of Warrant attached hereto as
12
<PAGE>
Exhibit A) at an exercise price per share equal to 130% of the Market Price for
shares of Common Stock as of the date of redemption; or (iii) the Company may,
not later than twenty (20) business days after the Conversion Default, issue to
the relevant holders of excess shares of Series T Preferred Stock and/or
Warrants such other securities of the Company, in exchange therefor, in such
quantities, at such prices and subject to such terms and conditions as may be
necessary in order to generate a value per share, in respect of the excess
shares of Series T Preferred Stock and/or Warrants, as the case may be, before
taxes equal to (A) one hundred ten percent (110%) of the Market Price for Shares
of Common Stock as of the Holder Conversion Date, on an as converted basis and
(B) Warrants in substantially the form attached hereto as Exhibit A, for the
purchase of an aggregate of 2,500 shares of Common Stock for each share of
Series T Preferred Stock redeemed (subject to adjustment for any stock splits,
split ups, stock dividends, recapitalization or other reorganizations occurring
after the Closing Date in accordance with the mechanisms set forth in Section 5
(a), (b), (d) or (e) of the form of Warrant attached hereto as Exhibit A) at an
exercise price per share equal to 130% of the Market Price for shares of Common
Stock as of the date of redemption. That value shall be established by taking
the average of the valuations of those securities provided by three of the
Approved Underwriters, one of whom shall have been selected by the relevant
holder, one of whom shall have been selected by the Company and the third of
whom will be selected by the first two Approved Underwriters.
(d) Upon any redemption of Series T Preferred Stock in accordance
with the foregoing, all of such shares of Series T Preferred Stock shall be
canceled and shall revert to the status of authorized and unissued shares of
Preferred Stock.
16. Transfer Restrictions. Shares of Series T Preferred Stock may not be
sold or otherwise transferred to a competitor of the Company engaged in, or to
the knowledge of the holder thereof, planning to engage in the business of
providing wireless voice or data communications services to mobile customers or
of providing equipment in connection therewith.
17. Withholding Taxes. Notwithstanding anything herein, the Company may
condition the making of any distribution (as such term is defined under
applicable tax law) in respect of any share of Series T Preferred Stock on the
holder of such share of Series T Preferred Stock depositing with the Company an
amount of cash sufficient to enable the Company to satisfy its withholding tax
obligations (the "Withholding Tax") with respect to such distribution. For the
avoidance of doubt, the Company shall not be required to redeem any Series T
Preferred Stock, and no dividends shall be capitalized as part of the Designated
Price of any share of Series T Preferred Stock, as a result of the Company's
failure to make a distribution because of a holder's failure to deliver the
proper Withholding Tax with respect to any distribution.
18. Consent for Distributions and Redemptions. For so long as the
Subscribers and their Permitted Assignees (as such terms are defined in that
certain Subscription Agreement dated as of June 14, 1996 by and among the
Company, Renaissance Fund LDC ("Renaissance") and the other signatories thereto)
own shares of the Company's Series N Cumulative Convertible Preferred Stock (the
"Series N Preferred Stock") having an aggregate stated value of at least
$25,000,000, the
13
<PAGE>
Company must obtain Renaissance's consent prior to the declaration or payment of
any dividend on the Series T Preferred Stock, or any redemption of Series T
Preferred Stock for, cash or securities of the Company which rank senior to or
on parity with the Series N Preferred Stock. Notwithstanding anything in this
Certificate to the contrary, the Company shall not redeem any Series T Preferred
Stock for cash upon the occurrence of a Disposition Transaction, a Conversion
Default or the occurrence of an event described in Section 12 of this
Certificate prior to any required purchase or payment of the Company's 15%
Senior Secured Discount Notes due 2005 (the "1995 Notes") pursuant to Section
4.11 or Article Six of the Indenture dated as of June 30 1995 governing such
1995 Notes.
IN WITNESS WHEREOF the undersigned have executed this Certificate of
Designation of Preferences at the City of Montvale, State of New Jersey, on this
15th day of May, 1998.
/s/ Anne E. Eisele /s/ Robert Vecsler
- --------------------- ---------------------------
Chief Financial Officer Secretary
The undersigned declare under the penalty of perjury that the matters set
forth in the foregoing Certificate are true of their own knowledge. Executed at
Montvale, New Jersey, on the 15th day of May, 1998.
/s/ Anne E. Eisele /s/ Robert Vecsler
- ---------------------- ---------------------------
Chief Financial Officer Secretary
CONVERSION AND EXCHANGE AGREEMENT
This Conversion and Exchange Agreement (the "Agreement"), dated as of May 15,
1998, has been executed by each of the undersigned investors whose name and
signature appear on the signature page hereof (each individually, an "Investor"
and collectively, the "Investors").
BACKGROUND
A. As of the date hereof, each of the Investors owns the number of shares
of Series Q Convertible Preferred Stock, $.01 par value per share (the "Series Q
Stock") of Geotek Communications, Inc., a Delaware corporation (the "Company"),
Series R Convertible Preferred Stock, $.01 par value per share (the "Series R
Stock") of the Company and Series S Convertible Preferred Stock, $.01 par value
per share (the "Series S Stock") of the Company as is set forth opposite such
Investor's name on Exhibit A hereto.
B. The Company has agreed and each of the Investors, severally and not
jointly, has agreed that each Investor will (i) convert shares of Series Q
Stock, Series R Stock and/or Series S Stock which they own into shares of Common
Stock, $.01 par value per share, of the Company ("Common Stock") and/or (ii)
exchange shares of Series Q Stock, Series R Stock and/or Series S Stock for
shares of a newly created series of preferred stock of the Company designated
"Series T Preferred Stock" (the "Series T Stock" or the "Preferred Stock") all
in the amounts set forth in Exhibit A hereto and on the terms and conditions set
forth herein. The rights and preferences of the Series T Stock, including the
terms on which the Series T Stock may be converted into Common Stock, are set
forth in the Certificate of Designation attached hereto as Exhibit B (the
"Series T Certificate of Designation"), which shall have been executed,
acknowledged, filed, recorded and become effective in accordance with the
General Corporation Law of the State of Delaware prior to the Closing (as
defined below).
C. The solicitation of this Agreement and, if accepted by the Company, the
issuance of Preferred Stock is being made in reliance upon the provisions of
Regulation D ("Regulation D") promulgated by the Securities and Exchange
Commission ("SEC") under the United States Securities Act of 1933, as amended
(the "Securities Act"), or under the provisions of Section 4(2) of the
Securities Act. The Preferred Stock and the Common Stock issuable upon
conversion or exercise thereof are sometimes collectively referred to in this
Agreement as the "Securities." The Common Stock issuable upon conversion of the
Preferred Stock is sometimes referred to as the "Underlying Stock."
-1-
<PAGE>
In consideration of the mutual promises, representations, warranties and
conditions set forth herein, and intending to be legally bound hereby, the
Company and the Investors agree as follows:
1. Agreement; the Investors
1.1 Agreement. Each Investor, severally and not jointly, hereby agrees that at
the Closing (as defined below) it will (i) convert shares of Series Q
Stock, Series R Stock and/or Series S Stock which they own into shares of
Common Stock and (ii) exchange shares of Series Q Stock, Series R Stock
and/or Series S Stock for shares of Series T Stock, at a rate of one share
of Series T Stock for each one share of Series Q Stock, Series R Stock or
Series S Stock; all in the amounts set forth in Exhibit A hereto and on
the terms and conditions set forth herein. The closing of the transactions
contemplated hereby (the "Closing") shall occur on May 15, 1998 or such
other date as the Company and the Investors shall agree (the "Closing
Date") and shall occur when all of the conditions to the Company's and the
Investors' obligations under Sections 1.3 and 1.4, respectively, have been
satisfied or waived by the appropriate party.
1.2 Nature of the Investor. Each Investor is obtaining the Preferred Stock for
its own account and each Investor severally represents and warrants that
it is an "Accredited Investor" as that term is defined in Rule 501 of
Regulation D.
1.3 Conditions Precedent to the Obligation of the Company to Issue the
Preferred Stock. The obligation hereunder of the Company to issue the
Preferred Stock to each Investor and otherwise to consummate the
transactions contemplated hereby is subject to the satisfaction, at or
before the Closing, of each of the conditions set forth below. These
conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion by delivering prior written
notice of any such waiver to each Investor.
(a) Accuracy of the Investor's Representations and Warranties. The
representations and warranties of such Investor shall be true and
correct as of the date when made and as of the Closing Date as
though made at each such time.
(b) Performance by the Investor. Such Investor shall have performed,
satisfied and complied in all respects with all covenants,
agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Investor at or prior
to the Closing.
-2-
<PAGE>
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction or any stock exchange, interdealer quotation
system or other self-regulatory organization with jurisdiction over
the Company or its securities which prohibits or adversely affects
any of the transactions contemplated by this Agreement, nor shall
any proceeding have been commenced which may have the effect of
prohibiting or adversely affecting any of the transactions
contemplated by this Agreement.
(d) Release. Each Investor shall have executed and delivered to the
Company a Release in the form attached hereto as Exhibit C.
(e) Delivery of Securities. Each Investor shall have delivered to the
Company certificates representing the shares of Series Q Stock,
Series R Stock and/or Series S Stock which are being exchanged for
shares of Series T Stock.
1.4 Conditions Precedent to the Obligation of the Investor. The obligation of
each Investor to consummate the transactions contemplated hereby is
subject to the satisfaction, at or before the Closing, of each of the
conditions set forth below. These conditions are for each Investor's sole
benefit and may be waived by such Investor at any time in its sole
discretion by delivering prior written notice to the Company and each
other Investor.
(a) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as
though made at each such time.
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants,
agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to
the Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits or adversely affects any of
the transactions contemplated by this Agreement, nor shall any
proceeding have been commenced which may
-3-
<PAGE>
have the effect of prohibiting or adversely affecting any of the
transactions contemplated by this Agreement.
(d) Registration Statement. That certain Registration Statement on Form
S-3 (Registration No. 48131) shall have been declared effective and
no order suspending the effectiveness of such registration statement
shall be in effect and no proceedings for such purpose shall be
pending or threatened by the SEC.
(e) No Suspension of Trading in or Delisting of Common Stock. Trading in
the Common Stock shall not have been suspended by the SEC or the
Nasdaq National Market ("Nasdaq" or the "Exchange") and the Common
Stock shall not have been delisted from the Exchange unless it shall
have been approved for trading on The Nasdaq SmallCap Market.
(f) Officer's Certificate. The Company shall have delivered to such
Investor a certificate in form and substance reasonably satisfactory
to such Investor, executed by an executive officer of the Company,
to the effect that all the conditions to the Closing shall have been
satisfied as of the Closing Date.
(g) Filing of the Certificate of Designation. The Series T Certificate
of Designation, conforming to the terms of this Agreement, shall
have been duly filed with the Secretary of State of the State of
Delaware and certified copies thereof shall have been delivered to
such Investor.
(h) Release. The Company shall have executed and delivered to such
Investor a Release in the form attached hereto as Exhibit E.
(i) Delivery of Securities. The Company shall have delivered to such
Investor duly executed stock certificates representing the Preferred
Stock issuable to such Investor.
(j) Registration Rights Agreement. The Company and each of the Investors
shall have executed and delivered the Registration Rights Agreement
(the "Registration Rights Agreement") in the form attached hereto as
Exhibit G.
1.5 Conversion into Common Stock. All shares of Series Q Stock, Series R Stock
and/or Series S Stock which Investors have agreed to convert into shares
of Common Stock at the Closing (the "Closing Conversion Shares") shall be
converted in accordance with the terms of the Certificate of Designation
creating the Series Q Stock (the "Series Q Certificate"), the Certificate
of Designation creating the Series R Stock (the "Series R Certificate") or
the Certificate of
-4-
<PAGE>
Designation creating the Series S Stock (the "Series S Certificate") as
the case may be, except that for purposes of such conversion the
"Conversion Date Market Price" (as defined in each of the Series Q
Certificate, the Series R Certificate and the Series S Certificate) shall
be $0.80. Each of the Investors converting shares of Series Q Stock,
Series R Stock and/or Series S Stock into shares of Common Stock at the
Closing shall execute and deliver at the Closing a conversion notice
evidencing such a transaction.
2. Representations and Warranties of Investor
Each Investor severally represents and warrants to the Company as to the
matters set forth below. The representations of each Investor under this Section
2 are made exclusively by and only with respect to such Investor and no Investor
shall be liable or responsible for the breach of any representation or warranty
made by any other Investor.
2.1 No Government Recommendation or Approval. The Investor understands that no
United States federal or state agency or similar agency of any other
country, has passed upon or made any recommendation or endorsement of the
Company or the issuance of the Securities.
2.2 Intent. The Investor is obtaining the Securities for its own account and
not with a view towards distribution in violation of securities laws, and
the Investor has no present arrangement (whether or not legally binding)
at any time to sell the Securities to or through any person or entity;
provided, however, that by making the representations herein, the Investor
does not agree to hold the Securities for any minimum or other specific
term and reserves the right to dispose of the Securities at any time in
accordance with federal and state securities laws applicable to such
disposition. The Investor has been advised of or is aware of the
provisions of Rule 144 promulgated under the Securities Act.
2.3 Sophisticated Investor. The Investor is a sophisticated investor (as
described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and has such experience
in business and financial matters that it is capable of evaluating the
merits and risks of an investment in the Securities. The Investor
acknowledges that the Securities are speculative and involve a high degree
of risk. The Investor understands that there is no established market for
the Preferred Stock and that no public market therefor is foreseen.
2.4 Independent Investigation. The Investor, in making its decision to obtain
the Securities obtained hereunder, has relied upon an independent
investigation made by it and/or its representatives and has not relied on
any information or
-5-
<PAGE>
representations made by third parties or on any oral or written
representations or assurances from the Company or any representative or
agent of the Company, other than as set forth in this Agreement, in the
public filings of the Company and in the documents described below. Prior
to the date hereof, the Investor has been furnished with and has reviewed
the Company's Annual Report on Form 10-K including, Form 10-KA for the
period ended December 31, 1997 (the "1997 Form 10-K") sent to the
Company's shareholders and all documents filed by the Company with the SEC
since December 31, 1997, pursuant to sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(excluding preliminary proxy statement filings) (such documents are
collectively referred to in this Agreement as the "Exchange Act Reports"),
including, without limitation, the Company's Current Reports on Form 8-K
for events dated April 9, 1998, March 18, 1998, February 26, 1998,
February 19, 1998, February 17, 1998, January 30, 1998 and January 21,
1998, and a copy of the Company's Registration Statement on Form S-3
declared effective by the SEC on April 21, 1998. The Investor has had a
reasonable opportunity to ask questions of and receive answers from the
Company concerning the Company and the transactions contemplated hereby.
2.5 Authority. This Agreement has been duly authorized and validly executed
and delivered by the Investor and is a valid and binding agreement
enforceable against the Investor in accordance with its terms, subject to
general principles of equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally.
2.6 Nasdaq Delisting. The Investors acknowledge that the Company has received
a letter from the Nasdaq Stock Market informing the Company that it
intends to delist the Company's securities from trading on The Nasdaq
National Market and the Company shall have no liability to the Investors
under this Agreement or the Certificate of Designation (other than under
Section 12 thereof) if the Company's securities are delisted from The
Nasdaq National Market.
2.7 No Broker. The Investor has taken no action which would give rise to any
claim by any person for brokerage commission, finder's fees or similar
payments by the Company relating to this Agreement or the transactions
contemplated hereby.
2.8 Not an Affiliate. The Investor is not an officer, director or "affiliate"
(as that term is defined in Rule 405 of the Securities Act) of the
Company.
2.9 Reliance on Representations and Warranties. The Investor understands that
the Securities are being issued to it in reliance on specific provisions
of United States federal and state securities laws and that the Company is
relying upon the truth and
-6-
<PAGE>
accuracy of the representations, warranties, agreements, acknowledgments
and understandings of the Investor set forth in this Agreement in order to
determine the applicability of such provisions.
2.10 Limitations on Investor's Right to Convert and Exercise. Notwithstanding
anything to the contrary contained herein, each notice of conversion of
Preferred Stock (a "Conversion Notice") shall contain or be accompanied by
a representation by the Investor that, after giving effect to the shares
of the Company's Common Stock to be issued pursuant to such Conversion
Notice or Exercise Notice, the total number of shares of the Company's
Common Stock deemed beneficially owned by the Investor, together with all
shares of the Company's Common Stock deemed beneficially owned by the
Investor's "affiliates" as defined in Rule 144 of the Securities Act and
excluding any shares of the Series Q Preferred Stock held by such holder
and its affiliates will not exceed 4.9% of the total issued and
outstanding shares of the Company's Common Stock and such other matters as
are set forth in Section 13(d) of the Certificate of Designation.
2.11 Transfer or Resale. The Investor understands that (i) except as provided
in the Registration Rights Agreement, the Securities have not been and are
not being registered under the Securities Act or any state securities
laws, and may not be transferred unless (a) subsequently registered
thereunder or (b) the Investor shall have delivered to the Company an
opinion of counsel (which opinion and counsel shall be reasonably
acceptable to the Company) to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (ii) any sale of such Securities made in reliance on Rule
144 promulgated under the Securities Act may be made only in accordance
with the terms of said Rule and further, if said Rule is not applicable,
any resale of such Securities under circumstances in which the seller (or
the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules
and regulations of the SEC thereunder; and (iii) neither the Company nor
any other person is under any obligation to register such Securities under
the Securities Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder (in each case, other than
pursuant to the Registration Rights Agreement).
2.12 Legends. The Investor understands that the Preferred Shares and, until
such time as the Underlying Stock has been registered under the Securities
Act (as contemplated by the Registration Rights Agreement) or otherwise
may be sold by the Investor pursuant to Rule 144 under the Securities Act
(or any successor rule thereto) without any restriction as to the number
of securities acquired hereunder that can then be immediately sold, the
certificates for the Underlying Stock, may
-7-
<PAGE>
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for
such Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective registration
statement for the securities under said Act, or an opinion of
counsel, in form, substance and scope reasonably acceptable to the
Company, that registration is not required under said Act."
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any of the Securities
upon which it is stamped, if, unless otherwise required by state
securities laws, (a) such Security is registered for sale under the
Securities Act or (b) such holder provides the Company with an opinion of
counsel, in form, substance and scope reasonably acceptable to the
Company, to the effect that a public sale or transfer of such Security may
be made without registration under the Securities Act or (c) such holder
provides the Company with reasonable assurances that such Security can be
sold pursuant to Rule 144 under the Securities Act (or a successor rule
thereto) without any restriction as to the number of Securities acquired
as of a particular date that can then be immediately sold. The Investor
agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, in compliance with
applicable securities law. In the event the above legend is removed from
any Security, the Company may, upon reasonable advance notice to the
Investor, require that the above legend be placed on any Security that
cannot then be sold pursuant to an effective registration statement or
Rule 144 under the Securities Act (or any successor rule thereto) without
any restriction as to the number of securities acquired hereunder that can
then be immediately sold.
2.13 Schedule A. To the best knowledge of each Investor, the information set
forth on Schedule A with respect to such Investor is true and accurate in
all material respects as of the date hereof.
3. Representations and Warranties of the Company
The Company represents and warrants to the Investors that:
3.1 Company Status. The Company has registered its Common Stock pursuant to
Section 12(b) or 12(g) of the Exchange Act, is in full compliance with all
reporting requirements of the Exchange Act.
-8-
<PAGE>
3.2 Current Public Information. The Exchange Act Reports are the only filings
made by the Company since December 31, 1997 pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act.
3.3 No General Solicitation in Regard to this Transaction. Neither the Company
nor any of its affiliates nor any distributor or any person acting on its
or their behalf has conducted any general solicitation (as that term is
used in Regulation D) with respect to any of the Securities, nor have they
made any offers or sales of any security or solicited any offers to buy
any security under circumstances that would require the registration of
the Securities under the Securities Act.
3.4 Capitalization; Valid Issuance of Preferred Stock and Common Stock. The
Company has an authorized capitalization set forth on Schedule 3.4. Except
as set forth on Schedule 3.4, no shares of Preferred Stock or options,
warrants or other securities convertible or exercisable into Common Stock
have been issued or are outstanding. The Company has issued and
outstanding that number of shares of Common Stock and preferred stock of
various series, as set forth on Schedule 3.4, and all such shares have
been duly and validly authorized and issued, are fully paid and
non-assessable; prior to the Closing, the authorized capitalization shall
include the Preferred Shares; upon issuance of the Preferred Shares, the
Preferred Shares will be duly and validly issued, fully paid and
non-assesable; the Underlying Stock, when issued and delivered in
accordance with the terms of the Series T Certificate of Designation, will
be duly and validly issued, fully paid and non-assessable; and, except as
set forth on Schedule 3.4 hereto, the holders of outstanding capital stock
of the Company are not and shall not be entitled to preemptive or other
rights afforded by the Company to subscribe for the Securities. As of the
Closing Date, the Company shall have duly filed the Series T Certificate
of Designation, and all of the rights, preferences and privileges of the
Preferred Stock shall be as set forth in the Series T Certificate of
Designation, a copy of which, certified by the Secretary of State of the
State of Delaware, shall be delivered to the Investor on or before the
Closing Date. There are no owners of shares of Series O Stock, Series Q
Stock, Series R Stock and Series S Stock other than the Investors and
Elliot Associates, L.P.
3.5 Organization and Qualification. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and
to carry on its business as now being conducted. The Company does not have
any subsidiaries, except as set forth on Schedule 3.5. The Company is duly
qualified to do business as a foreign corporation and is in good standing
in every jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary other than those
in which the failure so to qualify would not have a Material
-9-
<PAGE>
Adverse Effect. "Material Adverse Effect" means any material adverse
effect on the business, operations, properties, prospects of the entity
taken as a whole, or the consolidated financial condition of the entity
with respect to which such term is used, or with respect to any other
entity controlling or controlled by such entity, and/or any condition or
situation which would prohibit or otherwise interfere with the ability of
the entity with respect to which said term is used to enter into or
perform its obligations under this Agreement, the Series T Certificate of
Designation or the Registration Rights Agreement.
3.6 Authorization; Enforcement. (i) The Company has the requisite corporate
power and authority to enter into and perform this Agreement and to issue
the Securities subject to the limitations and conditions contained in and
otherwise in accordance with the terms hereof and of the Series T
Certificate of Designation, (ii) the execution and delivery of this
Agreement by the Company and the consummation by it of the transactions
contemplated hereby including, without limitation, the issuance of the
Underlying Stock (subject to the limitations contained in the Series T
Certificate of Designation) have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Company
or its Board of Directors or stockholders is required (except such
stockholder approvals as may be required under Rule 4460(i) promulgated by
the National Association of Securities Dealers, Inc. and to increase the
authorized but unissued shares of Common Stock of the Company), (iii) this
Agreement has been duly executed and delivered by the Company, and (iv)
this Agreement constitutes the valid and binding obligations of the
Company enforceable against the Company in accordance with their terms,
except (x) as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable
principles of general application and (y) as rights to indemnity or
contribution may be limited by federal and state securities laws and
public policy considerations.
3.7. Corporate Documents. The Company has furnished or made available to the
Investor true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof (the "Certificate"), and the
Company's By-Laws, as in effect on the date hereof (the "By-Laws").
3.8 No Conflicts Under Law. The business of the Company is not being conducted
in violation of any law, ordinance or regulations of any governmental
entity, except for possible violations which either singly or in the
aggregate do not and will not have a Material Adverse Effect. The Company
is not required under Federal, state or local law, rule or regulation in
the United States to obtain any consent which has not been obtained, or
authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or
-10-
<PAGE>
perform any of its obligations under this Agreement or issue and sell the
Securities in accordance with the terms hereof and thereof (other than any
SEC, Nasdaq or state securities filings in connection herewith which may
be required to be made by the Company subsequent to the Closing, and any
registration statement which may be filed pursuant hereto); provided that,
for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Investors and/or its principals herein.
3.9 Exchange Act Reports. The Company has delivered or made available to the
Investors true and complete copies of the Exchange Act Reports (including,
without limitation, proxy information and solicitation materials). The
Company has not provided to the Investors any information which, according
to applicable law, rule or regulation, should have been disclosed publicly
prior to the date hereof by the Company but which has not been so
disclosed; nor has the Company provided to the Investors, as an inducement
to enter into this Agreement or otherwise, any information which has not
been publicly announced or disclosed to the Company's stockholders
generally. As of their respective dates, the Exchange Act Reports complied
in all material respects with the requirements of the Exchange Act and
rules and regulations of the SEC promulgated thereunder and other federal,
state and local laws, rules and regulations applicable to such Exchange
Act Reports, and none of the Exchange Art Reports contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The financial statements of the Company included in the Exchange Act
Reports comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material
respects the financial position of the Company as of the dates thereof and
the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
3.10 Intentionally Omitted
3.11 Intentionally Omitted
-11-
<PAGE>
3.12 No Undisclosed Events or Circumstances. No event or circumstance has
occurred or exists with respect to the Company or its subsidiaries or
their respective businesses, properties, prospects, operations or
financial condition, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company, but which has
not been so publicly announced or disclosed. The Company has not provided
the Investor any information which, according to applicable law, rules or
regulations should have been disclosed publicly by the Company, but which
has not been so disclosed, other than with respect to the existence of
this Agreement and the transactions contemplated by this Agreement.
3.13 No Integrated Offering. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy
any security, under circumstances that would require registration of the
Securities under the Securities Act.
3.14 Broker. The Company has taken no action which would give rise to any claim
by any person for brokerage commission, finder's fees or similar payments
by the Investors relating to this Agreement or the transactions
contemplated hereby.
3.15 Acknowledgment of Dilution. The number of shares of Underlying Stock
issuable upon conversion of the Series T Stock may increase in the event
the current trading price of the Common Stock fails to significantly
increase. The Company acknowledges that its obligation to issue Underlying
Stock upon conversion of the Preferred Stock in accordance with the Series
T Certificate of Designation is absolute and unconditional, regardless of
the dilution that such issuance may have on the ownership interests of
other stockholders, but is nevertheless subject to the terms and
conditions of general application imposed upon the Company by governmental
decrees and by the Exchange.
4. Covenants of the Company
4.1 Intentionally Omitted
4.2 Reservation of Common Stock. Notwithstanding any representation, warranty,
covenant or agreement to the contrary contained herein, the parties
acknowledge and agree that the Company does not currently have any
authorized but unissued shares of Common Stock available to effect the
conversion of the Series T Stock. After the Closing, the Company shall use
commercially reasonable efforts to as promptly as practicable convene a
meeting of its shareholders to increase its
-12-
<PAGE>
authorized but unissued shares of capital stock or take such other action
as is appropriate in order that the Company have available a sufficient
number of shares to effect the conversion of the Series T Stock (the
"Stockholder Approval"). Thereafter, at all times while any shares of
Series T Stock are outstanding, the Company shall reserve and keep
available, free of preemptive rights and subject to such legal limits and
rules of exchanges on which the Common Stock may be traded, no less than
one hundred five percent (105%) and, after an Election is made (as defined
in the Series T Certificate of Designation), no less than two hundred
percent (200%) with respect to the shares of Preferred Stock for which an
Election has been made, of that number of shares of the Company's Common
Stock for which such outstanding shares of Preferred Stock are then
convertible, each amount as equitably adjusted pursuant to any stock
splits, split ups, recapitalization or reorganization of shares of Common
Stock. The Company shall notify the Investors as soon as practicable if
there is a decrease in the number of outstanding shares of Common Stock of
the Company.
4.3 Listing of Underlying Stock. The Company hereby agrees, promptly following
the Closing of the transaction contemplated by this Agreement and receipt
of the Stockholder Approval, if any, to take such action to cause the
Underlying Stock to be listed on the Exchange as promptly as possible but
no later than ninety (90) days following the Closing; provided, however,
at such time the Company's securities are approved for listing on the
Exchange or The Nasdaq SmallCap Market. The Company further agrees that,
if the Company applies to have the Common Stock traded on any principal
stock exchange, it will include in such application the Underlying Stock
and will take such other action as is necessary or desirable to cause the
Underlying Stock to be listed on such exchange as promptly as possible.
4.4 Exchange Act. For so long as the Company is in existence and Preferred
Stock remains outstanding, the Company will cause its Common Stock to
continue to be registered under Section 12(g) or 12(b) of the Exchange
Act, will comply in all respects with its reporting and filing obligations
under said Act and will not take any action or file any document (whether
or not permitted by said Act or the rules thereunder) to terminate or
suspend such registration or to terminate or suspend its reporting and
filing obligations under said Act. The Company will take all commercially
reasonable action necessary to continue the listing and trading of its
Common Stock on the Exchange and will comply in all respects with the
Company's reporting, filing and other obligations under the by-laws or
rules of the Exchange; provided, however, that the Company may terminate
such listing at any time so long as the Company's Common Stock is then
listed on either the Nasdaq SmallCap Market, the American Stock Exchange
or the New York Stock Exchange. The Company shall file with the SEC a Form
8-K (the "Form 8-K") or Form 10-Q (the "10-Q") disclosing this Agreement
and the transactions
-13-
<PAGE>
contemplated at the earliest practicable date, but no later than the first
business day after the date of the Closing and shall publicly announce, by
way of press release, this Agreement and the transactions contemplated
hereby, no later than 24 hours after the Closing.
4.5 Corporate Existence. The Company will take all steps necessary to preserve
and continue the corporate existence of the Company; provided, however,
that this sentence shall not limit the Company's ability to engage in any
bona fide corporate transaction or reorganization otherwise consistent
with this Agreement.
4.6 Rule 144. The Company shall not, directly or indirectly, dispute or
otherwise interfere with any claim by a holder of Series T Stock that such
holder's holding period of such security for purposes of Rule 144 under
the Securities Act ("Rule 144") relates back (i.e. tacks) to the holding
period for the Series Q Stock; provided, however, nothing contained herein
shall obligate the Company or its counsel to take a position that is
inconsistent with the state of the law at such time. The Company
acknowledges and agrees that as of the date hereof under Rule 144 and
no-action letters issued by the SEC, such talking is permitted.
5. [SECTION INTENTIONALLY LEFT BLANK]
6. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without regard to principles of conflicts of
law or choice of law, except for matters arising under the Securities Act
or the Exchange Act, which matters shall be construed and interpreted in
accordance with such Acts. The Company hereby agrees that all actions or
proceedings arising directly or indirectly from or in connection with this
Agreement shall, at the Investor's sole option, be litigated only in the
Supreme Court of the State of New York or the United States District Court
for the Southern District of New York located in New York County, New
York. The Company consents to the jurisdiction and venue of the foregoing
courts and consents that any process or notice of motion or other
application to either of said courts or a judge thereof may be served
inside or outside the State of New York or the Southern District of New
York by registered mail, return receipt requested, directed to the Company
at its address set forth in this Agreement (and service so made shall be
deemed complete five (5) days after the same has been posted as aforesaid)
or by personal service or in such other manner as may be permissible under
the rules of said court.
7. Assignment; Entire Agreement; Amendment; Consents; Expenses
-14-
<PAGE>
(a) Neither this Agreement nor any obligations of the Company hereunder
may be assigned by the Company to any other person or entity. The
provisions of this Agreement shall inure to the benefit of, and be
enforceable by, any transferee of any of the Securities with respect
to the Securities held by such person.
(b) This Agreement, the Series T Certificate of Designation, the
Registration Rights Agreement, and the other documents delivered
pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and
thereof and supersedes all prior agreements and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth in
this Agreement or therein. Except as expressly provided in this
Agreement, neither this Agreement nor any term hereof may be waived,
discharged or terminated other than by a written instrument signed
by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought. This Agreement and any provision
hereof may only be amended by an instrument in writing signed by the
Company and the holders of two-thirds of the shares of Preferred
Stock outstanding at the time.
(c) By executing and delivering this Agreement, the parties hereto
consent and agree to all of the transactions contemplated hereby.
The Investors acknowledge and agree that except as provided for
specifically herein, the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby shall
not create or trigger any additional rights which any Investor may
have pursuant to any agreements entered into with the Company or
attendant to any securities of the Company, including, without
limitation, the right to have the purchase price of any warrants
held by such Investor adjusted.
(d) The Company agrees to reimburse the Investors for all reasonable
legal expenses incurred by such Investors in connection with the
execution and delivery of this Agreement.
8. Publicity
The Company agrees that it will not disclose, and will not include in any
public announcement, the name of any Investor without such Investor's
consent, unless
-15-
<PAGE>
and until such disclosure is required by law or applicable regulation, and
then only to the extent of such requirement.
9. Notices, Etc.; Expenses; Indemnity
(a) Any notice, demand or request required or permitted to be given by
either the Company or the Investors pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when
delivered personally or by facsimile, with a hard copy to follow by
two day courier addressed to a Investor at the addresses of such
Investor set forth on the signature page hereof, to the Company at
102 Chestnut Ridge Road, Montvale, New Jersey 07645, Attention:
President, or such other address as a party may request by notifying
the other applicable party(s) in writing. Copies of all notices to a
Investor shall be sent to such Investor's designee or representative
(if any).
(b) The Company shall indemnify each Investor against any loss, cost or
damages (including reasonable attorney's fees) incurred as a result
of the Company's breach of any representation, warranty, covenant or
agreement in this Agreement, the Registration Rights Agreement
and/or the Preferred Stock. Each Investor shall severally indemnify
the Company against any loss, cost or damages (including reasonable
attorney's fees) incurred by the Company as a result of such
Investor's breach of any representation, warrant, covenant or
agreement in this Agreement, the Registration Rights Agreement
and/or the Preferred Stock.
10. Counterparts
This Agreement may be executed in any number of counterparts each of which
shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
11. Survival; Severability; Specific Performance
The representations, warranties, covenants and agreements of the parties
hereto shall survive the Closing for a period of four (4) years. In the
event that any provision of this Agreement becomes or is declared by a
court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said provision.
Notwithstanding anything in this Agreement, the Registration Rights
Agreement or the Series T Certificate of Designation to the contrary,
nothing shall limit a Investor's right to pursue any and
-16-
<PAGE>
all available remedies, whether at law or at equity (including, without
limitation, specific performance), in connection therewith.
12. Title and Subtitles
The titles and subtitles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this
Agreement.
13. Like Treatment of Holders
Neither the Company nor any of its affiliates shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee, payment for the redemption or the conversion of the
Preferred Stock, or otherwise, to any holder of shares of Preferred Stock,
for or as an inducement to, or in connection with the solicitation of, any
consent, waiver or amendment of any terms or provisions of the Series T
Certificate of Designation, this Agreement or the Registration Rights
Agreement, unless such consideration is offered to all holders of shares
of Preferred Stock and such consideration is required to be paid to all
holders of shares of Preferred Stock who agree to such consent, waiver or
amendment or tender their Preferred Stock for redemption or conversion.
-17-
<PAGE>
GEOTEK COMMUNICATIONS, INC.
By: /s/ Anne E. Eisele
---------------------------------
Investors:
Investor's Representative: Investor:
RGC International Investors, LDC
By: Rose Glen Capital Management, L.P., as
Investment Manager
By: RGC General Partner Corp., as general
partner
By: /s/ Wayne D. Bloch
------------------------------------
Wayne D. Bloch, Managing Director
Address: c/o Rose Glen Capital
Management, L.P.
Three Bala Plaza (East) Place of Execution: Pennsylvania
Suite 200
Bala Cynwyd, PA 19004
Telephone: (610) 617-5900 Place of Organization or Citizenship:
Cayman Islands
Fax: (610) 617-0570 Place of Residency and/or Principal Place of
Business: Cayman Islands
Telephone: (610) 617-5900
Fax: (610) 617-0570
Registration Instructions: RGC International
Investors, LDC
<PAGE>
Investor's Representative: Investor:
Palladin Group, L.P. Halifax Fund, L.P.
Attn: Andrew Kaplan
By: The Palladin Group, its Investment
Manager
By: Palladin Capital Management LLC, its
General Partner
By: /s/ Jeffrey Deavers
------------------------------------
Jeffrey Deavers, Authorized
Representative
Address: 40 West 57th Street
Suite 1520 Place of Execution: New York
New York, NY 10019
Telephone: (212) 698-0515 Place of Organization or Citizenship:
Cayman Islands
Fax: (212) 698-0599
Place of Residency and/or Principal Place of
Business:
c/o Citco Fund Services, Ltd.
Corporate Center, West Bay Road
P.O. Box 31106
SMB
Registration Instructions: Halifax Fund, L.P.
<PAGE>
Investor's Representative: Investor:
Palladin Group, L.P. AGR Halifax Fund, Ltd.
Attn: Andrew Kaplan F/b/o Ramius Halifax Partners, LP
By: AG Ramius Partners, LLC
Its: Investment Advisor
By:/s/ Morgan B. Stark
---------------------------------------
Morgan B. Stark, Managing Officer
Address: 40 West 57th Street
Suite 1520 Place of Execution: New York
New York, NY 10019
Telephone: (212) 698-0515 Place of Organization or Citizenship:
Cayman Islands
Fax: (212) 698-0599
Place of Residency and/or Principal Place of
Business:
c/o Citco Fund Services, Ltd.
Corporate Center, West Bay Road
P.O. Box 31106
SMB
Registration Instructions: AGR Halifax
Fund, Ltd.
<PAGE>
Investor's Representative: Investor:
Palladin Group, L.P. AGR Halifax Fund, Ltd.
Attn: Andrew Kaplan F/b/o Ramius Halifax Overseas Fund, Ltd.
By: AG Ramius Partners, LLC
Its: Investment Advisor
By: /s/ Morgan B. Stark
---------------------------------------
Morgan B. Stark, Managing Officer
Address: 40 West 57th Street
Suite 1520 Place of Execution: New York
New York, NY 10019
Telephone: (212) 698-0515 Place of Organization or Citizenship:
Cayman Islands
Fax: (212) 698-0599
Place of Residency and/or Principal Place of
Business:
c/o Citco Fund Services, Ltd.
Corporate Center, West Bay Road
P.O. Box 31106
SMB
Registration Instructions: AGR Halifax
Fund, Ltd.
<PAGE>
Investor's Representative: Investor:
Palladin Group, L.P. AGR Halifax Fund, Ltd.
Attn: Andrew Kaplan F/b/o Hick Investments, Ltd.
By: AG Ramius Partners, LLC
Its: Investment Advisor
By: /s/ Morgan B. Stark
---------------------------------------
Morgan B. Stark, Managing Officer
Address: 40 West 57th Street
Suite 1520 Place of Execution: New York
New York, NY 10019
Telephone: (212) 698-0515 Place of Organization or Citizenship:
Cayman Islands
Fax: (212) 698-0599
Place of Residency and/or Principal Place of
Business:
c/o Citco Fund Services, Ltd.
Corporate Center, West Bay Road
P.O. Box 31106
SMB
Registration Instructions: AGR Halifax
Fund, Ltd.
<PAGE>
Investor's Representative: Investor:
Palladin Group, L.P. Colonial Penn Insurance Company
Attn: Andrew Kaplan
By: The Palladin Group, its Investment
Manager
By: Palladin Capital Management LLC, its
General Partner
By: /s/ Jeffrey Deavers
---------------------------------------
Jeffrey Deavers, Authorized Representative
Address: 40 West 57th Street
Suite 1520 Place of Execution: New York
New York, NY 10019
Telephone: (212) 698-0515 Place of Organization or Citizenship:
New York
Fax: (212) 698-0599
Registration Instructions: Colonial Penn
Insurance
<PAGE>
Investor's Representative: Investor:
Palladin Group, L.P. Gleneagles Fund, LTD
Attn: Andrew Kaplan
By: The Palladin Group, its Investment
Manager
By: Palladin Capital Management LLC, its
General Partner
By: /s/ Jeffrey Deavers
---------------------------------------
Jeffrey Deavers, Authorized Representative
Address: 40 West 57th Street
Suite 1520 Place of Execution: New York
New York, NY 10019
Telephone: (212) 698-0515 Place of Organization or Citizenship:
Cayman Islands
Fax: (212) 698-0599
Place of Residency and/or Principal Place of
Business:
c/o Citco Fund Services, Ltd.
Corporate Center, West Bay Road
P.O. Box 31106
SMB
Registration Instructions: Gleneagles
Fund, LTD
<PAGE>
Investor's Representative: Investor:
Palladin Group, L.P. Colonial Penn Life Insurance Company
Attn: Andrew Kaplan
By: The Palladin Group, its Investment
Manager
By: Palladin Capital Management LLC, its
General Partner
By: /s/ Jeffrey Deavers
---------------------------------------
Jeffrey Deavers, Authorized Representative
Address: 40 West 57th Street
Suite 1520 Place of Execution: New York
New York, NY 10019
Telephone: (212) 698-0515 Place of Organization or Citizenship:
New York
Fax: (212) 698-0599
Registration Instructions: Colonial Penn Life
Insurance Company
<PAGE>
Investor's Representative: Investor:
Citadel Investment Group, L.L.C. Nelson Partners
Attn: Kenneth Simpler
By: /s/
-----------------------------------------
Address: 225 West Washington Street
9th Floor Place of Execution: Bermuda
Chicago, IL 60606
Telephone: (312) 696-2165 Place of Organization or Citizenship: Bermuda
Place of Residency and/or Principal Place of
Business:
c/o Leeds Management Services
129 Front Street, 5th Floor
Hamilton, HM12 Bermuda
Telephone: (441) 295-8617
Fax: (441) 292-2239
Registration Instructions: Nelson Partners
<PAGE>
Investor's Representative: Investor:
Citadel Investment Group, L.L.C. Olympus Securities, LTD.
Attn: Kenneth Simpler
By: /s/
-----------------------------------------
Address: 225 West Washington Street
9th Floor Place of Execution: Bermuda
Chicago, IL 60606
Telephone: (312) 696-2165 Place of Organization or Citizenship: Bermuda
Place of Residency and/or Principal Place of
Business:
c/o Leeds Management Services
129 Front Street, 5th Floor
Hamilton, HM12 Bermuda
Attn: Anne Dupuy
Telephone: (441) 295-8617
Fax: (441) 292-2239
Registration Instructions: Olympus
Securities, LTD.
<PAGE>
Investor:
CIBC, Wood Gundy Securities Corp.
By: /s/ Walter F. McLallen
---------------------------------------
Walter F. McLallen, Managing Director
Place of Execution: New York
Place of Organization or Citizenship:
New York
Place of Residency and/or Principal Place of
Business:
425 Lexington Avenue, 3rd Floor
New York, NY 10017
Attn: Walter F. McLallen
Telephone: (212) 885-4696
Fax: (212) 885-4933
Registration Instructions: CIBC, Wood Gundy
<PAGE>
Investor's Representative: Investor:
Promethean Investment Group, L.L.C. Themis Partners L.P.
Attn: James F. O'Brien, Jr.
By: Promethean Investment Group, L.L.C., its
General Partner
By: /s/
-----------------------------------------
Address: 40 W. 57th Street
Suite 1520 Place of Execution: New York
New York, NY 10019
Telephone: (212) 698-0588 Place of Organization or Citizenship:
New York
Fax: (212) 698-0505
Place of Residency and/or Principal Place of
Business:
c/o Promethean Investment Group, L.L.C.
40 West 57th Street, Suite 1520
New York, NY 10019
Registration Instructions: Themis
Partners L.P.
<PAGE>
Investor's Representative: Investor:
Promethean Investment Group, L.L.C. Samyang Merchant Bank
Attn: James F. O'Brien, Jr.
By: Promethean Investment Group, L.L.C., its
Investment Advisor
By: /s/
-----------------------------------------
Address: 40 W. 57th Street
Suite 1520 Place of Execution: New York
New York, NY 10019
Telephone: (212) 698-0588 Place of Organization or Citizenship:
South Korea
Fax: (212) 698-0505
Place of Residency and/or Principal Place of
Business:
c/o 6th Floor, Youngpoong Building
33, Seorin-dong, Chongro-Ku
Seoul, 110-110-Korea
Registration Instructions: Samyang Merchant
Bank
<PAGE>
Investor's Representative: Investor:
Promethean Investment Group, L.L.C. Heracles Fund
Attn: James F. O'Brien, Jr.
By: Promethean Investment Group, L.L.C., its
Investment Advisor
By: /s/
-----------------------------------------
Address: 40 W. 57th Street
Suite 1520 Place of Execution: New York
New York, NY 10019
Telephone: (212) 698-0588 Place of Organization or Citizenship:
Cayman Islands
Fax: (212) 698-0505
Place of Residency and/or Principal Place of
Business:
c/o Bank of Bermuda (Cayman) Limited
P.O. Box 513
Third Floor, British American Tower
Dr. Roy's Drive
Georgetown, Grand Cayman
Cayman Islands, BWI
Registration Instructions: Heracles Fund
<PAGE>
Investor's Representative: Investor:
Angelo, Gordon & Co., L.P. Leonardo, L.P.
Attn: Gary Wolf
By: Angelo, Gordon & Co., L.P., its General
Partner
By: /s/ Michael L. Gordon
----------------------------------------
Michael L. Gordon, Chief Operating Officer
Address: 245 Park Avenue
26th Floor Place of Execution: New York
New York, NY 10167
Telephone: (212) 692-2058 Place of Organization or Citizenship:
Cayman Islands
Fax: (212) 867-6449
Place of Residency and/or Principal Place of
Business:
c/o Trident Trust Company Limited
Elizabethan Square
P.O. Box 847
Grand Cayman, Cayman Islands, B.W.I.
Registration Instructions: Leonardo, L.P.
<PAGE>
Investor's Representative: Investor:
Angelo, Gordon & Co., L.P. GAM Arbitrage Investments, Inc.
Attn: Gary Wolf
By: Angelo, Gordon & Co., L.P., its
Investment Advisor
By: /s/ Michael L. Gordon
----------------------------------------
Michael L. Gordon, Chief Operating Officer
Address: 245 Park Avenue
26th Floor Place of Execution: New York
New York, NY 10167
Telephone: (212) 692-2058 Place of Organization or Citizenship:
British Virgin Islands
Fax: (212) 867-6449
Place of Residency and/or Principal Place of
Business:
11 Athel Street
Douglas Isle of Man, British Isles
British Virgin Islands
Registration Instructions: GAM Arbitrage
<PAGE>
Investor's Representative: Investor:
Angelo, Gordon & Co., L.P. AG Super Fund International Partners, L.P.
Attn: Gary Wolf
By: Angelo, Gordon & Co., L.P., its General
Partner
By: /s/ Michael L. Gordon
----------------------------------------
Michael L. Gordon, Chief Operating Officer
Address: 245 Park Avenue
26th Floor Place of Execution: New York
New York, NY 10167
Telephone: (212) 692-2058 Place of Organization or Citizenship: Cayman
Islands
Fax: (212) 867-6449
Place of Residency and/or Principal Place of
Business:
c/o Raphael Capital Management Partners,
L.P.
Transnational House
P.O. Box 30749
Seven Mile Beach
Grand Cayman, Cayman Islands, B.W.I.
Registration Instructions: AG Super Fund
International
Partners, L.P.
<PAGE>
Investor's Representative: Investor:
Angelo, Gordon & Co., L.P. Ramius Fund, LTD.
Attn: Gary Wolf
By: AG Ramius Partners, L.L.C., its
Investment Advisor
By: /s/ Michael L. Gordon
----------------------------------------
Michael L. Gordon, Chief Operating Officer
Address: 245 Park Avenue
26th Floor Place of Execution: New York
New York, NY 10167
Telephone: (212) 692-2058 Place of Organization or Citizenship:
Bermuda
Fax: (212) 867-6449
Place of Residency and/or Principal Place of
Business:
c/o Bank of Bermuda
Attn: Chandra Aramdjeroric
6 Front Street
Hamilton HM11 Bermuda
Registration Instructions: Ramius Fund, LTD.
<PAGE>
Investor's Representative: Investor:
Angelo, Gordon & Co., L.P. Raphael, L.P.
Attn: Michael L. Gordon
By: /s/ Michael L. Gordon
----------------------------------------
Michael L. Gordon, Chief Operating Officer
Address: 245 Park Avenue
26th Floor Place of Execution: New York
New York, NY 10167
Telephone: (212) 692-2058 Place of Organization or Citizenship:
Cayman Islands
Fax: (212) 867-6449
Place of Residency and/or Principal Place of
Business:
c/o Raphael Capital Management Partners,
L.P.
Transnational House
P.O. Box 30749
Seven Mile Beach
Grand Cayman, Cayman Islands, B.W.I.
Registration Instructions: Raphael, L.P.
<PAGE>
Investor's Representative: Investor:
Angelo, Gordon & Co., L.P. AG SUPER FUND, L.P.
Attn: Michael L. Gordon By: Angelo, Gordon & Co., L.P.
Its: General Partner
By: /s/ Michael L. Gordon
----------------------------------------
Name Michael L. Gordon, Chief Operating Officer
Address: 245 Park Avenue
26th Floor Place of Execution: New York
New York, NY 10167
Telephone: (212) 692-2058 Place of Organization or Citizenship:
United States
Fax: (212) 867-6449
Place of Residency and/or Principal Place of
Business:
c/o Angelo, Gordon & Co., L.P.
245 Park Avenue, 26th Floor
New York, NY 10167
Registration Instructions: AG SUPER FUND,
L.P.
<PAGE>
Investor's Representative: Investor:
Angelo, Gordon & Co., L.P. MICHAELANGELO, L.P.
Attn: Michael L. Gordon By: Angelo, Gordon & Co., L.P.
Its: General Partner
By: /s/ Michael L. Gordon
----------------------------------------
Michael L. Gordon, Chief Operating Officer
Address: 245 Park Avenue
26th Floor Place of Execution: New York
New York, NY 10167
Telephone: (212) 692-2058 Place of Organization or Citizenship:
United States
Fax: (212) 867-6449
Place of Residency and/or Principal Place of
Business:
c/o Angelo Gordon & Co., L.P.
245 Park Avenue, 26th Floor
New York, NY 10167
Registration Instructions: Michaelangelo,
L.P.
<PAGE>
Investor's Representative: Investor:
Angelo, Gordon & Co., L.P. ANGELO, GORDON & CO., L.P.
Attn: Michael L. Gordon
By: /s/ Michael L. Gordon
----------------------------------------
Michael L. Gordon, Chief Operating Officer
Address: 245 Park Avenue
26th Floor Place of Execution: New York
New York, NY 10167
Telephone: (212) 692-2058 Place of Organization or Citizenship:
United States
Fax: (212) 867-6449
Place of Residency and/or Principal Place of
Business:
c/o Angelo Gordon & Co., L.P.
245 Park Avenue, 26th Floor
New York, NY 10167
Registration Instructions: Angelo, Gordon &
Co., L.P.
<PAGE>
Investor's Representative: Investor:
PALLADIN PARTNERS I, L.P.
By: /s/
-----------------------------------------
Place of Execution: New York
Place of Organization or Citizenship:
Place of Residency and/or Principal Place of
Business:
40 West 57th Street
New York, NY 10019
Registration Instructions: Palladin Partners
I, L.P.
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Total
Q shares R shares S shares Shares O Warrants
-------- -------- -------- ------ ----------
<S> <C> <C> <C> <C> <C>
Nelson Partners 0 1,289,993 0 1,289,993 0
Olympus 0 1,289,993 0 1,289,993 0
Ramius Halifax Partners 0 351,443 161,341 512,784 0
Ramius Halifax Overseas 0 331,573 152,158 483,731 0
Hick Investments 0 56,814 26,125 82,939 0
Halifax Fund (includes Colonial Penn Ins.) 0 1,042,356 483,981 1,526,337 0
Pallidin Fund 0 251,363 131,882 383,245 0
Gleneagles 0 627,030 323,710 950,740 0
Colonial Penn Ins. (included in Halifax) 0 0 0 0 0
Colonial Penn Life Insurance 0 313,515 161,855 475,370 0
Ramius Fund 173,333 276,621 126,983 576,937 0
Raphael 66,667 104,443 0 171,110 0
Leonardo 33,333 522,212 0 555,545 0
AG Super Fund Int'l 40,000 61,436 0 101,436 0
GAM Arbitrage 53,333 86,011 0 139,344 0
Hercales Fund (includes Samyang) 213,333 491,493 0 704,826 0
Themis 53,333 122,873 0 176,206 0
RGC Int'l 0 1,530,139 0 1,530,139 0
CIBC Wood Gundy 0 938,065 471,191 1,409,256 340,000
Samyang (included in Heracles) 0 0 0 0 0
-------- ---------- ---------- ----------- --------
633,332 9,687,373 2,039,226 12,359,931 340,000
======== ========== ========== =========== ========
<CAPTION>
(A)
Total
Total Warrants Convert
Q Warrants Warrants & Shares $0.80/share Q Dollars
---------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Nelson Partners 90,000 90,000 1,379,993 $1,103,994 $0
Olympus 90,000 90,000 1,379,993 1,103,994 0
Ramius Halifax Partners 0 0 512,784 410,227 0
Ramius Halifax Overseas 0 0 483,731 386,985 0
Hick Investments 18,000 18,000 100,939 80,751 0
Halifax Fund (includes Colonial Penn Ins.) 300,000 300,000 1,826,337 1,461,070 0
Pallidin Fund 0 0 383,245 306,596 0
Gleneagles 120,000 120,000 1,070,740 856,592 0
Colonial Penn Ins. (included in Halifax) 0 0 0 0 0
Colonial Penn Life Insurance 60,000 60,000 535,370 428,296 0
Ramius Fund 269,863 269,863 846,800 677,440 173,333
Raphael 30,000 30,000 201,110 160,888 66,667
Leonardo 438,185 438,185 993,730 794,984 33,333
AG Super Fund Int'l 18,000 18,000 119,436 95,549 40,000
GAM Arbitrage 102,322 102,322 241,666 193,333 53,333
Hercales Fund (includes Samyang) 824,904 824,904 1,529,730 1,223,784 323,945
Themis 206,226 206,226 382,432 305,946 80,986
RGC Int'l 150,000 150,000 1,680,139 1,344,111 0
CIBC Wood Gundy 150,000 490,000 1,899,258 1,519,405 88
Samyang (included in Heracles) 0 0 0 0 0
---------- ---------- ----------- ------------ --------
2,867,500 3,207,500 15,567,431 $12,453,945 $771,685
========== ========== =========== ============ ========
<CAPTION>
(B) (B) - (A)
Total --------
Q s R Dollars S Dollars Dollars Series T
--- --------- --------- ------- --------
<S> <C> <C> <C> <C>
Nelson Partners $2,099,710 $0 $2,099,710 995,716
Olympus 2,099,710 0 2,099,710 995,716
Ramius Halifax Partners 566,000 509,500 1,075,500 665,273
Ramius Halifax Overseas 534,000 480,500 1,014,500 627,515
Hick Investments 91,500 82,500 174,000 93,249
Halifax Fund (includes Colonial Penn Ins.) 1,705,500 1,534,000 3,239,500 1,778,430
Pallidin Fund 411,278 418,006 829,284 522,688
Gleneagles 1,025,946 1,026,014 2,051,960 1,195,368
Colonial Penn Ins. (included in Halifax) 0 0 0 0
Colonial Penn Life Insurance 512,973 513,007 1,025,980 597,684
Ramius Fund 445,500 401,000 1,019,833 342,393
Raphael 170,000 0 236,667 75,779
Leonardo 850,000 0 883,333 88,349
AG Super Fund Int'l 100,000 0 140,000 44,451
GAM Arbitrage 140,000 0 193,333 0
Hercales Fund (includes Samyang) 899,839 0 1,223,784 0
Themis 224,960 0 305,946 0
RGC Int'l 2,490,000 0 2,490,000 1,145,889
CIBC Wood Gundy 1,526,879 1,526,879 3,053,846 1,534,441
Samyang (included in Heracles) 0 0 0 0
----------- ---------- ----------- -----------
$15,893,795 $6,491,406 $23,156,886 $10,702,941
=========== ========== =========== ===========
</TABLE>
<PAGE>
Schedule 1
Schedule of Exceptions
In connection with the Conversion and Exchange Agreement ("the
"Agreement"), of which this Schedule of Exceptions is a part, the Company hereby
sets forth the following exceptions to the representations and warranties of the
Company set forth in Article 3 of the Agreement:
3.1 [None].
3.2 [None].
3.3 See Schedule 3.4 for a description of the Company's Capitalization.
o Vanguard Cellular Systems, Inc. ("Vanguard") has certain rights to
acquire additional securities of the Company, on the same terms as
offered to the Subscriber, pursuant to that certain Stock Purchase
Agreement dated December 29, 1993 by and between Vanguard and the
Company.
o S-C Rig Investments - III, L.P. ("S-C Rig") has certain rights to
acquire additional securities of the Company, on the same terms as
offered to the Subscriber, pursuant to that certain Stock Purchase
Agreement dated September 28, 1994 by and between S-C Rig and the
Company.
3.4 [None].
See schedule 3.5 for a list of the Company's Subsidiaries.
3.5 [None].
3.6 [None].
3.7 [None].
3.8 [None].
3.9 [None].
3.10 [None].
3.11 [None].
3.12 [None].
3.13 [None].
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Registration Rights Agreement"),
entered into as of May 15, 1998, between each of the persons whose name and
signature appear on the signature page hereto (each a "Purchaser" and
collectively, the "Purchasers"), and Geotek Communications, Inc., a Delaware
corporation with its principal office at 20 Craig Road, Montvale, New Jersey
07645 (the "Company").
W I T N E S S E T H:
WHEREAS, the Purchasers have obtained pursuant to a Conversion and
Exchange Agreement (the "Agreement") shares of the Company's Series T
Convertible Preferred Stock ("Series T Stock" or the "Preferred Stock");
WHEREAS, pursuant to the terms of the Certificate of Designation
establishing the rights of the Preferred Stock (the "Certificate of
Designation"), the Preferred Stock is convertible into shares of the Company's
Common Stock, par value $.01 per share (the "Shares");
WHEREAS, pursuant to the terms of and in partial consideration for, the
Purchasers' agreement to enter into the Agreement, the Company has agreed to
provide the Purchasers with certain registration rights with respect to the
Shares;
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Agreement, Certificate of
Designation and this Registration Rights Agreement, the Company and the
Purchasers agree as follows:
1. Certain Definitions. As used in this Registration Rights Agreement, the
following terms shall have the following respective meanings:
(a) "SEC" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
(b) "Registrable Securities" shall mean: (i) Shares issued to the
Purchasers or their designees upon conversion of the Preferred Stock or upon any
stock split, stock dividend (pursuant to the Certificate of Designation or
otherwise), recapitalization or similar event with respect to such Shares; (ii)
any Shares issued to the Purchasers or any Holder as dividends on the Preferred
Stock; (iii) any securities issued or issuable to the Purchasers or any Holder
upon the conversion or exercise or exchange of any Preferred Stock or Shares and
(iv) shares of Common Stock issued pursuant to Section 5(a) hereof.
(c) The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act
<PAGE>
and applicable rules and regulations thereunder, and the declaration or ordering
of the effectiveness of such registration statement.
(d) "Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with each Purchaser's exercise of its registration rights
under this Registration Rights Agreement, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company and blue sky fees and expenses (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company).
(e) "Selling Expenses" shall mean all underwriting discounts and selling
commissions, if any, applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for the Holders.
(f) "Holder" and "Holders" shall include a Purchaser or the Purchasers,
respectively, and any transferee of Preferred Stock, Shares or Registrable
Securities which have not been sold to the public to whom the registration
rights conferred by this Registration Rights Agreement have been transferred in
compliance with Section 12 of this Registration Rights Agreement.
(g) "Registration Statement" shall have the meaning set forth in Section
2(a) herein.
(h) "Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
(i) "Securities Act" shall mean the Securities Act of 1933, as amended.
2. The Registration Requirements. The Company represents and warrants that
it is qualified and eligible to use the registration statement on Form S-3 under
the Securities Act. The Company shall file such Registration Statement no later
than that date which is thirty days after the date the Company's stockholders
approve an increase in the authorized number of shares of Common Stock and/or a
reverse stock split so that the Company has sufficient authorized and unissued
and unreserved shares of Common Stock to effect a conversion of the Series T
Stock (the "Registration Date") and use its best efforts to cause such
Registration Statement to become effective as promptly as possible thereafter.
Such Registration Statement shall be filed on Form S-3 under the Securities Act
or, if Form S-3 is not then available, another appropriate form covering the
resale of the Shares issuable on conversion of the Preferred Stock and upon
exercise of the Warrants. In addition, the Company shall take all action
necessary to qualify the Shares under state "blue sky" laws as hereinafter
provided. The Company shall use its diligent best efforts to effect the
registration contemplated by the foregoing (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act) and as would permit or facilitate the sale and distribution of all the
Registrable Securities in all
2
<PAGE>
states reasonably requested by the Holders for purposes of maximizing the
proceeds realizable by the Holders from such sale and distribution. The Company
shall distribute copies of the Registration Statement to the Holders promptly
after the filing thereof and shall give the Holders no less than ten days after
receipt of such Registration Statement the opportunity to provide comments
thereto. Such best efforts by the Company shall include, without limitation, the
following:
(a) The Company shall file (i) a registration statement with the SEC
pursuant to Rule 415 under the Securities Act on Form S-3 under the Securities
Act and the Company shall use its best efforts to qualify for the use of such
Form (or in the event that the Company is ineligible to use such form, such
other form as the Company is eligible to use under the Securities Act) covering
the Registrable Securities to be registered (the "Registration Statement"); (ii)
such blue sky filings as shall be reasonably requested to permit such sales;
provided, however, that the Company shall not be required to register the
Registrable Securities in any jurisdiction that would subject it to general
service of process in any such jurisdiction where it is not then so subject or
subject the Company to any tax in any such jurisdiction where it is not then so
subject or to require the Company to qualify to do business in any jurisdiction
where it is not then so qualified; and (iii) any required filings with the
Nasdaq National Market ("Nasdaq") and any exchange where the Shares are traded,
all as soon as practicable after the date hereof. The Company shall use its best
efforts to have such Registration Statement and other filings declared effective
as soon thereafter as may be practicable.
(b) The Company shall enter into such customary agreements (including a
customary underwriting agreement with the underwriter or underwriters, if any)
and take all such other reasonable actions, in connection therewith in order to
expedite or facilitate the disposition of such Registrable Securities and in
such connection whether or not the Registrable Securities are to be sold in an
underwritten offering, the Company shall:
(i) make such representations and warranties to the Holders and the
underwriter or underwriters, if any, in form and substance and scope as
are customarily made by issuers to underwriters in secondary underwritten
offerings;
(ii) cause to be delivered to the sellers of Registrable Securities
and the underwriter or underwriters, if any, opinions of counsel to the
Company, dated the date of delivery of any Registrable Securities sold
pursuant thereto, which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriter or
underwriters and the appointed representative or counsel of the Holders,
addressed to the Holders and each underwriter:
(A) in the case of an underwritten offering, covering the
matters customarily covered in opinions requested in secondary
underwritten offerings; or
(B) in the case of any offering that is not underwritten,
covering the effectiveness of the registration statement;
(iii) in the case of an underwritten offering, cause to be delivered
at the time of delivery of any Registrable Securities sold pursuant
thereto, letters from the Company's
3
<PAGE>
independent certified public accountants addressed to the Holders and each
underwriter stating that such accountants are independent public
accountants within the meaning of the Securities Act and the applicable
published rules and regulations thereunder, and otherwise in customary
form and covering such financial and accounting matters as are customarily
covered by letters of the independent certified public accountants
delivered in connection with secondary underwritten public offerings;
(iv) if an underwriting agreement is entered into, cause the same to
set forth indemnification and contribution provisions and procedures which
are no less favorable to the Holders and the Company than those
contemplated by sections 8 and 9 hereof with respect to all parties to be
indemnified pursuant to such sections;
(v) deliver such documents and certificates as may be reasonably
requested by the Holders of the Registrable Securities being sold or the
managing underwriter or underwriters, if any, to evidence compliance with
clause (i) above and with any customary conditions contained in the
underwriting agreement, if any, or other agreement entered into by the
Company;
the foregoing in this paragraph 2(b) shall be done at each closing under any
such underwriting or similar agreement or as and to the extent required
thereunder; provided, however, the foregoing in paragraph 2(b) shall not be
required on more than two (2) occasions;
(c) The Company shall make available for inspection, review and comment by
a representative or representatives of the Holders, any underwriter
participating in any disposition pursuant to a Registration Statement, and any
attorney or accountant retained by such Holders or underwriter, any such
registration statement or amendment or supplement or any blue sky, Nasdaq or
other filing, all financial and other records, pertinent corporate documents and
properties of the Company as they may reasonably request for the purpose, and
cause the Company's officers, directors and employees to supply all information
reasonably requested by any such representative, underwriter, attorney or
accountant in connection with such Registration Statement.
3. Underwritten Distribution. If any Holder intends to distribute the
Registrable Securities covered by a Registration Statement after the
Registration Date by means of an underwriting, such Holder shall so advise the
Company and, within thirty (30) days of the date thereof and without limiting
the generality of other provisions hereof, the Company will prepare and file
such amendment or amendments to the Registration Statement and make such other
filings as may be necessary or appropriate to effect any such underwritten
distribution. The managing underwriter for any such distribution shall be an
investment banking firm of national reputation selected by the Holders
participating in such distribution, subject to the Company's consent, which
shall not be unreasonably withheld.
4. Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Registration Rights Agreement shall be borne by the Company, and all Selling
Expenses shall be borne by the Holders.
4
<PAGE>
5. Registration Delay or Failure. The Company acknowledges that its
failure to register the Registrable Securities in accordance with the Agreement
and this Registration Rights Agreement will cause the Holders to suffer damages
in an amount that will be difficult to ascertain. Accordingly the parties agree
that it is appropriate to include herein a provision for liquidated damages and
to compensate the Holder fairly for the additional risk undertaken by the
Holders resulting from the Company's delay or failure to effect such
registration. The parties acknowledge and agree that the liquidated damages
provisions set forth in the Agreement represent the parties' good faith effort
to quantify such damages and, as such, agree that the form and amount of such
liquidated damages are reasonable and will not constitute a penalty; provided,
however, that nothing in this Section 6 shall limit the Holders' right to pursue
equitable relief, including without limitation, specific performance.
(a) If the Registration Statement covering the resale of the Shares is not
(i) filed by the Company with the SEC on or prior to the Registration Date the
Company shall pay to each Investor within five (5) days after such date a
penalty of 1% of the market value of the shares of Common Stock issued to each
such Investor upon conversion of shares of Series T Stock (assuming a market
price of no less than $0.80) and 1% of the Designated Price (as defined in the
Series T Certificate) of the shares of Series T Stock owned by such Investor as
of such date and/or (ii) declared effective on or prior to sixty days after the
Registration Date, the Company shall pay to each Investor within five (5) days
after such date a penalty of 1% of the market value of the shares of Common
Stock issued to each such Investor upon conversion of shares of Series T Stock
which are owned as of such date (assuming a market price of no less than $0.80)
and 1% of the Designated Price (as defined in the Series T Certificate) of the
shares of Series T Stock owned by such Investor as of such date. In addition,
the Company shall also pay a penalty of 2% of such market value and/or
Designated Price, as the case may be, on the fifth (5th) day after the end of
each month for each month (or partial month) thereafter that the Registration
Statement has not been declared effective. The Company may pay any penalty
pursuant to this Section 5(a) in shares of Common Stock, valued for such
purposes, at the average closing bid price of the Common Stock for the fifteen
trading days immediately preceding the date such payment is due.
6. Registration Procedures. In the case of each registration effected by
the Company pursuant to this Registration Rights Agreement, the Company will
keep the Holders advised in writing as to initiation of each registration and as
to the completion thereof. At its expense, the Company will use its best efforts
to:
(a) Keep such registration effective for the period of sixty (60) months
or until all the Securities are sold or eligible for sale pursuant to Rule
144(k) of the SEC or any successor or similar provision, whichever is earlier.
(b) Furnish such number of prospectuses and other documents incident
thereto as any Holder from time to time may reasonably request.
(c) Notify the Holders of any event or circumstance the result of which is
that the Company's Registration Statement or prospectus included therein
contains an untrue statement of material fact or omits to state any material
fact required to be stated therein or necessary to make the
5
<PAGE>
statements therein not misleading and shall (i) in the case of any event or
circumstance not provided for in clause (ii) below, within thirty (30) business
days of such notification or (ii) in the case of any acquisition, merger or
other similar material transaction requiring additional disclosure to correct
any such untrue statement or omission, within sixty (60) days of such
notification, amend or supplement the Registration Statement or prospectus to
correct such inaccuracy or disclose such development; provided, however, that
upon receipt of such notice, each Holder shall immediately discontinue
dispositions of Registrable Securities thereunder until such Holder's receipt
from the Company of a supplemented or amended prospectus and, if so requested by
the Company, each Holder shall deliver to the Company all copies (other than
permanent file copies in such Holder's possession) of the prospectus covering
the Registrable Securities current at the time of receipt of such notice; and
provided further, that if the Registration Statement or prospectus is not
amended or supplemented so as to remedy any inaccuracy or disclose such
development by the thirtieth (30th) business day in the case of clause (i), or
the sixtieth (60th) business day in the case of clause (ii), in each case, after
notice of inaccuracy is given by the Company to the Holders, then the Company
shall issue to a Holder upon each subsequent conversion by such Holder of any
Preferred Stock which was convertible into Common Stock at any time from the
applicable date upon which such Registration Statement was required to be
supplemented or amended (i.e., the thirtieth (30th) business day or sixtieth
(60th) business day after notification, as the case may be) (the "Required
Registration Statement Amendment Date") until such date as the Registration
Statement is so amended (the "Registration Statement Amendment Date"), such
additional shares of Common Stock as would have been issuable to such Holder
upon such conversion had the Applicable Percentage used in determining the
Conversion Date Market Price for such conversion been increased by the Amendment
Penalty Discount in the case of an event described in clause (i) or the
Alternative Penalty Discount in the case of an event described in clause (ii).
As used herein, (x) the "Amendment Penalty Discount" shall initially equal zero
percent (0%) on a Required Registration Amendment Date in the case of an event
described in clause (i) and shall increase by one percent (1%) for every fifth
(5th) business day thereafter until the applicable Registration Statement
Amendment Date and (y) the Alternative Penalty Discount shall initially equal
two and one-half percent (2 1/2%) on a Required Registration Statement Amendment
Date with respect to an event described in clause (ii) and shall increase by two
and one-half percent (2 1/2%) on the thirtieth (30th) business day thereafter if
the applicable Registration Statement Amendment Date has not then occurred and
shall increase by two percent (2%) for every thirtieth (30th) business day
thereafter until the applicable Registration Statement Amendment Date.
7. Indemnification.
(a) Company Indemnity. The Company will indemnify each Holder, each of its
officers, directors, partners, employees and agents and each person controlling
such Holder within the meaning of Section 15 of the Securities Act and the rules
and regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Registration Rights Agreement, and
each underwriter, if any, and each person who controls, within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus,
6
<PAGE>
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any state securities law or in either case, any rule or
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse such Holder, each of its
officers, directors, partners, employees and agents and each person controlling
such Holder, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by such Holder or the underwriter and
stated to be specifically for use therein. The indemnity agreement contained in
this Section 7(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent will not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will severally and not jointly, if
Registrable Securities held by it are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify the
Company, each of its officers, directors, partners, employees and agents and
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder, each other Holder (if any), and each of their officers,
directors and partners, and each person controlling such other Holder against
all claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any such registration statement, prospectus,
offering circular or other document, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statement therein not misleading and will reimburse the Company and such
other Holders and their officers, directors, partners, employees, agents,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by Holder and stated to be specifically for use
therein; provided, however, that the obligations of Holder shall not apply to
amounts paid in settlement of any such claims, losses, damages or liabilities if
such settlement is effected without the consent of such Holder (which consent
shall not be unreasonably withheld). Notwithstanding the foregoing, each
Holder's indemnification obligation hereunder shall be limited to the net
proceeds received by such Holder from sales of Registrable Securities.
(c) Procedure. Each party entitled to indemnification under this Article
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as
7
<PAGE>
to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim in any litigation resulting therefrom,
provided that counsel for the Indemnifying Party, who shall conduct the defense
of such claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld), and the
Indemnified Party may participate in such defense at such party's expense, and
provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Article except to the extent that the Indemnifying Party is actually
prejudiced by such failure to provide notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified of a release from all liability in
respect to such claim or litigation. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
8 Contribution. If the indemnification provided for in Section 7 herein is
unavailable to the Indemnified Parties in respect of any losses, claims, damages
or liabilities referred to herein, then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified party as a result of such losses, claims, damages or
liabilities (i) as between the Company and the applicable Holder on the one hand
and the underwriters on the other, in such proportion as is appropriate to
reflect the relative benefits received by the Company and such Holder on the one
hand or underwriters, as the case may be, on the other from the offering of the
Registrable Securities, or if such allocation is not permitted by applicable
law, in such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company on the one hand and of such
Holder or underwriters, as the case may be, on the other, in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations and (ii) as
between the Company on the one hand and the applicable Holder on the other, in
such proportion as is appropriate to reflect the relative fault of the Company
and of such Holder in connection with such statements or omissions.
The relative benefits received by the Company on the one hand and the
applicable Holder or the underwriters, as the case may be, on the other shall be
deemed to be in the same proportion as (x) the proceeds from the offering (net
of underwriting discounts and commissions but before deducting expenses)
received by the Company from the initial sale of the Preferred Stock by the
Company to such Holder pursuant to the Agreement and from the exercise of the
Warrants by such Holder bear to (y) the gain realized by such Holder or the
total underwriting discounts and commissions received by the underwriters as set
forth in the table on the cover page of the prospectus, as the case may be. The
relative fault of the Company on the one hand and of the applicable Holder or
underwriters, as the case may be, on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission to state a material fact relates to information
supplied by the Company, by such Holder or by the underwriters.
8
<PAGE>
In no event shall the obligation of any Indemnifying Party to contribute
under this Section 8 exceed the amount that such Indemnifying Party would have
been obligated to pay by way of indemnification if the indemnification provided
for under Section 7(a) or 7(b) hereof had been available under the
circumstances.
The Company and each Holder agree that it would not be just and equitable
if contribution pursuant to this Section 8 were determined by pro rata
allocation (even if the applicable Holder or the underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraphs. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraphs shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this section, no Holder or
underwriter shall be required to contribute any amount in excess of the amount
by which (i) in the case of the Holder, the net proceeds received by such Holder
from the sale of Registrable Securities or (ii) in the case of an underwriter,
the total price at which the Registrable Securities purchased by it and
distributed to the public were offered to the public exceeds, in any such case,
the amount of any damages that the Holder or underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
9 Survival. The Indemnity and contribution agreements contained in
Sections 7 and 8 and the representations and warranties of the Company referred
to in Section 2(b)(i) shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Indemnified Party or by or on behalf of the Company and
(iii) the consummation of the sale or successive resales of the Registrable
Securities.
10 Information from Holders. Each Holder shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Agreement.
11 Transfer or Assignment of Registration Rights. The rights granted to
the Purchasers by the Company under this Registration Rights Agreement to cause
the Company to register Registrable Securities, may be transferred or assigned
to a transferee or assignee, provided that the Company is given written notice
by the applicable Holder at the time of or within a reasonable time after said
transfer or assignment, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, and provided further that the
transferee or assignee of such rights is not deemed by the board of directors of
the Company, in its reasonable judgment, to be a competitor of the Company, and
provided further that the transferee or assignee of such rights agrees to be
bound by this Registration Rights Agreement.
9
<PAGE>
12 Miscellaneous.
(a) Entire Agreement. This Registration Rights Agreement, the Agreement
and the documents referenced in the Agreement contain the entire understanding
and agreement of the parties. This Registration Rights Agreement may not be
modified or terminated except by a written agreement signed by the Company and
the holders of at least two-thirds of the shares of Preferred Stock outstanding
at the time.
(b) Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be effective (i) upon hand
delivery or delivery by telex (with correct answer back received), telecopy or
facsimile, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (ii) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
to the Company:
Geotek Communications, Inc.
102 Chestnut Ridge Road
Montvale, NJ 07645
Attention: General Counsel and Secretary
Fax: (201) 930-9614
with copies to:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Attention: Leonard M. Klehr, Esq.
Fax: (215) 568-6603
to the Purchasers at the address set forth for each Purchaser in the
Agreement, with copies to such Purchaser's representatives (if any) at the
address for such representative set forth in the Agreement.
The Company or any Purchaser may from time to time change its address for
notices under this Section 13(b) by giving at least 10 days' written notice of
such changed address to each of the Purchasers (with respect to the Company) or
the Company (with respect to the Purchasers).
10
<PAGE>
(c) Gender of Terms. All terms used herein shall be deemed to include the
feminine and the neuter, and the singular and the plural as the context
requires.
(d) Governing Law; Consent to Jurisdiction. This Registration Rights
Agreement shall be governed by and construed in accordance with the laws of the
State of New York without regard to principles of conflicts of law or choice of
law, except for matters arising under the Securities Act or the Exchange Act
which matters shall be construed and interpreted in accordance with such Acts.
The Company hereby agrees that all actions or proceedings arising directly or
indirectly from or in connection with this Registration Rights Agreement shall,
at the Purchaser's sole option, be litigated only in the Supreme Court of the
State of New York or the United States District Court for the Southern District
of New York located in New York County, New York. The Company consents to the
jurisdiction and venue of the foregoing courts and consents that any process or
notice of motion or other application to either of said courts or a judge
thereof may be served inside or outside the State of New York or the Southern
District of New York by registered mail, return receipt requested, directed to
the Company at its address set forth in this Registration Rights Agreement (and
service so made shall be deemed complete five (5) days after the same has been
posted as aforesaid) or by personal service or in such other manner as may be
permissible under the rules of said court.
(e) Titles. The titles used in this Registration Rights Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Registration Rights Agreement.
(f) Counterparts. This Registration Rights Agreement may be executed in
any number of counterparts each of which shall be enforceable against the
parties actually executing such counterparts, and all of which together shall
constitute one instrument.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed as of the date first above written.
GEOTEK COMMUNICATIONS, INC.
By: /s/
-------------------------------------
PURCHASERS:
RGC International Investors, LDC
By: Rose Glen Capital Management, L.P.,
as Investment Manager
By: RGC General Partner Corp.,
as general partner
By: /s/ Wayne D. Bloch
-------------------------------------
Wayne D. Bloch, Managing Director
Halifax Fund, L.P.
By: The Palladin Group, its
Investment Manager
By: Palladin Capital Management LLC,
its General Partner
By:/s/ Andrew Kaplan
-------------------------------------
Andrew Kaplan, Authorized
Representative
[SIGNATURES CONTINUED]
<PAGE>
AGR Halifax Fund, Ltd.
F/b/o Ramius Halifax Partners, LP
By: AG Ramius Partners, LLC
Its: Investment Advisor
By:/s/ Morgan B. Stark
-------------------------------------
Morgan B. Stark, Managing Officer
AGR Halifax Fund, Ltd.
F/b/o Ramius Halifax Overseas Fund, Ltd.
By: AG Ramius Partners, LLC
Its: Investment Advisor
By:/s/ Morgan B. Stark
--------------------------------------
Morgan B. Stark, Managing Officer
AGR Halifax Fund, Ltd.
F/b/o Hick Investments, Ltd.
By: AG Ramius Partners, LLC
Its: Investment Advisor
By:/s/ Morgan B. Stark
--------------------------------------
Morgan B. Stark, Managing Officer
Gleneagles Fund, Ltd.
By: The Palladin Group, its
Investment Manager
By: Palladin Capital Management LLC,
its General Partner
By:/s/ Andrew Kaplan
-------------------------------------
Andrew Kaplan, Authorized
Representative
[SIGNATURES CONTINUED]
<PAGE>
Colonial Penn Insurance Company
By: The Palladin Group, its Investment
Manager
By: Palladin Capital Management LLC,
its General Partner
By:/s/ Andrew Kaplan
-------------------------------------
Andrew Kaplan, Authorized
Representative
Colonial Penn Life Insurance Company
By: The Palladin Group, its Investment
Manager
By: Palladin Capital Management LLC,
its General Partner
By:/s/ Andrew Kaplan
-------------------------------------
Andrew Kaplan, Authorized
Representative
Palladin Partners I, L.P.
By:/s/ Andrew Kaplan
-------------------------------------
Andrew Kaplan, Authorized
Representative
[SIGNATURES CONTINUED]
<PAGE>
Nelson Partners
By: /s/
-------------------------------------
Olympus Securities, LTD.
By: /s/
-------------------------------------
CIBC, Wood Gundy Securities Corp.
By:/s/ Walter F. McLallen
-------------------------------------
Walter F. McLallen, Managing Director
Themis Partners L.P.
By: Promethean Investment Group, L.L.C.,
its General Partner
By:/s/
--------------------------------------
Samyang Merchant Bank
By: Promethean Investment Group, L.L.C.,
its Investment Advisor
By:/s/
--------------------------------------
[SIGNATURES CONTINUED]
<PAGE>
Heracles Fund
By: Promethean Investment Group, L.L.C.,
its Investment Advisor
By:/s/
--------------------------------------
Leonardo, L.P.
By: Angelo, Gordon & Co., L.P., its
General Partner
By: /s/ Michael L. Gordon
-------------------------------------
Michael L. Gordon, Chief Operating
Officer
GAM Arbitrage Investments, Inc.
By: Angelo, Gordon & Co., L.P., its
Investment Advisor
By: /s/ Michael L. Gordon
-------------------------------------
Michael L. Gordon, Chief Operating
Officer
AG Super Fund International
Partners, L.P.
By: Angelo, Gordon & Co., L.P.,
its General Partner
By: /s/ Michael L. Gordon
-------------------------------------
Michael L. Gordon, Chief Operating
Officer
[SIGNATURES CONTINUED]
<PAGE>
Ramius Fund, Ltd.
By: AG Ramius Partners, L.L.C.,
its Investment Advisor
By: /s/ Michael L. Gordon
-------------------------------------
Michael L. Gordon, Managing Officer
Raphael, L.P.
By: /s/ Michael L. Gordon
-------------------------------------
Michael L. Gordon, Chief Operating
Officer
AG Super Fund, L.P.
By: Angelo, Gordon & Co., L.P., its
General Partner
By: /s/ Michael L. Gordon
-------------------------------------
Michael L. Gordon, Chief Operating
Officer
Michaelangelo, L.P.
By: Angelo, Gordon & Co., L.P., its
General Partner
By: /s/ Michael L. Gordon
-------------------------------------
Michael L. Gordon, Chief Operating
Officer
[SIGNATURES CONTINUED]
<PAGE>
Angelo, Gordon & Co., L.P.
By: /s/ Michael L. Gordon
-------------------------------------
Michael L. Gordon, Chief Operating
Officer
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Earnings include income before income taxes plus fixed charges less capitalized
interest. Fixed charges include interest and one-third of rent expense
(representing the estimated interest component of operating leases). The dollar
amount of the deficiency in earnings to fixed charges was $57.3 million for the
period ending March 31, 1998.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 11,643
<SECURITIES> 0
<RECEIVABLES> 7,034
<ALLOWANCES> 0
<INVENTORY> 22,989
<CURRENT-ASSETS> 121,290
<PP&E> 161,012
<DEPRECIATION> 40,073
<TOTAL-ASSETS> 351,137
<CURRENT-LIABILITIES> 121,545
<BONDS> 257,419
40,000
11
<COMMON> 1,135
<OTHER-SE> (74,285)
<TOTAL-LIABILITY-AND-EQUITY> 351,137
<SALES> 6,932
<TOTAL-REVENUES> 6,932
<CGS> 15,209
<TOTAL-COSTS> 32,434
<OTHER-EXPENSES> (1,306)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,034
<INCOME-PRETAX> 6,979
<INCOME-TAX> 82
<INCOME-CONTINUING> 6,897
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,897
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.06
</TABLE>
