Registration No. 333-______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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AMERICAN MOBILE SATELLITE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 93-0976127
(State or other jurisdiction (I.R.S. Employee
of incorporation or organization) Identification Number)
10802 Parkridge Blvd.
Reston, Virginia 20191-5416
(703) 758-6000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Randy Segal
Vice President, General
Counsel and Secretary
American Mobile Satellite Corporation
10802 Parkridge Blvd. Reston, Virginia 20191-5416
(703)758-6130
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box.
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If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (as defined below), other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. X
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If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
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If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
---
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
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<PAGE>
CALCULATION OF REGISTRATION FEE
-------------------------------
<TABLE>
<CAPTION>
Title of each class Amount to be Proposed Proposed Amount of
of registered maximum maximum registration fee
securities to be offering price aggregate
registered per offering
share(1) price(1)
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<S> <C> <C> <C> <C>
Warrants to
purchase Common
Stock 335,000 N/A(1) N/A(1) N/A(1)
Common Stock,
$0.01 par value per
share (2) 1,258,759 $12.51(3) $15,747,075(3) $4,378
Common Stock,
$0.01 par value per
share (4) 6,520,532 (5) $33,825,259(5) $9,404
===================== =========== ============= ================= ==============
</TABLE>
(1) In accordance with Rule 457(g) under the Securities Act of 1933, as amended
(the "Securities Act"), no separate registration fee is payable in respect
of the warrants ("Warrants") to purchase shares of common stock, par value
$.01 per share ("Common Stock").
(2) Represents the shares of Common Stock issuable upon the exercise of the
Warrants.
(3) Estimated in accordance with Rule 457(g) under the Securities Act
solely for the purpose of computing
the amount of the registration fee.
(4) Represents shares of Common Stock that may be sold by certain stockholders
of the Company.
(5) Estimated in accordance with Rule 457(c) under the Securities Act solely
for the purpose of computing the amount of the registration fee, based on the
average of the high and low price of the Common Stock ($5.1875) as reported on
the Nasdaq National Market on January 28, 1999.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act or until this registration statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
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EXPLANATORY NOTE
----------------
This Registration Statement contains two forms of prospectus: (1) one to be
used in connection with offers and sales of Warrants to purchase Common Stock
and the issuance of shares of Common Stock upon the exercise of such Warrants
and (2) the other in connection with offers and sales of shares of Common Stock
held by Motorola, a stockholder of the Company. The sections in these
prospectuses relating to general statements about the Company, as opposed to
statements about the securities covered thereby, are identical.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. The prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Dated February __, 1999
Prospectus
AMERICAN MOBILE SATELLITE
CORPORATION
335,000 Warrants
1,258,759 Shares of Common Stock
In a private transaction in March 1998, we issued Warrants to purchase our
common stock. Under this prospectus, we are offering the shares of our common
stock that holders of Warrants may purchase upon exercising the Warrants. In
addition, the holders of these Warrants who are listed inside are offering and
selling their Warrants under this prospectus.
Our common stock is quoted on the Nasdaq National Market and traded under
the symbol "SKYC."
Our principal executive offices are located at 10802 Parkridge Blvd.,
Reston, Virginia 20191-5416, and our telephone number is (703) 758-6000.
------------------
See "Risk Factors" beginning on page 5 for a discussion of certain material
factors that you should consider in connection with an investment in our common
stock.
------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
<PAGE>
TABLE OF CONTENTS
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Page
Prospectus Summary.............................................................2
The Company...........................................................2
The Offering..........................................................3
Risk Factors...................................................................5
Use of Proceeds...............................................................18
Selling Warrantholders........................................................18
Plan of Distribution..........................................................22
Description of the Warrants...................................................23
Description of Capital Stock..................................................28
Legal Matters.................................................................30
Experts.......................................................................30
Where You Can Find More Information...........................................31
This prospectus contains and incorporates by reference certain forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995 with respect to our business, financial condition and results
of operations, including, without limitation, statements under the captions
"Business" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our annual and quarterly reports. These forward
looking statements reflect our plans, expectations and beliefs and, accordingly,
are subject to certain risks and uncertainties. We cannot guarantee that any of
such forward looking statements will be realized. Factors that may cause actual
results to differ materially from those contemplated by such forward looking
statements include, among others, the factors discussed in the section of this
prospectus entitled "Risk Factors."
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<PAGE>
PROSPECTUS SUMMARY
------------------
The following summary is qualified in its entirety by the detailed
information and financial statements, including the notes thereto, contained or
incorporated by reference in this prospectus.
The Company
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The Company was incorporated on May 3, 1988. At that time, the FCC
determined that the public interest would be best served by granting the mobile
satellite services license to a consortium of all willing and qualified
applicants. The Company was formed by eight of the initial applicants for the
license. The FCC authorized us to construct, launch, and operate a mobile
satellite services system to provide a full range of mobile voice and data
services via satellite to land, air and sea-based customers. On April 7, 1995,
we successfully launched our first satellite, MSAT-2, from Cape Canaveral,
Florida.
Our service area:
-----------------
o The continental United States o Alaska
o Hawaii o Puerto Rico
o The U.S. Virgin Islands o United States coastal waters
o International waters and airspace o Any foreign territory where the local
government has authorized the provision
of service
Our wholly-owned subsidiary, AMSC Acquisition Company, Inc. operates our
mobile satellite services. On March 31, 1998 we acquired (through AMSC
Acquisition) ARDIS Company, then a wholly-owned subsidiary of Motorola, Inc.,
that owns and operates a two-way wireless data communications network. We
purchased ARDIS for approximately $50 million in cash and $50 million in our
common stock. Through the acquisition of ARDIS, we became a nationwide provider
of wireless communications services, including data, dispatch, and voice
services. We primarily serve business customers in the United States.
On October 16, 1997, our indirect subsidiary, XM Satellite Radio Inc.
(formerly American Mobile Radio Corporation), received a license from the FCC to
provide satellite-based Digital Audio Radio Service ("DARK") throughout the
United States. XM Radio bid $89.9 million at auction on April 2, 1997 for the
license. XM Radio has and will continue to be funded by parties other than the
Company in exchange for debt and an equity interest in XM Radio. Accordingly, we
do not expect that the development of this business will have a material impact
on our financial position, results of operations, or cash flows. XM Radio is an
indirect subsidiary that we own through our direct subsidiary XM Satellite Radio
Holdings Inc. (formerly AMRC Holdings, Inc.).
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<PAGE>
As a result of the combination of our satellite-based business with the
ARDIS terrestrial-based business, we now offer a broad range of end-to-end
wireless solutions utilizing a seamless network consisting of the nation's
largest, most fully-deployed terrestrial wireless data network and a satellite
in geosynchronous orbit. Our satellite-only data communications system provides
data services primarily to long-haul trucking customers. Our multi-mode
communications system uses both our terrestrial and satellite networks to
provide "least-cost routing" for two-way data communications. We are able to
provide cost-effective nationwide coverage for communications outside the
terrestrial network coverage area by routing messages over the lower cost
terrestrial network before automatically routing messages over the satellite
network. Our terrestrial network delivers superior in-building penetration,
completion rates and response times compared to other wireless data networks
through the use of a single frequency reuse technology.
In addition to providing data service, we offer two forms of mobile voice
communications service: nationwide dispatch service and satellite telephone
service. We are the only company to offer a nationwide dispatch service that
allows multiple users located anywhere in our service area to share a single
connection for point-to-multipoint communication using push-to-talk handsets. We
market our nationwide dispatch service primarily to field services users with
wide-area fleet communications needs. Our satellite telephone service provides
traditional voice, fax and data service through satellite terminals that are
similar to cellular phones. We market our satellite telephone service primarily
to maritime users, including both commercial and recreational vessels, and other
targeted market segments such as government, public safety organizations and the
natural resource industries.
The Offering
------------
Securities Offered..............We are offering 335,000 Warrants and 1,258,759
shares of our common stock issuable upon the
exercise of the Warrants. No fractional shares
of common stock will be issued upon exercise of
the Warrants. Instead, at the time of exercise,
the Company will pay to the holder of the
Warrant an amount in cash equal to the current
market value of any fractional share.
Expiration of Warrants..........The Warrants will expire on April 1, 2008.
Exercise of Warrants............The Warrants became exercisable on June 26,
1998. Each Warrant entitles its holder to
purchase 3.75749 shares of our common stock at
an exercise price of $12.51 per share. If
certain events listed in the warrant agreement
dated March 31, 1998 occur, we may adjust the
number of shares of common stock for which, and
the price per share at which, a Warrant is
exercisable.
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<PAGE>
Listing or Quotation
of Common Stock.................Our common stock is traded on the Nasdaq
National Market under the symbol "SKYC."
Registration....................The warrant registration rights agreement, dated
as of March 31, 1998, requires us to register
the Warrants and the common stock we will issue
when Warrants are exercised. Under the terms
of the warrant registration rights agreement, we
must use our best efforts to keep this
registration statement continuously effective
as follows:
o Duration of effectiveness: until the earlier
-------------------------
of (1) the time when the transfer of the
Warrants and the common stock is no longer
restricted or (2) the expiration of the
Warrants.
o Suspensions of effectiveness may occur:
--------------------------------------
- at our option, up to two times during any
consecutive 365-day period;
- for no more than 45 consecutive days
per suspension and
- only in connection with a possible
acquisition, business combination or
other development affecting the Company
if (1) the Board of Directors
reasonably believes that there is a
valid business purpose for a suspension
and (2) provides notice of its
determination to holders of Warrants.
Use of Proceeds...............We will not receive any proceeds from the sale
of the Warrants. To the extent that any
Warrants are exercised, we will receive the
exercise price for the common stock we issue.
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<PAGE>
RISK FACTORS
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We Have Substantial and Continuing Operating Losses
- ---------------------------------------------------
We have incurred significant operating losses and negative cash flows in
each year since we began operations. These losses are due primarily to start-up
costs, the costs of developing and building each network and the cost of
developing, selling and providing our products and services. For the nine months
ended September 30, 1998, we reported operating losses of approximately $65.6
million. For historical periods prior to our acquisition of ARDIS, we reported
operating losses of approximately $97.4 million, $120.0 million and $70.5
million in 1997, 1996 and 1995. During these periods ARDIS reported operating
losses of approximately $17.4 million, $29.2 million, and $40.6 million in 1997,
1996 and 1995. We expect to have significant operating losses and will record
significant net cash outflow in the near term. We cannot guarantee that we will
have sufficient resources to complete the expenditures required to operate the
business.
Since inception, we have been engaged in operating our business, recruiting
key management and technical personnel and raising capital to fund our
operations and the development of our networks. We launched commercial voice
service in January 1996. Accordingly, you only can evaluate our prospects in
each of our markets based on this short operating history. You must consider the
prospects for our success in light of the risks, expenses and difficulties often
encountered when establishing a new business in an evolving industry that is
subject to rapid technological and price changes, and characterized by an
increasing number of market competitors.
We estimate that we will not have sufficient operating revenues to cover
operating expenses for the foreseeable future. Our ability to generate positive
operating cash flow will depend upon, among other factors, the successful
integration of ARDIS into our operations, the achievement of related business
synergies and the successful marketing of our services. We cannot guarantee that
the ARDIS integration or our marketing efforts will be successful.
The leasing of our satellite to a third party has been delayed and may not
materialize. Accordingly, we are considering other alternatives for increased
usage from third parties. Without increased utilization, future cash flows
generated by the satellite and its network components may not be sufficient to
cover the carrying value and accordingly, a write down of the value of the
assets might be necessary.
In addition, we will require additional capital for expenditures necessary
to further develop our business and expand our networks.
We Are Highly Leveraged
- -----------------------
As of September 30, 1998, our indebtedness totaled approximately $492
million ($484 million net of debt discount). As of September 30, 1998 we had $63
million available under AMSC Acquisition Company, Inc.'s revolving credit
facility; however, the ability to borrow under this facility is subject to us
meeting certain covenants which we may not meet in the future. AMSC Acquisition
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<PAGE>
also received a commitment from Motorola for up to $10.0 million of vendor
financing of certain capital expenditures. On a pro forma basis, after giving
effect to the acquisition of ARDIS and the related financing as if these
transactions had been consummated on January 1 of the period presented, our
earnings would have been insufficient to cover our fixed charges by
approximately $176.2 million for fiscal 1997 and $114.1 million for the nine
months ended September 30, 1998. At September 30, 1998 our stockholders' equity
was approximately $10.6 million. We and our subsidiaries will be permitted to
incur additional indebtedness in the future.
Beginning April 1, 2001, AMSC Acquisition, our wholly-owned subsidiary,
will be allowed to pay dividends to us. This will permit us to meet our interest
expenses with respect to our $100 million term loan facility. Historically, we
have not generated sufficient earnings or cash flow from operations to make such
interest payments.
The degree to which we are leveraged could have important consequences
to the success of our business including, but not limited to:
o increasing our vulnerability to general adverse economic and industry
conditions;
o limiting our ability to obtain additional financing to fund future
working capital, capital expenditures, research and development
and other general corporate requirements;
o requiring the dedication of a substantial portion of our cash
flow from operations to the payment of principal of, and interest on,
our indebtedness, thereby reducing the availability of such cash
flow to fund working capital, capital expenditures, research and
development or for other general corporate purposes;
o limiting our flexibility in planning for, or reacting to, changes in
our business and the industry; and
o placing us at a competitive disadvantage vis-a-vis less leveraged
competitors.
We May Need Additional Capital
- ------------------------------
We expect to continue to make significant outlays for the foreseeable
future to fund interest expense, capital expenditures and working capital. We
will continue this practice until we begin to generate positive cash flow from
operations and for the foreseeable future thereafter. If our cash flows from
operations are less than projected, we will require additional debt or equity
financing in amounts that could be substantial. The type, timing and terms of
financing we may select will depend upon our cash needs, the availability of
other financing sources and the prevailing conditions in the financial markets.
We cannot guarantee that we will be able to find any such sources at any given
time on favorable terms.
Motorola has entered into an agreement with our wholly-owned, indirect
subsidiary, ARDIS, to provide up to $10 million of vendor financing, which will
be available to finance up to 75% of the purchase price of additional network
base stations necessary to meet the build-out requirements under a contract AMSC
Acquisition has with the United Parcel Service. Funds borrowed under this loan
agreement have an interest rate equal to LIBOR plus 7.0% and the loan is
guaranteed by us and each subsidiary of AMSC Acquisition. The terms of the loan
require that amounts borrowed be secured by the equipment purchased with the
loan. As of October 31, 1998, we had borrowed $591,707 from Motorola under this
loan.
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<PAGE>
We cannot guarantee that our current projection of cash flow from
operations will be accurate. Our projections will depend upon numerous future
factors and conditions, many of which are outside of our control. You should
note that projections are merely estimates of future events and you should
expect actual events to vary from current estimates, possibly materially. In
addition, if customer demand exceeds our current expectations and we can
accommodate such demand without adversely affecting the quality of our service,
we are likely to attempt to accelerate our expansion. If we elect to accelerate
our build-out or introduce new products or services, our funding needs will
increase, possibly to a significant degree. We cannot guarantee that we will be
able to secure any additional financing on commercially reasonable terms or at
all. Our cost of expanding our network and operating our business, as well as
our revenues, will depend on a variety of factors including:
o our ability to meet our expansion schedules;
o the number of customers and the services for which they subscribe;
o the nature and penetration of new services that we and our
competitors may offer;
o regulatory changes; and
o changes in technology.
As a result, our actual costs and revenues may vary from expected amounts,
possibly to a material degree. Such variations are likely to affect our future
capital requirements. Accordingly, it is possible that we will be required to
raise substantial additional capital in the future or that our current
projections will prove to be inaccurate.
Our Market Is Rapidly Changing
- ------------------------------
The markets for wireless communications services change rapidly. Our
success depends, in part, on our ability to respond and adapt to such changes.
We cannot guarantee that we will be able to compete effectively under, or adjust
our contemplated plan of development to meet, changing market conditions. We
cannot guarantee that we will be able to implement our strategy or that our
strategy will be successful in this rapidly evolving market.
This market is also marked by the continuous introduction of new
products and services and increased capacity for services similar to those we
provide. Future technological advances in the wireless communications industry
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<PAGE>
may result in the availability of new products or services. Advances may
increase the efficiency of existing products or services. If a technology
becomes available that is more cost-effective or creates a superior product, we
may be unable to access such technology or finance the necessary substantial
capital expenditures that may be required. Our technology may be rendered less
profitable or less viable by existing, proposed or as yet undeveloped
technologies. We cannot guarantee that we will have available the financial and
other resources to compete effectively against companies possessing such
technologies. We are unable to predict which of the many possible future
products and services will meet evolving industry standards and consumer
demands. We cannot guarantee that we can adapt to such technological changes or
offer such products or services on a timely basis or establish or maintain a
competitive position.
We Depend on Market Acceptance
- ------------------------------
Our success is subject to a number of business, economic, regulatory and
competitive factors, many of which are beyond our control, including the extent
to which prospective customers will purchase our services. The vitality of our
business is subject to the successful implementation of our growth strategy,
which, in turn, depends, among other things, on our expectation that demand for
our services will increase significantly in the markets we serve. We have not
yet commercially introduced certain of these services and we cannot guarantee
that any of them will achieve market acceptance or result in the generation of
operating cash flow. Failure to gain market acceptance for current or planned
products and services would have a material adverse effect on our business. In
addition, we have incurred and will continue to incur significant operating
expenses.
Based upon certain expectations as to the anticipated market acceptance of,
and customer demand for, our services, we have made, and will continue to make,
significant capital investments. Based on similar expectations, our subsidiaries
have entered into operating leases, equipment supply contracts and service
arrangements, and are attempting to secure financing. Accordingly, any material
miscalculation with respect to our operating strategy or business plan could
have a material adverse effect on our business.
We Must Effectively Manage Our Growth
- -------------------------------------
In our continuing efforts to respond to changing market conditions, we may
experience periods of rapid expansion. In order to manage growth effectively in
the complex environment in which we operate, we will need to maintain and
improve our operating and financial systems and expand, train and manage our
employee base. We must expand the capacity of our sales, distribution and
installation networks in order to achieve continued growth in our existing and
future markets. In general, if we fail to manage growth effectively there could
be a material adverse effect on our business, financial condition and results of
operations.
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<PAGE>
We May Be Subject to Liability Under the ARDIS/UPS Contract
- -----------------------------------------------------------
Our wholly-owned, indirect subsidiary, ARDIS, entered into a contract
with UPS for the use of the ARDIS network. Under this contract, we anticipate
providing communication services to UPS for approximately 50,000 terrestrial
wireless data units by the end of 2001. However, performance under the UPS
Contract is subject to certain significant conditions, including, among others:
o required capital expenditures to expand capacity of the ARDIS
network in certain areas;
o successful development of the DIAD III wireless data terminal device
by Motorola; and
o successful deployment of the DIAD III devices on the ARDIS network
within strict network operational performance levels guaranteed by
ARDIS.
The UPS Contract will require capital spending of approximately $10.5
million over the next three years. In addition, the contract represents a
significant implementation effort of a magnitude in excess of that of any
existing ARDIS customer. Failure to meet the requirements under the UPS Contract
could result in a loss of the contract as well as monetary penalties that could
materially adversely affect our business.
Under the UPS Contract, we also have significant warranties of performance,
both during the implementation phase and for ongoing network performance. During
the implementation phase, we must meet key checkpoints and milestones
culminating in an acceptance test. Failure of the acceptance test could result,
after a cure period, in the loss of the contract. In addition, we will have to
construct network capacity in several key cities. Failure to complete such
construction by the committed dates would subject us to monthly penalties until
we achieve compliance.
On an ongoing basis, the UPS Contract requires that we guarantee network
performance levels. If network availability drops below 99%, we will be subject
to an initial penalty of 2% of the average monthly use of the service,
calculated as the average of the last three months in the affected area. The
penalty increases if performance levels further drop.
As a part of the negotiations leading to the signing of the UPS Contract,
Motorola issued a performance guarantee regarding the network's performance. In
connection with our acquisition of ARDIS, we agreed to indemnify Motorola in
connection with such performance guarantee, and as security for our
indemnification obligations we have deposited $10.0 million into an escrow
account. This escrow account has the same three-year term (with two possible
one-year renewals) as the UPS Contract.
Our Customers Are Highly Concentrated
- -------------------------------------
After accounting for the acquisition of ARDIS, three customers accounted
for an aggregate of 32% of our recurring service revenue for the nine months
ended September 30, 1998 as follows:
o IBM -- 20%;
o NCR -- 7%; and
o Pitney Bowes -- 5%.
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<PAGE>
The loss of one or more of these customers, or any event, occurrence or
development which adversely affects our relationship with one or more of these
customers could have a material adverse effect on our business.
We Rely on Third Party Vendors
- ------------------------------
We rely on independent vendors to develop and manufacture wireless
communications devices for our networks, which are significant elements of our
business plan. These suppliers do not sell such devices to us on an exclusive
basis. We carry a limited inventory of such devices and generally have no
guaranteed supply arrangements. From time to time, we have experienced
interruptions and/or delays of supply. We cannot guarantee that we will not
experience such interruptions in the future. In addition, we have short-term
contracts with the majority of our suppliers. We cannot guarantee that our
suppliers will continue to provide products to us at attractive prices, or at
all, or that we will be able to obtain such products in the future from these or
other providers on the scale and within the time frames we require. Some or all
of our suppliers could enter into exclusive arrangements with our competitors,
or cease selling these components to us at commercially reasonable prices, or at
all. If we fail to obtain such products on a timely basis at an affordable cost,
or experience any significant delays or interruptions of supply, our business
would be materially adversely affected.
As part of our growth strategy, we rely on our suppliers to reduce the cost
of wireless communications devices approved and available for use on our
network. Our management believes that reductions in the cost of wireless
communications devices will result in increased sales of devices, additional
subscribers for our services and a corresponding increase in our service
revenues. If we fail to obtain such cost reductions on a timely basis, or
experience any significant delays of such reductions, our business would be
materially adversely affected.
We expect the anticipated expansion of our operations and infrastructure to
place a significant demand on our suppliers, some of which have limited
resources and production capacity. In addition, some of our suppliers, in turn,
rely on sole or limited sources of supply for components included in their
products. If our suppliers fail to adjust to meet such increasing demand, they
may be unable to supply devices in the quantities and the quality and at the
times we require, or at all. If we are unable to obtain sufficient quantities of
sole or limited source devices or to develop alternative sources, we could
experience delays and increased costs in the expansion of our operations and
infrastructure or become unable to properly maintain our existing level of
operations. Such occurrences could have a material adverse effect on our
business, financial condition and results of operations.
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<PAGE>
The ARDIS Technology Is Subject to Competitive Risks
- ----------------------------------------------------
The ARDIS network, and certain of its competitive strengths, such as deep
in-building penetration, is based upon a single frequency reuse ("SFR")
technology. Motorola holds the patent for SFR technology and ARDIS has a
non-exclusive license to use the SFR technology. ARDIS also relies on support
agreements with Motorola for support of the operations of certain portions of
the ARDIS network. However, Motorola could enter into arrangements with our
competitors and it is possible that such agreements could have a material
adverse effect on us. Also, in constructing additional network sites ARDIS may
encounter interfering facilities operated by other licensees that were not
anticipated in the design and licensing of the ARDIS facilities. To the extent
that ARDIS encounters such interfering facilities, ARDIS may be required to
purchase the interfering facilities or to cease operations where such
interference is encountered.
There Are Risks Associated With Satellite Technology
- ----------------------------------------------------
We have an agreement with TMI, the Canadian mobile satellite owner and
operator of MSAT-1, for backup, restoral and additional capacity usage if our
satellite fails or we need additional capacity. In return, we have agreed to
provide TMI with similar backup service on our MSAT-2 satellite. Each of the
MSAT-1 and MSAT-2 satellites has in the past experienced some technological
malfunctions, most recently with respect to MSAT-2 in January 1998. While recent
MSAT-2 malfunctions have involved either spare components or ones that did not
have a material impact on current operations, it is possible that either or both
satellites could experience future malfunctions at any time. If a serious
malfunction were to occur at a time when we have no backup capacity, there would
be a material adverse effect on our business.
MSAT-2 has an expected remaining service life of approximately seven years
and MSAT-1 has an expected remaining service life of greater than seven years,
in each case subject to potential technological failures and other factors. For
example, random failure of satellite components could result in damage to or
loss of MSAT-2 or MSAT-1. It is also possible that either satellite could be
damaged by electromagnetic storms or collisions with other objects, although
such occurrences are rare. Although we believe that the actual service lives of
both satellites may exceed their expected service lives, we cannot guarantee
that the expected service life of either satellite will be achieved or exceeded.
Although we have in-orbit insurance for a failure of MSAT-2, it is unlikely that
any recovery under such insurance would fully compensate us for losses we would
sustain for such a failure. In addition, the in-orbit insurance policy is
subject to annual or biannual renewal, and we cannot guarantee that insurance on
favorable terms and at commercially reasonable rates will remain available for
coverage of MSAT-2.
If there is a failure of MSAT-2 and MSAT-1 is not available for back-up, we
would have several additional options to replace the lost capacity. These
options include leasing or purchasing capacity on certain Inmarsat satellites,
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<PAGE>
or launching a new satellite. Any one of these options might not be adequate to
maintain all current service offerings, and would require substantial lead-time
and significant financing. It is likely that there would be significant service
interruptions and it would be necessary to raise significant additional funds,
both of which could have a material adverse effect on our business.
Our Remote Disaster Recovery System for the Satellite Network Ground Segment Is
Limited
Presently, our disaster recovery systems focus on internal redundancy and
diverse routing within each of the facilities operated by or for us. For
example, the ARDIS terrestrial network has access to a remote ground
communications backup complex that would enable us to continue to provide ARDIS
services in the event of a natural disaster affecting one geographic site. We do
not, however, currently have access to a remote backup satellite ground
communications facility that would enable us to continue to process mobile
satellite communications services for customers in the event of a natural
disaster or other occurrence that rendered the system unavailable. Our business
is subject to the risk that such a disaster or other occurrence could hinder or
prevent us from continuing to provide some services to some or all of our
customers.
Our Industry Is Highly Competitive
- ----------------------------------
The wireless communications industry is highly competitive and is
characterized by frequent technological innovation. The industry includes major
domestic and international companies, many of which have financial, technical,
marketing, sales, distribution and other resources substantially greater than
ours and which provide, or plan to provide, a wider range of services than we
will provide. Our products and services compete with a number of communications
services, including existing satellite services, terrestrial air-to-ground
services, and terrestrial land-mobile and fixed services, and may compete with
new technologies in the future. In addition, the FCC has recently allocated
large amounts of additional spectrum for communications uses or potential uses
that could compete with us. Additional allocations of spectrum for such uses may
occur in the future.
Our Business Is Subject to Regulatory Risks
- -------------------------------------------
The ownership and operations of our communication systems are subject to
significant regulation by the Federal Communications Commission. The FCC acts
under authority granted by the Communications Act of 1934, as amended, and
related federal laws. A number of our licenses are subject to renewal by the
FCC. Our satellite operations are subject to international frequency
coordination. Current FCC regulations generally limit the ownership and control
of our company by non-U.S. citizens or entities to no more than 25%. We cannot
guarantee that the rules and regulations of the FCC will continue to support our
operations as we presently conduct them and plan to conduct them in the future.
We cannot guarantee that all existing licenses will be renewed and requisite
frequencies coordinated.
- 12 -
<PAGE>
There are applications by others now pending before the FCC to use the
Inmarsat system and TMI's Canadian-licensed system, both of which operate in the
MSS L-band and have satellite footprints covering the United States, to provide
service in the United States. We have opposed these filings. In addition to
providing additional competition to us, a grant of domestic authority by the FCC
to use any of these foreign systems may increase the demand by these systems for
spectrum in the international coordination process and could adversely affect
our ability to coordinate our spectrum access.
On July 20, 1998, the International Bureau of the FCC granted an
application for Special Temporary Authority to use TMI's space segment to
conduct market tests in the U.S. for the next six months using up to 500 mobile
terminals. We have asked the full Commission to review this decision and stay
the effectiveness of the temporary authorization. There can be no assurance that
the FCC will stay the effectiveness of this decision or rescind the
International Bureau's grant of Special Temporary Authority.
Our Business Is Subject to the Year 2000 Problem
- ------------------------------------------------
We have developed and are implementing a Year 2000 Readiness Program to
address Year 2000 issues. Under the Year 2000 Readiness Program, we have
prioritized our core systems to undergo an assessment of Year 2000 vulnerability
and, if necessary, repair of Year 2000 problems. Our core business systems
include both hardware and software systems whose failure could have a material
impact on our financial condition and results of operations. Vendors that
provide critical products and services to us are also included in this
assessment of core business systems. Although the core business systems are the
top priority in our Year 2000 Readiness Program, we are assessing all of our
software and hardware for Year 2000 readiness.
Our Year 2000 Readiness Program includes the following phases:
Awareness Phase:
----------------
o educating employees about the problem and how the Year 2000 Readiness
Program will be implemented.
Inventory Phase:
----------------
o identifying all software programs and hardware systems and business
relationships with third parties.
Assessment Phase:
-----------------
o contacting the vendors of commercial off the shelf software and hardware
regarding Year 2000 readiness;
- 13 -
<PAGE>
o contacting business partners and service providers regarding their Year
2000 readiness status;
o analyzing software source code if available to us; and
o prioritizing non-compliant software and systems based on criticality to
the business.
Renovation Phase:
-----------------
o obtaining and installing software upgrades or patches for software that
is not Year 2000 ready; and
o replacing software or hardware that is not Year 2000 ready.
Validation/Testing Phase:
-------------------------
o conducting testing of upgraded/repaired software and hardware systems.
Implementation/Rollout Phase:
-----------------------------
o installing upgraded/repaired software and hardware systems;
o conducting user training; and
o updating documentation.
We completed the Inventory Phase in August 1998 for all systems that we
use, including software and hardware. We have also essentially completed the
Assessment Phase and overall, we are in the Renovation Phase. Planning has also
begun for the Validation/Testing Phase and the Implementation/Rollout Phase.
We anticipate completing the Implementation/Rollout Phase for all core
business systems before the end of 1999. Achieving Year 2000 readiness for our
satellite voice network and deploying renovated data terminals to customers
before the end of fourth quarter 1999 will be the most difficult tasks of the
Implementation/Rollout Phase. While we cannot guarantee that we will be
successful in making all core business systems Year 2000 ready by December 31,
1999, we believe we will be able to successfully complete the Year 2000
Readiness Program on time.
The total cost of our Year 2000 Readiness Program is estimated to have been
$2.4 million for 1998. Expenditures for the Year 2000 Readiness Program in
- 14 -
<PAGE>
1999 are estimated to be up to $7.4 million. Some modification costs, including
the purchase of software upgrades and consulting services, are expensed as
incurred. Other modification costs, such as hardware purchases, are being
treated as capital expenditures.
The cost and date on which we believe we will be Year 2000 ready are based
on our best estimates. We cannot guarantee that we will achieve these results
and our actual results could differ materially from those anticipated.
Some of our critical business systems depend on a significant number of
software programs and on services provided by third parties that are not within
our control. Failure to achieve Year 2000 readiness within our critical business
systems could result in possible service outages, miscalculations or disruptions
of operations that could have a material impact on our business. While we
believe we will be able to achieve Year 2000 readiness in a timely manner, the
schedule for the Implementation/Rollout Phase of several core business systems
extends to the third or fourth quarter 1999. Therefore, we may not achieve Year
2000 readiness on time or within budget. Contingency planning, as discussed
below, is currently underway to minimize the risk of business interruptions
caused by Year 2000 problems within the core business systems.
We already have certain contingency plans in place to minimize service
interruptions and these contingency plans can mitigate, although not eliminate,
interruptions caused by problems resulting from Year 2000 issues. For example,
we have backup power supplies and generators in place for certain portions of
our networks in the event of electrical power outages. In addition, for some
services we have contracted with more than one service provider. Some of our
systems that we already have in place are being incorporated into our Year 2000
contingency plan. If it is commercially reasonable to do so, we will include
other redundant or alternative sources of services in our Year 2000 contingency
planning efforts.
Five Principal Stockholders Control the Company
- -----------------------------------------------
Our principal stockholders are Hughes Communications Satellite Services,
Inc., Motorola, Inc., Baron Capital, Inc., Singapore Telecommunications Ltd. and
AT&T Wireless Services, Inc. These stockholders hold in aggregate approximately
75.7% of our common stock on a fully diluted basis. We have entered into
material contracts and transactions with our principal stockholders or their
affiliates and we may enter into additional contracts in the future. These
contracts may include the guarantee of our debt obligations. These stockholders
have other interests in the communications industry that may conflict with our
interests.
We Are Dependent on Our Key Personnel
- -------------------------------------
We are dependent on the efforts of a group of employees with technical and
business knowledge regarding our systems. If we lose the services of one or more
of these individuals it could materially and adversely affect our business and
our future prospects. We do not maintain key man life insurance on any of our
- 15 -
<PAGE>
officers or employees. Our future success will also depend on our ability to
attract and retain additional management and technical personnel required in
connection with the growth and development of our business. If we fail to retain
or attract such key personnel there could be a material adverse impact on our
business, financial condition and results of operations.
Our Charter and Bylaws Contain Anti-takeover Provisions
- -------------------------------------------------------
Our Certificate of Incorporation and Bylaws and the Delaware General
Corporation Law contain provisions that may have the following effects:
o discouraging, delaying or making more difficult a change in control; and
o preventing the removal of incumbent directors.
The existence of these provisions may negatively impact on the price of our
common stock and may discourage third-party bids. These provisions may reduce
any premiums paid to stockholders for their common stock. Furthermore, we are
subject to Section 203 of the Delaware General Corporation Law. Section 203
governs business combinations with interested stockholders, and also could have
the effect of delaying or preventing a change in control.
Our Certificate of Incorporation also allows our Board of Directors to
issue up to 200,000 shares of preferred stock and to fix the rights, privileges
and preferences of such shares without any further vote or action by the
stockholders. If this preferred stock is issued in the future, the rights of the
holders may adversely affect the rights of the holders of common stock. While we
have no present intention to issue shares of preferred stock, any such issuance
could be used to discourage, delay or make more difficult a change in control.
We Have Not Paid Dividends
- --------------------------
We have not declared or paid any dividends on our common stock since our
date of inception. We intend to retain any earnings to support the growth and
development of our business and we have no present intention of paying dividends
in the foreseeable future. In addition, our ability to pay dividends is
restricted by agreements we have made with several banks in connection with our
loans and credit facility arrangements.
The Prices of Our Common Stock and Warrants Could Be Volatile
- -------------------------------------------------------------
Historically, the market prices for securities of emerging companies in the
telecommunications industry have been highly volatile. Future announcements
concerning our business or the business of our competitors, including results of
technological innovations, new commercial products, or government regulations
may have a significant impact on the market price of our common stock. Our
common stock has been thinly traded since our initial public offering and its
price has been highly volatile in recent periods.
- 16 -
<PAGE>
We Have Shares Eligible for Future Sales
- ----------------------------------------
Future sales of substantial amounts of our common stock, or the perception
that such sales may occur, could adversely affect the value of the common stock
and could impair our ability to raise additional capital in the future through
the sale of equity securities. After giving effect to the issuance of common
stock upon the exercise of the Warrants, there will be approximately 33,495,707
million shares of common stock outstanding, approximately 21.1 million shares of
which will have been registered under the Securities Act. The majority of
outstanding shares are subject to various registration rights agreements,
lock-up agreements, and shareholder agreements. In addition, we have reserved
approximately 7.5 million shares of common stock for issuance upon the exercise
of other outstanding warrants and pursuant to employee benefit and stock
incentive plans. See "Description of Capital Stock."
There is Not a Public Market for the Warrants
- ---------------------------------------------
There is no public market for the Warrants and we do not intend to apply
for listing of the Warrants on any securities exchange or on the Nasdaq National
Market. We do expect that the Warrants will be eligible for trading in the
PORTAL Market.
We cannot guarantee that a liquid market for the Warrants will develop. If
an active market does not develop, the market price and liquidity of the
Warrants may be adversely affected. Historically, the market for Warrants such
as those offered hereby has been subject to disruptions that have caused
substantial volatility in the prices of similar securities. We cannot guarantee
that, if a market for the Warrants were to develop, such a market would not be
subject to similar disruptions. Any such disruptions may have an adverse effect
on the holders of the Warrants.
- 17 -
<PAGE>
USE OF PROCEEDS
---------------
We will not receive any proceeds from the sale of the Warrants. To the
extent that any holder exercises Warrants, we will receive the exercise price
for the common stock we issue upon the exercise, which is currently $12.51 per
share. We will use any proceeds we receive for general corporate purposes.
However, we cannot guarantee that any Warrants will be exercised.
SELLING WARRANTHOLDERS
----------------------
We originally issued and sold the Warrants in March 1998 as part of an
offering of 335,000 units. As part of this offering, we entered into a warrant
agreement, dated as of March 31, 1998, with our warrant agent, State Street Bank
and Trust Co. Each unit consisted of $1,000 principal amount of 12 1/4 % Senior
Notes due 2008 of AMSC Acquisition Company, Inc. and one Warrant. The units were
offered to Bear Stearns & Co. Inc., J.P. Morgan & Co., TD Securities (USA) Inc.
and BancAmerica Robertson Stephens in a private placement. The units were resold
by these initial purchasers in transactions exempt from the registration
requirements of the Securities Act of 1933. Within the United States, the
initial purchasers sold Warrants to qualified institutional buyers (as defined
in Rule 144A under the Securities Act). Outside the United States the initial
purchasers sold Warrants to non-U.S. persons in offshore transactions in
reliance on Regulation S under the Securities Act.
The following table shows, as of January 15, 1999, each Selling
Warrantholder, the number of Warrants and shares of common stock that each
holder beneficially owned and the number of Warrants each is offering pursuant
to this prospectus. However, we cannot provide you with an estimate of the
number of Warrants or shares of common stock that the Selling Warrantholders
will hold in the future. This information is unavailable because the Selling
Warrantholders may sell all, some or none of the Warrants they own and may elect
to exercise or hold their Warrants.
Except as shown in the table, none of the Selling Warrantholders has, or
within the past three years has had, any position, office or material
relationship with us or any of our predecessors or affiliates. The table has
been prepared based upon information furnished to us by or on behalf of the
Selling Warrantholders.
- 18 -
<PAGE>
<TABLE>
<CAPTION>
Number of
Warrants Being
Securities Beneficially Owned Prior to Offering (1) Offered
--------------------------------------------------- -------
Name of Selling Number of Number
Warrantholder Warrants of Shares Percent (2) Number
------------- -------- --------- ----------- ------
<S> <C> <C> <C> <C>
American Express Trust 3,500(3) 13,151 * 3,500
Company
The Bank of New York (4) 34,541 129,787 0.403 34,541
Bankers Trust Company 35,200 132,263 0.410 35,200
Bear, Stearns Securities 27,865(6) 104,702 0.325 27,865
Corp. (5)
Boston Safe Deposit and 7,900 29,684 * 7,900
Trust Company
Brown Brothers Harriman & 9,875 37,105 * 9,875
Co.
Chase Bank of 4,000 15,029 * 4,000
Texas, N.A.(7)
Chase Manhattan Bank(7) 49,755 186,953 0.580 49,755
Chase Manhattan 4,875 18,317 * 4,875
Bank/MSTC(7)
Chase Manhattan Bank(7) 365 1,371 * 365
Citibank, N.A.(7) 5,540 20,816 * 5,540
Custodial Trust Company 500 1,878 * 500
Deltec Asset Management 564 2,119 * 564
Corporation
The Fifth Third Bank 745 2,799 * 745
First Marathon Securities 9,000 33,187 0.103 9,000
Limited
First Union National Bank 500 1,878 * 500
Goldman, Sachs & Co. 250 939 * 250
Ing Baring Furman Selz LLC 12,850 48,283 0.150 12,850
</TABLE>
- 19 -
<PAGE>
<TABLE>
<CAPTION>
Number of
Warrants Being
Securities Beneficially Owned Prior to Offering (1) Offered
--------------------------------------------------- -------
Name of Selling Number of Number
Warrantholder Warrants of Shares Percent (2) Number
------------- -------- --------- ----------- ------
<S> <C> <C> <C> <C>
Investors Bank & 19,450 73,083 0.227 19,450
Trust/M.F. Custody
Investors Fiduciary Trust 4,350 16,345 * 4,350
Company
Lehman Brothers, Inc. 1,400 5,260 * 1,400
Mercantile-Safe Deposit & 250 939 * 250
Trust Company
NationsBanc Montgomery 5,600 21,041 * 5,600
Securities LLC(7)
The Northern Trust 440 1,653 * 440
Company
PNC Bank, National 2,660 9,994 * 2,660
Association
Prudential Securities 2,000 7,514 * 2,000
Incorporated
SG Cowen Securities Corp. 1,250 4,696 * 1,250
SG Cowen Securities 175 657 * 175
Corp./Custody
Spear, Leeds & Kellogg 250 939 * 250
SSB - Trust Custody 5,000 18,787 * 5,000
State Street Bank and Trust 72,600 272,793 0.846 72,600
Company(8)
Star Bank, National 1,000 3,757 * 1,000
Association, Cincinnati
U.S. Bank National 8,000(9) 30,059 * 8,000
Association
Yasuda Bank and Trust 2,500 9,393 * 2,500
Company (U.S.A.)
</TABLE>
- ------------
*Less than 0.1%
(1) Reflects beneficial ownership of Warrants and shares of common stock
prior to giving effect to the sale by the Selling Warrantholders of the
Warrants or the exercise of the Warrants.
- 20 -
<PAGE>
(2) Reflects the percentage of the outstanding shares of common stock
beneficially owned by the Selling Warrantholders.
(3) Includes 2,000 warrants beneficially owned by IDS Life Managed Fund,
Inc. and 1,500 warrants beneficially owned by IDS Life Income Advantage
Fund.
(4) This Selling Warrantholder has provided two letters of credit on behalf
of Baron Capital, Inc. that were issued in support of Baron Capital's
guarantee of our term loan and revolving credit facilities, for an
aggregate amount of $25 million.
(5) Bear, Stearns & Co. Inc., an affiliate of this Selling Warrantholder,
has provided investment advisory services to us and to AMSC
Acquisition, and served as the managing underwriter for the March 1998
offering of 335,000 units, of which the Warrants were a part.
(6) Includes 340 warrants beneficially owned by The Common Fund f/a/o
Absolute Return Fund, 1,310 warrants beneficially owned by Safe Harbor
Partners, L.P., 2,180 warrants beneficially owned by Safe Harbor
Partners II, L.P. and 190 warrants beneficially owned by Worldwide
Transactions Ltd.
(7) Either this Selling Warrantholder or an affiliate of this Selling
Warrantholder is a participant in the banking syndicate that has
provided funds to us through the revolving credit facility and term
loan facility.
(8) This Selling Warrantholder has served as a trustee, exchange agent,
unit agent and collateral agent for us and for AMSC Acquisition in
connection with the March 1998 offering of 335,000 units, of which the
Warrants were a part.
(9) These warrants are beneficially owned by High Yield Portfolio.
- 21 -
<PAGE>
PLAN OF DISTRIBUTION
--------------------
Distribution of Warrants
- ------------------------
The Selling Warrantholders may, from time to time, sell the Warrants to
purchasers directly. Alternatively, the Selling Warrantholders may, from time to
time, offer to sell the Warrants to or through underwriters, broker-dealers or
agents, who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Warrantholders or the purchasers of
Warrants. The Selling Warrantholders and any underwriters, broker-dealers or
agents that participate in the distribution of the Warrants may be deemed to be
"underwriters" within the meaning of the Securities Act. Any profit on the sale
of Warrants by them, and any discounts, commissions, concessions or other
compensation received by any of them, may be deemed to be underwriting discounts
and commissions under the Securities Act.
Holders may offer and sell the Warrants under this prospectus from time to
time in one or more transactions. These sales may be at fixed prices, at
prevailing market prices at the time of sale, at varying prices determined at
the time of sale or at negotiated prices. The Selling Warrantholders will
determine these prices either alone or by agreement with underwriters and
dealers who may receive fees or commissions in connection with sales. The
Selling Warrantholders may use any of the following methods when selling
Warrants, which may involve crosses or block transactions:
o sales on any national securities exchange or quotation service on which
the Warrants may be listed or quoted at the time of sale;
o sales in the over-the-counter market;
o transactions otherwise than on such exchanges or in the over-the-counter
market; or
o sales through the writing of options.
If required, a prospectus supplement will be distributed at the time a
particular offering of Warrants is made. The supplement will set forth the
aggregate amount and type of Warrants offered and the terms of the offering.
Terms listed may include the name or names of any underwriters, broker-dealers
or agents, any discounts, commissions and other terms constituting compensation
from the Selling Warrantholders and any discounts, commissions or concessions
allowed or reallowed or paid to broker-dealers.
Distribution of Common Stock
- ----------------------------
We are offering our common stock to the Selling Warrantholders in
connection with the exercise of the Warrants pursuant to the warrant agreement.
We do not intend that the Selling Warrantholders will use this prospectus in
connection with resales of this common stock.
- 22 -
<PAGE>
We Will List the Common Stock But Not the Warrants on Nasdaq
- ------------------------------------------------------------
Our outstanding common stock is listed on the Nasdaq National Market, and
we have applied for listing of the shares of common stock to be issued upon
exercise of Warrants on the Nasdaq National Market. We do not intend to apply
for listing of the Warrants on any securities exchange or authorization for
quotation of the Warrants on any quotation system. We cannot guarantee that any
liquid trading market will develop for the Warrants.
We Will Register the Warrants and Common Stock
- ----------------------------------------------
We have filed the registration statement, of which this prospectus forms a
part, with the Commission, as required pursuant to the terms of a warrant
registration rights agreement, dated as of March 31, 1998 among the Company and
the initial purchasers of the 335,000 units. See "Description of Warrants - We
Must Keep This Registration Statement Effective."
The warrant registration rights agreement provides that we will pay
expenses associated with the registration of the Warrants and the common stock
issued upon exercise of the Warrants, including, but not limited to, SEC filing
fees. However, the Selling Warrantholders will pay all underwriting discounts,
selling commissions and transfer taxes, if any. We have agreed with holders of
Warrants and common stock acquired upon exercise of Warrants to indemnify each
other against certain liabilities, including certain liabilities arising under
the Securities Act.
To comply with the securities laws of certain jurisdictions, if applicable,
Selling Warrantholders will offer or sell Warrants in such jurisdictions only
through registered or licensed brokers or dealers. In addition, the Selling
Warrantholders will offer or sell Warrants (unless they have been registered or
qualified for sale) only in such jurisdictions where an exemption from
registration or qualification is available.
DESCRIPTION OF THE WARRANTS
---------------------------
The Warrants were issued pursuant to the warrant agreement dated March 31,
1998 in a private transaction that was not subject to the registration
requirements of the Securities Act. The following summary of certain provisions
of the warrant agreement does not purport to be complete and is qualified in its
entirety by reference to the warrant agreement and the Warrants, including the
definitions of certain terms in the warrant agreement and the Warrants.
Exercise Price: $12.51 for 3.75749 shares of common stock
Each Warrant, when exercised by its holder, will entitle the holder to
receive 3.75749 fully paid and non-assessable shares of our common stock at an
- 23 -
<PAGE>
exercise price of $12.51 per share, subject to adjustment. The exercise price
and the number of shares of common stock issuable upon exercise of a Warrant are
both subject to adjustment as described later in this section.
Expiration Date: April 1, 2008
- ------------------------------
The Warrants became exercisable on June 26, 1998. Unless exercised, the
Warrants will expire on April 1, 2008. The Warrants entitle the holders of the
Warrants to purchase, in the aggregate, approximately 3.00% of our outstanding
common stock on a fully-diluted basis as of the date of issuance of the
Warrants, after giving effect to the exercise of all in-the-money outstanding
options and rights we have issued. We will give notice of expiration not less
than 90 nor more than 120 days prior to the expiration date to the registered
holders of the then outstanding Warrants. If we fail to give this notice, the
Warrants will not expire until 90 days after we give notice. In no event will
holders be entitled to any damages or other remedy for our failure to give
notice, other than this extension.
Exercise and Payment Procedures
- -------------------------------
Holders may exercise the Warrants by surrendering the Warrant certificates
to us evidencing the Warrants to be exercised along with the accompanying form
of election to purchase, properly completed and executed, and the payment of the
exercise price. Holders may choose to pay the exercise price in the form of
cash, by a certified or official bank check payable to the order of the Company,
or by surrender of additional Warrants. Upon surrender of the Warrant
certificate and payment of the exercise price, the warrant agent will deliver or
cause to be delivered, to or upon the written order of the holder, stock
certificates representing the number of whole shares of common stock or other
securities or property to which such holder is entitled under the Warrants and
the warrant agreement. The warrant agent will also deliver, if applicable, any
cash payment to adjust for fractional shares of common stock issuable upon the
exercise. If less than all of the Warrants evidenced by a Warrant certificate
are exercised, the warrant agent will issue a new Warrant certificate.
Fractional Shares Will Not Be Issued
- ------------------------------------
The warrant agent will not issue any fractional shares of common stock upon
exercise of the Warrants. When the holder exercises the Warrant, we will pay to
the holder an amount in cash equal to the current market value of the fractional
share.
Warrant Holders Do Not Have Common Stockholder Rights
- -----------------------------------------------------
The holders of the Warrants will have no right to vote on matters we submit
to our stockholders and will have no right to receive dividends. The holders of
Warrants will not be entitled to share in our assets in the event of a
liquidation, dissolution or winding up. In the event a bankruptcy or
reorganization is commenced by or against us, a bankruptcy court may hold that
unexercised Warrants are executory contracts, subject to rejection by us with
- 24 -
<PAGE>
approval of the bankruptcy court. The holders of Warrants may, even if
sufficient funds are available, receive nothing or a lesser amount as a result
of any such bankruptcy case than they would be entitled to if they had exercised
their Warrants prior to the commencement of any such case.
We Must Keep This Registration Statement Effective
- --------------------------------------------------
The warrant registration rights agreement dated March 31, 1998 requires us
to use our best efforts to keep the registration statement, of which this
prospectus is a part, continuously effective until the Warrants expire or, if
earlier, all of the Warrants and common stock we issue upon exercise of Warrants
cease to be "Transfer Restricted Securities." A Warrant or share of common stock
ceases to be a "Transfer Restricted Security" when such Warrant or share, as
applicable:
o has been effectively registered under the Securities Act and disposed of
in accordance with the registration statement covering it;
o is distributed to the public pursuant to Rule 144; or
o may be sold or transferred pursuant to Rule 144(k) (or any similar
provisions then in force) under the Securities Act or otherwise.
During any consecutive 365-day period, we are entitled to suspend the
effectiveness of this registration statement on two occasions for a period of
not more than 45 consecutive days, except for the 45 consecutive-day period
immediately prior to the expiration of the Warrants, if two factors are present.
First, there must be a possible acquisition or business combination or other
transaction, business development or event involving us that may require
disclosure in this registration statement. Second, the Board of Directors must
determine, in the exercise of its reasonable judgment, that either such
disclosure is not in the best interest of the Company and its stockholders, or
it would be impracticable to obtain any financial statements relating to an
acquisition or business combination required to be included in this registration
statement. However, in no event are we required to disclose the business purpose
for any suspension, if we determine in good faith that the business purpose must
remain confidential. We cannot guarantee that we will be able to file, cause to
be declared effective, or keep a registration statement continuously effective
until all of the Warrants have been exercised or have expired.
Each holder of Warrants that sells such Warrants pursuant to this
registration statement generally will be required to be named as a selling
securityholder in this prospectus and to deliver a prospectus to the purchaser.
Each holder will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by certain
provisions of the warrant registration rights agreement that are applicable to
such holder (including certain indemnification obligations). In addition, each
holder of Warrants and common stock acquired upon exercise of Warrants will be
required to deliver information to be used in connection with this registration
statement in order to have its Warrants and shares of common stock included.
- 25 -
<PAGE>
We May Adjust the Exercise Price
- --------------------------------
The exercise price and number of shares of common stock that can be
purchased by exercising Warrants will be subject to adjustment in certain
events, including:
o the payment by the Company of dividends (or other distributions) on
common stock payable in common stock;
o the subdivision, combination or reclassification of common stock;
o the issuance to all holders of common stock of rights, options or
warrants entitling them to subscribe for common stock, or for securities
convertible into or exercisable for shares of common stock, in either
case at an offering price (or with an initial conversion exchange or
exercise price) that is less than the Fair Market Value per share of
common stock (as defined below);
o the distribution to all holders of common stock of any of our assets
(including cash), debt securities, preferred stock or any rights or
warrants to purchase any such securities (excluding those rights and
warrants referred to in the preceding bullet point);
o the issuance of securities convertible into or exchangeable for common
stock for a conversion or exchange price plus consideration received
upon issuance less than the then Fair Market Value per share of
common stock (excluding securities issued in transactions referred to
in the bullet points above); and
o certain other events that could have the effect of depriving holders of
Warrants of the benefit of all or a portion of the purchase rights
evidenced by the Warrants.
No adjustment in the exercise price will be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the
exercise price. However, any adjustment that is not made will be carried forward
and taken into account in any subsequent adjustment.
"Fair Market Value" per security at any date of determination shall be
determined in one of two ways:
Listed Securities: If the security is listed on any exchange or
-------------------
admitted for trading on the Nasdaq Stock Market, the Fair Market Value
shall be the average of the last reported sale prices over the 20 trading
days ending on the date immediately preceding the date of such
determination, or, if no such sale takes place on any such day, the closing
bid price, in either case as reported for consolidated transactions on the
principal securities exchange (including the Nasdaq National Market) on
which such security is listed or admitted for trading. However, if any
event that results in an adjustment of the exercise price occurs during the
period beginning on the first day of such 20-day period and ending on the
date immediately preceding the date of determination, the Fair Market Value
as determined pursuant to the foregoing will be appropriately adjusted to
reflect the occurrence of such event.
- 26 -
<PAGE>
Unlisted Securities: If the security is not listed on any exchange or
--------------------
admitted for trading on the Nasdaq Stock Market, the Fair Market Value
shall be calculated as follows: If the security is sold to a party that is
not an affiliate of ours in an arm's-length transaction, the Fair Market
Value is the price per security at which such security is sold. If the
security is sold to an affiliate of ours, the Fair Market Value is:
o the last price per security at which such security was sold in a
non-affiliate sale within the three-month period preceding such
date of determination;
o a price determined by a majority of the Board of Directors,
including a majority of the Disinterested Directors, and approved
in a board resolution delivered to the warrant agent; or
o a price determined by a nationally recognized investment banking,
appraisal or valuation firm, which is not an affiliate of ours.
In addition, the calculation of the Fair Market Value for sales to
affiliates must take into account, among other factors deemed relevant
by the Board of Directors or such investment banking, appraisal or
valuation firm, the trading price and volume of such security on any
national securities exchange or automated quotation system on which
such security is traded.
"Disinterested Director" means, for any issuance of securities that
requires a determination of the Fair Market Value, each member of the Board of
Directors who is not an officer, employee, director or other affiliate of the
party to whom we are proposing to issue the securities requiring the
determination.
In case of certain consolidations or mergers of the Company, or the sale of
all or substantially all of the assets of the Company to another corporation,
each Warrant shall thereafter be exercisable for the right to receive the kind
and amount of shares of stock or other securities or property to which such
holder would have been entitled as a result of such consolidation, merger or
sale had the Warrants been exercised immediately prior to the consolidation or
merger. In addition, the person formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale shall have been made,
will assume our obligations under the warrant agreement.
We Have Reserved Sufficient Shares
- ----------------------------------
We have authorized and reserved for issuance the number of shares of common
stock that will be issuable upon the exercise of all outstanding Warrants. These
shares of common stock, when paid for and issued, will be duly and validly
issued, fully paid and non-assessable, free of preemptive rights and free from
all taxes, liens, charges and security interests.
We May Amend the Warrant Agreement
- ----------------------------------
From time to time, the Company and the warrant agent, without consent of
the holders of the Warrants, may amend or supplement the warrant agreement for
- 27 -
<PAGE>
certain purposes. We may amend the agreement to cure any defects or
inconsistencies. We may also amend the agreement to make changes that do not
materially adversely affect the rights of any holder. Any amendment or
supplement to the warrant agreement that has a material adverse effect on the
interests of the holders of the Warrants requires the written consent of the
holders of a majority of the then outstanding Warrants. We must obtain the
consent of each holder of the Warrants affected if a proposed amendment would
increase the exercise price or decrease the number of shares of common stock
purchasable upon exercise of Warrants (other than pursuant to adjustments
provided for in the warrant agreement as generally described above).
We Will File Reports With the Warrant Agent
- -------------------------------------------
Whether or not required by the rules and regulations of the SEC, so long as
any of the Warrants remain outstanding, we will file copies of certain reports
with the warrant agent and the warrant agent will mail these reports to the
holders at their addresses appearing in the register of Warrants maintained by
the warrant agent.
DESCRIPTION OF CAPITAL STOCK
----------------------------
Our authorized capital stock consists of 75,000,000 shares of common stock,
par value $0.01 per share and 200,000 shares of preferred stock, par value $0.01
per share.
Common Stock
On January 15, 1999, there were 32,236,948 shares of common stock
outstanding, held of record by 274 stockholders.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Cumulative voting
applies to the election of directors. Subject to preferences that may be
applicable to any then-outstanding preferred stock, holders of common stock are
entitled to receive ratably such dividends as may be declared by the Board of
Directors out of legally available funds. In the event of a liquidation,
dissolution or winding-up of the Company, holders of the common stock are
entitled to share ratably in all assets remaining after we pay our liabilities
and the liquidation preference of any then-outstanding preferred stock. With two
exceptions, there are no preemptive, subscription, redemption or sinking fund
provisions applicable to the common stock. The two exceptions are: (1)
provisions of the preferred stock described below and (2) provisions of an
existing stockholders agreement as to redemption if alien ownership issues
arise. All outstanding shares of common stock are, and all shares of common
stock to be outstanding upon completion of the offering will be, fully-paid and
nonassessable.
- 28 -
<PAGE>
Our Certificate of Incorporation requires cumulative voting for the
election of directors. Under cumulative voting, each stockholder is entitled to
cast as many votes in the election as equals the product of the number of
directors to be elected and the aggregate number of shares of common stock held
by such stockholder. The stockholder may cumulate such votes for one or more
directors as the stockholder determines. Under cumulative voting, assuming 10
directors were to be elected and 32,236,948 shares of common stock were
outstanding, a stockholder would have to hold at least 2,930,632 shares of
common stock to be certain of electing one director.
Preferred Stock
- ---------------
The Board of Directors may issue preferred stock in one or more series and
may fix the designations, preferences, powers and relative, participating,
optional and other rights, qualifications, limitations and restrictions on the
preferred stock, including the dividend rate, conversion rights, voting rights,
redemption price and liquidation preference, and may fix the number of shares to
be included in any such series. Any preferred stock may rank senior to the
common stock for the payment of dividends or amounts upon liquidation,
dissolution or winding-up, or both. In addition, any shares of preferred stock
may have class or series voting rights. We do not have any shares of preferred
stock outstanding. Issuances of preferred stock, while providing us with
flexibility in connection with general corporate purposes, may, among other
things, have an adverse effect on the rights of holders of common stock. The
Board of Directors, without stockholder approval, can issue preferred stock with
voting and conversion rights that could adversely affect the voting power and
other rights of holders of common stock. Preferred stock could thus be issued
quickly with terms calculated to delay or prevent a change of control of the
Company or to make the removal of management more difficult. In certain
circumstances, this could have the effect of decreasing the market price of the
common stock.
Certain Provisions of the Company's Certificate of Incorporation and Bylaws
- ---------------------------------------------------------------------------
Certificate of Incorporation. As currently in effect, our Certificate of
------------------------------
Incorporation may not be amended, modified, rendered ineffective or repealed
except by the vote of the holders of two-thirds of the issued and outstanding
shares of common stock. Except as required by law, other classes or series of
stock will not be entitled to vote on any such amendment, modification or other
change, unless and to the extent required by any applicable law. Our Certificate
of Incorporation currently requires the affirmative vote of the holders of
two-thirds of the issued and outstanding shares of common stock to approve:
o our merger or consolidation with or into any other entity;
o our dissolution or liquidation; or
o the sale, exchange or lease of all or substantially all of our property
and assets.
The Certificate of Incorporation also requires that at each election of
directors by the holders of common stock, all directors must be elected.
- 29 -
<PAGE>
Bylaws. As currently in effect, our Bylaws require that there be 10
-------
directors on the Board of Directors. The Bylaws provide that special meetings of
the stockholders generally may be called by the president and shall be called at
the request of the holders of at least one-third of the common stock then issued
and outstanding. A special meeting solely to elect all directors of the Company
shall be called at the written request of a holder or holders of sufficient
shares of common stock to then elect at least one director under principles of
cumulative voting. The Bylaws also provide that except as provided in the
Certificate of Incorporation or the Bylaws, the Bylaws may be altered, amended
or repealed or new Bylaws may be adopted only upon the vote of either:
o three-fourths of the members of the Board of Directors then in office or
o the holders of two-thirds of the issued and outstanding shares of common
stock.
LEGAL MATTERS
-------------
Certain legal matters with respect to the shares of common stock offered by
this prospectus will be passed upon for the Company by Randy Segal, our Vice
President, General Counsel and Secretary. Ms. Segal owns 163,881 shares of
common stock. Ms. Segal's ownership includes shares she owns through our
matching 401(k) Plan and /or Employee Stock Purchase Plan. Her ownership also
includes shares issuable upon the exercise of options granted under the Stock
Option Plan which options are vested and exercisable, subject to compliance with
applicable securities laws.
EXPERTS
-------
The consolidated financial statements of American Mobile Satellite
Corporation as of December 31, 1996 and 1997 and for each of the years in the
three-year period ended December 31, 1997, incorporated by reference in this
registration statement, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said report. The combined financial statements of ARDIS
Holding Company as of December 31, 1996 and 1997 and for each of the years in
the three-year period ended December 31, 1997, incorporated by reference in this
registration statement, have been audited by KPMG LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said report. The consolidated financial statements of XM
Satellite Radio Holdings Inc. (a development stage company, previously known as
AMRC Holdings, Inc.) as of December 31, 1997 and for the period from December
15, 1992 (date of inception) through December 31, 1997, incorporated by
reference in this registration statement, have been audited by KPMG LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said report.
- 30 -
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
-----------------------------------
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800- SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public at the SEC's web site at http://www.sec.gov. You also may find
information about us on our web site at http://www.ammobile.com.
The SEC allows us to incorporate by reference the information that we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings (File
No. 0-23044) we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934:
a. our annual report on Form 10-K for the year ended December 31, 1997 and
on Form 10-K/A for the year ended December 31, 1997, filed April 15,
1998;
b. our quarterly reports on Form 10-Q for the quarters ended March 31,
1998, June 30, 1998 and September 30, 1998;
c. our current reports on Form 8-K, dated January 5, 1998, January 22,
1998, March 9, 1998, April 15, 1998, June 5, 1998, October 9, 1998,
October 29, 1998, January 5, 1999 and January 20, 1999 and on Form 8-K/A
dated January 13, 1998; and
d. the description of our capital stock contained in our registration
statement on Form 8-A, dated December 9, 1993 and on Form 8-A/A, dated
December 13, 1993.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Randy Segal
Vice President, General
Counsel and Secretary
American Mobile Satellite Corporation
10802 Parkridge Blvd.
Reston, Virginia 20191-5416
(703) 758-6130
- 31 -
<PAGE>
No person has been authorized to give any information or to make any
representation other than those contained in this prospectus in connection with
the offering of the Warrants and the common stock issuable upon the exercise of
Warrants. If information or representations are given or made you must not rely
on it as if we authorized it. Neither the delivery of this prospectus nor any
sale made hereunder shall, under any circumstances, create an implication that
the information contained or incorporated by reference herein is correct as of
any time subsequent to its date or that there has been no change in the affairs
of the Company since such date. This prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities offered hereby in any
jurisdiction in which such offer or solicitation is not permitted, or to anyone
whom it is unlawful to make such offer or solicitation.
- 32 -
<PAGE>
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission
is effective. The prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion
Dated February __, 1999
Prospectus
AMERICAN MOBILE SATELLITE
CORPORATION
6,520,532 Shares of Common Stock
Under this prospectus, Motorola, Inc. is offering and selling 6,520,532
shares of our common stock. When we acquired Motorola's subsidiary, ARDIS
Company, in March 1998, Motorola received these shares as partial payment of the
purchase price.
Our common stock is quoted on the Nasdaq National Market and traded under
the symbol "SKYC."
Our principal executive offices are located at 10802 Parkridge Blvd.,
Reston, Virginia 20191-5416, and our telephone number is (703) 758-6000.
------------------
See "Risk Factors" beginning on page 4 for a discussion of certain material
factors that you should consider in connection with an investment in our common
stock.
------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
Prospectus Summary.............................................................2
The Company...........................................................2
The Offering..........................................................3
Risk Factors...................................................................4
Use of Proceeds...............................................................17
Selling Stockholder...........................................................17
Registration Rights of Selling Stockholder....................................18
Plan of Distribution..........................................................19
Description of Capital Stock..................................................20
Legal Matters.................................................................22
Experts.......................................................................23
Where You Can Find More Information...........................................23
This prospectus contains and incorporates by reference certain forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995 with respect to our business, financial condition and results
of operations, including, without limitation, statements under the captions
"Business" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our annual and quarterly reports. These forward
looking statements reflect our plans, expectations and beliefs and, accordingly,
are subject to certain risks and uncertainties. We cannot guarantee that any of
such forward looking statements will be realized. Factors that may cause actual
results to differ materially from those contemplated by such forward looking
statements include, among others, the factors discussed in the section of this
prospectus entitled "Risk Factors."
- 1 -
<PAGE>
PROSPECTUS SUMMARY
------------------
The following summary is qualified in its entirety by the detailed
information and financial statements, including the notes thereto, contained or
incorporated by reference in this prospectus.
The Company
-----------
The Company was incorporated on May 3, 1988. At that time, the FCC
determined that the public interest would be best served by granting the mobile
satellite services license to a consortium of all willing and qualified
applicants. The Company was formed by eight of the initial applicants for the
license. The FCC authorized us to construct, launch, and operate a mobile
satellite services system to provide a full range of mobile voice and data
services via satellite to land, air and sea-based customers. On April 7, 1995,
we successfully launched our first satellite, MSAT-2, from Cape Canaveral,
Florida.
Our service area:
-----------------
o The continental United States o Alaska
o Hawaii o Puerto Rico
o The U.S. Virgin Islands o United States coastal waters
o International waters and airspace o Any foreign territory where the local
government has authorized the provision
of service
Our wholly-owned subsidiary, AMSC Acquisition Company, Inc. operates our
mobile satellite services. On March 31, 1998 we acquired (through AMSC
Acquisition) ARDIS Company, then a wholly-owned subsidiary of Motorola, Inc.,
that owns and operates a two-way wireless data communications network. We
purchased ARDIS for approximately $50 million in cash and $50 million in our
common stock. Through the acquisition of ARDIS, we became a nationwide provider
of wireless communications services, including data, dispatch, and voice
services. We primarily serve business customers in the United States.
On October 16, 1997, our indirect subsidiary, XM Satellite Radio Inc.
(formerly American Mobile Radio Corporation), received a license from the FCC to
provide satellite-based Digital Audio Radio Service ("DARS") throughout the
United States. XM Radio bid $89.9 million at auction on April 2, 1997 for the
license. XM Radio has and will continue to be funded by parties other than the
Company in exchange for debt and an equity interest in XM Radio. Accordingly, we
do not expect that the development of this business will have a material impact
on our financial position, results of operations, or cash flows. XM Radio is an
indirect subsidiary that we own through our direct subsidiary XM Satellite Radio
Holdings Inc. (formerly AMRC Holdings, Inc.).
- 2 -
<PAGE>
As a result of the combination of our satellite-based business with the
ARDIS terrestrial-based business, we now offer a broad range of end-to-end
wireless solutions utilizing a seamless network consisting of the nation's
largest, most fully-deployed terrestrial wireless data network and a satellite
in geosynchronous orbit. Our satellite-only data communications system provides
data services primarily to long-haul trucking customers. Our multi-mode
communications system uses both our terrestrial and satellite networks to
provide "least-cost routing" for two-way data communications. We are able to
provide cost-effective nationwide coverage for communications outside the
terrestrial network coverage area by routing messages over the lower cost
terrestrial network before automatically routing messages over the satellite
network. Our terrestrial network delivers superior in-building penetration,
completion rates and response times compared to other wireless data networks
through the use of a single frequency reuse technology.
In addition to providing data service, we offer two forms of mobile voice
communications service: nationwide dispatch service and satellite telephone
service. We are the only company to offer a nationwide dispatch service that
allows multiple users located anywhere in our service area to share a single
connection for point-to-multipoint communication using push-to-talk handsets. We
market our nationwide dispatch service primarily to field services users with
wide-area fleet communications needs. Our satellite telephone service provides
traditional voice, fax and data service through satellite terminals that are
similar to cellular phones. We market our satellite telephone service primarily
to maritime users, including both commercial and recreational vessels, and other
targeted market segments such as government, public safety organizations and the
natural resource industries.
The Offering
------------
Securities Offered....Motorola is offering 6,520,532 shares of our common stock.
Listing or Quotation
of Common Stock.......Our common stock is traded on the Nasdaq National Market
under the symbol "SKYC."
Registration..........The registration rights agreement with Motorola, dated
March 31, 1998, requires us to register the shares of
common stock Motorola holds. The agreement also requires
us to prepare and file with the SEC amendments and
supplements to the registration statement and this
prospectus that are necessary to keep the registration
statement effective for a period of not less than 180
days.
Use of Proceeds.......We will not receive any proceeds from Motorola's sale
of our common stock.
- 3 -
<PAGE>
RISK FACTORS
------------
We Have Substantial and Continuing Operating Losses
- ---------------------------------------------------
We have incurred significant operating losses and negative cash flows in
each year since we began operations. These losses are due primarily to start-up
costs, the costs of developing and building each network and the cost of
developing, selling and providing our products and services. For the nine months
ended September 30, 1998, we reported operating losses of approximately $65.6
million. For historical periods prior to our acquisition of ARDIS, we reported
operating losses of approximately $97.4 million, $120.0 million and $70.5
million in 1997, 1996 and 1995. During these periods ARDIS reported operating
losses of approximately $17.4 million, $29.2 million, and $40.6 million in 1997,
1996 and 1995. We expect to have significant operating losses and will record
significant net cash outflow in the near term. We cannot guarantee that we will
have sufficient resources to complete the expenditures required to operate the
business.
Since inception, we have been engaged in operating our business, recruiting
key management and technical personnel and raising capital to fund our
operations and the development of our networks. We launched commercial voice
service in January 1996. Accordingly, you only can evaluate our prospects in
each of our markets based on this short operating history. You must consider the
prospects for our success in light of the risks, expenses and difficulties often
encountered when establishing a new business in an evolving industry that is
subject to rapid technological and price changes, and characterized by an
increasing number of market competitors.
We estimate that we will not have sufficient operating revenues to cover
operating expenses for the foreseeable future. Our ability to generate positive
operating cash flow will depend upon, among other factors, the successful
integration of ARDIS into our operations, the achievement of related business
synergies and the successful marketing of our services. We cannot guarantee that
the ARDIS integration or our marketing efforts will be successful.
The leasing of our satellite to a third party has been delayed and may not
materialize. Accordingly, we are considering other alternatives for increased
usage from third parties. Without increased utilization, future cash flows
generated by the satellite and its network components may not be sufficient to
cover the carrying value and accordingly, a write down of the value of the
assets might be necessary.
In addition, we will require additional capital for expenditures necessary
to further develop our business and expand our networks.
We Are Highly Leveraged
- -----------------------
As of September 30, 1998, our indebtedness totaled approximately $492
million ($484 million net of debt discount). As of September 30, 1998 we had $63
- 4 -
<PAGE>
million available under AMSC Acquisition Company, Inc.'s revolving credit
facility; however, the ability to borrow under this facility is subject to us
meeting certain covenants which we may not meet in the future. AMSC Acquisition
also received a commitment from Motorola for up to $10.0 million of vendor
financing of certain capital expenditures. On a pro forma basis, after giving
effect to the acquisition of ARDIS and the related financing as if these
transactions had been consummated on January 1 of the period presented, our
earnings would have been insufficient to cover our fixed charges by
approximately $176.2 million for fiscal 1997 and $114.1 million for the nine
months ended September 30, 1998. At September 30, 1998 our stockholders' equity
was approximately $10.6 million. We and our subsidiaries will be permitted to
incur additional indebtedness in the future.
Beginning April 1, 2001, AMSC Acquisition, our wholly-owned subsidiary,
will be allowed to pay dividends to us. This will permit us to meet our interest
expenses with respect to our $100 million term loan facility. Historically, we
have not generated sufficient earnings or cash flow from operations to make such
interest payments.
The degree to which we are leveraged could have important consequences to
the success of our business including, but not limited to:
o increasing our vulnerability to general adverse economic and industry
conditions;
o limiting our ability to obtain additional financing to fund future
working capital, capital expenditures, research and development and
other general corporate requirements;
o requiring the dedication of a substantial portion of our cash flow from
operations to the payment of principal of, and interest on, our
indebtedness, thereby reducing the availability of such cash flow to fund
working capital, capital expenditures, research and development or for
other general corporate purposes;
o limiting our flexibility in planning for, or reacting to, changes in our
business and the industry; and
o placing us at a competitive disadvantage vis-a-vis less leveraged
competitors.
We May Need Additional Capital
- ------------------------------
We expect to continue to make significant outlays for the foreseeable
future to fund interest expense, capital expenditures and working capital. We
will continue this practice until we begin to generate positive cash flow from
operations and for the foreseeable future thereafter. If our cash flows from
operations are less than projected, we will require additional debt or equity
financing in amounts that could be substantial. The type, timing and terms of
financing we may select will depend upon our cash needs, the availability of
other financing sources and the prevailing conditions in the financial markets.
We cannot guarantee that we will be able to find any such sources at any given
time on favorable terms.
Motorola has entered into an agreement with our wholly-owned, indirect
subsidiary, ARDIS, to provide up to $10 million of vendor financing, which will
- 5 -
<PAGE>
be available to finance up to 75% of the purchase price of additional network
base stations necessary to meet the build-out requirements under a contract AMSC
Acquisition has with the United Parcel Service. Funds borrowed under this loan
agreement have an interest rate equal to LIBOR plus 7.0% and the loan is
guaranteed by us and each subsidiary of AMSC Acquisition. The terms of the loan
require that amounts borrowed be secured by the equipment purchased with the
loan. As of October 31, 1998, we had borrowed $591,707 from Motorola under this
loan.
We cannot guarantee that our current projection of cash flow from
operations will be accurate. Our projections will depend upon numerous future
factors and conditions, many of which are outside of our control. You should
note that projections are merely estimates of future events and you should
expect actual events to vary from current estimates, possibly materially. In
addition, if customer demand exceeds our current expectations and we can
accommodate such demand without adversely affecting the quality of our service,
we are likely to attempt to accelerate our expansion. If we elect to accelerate
our build-out or introduce new products or services, our funding needs will
increase, possibly to a significant degree. We cannot guarantee that we will be
able to secure any additional financing on commercially reasonable terms or at
all. Our cost of expanding our network and operating our business, as well as
our revenues, will depend on a variety of factors including:
o our ability to meet our expansion schedules;
o the number of customers and the services for which they subscribe;
o the nature and penetration of new services that we and our competitors
may offer;
o regulatory changes; and
o changes in technology.
As a result, our actual costs and revenues may vary from expected amounts,
possibly to a material degree. Such variations are likely to affect our future
capital requirements. Accordingly, it is possible that we will be required to
raise substantial additional capital in the future or that our current
projections will prove to be inaccurate.
Our Market Is Rapidly Changing
- ------------------------------
The markets for wireless communications services change rapidly. Our
success depends, in part, on our ability to respond and adapt to such changes.
We cannot guarantee that we will be able to compete effectively under, or adjust
our contemplated plan of development to meet, changing market conditions. We
cannot guarantee that we will be able to implement our strategy or that our
strategy will be successful in this rapidly evolving market.
This market is also marked by the continuous introduction of new products
and services and increased capacity for services similar to those we provide.
Future technological advances in the wireless communications industry may result
- 6 -
<PAGE>
in the availability of new products or services. Advances may increase the
efficiency of existing products or services. If a technology becomes available
that is more cost-effective or creates a superior product, we may be unable to
access such technology or finance the necessary substantial capital expenditures
that may be required. Our technology may be rendered less profitable or less
viable by existing, proposed or as yet undeveloped technologies. We cannot
guarantee that we will have available the financial and other resources to
compete effectively against companies possessing such technologies. We are
unable to predict which of the many possible future products and services will
meet evolving industry standards and consumer demands. We cannot guarantee that
we can adapt to such technological changes or offer such products or services on
a timely basis or establish or maintain a competitive position.
We Depend on Market Acceptance
- ------------------------------
Our success is subject to a number of business, economic, regulatory and
competitive factors, many of which are beyond our control, including the extent
to which prospective customers will purchase our services. The vitality of our
business is subject to the successful implementation of our growth strategy,
which, in turn, depends, among other things, on our expectation that demand for
our services will increase significantly in the markets we serve. We have not
yet commercially introduced certain of these services and we cannot guarantee
that any of them will achieve market acceptance or result in the generation of
operating cash flow. Failure to gain market acceptance for current or planned
products and services would have a material adverse effect on our business. In
addition, we have incurred and will continue to incur significant operating
expenses.
Based upon certain expectations as to the anticipated market acceptance of,
and customer demand for, our services, we have made, and will continue to make,
significant capital investments. Based on similar expectations, our subsidiaries
have entered into operating leases, equipment supply contracts and service
arrangements, and are attempting to secure financing. Accordingly, any material
miscalculation with respect to our operating strategy or business plan could
have a material adverse effect on our business.
We Must Effectively Manage Our Growth
- -------------------------------------
In our continuing efforts to respond to changing market conditions, we may
experience periods of rapid expansion. In order to manage growth effectively in
the complex environment in which we operate, we will need to maintain and
improve our operating and financial systems and expand, train and manage our
employee base. We must expand the capacity of our sales, distribution and
installation networks in order to achieve continued growth in our existing and
future markets. In general, if we fail to manage growth effectively there could
be a material adverse effect on our business, financial condition and results of
operations.
- 7 -
<PAGE>
We May Be Subject To Liability Under The ARDIS/UPS Contract
- -----------------------------------------------------------
Our wholly-owned, indirect subsidiary, ARDIS, entered into a contract with
UPS for the use of the ARDIS network. Under this contract, we anticipate
providing communication services to UPS for approximately 50,000 terrestrial
wireless data units by the end of 2001. However, performance under the UPS
Contract is subject to certain significant conditions, including, among others:
o required capital expenditures to expand capacity of the ARDIS network in
certain areas;
o successful development of the DIAD III wireless data terminal device by
Motorola; and
o successful deployment of the DIAD III devices on the ARDIS network within
strict network operational performance levels guaranteed by ARDIS.
The UPS Contract will require capital spending of approximately $10.5
million over the next three years. In addition, the contract represents a
significant implementation effort of a magnitude in excess of that of any
existing ARDIS customer. Failure to meet the requirements under the UPS Contract
could result in a loss of the contract as well as monetary penalties that could
materially adversely affect our business.
Under the UPS Contract, we also have significant warranties of performance,
both during the implementation phase and for ongoing network performance. During
the implementation phase, we must meet key checkpoints and milestones
culminating in an acceptance test. Failure of the acceptance test could result,
after a cure period, in the loss of the contract. In addition, we will have to
construct network capacity in several key cities. Failure to complete such
construction by the committed dates would subject us to monthly penalties until
we achieve compliance.
On an ongoing basis, the UPS Contract requires that we guarantee network
performance levels. If network availability drops below 99%, we will be subject
to an initial penalty of 2% of the average monthly use of the service,
calculated as the average of the last three months in the affected area. The
penalty increases if performance levels further drop.
As a part of the negotiations leading to the signing of the UPS Contract,
Motorola issued a performance guarantee regarding the network's performance. In
connection with our acquisition of ARDIS, we agreed to indemnify Motorola in
connection with such performance guarantee, and as security for our
indemnification obligations we have deposited $10.0 million into an escrow
account. This escrow account has the same three-year term (with two possible
one-year renewals) as the UPS Contract.
- 9 -
<PAGE>
Our Customers Are Highly Concentrated
- -------------------------------------
After accounting for the acquisition of ARDIS, three customers accounted
for an aggregate of 32% of our recurring service revenue for the nine months
ended September 30, 1998 as follows:
o IBM -- 20%;
o NCR -- 7%; and
o Pitney Bowes -- 5%.
The loss of one or more of these customers, or any event, occurrence or
development which adversely affects our relationship with one or more of these
customers could have a material adverse effect on our business.
We Rely on Third Party Vendors
- ------------------------------
We rely on independent vendors to develop and manufacture wireless
communications devices for our networks, which are significant elements of our
business plan. These suppliers do not sell such devices to us on an exclusive
basis. We carry a limited inventory of such devices and generally have no
guaranteed supply arrangements. From time to time, we have experienced
interruptions and/or delays of supply. We cannot guarantee that we will not
experience such interruptions in the future. In addition, we have short-term
contracts with the majority of our suppliers. We cannot guarantee that our
suppliers will continue to provide products to us at attractive prices, or at
all, or that we will be able to obtain such products in the future from these or
other providers on the scale and within the time frames we require. Some or all
of our suppliers could enter into exclusive arrangements with our competitors,
or cease selling these components to us at commercially reasonable prices, or at
all. If we fail to obtain such products on a timely basis at an affordable cost,
or experience any significant delays or interruptions of supply, our business
would be materially adversely affected.
As part of our growth strategy, we rely on our suppliers to reduce the cost
of wireless communications devices approved and available for use on our
network. Our management believes that reductions in the cost of wireless
communications devices will result in increased sales of devices, additional
subscribers for our services and a corresponding increase in our service
revenues. If we fail to obtain such cost reductions on a timely basis, or
experience any significant delays of such reductions, our business would be
materially adversely affected.
We expect the anticipated expansion of our operations and infrastructure to
place a significant demand on our suppliers, some of which have limited
resources and production capacity. In addition, some of our suppliers, in turn,
rely on sole or limited sources of supply for components included in their
products. If our suppliers fail to adjust to meet such increasing demand, they
may be unable to supply devices in the quantities and the quality and at the
- 9 -
<PAGE>
times we require, or at all. If we are unable to obtain sufficient quantities of
sole or limited source devices or to develop alternative sources, we could
experience delays and increased costs in the expansion of our operations and
infrastructure or become unable to properly maintain our existing level of
operations. Such occurrences could have a material adverse effect on our
business, financial condition and results of operations.
The ARDIS Technology Is Subject to Competitive Risks
- ----------------------------------------------------
The ARDIS network, and certain of its competitive strengths, such as deep
in-building penetration, is based upon a single frequency reuse ("SFR")
technology. Motorola holds the patent for SFR technology and ARDIS has a
non-exclusive license to use the SFR technology. ARDIS also relies on support
agreements with Motorola for support of the operations of certain portions of
the ARDIS network. However, Motorola could enter into arrangements with our
competitors and it is possible that such agreements could have a material
adverse effect on us. Also, in constructing additional network sites ARDIS may
encounter interfering facilities operated by other licensees that were not
anticipated in the design and licensing of the ARDIS facilities. To the extent
that ARDIS encounters such interfering facilities, ARDIS may be required to
purchase the interfering facilities or to cease operations where such
interference is encountered.
There Are Risks Associated With Satellite Technology
- ----------------------------------------------------
We have an agreement with TMI, the Canadian mobile satellite owner and
operator of MSAT-1, for backup, restoral and additional capacity usage if our
satellite fails or we need additional capacity. In return, we have agreed to
provide TMI with similar backup service on our MSAT-2 satellite. Each of the
MSAT-1 and MSAT-2 satellites has in the past experienced some technological
malfunctions, most recently with respect to MSAT-2 in January 1998. While recent
MSAT-2 malfunctions have involved either spare components or ones that did not
have a material impact on current operations, it is possible that either or both
satellites could experience future malfunctions at any time. If a serious
malfunction were to occur at a time when we have no backup capacity, there would
be a material adverse effect on our business.
MSAT-2 has an expected remaining service life of approximately seven years
and MSAT-1 has an expected remaining service life of greater than seven years,
in each case subject to potential technological failures and other factors. For
example, random failure of satellite components could result in damage to or
loss of MSAT-2 or MSAT-1. It is also possible that either satellite could be
damaged by electromagnetic storms or collisions with other objects, although
such occurrences are rare. Although we believe that the actual service lives of
both satellites may exceed their expected service lives, we cannot guarantee
that the expected service life of either satellite will be achieved or exceeded.
Although we have in-orbit insurance for a failure of MSAT-2, it is unlikely that
any recovery under such insurance would fully compensate us for losses we would
sustain for such a failure. In addition, the in-orbit insurance policy is
- 10 -
<PAGE>
subject to annual or biannual renewal, and we cannot guarantee that insurance on
favorable terms and at commercially reasonable rates will remain available for
coverage of MSAT-2.
If there is a failure of MSAT-2 and MSAT-1 is not available for back-up, we
would have several additional options to replace the lost capacity. These
options include leasing or purchasing capacity on certain Inmarsat satellites,
or launching a new satellite. Any one of these options might not be adequate to
maintain all current service offerings, and would require substantial lead-time
and significant financing. It is likely that there would be significant service
interruptions and it would be necessary to raise significant additional funds,
both of which could have a material adverse effect on our business.
Our Remote Disaster Recovery System for the Satellite Network Ground Segment Is
- -------------------------------------------------------------------------------
Limited
Presently, our disaster recovery systems focus on internal redundancy and
diverse routing within each of the facilities operated by or for us. For
example, the ARDIS terrestrial network has access to a remote ground
communications backup complex that would enable us to continue to provide ARDIS
services in the event of a natural disaster affecting one geographic site. We do
not, however, currently have access to a remote backup satellite ground
communications facility that would enable us to continue to process mobile
satellite communications services for customers in the event of a natural
disaster or other occurrence that rendered the system unavailable. Our business
is subject to the risk that such a disaster or other occurrence could hinder or
prevent us from continuing to provide some services to some or all of our
customers.
Our Industry Is Highly Competitive
- ----------------------------------
The wireless communications industry is highly competitive and is
characterized by frequent technological innovation. The industry includes major
domestic and international companies, many of which have financial, technical,
marketing, sales, distribution and other resources substantially greater than
ours and which provide, or plan to provide, a wider range of services than we
will provide. Our products and services compete with a number of communications
services, including existing satellite services, terrestrial air-to-ground
services, and terrestrial land-mobile and fixed services, and may compete with
new technologies in the future. In addition, the FCC has recently allocated
large amounts of additional spectrum for communications uses or potential uses
that could compete with us. Additional allocations of spectrum for such uses may
occur in the future.
Our Business Is Subject to Regulatory Risks
- -------------------------------------------
The ownership and operations of our communication systems are subject to
significant regulation by the Federal Communications Commission. The FCC acts
under authority granted by the Communications Act of 1934, as amended, and
related federal laws. A number of our licenses are subject to renewal by the
- 11 -
<PAGE>
FCC. Our satellite operations are subject to international frequency
coordination. Current FCC regulations generally limit the ownership and control
of our company by non-U.S. citizens or entities to no more than 25%. We cannot
guarantee that the rules and regulations of the FCC will continue to support our
operations as we presently conduct them and plan to conduct them in the future.
We cannot guarantee that all existing licenses will be renewed and requisite
frequencies coordinated.
There are applications by others now pending before the FCC to use the
Inmarsat system and TMI's Canadian-licensed system, both of which operate in the
MSS L-band and have satellite footprints covering the United States, to provide
service in the United States. We have opposed these filings. In addition to
providing additional competition to us, a grant of domestic authority by the FCC
to use any of these foreign systems may increase the demand by these systems for
spectrum in the international coordination process and could adversely affect
our ability to coordinate our spectrum access.
On July 20, 1998, the International Bureau of the FCC granted an
application for Special Temporary Authority to use TMI's space segment to
conduct market tests in the U.S. for the next six months using up to 500 mobile
terminals. We have asked the full Commission to review this decision and stay
the effectiveness of the temporary authorization. There can be no assurance that
the FCC will stay the effectiveness of this decision or rescind the
International Bureau's grant of Special Temporary Authority.
Our Business Is Subject to the Year 2000 Problem
- ------------------------------------------------
We have developed and are implementing a Year 2000 Readiness Program to
address Year 2000 issues. Under the Year 2000 Readiness Program, we have
prioritized our core systems to undergo an assessment of Year 2000 vulnerability
and, if necessary, repair of Year 2000 problems. Our core business systems
include both hardware and software systems whose failure could have a material
impact on our financial condition and results of operations. Vendors that
provide critical products and services to us are also included in this
assessment of core business systems. Although the core business systems are the
top priority in our Year 2000 Readiness Program, we are assessing all of our
software and hardware for Year 2000 readiness.
Our Year 2000 Readiness Program includes the following phases:
Awareness Phase:
----------------
o educating employees about the problem and how the Year 2000 Readiness
Program will be implemented.
Inventory Phase:
----------------
o identifying all software programs and hardware systems and business
relationships with third parties.
- 12 -
<PAGE>
Assessment Phase:
-----------------
o contacting the vendors of commercial off the shelf software and hardware
regarding Year 2000 readiness;
o contacting business partners and service providers regarding their Year
2000 readiness status;
o analyzing software source code if available to us; and
o prioritizing non-compliant software and systems based on criticality to
the business.
Renovation Phase:
-----------------
o obtaining and installing software upgrades or patches for software that
is not Year 2000 ready; and
o replacing software or hardware that is not Year 2000 ready.
Validation/Testing Phase:
-------------------------
o conducting testing of upgraded/repaired software and hardware systems.
Implementation/Rollout Phase:
-----------------------------
o installing upgraded/repaired software and hardware systems;
o conducting user training; and
o updating documentation.
We completed the Inventory Phase in August 1998 for all systems that we
use, including software and hardware. We have also essentially completed the
Assessment Phase and overall, we are in the Renovation Phase. Planning has also
begun for the Validation/Testing Phase and the Implementation/Rollout Phase.
We anticipate completing the Implementation/Rollout Phase for all core
business systems before the end of 1999. Achieving Year 2000 readiness for our
satellite voice network and deploying renovated data terminals to customers
before the end of fourth quarter 1999 will be the most difficult tasks of the
Implementation/Rollout Phase. While we cannot guarantee that we will be
successful in making all core business systems Year 2000 ready by December 31,
1999, we believe we will be able to successfully complete the Year 2000
Readiness Program on time.
- 13 -
<PAGE>
The total cost of our Year 2000 Readiness Program is estimated to have been
$2.4 million for 1998. Expenditures for the Year 2000 Readiness Program in 1999
are estimated to be up to $7.4 million. Some modification costs, including the
purchase of software upgrades and consulting services, are expensed as incurred.
Other modification costs, such as hardware purchases, are being treated as
capital expenditures.
The cost and date on which we believe we will be Year 2000 ready are based
on our best estimates. We cannot guarantee that we will achieve these results
and our actual results could differ materially from those anticipated.
Some of our critical business systems depend on a significant number of
software programs and on services provided by third parties that are not within
our control. Failure to achieve Year 2000 readiness within our critical business
systems could result in possible service outages, miscalculations or disruptions
of operations that could have a material impact on our business. While we
believe we will be able to achieve Year 2000 readiness in a timely manner, the
schedule for the Implementation/Rollout Phase of several core business systems
extends to the third or fourth quarter 1999. Therefore, we may not achieve Year
2000 readiness on time or within budget. Contingency planning, as discussed
below, is currently underway to minimize the risk of business interruptions
caused by Year 2000 problems within the core business systems.
We already have certain contingency plans in place to minimize service
interruptions and these contingency plans can mitigate, although not eliminate,
interruptions caused by problems resulting from Year 2000 issues. For example,
we have backup power supplies and generators in place for certain portions of
our networks in the event of electrical power outages. In addition, for some
services we have contracted with more than one service provider. Some of our
systems that we already have in place are being incorporated into our Year 2000
contingency plan. If it is commercially reasonable to do so, we will include
other redundant or alternative sources of services in our Year 2000 contingency
planning efforts.
Five Principal Stockholders Control The Company
- -----------------------------------------------
Our principal stockholders are Hughes Communications Satellite Services,
Inc., Motorola, Inc., Baron Capital, Inc., Singapore Telecommunications Ltd. and
AT&T Wireless Services, Inc. These stockholders hold in aggregate approximately
75.7% of our common stock on a fully diluted basis. We have entered into
material contracts and transactions with our principal stockholders or their
affiliates and we may enter into additional contracts in the future. These
contracts may include the guarantee of our debt obligations. These stockholders
have other interests in the communications industry that may conflict with our
interests.
- 14 -
<PAGE>
We Are Dependent On Our Key Personnel
- -------------------------------------
We are dependent on the efforts of a group of employees with technical and
business knowledge regarding our systems. If we lose the services of one or more
of these individuals it could materially and adversely affect our business and
our future prospects. We do not maintain key man life insurance on any of our
officers or employees. Our future success will also depend on our ability to
attract and retain additional management and technical personnel required in
connection with the growth and development of our business. If we fail to retain
or attract such key personnel there could be a material adverse impact on our
business, financial condition and results of operations.
Our Charter and Bylaws Contain Anti-takeover Provisions
Our Certificate of Incorporation and Bylaws and the Delaware General
Corporation Law contain provisions that may have the following effects:
o discouraging, delaying or making more difficult a change in control; and
o preventing the removal of incumbent directors.
The existence of these provisions may negatively impact on the price of our
common stock and may discourage third-party bids. These provisions may reduce
any premiums paid to stockholders for their common stock. Furthermore, we are
subject to Section 203 of the Delaware General Corporation Law. Section 203
governs business combinations with interested stockholders, and also could have
the effect of delaying or preventing a change in control.
Our Certificate of Incorporation also allows our Board of Directors to
issue up to 200,000 shares of preferred stock and to fix the rights, privileges
and preferences of such shares without any further vote or action by the
stockholders. If this preferred stock is issued in the future, the rights of the
holders may adversely affect the rights of the holders of common stock. While we
have no present intention to issue shares of preferred stock, any such issuance
could be used to discourage, delay or make more difficult a change in control.
We Have Not Paid Dividends
- --------------------------
We have not declared or paid any dividends on our common stock since our
date of inception. We intend to retain any earnings to support the growth and
development of our business and we have no present intention of paying dividends
in the foreseeable future. In addition, our ability to pay dividends is
restricted by agreements we have made with several banks in connection with our
loans and credit facility arrangements.
- 15 -
<PAGE>
The Prices of Our Common Stock Could Be Volatile
- ------------------------------------------------
Historically, the market prices for securities of emerging companies in the
telecommunications industry have been highly volatile. Future announcements
concerning our business or the business of our competitors, including results of
technological innovations, new commercial products, or government regulations
may have a significant impact on the market price of our common stock. Our
common stock has been thinly traded since our initial public offering and its
price has been highly volatile in recent periods.
We Have Shares Eligible for Future Sales
- ----------------------------------------
Future sales of substantial amounts of our common stock, or the perception
that such sales may occur, could adversely affect the value of the common stock
and could impair our ability to raise additional capital in the future through
the sale of equity securities. We have issued 335,000 Warrants in a private
transaction that we are also registering under the registration statement of
which this prospectus forms a part. After giving effect to the issuance of
common stock upon the exercise of the Warrants, and including the shares offered
by Motorola, there will be approximately 33,495,707 million shares of common
stock outstanding, approximately 21.1 million shares of which will have been
registered under the Securities Act. The majority of outstanding shares are
subject to various registration rights agreements, lock-up agreements, and
shareholder agreements. In addition, we have reserved approximately 7.5 million
shares of common stock for issuance upon the exercise of other outstanding
warrants and pursuant to employee benefit and stock incentive plans. See
"Description of Capital Stock."
- 16 -
<PAGE>
USE OF PROCEEDS
---------------
We will not receive any proceeds from Motorola's sale of our common stock.
Motorola will receive all of the proceeds from its sale of our common stock.
SELLING STOCKHOLDER
-------------------
Motorola acquired 6,520,532 shares of our common stock as part of the
purchase price we paid when we acquired its subsidiary, ARDIS, in March 1998. We
also paid Motorola $50 million in cash.
The following table shows, as of January 15, 1999, the number of shares of
common stock that Motorola beneficially owned and the number of shares that
Motorola may offer under this prospectus. We cannot provide you with an estimate
of the number of shares of common stock that Motorola will hold in the future.
This information is unavailable because Motorola may sell all, some or none of
its shares of common stock. The table has been prepared based upon information
furnished to us by or on behalf of Motorola.
Number of Shares(1) Percent(2)
------------------- ----------
Motorola, Inc. 6,520,532 20.2
- ------------
(1) Reflects beneficial ownership of shares of common stock prior to giving
affect to the sale of the shares offered in this prospectus.
(2) Reflects the percentage of the outstanding shares of common stock
beneficially owned.
Motorola does not have, and within the past three years has not had, any
position or office with us or any of our predecessors or affiliates. Motorola,
however, does have other material relationships with us.
First, in connection with our acquisition of ARDIS we agreed to give
Motorola participation rights with respect to our common stock under the
participation rights agreement dated December 31, 1997. If any of Hughes
Communications Satellite Services, Inc., Singapore Telecommunications Ltd. or
AT&T Wireless Services, Inc. wants to transfer its shares of our common stock
other than in a Rule 144 or public stock exchange or Nasdaq Stock Market
transaction at a time when Motorola owns 5% or more of our common stock,
Motorola would have a right to receive notice of the intended transfer and a
right to participate proportionately in the contemplated transfer. Likewise,
Motorola agreed to provide these three stockholders with similar notice and
participation rights if Motorola decides to transfer its interests in our common
stock. Second, the participation rights agreement and the registration rights
- 17 -
<PAGE>
agreement with Motorola, dated March 31, 1998, gives Motorola "demand" and
"piggyback" registration rights as described below. See "Registration Rights Of
Selling Stockholder."
Third, Motorola has entered into an agreement with our wholly-owned
subsidiary, ARDIS, to provide up to $10 million of vendor financing, which will
be available to finance up to 75% of the purchase price of additional network
base stations necessary to meet the build-out requirements under a contract with
our subsidiary AMSC Acquisition Company, Inc. has with UPS. Funds borrowed under
this loan agreement have an interest rate equal to LIBOR plus 7.0% and the loan
is guaranteed by us and each subsidiary of AMSC Acquisition. The terms of the
loan require that amounts borrowed be secured by the equipment purchased with
the loan. As of October 31, 1998, we had borrowed $591,707 from Motorola under
this loan.
REGISTRATION RIGHTS OF SELLING STOCKHOLDER
------------------------------------------
When we issued shares of our common stock to Motorola as part of the
purchase price for ARDIS, we agreed to register those shares under the
Securities Act of 1933 pursuant to the terms of a participation rights agreement
with Motorola dated December 31, 1997 and a registration rights agreement with
Motorola dated March 31, 1998. The registration rights agreement provided both
"demand" and "piggyback" registration rights.
At any time after March 31, 1999, the first anniversary of our acquisition
of ARDIS, the holders of at least 10% of the shares that were issued to Motorola
may "demand" that all or any portion of such shares be registered under the
Securities Act, subject to registration priorities and postponement rights of
the Company. The registration rights agreement requires that one of these two
demand registrations be an underwritten registration.
The registration rights agreement also provides that any time after March
31, 1998, whenever we propose to register any of our securities under the
Securities Act, whether or not for our own account, on a form that may also be
used for the registration of the shares issued to Motorola, the holders of such
shares may request that we include, or "piggyback," all of their shares in such
registration. If piggyback registrations are underwritten registrations, the
registration rights agreement sets forth requirements relating to the priority
for inclusion of the holders' shares.
The registration rights agreement also requires us to prepare and file with
the SEC amendments and supplements to the registration statement and this
prospectus that are necessary to keep the registration statement effective for a
period of not less than 180 days.
The registration statement to which this prospectus relates is being filed
pursuant to the requirements of the warrant registration rights agreement
between us and the underwriters of our March 31, 1998 offering of 335,000 units.
Under that agreement, we are required to register under the Securities Act the
warrants issued as part of the units and the underlying shares of common stock
- 18 -
<PAGE>
issuable pursuant to the warrants. This is not an underwritten registration.
Motorola, as the sole holder of the 6,520,532 shares of common stock we issued
in connection with our acquisition of ARDIS, has exercised its piggyback
registration rights and is offering all of its 6,520,532 shares of our common
stock to the public at the same time as the registration of the warrants and the
underlying shares is deemed effective under the Securities Act.
PLAN OF DISTRIBUTION
--------------------
Motorola may sell its shares of common stock, from time to time, on the
Nasdaq National Market (or any other securities exchange or automated quotation
system on which our shares are then listed or quoted or in the over-the-counter
market), in privately negotiated transactions or a combination of these methods
of sale. Motorola may sell the shares at fixed prices (which may be changed), at
market prices prevailing at the time of sale, at prices related to market prices
or at negotiated prices. Motorola may sell its common stock directly or by or
through agents, brokers, dealers or underwriters in one or more of the following
types of transactions:
o underwritten public offerings;
o ordinary brokerage transactions and in transactions in which the broker
solicits purchasers;
o purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this prospectus;
o for the purpose of covering short positions; and
o in "block" sales.
If Motorola hires brokers or dealers to sell its shares of common stock,
Motorola may arrange for other brokers or dealers to participate in the resales.
In addition, any shares covered by this prospectus which qualify for sale
pursuant to Section 4(1) of the Securities Act of 1933 or Rule 144 may be sold
under such provisions rather than pursuant to this prospectus.
At the time Motorola makes a particular offer, Motorola, if required, will
distribute a prospectus supplement that sets forth the number of shares of
common stock offered and other terms of the offering, including the name or
names of any underwriters, dealers or agents, the purchase price paid by any
underwriters for the common stock purchased from Motorola, any discounts,
commissions or other items constituting compensation from Motorola and any
discounts, concessions or commissions allowed or reallowed or paid to dealers.
Motorola and any brokers, dealers or agents who participate in a sale of
the shares of common stock may be considered "underwriters" within the meaning
- 19 -
<PAGE>
of Section 2(11) of the Securities Act. Any profits realized by Motorola and the
compensation of any brokers, dealers or agents may be deemed to be underwriting
discounts and commissions.
We have filed the registration statement of which this prospectus forms a
part with the SEC as required pursuant to the terms of the registration rights
agreement.
Our outstanding common stock is listed on the Nasdaq National Market, and
we have applied for listing of the 6,520,532 shares of common stock held by
Motorola on the Nasdaq National Market.
We will not receive any of the proceeds from Motorola's sale of our common
stock. We will bear the costs of registering the shares of our common stock held
by Motorola, including all registration and filing fees, fees and expenses for
compliance with securities or blue sky laws, printing expenses, messenger and
delivery expenses, fees and disbursements of custodians, and fees and
disbursements of counsel for the Company and all independent certified public
accountants and underwriters (excluding discounts and commissions). Motorola,
however, is responsible for the fees and disbursements of its separate legal
counsel in connection with the registration.
Pursuant to the terms of the registration rights agreement, the Company and
Motorola have agreed to indemnify each other for certain liabilities, including
liabilities under the Securities Act, in connection with the registration of the
shares held by Motorola.
DESCRIPTION OF CAPITAL STOCK
----------------------------
Our authorized capital stock consists of 75,000,000 shares of common stock,
par value $0.01 per share and 200,000 shares of preferred stock, par value $0.01
per share.
Common Stock
- ------------
On January 15, 1999, there were 32,236,948 shares of common stock
outstanding, held of record by 274 stockholders.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Cumulative voting
applies to the election of directors. Subject to preferences that may be
applicable to any then-outstanding preferred stock, holders of common stock are
entitled to receive ratably such dividends as may be declared by the Board of
Directors out of legally available funds. In the event of a liquidation,
dissolution or winding-up of the Company, holders of the common stock are
entitled to share ratably in all assets remaining after we pay our liabilities
and the liquidation preference of any then-outstanding preferred stock. With two
exceptions, there are no preemptive, subscription, redemption or sinking fund
provisions applicable to the common stock. The two exceptions are: (1)
provisions of the preferred stock described below and (2) provisions of an
- 20 -
<PAGE>
existing stockholders agreement as to redemption if alien ownership issues
arise. All outstanding shares of common stock are, and all shares of common
stock to be outstanding upon completion of the offering will be, fully-paid and
nonassessable.
Our Certificate of Incorporation requires cumulative voting for the
election of directors. Under cumulative voting, each stockholder is entitled to
cast as many votes in the election as equals the product of the number of
directors to be elected and the aggregate number of shares of common stock held
by such stockholder. The stockholder may cumulate such votes for one or more
directors as the stockholder determines. Under cumulative voting, assuming 10
directors were to be elected and 32,236,948 shares of common stock were
outstanding, a stockholder would have to hold at least 2,930,632 shares of
common stock to be certain of electing one director.
Preferred Stock
- ---------------
The Board of Directors may issue preferred stock in one or more series and
may fix the designations, preferences, powers and relative, participating,
optional and other rights, qualifications, limitations and restrictions on the
preferred stock, including the dividend rate, conversion rights, voting rights,
redemption price and liquidation preference, and may fix the number of shares to
be included in any such series. Any preferred stock may rank senior to the
common stock for the payment of dividends or amounts upon liquidation,
dissolution or winding-up, or both. In addition, any shares of preferred stock
may have class or series voting rights. We do not have any shares of preferred
stock outstanding. Issuances of preferred stock, while providing us with
flexibility in connection with general corporate purposes, may, among other
things, have an adverse effect on the rights of holders of common stock. The
Board of Directors, without stockholder approval, can issue preferred stock with
voting and conversion rights that could adversely affect the voting power and
other rights of holders of common stock. Preferred stock could thus be issued
quickly with terms calculated to delay or prevent a change of control of the
Company or to make the removal of management more difficult. In certain
circumstances, this could have the effect of decreasing the market price of the
common stock.
Certain Provisions of the Company's Certificate of Incorporation and Bylaws
- ---------------------------------------------------------------------------
Certificate of Incorporation. As currently in effect, our Certificate of
-----------------------------
Incorporation may not be amended, modified, rendered ineffective or repealed
except by the vote of the holders of two-thirds of the issued and outstanding
shares of common stock. Except as required by law, other classes or series of
stock will not be entitled to vote on any such amendment, modification or other
change, unless and to the extent required by any applicable law. Our Certificate
of Incorporation currently requires the affirmative vote of the holders of
two-thirds of the issued and outstanding shares of common stock to approve:
o our merger or consolidation with or into any other entity;
o our dissolution or liquidation; or
o the sale, exchange or lease of all or substantially all of our property
and assets.
- 21 -
<PAGE>
The Certificate of Incorporation also requires that at each election of
directors by the holders of common stock, all directors must be elected.
Bylaws. As currently in effect, our Bylaws require that there be 10
------
directors on the Board of Directors. The Bylaws provide that special meetings of
the stockholders generally may be called by the president and shall be called at
the request of the holders of at least one-third of the common stock then issued
and outstanding. A special meeting solely to elect all directors of the Company
shall be called at the written request of a holder or holders of sufficient
shares of common stock to then elect at least one director under principles of
cumulative voting. The Bylaws also provide that except as provided in the
Certificate of Incorporation or the Bylaws, the Bylaws may be altered, amended
or repealed or new Bylaws may be adopted only upon the vote of either:
o three-fourths of the members of the Board of Directors then in office; or
o the holders of two-thirds of the issued and outstanding shares of common
stock.
Warrants Issued In Connection with Debt Offering
- ------------------------------------------------
We issued 335,000 Warrants pursuant to the warrant agreement dated March
31, 1998 in a private transaction that was not subject to the registration
requirements of the Securities Act. Each Warrant, when exercised by its holder,
will entitle the holder to receive 3.75749 fully paid and non-assessable shares
of our common stock at an exercise price of $12.51 per share. The exercise price
and the number of shares of common stock issuable upon exercise of a Warrant are
both subject to adjustment.
The Warrants became exercisable on June 26, 1998. Unless exercised, the
Warrants will expire on April 1, 2008. The Warrants entitle the holders of the
Warrants to purchase, in the aggregate, approximately 3.00% of our outstanding
common stock on a fully-diluted basis as of the date of issuance of the
Warrants, after giving effect to the exercise of all in-the-money outstanding
options and rights we have issued. We will give notice of expiration not less
than 90 nor more than 120 days prior to the expiration date to the registered
holders of the then outstanding Warrants. If we fail to give this notice, the
Warrants will not expire until 90 days after we give notice. In no event will
holders be entitled to any damages or other remedy for our failure to give
notice, other than this extension.
LEGAL MATTERS
-------------
Certain legal matters with respect to the shares of common stock offered by
this prospectus will be passed upon for the Company by Randy Segal, our Vice
President, General Counsel and Secretary. Ms. Segal owns 163,881 shares of
common stock. Ms. Segal's ownership includes shares she owns through our
- 22 -
<PAGE>
matching 401(k) Plan and /or Employee Stock Purchase Plan. Her ownership also
includes shares issuable upon the exercise of options granted under the Stock
Option Plan which options are vested and exercisable, subject to compliance with
applicable securities laws.
EXPERTS
-------
The consolidated financial statements of American Mobile Satellite
Corporation as of December 31, 1996 and 1997 and for each of the years in the
three-year period ended December 31, 1997, incorporated by reference in this
registration statement, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said report. The combined financial statements of ARDIS
Holding Company as of December 31, 1996 and 1997 and for each of the years in
the three-year period ended December 31, 1997, incorporated by reference in this
registration statement, have been audited by KPMG LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said report. The consolidated financial statements of XM
Satellite Radio Holdings Inc. (a development stage company, previously known as
AMRC Holdings, Inc.) as of December 31, 1997 and for the period from December
15, 1992 (date of inception) through December 31, 1997, incorporated by
reference in this registration statement, have been audited by KPMG LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said report.
WHERE YOU CAN FIND MORE INFORMATION
-----------------------------------
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public at the SEC's web site at http://www.sec.gov. You also may find
information about us on our web site at http://www.ammobile.com.
The SEC allows us to incorporate by reference the information that we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings (File
No. 0-23044) we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934:
- 23 -
<PAGE>
a. our annual report on Form 10-K for the year ended December 31, 1997
and on Form 10-K/A for the year ended December 31, 1997, filed April
15, 1998;
b. our quarterly reports on Form 10-Q for the quarters ended March 31,
1998, June 30, 1998 and September 30, 1998;
c. our current reports on Form 8-K, dated January 5, 1998, January 22,
1998, March 9, 1998, April 15, 1998, June 5, 1998, October 9, 1998,
October 29, 1998, January 5, 1999 and January 20, 1999 and on Form
8-K/A dated January 13, 1998; and
d. the description of our capital stock contained in our registration
statement on Form 8-A, dated December 9, 1993 and on Form 8-A/A, dated
December 13, 1993.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Randy Segal
Vice President, General
Counsel and Secretary
American Mobile Satellite Corporation
10802 Parkridge Blvd.
Reston, Virginia 20191-5416
(703) 758-6130
No person has been authorized to give any information or to make any
representation other than those contained in this prospectus in connection with
the offering of common stock. If information or representations are given or
made you must not rely on it as if we authorized it. Neither the delivery of
this prospectus nor any sale made hereunder shall, under any circumstances,
create an implication that the information contained or incorporated by
reference herein is correct as of any time subsequent to its date or that there
has been no change in the affairs of the Company since such date. This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any securities offered hereby in any jurisdiction in which such offer or
solicitation is not permitted, or to anyone whom it is unlawful to make such
offer or solicitation.
- 24 -
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
--------------------------------------
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
-------------------------------------------
The following are the estimated expenses (other than underwriting discounts
and commissions) of the issuance and distribution of the securities being
registered to be paid by the Company.
SEC registration fee............................................... $13,781
Legal fees and expenses................................................. *
Blue Sky fees and expenses.............................................. *
Accounting fees and expenses............................................ *
Transfer agent fees...................................................... *
Listing fees.........................................................17,500
Miscellaneous............................................................ *
----------
Total $*
.........
[* To be filed by amendment.]
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
------------------------------------------
The Company's Bylaws provide that the Company will indemnify its directors
and officers to the fullest extent permitted by Delaware law. The Company may be
required to advance litigation expenses in the case of stockholder derivative
actions or other actions, against an undertaking by the indemnified party to
repay such advances if it is ultimately determined that the indemnified party is
not entitled to indemnification.
In addition, the Company's Certificate of Incorporation provides that,
pursuant to Delaware law, its directors shall not be liable for monetary damages
for breach of the directors' fiduciary duty of care to the corporation and its
stockholders. This provision in the Certificate of Incorporation does not
eliminate the duty of care, and in appropriate circumstances equitable remedies
such as injunctive or other forms of nonmonetary relief will remain available
under Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Company for acts
or omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws.
II-1
<PAGE>
At present, there is no pending litigation or proceeding involving an
officer or director of the Company as to which indemnification is being sought,
nor is the Company aware of any threatened litigation that may result in claims
for indemnification by any officer or director.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
-------------------------------------------
Exhibits
- --------
5 Opinion of Randy Segal, General Counsel, Vice President and Secretary.
23.1 Consent of Arthur Andersen LLP, independent public accountants.
23.2 Consent of KPMG LLP, Chicago, Illinois, independent public accountants.
23.3 Consent of KPMG LLP, Washington, D.C., independent public accountants.*
23.4 Consent of Randy Segal, General Counsel, Vice President and Secretary
(included in Exhibit 5 to this registration statement).
24 Powers of Attorney of directors and officers of the Company (included
in the signature page).
- ----------
*To be filed by amendment.
ITEM 17. UNDERTAKINGS.
-------------
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) of the Securities Act if, in the aggregate, the
II-2
<PAGE>
changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the
effective Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement; Provided, however, that paragraphs
(a)(1)(i) and (a)(1)(ii) do not apply if the information
required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by
the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the County of Fairfax, Commonwealth of Virginia, on the 28th day
of January, 1999.
AMERICAN MOBILE SATELLITE
CORPORATION
By: /s/Walter V. Purnell, Jr.
Name: Walter V. Purnell, Jr.
Title: President and Chief
Executive Officer
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Gary M. Parsons, Walter V. Purnell, Jr.
and Randy S. Segal, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign any and all amendments to this
registration statement, and to file the same, with exhibits thereto, and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or either of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Walter V. Purnell, Jr. President and Chief January 28, 1999
- ----------------------------- Executive Officer, and Director
Walter V. Purnell, Jr. (Principal Executive Officer)
/s/ Stephen D. Peck Vice President and Chief January 28, 1999
- ----------------------------- Financial Officer (Principal
Stephen D. Peck Financial and Accounting Officer)
/s/ Gary M. Parsons Chairman of the Board January 28, 1999
- ----------------------------- of Directors
Gary M. Parsons
II-4
<PAGE>
/s/ Douglas I. Brandon Director January 28, 1999
- -----------------------------
Douglas I. Brandon
/s/ Pradeep P. Kaul Director January 28, 1999
- -----------------------------
Pradeep P. Kaul
/s/ Billy J. Parrott Director January 28, 1999
- -----------------------------
Billy J. Parrott
/s/ Andrew A. Quartner Director January 28, 1999
- -----------------------------
Andrew A. Quartner
/s/ Jack A. Shaw Director January 28, 1999
- -----------------------------
Jack A. Shaw
/s/ Roderick M. Sherwood, III Director January 28, 1999
- -----------------------------
Roderick M. Sherwood, III
/s/ Michael T. Smith Director January 28, 1999
- -----------------------------
Michael T. Smith
II-5
Exhibit 5
AMERICAN MOBILE SATELLITE CORPORATION
January 29, 1999
American Mobile Satellite Corporation
10802 Parkridge Blvd.
Reston, Virginia 20191-5416
Ladies and Gentlemen:
As set forth in the Registration Statement on Form S-3 (the "Registration
Statement") filed by American Mobile Satellite Corporation (the "Company"), with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended, relating to (i) 335,000 warrants (the "Warrants") to purchase shares of
the Company's common stock, par value $.01 per share (the "Common Stock"),
issued pursuant to the Warrant Agreement, dated as of March 31, 1998 (the
"Warrant Agreement"), between the Company and State Street Bank and Trust
Company, (ii) 1,258,759 shares of Common Stock (the "Warrant Shares") that may
be issued from time to time by the Company upon the exercise of the Warrants,
and (iii) 6,520,532 shares of Common Stock (the "Additional Shares") that may be
sold by Motorola, Inc. (the "Selling Stockholder"), certain legal matters in
connection with the Warrants, the Warrants Shares and the Additional Shares are
being passed upon for the Company by me. At your request, this opinion is being
furnished to you for filing as Exhibit 5 to the Registration Statement.
In my capacity as general counsel of the Company, I have examined the
Certificate of Incorporation and Bylaws of the Company, each as amended to date,
the originals, or copies certified or otherwise identified, of corporate records
of the Company, including minute books of the Company as furnished to me by the
Company, certificates of public officials and of representatives of the Company,
statutes and other instruments and documents as a basis for the opinions
hereinafter expressed. In giving such opinions, I have relied upon certificates
of officers of the Company with respect to the accuracy of certain factual
matters contained in such certificates.
On the basis of the foregoing, and subject to the assumptions, limitations
and qualifications set forth herein, I am of the opinion that:
1. The Company is a corporation duly incorporated and validly existing
under the laws of the State of Delaware.
<PAGE>
American Mobile Satellite Corporation
January 29, 1999
Page 2
2. The Warrants are duly authorized and validly issued in accordance with
the terms of the Warrant Agreement.
3. The issuance of the Warrant Shares has been duly authorized by all
necessary corporate action on the part of the Company, and when the
Warrant Shares are issued upon exercise of the Warrants in accordance
with the terms of the Warrant Agreement against payment of the
consideration therefor, they will be validly issued, fully paid and
nonassessable.
4. The Additional Shares to be sold by the Selling Stockholder are duly
authorized, validly issued, fully paid and nonassessable.
The opinions set forth above are limited in all respects to the General
Corporation law of the State of Delaware as in effect on the date hereof.
I hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement.
Sincerely,
/s/ Randy S. Segal
Randy S. Segal
General Counsel
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-3 of our report dated March
31, 1998 included in American Mobile Satellite Corporation's Form 10-K for the
year ended December 31, 1997 and to all references to our Firm included in this
registration statement.
/s/ ARTHUR ANDERSEN LLP
Washington, D.C.
January 28, 1999
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
American Mobile Satellite Corporation:
We consent to the incorporation by reference into the American Mobile Satellite
Corporation (AMSC) Registration Statement on Form S-3 of our report dated
February 13, 1998, with respect to the combined balance sheets of ARDIS Holding
Company as of December 31, 1996 and 1997, and the related combined statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1997, which report appears in the AMSC
Current Report on Form 8-K dated April 15, 1998 and to the reference to our firm
under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Chicago, Illinois
January 26, 1999
