<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
PRONET INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
PRONET INC.
6340 LBJ FREEWAY
DALLAS, TEXAS 75240
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 20, 1996
To the Stockholders of ProNet Inc.
Notice is hereby given that the Annual Meeting of Stockholders of ProNet
Inc., a Delaware corporation (the "Company"), will be held at the Westin
Hotel, Galleria Dallas, 13340 Dallas Parkway, Dallas, Texas 75240, on
Wednesday, November 20, 1996, at 1:00 p.m., Dallas, Texas time, for the
following purposes:
(a) To elect five directors to hold office until the next Annual
Meeting of Stockholders; and
(b) To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
The close of business on October 3, 1996, has been fixed by the Board of
Directors as the record date for the Annual Meeting. Only stockholders of
record on that date will be entitled to notice of and to vote at the Annual
Meeting or any adjournment(s) thereof, notwithstanding the transfer of any
stock on the books of the Company after such record date.
A Proxy Statement, Proxy Card and Annual Report on the Company's
operations during the fiscal year ended December 31, 1995, accompany this
notice.
It is important that your shares be represented at the Annual Meeting.
Therefore, if you do not expect to attend in person, please sign and date the
enclosed Proxy Card and return it in the enclosed envelope. No postage is
required. If you attend the Annual Meeting, you will be entitled to vote in
person. In any event, a proxy may be revoked at any time before it is
exercised.
By Order of the Board of Directors
Mark A. Solls
Secretary
Dallas, Texas
October 18, 1996
<PAGE>
PRONET INC
6340 LBJ FREEWAY
DALLAS, TEXAS 75240
PROXY STATEMENT
SOLICITATION OF PROXIES
This Proxy Statement is furnished to stockholders of ProNet Inc., a
Delaware corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors of the Company to be voted at the Annual
Meeting of Stockholders (the "Annual Meeting") of the Company to be held at
the Westin Hotel, Galleria Dallas, 13340 Dallas Parkway, Dallas, Texas,
75240, on Wednesday, November 20, 1996, at 1:00 p.m., Dallas, Texas time, or
at any adjournment(s) thereof, for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders. The Board of Directors solicits
your proxy on the enclosed form.
The enclosed proxy is solicited by and on behalf of the Board of
Directors of the Company. The cost of the solicitation of proxies for this
meeting, including the cost of mailing, will be borne by the Company. In
addition to the solicitation of proxies by use of the mails, proxies also may
be solicited by personal interview, telecopy or telephone by directors,
officers, employees and agents of the Company, with no additional
compensation to such persons. The Company also may engage the service of
others to solicit proxies in person or by telephone or telecopy. The cost of
all such additional solicitations, together with the expenses of brokers who
at the request of the Company mail proxy material to their customers, will be
borne by the Company.
The approximate date on which this Proxy Statement and the enclosed form
of proxy are first being sent to stockholders is October 18, 1996.
The record date for the determination of the stockholders entitled to
notice of and to vote at the Annual Meeting has been established by the Board
of Directors as the close of business on October 3, 1996. Only stockholders
of record at the close of business on that date will be entitled to vote at
the Annual Meeting, notwithstanding any subsequent transfer of any stock on
the books of the Company. As of October 3, 1996, the Company had issued and
outstanding and entitled to vote at the Annual Meeting 11,575,437 shares of
common stock, $.01 par value per share ("Common Stock").
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock of the Company entitled to vote is
necessary to constitute a quorum at the Annual Meeting. Except for the
election of directors, any matters to be voted on will be decided by a
majority of the shares represented and voting in person or by proxy.
Directors will be elected by a plurality of the votes of the shares
represented voting in person or by proxy. With respect to the election of
directors, votes may be cast in favor or withheld. A holder of Common Stock
will be entitled to one vote per share on each matter properly brought before
the Annual Meeting. Cumulative voting is not permitted in the election of
directors.
Brokers who hold shares in street name for customers are required to
vote those shares in accordance with instructions received from the
beneficial owners. In addition, brokers are entitled to vote on certain
"discretionary items" even when they have not received instructions from
beneficial owners. Brokers are not permitted to vote (a "broker non-vote")
for other "non-discretionary" items without specific instructions from the
beneficial owners. Broker non-votes on non-discretionary items will be
treated as shares as to which voting power has been withheld by the
beneficial owner and, therefore, as shares not entitled to vote on the item
as to which there is a broker non-vote. In determining whether an individual
nominee for election as a director of the Company has received the requisite
number of affirmative votes, votes that are withheld and broker non-votes
will be excluded entirely from the vote and will have no effect. Any
stockholder giving the proxy enclosed with this Proxy Statement has the power
to revoke
<PAGE>
such proxy at any time prior to the exercise thereof by giving written notice
of such revocation to the Company at or prior to the Annual Meeting, by
executing and submitting a proxy bearing a later date or by attending the
Annual Meeting and voting in person the shares of stock such stockholder is
entitled to vote.
Proxies in the accompanying form, if properly executed and returned,
will be voted at the Annual Meeting in accordance with the instructions
thereon. Any proxy upon which no instructions have been indicated with
respect to any of the following matters will be voted as follows: (i) "FOR"
the election of the five persons named in this Proxy Statement as the Board
of Directors' nominees for election to the Board of Directors; and (ii) in
accordance with the discretion of the holders of such proxies with respect to
any other business that properly comes before the stockholders at the Annual
Meeting or any adjournment(s) thereof. The Board of Directors knows of no
matters, other than the election of directors, to be presented for
consideration at the Annual Meeting. If, however, other matters properly come
before the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote such proxy in accordance with their judgment on
any such matters. The persons named in the accompanying proxy may also, if it
is deemed to be advisable, vote such proxy to adjourn the Annual Meeting from
time to time.
STOCK OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of September 30,
1996, regarding the amount and nature of the beneficial ownership of Common
Stock by (i) each person known to the Company to be the beneficial owner of
more than five percent of the outstanding shares of Common Stock, (ii) each
of its directors and nominees for director, (iii) each executive officer of
the Company named in the Summary Compensation Table below and (iv) all of the
Company's directors and executive officers as a group. Except as otherwise
noted, the persons named in the table have sole voting and investment power
in the shares of Common Stock shown as beneficially owned by such persons.
BENEFICIAL OWNERSHIP
AS OF
SEPTEMBER 30, 1996
--------------------------
NUMBER OF PERCENT OF
SHARES OF OUTSTANDING
NAME OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------ ------------ -----------
PRINCIPAL STOCKHOLDERS:
Wellington Management Company, LLP(1)............... 1,336,000 11.54%
DIRECTORS AND OFFICERS:
Bo Bernard (2)...................................... 118,113 1.01
Thomas V. Bruns (3)................................. 9,333 *
Harvey B. Cash (3).................................. 28,333 *
Jan E. Gaulding (4)................................. 77,174 *
Edward E. Jungerman (5)............................. 8,333 *
Jackie R. Kimzey (6)................................ 161,193 1.39
Mark C. Masur (7)................................... 120,333 1.04
Mark A. Solls (8)................................... 5,501 *
David J. Vucina (9)................................. 58,333 *
All directors and executive officers as a group
(10 persons) (10)................................... 662,889 5.54
- -----------
*REPRESENTS LESS THAN 1% OF THE SHARES OUTSTANDING
(1) Wellington Management Company, LLP ("WMC") is an investment adviser
registered with the Securities and Exchange Commission under the
Investment Advisors Act of 1940, as amended. As of September 30, 1996
WMC, in its capacity as investment adviser, may be deemed to have
beneficial ownership of 1,336,000 shares of Common Stock that are owned
by numerous investment advisory clients, none of which is known to have
such interest with respect to more than five percent of the class
except for Hartford Capital Appreciation Fund, Inc.
-2-
<PAGE>
As of September 30, 1996, WMC had shared voting power with respect to
1,041,700 shares and shared dispositive power with respect to all
1,336,000 shares. The business address of WMC is 75 State Street,
Boston, Massachusetts 02109.
(2) Includes 64,000 shares subject to currently exercisable options or
options exercisable within 60 days after November 30, 1996 and 714
shares beneficially owned by Mr. Bernard's child.
(3) Includes 8,333 shares subject to currently exercisable options or
options exercisable within 60 days after November 30, 1996.
(4) Includes 61,325 shares subject to currently exercisable options or
options exercisable within 60 days after November 30, 1996.
(5) Represents shares subject to currently exercisable options or options
exercisable within 60 days after November 30, 1996.
(6) Includes 56,000 shares subject to currently exercisable options or
options excercisable within 60 days after November 30, 1996 and 61,000
shares beneficially owned by Mr. Kimzey's children.
(7) Includes 8,333 shares subject to currently exercisable options or
options exercisable within 60 days after November 30, 1996 and 100,000
shares beneficially owned by Silver Creek Fund of which Mr. Masur is
the sole general partner. Mr. Masur has sole voting and investment
power in the shares beneficially owned by such partnership.
(8) Includes 5,000 shares subject to currently exercisable options or
options exercisable within 60 days after November 30, 1996.
(9) Includes 56,500 shares subject to currently exercisable options or
options exercisable within 60 days after November 30, 1996.
(10) Includes 340,157 shares subject to currently exercisable options or
options exercisable within 60 days after November 30, 1996.
Section 16(a) of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act"), requires the Company's officers and directors, and
beneficial owners of more than ten percent of the Common Stock, to file with
the Securities and Exchange Commission and the National Association of
Securities Dealers, Inc. reports of ownership and changes in ownership of the
Common Stock. Copies of such reports are required to be furnished to the
Company. Based solely on its review of the copies of such reports furnished
to the Company, or written representations that no reports were required, the
Company believes that during fiscal year 1995, all filing requirements
applicable to its officers, directors, and ten percent beneficial owners were
satisfied except that Ms. Jan E. Gaulding inadvertently filed a Form 4,
reporting the exercise of stock options, late; and Mr. Jackie R. Kimzey, Mr.
David J. Vucina, Ms. Jan E. Gaulding and Mr. Mark A. Solls inadvertently
filed Form 4's, reporting the purchase of Common Stock under the Company's
Employee Stock Purchase Plan, late.
-3-
<PAGE>
ELECTION OF DIRECTORS
Five directors are to be elected at the Annual Meeting to serve until
the next Annual Meeting of Stockholders or until their successors are elected
and qualified.
Votes authorized by the enclosed proxy will be cast for the five persons
named below. If any of such persons are unavailable for election at the date
of the Annual Meeting, the stock represented by proxy will be voted for such
nominees as the Board of Directors shall designate. There is no family
relationship between or among any director, executive officer or person
nominated or chosen to become a director or executive officer of the Company.
Mark C. Masur, a director of the Company since 1984, has delivered his
resignation to the Board of Directors to be effective November 20, 1996. At
that time, the number of the Board of Directors will be reduced from six to
five members. Management at this time has no reason to believe that any of
the nominees will be unavailable for election.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED
BELOW.
Thomas V. Bruns, age 63, has been a director of the Company since May
1991. Mr. Bruns has been Chairman of the Board of Zaun Equipment Company, a
power equipment distributor company, since 1986.
Harvey B. Cash, age 57, has been a director of the Company since 1982.
Mr. Cash was Chairman of the Board of the Company from 1982 until March 1990.
Mr. Cash is currently general partner of Berry Cash Southwest Partnership, a
venture capital fund. Mr. Cash is Chairman of the Board of Cyrix
Corporation, a publicly held microprocessor company, and currently also
serves on the Boards of Directors of the following public companies: i2
Technologies, Inc., a provider of supply chain management software; Aurora
Electronics, Inc., a distributor of recycled integrated circuit boards and
computer components; Benchmarq Microelectronics, Inc., a developer of chips
and chipsets for portable electronic devices; AMX Corporation, a manufacturer
of remote control systems; and Heritage Media Corporation, an owner and
operator of radio and television stations.
Edward E. Jungerman, age 53, has been a director of the Company since
1992. Mr. Jungerman has been President of Impulse Telecommunications
Corporation, a strategic telecommunications consulting firm, since 1986. He
has over 25 years experience in the telecommunications field, including
senior executive positions at Northern Telecom, Inc. and private, start-up
ventures in the specialized advanced telecommunications services field.
Jackie R. Kimzey, age 43, is a founder of the Company and has been a
director of the Company since 1983. Mr. Kimzey has been Chairman of the
Board of the Company since March 1990 and Chief Executive Officer of the
Company since May 1983. Mr. Kimzey served as President of the Company from
May 1983 until May 1991.
David J. Vucina, age 42, joined the Company in August 1988 and has been
a director of the Company since 1994. Mr. Vucina served as Executive Vice
President of the Company and President and Chief Operating Officer of ProNet
Medical Communications, the Company's medical communications division until
May 1991, at which time he was elected President and Chief Operating Officer
of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
"FOR" THE PROPOSED DIRECTORS.
-4-
<PAGE>
RELATED TRANSACTIONS
Since March 1992, upon management's request, Impulse Telecommunications
Corporation ("Impulse") has provided consulting services in the area of
personal communications services to the Company. Mr. Jungerman is the
President of, and owns a controlling interest in, Impulse. During the last
fiscal year, the Company paid Impulse $28,300 for these consulting services,
an amount which management believes is fair and reasonable and as favorable
to the Company as could have been obtained from a wholly unrelated party.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held seven meetings in 1995. Each director
attended at least 75% of the aggregate of (i) the total number of meetings
held by the Board of Directors and (ii) the total number of meetings held by
all committees of the Board of Directors on which he served.
The Board of Directors has a Compensation Committee that in 1995
consisted of Messrs. Bruns, Cash, Jungerman, and Masur. The Compensation
Committee makes recommendations to the Board of Directors concerning
compensation policies and salaries of executive officers. The Compensation
Committee also administers the Company's 1995 Long-Term Incentive Plan, 1987
Stock Option Plan and the 1994 Employee Stock Purchase Plan. The
Compensation Committee met once during 1995.
The Board of Directors has an Audit Committee that in 1995 consisted of
Messrs. Cash and Masur. The Audit Committee consults with the Company's
independent auditors and with personnel from the Company's financial
department on corporate accounting and financial reporting matters. The
Audit Committee also makes recommendations to the Board of Directors
regarding the appointment of independent auditors to serve as auditors for
the Company. The Audit Committee met once in 1995.
The Board of Directors does not have a nominating committee.
The Company currently has a policy whereby each non-employee director
receives a $4,000 annual retainer and $1,000 for each Board meeting attended.
All directors of the Company are reimbursed for traveling costs and other
out-of-pocket expenses incurred in attending meetings of the Board of
Directors.
On May 22, 1991, the Company granted to Mr. Bruns, as a newly elected
non-employee director, an option to purchase 7,500 shares of Common Stock at
an exercise price equal to the closing price of the Common Stock as quoted on
the NASDAQ National Market System on May 22, 1991. On July 2, 1991, the
Company adopted a Non-Employee Director Stock Option Plan which provides for
a one-time grant of an option to purchase 7,500 shares of Common Stock of the
Company to each non-employee director of the Company who at the time of
adoption previously had not received a stock option grant (Messrs. Cash and
Masur), and to any subsequent outside director who is elected and begins
serving on the Company's Board of Directors on or before July 1, 2001 (Mr.
Jungerman). Options granted under this plan may be exercised after the
director has completed six months of service as a member of the Board after
the date on which the director was granted the option. The exercise price of
each option granted under this plan on the effective date of the plan (July
2, 1991) was the closing price of the Company's Common Stock as quoted on the
NASDAQ National Market System on such effective date, and the exercise price
of subsequently granted options is the closing price of the Company's Common
Stock as quoted on the NASDAQ National Market System as of the date the
grantee is elected to the Company's Board of Directors.
On May 25, 1995, the Company adopted the 1995 Long-Term Incentive Plan
which provides for automatic annual grants of non-qualified stock options to
purchase 2,500 shares of Common Stock to each non-employee director. The
exercise price of each director option will be the fair market value per
share of Common Stock (equal to the closing price of the Common Stock as
quoted on the NASDAQ National Market System) on the date of grant and such
options will vest equally over a period of three years from the date of grant.
-5-
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
NAME OFFICE CURRENTLY HELD
---- ---------------------
Jackie R. Kimzey................ Chairman of the Board, Chief
Executive Officer and Director
David J. Vucina................. President, Chief Operating Officer
and Director
Bo Bernard...................... Executive Vice President
Jan E. Gaulding................. Senior Vice President, Treasurer
and Chief Financial Officer
Jeffery A. Owens................ Senior Vice President and
Chief Technology Officer
Mark A. Solls................... Vice President, Secretary and
General Counsel
Mr. Kimzey is currently a director of the Company. See "Election of
Directors" above for additional information regarding Mr. Kimzey.
Mr. Vucina is currently a director of the Company. See "Election of
Directors" above for additional information regarding Mr. Vucina.
Mr. Bernard, age 50, is a founder of the Company. He served as Senior
Vice President of the Company from May 1983 until July 1991. In July 1991,
he was elected Executive Vice President of the Company. Mr. Bernard is
responsible for expansion programs for the Company.
Ms. Gaulding, age 42, joined the Company in March 1984 and served as
Vice President - Finance, Treasurer and Chief Financial Officer until January
1994 at which time she was elected Senior Vice President, Treasurer and Chief
Financial Officer of the Company. Ms. Gaulding served as Secretary of the
Company from February 1986 until December 1994. As Chief Financial Officer,
Ms. Gaulding has primary responsibility for the Company's financial,
treasury, accounting, human resources and information systems functions.
Mr. Owens, age 42, joined the Company in May 1984 as Vice President -
Engineering and served in that capacity until January 1996, at which time he
was elected Senior Vice President and Chief Technology Officer. Mr. Owens is
responsible for the Company's strategic technology and engineering functions.
Mr. Solls, age 40, joined the Company in December 1994 as Vice
President, Secretary and General Counsel. From February 1993 until joining
the Company, Mr. Solls engaged in the private practice of law. From November
1990 until February 1993, Mr. Solls served as Senior Vice President,
Secretary and General Counsel of Maxum Health Corp., a provider of medical
diagnostic services. From 1988 to 1990, he served as Associate General
Counsel for Republic Health Corporation (since renamed OrNda Health Corp.), a
hospital management company.
Officers are appointed by the Board of Directors and serve until their
respective successors are appointed and qualified by the Board of Directors.
-6-
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation of the Company's Chief Executive Officer and the Company's four
most highly compensated executive officers other than the Chief Executive
Officer (the "Named Executives"), as well as the total compensation earned by
each such individual for the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
LONG-TERM
COMPENSATION
ANNUAL AWARDS-- ALL OTHER
COMPENSATION OPTIONS (1) COMPENSATION
------------------- ------------ ------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (#) (2)
- --------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Jackie R. Kimzey.............. 1995 $208,000 $ 97,955 - $16,716
Chief Executive Officer 1994 191,435 92,736 70,000 15,708
1993 178,440 86,722 50,000 12,686
David J. Vucina............... 1995 $168,000 $101,722 - $12,737
President 1994 149,511 108,675 70,000 8,290
1993 138,276 106,520 50,000 6,143
Bo Bernard.................... 1995 $114,125 $ 51,803 - $ 5,222
Executive Vice President 1994 114,708 55,545 30,000 4,847
1993 108,000 40,594 15,000 3,937
Jan E. Gaulding............... 1995 $105,000 $ 35,320 - $ 4,126
Senior Vice President 1994 94,704 30,590 50,000 3,607
1993 87,900 23,484 10,000 3,248
Mark A. Solls................. 1995 $125,004 $ 33,250 20,000 $ 6,055
Vice President and General 1994 - - - -
Counsel 1993 - - - -
</TABLE>
- -----------------------
(1) Options to acquire shares of Common Stock.
(2) Amount represents premiums paid by the Company for compensatory split-
dollar life and disability insurance including the portion attributable
to term life insurance (less than $1,000 for each Named Executive) that is
taxable compensation to the Named Executive.
-7-
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes options to acquire shares of Common Stock
granted to the Named Executives during 1995.
<TABLE>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM (2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---- -------------- ------------ --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Jackie R. Kimzey..... -- -- -- -- -- --
David J. Vucina...... -- -- -- -- -- --
Bo Bernard........... -- -- -- -- -- --
Jan E. Gaulding...... -- -- -- -- -- --
Mark A. Solls........ 20,000 43% $14.25 1/3/2005 $179,200 $454,200
</TABLE>
- ----------------
(1) All options were granted pursuant to the 1987 Incentive Stock Option Plan.
The exercise price represents the fair market value of the Common Stock
on the date of grant. The options have a term of ten years and vest in 25%
cumulative annual increments over that period beginning with the first
anniversary date of the grant.
(2) The potential realizable value portion of the table illustrates the values
that might be realized upon exercise of the options immediately prior to
the expiration of their term, assuming the specified compounded rates of
appreciation in Common Stock over the term of the options. The price of
Common Stock at the end of the ten year term of the options would be $23.21
assuming five percent annual appreciation and would be $36.96 assuming
ten percent annual appreciation. These amounts represent assumed rates of
appreciation only. Actual gains, if any, on stock option exercises depend
on the future performance of the Common Stock and overall market
conditions. There can be no assurances that the potential values set forth
in this table reflect the actual values that may be obtained by any of the
Named Executives.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table summarizes options exercised during 1995 and
presents the value of unexercised options held by the Named Executives at
fiscal year-end.
<TABLE>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END (#) AT FISCAL YEAR-END (2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE (#) REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jackie R. Kimzey.... 96,168 $2,326,491 42,000 88,000 $ 884,000 $1,692,250
David J. Vucina..... 91,732 1,540,704 42,500 90,000 881,813 1,736,000
Bo Bernard.......... - - 58,000 34,500 1,327,250 660,563
Jan E. Gaulding..... 4,675 122,719 56,325 46,500 1,244,944 823,438
Mark A. Solls....... - - - 20,000 - 305,000
</TABLE>
- ----------------
(1) Value is calculated based on the remainder of the closing market price of
Common Stock on the date of the exercise minus the exercise price
multiplied by the number of shares to which the exercise relates.
(2) The last sales price of Common Stock as reported on the NASDAQ National
Market on December 29, 1995, the last trading day of 1995, was $29.50.
Value is calculated on the basis of the remainder of $29.50 minus the
exercise price multiplied by the number of shares of Common Stock
underlying the option.
-8-
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, the Compensation Committee was composed of Messrs. Bruns,
Cash, Jungerman and Masur. No member of the Compensation Committee is an
officer of the Company. Since March 1992, upon management's request, Impulse
has provided consulting services in the area of personal communications
technologies and services to the Company. Mr. Jungerman is the President of
and owns a controlling interest in Impulse. During the last fiscal year, the
Company paid Impulse approximately $28,300 for these consulting services.
COMPENSATION COMMITTEE REPORT
The Compensation Committee (the "Committee") of the Board of Directors
has provided the following report:
GENERAL
Executive compensation for 1995 was reflective of the accomplishments of
the executive management team in managing the Company's resources to further
implement the Company's growth strategy. Executive total compensation levels
were above initial compensation targets just as the Company's results of
operations exceeded the 1995 goals established in late 1994.
The investment community measures performance in the paging industry
through subscriber growth as well as financial measures. Because of the
capital intensive nature of the paging industry, the financial performance
measurement generally used by the investment community is earnings before
other income (expense), income taxes, depreciation and amortization
("EBITDA"). The Company's 1995 financial performance was the result of
further implementation of the Company's growth strategy as discussed below.
In early 1993, after several months of study, the Company announced its
plans to accelerate its growth through a program of acquiring smaller paging
businesses that serve the broader commercial paging marketplace. The Company
acquired four paging operations in 1994 and in 1995 increased its level of
acquisition and integration activities. In 1995, the Company completed the
acquisitions of nine paging operations for a total purchase price of
approximately $91 million. These transactions increased the Company's
subscriber base of over 353,800 at the end of 1994 by approximately 373,700
subscribers.
Throughout 1995, management concentrated on integrating the acquisitions
into its regional operating structure while maintaining its focus on EBITDA
margins and subscriber growth generated by its internal sales force. The
Company's EBITDA increased 56% from 1994 to 1995 while net revenues increased
72% during the same period. The 1995 EBITDA margin was 32% compared to an
industry average of approximately 27%.
The Company's internal subscriber growth rate was 36% compared to an
industry average of approximately 30%. The Company's internal sales force
generated 128,800 net new subscribers in 1995, increasing the total number of
paging subscribers (including acquired subscribers) to approximately 856,300
at the end of 1995, a total increase of 140% from that at the end of 1994.
As indicated in the enclosed Stock Performance Graph, the cumulative
total stockholder return (assuming reinvestment of dividends) to the
Company's stockholders shows a marked improvement from 1994. The index level
for the Company increased from $282.94 for 1994 to $575.60 for 1995, a 103%
increase compared to index levels for the Company's industry peer group of
$248.91 for 1994 to $310.47 for 1995, a 25% increase.
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<PAGE>
EXECUTIVE COMPENSATION POLICY
The Company's overall compensation philosophy is as follows:
- Attract and retain quality talent, which is critical to both the
short-term and long-term success of the Company.
- Reinforce strategic performance objectives through the use of both
annual and long-term incentive compensation programs.
- Create a mutuality of interest between executive officers and
stockholders through compensation structures that share the rewards
and risks of strategic decision-making.
- Encourage executives to achieve levels of ownership of stock in the
Company that will align the executives' interests with those of the
stockholders.
BASE COMPENSATION
The Committee annually examines market compensation levels and trends
observed in the labor market. For its purposes, the Committee has defined the
labor market as the pool of executives who are currently employed in similar
positions in public companies with similar sales, with special emphasis
placed on salaries paid by other companies in the paging industry. Market
information is used as a frame of reference for annual salary adjustments and
starting salaries. Salaries may also be adjusted for increased
responsibilities or improved performance.
The Committee makes salary decisions in a structured annual review with
input from the Chief Executive Officer ("CEO"). This annual review considers
the decision-making responsibilities of each position and the experience,
work performance and team-building skills of position incumbents. The
Committee places equal weight on work performance and team-building skills.
The average base salaries for the three executive officers (excluding Mr.
Solls, who joined the Company on December 31, 1994, and the CEO) which appear
in the summary compensation table increased 8% in 1995.
ANNUAL INCENTIVE COMPENSATION
Annual incentive levels for executive officers are determined by the
Committee and range from 20% to 45% of base salaries with maximum payout at
two times the stated percentage. The annual incentive level for the CEO is
35% and the average annual incentive level for the four executive officers
(excluding the CEO) which appear in the summary compensation table was 33% of
the related base salaries. These levels are intended to contribute to
management's dedication to achieve significant improvements in the Company's
long-term financial performance. Management believes that over time,
maximizing growth as evidenced by increased net revenues, EBITDA and
subscribers contributes to stockholder return through increased stock price.
All executive officers have annual incentives based on the two financial
measures. The equally weighted financial measures of net revenues and EBITDA
are set in November of the preceding fiscal year by the Committee with input
from the CEO.
The average annual incentive earned in 1995 by the four executive
officers (other than the CEO) which appear in the summary compensation table
was 43% of their base salaries. The increase in the incentive earned over the
annual incentive level of 33% is directly related to the improvement in
Company net revenues and EBITDA over the goals set by the Committee.
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<PAGE>
LONG-TERM INCENTIVE COMPENSATION
Long-term incentives for executive officers are provided through grants
of stock options under the Company's stock option plans. Stock options are
intended to attract, retain and motivate executive officers by providing them
with an equity participation in the Company, which further provides them with
an incentive to maximize stockholder value. Stock options are granted based
on competitive practice and position level, are priced at the prevailing
market value and will only have value if the Company's stock price increases.
The option program typically utilizes vesting periods of four and five years.
Further, all options shall vest automatically upon a change in control of the
Company.
CEO COMPENSATION
Mr. Kimzey's base salary increased in 1995 by 9% and his annual
incentive award was 47% of his base salary. The increase in the incentive
earned over the annual incentive level of 35% is directly related to the
improvement in Company net revenues and EBITDA over the goals set by the
Committee.
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
The CEO and President of the Company entered into three-year Employment
Agreements with the Company which expire on May 31, 1997. These agreements
specify the terms of employment, including the duties and certain
restrictions and the compensation and benefits of such executives. The
Employment Agreements state that if the executive's employment is terminated
by the Company without cause or by the executive for good reason (as defined
in the Employment Agreements) prior to a change in control of the Company,
the executive shall be paid a lump sum in cash equal to his full annual base
salary and his bonus paid in the prior fiscal year, as well as certain
benefits. If the executive's employment is terminated by the Company without
cause or by the executive for good reason after a change in control of the
Company, the executive shall be paid a lump sum in cash equal to two times
his annual base salary and his bonus paid for the prior fiscal year, as well
as certain benefits. The Company has also entered into Change In Control
Agreements with the remaining three named executive officers. The Change In
Control Agreements provide for a payment of a lump sum in cash equal to the
executive's annual base salary and bonus paid for the prior fiscal year (as
well as certain benefits), payable to such executive in the event of a
termination of employment without cause by the Company or by the executive
for good reason (as defined in the Change in Control Agreement) after a
change in control of the Company. The Employment Agreements and Change In
Control Agreements also provide that an executive whose employment has
terminated shall keep certain information confidential and shall not compete
with the Company or its subsidiaries for one year following termination of
employment.
SUMMARY
The Committee believes the executive compensation policies and programs
described in this report serve the interests of the stockholders and the
Company. Pay delivered to executives is intended to be linked to, and
commensurate with, Company performance and with stockholder expectations. We
will continue to monitor the effectiveness and appropriateness of each of the
components to reflect changes in the business environment.
Harvey B. Cash, Thomas V. Bruns, MEMBER
CHAIRMAN OF THE COMPENSATION COMMITTEE Edward E. Jungerman, MEMBER
Mark C. Masur, MEMBER
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<PAGE>
CORPORATE PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change
in the cumulative total stockholder return on the Common Stock, with the
cumulative total return of the NASDAQ Stock Market (U.S. Companies) Index and
an index of companies in the telecommunications industry consisting of A+
Network, Inc., American Paging, Arch Communications Group, Inc., Metrocall,
Inc., Mobile Telecommunications Technologies Corp., MobileMedia Corporation,
Paging Network, Inc. and Teletouch Communications, Inc. (collectively, the
"Peer Group") for the period beginning December 31, 1990, and ending December
31, 1995. The comparison assumes $100 was invested on December 31, 1990, in
Common Stock and in each of the foregoing indices and assumes reinvestment of
dividends.
[GRAPH]
LEGEND
INDEX DESCRIPTION 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
----------------- -------- -------- -------- -------- -------- --------
ProNet Inc................. 100 156.10 143.90 248.78 282.92 575.60
NASDAQ Stock Market
(U.S. Companies).......... 100 160.56 186.87 214.51 209.69 296.30
Peer Group................. 100 116.12 164.71 250.96 248.91 310.47
- -----------
(1) The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
(2) If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
(3) The index level for all series was set to 100.00 on December 31, 1990.
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<PAGE>
INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors
has selected Ernst & Young as the Company's independent auditor for the
fiscal year ending December 31, 1996. Ernst & Young has been the auditor of
the Company since the Company was founded in 1982. The Company anticipates
that representatives of Ernst & Young will be present at the Annual Meeting,
will have the opportunity to make a statement if they desire to do so, and
will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Should any stockholder desire to present a proposal at the 1997 Annual
Meeting of Stockholders, the proposal must be received by the Company at its
offices at 6340 LBJ Freeway, Dallas, Texas 75240 by not later than December
20, 1996.
OTHER MATTERS
The Board of Directors of the Company does not know of any other matters
to be brought before the Annual Meeting. However, if any other matters are
properly brought before the Annual Meeting by the Board of Directors or any
stockholder, the persons named in the accompanying proxy will have
discretionary authority to vote such proxy in accordance with their best
judgment on such matters.
By Order of the Board of Directors
MARK A. SOLLS
Secretary
Dated: October 18, 1996
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<PAGE>
PRONET INC.
6340 LBJ FREEWAY
DALLAS, TX 75240
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PRONET INC.
The undersigned appoints Jackie R. Kimzey and Mark A. Solls, or either
of them, as proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and to vote, as designated below,
all the shares of Common Stock of ProNet Inc. held of record by the
undersigned on October 3, 1996 at the Annual Meeting of Stockholders to be
held on November 20, 1996, or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDERS. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1. THE INDIVIDUALS NAMED ABOVE ARE AUTHORIZED TO
VOTE IN THEIR DISCRETION ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE
THE MEETING.
(CONTINUED ON REVERSE SIDE)
FOLD AND DETACH HERE
<PAGE>
<TABLE>
<S> <C> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
PLEASE MARK
YOUR VOTES AS /X/
INDICATED IN
THIS EXAMPLE
1. ELECTION OF DIRECTORS. NOMINEES: Thomas V. Bruns, Harvey B. Cash, Edward E. Jungerman,
Jackie R. Kimzey, David J. Vucina
FOR ALL NOMINEES WITHHOLD (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
LISTED TO THE RIGHT AUTHORITY NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.)
(EXCEPT AS MARKED TO THE TO VOTE FOR ALL NOMINEES
CONTRARY). LISTED TO THE RIGHT.
/ / / /
2. To transact such other business as may properly come before the meeting or any adjournment thereof.
Dated: ___________________________, 1996
________________________________________
SIGNATURE
________________________________________
SIGNATURE (if held jointly)
Please sign exactly as your name appears hereon.
When shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the
president or other authorized officer. If a partnership,
please sign in full partnership name by authorized person.
FOLD AND DETACH HERE
</TABLE>
