As filed with the Securities and Exchange Commission on April 27, 2005
Registration No. 333-
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SKYTERRA COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
__________________________
Delaware 23-2368845
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
19 West 44th Street, Suite 507
New York, New York 10036
(212) 730-7540
(Address, Including Zip Code, and Telephone Number, Including Area Code
of Registrant's Principal Executive Offices)
__________________________
Robert C. Lewis
Senior Vice President, General Counsel and Secretary
SkyTerra Communications, Inc.
19 West 44th Street, Suite 507
New York, New York 10036
(212) 730-7540
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
__________________________
Copy to:
Gregory Fernicola, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
(212) 735-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after this Registration Statement becomes effective.
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 to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest 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 of 1933, please check the
following box and list the Securities Act of 1933 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 of 1933, please check the following box and list the
Securities Act of 1933 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 Proposed
Maximum Maximum
Title of Each Class of Amount to Be Offering Price Aggregate Amount of
Securities to Be Registered Registered Per Unit (1) Offering Price Registration Fee
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| | | | | |
| Common Stock, par value $.01 per share | 3,010,000 shares | $37.975 | $114,304,750 | $13,453.67 |
| | | | | |
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___________________
(1) Estimated solely for the purpose of computing the amount of the
registration fee based on the average of the bid and asked price of the
common stock of the Registrant reported on the OTC Bulletin Board on
April 21, 2005, in accordance with Rule 457(c) under the Securities Act
of 1933, as amended.
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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
2
The information in this prospectus is not complete and may be changed. The
selling stockholders 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 APRIL 27, 2005
PROSPECTUS
SKYTERRA COMMUNICATIONS, INC.
3,010,000 Shares
Common Stock
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This prospectus relates to the possible offer and sale from time to
time by certain selling stockholders identified in this prospectus of up to
3,010,000 shares of our common stock, par value $.01 per share. The shares of
our common stock are being registered pursuant to registration rights
agreements with the selling stockholders.
The selling stockholders will receive all of the proceeds from any
sales. We will not receive any of the proceeds.
The selling stockholder may sell the shares of common stock at various
times and in various types of transactions, including sales in the open market,
sales in negotiated transactions and sales by a combination of these methods.
Shares may be sold at the market price of the common stock at the time of a
sale, at prices relating to the market price over a period of time, or at
prices negotiated with the buyers of shares.
Our common stock is traded in the over-the-counter market and is
quoted on the OTC Bulletin Board under the symbol "SKYT." On April 26, 2005,
the closing bid price of our common stock as reported on the OTC Bulletin Board
was $38.50 per share.
_________________________
AN INVESTMENT IN OUR COMMON STOCK INVOLVES SIGNIFICANT RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 1.
_________________________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this prospectus is , 2005.
TABLE OF CONTENTS
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PAGE
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THE COMPANY...................................................................1
RISK FACTORS..................................................................1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS............................12
USE OF PROCEEDS..............................................................12
SELLING STOCKHOLDERS.........................................................12
PLAN OF DISTRIBUTION.........................................................14
LEGAL MATTERS................................................................17
EXPERTS......................................................................17
WHERE YOU CAN FIND MORE INFORMATION..........................................17
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..............................17
You should rely only on information contained or incorporated by
reference in this prospectus. Neither we nor the selling stockholders have
authorized any other person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. The selling stockholders are not making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted. You
should assume that the information appearing in this prospectus is accurate as
of the date on the front cover of this prospectus only. Our business, financial
condition, results of operations and prospects may have subsequently changed.
Whenever we refer to "SkyTerra," "the Company," "we," "our" or "us" in
this prospectus, we mean SkyTerra Communications, Inc. and its subsidiaries,
unless the context suggests otherwise. When we refer to "you" or "yours," we
mean the persons to whom offers are made hereunder.
THE COMPANY
We operate our business through a group of complementary companies in
the telecommunications industry. These companies include:
o Hughes Network Systems, LLC, referred to in this prospectus as
HNS, the leading developer, manufacturer, installer and provider
of advanced satellite based networking solutions and services for
businesses, governments and consumers worldwide, which we
acquired a 50% interest in from The DIRECTV Group, Inc. pursuant
to a December 2004 agreement. We are the managing member of HNS;
o the Mobile Satellite Venture, L.P. joint venture, referred to in
this prospectus as the "MSV Joint Venture", a joint venture which
provides mobile digital voice and data communications services
via satellite;
o Electronic System Products, Inc., a product development and
engineering services firm;
o AfriHUB, LLC, an early stage company that provides a limited
amount of satellite based Internet access and domestic and
international calling services through exclusive partnerships
with certain Nigerian based universities while it actively
pursues opportunities to provide technical training in the
Nigerian market; and
o Navigauge, Inc., a market research firm that utilizes wireless
technology to track the in-car radio usage and driving habits of
consumers.
Our principal executive offices are located at 19 West 44th Street,
Suite 507, New York, New York 10036. Our telephone number is (212) 730-7540.
RISK FACTORS
You should carefully consider the following risks and all the
information set forth or incorporated by reference in this prospectus before
investing in our common stock.
Risks relating to our common stock generally
Fluctuations in our financial performance could adversely affect the
trading price of our common stock.
Our operating results may fluctuate as a result of a variety of
factors, many of which are outside of our control, including:
o risks and uncertainties affecting the current and proposed
business of the MSV Joint Venture and the mobile satellite
services, or MSS, industry;
o increased competition in the MSS industry;
o risks and uncertainties affecting the current and proposed
business of HNS;
o competition in the very small aperture terminal business,
referred to in this prospectus as the "VSAT business"; and
o general economic conditions.
As a result of these possible fluctuations, period-to-period
comparisons of our financial results may not be reliable indicators of future
performance.
1
We have a history of operating losses.
We have incurred substantial losses since our inception and have an
accumulated deficit of approximately $539.6 million as of December 31, 2004.
For the years ended December 31, 2004 and 2003, we incurred a loss from
operations of approximately $11.9 million and $6.9 million, respectively. There
can be no assurance that we will not experience losses in the foreseeable
future.
The price of our common stock has been volatile.
The market price of our common stock has been, and is likely to
continue to be, volatile, experiencing wide fluctuations. In recent years, the
stock market has experienced significant price and volume fluctuations that
have particularly affected the market prices of equity securities of many
companies in the technology sector. Future market movements may materially and
adversely affect the market price of our common stock, particularly in light of
the diminished liquidity of our common stock as a result of our delisting from
the Nasdaq National Market.
Our common stock is quoted on the OTC Bulletin Board, which limits the
liquidity and could negatively affect the value of our common stock.
Since January 30, 2003, following our delisting from the Nasdaq
National Market, price quotations have been available on the OTC Bulletin
Board. Delisting from the Nasdaq National Market resulted in a reduction in the
liquidity of our common stock. This lack of liquidity may also make it more
difficult for us to raise additional capital, if necessary, through equity
financings. In addition, the delisting of our common stock from the Nasdaq
National Market resulted in an event of non-compliance under the provisions of
our preferred stock. As we have been unable to obtain a waiver of this event of
non-compliance, the holders of our preferred stock are entitled to elect a
majority of the members of our board of directors.
We do not intend to pay dividends on shares of our common stock in the
foreseeable future.
We currently expect to retain our future earnings, if any, for use in
the operation and expansion of our business. We do not anticipate paying any
cash dividends on shares of our common stock in the foreseeable future.
The issuance of preferred stock or additional common stock may adversely
affect our stockholders.
Our board of directors has the authority to issue up to 10,000,000
shares of our preferred stock and to determine the terms, including voting
rights, of those shares without any further vote or action by our common
stockholders. The voting and other rights of the holders of our common stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. Similarly, our board
may issue additional shares of common stock without any further vote or action
by our common stockholders, which would have the effect of diluting common
stockholders. An issuance could occur in the context of a public or private
offering of shares of common stock or preferred stock or in a situation where
the common stock or preferred stock is used to acquire the assets or stock of
another company. The issuance of common stock or preferred stock, while
providing desirable flexibility in connection with possible acquisitions,
investments and other corporate purposes, could have the effect of delaying,
deferring or preventing a change in control.
Anti-takeover provisions of the Delaware General Corporation Law could
make a third-party acquisition of our company difficult.
We are a Delaware corporation. The Delaware General Corporation Law
contains provisions that could make it more difficult for a third party to
acquire control of our company. In addition, the holders of our preferred stock
have certain rights which could prevent or impair the ability of a third party
to acquire control of the company.
Shares eligible for future sale could cause our stock price to decline.
2
The market price of our common stock could decline as a result of
future sales of substantial amounts of our common stock, or the perception that
such sales could occur. Furthermore, our preferred stock and Series 1-A and 2-A
warrants have the right to require us to register the shares of common stock
underlying these securities, which may facilitate their sale of shares in the
public market. In addition, in December 2004, we sold 2,000,000 shares of our
common stock in a private placement. In connection with this sale, we entered
into a registration rights agreement with the investors requiring that we
register the resale of the shares. If we do not meet certain deadlines between
June 30, 2005 and December 31, 2005 with respect to making the registration
statement of which this prospectus forms a part effective, then warrants, which
were issued to the investors, to purchase up to an additional 600,000 shares of
common stock at an exercise price of $18.25 per share will vest. The number of
warrants that vest, if any, will depend on when the registration statement
becomes effective and whether it remains effective as required by the
registration rights agreement. The future sale of substantial amounts of our
common stock pursuant to any such registration statements could have an adverse
impact on our stock price.
We may suffer adverse consequences if we are deemed to be an investment
company.
We may suffer adverse consequences if we are deemed to be an
investment company under the Investment Company Act of 1940. A company may be
deemed to be an investment company if it owns investment securities with a
value exceeding 40% of its total assets, subject to certain exclusions. Some
investments made by us may constitute investment securities under the
Investment Company Act of 1940. If we were to be deemed an investment company,
we would become subject to registration and regulation as an investment company
under the Investment Company Act of 1940. If we failed to do so, we would be
prohibited from engaging in business or issuing our securities and might be
subject to civil and criminal penalties for noncompliance. In addition, certain
of our contracts might be voidable, and a court-appointed receiver could take
control of our company and liquidate our business. If we registered as an
investment company, we would be subject to restrictions regarding our
operations, investments, capital structure, governance and reporting of our
results of operations, among other things, and our ability to operate as we
have in the past would be adversely affected.
Although we believe that our investment securities currently do not
comprise more than 40% of our total assets, this view is dependent upon our
belief that our largest asset, our stake in the MSV Joint Venture, is not an
investment security. Should that interest be deemed to be an investment
security, then unless an exclusion or safe harbor were available to us, in
certain circumstances, we would have to either attempt to purchase operations
or business sufficiently large to offset such treatment or, alternatively,
reduce our ownership of the MSV Joint Venture as a percentage of our total
assets in order to avoid becoming subject to the requirements of the Investment
Company Act of 1940. There can be no assurances that such transactions, to the
extent necessary, could be consummated on satisfactory terms, if at all, and
that such transactions would not have an adverse effect on us and the price of
our common stock. In addition, contractual or legal restrictions could impair
our ability to consummate such a transaction. Moreover, we could incur
significant tax liabilities in connection with any such actions.
Compliance with changing regulation of corporate governance and public
disclosure may result in additional expenses.
Changing laws, regulations and standards relating to corporate
governance and public disclosure, including the Sarbanes-Oxley Act of 2002, is
creating uncertainty for companies such as ours. We are committed to
maintaining high standards of corporate governance and public disclosure. As a
result, we intend to invest reasonably necessary resources to comply with
evolving standards, and this investment may result in increased general and
administrative expenses and a diversion of management time and attention from
assisting the MSV Joint Venture and HNS in revenue-generating activities to
compliance activities, which could harm our business prospects.
The Apollo Stockholders beneficially own a large percentage of our
voting stock.
As of April 22, 2005, Apollo Investment Fund IV, L.P., Apollo
Overseas Partners IV, L.P., AIF IV/RRRR LLC and AP/RM Acquisition LLC,
referred to collectively in this prospectus as the "Apollo Stockholders,"
owned an aggregate of 1,745,375 shares of our voting common stock, all of
the 8,990,212 shares of our non-voting common stock, all of the 1,199,007
outstanding shares of our preferred stock and
3
all of our outstanding Series 1-A and Series 2-A warrants. Assuming that all
outstanding shares of our preferred stock are converted and all Series 1-A
warrants and Series 2-A warrants are exercised, as of April 22, 2005, the
Apollo Stockholders beneficially own approximately 63% of our outstanding
common stock and 35% of our outstanding voting power on a fully diluted
basis. As long as the Apollo Stockholders own at least 100,000 shares of the
preferred stock, we are precluded from taking various corporate actions and
entering into various transactions without the Apollo Stockholders' consent.
In addition, voting as a separate class, the Apollo Stockholders have the
right to elect two of the members of our board of directors and have certain
approval rights with respect to additional members of our board of directors
in the event that the size of our board of directors is increased.
Furthermore, the delisting of our common stock from the Nasdaq National
Market resulted in an event of non-compliance under the provisions of our
preferred stock. As a result, the Apollo Stockholders have the right to elect
the majority of our board of directors.
Because of the Apollo Stockholders' large percentage of ownership and
their rights as holders of preferred stock, including being entitled to 975,000
votes with respect to the preferred stock, the Apollo Stockholders have
significant influence over our management and policies, such as the election of
our directors, the appointment of new management and the approval of any other
action requiring the approval of our stockholders, including any amendments to
our certificate of incorporation and mergers or sales of all or substantially
all of our assets. In addition, the level of the Apollo Stockholders' ownership
of our shares of common stock and these rights could have the effect of
discouraging or impeding an unsolicited acquisition proposal.
The Apollo Stockholders are entitled to quarterly cash dividends.
In accordance with the terms of our preferred stock, the Apollo
Stockholders are entitled to receive quarterly cash dividends at an annual rate
of 4.65% of the then current face value to be paid quarterly in arrears
commencing with the three months ended September 30, 2004. While we had cash,
cash equivalents and short-term investments of approximately $94.5 million as
of December 31, 2004, we have paid $50.0 million in connection with our
purchase of a 50% interest in HNS. Such dividend payments will be approximately
$5.6 million per year through the mandatory redemption on June 30, 2012 or such
earlier time as the terms of the preferred stock are renegotiated. There can be
no assurance that we will be able to meet these quarterly dividend obligations
from existing cash, cash equivalents and short-term investments. Even if we are
able to satisfy these obligations, the effect of such payments on our cash
position may adversely affect our ability to meet our operational payment
obligations. We may be required to raise additional capital to meet these
obligations or to otherwise reach an agreement with the Apollo Stockholders to
modify the terms of these obligations.
Risks relating to the industries in which the MSV Joint Venture and HNS operate
Our business is subject to general economic conditions. Future economic
downturns could have an adverse impact on HNS and the MSV Joint Venture.
Our business is subject to fluctuations based upon the general
economic conditions in North America and, to a lesser extent, the global
economy. Future general economic downturns or a continued recession in the
United States could substantially reduce the demand for satellite
communications services, thereby reducing the value of HNS, the MSV Joint
Venture or both. A further deterioration in existing economic conditions could
therefore materially and adversely affect our financial condition, operating
results and business.
Governmental regulation of the mobile satellite services industry could
negatively impact the value of our interest in the MSV Joint Venture.
Currently, we are not subject to any direct governmental regulation
other than the securities laws and regulations applicable to all publicly
owned companies and laws and regulations applicable to businesses generally.
The mobile satellite services business of the MSV Joint Venture, however, is
subject to extensive government regulation in the United States and Canada.
Unlike some satellite services where a satellite licensee is granted an
exclusive right to a predetermined amount of spectrum for a definite time
period, L-band spectrum historically has been shared among five different
licensees (Solidaridad in Mexico, TMI Communications in Canada, Motient
Corporation in the United States, the Russian
4
Federation, and Inmarsat), and these five licensees have agreed to coordinate
their spectrum needs on an annual basis and divide the available L-band
spectrum among themselves. Among other considerations, prior usage of the
L-band to provide service is one factor determining the allotment to each
licensee on an annual basis. Notwithstanding the agreement among these five
licensees to coordinate annually their spectrum usage in the L-band, the five
licensees currently continue to operate pursuant to a coordination agreement
reached in Mexico City in 1995 and annual coordination meetings have not been
held since 1999. Motient and TMI were licensed by their respective
communications regulatory agencies many years ago to use L-band spectrum in
their respective countries. In November 2001, following Federal
Communications Commission, or FCC, and Industry Canada consent, Motient and
TMI assigned their respective L-band satellite licenses to the MSV Joint
Venture. The MSV Joint Venture cannot be assured that it will have access to
sufficient L-band spectrum to meet its needs in the future pursuant to this
annual coordination process. Moreover, Inmarsat had vigorously opposed the
approval of an ancillary terrestrial component, or ATC, in the L-band and,
following a recent ATC approval by the FCC has announced that it will file
its own ATC application, which may complicate the coordination process for
spectrum in the L-band.
Several companies were authorized by the FCC to use mobile earth
terminals in the U.S. over the Inmarsat L-band satellites. These authorizations
could increase the demand for and usage of the L-band by Inmarsat, which in
turn could increase Inmarsat's demand for L-band spectrum pursuant to the
annual coordination process. The FCC further proposed that any new spectrum
that becomes available in the L-band may be awarded to competing mobile
satellite services providers. If the FCC adopts this proposal, the MSV Joint
Venture could face increased competition in the mobile satellite services
marketplace.
Furthermore, the MSV Joint Venture's ability to operate a satellite
system with an ATC is subject to:
o the FCC order released in February 2003 which greatly expanded
the scope of the MSV Joint Venture's business by permitting the
incorporation of an ATC into its mobile satellite network,
referred to in this prospectus as the "February 2003 ATC Order;"
o the grant by the FCC in November 2004 of the MSV Joint Venture's
application to operate an ATC in the L-Band, subject to certain
conditions, referred to in this prospectus as the "November 2004
Application Approval Order;"
o the FCC's new rules for the deployment and operation by the MSV
Joint Venture of an ATC for its service, which provided the MSV
Joint Venture with substantial additional flexibility in its
system implementation, which is expected to allow it to
significantly lower the cost of an ATC deployment and increase
the capacity of the mobile satellite services/ATC hybrid system,
referred to in this prospectus as the "February 2005
Reconsideration Order;" and
o general FCC oversight and approval.
If the MSV Joint Venture is unable to implement an ATC due to restrictions
imposed by the FCC or otherwise, the MSV Joint Venture's business will be
severely limited and the value of our interest in the MSV Joint Venture will be
significantly and negatively impacted.
If court challenges to the February 2003 ATC Order and the February 2005
Reconsideration Order are successful, it would likely have negative
consequences on the nature of the MSV Joint Venture's ATC implementation
which could negatively impact the value of our interest in the MSV Joint
Venture.
In July 2003, certain terrestrial wireless providers petitioned the
U.S. Court of Appeals for the District of Columbia to review the FCC's
decision to grant the February 2003 ATC Order. The petition was held in
abeyance until the February 2005 Reconsideration Order was released. If the
FCC strikes down all or certain aspects of the February 2003 ATC Order or the
February 2005 Reconsideration Order following
5
an appeal or the Court of Appeals invalidates either order, the ability of the
MSV Joint Venture to execute its business plan and the value of our interest in
the MSV Joint Venture could be materially negatively impacted. While the MSV
Joint Venture along with its members, including us, will continue to deploy our
resources to support the February 2003 ATC Order and the February 2005
Reconsideration Order, there can be no assurances that we will be successful.
HNS is subject to significant regulation.
The provision of international telecommunications is regulated.
Currently, HNS is required to obtain approvals from national and local
authorities in connection with most of the services that it provides. As a
provider of communications services in the United States, it is subject to the
regulatory authority of the United States, primarily the FCC. It is also
subject to the export control laws, sanctions and regulations of the United
States with respect to the export of telecommunications equipment and services.
In addition, certain aspects of HNS' business are subject to state and local
regulation. HNS is also subject to regulation by the national communications
authorities of other countries in which HNS, and under certain circumstances
its resellers, provide service.
The governmental approvals for HNS' current business generally have
not been difficult to obtain in a timely manner. However, the failure to obtain
particular approvals has delayed, and in the future may delay, HNS' provision
of current and new services. Moreover, the imposition by a governmental entity
of conditions on HNS' business, or the failure to obtain authorizations
necessary to operate satellites or provide satellite service, could have a
material adverse effect on HNS' ability to generate revenue and conduct its
business as currently planned. Violations of laws or regulations may result in
various sanctions including fines, loss of authorizations and the denial of
applications for new authorizations or the renewal of existing authorizations.
Future changes to the regulations under which HNS operates could
increase its costs or make it easier or less expensive for our competitors to
compete with HNS.
HNS' international sales and operations are subject to U.S. laws relating
to trade, export controls and foreign corrupt practices, the violation of
which could adversely affect HNS' operations.
HNS must comply with all applicable export control laws and
regulations of the United States and other countries. United States laws and
regulations applicable to HNS include the Arms Export Control Act, the
International Traffic in Arms Regulations, or ITAR, the Export Administration
Regulations and the trade sanctions laws and regulations administered by the
Office of Foreign Assets Control of the United States Department of the
Treasury, or OFAC. The export of satellite hardware, services and technical
information with military or dual-use applications to non-United States persons
is regulated by the United States Department of State's Directorate of Defense
Trade Controls under ITAR. The United States Department of Commerce's Bureau of
Industry and Security also regulates most of HNS's international activities
under the Export Administration Regulations. In addition, HNS is subject to the
Foreign Corrupt Practices Act, or FCPA, that, generally, bars bribes or
unreasonable gifts to foreign governments or officials.
In January 2005, DIRECTV and Hughes Network Systems, Inc. entered
into a consent agreement with the State Department regarding violations of the
ITAR regulations involving exports of technology related to the VSAT business
primarily to China but also to several other countries. This consent agreement
applies to HNS after the Transactions. As part of this agreement, DIRECTV paid
a $4.0 million fine, one of HNS' subsidiaries was debarred from conducting
certain international business until at least May 2005, at which point it can
seek reinstatement, and HNS is required to enhance its compliance program to
avoid future infractions. Also as part of the same consent agreement a civil
penalty of $1.0 million was assessed against HNS, which it is required to use
for enhancing compliance measures. This amount will be applied by HNS to its
compliance program over a three-year period. HNS is currently unable to
perform its obligations under certain contracts in China and Korea addressed
by the January 26, 2005 consent agreement and may be liable for certain
damages as a result of its nonperformance. This consent agreement
6
supplemented another consent agreement of DIRECTV in March 2003, arising out
of separate violations of ITAR. Further violations of laws or regulations may
result in significant additional sanctions including fines, more onerous
compliance requirements, more extensive debarments from export privileges or
loss of authorizations needed to conduct aspects of HNS's international
business. A future violation of ITAR or the other regulations enumerated above
could materially adversely impact HNS' business, financial conditions and
results of operations.
The State Department has required us to register under ITAR as the manager
of HNS, a future violation of ITAR by HNS could expose us to liability and
could subject us to significant financial and other penalties
Because we are manager of HNS, the State Department has required us to
register under ITAR. Accordingly, a future violation of ITAR by HNS could
expose us to liability and could subject us to significant financial and other
penalties. If HNS were to commit such a violation and we were considered
responsible, it could impact our ability to operate internationally.
HNS depends heavily on the VSAT market.
A material portion of the revenues of HNS are derived from sales of
VSAT communications networks. A significant decline in demand for such services
following closing or the replacement of VSAT technology by an alternative
technology could materially harm HNS' business.
If commercial wireless communications markets fail to grow as anticipated,
HNS' business could be materially harmed.
A number of the commercial markets for HNS in the wireless
communications area, including the market for broadband products, have only
recently developed. Because these markets are relatively new, it is difficult
to predict the rate at which these markets will grow, if at all. If the markets
for commercial wireless communications products fail to grow, or grow more
slowly than anticipated, the HNS business could be materially harmed.
Conversely, to the extent that growth in these markets results in capacity
limitations in the wireless communications area, it could materially harm HNS.
The success of HNS will depend on the development of new satellite and
other wireless communications products and acceptance of these products.
The wireless communications market in general, and the satellite
communications market in particular, are subject to rapid technological change,
frequent new and enhanced product introductions, product obsolescence and
changes in user requirements. The ability of HNS to compete successfully in
these markets depends on its success in anticipating changes in technology and
applying our expertise and new technology to existing and emerging satellite
and other wireless communications markets. The ability of HNS to compete in
these markets therefore depends in large part on HNS' ability to successfully
develop, introduce and sell new products and enhancements on a timely and
cost-effective basis that respond to ever-changing customer requirements. HNS'
ability to successfully introduce new products depends on several factors,
including:
o successful integration of various elements of its complex
technologies and system architectures;
o timely completion and introduction of new product designs;
o achievement of acceptable product costs;
o timely and efficient implementation of its manufacturing and
assembly processes and cost reduction efforts;
7
o establishment of close working relationships with major customers
for the design of their new wireless communications systems
incorporating our products;
o development of competitive products by competitors;
o marketing and pricing strategies of its competitors with respect
to competitive products; and
o market acceptance of its new products.
We cannot assure you that HNS' product development efforts for
communications products will be successful or any new products developed in the
future will achieve sufficient market acceptance. HNS may experience
difficulties that could delay or prevent it from successfully selecting,
developing, manufacturing or marketing new products or enhancements. In
addition, defects may be found in HNS products after deliveries commence, which
could result in the delay or loss of market acceptance. If HNS is unable to
design, manufacture, integrate and market profitable new products for existing
or emerging communications markets, it could materially harm the HNS business.
Risks relating to the businesses of the MSV Joint Venture and HNS
The value of our interest in the MSV Joint Venture may not appreciate
further or may decline significantly in the future because the MSV Joint
Venture has entered a new stage of development and its business involves a
high degree of risk.
Our interest in the MSV Joint Venture represents a substantial portion
of the value of our total assets. The value of our interest in the MSV Joint
Venture may not appreciate further or may decline significantly and rapidly in
value in the future. With the FCC's issuance of the February 2003 ATC Order,
the November 2004 Application Approval Order and the February 2005
Reconsideration Order, the MSV Joint Venture has entered a new stage of
development which will require significant future funding requirements and/or a
need for one or more strategic partners. There can be no assurances that the
MSV Joint Venture will obtain financing or reach an agreement with a strategic
partner on satisfactory terms. In addition, the MSV Joint Venture's business is
subject to a number of other significant risks and uncertainties, including:
o rapid technological change,
o intense competition, and
o extensive government regulation by the FCC in the United States
and by Industry Canada in Canada.
If it implements an ATC system, the MSV Joint Venture may face increased
competition which may have negative consequences on our interest in the
MSV Joint Venture.
The February 2003 ATC Order permitted the MSV Joint Venture, which
currently operates in the L-band, as well as the MSS operators in the Big LEO
band and the S-band, to implement ATCs, subject to meeting the FCC's
conditions. While the MSV Joint Venture is the first to have had such an
application approved, the MSV Joint Venture will likely face serious
competition in the provision of MSS using an ATC. Moreover, like the MSV Joint
Venture, Inmarsat offers mobile satellite service in the U.S. using the L-band
spectrum. Although Inmarsat had vigorously opposed the grant of ATC in the
L-band - claiming it would cause unacceptable interference to its satellites -
following the February 2005 Reconsideration Order, Inmarsat reconsidered its
position and has announced that it will seek approval to incorporate an ATC
into its satellite service in the United States. If Inmarsat or any of the
other competitors of the MSV Joint Venture receive more extensive or more
favorable approvals from the FCC, the MSV Joint Venture's ability to implement
its business strategy and compete effectively also could be harmed.
8
The MSV Joint Venture has experienced, and may continue to experience,
anomalies with its satellites which may have negative consequences on our
interest in the MSV Joint Venture.
Satellite services face numerous uncertainties that are unique to the
industry. Satellite launches include risk, and launch failures do occur.
Moreover, once in orbit, satellites can experience failures or technical
anomalies that could damage the ability to provide services to customers. The
MSV Joint Venture's satellites have experienced anomalies. No adequate
assurance can be given that such anomalies will not impair the MSV Joint
Venture's business or that they will not occur on future satellites. Satellites
cannot be repaired once in orbit and, accordingly, even a technical anomaly
short of total failure of the satellite could limit the usefulness of the
satellite. The MSV Joint Venture's application to incorporate an ATC
contemplates that these services will be provided using one or more
next-generation satellites. Accordingly, the MSV Joint Venture will face the
risks attendant with launching new satellites in the near term should specific
authorizations to launch be received.
The MSV Joint Venture may be unable to raise the additional capital
necessary to meet its strategic objectives which may have negative
consequences on our interest in the MSV Joint Venture.
The MSV Joint Venture will need to raise additional funds through
public or private debt or equity financings in order to (1) implement its
business plans; (2) take advantage of opportunities, including acquisitions of,
or investments in, businesses or technologies; (3) develop new services; or (4)
respond to competitive pressures. We cannot assure you that any such additional
financing will be available on terms favorable to the MSV Joint Venture, or at
all.
HNS' business is subject to uncertainties which could adversely impact the
value of our stake in HNS.
The HNS business involves numerous uncertainties. If we are not
successful in assisting HNS in maintaining or growing its revenues and/or
cannot control its costs, the business could need additional capital which
could require additional indebtedness or the sale of further additional equity
of HNS resulting in dilution of our interest in HNS or require additional
capital contributions by us. If such actions are necessary, there can be no
assurances that they will be on terms favorable to us or that they will result
in the business being successful or financially viable. If we are unable to
take such actions, the value of our interest in HNS will be adversely affected
or lost.
If HNS loses key personnel or is unable to attract and retain senior
operation employees, HNS' operations could be materially and adversely
affected.
HNS' success is dependent to a significant extent upon the continuing
efforts, abilities and business generation capabilities of its executive
management team and certain key employees at HNS. While HNS has programs in
place, and will implement new programs, to motivate, reward and retain those
individuals, they may be unwilling or unable to continue in their present
positions. The loss or unavailability of certain key employees at HNS could
affect HNS' client relationships or new business opportunities and could impede
HNS' ability to implement its business strategy. HNS' success and plans for
future growth will also depend on its ability to hire and retain executives and
other senior personnel. If HNS is not successful in this regard, the value of
our stake in HNS may be materially and adversely affected..
If HNS is unable to attract, retain and manage its employees, its business
will suffer.
HNS' future performance depends in large part upon its ability to
attract, develop, motivate and retain skilled personnel. Qualified employees
are in demand, and there is significant competition for these individuals. As a
result, HNS may not be able to attract and retain sufficient numbers of these
qualified individuals in the future, which may adversely affect HNS' future
performance. Further, there can be no assurances that the additional personnel
that HNS hires will work well together with existing members of its management
team.
9
The long-term debt obligations of HNS could limit its ability to implement
its business plan.
The indebtedness that has been incurred by HNS exceeds $325 million
and contains restrictions that may limit HNS' ability to finance future
operations, respond to changing business and economic conditions, secure
additional financing, and engage in opportunistic transactions, such as
strategic acquisitions. HNS' substantial level of indebtedness could have
important consequences, including the following:
o HNS' ability to obtain additional financing for working capital,
capital expenditures or general corporate purposes may be
impaired;
o the portion of HNS' cash flow needed to make debt service
payments on the debt will reduce the funds available to it for
other purposes; and
o HNS may have a higher level of indebtedness than some of its
competitors, which may put it at a competitive disadvantage and
reduce its flexibility in planning for, or responding to,
changing conditions in our industry, including technological
change or increased competition.
HNS' ability to protect proprietary technology is limited and infringement
claims against HNS could restrict the business.
HNS' success depends significantly on its ability to protect
proprietary rights to the technologies used in its products and services. If
HNS is unable to protect its proprietary rights adequately, its competitors
could use the intellectual property HNS has developed to enhance their own
products and services, which could materially harm HNS' business and negatively
impact the value of our common stock. HNS currently relies on a combination of
patents, trade secret laws, copyrights, trademarks, service marks and
contractual rights to protect its intellectual property. We cannot assure you
the steps HNS has taken to protect its proprietary rights are adequate. Also,
we cannot assure you that HNS' issued patents will remain valid or that any
pending patent applications will be issued. Additionally, the laws of some
foreign countries in which HNS products are or may be sold do not protect its
intellectual property rights to the same extent as do the laws of the United
States.
Litigation may often be necessary to protect HNS' intellectual
property rights and trade secrets, to determine the validity and scope of the
proprietary rights of others or to defend against claims of infringement or
invalidity. We believe infringement, invalidity, right to use or ownership
claims by third parties or claims for indemnification resulting from
infringement claims will likely be asserted against HNS in the future. If any
claims or actions are asserted against HNS, it may seek to obtain a license
under a third party's intellectual property rights. We cannot assure you,
however, that a license will be available under reasonable terms or at all.
Litigation of intellectual property claims could be extremely expensive and
time consuming, which could materially harm HNS' business, regardless of the
outcome of the litigation. If HNS' products are found to infringe upon the
rights of third parties, it may be forced to incur substantial costs to develop
alternative products. We cannot assure you that HNS would be able to develop
alternative products or, if these alternative products were developed, they
would perform as required or be accepted in the applicable markets. If HNS is
unable to address any of the risks described above relating to the protection
of its proprietary rights, it could materially harm HNS' business and
negatively impact the value of our common stock.
Because HNS conducts significant business internationally, it faces risks
related to foreign currency fluctuation as well as global political and
economic conditions.
HNS has a significant international operation. HNS' international
sales account for a significant percentage of its revenues. Many of these
international sales may be denominated in foreign currencies. A decrease in the
value of foreign currencies relative to the U.S. dollar could result in losses
from transactions denominated in foreign currencies or the repatriation of
revenues earned outside of the U.S. This decrease in value could also make HNS'
products less price-competitive.
There are additional risks in conducting business internationally,
including:
10
o unexpected changes in regulatory requirements;
o increased cost of localizing systems in foreign countries;
o increased sales and marketing and research and development
expenses;
o availability of suitable export financing;
o timing and availability of export licenses;
o tariffs and other trade barriers;
o political and economic instability;
o challenges in staffing and managing foreign operations and
ensuring compliance with U.S. and foreign regulations, including
U.S. laws relating to trade, export controls and foreign corrupt
practices;
o difficulties in managing distributors;
o potentially adverse tax consequences;
o potential difficulty in making adequate payment arrangements; and
o potential difficulty in collecting accounts receivable.
In addition, some of HNS' customer agreements are governed by foreign
laws, which may differ significantly from U.S. laws. HNS may be limited in its
ability to enforce its rights under these agreements and to collect damages, if
awarded. If HNS is unable to address any of the risks described above, it could
materially harm its business.
11
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents that are incorporated by reference
contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934
that involve risks and uncertainties, including statements regarding our
capital needs, business strategy, expectations and intentions. We urge you to
consider that statements that use the terms "believe," "do not believe,"
"anticipate," "expect," "plan," "estimate," "strive," "intend" and similar
expressions are intended to identify forward-looking statements. These
statements reflect our current views with respect to future events and because
our business is subject to numerous risks, uncertainties and risk factors, our
actual results could differ materially from those anticipated in the
forward-looking statements, including those set forth under "Item 1. Business,"
"Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our Annual Report on Form 10-K for the year ended
December 31, 2004 and elsewhere in this prospectus and the documents that are
incorporated by reference. Actual results will most likely differ from those
reflected in these statements, and the differences could be substantial. We
disclaim any obligation to update these statements, or disclose any difference
between our actual results and those reflected in these statements. The
information constitutes forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995.
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock by the
selling stockholders. All proceeds from the sale of the shares will be for the
account of the selling stockholders. See "Selling Stockholders" and "Plan of
Distribution" described below.
SELLING STOCKHOLDERS
The following table sets forth information regarding the ownership of
shares of our common stock by the selling stockholders prior to this offering
and the respective amounts of shares offered by the selling stockholders
pursuant to this prospectus. This information has been obtained from the
selling stockholders. We have not independently verified this information.
Other than as disclosed in this prospectus or in the documents incorporated
herein by reference, none of the selling stockholders has, or within the past
three years has had, any position, office or other material relationship with
us or, insofar as we are aware, any of our predecessors or affiliates. Because
the selling stockholders may offer all or some portion of the shares pursuant
to this prospectus, no estimate can be given as to the amount of the shares
that will be held by the selling stockholders upon termination of this
offering. In addition, the selling stockholders identified below may have sold,
transferred or otherwise disposed of all or a portion of their shares since the
date on which they provided the information to us for inclusion in the
following table.
SELLING STOCKHOLDER* NUMBER OF SHARES OWNED NUMBER OF SHARES
PRIOR TO THE OFFERING OFFERED HEREBY
LC Capital Master Fund, Ltd 156,000 (1) 156,000 (1)
York Capital Management, L.P. 45,240 (1) 45,240 (1)
York Investment Limited 170,430 (1) 170,430 (1)
York Select, L.P. 41,730 (1) 41,730 (1)
York Credit Opportunities Fund, L.P. 64,220 (1) 64,220 (1)
York Select Unit Trust 35,620 (1) 35,620 (1)
York Global Value Partners, L.P. 47,450 (1) 47,450 (1)
York/Green Capital Partners, L.P. 11,310 (1) 11,310 (1)
George W. Haywood 157,400 (1) 104,000 (1)
The Tudor BVI Global Portfolio Ltd. 53,849 (1) 53,849 (1)
Tudor Proprietary Trading, L.L.C. 28,995 (1) 28,995 (1)
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SELLING STOCKHOLDER* NUMBER OF SHARES OWNED NUMBER OF SHARES
PRIOR TO THE OFFERING OFFERED HEREBY
Witches Rock Portfolio Ltd. 333,156 (1) 333,156 (1)
Fleet Maritime, Inc. 10,177 (1) 9,485 (1)
OZ Master Fund, Ltd. 406,515 (1) 406,515 (1)
Harbert Distressed Investment Master Fund, Ltd. 1,014,060 (1) 406,640 (1)
Greywolf Capital Overseas Fund (2) 124,800 (1) 124,800 (1)
Greywolf Capital Partners II LP (2) 31,200 (1) 31,200 (1)
Millennium Partners, L.P. (3) 156,000 (1) 156,000 (1)
Second Gary & Karen Singer Children's Trust 104,000 (1) 104,000 (1)
Ore Hill Hub Fund Ltd. 156,000 (1) 156,000 (1)
Xerion Partners I LLC (4) 122,000 (1) 104,000 (1)
Alpha US Sub Fund VI, LLC 24,940 (1) 9,360 (1)
Tejas Incorporated 60,000 (5) 60,000 (5)
Morris D. Weiss (6) 13,000 (5) 5,000 (5)
Joseph Moran 45,000 (5) 45,000 (5)
The DIRECTV Group, Inc. 300,000 300,000
TOTAL 3,713,092 3,010,000
* Assuming each selling stockholder sells all of the shares of our common
stock it holds that are being registered pursuant to the registration
statement of which this prospectus forms a part (i) each such selling
stockholder (other than Harbert Distressed Investment Master Fund, Ltd.)
will hold less than one percent of the shares of our common stock
outstanding after the completion of this offering and (ii) Harbert
Distressed Investment Master Fund, Ltd will hold approximately 6.52% of
our voting common stock (assuming all of the warrants referred to in
Footnote (1) to this table are exercised in full).
(1) Includes shares of common stock issuable upon exercise of warrants in the
number set forth adjacent to such selling stockholder's name in the
following table. Such warrants are currently unvested. For further
information in relation to these warrants, see "Risk Factors-- Shares
eligible for future sale could cause our stock price to decline."
NUMBER OF SHARES ISSUABLE
SELLING STOCKHOLDER UPON EXERCISE OF WARRANTS
LC Capital Master Fund, Ltd 36,000
York Capital Management, L.P. 10,440
York Investment Limited 39,330
York Select, L.P. 9,630
York Credit Opportunities Fund, L.P. 14,820
York Select Unit Trust 8,220
York Global Value Partners, L.P. 10,950
York/Green Capital Partners, L.P. 2,610
George W. Haywood 24,000
The Tudor BVI Global Portfolio Ltd. 12,427
Tudor Proprietary Trading, L.L.C. 6,691
Witches Rock Portfolio Ltd. 76,882
Fleet Maritime, Inc. 2,189
OZ Master Fund, Ltd. 93,811
Harbert Distressed Investment Master Fund, Ltd. 93,840
Greywolf Capital Overseas Fund 28,800
Greywolf Capital Partners II LP 7,200
Millennium Partners, L.P. 36,000
Second Gary & Karen Singer Children's Trust 24,000
Ore Hill Hub Fund Ltd. 36,000
Xerion Partners I LLC 24,000
Alpha US Sub Fund VI, LLC 2,160
(2) Greywolf Capital Overseas Fund and Greywolf Capital Partners II LP are
both controlled by Mr. Jonathan Savitz.
13
(3) Millennium Management, L.L.C., a Delaware limited liability company, is
the managing partner of Millennium Partners, L.P., a Cayman Islands
exempted limited partnership, and consequently may be deemed to have
voting control and investment discretion over securities owned by
Millennium Partners, L.P. Israel A. Englander is the managing member of
Millennium Management, L.L.C. As a result, Mr. Englander may be considered
the beneficial owner of any shares deemed to be beneficially owned by
Millennium Management, L.L.C. The foregoing should not be construed in and
of itself as an admission by either of Millennium Management, L.L.C. or
Mr. Englander as to beneficial ownership of the shares of the Company's
common stock owned by Millennium Partners, L.P.
(4) Mr. S. Donald Sussman indirectly controls Poloma GP LLC, or Paloma GP,
which is the non-member manager of Xerion Partners I LLC, or XP-I, and has
voting and investment discretion over securities held by XP-I. Paloma GP
and Mr. Sussman thus may be deemed to be beneficial owners of the shares
of common stock identified as being beneficially owned by XP-I. Paloma GP
and Mr. Sussman disclaim beneficial ownership of the shares held by XP-I.
(5) All of these shares of common stock are issuable upon exercise of
warrants. Such warrants are currently vested.
(6) Mr. Weiss indirectly holds 8,000 shares of our common stock (being the
number of shares listed adjacent to Mr. Weiss' name not issuable pursuant
to a warrant (see Footnote 3 above)). Of those 8,000 shares, 4,000 are
held by Morris D. Weiss & Lauren C. Ravkind, JTWROS, 1,000 are held by Mr.
Weiss as SEP IRA Custodian, 1,000 are held by Mr. Weiss as IRA Custodian,
1,000 are held by Morris D. Weiss Custodian FBO Sara Weiss UTMA TX and
1,000 are held by Morris D. Weiss Custodian FBO Ariana Weiss UTMA TX.
PLAN OF DISTRIBUTION
We are registering shares of our common stock on behalf of the selling
stockholders. As used in this prospectus, "selling stockholders" includes
donees, transferees, pledgees and other successors in interest (other than
purchasers pursuant to this prospectus) selling shares received from a named
selling stockholder after the date of this prospectus. We will pay for all
costs, expenses and fees in connection with the registration of the shares. The
selling stockholders will pay for all selling discounts and commissions, if
any. The selling stockholders may offer and sell their shares from time to time
in one or more of the following types of transactions (including block
transactions):
o on any national exchange on which the shares may be listed or any
automatic quotation system through which the shares may be
quoted,
o in the over-the-counter market,
o in privately negotiated transactions,
o through put and call transactions,
o through short sales, and
o a combination of such methods of sale.
The selling stockholders may sell their shares at prevailing market
prices or at privately negotiated prices. The selling stockholders may use
brokers, dealers or agents to sell their shares. The persons acting as agents
may receive compensation in the form of commissions, discounts or concessions.
This compensation may be paid by the selling stockholders or the purchasers of
the shares for whom such persons may act as agent, or to whom they may sell as
a principal, or both.
The selling stockholders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with these
transactions, broker-dealers or other financial institutions may engage in
short sales of the shares in the course of hedging positions they assume with
selling stockholders. The selling stockholders may also enter into options or
other transactions with broker-dealers or other financial institutions which
require the delivery to these broker-dealers or other financial institutions of
shares, which such broker-dealer or other financial institution may resell
pursuant to this prospectus (as amended or supplemented to reflect such
transaction). The selling shareholders may also engage in short sales of shares
and, in those instances, this prospectus may be delivered in connection with
the short sales and the shares offered under this prospectus may be used to
cover the short sales.
14
The selling stockholders and any agents or broker-dealers that
participate with the selling stockholders in the offer and sale of the shares
may be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act of 1933. Any commissions they receive and any profit they
realize on the resale of the shares by them may be deemed to be underwriting
discounts and commissions under the Securities Act of 1933. Neither we nor any
selling stockholder can presently estimate the amount of such compensation.
Because a selling stockholder may be deemed to be an "underwriter" within the
meaning of the Securities Act of 1933, the selling stockholders will be subject
to the prospectus delivery requirements of the Securities Act of 1933, which
may include delivery through the facilities of the applicable exchange or
automated quotation system pursuant to Rule 153 under the Securities Act of
1933. The selling stockholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving shares against
certain liabilities, including liabilities arising under the Securities Act of
1933.
In order to comply with the securities laws of most states, if
applicable, the shares of common stock may be sold in those jurisdictions only
through registered or licensed brokers or dealers. In addition, in some states
the shares of common stock may not be sold unless they have been registered or
qualified for sale or an exemption from registration or qualification
requirements is available and is complied with.
The selling stockholders and any other person participating in a
distribution of the securities covered by this prospectus will be subject to
applicable provisions of the Securities Exchange Act of 1934 and the rules and
regulations under the Securities Exchange Act of 1934, including Regulation M,
which may limit the timing of purchases and sales of any of the securities by
the selling stockholders and any other such person. Furthermore, under
Regulation M, any person engaged in the distribution of the securities may not
simultaneously engage in market-making activities with respect to the
particular securities being distributed for certain periods prior to the
commencement of or during such distribution. Regulation M's prohibition on
purchases may include purchases to cover short positions by selling
stockholders, and a selling stockholder's failure to cover a short position at
a lender's request and subsequent purchases by the lender in the open market of
shares to cover such short positions, may be deemed to constitute an inducement
to buy shares, which is prohibited by Regulation M. All of the above may affect
the marketability of the securities and the ability of any person or entity to
engage in market-making activities with respect to the securities.
We are not aware of whether the selling stockholders have entered into
any agreements, understanding or arrangements with any broker-dealers regarding
the sale of their shares, nor are we aware that there is an underwriter or
coordinating broker acting in connection with the proposed sale of shares by
the selling stockholders.
Selling stockholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act of
1933, provided they meet the criteria and conform to the requirements of that
rule.
Following notification by a selling stockholder that it has entered
into any material arrangement with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing:
o the name of each such selling stockholder and of the
participating broker-dealer(s);
o the number of shares involved;
o the initial price at which these shares were sold;
o the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
o that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in
this prospectus; and
15
o any other facts material to the transactions.
In addition, following notification by a selling stockholder that a
donee, pledgee, transferee or other successor-in-interest of such selling
stockholder intends to sell more than 500 shares, we will file a supplement to
this prospectus.
16
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, is
acting as our counsel in connection with this registration statement.
EXPERTS
Our consolidated financial statements and schedule as of December 31,
2004 and 2003, and for each of the years in the three-year period ended
December 31, 2004, have been incorporated by reference herein in reliance upon
the reports of KPMG LLP, independent registered public accounting firm,
incorporated by reference herein, dated March 31, 2005 and included in our
Annual Report on Form 10-K, and upon the authority of said firm as experts in
accounting and auditing.
The combined consolidated financial statements of HNS as of and for
the years ended December 31, 2004, 2003 and 2002, included in our Current
Report on Form 8-K filed with the SEC on April 26, 2005, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements of Mobile Satellite Ventures LP and subsidiaries included
in our Annual Report on Form 10-K for the year ended December 31, 2004, as set
forth in their report, which is incorporated by reference in this prospectus
and elsewhere in the registration statement. Mobile Satellite Venture LP and
subsidiaries consolidated financial statements are incorporated by reference in
reliance on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any documents we file at
the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.,
20549. You may call the SEC at 1-800-SEC-0330 for further information on the
public reference room. Our SEC filings are also available to the public from
the SEC's Website at "http://www.sec.gov."
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Robert C. Lewis
Senior Vice President,
General Counsel and Secretary
19 West 44th Street, Suite 507
New York, New York 10036
(212) 730-7540
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT PRESENTED IN
OR DELIVERED WITH THIS DOCUMENT. TO OBTAIN THESE ADDITIONAL DOCUMENTS, SEE
"WHERE YOU CAN FIND MORE INFORMATION."
The SEC allows us to "incorporate by reference" into this
prospectus the information we filed with the SEC. This means that we can
disclose important information by referring you to those documents. The
information incorporated by reference is considered to be a part of this
prospectus. Information that we file later with the SEC will automatically
update and supersede this information. All documents filed by us pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 prior to the completion of the offering shall be deemed incorporated
by reference into this prospectus from the date of
17
filing of those documents. We incorporate by reference the documents listed
below, which have been filed with the SEC, into this prospectus:
o Our Annual Report on Form 10-K for the year ended December 31,
2004 filed with the SEC on March 31, 2005;
o Our Current Report on Form 8-K filed with SEC on April 7, 2005;
o Our Current Report on Form 8-K filed with SEC on April 21, 2005;
o Our Current Report on Form 8-K filed with SEC on April 26, 2005;
and
o Our Definitive Proxy Statement for an Annual Meeting of
Stockholders held on December 10, 2004.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference will be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained herein
or any other subsequently filed document that is deemed to be incorporated
herein by reference modifies or supersedes the statement. Any statement so
modified or superseded will not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.
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PROSPECTUS
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SkyTerra Communications, Inc.
3,010,000 Shares
Common Stock
Prospectus dated , 2005
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with this offering to be paid by
us are as follows:
SEC registration fee $ 13,453.67
Legal fees and expenses $125,000.00
Accounting fees and expenses $ 85,000.00
Blue Sky expenses $ 50,000.00
Total $273,453.67
Item 15. Indemnification of Officers and Directors.
The Company's restated certificate of incorporation, referred to
herein as the "certificate of incorporation," contains a provision which
provides that no director of the Company shall be personally liable to the
Company or its stockholders for monetary damages for a breach of fiduciary duty
as a director except for liabilities:
(i) for any breach of the director's duty of loyalty;
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
(iii) for an unlawful dividend payment or an unlawful repurchase or
redemption of stock under Section 174 of the Delaware General
Corporation Law; or
(iv) for any transaction from which the director derived an improper
personal benefit.
The Company's certificate of incorporation provides that the Company
may indemnify each 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 Company) by reason of the fact that he is or was a
director, officer, employee or agent of the Company, or is or was serving at
the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amount paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, if he acted in good faith in a manner he reasonably
believed to be in or not opposed to the best interest of the Company, and with
respect to any criminal action or proceeding, had no reasonable cause to
believe his 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, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interest of the Company, and with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
The Company's certificate of incorporation provides that the Company
may indemnify each 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 the
right of the Company to procure a judgment in its favor by reason of the fact
that he is or was a director, officer, employee or agent of the Company, or is
or was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interest of the Company, except that no
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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 the Company unless
and only to the extent that 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 indemnify for such expenses which the court of chancery
or such other court shall deem proper.
To the extent that a director, officer, employee or agent of the
Company has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to above or in defense of any claim, issue
or matter therein, the Company's certificate of incorporation provides that he
will be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Any indemnification under the provisions of the Company's certificate
of incorporation (unless ordered by a court) will be made by the Company upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth above. Such determination shall be made (1) by the board of
directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
The Company's certificate of incorporation provides that the Company
may pay expenses incurred by defending a civil or criminal action, suit or
proceeding in advance of the final disposition of such action, suit or
proceeding in the manner provided herein upon receipt of any undertaking by or
on behalf of the director, officer, employee or agent to repay such amount if
it is ultimately determined that he is not entitled to be indemnified by the
Company.
The Company's certificate of incorporation provides that the
indemnification and advancement of expenses will, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
The Company's certificate of incorporation provides that the
indemnification and advancement of expenses provided therein will not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or of any disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
The Company's certificate of incorporation provides that the Company
may purchase and maintain insurance on behalf of any person who is or was
serving the Company in any capacity referred to above against any liability
asserted against him and incurred by him in such capacity, or arising out of
his status as such, whether or not the Company would have the power to
indemnify him against such liability under the provisions of its certificate of
incorporation.
The Company's amended and restated by-laws, referred to herein as the
"by-laws," provide that the Company will indemnify any director and any officer
of the Company 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, quasi-administrative or investigative, other than an
action by or in the right of the Company, referred to herein as a "Third Party
Proceeding," by reason of the fact that he or she was or is a director or
officer, employee or agent of the Company, acting solely in such capacity, or a
person serving at the request of the Company as a director, officer, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust, committee or other enterprise 50% or more of whose voting stock or
equitable interest shall be owned by this Company, each referred to herein as
an "Authorized Representative, against his or her expenses and liabilities
(including attorneys' fees), actually and reasonably incurred by him or her in
connection with the Third Party Proceeding if he or she acted in good faith and
in a manner reasonably believed by him or her to be in, or not opposed to, the
best interests of the Company and, with respect to any Third Party Proceeding
involving potential criminal liability, referred to herein as a "Criminal Third
Party Proceeding," had no reasonable cause to believe his or her conduct was
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unlawful or in violation of applicable rules. The termination of any Third
Party Proceeding by judgment, order, settlement, consent filing of a criminal
complaint or information, indictment, 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 he or she reasonably
believed to be in, or not opposed to, the best interests of the Company or,
with respect to any Criminal Third Party Proceeding, had reasonable cause to
believe that his or her conduct was unlawful.
The Company's by-laws provide that the Company will indemnify any
director or officer of the Company who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by the
Company to produce a judgment in favor of its shareholders, or any threatened,
pending or completed action or suit in the right of the Company by its
stockholders to procure a judgment in favor of the Company, referred to herein
as a "Derivative Action," by reason of the fact that the director or officer
was or is an Authorized Representative of the Company, against his or her
expenses (including attorneys' fees) actually and reasonably incurred by the
director or officer in the action if he or she acted in good faith and in a
manner reasonably believed by him or her to be in, or not opposed to, the best
interests of the Company; except that no indemnification will be made in
respect of any claim, issue or matter as to which he or she has been adjudged
to be liable for negligence or misconduct in the performance of his or her duty
to the Company unless and only to the extent that the court of common pleas, or
other similarly constituted state court, located in the county where the
registered office of the Company is located or the court in which such
Derivative Action is or was pending, determines upon application that, despite
the adjudication of liability but in view of all circumstances of the case, he
or she is fairly and reasonably entitled to indemnify for expenses which the
court deems proper.
An Authorized Representative of the Company (other than a director or
officer of the Company) may be indemnified by the Company or have his or her
expenses advanced in accordance with the procedures described below. To the
extent that an Authorized Representative of the Company has been successful on
the merits or otherwise in defense of any Third Party Proceeding or Derivative
Action or in defense of any claim, issue or matter therein, the Authorized
Representative will be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection therewith.
Indemnification under the provisions of the Company's by-laws
described above (unless ordered by a court, in which case the expenses,
including attorneys' fees of the Authorized Representative in enforcing
indemnification will be added to and included in the final judgment against the
Company) will be made by the Company only as authorized in the specific case
upon a determination that the indemnification of the Authorized Representative
is required or proper in the circumstances because he or she has met the
applicable standard of conduct set forth above or has been successful on the
merits or as otherwise in defense of any Third Party Proceeding or Derivative
Action and that the amount requested has been actually and reasonably incurred.
Such determination shall be made:
(a) By the board of directors or a committee thereof, acting by a
majority vote of a quorum consisting of directors of the Company who
are not parties or have no economic or other collateral personal
benefit relating to a Third Party Proceeding or Derivative Action,
referred to here in as "Disinterested Directors;" or
(b) If a quorum is not obtainable or, even if obtainable, a majority
vote of a quorum of Disinterested Directors so directs, by independent
legal counsel in a written opinion.
The Company's by-laws provide that expenses incurred in defending a
Third Party Proceeding or Derivative Action will be paid on behalf of a director
or officer, and may be paid on behalf of any Authorized Representative, by the
Company in advance of the final disposition of the action as authorized in the
manner provided above (except that the person(s) making the determination
thereunder need not make a determination on whether the applicable standard of
conduct has been met unless a judicial determination has been made with respect
thereto, or the person seeking indemnification has conceded that he or she has
not met such standard) upon receipt of an undertaking by or on behalf of the
Authorized Representative to repay the amount to be advanced unless it shall
ultimately be determined that the Authorized Representative is entitled to be
indemnified by the Company as required in the Company's by-laws
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or authorized by law. The financial ability of any Authorized Representative
to make repayment will not be a prerequisite to making of an advance.
The Company's by-laws provide the Company may purchase and maintain
insurance on behalf of any person who is or was an Authorized Representative
against any expenses and liabilities asserted against him or her and incurred
by him or her in any such capacity, whether or not the Company would have the
power to indemnify him or her against such expenses and liabilities under the
provisions of the Company's by-laws.
The indemnification provided by the Company's by-laws is not deemed to
be exclusive of any other right to which a person seeking indemnification may
be entitled under any statute, agreement, vote of Disinterested Directors, or
otherwise, regardless of whether the event giving rise to indemnification
occurred before or after the effectiveness thereof, both as to action taken in
another capacity while holding his or her office or position, and will continue
as to a person who has ceased to be an Authorized Representative of the Company
and will inure to the benefit of his or her heirs and personal representatives.
Item 16. List of Exhibits.
Exhibit
Number Description
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to legality
of the common stock being registered (to be filed with an amendment
to this registration statement).
23.1 Consent of KPMG LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Ernst & Young LLP.
23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20% change
in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement and
(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.
(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.
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(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.
The undersigned registrant hereby further undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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 provisions described in "Item
15-Indemnification of Directors and Officers" above, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
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 Act and
will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York on April 26, 2005.
SKYTERRA COMMUNICATIONS, INC.
By: /s/ Robert C. Lewis
------------------------------------------
Robert C. Lewis
Senior Vice President, General Counsel and
Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert C. Lewis and Craig J. Kaufmann, and each
of them acting individually, with full power to act without the others, as his
true and lawful attorneys-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments to this Registration Statement
(including post-effective amendments, or any abbreviated registration statement
and any amendments thereto filed pursuant to Rule 462 under the Securities Act
of 1933, as amended and otherwise), and to cause the same to be filed, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
each said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
on the 26th day of April 2005.
/s/ Jeffery A. Leddy Chief Executive Officer and President
----------------------------- (Principal Executive Officer and
Jeffrey A. Leddy Principal Financial Officer)
/s/ Craig J. Kaufmann Controller and Treasurer
----------------------------- (Principal Accounting Officer)
Craig J. Kaufmann
/s/ Andrew D. Africk Director
-----------------------------
Andrew D. Africk
/s/ Michael S. Gross Director
-----------------------------
Michael S. Gross
/s/ Jeffery M. Killeen Director
-----------------------------
Jeffrey M. Killeen
/s/ Marc J. Rowan Director
-----------------------------
Marc J. Rowan
/s/ William F. Stasior Director
-----------------------------
William F. Stasior
S-1
Exhibit Index
Exhibit
Number Description
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to legality
of the common stock being registered (to be filed with an amendment
to this registration statement).
23.1 Consent of KPMG LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Ernst & Young LLP.
23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).