As filed with the Securities and Exchange Commission on January 25, 2001
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------------------
TELIGENT, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of 54-18665620
incorporation or organization) (I.R.S. Employer Identification No.)
8065 LEESBURG PIKE
SUITE 400
VIENNA, VIRGINIA 22182
(703) 762-5100
(Name, address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
---------------------------
LAURENCE E. HARRIS, ESQ.
TELIGENT, INC.
SUITE 400
8065 LEESBURG PIKE
VIENNA, VIRGINIA 22182
(703) 762-5100
(Name, address, including zip code,
and telephone number, including area
code, of agent for service)
---------------------------
WITH COPIES OF NOTICES TO:
ROBERT ROSENMAN, ESQ.
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019
(212) 474-1000
---------------------------
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. [ ]
If any of the securities being registered on this Form are being offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
===================================================================================================================
Proposed
Title of each class Securities Amount to be Maximum Offering Proposed Maximum Amount of
to be Registered Registered (1) Price Per Unit Aggregate Offering Price Registration Fee
- -------------------------------------------------------------------------------------------------------------------
Class A Common Stock,
$.01 par value 131,578,947 $3.16(2) $415,789,473(2) $103,947(2)
- -------------------------------------------------------------------------------------------------------------------
Class A Common Stock,
$.01 par value 4,972,370 $3.16(2) $ 15,712,689(2) $3,928 (2)
Total: 136,551,317 -- $431,502,162 $107,875
===================================================================================================================
(1) Represents shares of Class A common stock being registered for resale by
the selling stockholder pursuant to this registration statement
consisting of (i) a maximum of 131,578,947 shares issuable pursuant to
the purchase agreement, dated as of December
7, 2000, and (ii) 4,972,370 shares as may become issuable upon exercise
of the warrants, which were issued in connection with the purchase
agreement. For purpose of estimating the number of shares to be included
in this registration statement, we assumed that $250 million of our
shares would be purchased under the purchase agreement at an assumed
price of $1.90 per share, the minimum price per share. In addition to the
shares set forth in the table, the amount to be registered includes an
indeterminate number of shares as may become issuable as a result of
stock splits, stock dividends and similar transactions in accordance with
Rule 416(a) under the Securities Act of 1933.
(2) Pursuant to Rule 457(c), the offering price and registration fee are
computed on the basis of the average of the high and low prices of Class
A Common Stock, as reported by the Nasdaq National Market on January 22,
2001.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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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. This 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 JANUARY 25, 2001
PROSPECTUS
[GRAPHIC OMITTED]
Teligent
TELIGENT, INC.
CLASS A COMMON STOCK
____________
This prospectus relates to the offer and sale by RGC International
Investors, LDC ("RGC") of up to 131,578,947 shares of our Class A common stock
that may be purchased by RGC pursuant to a purchase agreement dated December
7, 2000. Pursuant to the purchase agreement, we may from time to time through
o, 2002 [18 months from effectiveness], sell up to an aggregate of $250
million of Class A common stock to RGC in tranches. The aggregate purchase
price to be paid by RGC for each tranche shall be designated by us in draw
down notices delivered from time to time to RGC, and the number of shares to
be purchased by RGC in each tranche will be based upon the volume-weighted
average trading price of the shares for each of the nine business days
following the receipt of a draw down notice. In addition, the prospectus
relates to an additional 4,972,370 shares of Class A common stock that may be
acquired by RGC pursuant to the exercise of warrants issued in connection with
the purchase agreement at an exercise price of $3.62 per share. Warrants to
purchase 3,729,278 shares vested on December 7, 2000. The remaining 1,243,092
warrants will vest pro rata with each tranche purchased after the draw down of
$150 million. RGC may sell the shares of Class A common stock purchased
pursuant to the purchase agreement, including upon exercise of the warrants,
from time to time on the Nasdaq National Market or in negotiated transactions
at prices determined at the time of sale. See "Stock Purchase Agreement" and
"Plan of Distribution" herein for a more detailed description of the terms of
the purchase agreement pursuant to which RGC is acquiring our shares and the
proposed public sale from time to time by it of our shares acquired pursuant
to the purchase agreement, including upon exercise of the warrants. You should
read this prospectus and any supplement carefully before you invest.
In connection with each draw down notice delivered to RGC pursuant to the
purchase agreement, we will supplement this prospectus to show:
o the delivery date of the notice of such draw down;
o the dollar amount of the shares of Class A common stock proposed to
be sold in such draw down;
o the gross proceeds received by us from sales of Class A common stock
to RGC pursuant to prior draw downs under the purchase agreement
(excluding any proceeds from the proposed sale contemplated by that
draw down notice and before deducting expenses paid by us) and the
number of shares of Class A common stock sold to RGC pursuant to
such prior draw downs;
o the number and aggregate purchase price of shares of Class A common
stock that have been sold to RGC upon exercise of the warrants; and
o the last reported price of the Class A common stock.
Shares of our Class A common stock are traded on the Nasdaq National
Market under the symbol "TGNT."
Investing in our Class A common stock involves risks. See "Risk Factors"
beginning on page 6. ____________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The date of this prospectus is , 2001
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND IN ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. YOU SHOULD NOT
ASSUME THAT THE INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS.
WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE
OFFER IS NOT PERMITTED.
____________________
TABLE OF CONTENTS
PAGE
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WHERE YOU CAN FIND MORE INFORMATION ABOUT TELIGENT........................ 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 3
NOTE ON FORWARD-LOOKING STATEMENTS........................................ 4
BUSINESS.................................................................. 4
FINANCING PLAN............................................................ 5
USE OF PROCEEDS........................................................... 5
RISK FACTORS.............................................................. 6
DESCRIPTION OF CAPITAL STOCK.............................................. 21
STOCK PURCHASE AGREEMENT.................................................. 29
SELLING STOCKHOLDER....................................................... 32
PLAN OF DISTRIBUTION...................................................... 33
LEGAL MATTERS............................................................. 36
EXPERTS................................................................... 36
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WHERE YOU CAN FIND MORE INFORMATION ABOUT TELIGENT
We are subject to the informational requirements of the Securities
Exchange Act of 1934, which requires us to file annual, quarterly and special
reports, proxy statements and other information with the SEC. You may read and
copy any document that we file at the Public Reference Room of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549. Information regarding the Public
Reference Room, including hours of operation, may be obtained by calling the
SEC at 1-800-SEC-0330. You may also inspect our filings at the regional
offices of the SEC located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and at 7 World Trade Center, New York, New York 10048 or via
the Internet at the SEC's home page at http://www.sec.gov.
This prospectus constitutes part of a Registration Statement on Form S-3
filed with the SEC under the Securities Act of 1933. It omits some of the
information contained in the Registration Statement, and reference is made to
the Registration Statement for further information with respect to us and the
securities RGC is selling hereby. Any statement contained in this prospectus
concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the SEC may not be complete
and, in each instance, you should refer to the copy of the document filed with
the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, 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 later information that we file
with the SEC will automatically update and supersede this information and the
information in this prospectus. We incorporate by reference the documents
listed below and any future filings made with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until all of the
securities covered by this prospectus are sold:
1. Our Annual Report on Form 10-K for the year ended December 31, 1999;
2. Our Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 2000, June 30, 2000 and September 30, 2000;
3. Our Current Reports on Form 8-K dated January 18, 2000, April 7,
2000, September 11, 2000, October 4, 2000 and December 21, 2000; and
4. The description of our Class A common stock in our Form 8-A filed on
November 18, 1997.
You may request a copy of these filings at no cost, by writing or
telephoning the office of Investor Relations, Teligent, Inc., 8065 Leesburg
Pike, Suite 400, Vienna, Virginia 22182, telephone: (703) 762-5264.
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NOTE ON FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. Forward-looking
statements can be identified by the use of such forward-looking terminology as
"believes", "expects", "may", "intends", "will", "should" or "anticipates" or
the negative thereof or other variations thereon or similar terminology, or by
discussions of strategy. We have based these forward-looking statements on our
current expectations and projections about future events. These
forward-looking statements are subject to risks, uncertainties, and
assumptions about us, including those set forth under "Risk Factors."
In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus or in any supplement to
this prospectus might not occur. We undertake no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
BUSINESS
We are a full-service, facilities-based communications company. We offer
small and medium- sized business customers local and long distance telephony,
high-speed data and Internet access services over our digital SmartWave(TM)
local networks. Our SmartWave(TM) local networks integrate advanced fixed
wireless technologies with traditional broadband wireline technology. Our
digital wireless technology provides many of the advantages of fiber and can
transport information within the network at up to 155 Megabits per second, or
Mbps, also known as OC-3 speed, via a point-to- point or point-to-multipoint
radio. We believe this technology addresses the growing marketplace demand for
the delivery of broadband applications and services. This demand results in
part from the increased acceptance and reliance on the Internet by business
users as well as the emergence of bandwidth intensive applications such as
electronic commerce, streaming audio and video and large data file transfers.
We believe we are well positioned to capture revenues in the rapidly
growing, approximately $150 billion domestic business local exchange, long
distance, Internet, and data communications markets. Incumbent local exchange
carriers, or ILECs, who have historically provided local exchange services,
have networks increasingly burdened by capacity constraints. These capacity
constraints are a result of increased data traffic and the inherent
inefficiency of the ILECs' older, copper wire-based networks. The need for
companies that can alleviate this local access bottleneck, coupled with
changes in the regulatory environment intended to enhance competition, has
created opportunities for providers of broadband access such as ourselves.
We recently announced a new initiative to provide wholesale
telecommunications service in each of our 43 markets. In nine of these markets
our sales efforts will be focused solely on acquiring new customers for our
wholesale telecommunications service. We have begun to develop a suite of
wholesale services that will comprise the core of our wholesale initiative.
These services may include (i) the sale of excess capacity on our
Smartwave(TM) local networks to carriers located in buildings on our network,
(ii) the provision of dedicated capacity on a build-to-suit basis, and (iii)
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the sale of capacity to mobile carriers for communications with cellular
towers. We expect that the primary market for our wholesale services would be
carriers and corporate customers.
We believe the provision of these wholesale services will maximize
utilization of excess capacity of our network assets both in buildings and
individual markets and will result in the most efficient and profitable use of
our spectrum in medium to smaller size markets. We also believe that the
characteristics of fixed wireless and broadband provide an attractive
alternative for customers and carriers seeking (i) broadband solutions in
areas where fiber is not available, or (ii) to leverage the reach of existing
fiber rings. However, we do not expect significant revenues from our wholesale
services until approximately 2002.
Our principal executive offices are located at 8065 Leesburg Pike, Suite
400, Vienna, Virginia 22182. Our main telephone number is (703) 762-5100. For
additional information about Teligent, you should consult the information
sources listed above under the heading "Where You Can Find More Information
About Teligent."
FINANCING PLAN
As of January 8, 2001, the Company had approximately $351 million of
cash, cash equivalents, and short-term investments, which is expected to allow
us to remain funded into the second quarter of 2001. Our credit facility,
entered into on July 2, 1998, has been fully drawn-down.
We anticipate supplementing these funds with proceeds of up to $250
million in connection with the purchase agreement with RGC that is described
herein under "Selling Stockholder and Plan of Distribution." Based on our
internal projections, we anticipate that we will be funded through 2001 if we
receive these proceeds from RGC prior to the end of 2001. These projections
may be materially different than the actual timing and amount of money
required for the development of our business and to fund net operating
expenses. See "Risk Factors -- We May Be Unable To Acquire The Significant
Additional Capital Necessary To Develop And Expand Our Business Or Meet Our
Operating Requirements." The equity financing from RGC of up to $250 million
is contingent upon certain conditions described herein under "Selling
Stockholder and Plan of Distribution," and there can be no assurance that we
will be able to obtain all or any part of the $250 million equity financing
from RGC or when such financing will be available or that we will be able to
obtain any other additional financing on terms acceptable to us.
USE OF PROCEEDS
We will not receive any proceeds from the sale of our common stock by RGC
pursuant to this prospectus. Pursuant to the purchase agreement dated December
7, 2000, between us and RGC, we may from time to time through o, 2002 [18
months from effectiveness], sell up to an aggregate of $250 million of Class A
common stock to RGC. We may also receive proceeds of up to approximately $18
million to the extent that RGC exercises warrants to acquire common shares,
which shares are being registered for resale under the registration statement
of which this prospectus is a part. We cannot assure you, however, that we
will receive the full amount or that such amount will be available to us at
anytime. We will use any proceeds from the sale of our shares to RGC and
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upon RGC's exercise of the warrants for general corporate purposes, including
construction of our fixed wireless and fiber optic voice and data networks.
RISK FACTORS
An investment in our Class A common stock involves a high degree of risk.
Before making an investment in shares of our Class A common stock, you should
carefully consider the following risks, together with all of the other
information included in this prospectus. Our business, financial condition and
results of operations could be materially adversely affected by the
realization of any of the following risks. In that event, the trading price of
shares of our Class A common stock could decline and you could lose all or
part of your investment.
WE HAVE HAD OPERATING LOSSES AND NEGATIVE CASH FLOW SINCE OUR INCEPTION, AND
WE EXPECT THAT SIGNIFICANT LOSSES WILL CONTINUE IN THE FUTURE
Development of our telecommunications infrastructure and other elements
of our business is costly, and these costs have resulted in and will continue
to result in negative cash flow at least until we establish a larger customer
base and complete more of our network. We experienced losses from operations
of $124 million for the three months ended September 30, 2000, $408 million
for the nine months ended September 30, 2000, and $459 million for the year
ended December 31, 1999. We experienced net losses of $228 million for the
three months ended September 30, 2000, $548 million for the nine months ended
September 30, 2000, and $529 million for the year ended December 31, 1999. We
expect to continue to generate significant operating and net losses for
several years. The extent to which we continue to experience negative cash
flow in the future will be affected by a variety of factors including:
o our ability to sell existing customers additional services;
o our ability to penetrate existing buildings and markets by adding
new customers;
o our pace of entry into new markets;
o the time and expense required for building our planned network
including securing equipment with appropriate capabilities, securing
building access, and installing the equipment and making it
operational;
o our ability to initiate and succeed at a wholesale
telecommunications service sales effort in each of our markets,
especially in nine markets where the sole focus will be on providing
such service;
o our ability to acquire fixed wireless spectrum in new and existing
markets and retain fixed wireless spectrum in existing markets;
o our ability to raise additional funds to pursue our business plan;
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o our ability to accurately provision services for customers in a
timely fashion;
o our ability to attract and retain customers;
o the impact of changes in telecommunication laws and regulations
(including laws concerning the Internet, and cable and electric
companies);
o our ability to secure acceptable interconnection arrangements with
incumbent local exchange carriers, or ILECs, and Internet service
providers, or ISPs;
o the timely development and acceptance of our products and services
and the perceived overall value of these products and services by
users, including the features, pricing and quality compared to
competitors' products and services;
o failure of vendors to supply critical telecommunications equipment;
o our ability to adjust to rapid changes in technology, services and
industry standards;
o the willingness of users to substitute competitors' products and
services for our products and services;
o our success in gaining regulatory approval of our product and
service offerings, when required;
o the intensity of industry competition;
o our ability to identify and ally with suitable local partners in
international markets; and
o general economic conditions.
WE MAY BE UNABLE TO ACQUIRE THE SIGNIFICANT ADDITIONAL CAPITAL NECESSARY TO
DEVELOP AND EXPAND OUR BUSINESS OR MEET OUR OPERATING REQUIREMENTS
We will require significant capital to, among other things, finance the
further development and expansion of our business and deployment of our
services, including purchasing and installing equipment, operating our
network, obtaining additional spectrum licenses, financing future
acquisitions, investing in our international expansion and joint ventures,
leasing office space, hiring and retaining employees, funding operating losses
and for working capital and debt service purposes. Based on our current
business plan, we expect to incur between $220 million and $250 million in
capital investments in the year 2001.
With our existing cash, cash equivalents and short-term investments, and
the net proceeds from the sale of the $250 million of common stock pursuant to
the purchase agreement (but not including any amount receivable upon exercise
of the warrants), we expect to have sufficient funds to operate our business
through 2001 based on our internal financial projections. However, the actual
proceeds
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from sales of our common stock under the purchase agreement and the timing of
receipt of such proceeds will depend on a number of conditions. The amount of
any draw down is subject to conditions based on the market price of the common
stock and the volume of trading prior to the draw down. Our ability to issue
draw down notices is subject to the satisfaction of certain conditions.
Further, RGC may terminate our right to effect any draw downs if we do not
comply with certain conditions. See "Stock Purchase Agreement."
The actual timing and amount of money required for development of our
business and to fund net operating expenses may vary materially from our
estimates and, consequently, we may require additional funds prior to the
commencement of 2002. Some of the factors which could cause our estimates to
vary include:
o significant departures from our current business plan;
o accelerated roll-out of our products and services in our licensed
market areas;
o current or potential financial commitments associated with future
acquisitions, international expansion or joint ventures;
o deployment delays;
o cost overruns associated with network deployment;
o engineering design changes in our network topology;
o timing of receipt of requisite regulatory approvals;
o requirement to make payments on accelerated principal and interest
or otherwise make payments upon a breach of covenant or an event of
default under our credit facilities and other obligations;
o inability to effect sales to RGC pursuant to the purchase agreement
due to our failure to satisfy its conditions or otherwise;
o a downturn in general economic conditions of our industry;
o expenses associated with new spectrum acquisitions and auctions;
o other unanticipated expenses; and
o greater than anticipated operating losses.
In such event, we may need to obtain additional financing earlier, which
may include vendor financings and the sale or issuance of equity and debt
securities. Stockholder approval may be required in connection with obtaining
additional financing through the sale of shares of our common
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stock or securities convertible into shares of common stock. If we are unable
to gain stockholder approval for these types of financings, our ability to
fund our business could be materially adversely affected. Further, obtaining
additional financing through the sale of shares of our common stock will be
more difficult if we fail to maintain the listing of our common stock on the
Nasdaq National Market or another national exchange or trading market.
We cannot assure you that additional financing will be available to us
or, if available, that it can be obtained on a timely basis and on acceptable
terms. Failure to obtain additional financing could require us to modify,
delay or abandon some of our planned future expansion or expenditures and
could have a material adverse effect on our business, financial condition and
results of operations, or could force us to seek bankruptcy protection or
cease doing business.
Because we may not have adequate sources of cash to service our debt,
finance anticipated capital expenditures, finance possible future acquisitions
and fund working capital requirements, we may need to refinance our debt
obligations, and we do not know if this refinancing will be available, or
available on reasonable terms. If we are unable to obtain adequate financing
or refinancing on satisfactory terms, we would have to consider other options
in order to meet our debt service requirements, such as altering our business
plan, selling certain assets or additional equity or pursuing other
alternatives available to us.
OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE EXTREMELY VOLATILE
The trading price of our common stock has been and is likely to continue
to be extremely volatile. Our stock price and trading volume could be subject
to wide fluctuations in response to a variety of factors, including the
following:
o variations in our operating results and the difference between our
actual results and the results expected by investors and securities
analysts;
o our ability to obtain financing;
o rumors in the marketplace regarding our activities;
o additions or departures of key personnel;
o announcements of technological innovations or new services by us or
our competitors;
o conditions or trends in the telecommunications industry, including
regulations;
o changes in the market valuations of other telecommunications and
fixed wireless telecommunications companies;
o announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
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o press and securities analyst reports; and
o sales of shares of our common stock or other securities in the open
market.
We do not meet all the maintenance standards for listing on the Nasdaq
National Market, and, therefore, the NASD has the discretion to remove our
shares from listing on the Nasdaq National Market. If we are delisted, the
liquidity of our common stock may be adversely affected, which may adversely
affect our stock price. If such an event were to occur, we would appeal the
action and attempt to maintain the listing of our shares. If our appeal were
unsuccessful, then we would attempt to list our shares on the Nasdaq SmallCap
Market. However, even if we are successful in listing our shares on the Nasdaq
SmallCap Market, the liquidity of our common stock may still be adversely
affected, which may adversely affect our stock price.
Any negative change in investors' and securities analysts' perceptions of
the prospects of telecommunications or fixed wireless telecommunications
companies could further depress our stock price, regardless of our operating
results. Other broad market industry factors may also decrease the market
price of our common stock, regardless of our operating performance. Market
fluctuations, as well as general political and economic conditions, such as a
recession or interest rate or currency rate fluctuations, also may decrease
the market price of our common stock. In the past, following declines in the
market price of a company's securities, securities class-action litigation has
often been initiated. Litigation of this type, if initiated, could result in
substantial costs and a diversion of management's attention and resources.
OUR SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS COULD IMPEDE OUR
OPERATIONS AND FLEXIBILITY
We have a substantial amount of debt outstanding. As of January 2001, we
had outstanding $300 million aggregate principal amount of 11.5% Senior Notes
due 2007, $440 million in aggregate principal amount of 11.5% Senior Discount
Notes due 2008, and $800 million under our term loan facility. In addition,
subject to any restrictions in our credit facility and indentures that govern
our notes, we may borrow additional funds to acquire telecommunications
assets.
Our high level of debt could have important consequences to you,
including:
o we may not be able to earn enough money to pay interest and
principal on our debt and to make our planned capital expenditures;
o we may have difficulty borrowing money in the future for working
capital, capital expenditures or other purposes;
o we will need to use a large portion of the money we earn to pay
principal and interest on our debt, which will reduce the amount of
money we can use in our business;
o our debt level reduces our flexibility in planning for, or reacting
to, changes in our business and markets;
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o we may have a much higher level of debt than our competitors, which
may put us at a competitive disadvantage; and
o our debt level makes us more vulnerable to changes in general
economic conditions and downturns in our business.
OUR DEBT INSTRUMENTS IMPOSE SIGNIFICANT RESTRICTIONS ON OUR BUSINESS AND
FINANCING ACTIVITIES
The indentures, the credit agreement and other instruments governing our
debt impose significant operating and financial restrictions on us, including
certain limitations on our ability to incur additional debt, pay dividends,
redeem capital stock, sell assets, engage in mergers or acquisitions or make
investments, transact with affiliates, sell stock of subsidiaries and place
liens on our assets. In addition, our credit facility contains certain
covenants, including covenants regarding the achievement of certain
performance targets and the maintenance of certain financial ratios.
We may not be able to comply with the covenants in the credit agreement
or indentures. Failure to observe or perform one or more of the covenants at
any given time will require us to obtain a waiver or consent from the lenders,
or refinance our credit facilities. Such a waiver, consent or refinancing may
not be available to us on reasonable terms. A breach of these covenants,
ratios or restrictions in our credit facilities also could result in an event
of default. Upon the occurrence of an event of default under our credit
facilities, the lenders could elect to declare all amounts outstanding under
our credit facilities, together with accrued interest, to be immediately due
and payable. If we are unable to repay these amounts, the lenders could
proceed against the collateral granted to them to secure the indebtedness. If
the lenders under the facilities accelerate the payment of the indebtedness,
we cannot assure you that our assets would be sufficient to repay in full that
indebtedness and our other indebtedness. Our failure to comply with any of
these covenants or restrictions could also limit our ability to obtain future
financings. Limitations on our ability to obtain future financings could also
have a material adverse effect on our operations, the market price of our
securities and/or our ability to make principal and interest payments on
outstanding debt or distributions on our common stock.
WE HAVE A LIMITED OPERATING HISTORY, AND RAPID EXPANSION OF OUR OPERATIONS MAY
PLACE A SIGNIFICANT STRAIN ON OUR MANAGEMENT, FINANCIAL AND OTHER RESOURCES
We began operations in 1997. The execution of our business plan has
resulted in, and is expected to continue to result in, rapid expansion of our
operations. Our ability to manage this expansion effectively will depend upon
our ability to:
o manage operations;
o control costs;
o maintain regulatory compliance;
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o maintain customer satisfaction;
o maintain and expand our internal management, administrative,
technical, information, billing and accounting systems;
o attract, assimilate and retain qualified management and professional
and technical personnel; and
o integrate acquired businesses.
If we are unable to achieve any of the above in an efficient manner and
at a pace consistent with the growth of our business, customers could
experience connection delays and lower levels of customer service. Failure to
meet the demands of customers and to manage the expansion of our business and
operations could have a material adverse effect on our business, financial
condition and results or operations.
WE RELY ON A LIMITED NUMBER OF THIRD PARTIES TO SUPPLY TELECOMMUNICATIONS
EQUIPMENT CRITICAL FOR THE SERVICES WE PROVIDE
We currently obtain our telecommunications equipment from a limited
number of suppliers. Any delay, reduction or interruption in supply from any
of our suppliers, or failure of equipment to meet our standards could disrupt
our ability to deploy our telecommunications infrastructure. Further, we do
not have the capability to manufacture, nor do we anticipate establishing the
capability to manufacture, any of our telecommunications equipment.
Additionally, our suppliers may not be able to manufacture and deliver the
volume of equipment we need.
THE MARKET FOR OUR FIXED WIRELESS SERVICE IS NEW AND WIDESPREAD ACCEPTANCE IS
UNCERTAIN
Fixed wireless telecommunications services represent an emerging sector
of the telecommunications industry, and the demand for these services is
uncertain. We expect that substantial marketing efforts, time and expense will
be required to stimulate demand for our wireless services. Substantial markets
may not develop for our wireless services, or, if such markets were to
develop, we may not be able to attract and maintain a sufficient
revenue-generating customer base or operate profitably.
OUR ABILITY TO SECURE BUILDING ACCESS AFFECTS OUR OPERATIONS
In order to obtain the necessary access to install our transmit/receive
antennas and to provide service to our intended customers, we must secure roof
and other building access rights or rights to access other line-of-sight
locations. We must also secure access to conduits and wiring within each
building or other structure on which we propose to install our equipment, and
may require construction, zoning, franchises or other governmental permits. We
may not succeed in obtaining the roof and other building access rights from
the building owners or the construction, zoning, franchises or other
governmental permits, necessary to establish wireless services to all or most
potential customers in our market areas at reasonable costs or on favorable
terms, or at all, and
12
delays or failures in obtaining such rights or permits may also have a
material adverse effect on our business, financial condition and results of
operations.
LINE-OF-SIGHT AND DISTANCE REQUIREMENTS PLACE RESTRICTIONS ON OUR OPERATIONS
Line-of-sight and distance limitations generally do not present problems
in urban areas due to the existence of tall structures from which to transmit
and the concentration of customers within a limited area. Line-of-sight and
distance limitations in non-urban areas can arise due to lack of structures
with sufficient height to clear local obstructions. We generally expect to be
able to install additional antennas to resolve line-of-sight and distance
issues. However, these limitations may render our wireless services
uneconomical in certain locations. In such cases, we may (1) decide to provide
services that are uneconomical in the short term, (2) use alternative methods
of transmission to provide services on a more economical basis, or (3) decide
not to provide services to potential customers in these locations.
OUR NETWORK MAY EXPERIENCE FAILURE OR DELAYS AND ERRORS IN TRANSMISSION AND
EXPOSE US TO POTENTIAL LIABILITY
Our network consists of a complex collection of various communications
equipment, software, operating protocols and proprietary applications for the
broadband transmission of large quantities of data. It is possible that data
carried over our networks may be lost, delayed or distorted. Loss, delay or
distortion of customer data may cause significant losses to a customer using
our network. Our network may also contain undetected design faults and
software bugs that, despite our testing and usage, may be discovered only at a
later date. The failure of any of our network components due to yet
undiscovered faults and software bugs could result in the interruption of
customer service until we effect the necessary repairs. Such a failure, fault
or loss could also result from other causes, including natural disasters,
power losses, security breaches and computer viruses. These failures, faults
or errors could cause delays and service interruptions and expose us to
customer liability or require expensive modifications to our network that
could have a material adverse effect on our business.
WE MAY BE UNABLE TO ADJUST TO RAPID CHANGES IN TECHNOLOGY, SERVICES AND INDUSTRY
STANDARDS
The telecommunications industry has experienced rapid technological
advances, changes in end-user requirements, frequent introduction of new
services, evolving industry standards and decreases in the cost of equipment.
We expect these changes to continue, and believe that our long- term success
will increasingly depend on our ability to offer services that take advantage
of advanced technologies and to anticipate or adapt to evolving industry
standards. Changes in technology pose the following risks:
o our wireless services may become economically or technically
outdated by technology or services now existing or developed and
used in the future;
o we may not have sufficient resources to develop or acquire new
technologies or to introduce new services capable of competing with
future technologies or service offerings; and
13
o our inventory of equipment may be rendered obsolete.
WE OPERATE OUR BUSINESS IN A HIGHLY COMPETITIVE INDUSTRY
The telecommunications industry is highly competitive, and we expect that
competition will intensify in the future. We compete with a wide range of
service providers for each of the wholesale and retail services that we
provide, including the regional Bell operating companies, ILECs, competitive
local exchange carriers, and ISPs. These include, but are not limited to,
Winstar Communications, Inc., XO Communications, Inc., Worldcom, Inc., AT&T
Corp., and Sprint Corp. Many of our competitors have long-standing
relationships with customers and suppliers in their respective industries,
greater name recognition, less leverage and significantly greater financial,
technical and marketing resources than we do. Moreover, as competition
continues to increase in the telecommunications market, we expect a
significant increase in general pricing pressures. We expect to compete on the
basis of local service features, quality, price, reliability, customer service
and rapid response to customer needs while providing local and long distance
voice, data, video and Internet access.
Since the launch of our commercial services, we have marketed our
telecommunications services to potential customers in 43 markets. However, we
may not be able to compete effectively in any of our market areas. At this
time, we have not obtained significant portions of the telecommunications
business in any of our existing markets, nor do we expect to do so in the near
future given the size of the local telecommunications market, the intense
competition therein and the diversity of customer requirements.
In the fourth quarter of 2000, we announced a new initiative to provide
wholesale telecommunications service in each of our existing 43 markets. In
nine of these markets, we plan to transition to provide exclusively wholesale
services to new customers. We may not be able to compete effectively for the
wholesale telecommunications market in any of these market areas. Other ILECs,
as well as metrofiber providers, will be our primary competition in the
wholesale market.
Advances in communications technology are continuing and other new
technologies may become competitive with technologies that we deploy. For
example, there are several alternatives for providing high-bandwidth capacity,
including coaxial cable, unlicenced spectrum, fixed wireless spectrum at
various frequency bands, laser technology and digital subscriber line
technology. Changes in the marketplace and the regulatory and legislative
environment are also taking place, potentially increasing the number of
competitors we may face. For example, recently the first ILECs affiliated with
a regional Bell operating company provided in-region long distance services
pursuant to Section 271 of the Communications Act of 1934. Verizon was granted
this authority in December 1999 for the State of New York and began offering a
full bundle of services on January 5, 2000. SBC Communications was granted
similar authority for the State of Texas on June 30, 2000, and the States of
Kansas and Oklahoma on January 19, 2001. Other ILEC Section 271 applications
for providing like services have followed. We cannot predict the impact these
developments will have on our ability to successfully market our services in
these states. In addition, the growing
14
consolidation of telecommunications companies and the formation of strategic
alliances within the telecommunications industry may create significant new
competitors. For example, building owners and large real estate investment
trusts have created competitive service providers of their own for servicing
multi-tenant building complexes where we seek to compete. We cannot predict to
what extent competition from such developing and future technologies or from
such future competitors will have a material impact on our operations.
THE EXTENT TO WHICH ILECS COOPERATE WITH US AFFECTS OUR BUSINESS
The Telecommunications Act of 1996, and the regulations thereunder, as
well as other federal and state statutes and rules, create an obligation for
the ILECs with whom we are competing to cooperate with us and other
competitors, for example, by transferring customers and by providing
interconnection, number portability, transport and unbundled network elements.
If this cooperation is not provided appropriately, ILEC customers may not be
able to communicate seamlessly with our customers and vice-versa, our
customers may experience temporary loss of dial tone when they switch service
or may experience other delays and inconvenience. Many competitive carriers,
including Teligent, have experienced some or all of these problems and have
lost some customers as a result.
WE ARE SUBJECT TO EXTENSIVE FEDERAL AND STATE LAWS, RULES AND REGULATIONS
Our telecommunications services are subject to federal, state, local and
foreign government regulation which continually change. These regulations
often have a direct or indirect impact on the costs of operating our networks
and, therefore, the profitability of our services. These regulations also have
a direct or indirect impact on the costs our competitors incur and the prices
they can charge, including their ability to price flexibly in response to
competition and to handle various products and services to make their
offerings more attractive to customers. Today, certain of our largest ILEC
competitors have been granted pricing flexibility in some jurisdictions for
certain services and others have been authorized to offer long-distance and
other services that compete with our bundled offerings. We are not able to
predict what effect these regulations and changes to these regulations will
have on the telecommunications industry in general and on us in particular. In
addition, if any communications regulatory body deems us to be an affiliate of
any of our stockholders, we may be subject to financial or regulatory burdens
or obligations to which we would not otherwise be subject.
Federal and state regulatory decisions may be made regarding issues that
may materially affect us, including, but not limited to, rules governing use
of the spectrum licensed to us in any frequency band and the radio equipment
we use, universal service, preemption of barriers to competition and access to
rights-of-way and buildings. The Federal Communications Commission (the "FCC")
recently adopted new rules for future fixed wireless licensing in the 24 GHz
band which include rules to auction available spectrum on an Economic Area
basis. In addition, the FCC adopted new service rules that provide 24 GHz
licensees increased flexibility in network design. Two parties filed petitions
for reconsideration of the Economic Area basis for the 24 GHz spectrum
auctions, requesting that the FCC auction at least some of the spectrum in
each market with a smaller geographic area. These petitions are still pending.
The FCC is also considering whether to adopt
15
additional rules to address non-discriminatory building access for all service
providers. The FCC has recently issued the first order in this matter
prohibiting new exclusive contracts for commercial buildings. Additional rules
may never be adopted, and if they are, they may not enhance our ability to
gain access.
Although we do not intend to install wireless facilities in public
rights-of-way, some municipalities nevertheless may claim that we must pay
franchise or rights-of-way fees. As we and several other providers have
experienced before, we may become involved in litigation or administrative
proceedings regarding whether local franchise requirements must be satisfied
and what constitutes use of public rights-of-way. We cannot predict that any
regulation, litigation or proceeding will broaden our available opportunities
or whether it will have a material adverse effect on our business, financial
condition and results of operations.
Certain of our interconnection agreements are currently being
renegotiated because they have reached their expiration dates and others will
reach their expiration dates and will become subject to renegotiation this
year. While these agreements contain provisions for uninterrupted
interconnection during the renegotiation period, we may not be able to obtain
comparable provisions in the subsequent agreements or we may have to resort to
the states for resolution pursuant to arbitration under the Telecommunications
Act.
THE LOSS OR DECLINE IN VALUE OF OUR WIRELESS LICENSES OR OUR INABILITY TO
RENEW OUR FIXED WIRELESS LICENSES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS
The FCC's current policy is to align the expiration dates of all fixed
wireless licenses of a particular service such that they mature concurrently
and, upon expiration, to renew all such licenses for ten years. The initial
term of most currently outstanding fixed wireless licenses, including our 24
GHz licenses, expires on February 1, 2001. We filed our 24 GHz renewal
applications on January 18, 2001. While custom and practice of the FCC
establish a presumption in favor of granting renewal of licenses to licensees,
this presumption requires that the licensee substantially comply with its
regulatory obligations during the license period. We believe that we have
been, and currently are, in substantial compliance with our fixed wireless
licenses and have met the criteria for renewal expectancy for these licenses.
If we subsequently fail to comply with our regulatory obligations, the FCC may
choose not to renew one or more of our licenses, which would render us unable
to provide service in the area covered by such licenses.
The value of our licenses may change. Our licenses are essential assets,
the value of which will depend significantly upon the success of our fixed
wireless telecommunications operations and the future direction of the fixed
wireless segment of the telecommunications industry. The value of licenses to
provide fixed wireless services also may be affected by fluctuations in the
level of supply and demand for such licenses. Any assignment of a license or
transfer of control by an entity holding a license is subject to certain
transfer restrictions, including prior federal regulatory approval, which may
impact our ability to obtain additional licenses. In some instances, state
regulatory approval as it relates to the provision of telecommunications
services by the provider using such licenses in that state is required.
16
REGULATORY RESTRICTIONS ON FOREIGN OWNERSHIP OF STOCK MAY AFFECT OUR BUSINESS
The Communications Act of 1934 imposes statutory limits on foreign
ownership, with some exceptions, of the common stock of companies that
directly or indirectly hold wireless and other common carrier licenses used in
the telecommunications industry. We believe that we are currently in
compliance with the Communications Act's foreign ownership limits and the
applicable FCC rules, regulations, orders and notices related thereto. A
significant amount of our common stock is held in nominee name and, thus, we
are not aware of the citizenship of the actual beneficial owners of such
shares. Moreover, shares of our stock, and the stock of some of our
significant stockholders, are publicly traded and thus ownership is subject to
change at any time upon any transfer of direct or indirect ownership of our
common stock. Further, holders of our convertible preferred stock may in the
future register their shares for resale and convert them to shares of our
Class A common stock, resulting in more publicly traded common stock.
Accordingly, we cannot guarantee that we will remain in compliance with the
Communications Act's foreign ownership limits.
If the FCC were to determine that the foreign ownership of our stock
exceeded the Communications Act's foreign ownership limits and the related FCC
orders, it could revoke our licenses, require us to take actions necessary to
reduce such foreign ownership so as not to exceed the statutory limits, or
determine that it was in the public interest to allow us to maintain such
foreign ownership levels. Our certificate of incorporation authorizes the
board of directors to redeem equity securities owned by non-U.S. citizens and
companies at their then-current market value in order to ensure compliance
with the Communications Act and the FCC's rules. See "Description of Capital
Stock--Restriction on Foreign Ownership" for a more complete description.
These restrictions on foreign ownership could adversely affect our ability to
attract additional equity financing from entities that are, or are owned by,
non-U.S. persons.
OUR ENTRY INTO VARIOUS INTERNATIONAL MARKETS WILL SUBJECT US TO MANY
ADDITIONAL RISKS AS WE SEEK TO ENTER SUCH MARKETS AND AS WE BECOME OPERATIONAL
IN SUCH MARKETS
We plan to and are currently expanding the offering of our
telecommunications services internationally through joint ventures with local
partners or otherwise. Certain risks inherent to our entering foreign markets
and doing business within such markets include:
o regulatory changes or limitations delaying, restricting or
prohibiting us from providing our services, including the inability
to acquire spectrum rights or other licenses or our failure to
satisfy the requirements of those licenses once awarded;
o ability to enforce our rights under foreign laws;
o our ability to successfully negotiate definitive agreements with our
international joint venture partners;
o our status as a minority partner in joint ventures limiting our
ability to manage such joint ventures;
17
o difficulties in staffing and managing our international operations;
o unanticipated changes in, or impositions of, regulatory
requirements;
o difficulties in obtaining acceptable interconnection agreements with
foreign incumbent carriers;
o unanticipated changes in tariffs, customs, duties and other trade
barriers;
o limitations on our flexibility in structuring our foreign
investments imposed by the agreements governing our outstanding
indebtedness;
o restrictions on capital or profit repatriations;
o longer payment cycles and problems in collecting accounts
receivable;
o political risks;
o pricing pressures resulting from the entry of new competitors or
strategic alliances of existing competitors;
o fluctuations in exchange rates of international currencies; and
o potentially adverse tax consequences resulting from operating in
multiple countries with different laws and regulations.
POSSIBLE FUTURE ACQUISITIONS MAY PLACE A SIGNIFICANT STRAIN ON OUR MANAGEMENT,
FINANCIAL AND OTHER RESOURCES
We are continuing to evaluate potential acquisitions. The pursuit of
acquisition opportunities will place significant demands on the time and
attention of our senior management and may involve considerable financial and
other costs with respect to identifying and investigating acquisition
candidates, negotiating acquisition agreements and integrating the acquired
businesses with our existing operations and operating the business after
acquisition. In the event we conduct acquisitions in which the consideration
paid includes cash, we may require additional financing earlier than expected.
Employees and customers of acquired businesses may sever their relationships
with these businesses during or after such an acquisition. We cannot assure
you that we will be able to consummate any acquisitions successfully or
integrate any business that we may acquire.
CONCERN OVER RADIO FREQUENCY EMISSIONS MAY ADVERSELY AFFECT OUR BUSINESS
The use of wireless equipment has been alleged to pose health risks to
humans due to radio frequency emissions from transmitting units, such as the
units we use in our systems. Any allegations of health risks, if proven, could
result in claims of liability on our part and adverse rulings. In addition, we
could be required to reduce power in our transmissions or otherwise change
18
the way we operate in order to reduce emissions to acceptable levels. Concerns
over radio frequency emissions also may have the effect of discouraging the
use of wireless communications devices such as ours. Any of these results
could have a material adverse effect on our financial condition. In the United
States, the FCC has adopted guidelines and methods for evaluating the
environmental effects of such emissions from FCC regulated transmitters,
including wireless antennas. The FCC has determined that the fixed wireless
antennas which we currently deploy offer little potential for causing radio
frequency exposure in excess of its guidelines. Although the current
guidelines and methods generally are more stringent than those previously in
effect, we believe that all of our equipment and operations comply with
applicable FCC guidelines.
POTENTIAL FOR DILUTION
As of December 7, 2000, we entered into a purchase agreement with RGC
pursuant to which we may sell to RGC up to $250 million of our shares from
time to time over a period of 18 months; the number of shares and price per
share will depend on the market price of the shares at the time of the draw
down. In connection with the purchase agreement, we also issued to RGC
warrants to purchase up to an aggregate of 4,972,370 shares at an exercise
price of $3.62 per share. The sale of shares to RGC pursuant to the purchase
agreement and the issuance of shares upon exercise of the related warrants
issued to RGC will have a dilutive impact on our existing stockholders.
Subsequent sales of these shares in the open market by RGC may also have the
effect of lowering our stock price, therefore increasing the number of shares
issuable under the purchase agreement (should we choose to issue a draw down
notice) and consequently further diluting our outstanding shares. These sales
could have an immediate adverse effect on the market price of the shares and
could result in dilution to the holders of our shares. Further, if we need to
obtain additional financing, it may not be on terms favorable to us and such
financing may cause additional dilution.
To illustrate this potential for dilution, the following table provides
examples of the number of shares potentially issuable for a given
volume-weighted average trading price on the Nasdaq National Market ("VWAP")
if we draw down the maximum amount of $250 million allowed under the purchase
agreement:
- --------------------------------------------------------------------------------
VWAP Aggregate Draw Down Amount Aggregate Number of Shares Issued
- --------------------------------------------------------------------------------
$2.00 $250,000,000 131,578,947
- --------------------------------------------------------------------------------
$3.00 $250,000,000 87,719,298
- --------------------------------------------------------------------------------
$4.00 $250,000,000 65,789,474
- --------------------------------------------------------------------------------
$5.00 $250,000,000 55,555,556
- --------------------------------------------------------------------------------
$7.00 $250,000,000 37,593,985
- --------------------------------------------------------------------------------
These share prices are illustrative only and should not be interpreted as a
forecast of share prices or the expected or historical volatility of the share
prices of our common stock.
19
The purchase agreement entered into with RGC is limited to a period of 18
months. Our ability to draw down the full $250 million allowed under the
purchase agreement is dependent upon the stock price and average trading
volume of our shares. See "Plan of Distribution".
MISAPPROPRIATION OF OUR INTELLECTUAL PROPERTY MAY ADVERSELY AFFECT OUR BUSINESS
We rely upon a combination of licenses, confidentiality agreements and
other contractual covenants to establish and protect our technology, trade
secrets and other intellectual property rights. We currently have four patent
applications pending. We cannot be sure that the steps we have taken will
adequately prevent misappropriation of our technology, trade secrets or other
intellectual property. As needed, we will continue to file lawsuits and take
other appropriate steps to protect other technology, trade secrets and other
intellectual property rights. We believe that our business as currently
conducted does not violate or infringe upon technology or intellectual
property rights of others. A third party could assert a claim against us for
the unauthorized use of their technology and, in the event of an unfavorable
ruling on any such claim, a license or similar agreement to use technology
that we rely upon in the conduct of our business may not be available on
reasonable terms. Loss of such rights or failure to obtain similar licenses or
agreements may have a material adverse effect on our business, financial
condition and results of operations.
CERTAIN OF OUR STOCKHOLDERS HAVE ENTERED INTO AN AGREEMENT TO DESIGNATE
MEMBERS OF OUR BOARD OF DIRECTORS
Certain of our stockholders have entered into an agreement which
provides, among other things, that the parties will vote their shares so that
our board of directors shall consist of eight directors, of which three
directors will be nominees of Liberty Media Corporation ("Liberty Media") and
two directors will be nominees of Telcom-DTS Investors, L.L.C. ("Telcom-DTS").
The other three directors will be Alex J. Mandl for so long as he is our chief
executive officer, and one director designated by each of Nippon Telegraph and
Telephone ("NTT"), the holder of our Series B-3 common stock, and Hicks, Muse,
Tate & Furst Incorporated ("HMTF") for so long as they maintain their
respective stockholdings above specified thresholds. See "Description of
Capital Stock--Common Stock--Stockholders' Agreement" for a more complete
description. These stockholders may have interests that are inconsistent with
each other and the interests of our other stockholders.
OUR CHARTER AND BY-LAWS CONTAIN PROVISIONS MAKING IT MORE DIFFICULT TO OBTAIN
STOCKHOLDER APPROVAL IN CHANGE OF CONTROL SITUATIONS
Our certificate of incorporation and by-laws contain provisions that
could discourage certain transactions involving an actual or threatened change
of control. In addition, our board of directors is authorized to issue,
without stockholder approval, one or more series of preferred stock having
such preferences, powers and other rights as our board of directors may
determine. These provisions may have the effect of discouraging a third party
from making a tender offer or otherwise attempting to obtain control of us
even though such a transaction might be
20
economically beneficial to us and our stockholders. See "Description of
Capital Stock" herein for a more complete description.
Shares eligible for future sale may cause the market price for our common
stock to drop significantly, even if our business is doing well
We cannot predict the effect, if any, that future sales of our Class A
common stock or the availability of shares for future sale will have on the
market price of our Class A common stock from time to time. Based on
information which is current to December 31, 2000, 9,383,357 shares of our
Class A common stock are issuable upon conversion of our outstanding Series A
preferred stock. These shares may be resold in the public market immediately.
Other shares of our common stock issued in the future may become available for
resale in the public market from time to time, and the market price of shares
of our Class A common stock could drop significantly if the holders of these
shares sell them or are perceived by the market as intending to sell them.
Our failure to hire or retain qualified personnel could harm our business
There is significant competition for employees with requisite skills. We
may not be able to attract sufficient qualified employees in the future to
sustain and grow our business, and may not be successful in motivating and
retaining the employees we are able to attract. Employees trained by us may
leave to work at companies that compete with us.
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock is based upon our
certificate of incorporation, the certificate of designation relating to the
Series A preferred stock, our by-laws and applicable provisions of law. The
following description is qualified in its entirety by reference to such
certificate of incorporation, certificate of designation, and by-laws, which
have been filed as exhibits to earlier registration statements filed by us
with the SEC. See "Where You Can Find More Information About Teligent" for
information sources at which you can locate copies of our certificate of
incorporation, certificate of designation, and by-laws.
Certain provisions of our certificate of incorporation, certificate of
designation, and by-laws summarized in the following paragraphs may be deemed
to have an anti-takeover effect and may delay, defer or prevent a tender offer
or takeover attempt that a stockholder might consider in its best interests,
including those attempts that might result in a premium over the market price
for shares held.
Authorized and Outstanding Capital Stock
Our authorized capital stock consists of 570,000,000 shares of common
stock and 10,000,000 shares of preferred stock. Of the 570,000,000 authorized
shares of our common stock, 500,000,000 shares are designated as Class A
common stock and 70,000,000 shares are designated as Class B common stock. Of
the 70,000,000 authorized shares of Class B common
21
stock, 50,000,000 shares are designated as Class B, Series 2 (the "Series B-2
common stock") and 20,000,000 shares are designated as Class B, Series 3 (the
"Series B-3 common stock"). As of December 31, 2000, there were 42,423,082
shares of Class A common stock issued and outstanding; 15,477,210 shares of
Series B-2 common stock issued and outstanding, held by Telcom Ventures, Inc.;
5,783,400 shares of Series B-3 common stock issued and outstanding, held by
NTT; and 22,578,100 shares of Class A common stock were reserved for issuance
upon exercise of outstanding options and warrants, as well as 9,383,356 shares
of Class A common stock reserved for issuance upon conversion of Series A
preferred stock. Of the 10,000,000 shares of preferred stock authorized at
December 31, 2000, 539,543 shares of Series A preferred stock due 2014 are
outstanding.
Our Class A common stock is admitted for trading on the Nasdaq National
Market and trades under the symbol "TGNT." The Transfer Agent and Registrar
for our Class A common stock is First Union National Bank.
Common Stock
Voting Rights. In general, the rights of Class A common stock and Class B
common stock stockholders are substantially identical, except that until the
number of shares held by holders of the respective Series B-2 and Series B-3
common stock fall below certain thresholds, such holders will each have the
right to elect a director to the Company's board of directors. As described
below, the Series A preferred stock votes on an as-converted basis with the
holders of Class A common stock.
There are currently eight directors. According to our certificate of
incorporation, the holders of Class A common stock, the holders of Class B
common stock and the holders of Series A preferred stock, voting together as a
single class, are entitled to elect five members of our board of directors.
The other three directors are elected by the holders of Series B-2 common
stock, holders of Series B-3 common stock and the holders of the shares of
Series A preferred stock purchased by HMTF, respectively. Some of our
stockholders have entered into an agreement governing how they vote their
shares to elect members of our board. The election of directors is further
described below. See "Stockholders' Agreement" below for a more complete
description.
Pursuant to our certificate of incorporation, the holders of Series B-2
common stock, voting as a separate class, are entitled to elect one member of
our board of directors. However, if at any time the number of issued and
outstanding shares of Series B-2 common stock is less than 10% of the
aggregate number of issued and outstanding shares of common stock then,
without any further action by us or any other party, all such issued and
outstanding shares of Series B-2 common stock will automatically be converted
into an equal number of shares of Class A common stock and the holders of the
converted Series B-2 common stock will no longer be entitled to elect a
director by virtue thereof.
If at any time (A) the number of issued and outstanding shares of Series
B-3 common stock is less than (1) 3% of the aggregate number of issued and
outstanding shares of common stock or (2) 1,156,680 shares of Series B-3
common stock or (B) NTT or any person or entity controlled
22
by it chooses at any time to engage in, or make a material investment in any
person or entity whose principal business is, the provision in the United
States of any terrestrial fixed wireless local telecommunications services we
offer in the same market segments (e.g., business or residential), then,
without any further action by us or any party, all such issued and outstanding
shares of Series B-3 common stock will automatically be converted into an
equal number of shares of Class A common stock and the holders of the
converted Series B-3 common stock will no longer be entitled to elect a
director.
Except as otherwise required by law or, as described herein, the holders
of shares of common stock and the Series A preferred stock vote together as a
single class on all matters presented to a vote of stockholders. Each
registered holder of common stock is entitled to one vote per share, and each
holder of Series A preferred stock is entitled to one vote per share of common
stock into which the Series A preferred stock is convertible. There is no
cumulative voting.
Stockholders' Agreement. Alex J. Mandl, Liberty Media, Telcom-DTS, and
Microwave Services, Inc. ("Microwave Services"), entered into a stockholders'
agreement dated January 13, 2000. The stockholders' agreement provides that
the parties will vote their shares so that our board shall consist of eight
directors, of which three directors will be nominees of Liberty Media and two
directors will be nominees of Telcom-DTS. The other three directors will be:
Alex J. Mandl for so long as Alex J. Mandl is our chief executive officer; one
director nominated by NTT, the holder of our Series B-3 common stock, for so
long as the holders of Series B-3 common stock are entitled to designate a
director; and one director nominated by HMTF and its affiliates and their
officers, directors, partners and employees and their families for so long as
such group holds a specified amount of shares of Series A preferred stock or
shares of Class A common stock issued upon conversion thereof. In the event
that Alex J. Mandl is no longer a director, NTT is no longer entitled to
designate a director or HMTF is no longer entitled to designate a director,
the replacement for such director will be an additional designee mutually
acceptable to each of the nominees of Liberty Media, Telcom-DTS and one other
director. The stockholders' agreement terminates on the earlier of the
following: (1) the consummation of a merger transaction in which all of the
outstanding shares of Class A common stock of the Registrant are acquired by
any party and (2) September 30, 2001.
The following persons are currently directors of our company: Carl Vogel,
David J. Berkman, Thomas O. Hicks, Gary S. Howard, Alex J. Mandl, Tetsuro
Mikami, Neera Singh and Dr. Rajendra Singh.
Transfers of Certain Common Stock. Under our certificate of
incorporation, no holder of shares of Class B common stock may transfer, and
we may not register, or permit the transfer agent for such common stock to
register, the transfer of any shares of Class B common stock or any interest
therein, whether by sale, assignment, gift, bequest, pledge, hypothecation,
encumbrance, or any other disposition, except to a Permitted Transferee (as
defined below) of such holder. If a holder of shares of Class B common stock
transfers any such shares to any person or entity other than a Permitted
Transferee of such holder, such transfer, without any further action by us or
of any party, will automatically convert such shares into an equal number of
shares of Class A common stock from the date of such transfer. The certificate
of
23
incorporation defines "Permitted Transferee" to mean only: (1) in the case of
any holder of shares of Series B-2 common stock, Dr. Rajendra Singh, Neera
Singh and any corporation, partnership or other business entity directly or
indirectly controlled by Dr. Rajendra Singh, Neera Singh or their respective
executors (to the extent acting in such capacity) or direct descendants;
provided, however, that if any holder of Series B-2 common stock ceases to be
so controlled, then any shares of Series B-2 common stock held by such holder
will be deemed to have been transferred to a person or entity other than a
Permitted Transferee; and (2) in the case of any holder of shares of Series
B-3 common stock, NTT and any corporation, partnership or other business
entity directly or indirectly controlled by NTT at the time of transfer.
Any holder of shares of Class B common stock, or any Permitted Transferee
of such holder, may grant a security interest in, or pledge, pursuant to a
bona fide financing arrangement involving the holder or Permitted Transferee,
all or any portion of the holder's or Permitted Transferee's shares of Class B
common stock, if (1) the grant or pledge does not require registration or
qualification pursuant to any federal or state securities laws and (2) we
receive copies of any instruments evidencing the grant or pledge and the
secured party's or pledgee's written acknowledgment that it has reviewed the
terms of the certificate of incorporation. No such grant or pledge will by
itself cause the conversion of any such shares of Class B common stock into
shares of Class A common stock. If any secured party or pledgee (which is not
a Permitted Transferee of the holder making such grant or pledge) forecloses
upon any such shares of Class B common stock, such foreclosure, without any
further action by us or any other party, will automatically and irrevocably
convert such shares into an equal number of shares of Class A common stock
from the date of such foreclosure.
Voluntary Conversion into Class A Common Stock. Under our certificate of
incorporation, each share of Class B common stock is convertible at any time,
at the option of the registered holder, into one fully paid and nonassessable
share of Class A common stock.
Liquidation. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of our company, after distribution in full of any
amounts to be distributed to holders of shares of preferred stock, unless
otherwise required by law, holders of shares of common stock are entitled to
receive all the remaining assets. Distribution of such remaining assets to the
holders of common stock will be in proportion to the number of shares of
common stock held by them. Under the certificate of incorporation, the holders
of common stock will participate in such assets as if all classes and series
of common stock constituted a single class of stock.
Dividends. The holders of our shares of common stock will be entitled to
receive, when, as and if declared by the board of directors, out of our assets
which are by law available therefor, dividends payable either in cash, in
property or in shares of capital stock. The payment of such dividends is
subject to the preferential rights of holders of preferred stock. Under the
certificate of incorporation, no dividend will be declared or paid in respect
of any class of common stock unless the holders of all classes of common stock
receive the same per share dividend, payable in the same amount and type of
consideration, as if such classes constituted a single class. However, if any
dividend is declared that is payable in shares of common stock, or in other
rights to acquire shares of common stock, then (1) such dividend will be
declared and paid at the same rate per
24
share with respect to each class of common stock, (2) the dividend payable on
shares of Class A common stock will be payable only in shares of, or in other
rights to acquire shares of, Class A common stock and (3) the dividend payable
on shares of each series of Class B common stock will be payable only in
shares of, or in other rights to acquire shares of, the same series of Class B
common stock.
Transfer Agent and Registrar. The Transfer Agent and Registrar for our
Class A common stock and our Series B-2 common stock is First Union National
Bank. We serve as Transfer Agent and Registrar for our Series B-3 common
stock.
Preferred Stock
Under our certificate of incorporation, the board of directors has the
authority to create one or more series of preferred stock, to issue shares of
preferred stock in such series up to the maximum number of shares of preferred
stock authorized, and to determine the preferences, rights, privileges and
restrictions of any series, including the dividend rights, voting rights,
rights and terms of redemption, liquidation preferences, the number of shares
constituting any such series and the designation of such series. The
authorized shares of preferred stock, as well as authorized but unissued
shares of common stock, are available for issuance without further action by
the our stockholders, except to the extent stockholder action is required by
applicable law or by the rules of a stock exchange or quotation system on
which any series of our stock may then be listed or quoted, or as required by
our certificate of incorporation or by-laws.
The 7 3/4% Series A Convertible preferred stock due 2014 has the
following terms:
Rank. The shares of Series A preferred stock rank, with respect to
dividend rights and rights on liquidation, winding-up and dissolution: (1)
senior to all shares of common stock and to each other class of our capital
stock or preferred stock, the terms of which do not expressly provide that it
ranks senior to or on a parity with the shares of the Series A preferred stock
as to dividend rights and rights on liquidation, winding-up and dissolution of
our company; (2) on a parity with additional shares of Series A preferred
stock issued by us and each other class of our capital stock or series of
preferred stock, the terms of which expressly provide that such class or
series will rank on a parity with the shares of the Series A preferred stock
as to dividend rights and rights on liquidation, winding-up and dissolution,
if we, in issuing the shares, comply with applicable provisions in the
certificate of designation; and (3) junior to each class of our capital stock
or series of preferred stock, the terms of which expressly provide that such
class or series will rank senior to the shares of Series A preferred stock as
to dividend rights and rights upon liquidation, winding-up and dissolution, if
we, in issuing the shares, comply with applicable provisions in the
certificate of designation.
Dividends. The holders of the shares of Series A preferred stock are
entitled to receive with respect to each share of Series A preferred stock,
out of funds legally available for the payment of dividends, dividends at a
rate per annum of 7 3/4% of the then-effective liquidation preference. Such
dividends shall be cumulative from the date of issuance of the Series A
preferred stock and shall be payable quarterly in arrears. We shall make any
dividend payments
25
with respect to any period (1) prior to November 30, 2004, by delivery of
shares of Series A preferred stock, and (2) after November 30, 2004, (a) in
cash, (b) by delivery of shares of Series A preferred stock or (c) through any
combination of the foregoing.
Voluntary Conversion. The holders of shares of Series A preferred stock
have the right, generally, at any time, to convert any of or all their shares
of Series A preferred stock into a number of fully paid and nonassessable
shares of Class A common stock equal to the then effective liquidation
preference thereof plus accrued and unpaid dividends to the date of conversion
divided by the conversion price in effect at the time of conversion. The
initial conversion price is $57.50 per common share.
Redemption. The shares of Series A preferred stock may be redeemed at any
time commencing on or after November 30, 2004 (or earlier, if, under the
certificate of designation, certain conditions relating to a change of control
(as defined in the certificate of designation) shall have occurred), in whole
or from time to time in part, at our election, at a redemption price payable
in cash equal to 100% (or, under certain conditions described below relating
to a change of control, 101%) of the then effective liquidation preference
plus accrued and unpaid dividends from the last dividend payment date to the
date fixed for redemption. Shares of Series A preferred stock (if not earlier
redeemed or converted) shall be mandatorily redeemed by us on November 30,
2014, at a redemption price per share in cash equal to the then effective
liquidation preference, plus accrued and unpaid dividends thereon from the
last dividend payment date to the date of mandatory redemption.
Change of Control. Upon occurrence of a change of control (as defined in
the certificate of designation), the holders of Series A preferred stock shall
have the right to either (a) continue to hold their shares of Series A
preferred stock or securities issued in respect of Series A preferred stock in
connection with such change of control and in compliance with the terms of the
certificate of designation, (b) convert their shares of Series A preferred
stock (including shares received as a special payment (defined below)) and, if
the change of control occurs prior to November 30, 2004, receive the special
payment on such shares or (c) elect to have their shares of Series A preferred
stock redeemed by the Company or remarketed as described below.
If the conversion option described above is selected with respect to a
share of Series A preferred stock, the holder of such share of Series A
preferred stock shall be deemed to have elected to convert such share in
accordance with provisions of the certificate of designation and, if the
change of control occurs prior to November 30, 2004, we shall issue, and the
holder shall be entitled to receive, in respect of such share selected for the
conversion option, a number of shares of Series A preferred stock determined
pursuant to a formula set forth in the certificate of designation (the
"special payment"). Any shares of Series A preferred stock received as a
special payment may then be converted by the holder thereof as provided in the
certificate of designation.
If the redemption or remarketing option referenced above is selected with
respect to a share of Series A preferred stock, such holder shall be deemed to
have elected to waive such holder's right to receive the special payment with
respect to such change of control and we shall thereafter
26
have the option to either (a) have such share redeemed in accordance with the
provisions for optional redemption contained in the certificate of
designation, except that, if the change of control occurs prior to November
30, 2004, the redemption price shall be 101% of the liquidation preference of
such share plus accrued and unpaid dividends from the last dividend payment
date to the redemption date, or (b) remarket such share for the account of
such holder and, if the net proceeds to such holder of such remarketing are
less than 101% of the liquidation preference of such share plus accrued and
unpaid dividends thereon from the last dividend payment date to the date
payment is received by such holder in respect of such share, we shall issue to
and sell for the account of such holder a sufficient number of shares of Class
A common stock to make up such shortfall. If we do not, within 180 days after
the date of the our giving written notice of our election of (a) or (b) above,
settle the claim with the holder pursuant to (a) or (b) above, then the holder
shall have the option, for a period of 10 business days, of electing the
conversion option described above.
Voting Rights. The holders of the shares of Series A preferred stock are
entitled to vote on all matters that the holders of our Class A common stock
are entitled to vote upon. In exercising these voting rights, each share of
Series A preferred stock shall be entitled to vote on an as- converted basis
with the holders of our Class A common stock. The approval of the holders of
at least a majority of the then-outstanding shares of Series A preferred
stock, voting as one class, will be required for us to take certain actions.
In addition, the holders of our Series A preferred stock, voting as a class,
have a right to elect a director under certain circumstances. See "Common
Stock--Voting Rights" above for a more complete description.
Restriction on Foreign Ownership
Under our certificate of incorporation, the board of directors has all
the powers necessary to ensure our compliance with the foreign ownership
restrictions under the Communications Act of 1934, and the rules, regulations
and decisions of the FCC. The board of directors' power includes the power to
prohibit the transfer of any shares of our capital stock to any Foreign Owner
and to take or cause to be taken such action as it deems appropriate to
implement such prohibition. "Foreign Owner" means: (a) any person who is a
citizen of a country other than the United States; (b) any corporation or
other legal entity organized under the laws of any government other than the
government of the United States or of any state, territory or possession of
the United States; (c) any government other than the government of the United
States or of any state, territory or possession of the United States; and (d)
any representative of any of the foregoing or any entity owned, or whose
capital was contributed in whole or in part, by any of the foregoing.
Under the certificate of incorporation, any shares of our capital stock
determined by the board of directors to be beneficially owned by any Foreign
Owner, or with respect to which any Foreign Owner has voting rights, will be
subject to redemption by action of the board of directors to the extent
necessary to comply with foreign ownership restrictions. In such event, the
redemption price of the shares to be redeemed will be equal to the fair market
value of such shares, as determined by the board of directors in good faith.
Under the certificate of incorporation, the redemption price of such shares
may be paid in cash, securities or any
27
combination thereof. Such redemption will be upon such other terms and
conditions as the board of directors shall determine.
We have entered into a stockholders' agreement with holders of the Class
B common stock. The stockholders' agreement provides for certain rights and
obligations with respect to our ownership and governance. The stockholders'
agreement also provides for certain rights and obligations of the parties
thereto relating to our compliance with the foreign ownership restrictions
under the Communications Act of 1934 and the rules, regulations and decisions
of the FCC.
Under the stockholders' agreement, if we are required by a change in law
or other circumstance to reduce the level of foreign ownership in us and we
are unable to obtain a waiver of such requirement, we will have the right, and
will be required, at the holder of the Series B-3 common stock's election, to
refuse to sell our stock to any Foreign Owner if such a transaction would have
an adverse impact on the holder of the Series B-3 common stock's ability to
hold its then existing share ownership in us. In addition, we will have the
right, and will be required, at the election of any party to the stockholders'
agreement, to repurchase for cash, to the extent permitted by applicable
Delaware corporation law, shares first from all other Foreign Owners other
than the parties to the stockholders' agreement, if applicable, and thereafter
from each party to the stockholders' agreement, on a pro rata basis in
accordance with the stockholders' agreement.
Anti-takeover Effects of Provisions of Our Certificate of Incorporation and
By-laws and the Delaware General Corporation Law
Our certificate of incorporation provides disproportionate voting rights
to the Class B common stock to elect a majority of the members of our board of
directors relative to the Class A common stock and authorizes our board of
directors to issue, without stockholder approval, one or more series of
preferred stock having such preferences, powers and relative, participating,
optional and other rights as the board of directors may determine. The
certificate of incorporation further provides that stockholders are not
entitled to call a special meeting of stockholders, nor to require the board
of directors to call such a meeting. The certificate of incorporation also
provides that stockholders are not entitled to act by written consent in lieu
of a meeting; except that in connection with the election or removal of any
Series B-2 Director or Series B-3 Director, the holders of the series of Class
B common stock entitled to elect or remove such director may vote as a
separate class by written consent in lieu of a meeting. In addition, the
by-laws contain certain advance notice requirements that must be complied with
by any stockholder who wishes to nominate any person for election to our board
of directors or who otherwise wishes to properly bring business before an
annual meeting of our stockholders. These provisions of the certificate of
incorporation, together with the ability of Liberty Media to elect a majority
of Teligent's board of directors, could discourage potential acquisition
proposals and could delay or prevent a change of control of Teligent.
Delaware Takeover Statute. We are subject to Section 203 ("Section 203")
of the Delaware General Corporation Law, which, subject to certain exceptions,
prohibits a Delaware corporation
28
from engaging in any business combination with any interested stockholder for
a period of three years following the date that such stockholder became an
interested stockholder, unless: (1) prior to such date, the board of directors
of the corporation approved either the business combination or the transaction
that resulted in the stockholder becoming an interested stockholder; (2) upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned (a) by persons who are both directors and
officers and (b) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (3) on or subsequent
to such date, the business combination is approved by the board of directors
and authorized at an annual or special meeting of stockholders, and not by
written consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock that is not owned by the interested stockholder.
Section 203 defines "business combination" to include: (1) any merger or
consolidation involving the corporation and the interested stockholder; (2)
any sale, transfer, pledge or other disposition of 10% or more of the assets
of the corporation involving the interested stockholder; (3) subject to
certain exceptions, any transaction that results in the issuance or transfer
by the corporation of any stock of the corporation to the interested
stockholder; (4) any transaction involving the corporation that has the effect
of increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or (5) the
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits provided by or through the
corporation. In general, Section 203 defines an interested stockholder as any
entity or person beneficially owning 15% or more of the outstanding voting
stock of the corporation and any entity or person affiliated with or
controlling or controlled by such entity or person. The restrictions on
business combinations contained in Section 203 would not apply to any business
combination between the current holders of the Series B-1 common stock or the
current holders of the Series B-2 common stock, on the one hand, and us, on
the other hand.
STOCK PURCHASE AGREEMENT
On December 7, 2000, we entered into a purchase agreement with RGC as a
private placement pursuant to Section 4(2) of the Securities Act of 1933.
Pursuant to the purchase agreement, we may, from time to time and at our sole
discretion during the 18 months following the date of effectiveness of the
registration statement of which this prospectus is a part, effect a series of
draw downs requiring RGC to purchase up to an aggregate of $250 million of our
Class A common stock. Pursuant to the purchase agreement, we also issued
warrants to RGC providing, upon vesting and exercise, for the issuance of up
to 4,972,370 shares of our Class A common stock. Concurrently, we also entered
into a registration rights agreement for the benefit of RGC to register, under
applicable federal and state securities laws, our common stock to be issued to
RGC under the purchase agreement and upon the exercise of the warrants.
29
A draw down is initiated upon our delivery of a draw down notice that
will include a draw down amount and a minimum price at which we are willing to
issue stock to RGC. The maximum permitted amount of any draw down will be 90%
of the VWAP of our common stock on the trading day preceding the date of the
draw down notice multiplied by the average daily trading volume of our common
stock during the 30 trading days preceding the date of such draw down notice.
The minimum amount of any draw down is $1 million. If, on any given date, the
maximum permitted draw down amount is less than $1 million or if the VWAP of
our common stock is at or below $2 for the preceding trading day, we may not
deliver a draw down notice.
Pursuant to each draw down notice that we provide to RGC, it will
purchase our common stock in three subtranches. The subtranche purchases will
occur over a period of nine trading days and will close on every third trading
day over the period of the draw down, or the fourth, seventh and tenth trading
day after the delivery of the draw down notice.
For each of the nine trading days during the draw down, 1/9th of the
total draw down amount will be allocated to purchase our common stock on that
trading day at a price equal to 95% of the VWAP of our common stock. If the
VWAP of our common stock on any given trading day during the draw down is less
than $2 then no shares will be purchased by RGC with respect to such day and
the total amount of the draw down will be reduced by the 1/9th of the total
draw down amount attributable to such day.
The following table provides examples of hypothetical draw down amounts
and shares to be issued given certain VWAPs and trading volumes and assuming
we were to draw down the maximum amount allowed under the purchase agreement
for each such draw down:
- -------------------------------------------------------------------------------
Trading Day VWAP Volume Draw Down Amount Number of Shares Issued
(1) (2) (3) (4) (5)
- -------------------------------------------------------------------------------
1 $3.50 800,000 $2,520,000 757,895
- -------------------------------------------------------------------------------
13 $3.25 790,000 $2,310,750 748,421
- -------------------------------------------------------------------------------
25 $3.00 820,000 $2,214,000 776,842
- -------------------------------------------------------------------------------
37 $2.75 750,000 $1,856,250 710,526
- -------------------------------------------------------------------------------
49 $2.50 775,000 $1,743,750 734,211
---------- -------
- -------------------------------------------------------------------------------
Subtotal $10,644,750 3,727,895
- -------------------------------------------------------------------------------
(1) "Trading Day" indicates the first trading day after issuance of a draw
down notice. The total duration of a draw down period is nine days. After a
draw down period has elapsed, a waiting period of three days is required
before another draw down notice may be issued.
(2) Assumes the VWAP of our shares on our principal trading market for each
trading day during the pricing period.
(3) The trading volume of our shares during the 30 trading days preceding the
date of a draw down notice.
(4) The minimum permitted draw down amount is $1 million. The maximum
permitted draw down amount is 90% of the VWAP of our shares on the trading day
preceding the date of the draw down notice multiplied by the average daily
trading volume for the 30 trading days preceding the date of such draw down
notice. In this example, the maximum draw down amount has been used.
(5) The number of shares issued is calculated by taking the total draw down
amount and prorating it over the nine trading days following the delivery of
the draw down notice. Each of the prorated draw down amounts is then divided
by 95% of the VWAP of our shares for that day. The aggregate of the shares
issued over the nine days is the total number of shares issued for that draw
down period. It is assumed that the VWAP of our shares on each of the nine
trading days following the delivery of the draw down notice is equal to the
VWAP of our shares on the trading day preceding such draw down notice.
30
These share prices are hypothetical and should not be interpreted as a
forecast of share prices or the expected or historical volatility of the share
prices of our common stock. In this hypothetical example, over the course of
49 trading days, we would issue an aggregate of 3,727,895 shares in five
separate draw downs and would receive proceeds totaling $10,644,750.
Our ability to issue a draw down notice is also subject to other factors
including, but not limited to, our maintaining an effective registration
statement for the resale by RGC of the shares to be issued pursuant to the
purchase agreement, the accuracy of our representations and warranties, the
amount being drawn down not resulting in the beneficial ownership by RGC of
more than 9.9% of our outstanding shares on the draw down date, our
performance of covenants and maintaining our listing on the principal trading
exchange for our common stock at that time, which may include the Nasdaq
National Market, the Nasdaq SmallCap Market, the American Stock Exchange or
the New York Stock Exchange, (the "Principal Market"). See "Risk Factors - -
Our Stock Price Has Been And May Continue To Be Extremely Volatile."
RGC may terminate our right to effect any draw downs under the purchase
agreement upon one trading day's notice if, among other things:
o there is a material adverse change to our business or our financial
condition;
o we fail to issue shares of common stock to RGC on any settlement
date;
o we fail to remove any restrictive legend on any shares of common
stock issued to RGC when required by the purchase agreement;
o trading in our common stock is halted or suspended for a period of
10 consecutive trading days;
o we fail to fulfill our obligations under certain sections of the
purchase agreement;
o we fail to maintain the effectiveness of our registration statement
for the resale by RGC of the shares to be issued pursuant to the
purchase agreement;
o we fail to maintain the listing of our common stock on our Principal
Market;
o we sell, convey, or dispose of all or substantially all of our
assets;
o we assign for the benefit of creditors, or apply for or consent to
the appointment of a receiver or trustee for all or substantially
all of our property or business;
o we become insolvent; or
o we breach any material representation or warranty contained in the
purchase agreement.
31
During the 18-month period in which we may issue draw down notices
pursuant to the purchase agreement, there are approximately 375 trading days.
Assuming that all requirements for issuing a draw down notice are met, the
maximum number of draw downs that may be issued during the duration of the
purchase agreement is 31. Thus, in order to draw down the full amount of $250
million, the average purchase price per draw down would have to exceed
$8,064,516. Unless our stock price and average daily trading volume increase
significantly, we will be unable to draw down over the course of 18 months the
full $250 million allowed under the purchase agreement and will not be able to
finance operations through 2001 solely by draw downs under the purchase
agreement.
Up to 4,972,370 shares of our common stock will be issued by us upon the
exercise of the warrants by RGC. Each warrant has an exercise price of $3.62
and a term of five years beginning December 7, 2000. Initially, 3,729,278
warrants vested on December 7, 2000, the date of the purchase agreement. The
remaining 1,243,092 warrants will vest ratably with each draw down under the
purchase agreement after we have drawn down $150 million. The warrants contain
antidilution provisions which may adjust the exercise price and the number of
shares issuable upon exercise of the warrants.
SELLING STOCKHOLDER
The total number of shares that RGC may resell pursuant to this prospectus
is 136,551,317. This number includes up to an aggregate of 131,578,947 shares
that we may sell to RGC under the purchase agreement based upon the $1.90
minimum price at which the shares may be sold under the purchase agreement. This
figure (which is 158% of the number of shares that would be issuable at a price
per share of $3.16, the average of the high and low trading prices on January
22, 2001) should not be interpreted as a forecast of future share prices. Such
shares are not deemed beneficially owned within the meaning of Sections 13(d)
and 13(g) of the Securities Exchange Act of 1934 before their acquisition by
RGC. The actual number of shares issuable to RGC under the purchase agreement is
indeterminate and could be materially less than such estimated number depending
on factors that cannot be predicted by us at this time, including, among other
factors, the extent to which we decide to put shares to RGC under the purchase
agreement and the future market price of our common stock. The total number of
shares of common stock that may be sold by RGC also includes up to an aggregate
of 4,972,370 shares issuable upon the exercise of the warrants. Only 3,729,278
of those warrants are immediately exercisable. The remaining 1,243,092 warrants
will become exercisable only if, and to the extent that, RGC has purchased an
amount of shares pursuant to the purchase agreement with a dollar value of at
least $150 million. The actual number of shares offered in this prospectus, and
included in the registration statement of which this prospectus is a part,
includes such additional number of shares as may be issued by reason of any
stock split, stock dividend or similar transaction involving the shares, in
accordance with Rule 416(a) under the Securities Act of 1933.
Prior to the execution and delivery of the purchase agreement, RGC had no
material relationship with us and as of the date of this prospectus, does not
own any of our Class A common stock. Pursuant to draw downs under the purchase
agreement and upon the exercise of the warrants, RGC could become the holder
of approximately 76% of our Class A common stock
32
issued and outstanding as of December 31, 2000, assuming a VWAP of $2.00.
However, pursuant to the terms of the purchase agreement and related warrants,
we may exercise our right to issue a draw down notice, and RGC may exercise
the warrants, only to the extent that the number of shares issuable, together
with the number of shares owned by such holder and its affiliates (other than
shares of common stock which may be deemed beneficially owned through the
ownership of the unexercised warrants and the unexercised or unconverted
portion of any of our other securities (including the rights or obligations of
RGC to purchase securities from us under the purchase agreement)), would not
exceed 9.9% of the outstanding shares of our Class A common stock on the date
of the draw down as determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934. Further, we may not issue 20% or more of our
common stock as of December 7, 2000, or 20% or more of our voting power
outstanding as of December 7, 2000, without shareholder approval.
Assuming that we fully exercise our rights under the purchase agreement
and require RGC to purchase shares of our Class A common stock for a total
purchase price of $250 million and also assuming that RGC sells all the shares
it acquires from us pursuant to the purchase agreement and upon full exercise
of the related warrant, RGC will no longer own any shares of our Class A
common stock.
PLAN OF DISTRIBUTION
The shares being sold by RGC pursuant to this prospectus, or, to the
extent permitted, its pledgees, donees, transferees or other
successors-in-interest, may be disposed of from time to time in one or more
transactions, which may involve:
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
o sales on the Nasdaq National Market, or any other Principal Market on
which the shares trade at the time of sale, including directly with
market makers acting as principal;
o privately-negotiated transactions, which include direct sales to
purchasers and sales effected through agents;
o a block trade in which the broker or dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by that broker or
dealer for its own account;
o an exchange distribution in accordance with the rules of that exchange or
transactions in the over-the-counter market;
o transactions otherwise than in the over-the-counter market;
33
o the writing of put or call options on the securities;
o short sales of the shares and transactions covering short sales;
o the pledge of the security for any loan or obligation, including pledges
to brokers or dealers who may, from time to time, themselves sell or
transfer the securities or interest therein;
o the transfer of the securities by RGC to its partners, members or
shareholders; or
o a combination of any of the above.
The sale price pursuant to this prospectus may be:
o a fixed price;
o the market price prevailing at the time of sale;
o a price related to such prevailing market price;
o a negotiated price; or
o such other price as RGC may determine from time to time, including sales
below the market price.
In addition, the shares may also be sold in private transactions or under
Rule 144, rather than pursuant to this prospectus. RGC shall have the sole and
absolute discretion not to accept any purchase offer or make any sale of
shares if it deems the purchase price to be unsatisfactory at any particular
time.
Market makers acting as principals, or brokers or dealers acting as
agents for RGC or their customers, may receive compensation in the form of
discounts, concessions or commissions from RGC and/or the purchasers of shares
for whom such brokers or dealers may act as agents or to whom they may sell as
principal or both, which compensation as to a particular broker or dealer
might be in excess of customary commissions. Market makers and block
purchasers purchasing the shares will do so for their own account and at their
own risk. It is possible that RGC will attempt to sell the shares in block
transactions to market makers or other purchasers at a price per share which
may be below the then current market price. In effecting sales, brokers or
dealers may arrange for other brokers or dealers to participate. RGC cannot
ensure that all or any of the shares offered pursuant to this prospectus will,
in fact, be sold by RGC or that RGC will not sell, gift or otherwise transfer
any such shares by other means not described herein. RGC is deemed to be an
"underwriter" within the meaning of Section 2(a)(11) of the Securities Act of
1933 with respect to any shares it sells pursuant to this prospectus, and any
brokers, dealers or agents may de deemed to be "underwriters" within the
meaning of the Securities Act of 1933 in connection with the sale of the
shares offered hereby. Accordingly, any discounts, concessions
34
or commissions such broker, dealer or agent receives may be deemed to be
underwriting compensation under the Securities Act of 1933.
To the best of our knowledge, there are currently no plans, arrangements
or agreements between RGC and any broker, dealer or agent regarding the sale
of shares by RGC pursuant to this prospectus, and there is no assurance that
any such plans, arrangements or agreements will be entered into. If RGC enters
into such a material plan, arrangement or agreement (other than for ordinary
and customary trading fees, discounts, or commissions) with a broker, dealer
or agent, acting as principal, a prospectus supplement pursuant to Rule 424(b)
under the Securities Act of 1933 or a post-effective amendment to the
registration statement, if required, will be filed and distributed,
disclosing, in addition to those items previously mentioned:
o the name of any such broker, dealer or agent;
o the number of shares involved;
o the price at which such shares are to be sold;
o the commissions paid or discounts or concessions allowed to such broker,
dealer or agent where applicable; and
o other facts material to the transaction.
In order to comply with securities laws of certain jurisdictions, if
applicable, the shares may be sold in these jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain
jurisdictions, the shares may not be sold unless the shares have been
registered or qualified for sale in these jurisdictions, or an exemption from
registration or qualification is available and complied with.
RGC and any other persons participating in the sales of the shares
pursuant to this prospectus may be subject to applicable provisions of the
Securities Exchange Act of 1934 and the rules and regulations under such Act,
including, without limitation, Regulation M. In general, Regulation M
prohibits any person connected with a distribution of our shares from directly
or indirectly bidding for, or purchasing for any account in which it has a
beneficial interest, any of our shares.
We have advised RGC that the anti-manipulation rules under the Securities
Exchange Act of 1934 may apply to sales of shares in the market and to the
activities of RGC and any of its affiliates. RGC has advised us that, during
the time that RGC may be engaged in sales of shares registered under this
prospectus, it will comply with Regulation M under the Securities Exchange Act
of 1934.
RGC will pay all commissions, transfer taxes and other expenses
associated with its sale of the shares pursuant to this prospectus. However,
we have contractual obligations to pay the expenses for the preparation of
this prospectus under the purchase agreement. This prospectus
35
must continue to be available to permit RGC to publicly resell the shares that
it acquires from us under the purchase agreement and related warrants. We have
also agreed to indemnify RGC and its affiliates, as well as its pledgees,
donees, transferees or assignees who sell shares pursuant to this prospectus,
against certain liabilities, including liabilities under the Securities Act of
1933, or if such indemnity is unavailable, to contribute to payments RGC or
such persons may be required to make in respect of such liabilities.
LEGAL MATTERS
The validity of the securities in respect of which this prospectus is
being delivered has been passed on for us by our counsel, Cravath, Swaine &
Moore, New York, New York.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1999, as set forth in their report, which is incorporated
by reference in this prospectus. Our financial statements are incorporated by
reference in reliance on Ernst & Young LLP's report, given on their authority
as experts in accounting and auditing.
36
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by Teligent
in connection with sale of the securities being registered hereby. All amounts
are estimates, except the registration fee.
Item Amount
- ---- ------
Registration Fee $107,875
Printing* $ 25,000
Legal Fees and Expenses* $100,000
Accounting Fees and Expenses* $ 10,000
Miscellaneous Expenses* $ 2,125
--------
Total $245,000
========
*Estimated
Item 15. Indemnification of Directors and Officers
The certificate of incorporation implements Section 102 of the Delaware
General Corporation Law ("DGCL") by providing that no director shall be
personally liable to the Corporation or any of its stockholders for monetary
damages for breach of fiduciary duty as a director, except to the extent such
exemption from liability or limitation thereto is not permitted under the
DGCL. Section 102 of the DGCL, as amended, allows a corporation to eliminate
the personal liability of directors of a corporation to the corporation or its
stockholders for monetary damages for a breach of fiduciary duty as a
director, except where the director breached his duty of loyalty, failed to
act in good faith, engaged in intentional misconduct or knowingly violated a
law, authorized the payment of a dividend or approved a stock repurchase in
violation of Delaware corporate law or obtained an improper personal benefit.
Section 145 of the DGCL, as amended, provides that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of the corporation), by reason of the fact that he is or was a
director, officer, employee or agent of the corporation or is or was serving
at its request in such capacity in another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of
37
the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Certificate of Incorporation
Article Eighth of our certificate of incorporation provides that we will
indemnify our directors and officers to the fullest extent authorized or
permitted by law, as now or hereafter in effect, and such right to
indemnification will continue as to a person who has ceased to be a director
or officer of ours and will inure to the benefit of his or her heirs,
executors and personal and legal representatives; provided, that except for
proceedings to enforce rights to indemnification, we will not be obligated to
indemnify any director or officer (or his or her heirs, executors or personal
or legal representatives) in connection with a proceeding (or part thereof)
initiated by such person unless our Board of Directors authorized or consented
to such proceeding (or part thereof). The right to indemnification conferred
by Article Eighth includes the right to be paid by us for the expenses
incurred in defending or otherwise participating in any proceeding in advance
of its final disposition. The rights to indemnification and to the advance of
expenses conferred in Article Eighth are not exclusive of any other right
which any person may have or hereafter acquire under the certificate of
incorporation, our by-laws, any statute, agreement, vote of stockholders or
disinterested directors or otherwise.
By-laws
Section 1 of Article VIII of the by-laws provides that, subject to
Section 3 of Article VIII, we will indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of us) by reason of the
fact that such person is or was a director or officer of ours, or is or was a
director or officer of ours serving at our request as a director or officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of us, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe such person's conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, will not, of itself, create a
presumption that the person did not act in good faith and in a manner which
such person reasonably believed to be in or not opposed to our best interests,
and, with respect to any criminal action or proceeding, had reasonable cause
to believe that such person's conduct was unlawful.
Section 2 of Article VIII of the by-laws provides that, subject to
Section 3 of Article VIII, we will indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in our right to procure a judgment in our favor by reason
of the fact that such person is or was a director or officer of ours, or is or
was a director or officer of ours serving at our request as a director,
officer, employee or agent of
38
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to our best
interests; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to us unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3 of Article VIII of the by-laws provides that any
indemnification under Article VIII (unless ordered by a court) will be made by
us only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Section 1 or Section 2 of Article VIII, as the case may be. Such determination
shall be made (i) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (ii) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion or (iii) by the stockholders. To the
extent, however, that a director or officer of ours has been successful on the
merits or otherwise in defense of any action, suit or proceeding described
above, or in defense of any claim, issue or matter therein, such person will
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith, without the
necessity of authorization in the specific case.
Section 5 of Article VIII of the by-laws provides that, notwithstanding
any contrary determination in the specific case under Section 3 of Article
VIII, and notwithstanding the absence of any determination thereunder, any
director or officer may apply to the Court of Chancery in the State of
Delaware for indemnification to the extent otherwise permissible under
Sections 1 and 2 of Article VIII. The basis of such indemnification by a court
will be a determination by such court that indemnification of the director or
officer is proper in the circumstances because such person has met the
applicable standards of conduct set forth in Section 1 or 2 of Article VIII,
as the case may be. Neither a contrary determination in the specific case
under Section 3 of Article VIII nor the absence of any determination
thereunder will be a defense to such application or create a presumption that
the director or officer seeking indemnification has not met any applicable
standard of conduct. Notice of any application for indemnification pursuant to
Section 5 shall be given to us promptly upon the filing of such application.
If successful, in whole or in part, the director or officer seeking
indemnification will also be entitled to be paid the expense of prosecuting
such application.
Section 7 of Article VIII of the by-laws provides that the
indemnification and advancement of expenses provided by or granted pursuant to
Article VIII will not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under the
certificate of incorporation, any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, it being our policy that indemnification of
39
the persons specified in Sections 1 and 2 of Article VIII shall be made to the
fullest extent permitted by law. The provisions of Article VIII are not deemed
to preclude the indemnification of any person who is not specified in Section
1 or 2 of Article VIII but whom we have the power or obligation to indemnify
under the provisions of the DGCL, or otherwise.
Section 8 of Article VIII of the by-laws provides that we may purchase
and maintain insurance on behalf of any person who is or was a director or
officer of ours, or is or was a director or officer of ours serving at our
request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether
or not we would have the power or the obligation to indemnify such person
against such liability under the provisions of Article VIII. Section 11 of
Article VIII of the by-laws provides that notwithstanding anything contained
in Article VIII to the contrary, except for proceedings to enforce rights to
indemnification (which shall be governed by Section 5 thereof), we will not be
obligated to indemnify any director or officer in connection with a proceeding
(or part thereof) initiated by such person unless such proceeding (or part
thereof) was authorized or consented to by our Board of Directors.
We have agreed to indemnify the selling stockholder and any underwriter
acting on its behalf, their respective directors, officers, partners,
employees, agents and each person who controls the selling stockholder or such
underwriter, in connection with liability arising from inaccurate information
contained in any registration statement, prospectus or applicable supplement
or under any other state or federal securities law violation related to the
offering or sale by the selling stockholder of the stock registered hereby.
Likewise, the selling stockholder has agreed to indemnify us, our directors,
certain of our officers and each person who controls us, against any and all
liability arising from inaccurate information provided to us by the selling
stockholder to be used in connection with such registration statement.
Insurance
Our directors and officers are covered by insurance policies indemnifying
against certain liabilities, including certain liabilities arising under the
Securities Act of 1933, which might be incurred by them in such capacities and
against which they cannot be indemnified by us.
Item 16. Exhibits
4.1 Form of Certificate for the Class A Common Stock, filed as Exhibit
4.5 to the Company's Registration Statement on Form S-1
(Registration No. 333-37381), dated November 26, 1997, and
incorporated herein by reference.
4.4 Stock Purchase Warrant, dated as of December 7, 2000, by the
registrant in favor of RGC International Investors, LDC.*
5.1 Opinion of Cravath, Swaine & Moore as to legality of the securities
being registered.
40
10.1 Stockholders' Agreement, dated as of January 13, 2000, by and
among Alex J. Mandl, Liberty Media, Telcom-DTS, and Microwave
Services filed as Exhibit 10.1 to the Company's Current Report on
Form 8-K, dated January 18, 2000, and incorporated herein by
reference.
10.2 Common Stock Purchase Agreement, dated as of December 7, 2000, by
and between the registrant and RGC International Investors, LDC.*
10.3 Registration Rights Agreement, dated as of December 7, 2000, by
and among the registrant and RGC International Investors, LDC.*
23.1 Consent of Cravath, Swaine & Moore (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP, Independent Auditors.
* Incorporated by reference to Registrant's Current Report on Form
8-K filed December 21, 2000
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made of
securities registered hereby, 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
Securities and Exchange Commission pursuant to Rule 424(b) under the
Securities Act of 1933 if, in the aggregate, the 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 the undertakings set forth in paragraph (i) and
(ii) above 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
41
pursuant to section 13 or section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in this 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 understands 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 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.
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 SEC such
indemnification is against public policy as expressed in the Securities Act of
1933 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
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
42
SIGNATURE PAGE
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Vienna, Commonwealth of Virginia, on
January 25, 2001.
TELIGENT, INC.
By: /s/ Alex J. Mandl
-------------------------------
Name: Alex J. Mandl
Title: Chairman of the Board,
CEO, President and COO
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Alex J. Mandl
- ----------------------------- Chairman of the Board, CEO, January 25, 2001
Alex J. Mandl President and COO (Principal
Executive Officer)
/s/ John C. Wright
- ----------------------------- Senior Vice President and CFO January 25, 2001
John C. Wright (Principal Financial Officer
and Principal Accounting
Officer)
- ----------------------------- Director
David J. Berkman
/s/ Thomas O. Hicks
- ----------------------------- Director January 25, 2001
Thomas O. Hicks
/s/ Gary S. Howard
- ----------------------------- Director January 25, 2001
Gary S. Howard
Signature Title Date
--------- ----- ----
- ----------------------------- Director
Tetsuro Mikami
/s/ Neera Singh
- ----------------------------- Director January 25, 2001
Neera Singh
/s/ Dr. Rajendra Singh
- ----------------------------- Director January 25, 2001
Dr. Rajendra Singh
/s/ Carl Vogel
- ----------------------------- Director January 25, 2001
Carl Vogel
EXHIBIT INDEX
The following Exhibits are filed as part of this Registration Statement.
4.1 Form of Certificate for the Class A Common Stock, filed as Exhibit 4.5
to the Company's Registration Statement on Form S-1 (Registration No.
333-37381), dated November 26, 1997, and incorporated herein by
reference.
4.4 Stock Purchase Warrant, dated December 7, 2000, by the registrant in
favor of RGC International Investors, LDC.*
5.1 Opinion of Cravath, Swaine & Moore as to legality of the securities
being registered.
10.1 Stockholders' Agreement, dated as of January 13, 2000, by and among
Alex J. Mandl, Liberty Media, Telcom-DTS., and Microwave Services
filed as Exhibit 10.1 to the Company's Current Report on Form 8-K,
dated January 18, 2000, and incorporated herein by reference.
10.2 Common Stock Purchase Agreement, dated December 7, 2000, by and
between the registrant and RGC International Investors, LDC.*
10.3 Registration Rights Agreement, dated as of December 7, 2000, by and
among the registrant and RGC International Investors, LDC.*
23.1 Consent of Cravath, Swaine & Moore (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP, Independent Auditors.
* Incorporated by reference to Registrant's Current Report on Form 8-K
filed December 21, 2000