PREFERRED NETWORKS INC, DEF 14A, 1998-04-29

PREFERRED NETWORKS INC
DEF 14A, 1998-04-29
RADIOTELEPHONE COMMUNICATIONS

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<PAGE> 1

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

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:

<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>

PREFERRED NETWORKS, 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:
<PAGE> 2

PREFERRED NETWORKS, INC. (LOGO)

April 28, 1998

Dear Preferred Networks Owner:

You are cordially invited to attend the Annual Meeting of Stockholders to
be held on May 28, 1998, at 9:00 a.m., local time, at Preferred Networks, Inc.,
850 Center Way, Norcross, Georgia.

At the annual meeting, you will be asked to approve the 1995 Stock Option
Plan as amended, and to elect three directors for a three-year term and one
director for a one-year term. The accompanying proxy statement contains more
information describing these matters. Your Board of Directors recommends that
all stockholders vote in favor of these actions.

Your vote is important. Whether or not you plan to attend the annual
meeting in person and regardless of the number of shares you own, I urge you to
complete, sign and date the enclosed proxy card and return it in the enclosed
prepaid envelope as soon as possible. You may, of course, attend the annual
meeting and vote in person, even if you have previously returned your proxy
card.

We value your support as owners of our company, and we thank you in advance
for your participation.

Very truly yours,

/s/ MARK H. DUNAWAY
Mark H. Dunaway
Chairman of the Board
and Chief Executive Officer
<PAGE> 3

(Preferred Networks, Inc. logo)
850 CENTER WAY
NORCROSS, GEORGIA 30071
---------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 1998

You are cordially invited to attend the 1998 Annual Meeting of Stockholders
(the "Meeting") of Preferred Networks, Inc. (the "Company") to be held on May
28, 1998, at 9:00 a.m., local time, at 850 Center Way, Norcross, Georgia 30071,
for the following purposes:

1. To elect four members of the Board of Directors;

2. To consider and vote upon a proposal to approve the Company's 1995
Stock Option Plan as amended; and

3. To transact such other business as may properly come before the
Meeting.

Only stockholders of record at the close of business on March 27, 1998,
will be entitled to notice of, and to vote at, the Meeting or any adjournment of
the Meeting.

WHETHER OR NOT YOU EXPECT TO BE AT THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS, AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE. YOUR PROXY WILL BE VOTED WITH RESPECT TO THE
MATTERS IDENTIFIED THEREON IN ACCORDANCE WITH ANY SPECIFICATIONS ON THE PROXY.
If you plan to attend the Meeting and wish to vote your shares personally, you
may do so at any time before the Proxy is voted.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ MARK B. JONES
Mark B. Jones
Secretary

April 28, 1998
<PAGE> 4

PREFERRED NETWORKS, INC.
850 CENTER WAY
NORCROSS, GEORGIA 30071
---------------------

PROXY STATEMENT

FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 1998

This Proxy Statement is furnished to stockholders of Preferred Networks,
Inc. (the "Company") in connection with the solicitation of proxies for use at
the 1998 Annual Meeting of Stockholders of the Company to be held at the
Company's executive offices at 850 Center Way, Norcross, Georgia 30071, on
Thursday, May 28, 1998 at 9:00 a.m., local time, and at any and all adjournments
or postponements thereof (the "Meeting"), for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. The Company's Annual
Report to Stockholders for the year ended December 31, 1997 is being mailed with
this Proxy Statement. This Proxy Statement and the enclosed form of proxy were
first sent or given to stockholders on or about April 28, 1998.

This solicitation is made on behalf of the Board of Directors of the
Company. Directors, officers and employees of the Company and its affiliates may
also solicit proxies by telephone, telecopier, or personal interview but will
not receive additional compensation for the solicitation activities. The Company
will reimburse banks, brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy material
to beneficial owners. In addition, the Company has retained Georgeson & Co.,
Inc. to assist in the solicitation of proxies, at a fee of $5,000.

ACTIONS TO BE TAKEN UNDER THE PROXY

In voting on the election of directors [Proposal I], shareholders may vote
in favor of all nominees or withhold their votes as to some or all nominees,
except that only holders of Class A Redeemable Preferred Stock ("Class A
Preferred") may vote for one director and only holders of Class B Senior
Redeemable Preferred Stock ("Class B Preferred") may vote for one director, all
as more particularly set forth below. In voting on the proposal to approve the
1995 Stock Option Plan as amended [Proposal II], shareholders may vote FOR,
AGAINST or ABSTAIN with respect to the proposal. Unless other instructions are
indicated on the proxy card, all properly executed proxies received by the
Company will be voted FOR the election of all of the nominees for director set
forth below under "Election of Directors" and FOR Proposal II. Some proxies may
be broker non-votes (marked to indicate that the shares are not being voted on
any one or all proposals).

The election of directors will require the affirmative vote of a plurality
of the shares represented at the Meeting, in person or by proxy, and entitled to
vote thereon. Votes withheld and broker non-votes will not be included in vote
totals for director nominees and will have no effect on the outcome of the vote.
Approval of Proposal II (the approval of the amended 1995 Stock Option Plan as
amended) will require the affirmative vote of the holders of a majority of the
shares represented at the Meeting, in person or by proxy, and entitled to vote
for approval of Proposal II. Both abstentions and broker non-votes will have the
effect of a vote against Proposal II.

The presence, in person or by proxy, of at least a majority of the total
number of outstanding shares of stock that are entitled to vote at the Meeting
must be present in person, or by proxy, in order to have the quorum that is
necessary for the transaction of business at the Meeting. Any proxy authorized
to be voted at the Meeting on any matter (including on routine matters pursuant
to the discretionary authority granted in management's proxy) whether or not the
proxy is marked to "WITHHOLD AUTHORITY", to "ABSTAIN" or to effect a broker
non-vote on any proposal, will be counted in establishing a quorum.

Any stockholder giving a proxy may revoke it at any time before it is
exercised by giving written notice of revocation, or a duly executed proxy
bearing a later date, to the Secretary of the Company. In order to be

1
<PAGE> 5

effective, such notice or later dated proxy must be received by the Company
prior to the exercise of the earlier proxy. A stockholder may attend the
Meeting, revoke his proxy and vote in person.

STOCK OWNERSHIP

Only holders of record of shares of the no par value common stock ("Common
Stock"), Class A Preferred, and Class B Preferred as of the close of business on
the record date of March 27, 1998 ("Record Date") are entitled to receive notice
of, and to vote at, the Meeting. Each holder of record of the Common Stock is
entitled to one vote per share for every matter to be voted upon by the
stockholders at the Annual Meeting, other than the election of two of the four
directors. Each holder of record of the Class A Preferred and Class B Preferred
is entitled to one vote per share for every matter to be voted upon by the
stockholders at the Meeting, except that holders of the Class A Preferred,
voting as a separate class, are entitled to elect one director, and holders of
the Class B Preferred, voting as a separate class, are entitled to elect one
director. As of the Record Date, there were 16,295,028 shares of Common Stock
outstanding, 10,000,000 shares of Class A Preferred outstanding, and 5,333,336
shares of Class B Preferred outstanding.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 27, 1998, certain information
with respect to the beneficial ownership of shares of Common Stock, Class A
Preferred, and Class B Preferred of (i) all stockholders known by the Company to
be the beneficial owners of more than 5% of its outstanding Common Stock, Class
A Preferred, and Class B Preferred, as determined pursuant to Rule 13d-3 ("Rule
13d-3") promulgated by the Securities and Exchange Commission (the "SEC"), (ii)
each director of the Company and each Named Executive Officer (as defined
below), and (iii) all directors and executive officers as a group. The following
table is based in part on information provided in Schedule 13Ds and Schedule
13Gs furnished to the Company. Except as otherwise indicated, the holders listed
below have sole voting and investment power with respect to all shares
beneficially owned by them.

2
<PAGE> 6

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
------------------------------------------
ACQUIRABLE
NAME OF BENEFICIAL OWNER OR GROUP TITLE OF CURRENTLY WITHIN 60 PERCENTAGE
(AND ADDRESS OF 5% STOCKHOLDER) CLASS OWNED DAYS OF CLASS
--------------------------------- ------------------ --------- ---------- ----------
<S> <C> <C> <C> <C>
Jeffrey H. Schutz(8)....................... Common 1,057,502(5) 3,717,408 13.93%
Director Class A Preferred 3,133,333 -- 31.33%
Class B Preferred 112,667 -- 2.11%
Ronald W. White............................ Common 480,663(5)(9) 18,375 1.46%
Director
Robert F. Benbow(10)....................... Common 12,500(5) 3,712,500 10.86%
Director Class B Preferred 3,666,667 -- 68.75%
Richard P. Campbell(11).................... Common 1,055,002(5) 1,771,032 8.24%
Director Class A Preferred 1,200,000 -- 12.00%
Class B Preferred 386,205 -- 7.24%
Alta Communications VI, L.P.(12)........... Common -- 3,712,500 10.83%
One Post Office Square, Suite 3800 Class B Preferred 3,666,667 -- 68.75%
Boston, Massachusetts 02109
Centennial Fund IV, L.P.(13)............... Common 1,057,502(5) 3,717,408 13.93%
1428 Fifteenth Street Class A Preferred 3,133,333 -- 31.33%
Denver, Colorado 80202 Class B Preferred 112,667 -- 2.11%
Saugatuck Capital Company L.P. III(14)..... Common 1,042,502 1,771,032 8.21%
One Canterbury Green Class A Preferred 1,200,000 -- 12.00%
Stamford, Connecticut 06901 Class B Preferred 386,205 -- 7.24%
PNC Capital Corp.(15)...................... Common 416,997 1,460,118 5.47%
3150 CNG Tower Class A Preferred 1,133,333 -- 11.33%
625 Liberty Avenue Class B Preferred 154,849 -- 2.90%
Pittsburgh, Pennsylvania 15222
Primus Capital Fund III Limited(16)........ Common 521,250 1,499,159 5.89%
Partnership Class A Preferred 1,133,333 -- 11.33%
5900 Landerbrook Drive, Suite 200 Class B Preferred 193,408 -- 3.63%
Cleveland, Ohio 44124
Fleet Venture Resources, Inc.(17).......... Common 1,042,500 4,301,032 15.58%
50 Kennedy Plaza Class A Preferred 3,400,000 -- 34.00%
Providence, Rhode Island 02903 Class B Preferred 386,205 -- 7.24%
All executive officers and directors as a
group (13 persons)(18)................... Common 6,959,637 14,032,903(2) 61.23%
Class A Preferred 7,733,333 -- 77.33%
Class B Preferred 4,751,745 -- 89.10%
</TABLE>

- ---------------

* Less than one percent
(1) Includes 2,307,825 shares of Common Stock, 66,667 shares of Class B
Preferred and warrants to acquire 67,500 shares of Common Stock jointly
held with Marcia M. Dunaway, Mr. Dunaway's spouse.
(2) Includes shares subject to stock options granted pursuant to the Company's
stock option plans and, in the case of Mr. Dunaway, warrants to acquire
67,500 shares of Common Stock acquired in connection with his purchase of
Class B Preferred.
(3) Includes 53,726 shares of Common Stock held in the name of Saner
Communications, Inc., a corporation wholly-owned by Mr. Saner.
(4) Reflects 66,667 shares of Class B Preferred and warrants to acquire 67,500
shares of Common Stock owned by certain family members. Ms. Putnam
disclaims any beneficial ownership of the Class B Preferred and warrants to
acquire 67,500 shares of Common Stock held by family members. The total
shares acquirable within 60 days also includes warrants to acquire 4,772
shares of Common Stock with respect to which Ms. Putnam has a beneficial
interest and may be deemed to share voting and investment power.

3
<PAGE> 7

(5) Includes shares awarded pursuant to the Company's 1995 Non-Employee
Restricted Stock Award Plan, which are subject to restrictions on transfer
that lapse over five years.
(6) Includes 66,667 shares of Class B Preferred and warrants to acquire 67,500
shares of Common Stock jointly held with Sylvia Hurley, Mr. Hurley's
spouse.
(7) Includes 271,049 shares of Common Stock, 1,002,000 shares of Class A
Preferred, 115,861 shares of Class B Preferred, and warrants to acquire
1,269,610 shares of Common Stock held by Fleet Equity Partners VI, L.P.
("FEP"), 632,450 shares of Common Stock, 2,338,000 shares of Class A
Preferred, 270,344 shares of Class B Preferred, and warrants to acquire
2,962,422 shares of Common Stock held by Fleet Venture Resources, Inc.
("FVR"), and 139,001 shares of Common Stock, 60,000 shares of Class A
Preferred, and warrants to acquire 69,000 shares of Common Stock held by
Chisholm Partners II L.P. ("CPII"). Mr. Van Degna is Chairman and CEO of
Fleet Growth Resources II, Inc. and Chairman and CEO of Silverado IV Corp.,
the general partners of FEP and he is a limited partner of FEP. Mr. Van
Degna is Chairman and CEO of FVR, and he is Chairman and CEO of Silverado
II Corp., the general partner of Silverado II, L.P. which is the general
partner of CPII. Mr. Van Degna is also a limited partner of Silverado II,
L.P. As Chairman and CEO of Fleet Growth Resources II, Inc. and Chairman
and CEO of Silverado II Corp., Mr. Van Degna may be deemed to share voting
and investment power with respect to such shares. Mr. Van Degna disclaims
beneficial ownership of all shares of Common Stock, Class A Preferred,
Class B Preferred, and warrants to acquire shares of Common Stock which are
directly owned by FVR, and those shares of Common Stock, Class A Preferred,
Class B Preferred, and warrants to acquire shares of Common Stock which are
directly held by FEP and CPII, except for his pecuniary interest therein.
(8) Includes 1,042,502 shares of Common Stock, 3,133,333 shares of Class A
Preferred, 112,667 shares of Class B Preferred, and warrants to acquire
3,717,408 shares of Common Stock owned by Centennial Fund IV, L.P. ("CIV").
15,000 shares of Common Stock (which were granted pursuant to the Company's
1995 Non-Employee Restricted Stock Award Plan) are held by Mr. Schutz on
behalf of CIV. Mr. Schutz is a General Partner of Centennial Holdings IV,
L.P. ("Holdings"). Holdings is the sole general partner of CIV and in such
capacity has authority to make decisions regarding the voting and
disposition of shares of Common Stock, Class A Preferred, Class B Preferred
and warrants to acquire Common Stock owned by CIV. Holdings may, therefore,
be deemed to be the indirect beneficial owner of the shares reported by CIV
above, although it does not directly own any shares itself. Mr. Schutz is
one of five individual general partners of Holdings, each of whom disclaims
beneficial ownership of all shares of Common Stock, Class A Preferred,
Class B Preferred and warrants to acquire Common Stock directly or
indirectly owned by CIV, except to the extent of his indirect proportionate
interest in CIV.
(9) Includes 465,663 shares held by Advanced Technology Development Fund II,
L.P. ("ATDF"), an entity for which Mr. White serves as general partner.
Does not include 816,708 shares of Common Stock held by Transit
Communications U.S.A., L.P., a limited partnership in which ATDF owns an
approximate 70% limited partnership interest.
(10) Includes 3,585,060 shares of Class B Preferred and warrants to acquire
3,629,873 shares of Common Stock held by Alta Communications VI, L.P.
("ACVI"), and 81,607 shares of Class B Preferred and warrants to acquire
82,627 shares of Common Stock held by Alta Communications S by S, LLC
("ACS"). Mr. Benbow is a managing general partner of Alta Communications VI
Management Partners, L.P. ("ACMP"). ACMP is the sole general partner of
ACVI and in such capacity has authority to make decisions regarding the
voting and disposition of the Class B Preferred and warrants to acquire
Common Stock owned by ACVI. Mr. Benbow is a member of ACS. Mr. Benbow may
therefore be deemed to be the indirect beneficial owner of the warrants and
Class B Preferred reported by ACVI and ACS above. Mr. Benbow disclaims
beneficial ownership of all Class B Preferred and warrants to acquire
Common Stock held by ACS and ACVI, except for his pecuniary interest
therein.
(11) Includes 1,042,502 shares of Common Stock, 1,200,000 shares of Class A
Preferred, 386,205 shares of Class B Preferred, and warrants to acquire
1,771,032 shares of Common Stock held by Saugatuck Capital Company Limited
Partnership III ("Saugatuck"). Mr. Campbell is a general partner of
Greyrock Partners Limited Partnership ("Greyrock"). Greyrock is the sole
general partner of Saugatuck and may be deemed to share voting and
investment power with respect to said Common Stock,

4
<PAGE> 8
Class A Preferred, Class B Preferred and warrants to acquire Common Stock.
Mr. Campbell disclaims beneficial ownership of all shares of Common Stock,
Class A Preferred, Class B Preferred, and warrants to acquire Common Stock
held by Saugatuck, except to the extent of his indirect proportionate
interest in Saugatuck.
(12) Includes 3,585,060 shares of Class B Preferred and warrants to acquire
3,629,873 shares of Common Stock held by ACVI, and 81,607 shares of Class B
Preferred and warrants to acquire 82,627 shares of Common Stock held by
ACS. Beneficial ownership of shares and warrants held by ACVI may be deemed
to be indirectly held or shared by Alta Communications, Inc., ACMP, Robert
F. Benbow, William P. Egan, Brian McNeill and/or Timothy Dibble, who may be
deemed to be affiliates of ACVI and ACS.
(13) Includes 1,042,502 shares of Common Stock, 3,133,333 shares of Class A
Preferred, 112,667 shares of Class B Preferred and warrants to acquire
3,717,408 shares of Common Stock owned by CIV, and 15,000 shares of Common
Stock (which were granted pursuant to the Company's 1995 Non-Employee
Restricted Stock Award Plan) held by Mr. Schutz on behalf of CIV.
Beneficial ownership of shares and warrants held by CIV may be deemed to be
indirectly held or shared by Centennial Holdings IV, L.P., Steven C.
Halstedt, Jeffrey H. Schutz, Adam Goldman, Donald H. Parsons, Jr. and/or
David C. Hull, Jr., who may be deemed to be affiliates of CIV.
(14) Beneficial ownership of shares and warrants held by Saugatuck may be deemed
to be indirectly held or shared by Greyrock, Frank J. Hawley, Jr., Christy
S. Sadler, Owen S. Crihfield, Richard P. Campbell and/or Barbara E. Parker,
who may be deemed to be affiliates of Saugatuck.
(15) Beneficial ownership of shares and warrants held by PNC Capital Corp.
("PNC") may be deemed to be indirectly held or shared by PNC Holding Corp.
and/or PNC Bank Corp., which may be deemed to be affiliates of PNC.
(16) Beneficial ownership of shares and warrants held by Primus Capital Fund III
Limited Partnership ("Primus") may be deemed to be indirectly held or
shared by Primus Venture Partners III Limited Partnership and/or Primus
Venture Partners, Inc., which may be deemed to be affiliates of Primus.
(17) Includes 271,049 shares of Common Stock, 1,002,000 shares of Class A
Preferred, 115,861 shares of Class B Preferred and warrants to acquire
1,269,610 shares of Common Stock held by FEP, 632,450 shares of Common
Stock, 2,338,000 shares of Class A Preferred, 270,344 shares of Class B
Preferred and warrants to acquire 2,962,422 shares of Common Stock held by
FVR, and 139,001 shares of Common Stock, 60,000 shares of Class A Preferred
and warrants to acquire 69,000 shares of Common Stock held by CPII.
Beneficial ownership of shares and warrants held by FVR, FEP and CPII may
be deemed to be indirectly held or shared by Fleet Growth Resources II,
Inc., Silverado IV Corp., Fleet Growth Resources, Inc., Fleet Private
Equity Co., Fleet Financial Group, Inc., Silverado II, L.P., Silverado II
Corp., Robert Van Degna and/or Habib Y. Gorgi, who may be deemed to be
affiliates of FEP, FVR and CPII.
(18) Includes shares of Common Stock, Class A Preferred, Class B Preferred and
warrants to acquire Common Stock that may be deemed to be beneficially
owned by one officer and certain directors of the Company who have
disclaimed beneficial ownership. See Notes 4, 7, 8, 10 and 11.

PROPOSAL I

ELECTION OF DIRECTORS

The Company's Board of Directors currently consists of nine directors
divided into three classes, which shall be as nearly equal in number as possible
and which have staggered terms. Two directors, Messrs. Schutz and Van Degna, are
in the class the term of which expires in 1998. Two directors, Messrs. Benbow
and Campbell, were appointed by the Board in March 1998, to fill vacancies
created when the Board was expanded from seven to nine, and as a result their
terms also expire in 1998. In general, directors are elected by the stockholders
and hold office for a three-year term or until their successors are duly elected
and qualified.

The nominees of the Board of Directors for election at the Meeting are
Jeffrey H. Schutz, Robert Van Degna, Robert F. Benbow, and Richard P. Campbell,
each of whom currently serves as a director of the Company. If reelected at the
Meeting, each of Messrs. Schutz, Van Degna, and Benbow will serve a new term
5
<PAGE> 9

to end as of the 2001 Annual Meeting of Stockholders, or until his earlier
death, resignation or removal, and Mr. Campbell will serve a new term to end as
of the 1999 Annual Meeting of Stockholders or until his earlier death,
resignation or removal. Although it is anticipated that each nominee will be
able to serve as a director, should any nominee become unavailable to serve, the
shares represented by the proxies will be voted for another person or persons
designated by the Company's Board of Directors. In no event will the proxies be
voted for more than four nominees.

Pursuant to the Company's Articles of Incorporation, holders of the Class A
Preferred, voting as a separate class, are entitled to elect one director, and
holders of the Class B Preferred, voting as a separate class, are entitled to
elect one director. Holders of the Class A Preferred have nominated Mr. Campbell
as a director and holders of the Class B Preferred have nominated Mr. Benbow as
a director.

INFORMATION REGARDING NOMINEES AND CONTINUING DIRECTORS

Set forth below is certain information regarding each of the four nominees
and the directors of the Company who will continue to serve after the Meeting:

NOMINEES FOR THREE-YEAR TERMS:

<TABLE>
<CAPTION>
TERM
NAME TITLE ENDS AGE
- ---- ----- ---- ---
<S> <C> <C> <C>
Jeffrey H. Schutz........................................... Director 1998 46
Robert Van Degna............................................ Director 1998 53
Robert F. Benbow............................................ Director 1998 62
</TABLE>

JEFFREY H. SCHUTZ has been a director of the Company since June 1995. Since
1987, Mr. Schutz has been a general partner of various entities affiliated with
The Centennial Funds, a group of venture capital funds based in Denver,
Colorado. The Centennial Funds specialize in investments in telecommunications
networks and service businesses, and other communications technology companies.
Mr. Schutz currently serves as a director of Crown Castle International, a
Centennial portfolio company, and several other privately-held companies in
which Centennial has an equity stake.

ROBERT M. VAN DEGNA has been a director of the Company since June 1995.
Since 1982, Mr. Van Degna has been a Managing Director and an executive officer
with various partnerships and corporations affiliated with Fleet Private Equity
Co., an investment firm affiliated with Fleet Financial Group, based in
Providence, Rhode Island. Mr. Van Degna currently serves as a director of
several privately-held companies.

ROBERT F. BENBOW has been a director of the Company since March 1998. Since
1990, Mr. Benbow has served as a general partner of certain funds managed by
Burr, Egan, Deleage & Company. In addition, Mr. Benbow is one of the managing
general partners of Alta Communications VI Management Partners, L.P., the sole
general partner of Alta Communications, VI, L.P. Mr. Benbow serves as a director
of several privately-held companies.

NOMINEE FOR ONE-YEAR TERM:

<TABLE>
<CAPTION>
TERM
NAME TITLE ENDS AGE
- ---- ----- ---- ---
<S> <C> <C> <C>
Richard P. Campbell......................................... Director 1999 54
</TABLE>

RICHARD P. CAMPBELL has been a director of the Company since March 1998.
Since 1989, Mr. Campbell has been a general partner and is currently the
Managing Director of Saugatuck Capital Company which invests in the acquisition
of middle market operating companies. Mr. Campbell serves as a director of
several privately-held companies.

6
<PAGE> 10

CONTINUING DIRECTORS:

<TABLE>
<CAPTION>
TERM
NAME TITLE ENDS AGE
- ---- ----- ---- ---
<S> <C> <C> <C>
Mark H. Dunaway.......................... Chairman of the Board of Directors 1999 53
Michael J. Saner......................... President and Director 1999 56
William H. Bang.......................... Director 2000 68
John J. Hurley........................... Director 2000 62
Ronald W. White.......................... Director 2000 57
</TABLE>

MARK H. DUNAWAY, a founder of the Company, has been Chairman of the Board
of Directors and Chief Executive Officer of the Company since 1991. From 1986 to
1994, he served as the Chairman and Chief Executive Officer of The Beeper
Company of America, Inc., a company he founded. The Beeper Company of America,
Inc. provided paging services to more than 60,000 subscribers before it was sold
in 1994 to Arch Communications Group, Inc. In 1987, Mr. Dunaway founded Dunaway
Enterprises, Inc., a consulting company which supplied management consulting
services to British Telecom's paging operations in the United Kingdom and other
companies, and he served as its Chief Executive Officer and Chairman from 1987
to 1994. Mr. Dunaway has served on a number of committees for Personal
Communications Industry Association ("PCIA").

MICHAEL J. SANER, a founder of the Company, has been President and a
director of the Company since 1991. From 1991 to 1993, Mr. Saner served as
President of Paging Services, Inc., a paging-related repair, maintenance,
installation and sales company he founded and which the Company acquired in
1996. From 1984 to 1990, Mr. Saner served as President of Message World, Inc., a
voice mail and paging company he founded, with offices in Atlanta, Baltimore,
Houston, and Washington, D.C. In 1990 Mr. Saner acquired the operating assets of
Message World, Inc. and until 1997 served as President of this business, which
operated as Saner Communications, Inc. From 1992 to 1993, Mr. Saner served as a
member of the Board of Directors of the Association of Telemessaging Services
International.

WILLIAM H. BANG has been a director of the Company since August 1995. In
April 1994, Mr. Bang retired from the position of Corporate Vice President at
Motorola, Inc., a leading manufacturer of equipment for the wireless industry.
Mr. Bang was employed by Motorola from 1964 to 1994 and held a variety of
positions with respect to the marketing of Motorola's radio and paging products.
Mr. Bang serves as a consultant to Motorola from time to time and serves as a
member of the Board of Directors of the PCIA Service and Education Foundation.

JOHN J. HURLEY has been a director of the Company since July 1996. Since
1994, Mr. Hurley has been Vice Chairman and a member of the Board of Directors
of Glenayre Technologies, Inc., a leading manufacturer of network equipment for
the wireless industry. From November 1992 to December 1994, he served as
President, Chief Operating Officer, and Chief Executive Officer of Glenayre
Technologies, Inc. Mr. Hurley received the Management Award for Innovation and
Excellence from the PCIA convention in 1995.

RONALD W. WHITE has been a director of the Company since October 1994.
Since 1997, Mr White has been Vice President of Argo Global Capital, Inc. and
continues to serve as a General Partner of certain entities affiliated with
Advanced Technology Development Funds, a family of high technology development
funds. Mr. White also serves as a director of National MicroSystems Corporation
and several privately-held companies.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors met nine times in 1997, and each director attended
at least 75% of such meetings. During 1997, each director also attended at least
75% of the meetings of each committee of the Board upon which such director
served.

The Board of Directors has standing compensation and audit committees. The
Board of Directors does not have a nominating committee.

7
<PAGE> 11

The compensation committee (the "Compensation Committee"), composed of Mr.
Bang and Mr. Van Degna, met six times in 1997. The Compensation Committee
reviews and recommends executive compensation policies, practices and amounts,
and it administers the Company's employee stock plans, including the granting of
stock options pursuant to the Company's stock option plans.

The audit committee, composed of Mr. Schutz and Mr. White, met two times in
1997. The audit committee's functions are to recommend the Company's independent
auditors, review the scope of their engagement, consult with such auditors,
review the results of the audit examination, review the disposition of
recommendations made by the independent auditors, act as liaison between the
Board of Directors and the independent auditors, and review various Company
policies related to accounting and internal control matters.

ELECTION OF DIRECTORS

Election of the Messrs. Schutz and Van Degna will require the affirmative
vote of a plurality of the shares represented at the Meeting, in person or by
proxy, and entitled to vote thereon, assuming a quorum is present. The election
of Mr. Campbell will require the affirmative vote of a plurality of the shares
of Class A Preferred represented at the Meeting in person or by proxy, and
entitled to vote thereon, assuming a quorum is present. The election of Mr.
Benbow will require the affirmative vote of a plurality of the shares of Class B
Preferred represented at the Meeting in person or by proxy, and entitled to vote
thereon assuming a quorum is present. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE "FOR" THE ELECTION OF THE FOUR NOMINEES NAMED ABOVE.

PROPOSAL II

APPROVAL OF 1995 STOCK OPTION PLAN, AS AMENDED

On March 26, 1998, the Board of Directors voted to amend the Company's 1995
Stock Option Plan (the "Stock Option Plan") subject to shareholder approval, to
increase the number of shares of Common Stock which may be issued pursuant to
stock options or stock appreciation rights (together "Stock Incentives") granted
under the Stock Option Plan from 2,374,450 to 3,374,450, and (b) to increase the
number of shares which may be subject to Stock Incentives granted during any
calendar year to any participant from 50,000 shares to 200,000 shares of Common
Stock. The shareholders are being asked to approve these amendments to the Stock
Option Plan.

The Stock Option Plan, originally adopted by the Board of Directors and
approved by the Company's stockholders in 1995, is designed to aid the Company
in attracting and retaining highly qualified executives and other key employees
by providing them with stock options and stock appreciation rights ("SARs"). The
summary of the principal terms of the Stock Option Plan that follows is subject
to the specific provisions of the Stock Option Plan, as amended, a copy of which
is attached as Exhibit "A" hereto.

ELIGIBILITY FOR PARTICIPATION

Employees and consultants of the Company and its future parent or
subsidiaries, if any, are eligible to participate in the Stock Option Plan. The
Board or the Compensation Committee of the Board has full responsibility for
determining the employees and consultants to whom stock options or SARs will be
granted. In making such determinations, the Board or the Compensation Committee
will take into account the nature of the services rendered by the respective
employees and consultants, their present and potential contributions to the
Company and any other factors it deems relevant. Approximately 300 employees are
currently eligible to participate in the Stock Option Plan.

SECURITIES UNDERLYING THE OPTIONS

Subject to shareholder approval, up to 3,374,450 shares of Common Stock may
be issued pursuant to Stock Incentives granted under the Stock Option Plan, and
during any one calendar year no participant may be granted any Stock Incentives
that relate to more than 200,000 shares of Common Stock.

8
<PAGE> 12

STOCK OPTIONS

Options granted under the Stock Option Plan may be "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), or stock options not qualifying as incentive stock
options ("non-qualified stock options"). In the case of incentive stock options,
the aggregate fair market value (determined as of the time an incentive stock
option is granted) of Common Stock with respect to which incentive stock options
are exercisable for the first time by an individual during any calendar year
under all plans of the Company and its parent or subsidiaries cannot exceed
$100,000. To the extent the aggregate fair market value exceeds $100,000, such
options shall be treated as non-qualified options. The option price per share of
an incentive stock option may not be less than the fair market value of a share
of Common Stock as of the date such option is granted. Any incentive stock
option granted to any person who, at the time such option is granted, owns (as
defined in Sections 422 and 424 of the Code) Common Stock possessing more than
10% of the total combined voting power of all classes of stock of the Company or
its parent (if any) or one of its subsidiary corporations (if any) shall have an
exercise price of at least 110% of the fair market value of a share of Common
Stock on the date such option is granted. The option price per share of a
non-qualified stock option may not be less than 50% of the fair market value of
a share of Common Stock as of the date such option is granted. Payment for
shares purchased pursuant to options must be made in cash or check or, if the
option agreement so provides, by delivery of shares of Common Stock having a
market value equal to the exercise price of the option.

Options become exercisable at the times and subject to the conditions
prescribed by the Board or the Compensation Committee and set forth in a
particular option agreement, but generally no options may be exercised during
the first six months following the date of grant. This general rule is subject
to the following exceptions: (1) different exercise terms may be prescribed in
substitute options that replace options previously granted by an acquired
company, (2) upon a Corporate Transaction (as defined in the Stock Option Plan
and described below) the vesting schedule of an option will accelerate so that
it will become freely exercisable, and (3) following the grant of an option, the
Board or the Compensation Committee, in its discretion, may accelerate the
exercisability of the option in whole or in part prior to termination of the
option. Options granted under the Stock Option Plan to employees must be
exercised while the option holder is an employee of the Company or one of its
subsidiaries, except that, unless the option agreement otherwise provides,
options may be exercised within one year after the holder's death or disability
and within three months after termination of employment for other reasons. An
option may be terminated immediately if an option holder's employment is
terminated for cause. Options are nontransferable except by will or the laws of
descent and distribution and are exercisable during the holder's lifetime only
by the holder or thereafter by the holder's legatee or personal representative.
The term of each incentive stock option may not exceed ten years. The Stock
Option Plan authorizes the transfer of Common Stock to a broker upon delivery by
the broker to the Company of the applicable option price for the Common Stock.

Any option issued pursuant to the Stock Option Plan in connection with
certain acquisitions in substitution for an option previously issued by the
acquired entity may contain an exercise price and such other terms and
conditions as the Board or Compensation Committee may prescribe to cause the
substitute option to contain terms and conditions comparable to those contained
in the previously issued option being replaced.

SARS

SARs may be granted at the discretion of the Board or the Compensation
Committee in connection with all or any portion of a stock option, or not in
connection with a stock option. A SAR entitles the recipient to receive the
difference between (a) the fair market value of a specified number of shares at
a certain time and (b)(1) the exercise price of a stock option if the SAR was
granted in connection with that option, or (2) if not granted in connection with
a stock option, a price that is not less than 50% of the fair market value of
the Common Stock at the time the SAR was granted.

SARs become exercisable at the times and subject to the conditions
prescribed by the Board or the Compensation Committee, provided that no SAR
shall be exercisable in whole or in part during the first six months of its term
and no SAR shall have a term of less than one year or more than ten years.
Following the

9
<PAGE> 13

grant of a SAR, the Board or the Compensation Committee, in its discretion, may
accelerate the exercisability of the SAR in whole or in part prior to the
termination of the SAR. Upon a Corporate Transaction, the vesting schedule of a
SAR will accelerate so that it will become freely exercisable. Generally SARs
held by employees are only exercisable during the employee's employment by the
Company (or one of its subsidiaries) or within 30 days following the termination
of such employment, except that if an employee's employment is terminated for
cause, the Board or the Compensation Committee may terminate his SAR
immediately. Upon exercise of a SAR, payment may be made in cash or Common Stock
(at fair market value on the date of exercise), as provided in the particular
SAR agreement or at the discretion of the Board or the Compensation Committee.

FEDERAL INCOME TAX CONSEQUENCES

The Stock Option Plan is not qualified under Section 401(a) of the Code,
which applies only to certain qualified pension, profit-sharing and stock bonus
plans. Under present law, the following is a brief summary of the primary
federal tax consequences generally arising with respect to stock options or SARs
granted under the Stock Option Plan.

The grant of an option will create no tax consequences for an optionee or
the Company. The optionee will have no taxable income upon exercising an
incentive stock option (except that the alternative minimum tax may apply), and
the Company will receive no deduction when an incentive stock option is
exercised. Upon exercising a non-qualified stock option, the optionee must
recognize ordinary income equal to the difference between the exercise price and
the fair market value of the stock on the date of exercise; the Company will be
entitled to a deduction for the same amount. Different tax rules apply to the
exercise of a non-qualified stock option by optionees who are subject to Section
16 of the Securities Exchange Act of 1934 (the "Exchange Act"). The treatment to
an optionee of a disposition of shares acquired through the exercise of an
option depends on how long the shares have been held and on whether such shares
were acquired by exercising an incentive stock option or a non-qualified stock
option. Generally, there will be no tax consequence to the Company in connection
with a disposition of shares acquired under an option except that the Company
may be entitled to a deduction in the case of a disposition of shares acquired
under an incentive stock option before the applicable holding period has been
satisfied.

A participant is not taxed upon the grant of a SAR. Upon exercise of a SAR,
the participant will be taxed at the ordinary income tax rates (subject to
withholding) in the amount of cash received, and the Company will be entitled to
a corresponding deduction.

OTHER PROVISIONS

Upon an issuance or transfer of shares of Common Stock pursuant to the
settlement of a Stock Incentive, the Company has the right to require the
recipient to remit to the Company, prior to the delivery of any certificates,
any withholding tax requirements for such shares. The recipient of a
non-qualified stock option may elect to surrender or authorize the Company to
withhold shares of Common Stock in satisfaction of his estimated withholding tax
obligations, subject to certain procedures and conditions.

In the event of any change in the capitalization of the Company by reason
of a dividend, stock split or combination or any similar change or a merger,
consolidation, recapitalization, reclassification of shares or similar
reorganization, the Stock Option Plan provides that the Board or the
Compensation Committee can make certain adjustments in the number and type of
shares with respect to which any current or future Stock Incentives may be
exercised. In the event of a dissolution or liquidation of the Company or a
merger or consolidation in which the Company is not the surviving corporation,
each Stock Incentive shall terminate except to the extent another corporation
assumes the Stock Incentive or substitutes another Stock Incentive for it.

Stock Incentives granted pursuant to the Stock Option Plan will
automatically become fully exercisable upon certain transactions (each a
"Corporate Transaction") that might result in a change in control of the
Company. The Corporate Transactions that will trigger such acceleration include
a merger or consolidation, share exchange (in which 95% or more of the Company
stock is exchanged for the stock of another company), or the sale of all or
substantially all of the Company's assets, unless persons who are security
holders of the
10
<PAGE> 14

Company before the Corporate Transaction are holders of more than 50% of the
outstanding voting common stock (or equivalent interests) of the surviving or
acquiring company after the Corporate Transaction. In addition, the Board or the
Compensation Committee has the discretion to accelerate the vesting schedules of
both stock options and SARs at any time subsequent to their grant.

The Board of Directors or the stockholders may amend, modify or terminate
the Stock Option Plan at any such time, provided that any amendment,
modification or termination without stockholder approval (a) shall not adversely
affect the rights of a Stock Incentive holder without his or her consent (except
that the Board or the Compensation Committee may terminate a Stock Incentive if
the holder is terminated for cause), and (b) shall not be effective if
stockholder approval is required in order for the Stock Option Plan to continue
to meet the requirements of SEC Rule 16b-3 or any successor rule, if applicable,
or any other legal or regulatory requirements, unless such stockholder approval
is received.

The following table sets forth the number of shares subject to options that
have been granted under the Stock Option Plan since its adoption and through
March 31, 1998. No SARs have been granted pursuant to the Stock Option Plan.

1995 STOCK OPTION PLAN

<TABLE>
<CAPTION>
NUMBER
NAME AND POSITION DOLLAR VALUE(1) OF SHARES(2)
- ----------------- --------------- ------------
<S> <C> <C>
Mark H. Dunaway............................................. -- 132,900
Chairman of the Board and Chief Executive Officer
Michael J. Saner............................................ -- 132,900
President and Director
Kathryn Loev Putnam......................................... -- 160,000
Senior Vice President and Chief Financial Officer
Eugene H. Kreeft............................................ 132,900
Executive Vice President of Engineering
Gary E. Park................................................ -- 110,000
Vice President of Sales
All executive officers as a group........................... -- 728,275
All non-executive officer directors as a group.............. -- --
All non-executive officer employees as a group.............. -- 1,037,967
</TABLE>

- ---------------

(1) In each case, the exercise price was greater than the market price as of
March 31, 1998.
(2) Based on the number of shares of Common Stock subject to options under the
Stock Option Plan.

No nominee for Director or associate of any nominee for Director or
executive officer has received any options under the Stock Option Plan and no
person, other than those identified elsewhere herein, has received five percent
or more of the options granted under the Stock Option Plan.

At April 24, 1998, the closing market price of Common Stock on the Nasdaq
Stock Market National Market was $1.8125 per share.

STOCKHOLDER APPROVAL OF THE 1995 STOCK OPTION PLAN AS AMENDED

Approval of the 1995 Stock Option Plan as amended will require the
affirmative vote of the holders of a majority of the Company's shares
represented in person or by proxy at the meeting and entitled to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE 1995 STOCK
OPTION PLAN AS AMENDED.

11
<PAGE> 15

COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION

Effective July 1995, the Board of Directors established the Compensation
Committee, now composed of Mr. Van Degna and Mr. Bang. Prior to that time, the
Board of Directors as a whole, including Mr. Dunaway, the Chief Executive
Officer, and Mr. Saner, the President, participated in determining executive
officer compensation. In 1997 and 1998, entities that may be deemed to be
affiliated with Robert Van Degna, a director of the Company and member of the
Compensation Committee, purchased Class A Preferred, Class B Preferred and
warrants to purchase Common Stock from the Company. See "Certain Transactions."

EXECUTIVE COMPENSATION

COMPENSATION SUMMARY

The following table shows annual compensation paid by the Company in each
of the past three fiscal years to Mark H. Dunaway, the Chief Executive Officer,
and to the four other most highly compensated executive officers of the Company
(collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
ANNUAL COMPENSATION ------------
--------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND COMPENSATION OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1) (#)(2) ($)(3)
------------------ ---- ---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Mark H. Dunaway.............. 1997 190,377 28,125 4,800 22,350 950
Chairman of the Board and 1996 225,000 -- 4,800 -- 950
Chief Executive Officer 1995 190,745 -- 4,800 7,350 --
Michael J. Saner............. 1997 151,046 22,500 4,800 22,350 950
President and Director 1996 180,000 -- 4,800 -- 950
1995 153,550 -- 4,800 7,350 --
Kathryn Loev Putnam(4)....... 1997 95,004 40,000 4,800 60,000 950
Senior Vice President and 1996 61,875 37,625 3,600 -- 563
Chief Financial Officer
Eugene H. Kreeft............. 1997 150,000 30,000 -- 22,350 --
Executive Vice President 1996 150,000 -- -- -- --
of Engineering 1995 135,000 -- -- 7,350 --
Gary E. Park(5).............. 1997 117,500 37,961 4,800 50,000 825
Vice President of Sales 1996 20,433 -- 800 -- --
</TABLE>

- ---------------

(1) Reflects car allowances paid to these employees.
(2) Includes options granted pursuant to the Company's 1992 Stock Option Plan,
1994 Stock Option Plan and 1995 Stock Option Plan.
(3) Reflects the Company's matching contributions to the 401(k) plan: Mr.
Dunaway, Mr. Saner, and Ms. Putnam are 66 2/3% vested; Mr. Park is 33 1/3%
vested.
(4) Ms. Putnam became an employee of the Company in April 1996. Prior to her
assuming the position of Senior Vice President and Chief Financial Officer
in July 1997, Ms. Putnam was Vice President of Corporate Development.
(5) Mr. Park became an employee of the Company in November 1996.

12
<PAGE> 16

OPTION REPRICING

On April 7, 1997, the Board and the Compensation Committee approved a plan
to reprice certain options to purchase the Company's Common Stock granted to
employees pursuant to the 1995 Stock Option Plan. The stock options were
repriced effective April 18, 1997, at a price of $2.50, the closing market price
on that date. In connection with the repricing, the vesting periods were amended
to provide for vesting in the amount of one third per year beginning one year
from the date of the grant. The following table provides details regarding the
effect of the option repricing on the Named Executive Officers.

TEN-YEAR OPTION REPRICING

<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL
SECURITIES OPTION TERM
UNDERLYING MARKET PRICE OF EXERCISE PRICE REMAINING AT
OPTIONS STOCK AT TIME OF AT TIME OF NEW DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISES REPRICING OR
NAME DATE AMENDED AMENDMENT ($) AMENDMENT ($) PRICE ($) AMENDMENT
- ---- ------- ----------- ---------------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Mark H. Dunaway............... 4/18/97 7,350 2.50 10.61 2.50 8.63 yrs
Chairman of the Board and
Chief Executive Officer
Michael J. Saner.............. 4/18/97 7,350 2.50 10.61 2.50 8.63 yrs
President and Director
Kathryn Loev Putnam........... 4/18/97 50,000 2.50 6.50 - 9.25 2.50 8.95 - 9.8 yrs
Senior Vice President and
Chief Financial Officer
Eugene H. Kreeft.............. 4/18/97 7,350 2.50 10.61 2.50 8.63 yrs
Executive Vice President of
Engineering
Gary E. Park.................. 4/18/97 50,000 2.50 6.75 2.50 9.54 yrs
Vice President of Sales
</TABLE>

OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following table provides details regarding stock options granted (no
SARs were granted) to the Named Executive Officers during 1997 pursuant to the
1995 Stock Option Plan, as amended:

<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR POTENTIAL REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL RATES
-------------------------------------------------- OF STOCK PRICE
NUMBER OF % OF TOTAL APPRECIATION
SECURITIES OPTIONS GRANTED TO EXERCISE FOR OPTION TERM(2)
UNDERLINING EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME OPTIONS GRANTED FISCAL YEAR ($/SHARES) DATE 5% ($) 10% ($)
- ---- --------------- ------------------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mark H. Dunaway.......... 7,350(1) .54 2.50 4/18/07 11,555.94 29,285.02
15,000 1.10 2.25 7/24/07 21,225.19 53,788.81
Michael J. Saner ........ 7,350(1) .54 2.50 4/18/07 11,555.94 29,285.02
15,000 1.10 2.25 7/24/07 21,225.19 53,788.81
Kathryn Loev Putnam...... 50,000(1) 3.66 2.50 4/18/07 78,611.83 199,217.81
10,000 .73 2.25 7/24/07 14,150.13 35,859.21
Eugene H. Kreeft ........ 7,350(1) .54 2.50 4/18/07 11,555.94 29,285.02
15,000 1.10 2.25 7/24/07 21,225.19 53,788.81
Gary E. Park............. 50,000(1) 3.66 2.50 4/18/07 78,611.83 199,217.81
</TABLE>

- ---------------

(1) Reflects the cancellation and reissuance of stock option grants pursuant to
the 1995 Stock Option Plan in prior fiscal years at an exercise price of
$2.50 based on the closing price of the Company's common stock as of April
18, 1997. See "Option Repricing."
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any on stock option exercises are dependant on future performance
of the Common Stock and overall market conditions. The amounts set forth in
the table may not necessarily be achieved.

13
<PAGE> 17

EXERCISES OF OPTIONS IN 1997 AND AGGREGATE YEAR-END OPTION VALUES

The following table sets forth information with respect to the December 31,
1997 value of all options held by the Named Executive Officers at that date. No
Named Executive Officer exercised any options in 1997.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY -- END OPTION/SAR VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL AT FISCAL
SHARES YEAR-END (#) YEAR-END ($)(1)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- -------------- ------------- --------------------- ----------------
<S> <C> <C> <C> <C>
Mark H. Dunaway..................... N/A N/A 53,846/56,704 5,457.82/0
Michael J. Saner.................... N/A N/A 60,343/50,207 9,036.36/0
Kathryn Loev Putnam ................ N/A N/A 0/60,000 0/0
Eugene H. Kreeft.................... N/A N/A 60,343/50,207 9,096.36/0
Gary E. Park........................ N/A N/A 0/50,000 0/0
</TABLE>

- ---------------

(1) Assumes, for all unexercised in-the-money options, the difference between
fair market value and the exercise price.

EMPLOYMENT AGREEMENTS

The Company currently has an employment agreement with Mr. Dunaway, which
provides for his employment as Chief Executive Officer of the Company for a
period of three years, ending in June 1998, and on a month-to-month basis
thereafter. Mr. Dunaway's employment agreement provided initially for an annual
base salary of $18,750 per month but this was increased in 1997 to $20,168 per
month. Of this amount, $6,050.40 per month was accrued for the months of April
through December 1997, and paid in 1998. The employment agreement prohibits Mr.
Dunaway from competing against the Company during its term and for a period of
one year thereafter in certain specified geographical areas. In addition, Mr.
Dunaway is prohibited from providing paging services to customers of the Company
for a six-month period after the termination of his employment. The employment
agreement may be terminated by mutual agreement, voluntarily by Mr. Dunaway upon
365 days' prior written notice, for cause or upon the death or disability of Mr.
Dunaway. Depending upon the manner in which the employment agreement is
terminated, Mr. Dunaway or his heirs are entitled to different levels of
compensation upon termination, subject to a maximum amount equal to 18 months
compensation.

The Company has an employment agreement with Mr. Saner which provides for
his employment as President of the Company for a period of three years, ending
in July 1998. Mr. Saner's employment agreement provided initially for an annual
base salary of $15,000 per month but this was increased to $16,125 per month in
1997. Of this amount, $4,837.50 per month was accrued for the months of April
through December 1997, and paid in 1998. The other provisions of Mr. Saner's
employment agreement are similar to those of Mr. Dunaway's employment agreement.

The Company also has an employment agreement with Mr. Kreeft which provides
for his employment as Executive Vice President of Engineering of the Company for
a period of five years, ending in August 1997, and on a month-to-month basis
thereafter. Mr. Kreeft's employment agreement initially provided for an annual
base salary of $7,500 per month but this was increased to $12,500 per month in
1995. The employment agreement also prohibits Mr. Kreeft from competing with the
Company for a period of six months after termination of his employment. The
employment agreement may be terminated by mutual agreement, voluntarily by Mr.
Kreeft upon 90 days' prior written notice, for cause or upon death or disability
of Mr. Kreeft. Depending on the manner in which the employment agreement is
terminated, Mr. Kreeft or his

14
<PAGE> 18

heirs are entitled to different levels of compensation upon termination, subject
to a maximum amount equal to two years' compensation.

DIRECTOR COMPENSATION

The Company pays Mr. Bang and Mr. Hurley a director's fee of $500 for each
Board meeting and $250 for each committee meeting attended. Otherwise, the
Company pays no cash remuneration to its directors except reimbursement for
reasonable expenses.

In 1995 the Company implemented, effective March 1, 1996, the 1995
Non-Employee Directors Restricted Stock Award Plan (the "Restricted Stock
Plan"), pursuant to which non-employee directors are granted restricted stock
awards. Under the Restricted Stock Plan, every five years each non-employee
director will receive a restricted stock award covering 15,000 shares of Common
Stock, twenty percent of which vests each year the non-employee director serves
on the Board of Directors. Awards are pro-rated for non-employee directors
selected between annual meetings of the stockholders. A total of 240,000 shares
of Common Stock have been reserved for issuance under the Restricted Stock Plan
and 99,000 shares have been granted as of April 21, 1998.

15
<PAGE> 19

PERFORMANCE GRAPH

The Company completed its initial public offering on March 1, 1996, and its
Common Stock began trading on Nasdaq at a price of $10.00. The following graph
shows the value at the end of the indicated period of a $100 investment in the
Company, compared with similar investments based on (1) the value of The Nasdaq
Stock Market Index and (2) the value of an index comprised of the common stock
of the five other companies that offer exclusively paging services (the "Custom
Peer Group"), in each case on a total return basis assuming reinvestment of
dividends.

<TABLE>
<CAPTION>
The Nasdaq
Measurement Period The Stock Market Custom Peer
(Fiscal Year Covered) Company (1) Index Group (2)
<S> <C> <C> <C>
2/96 100 100 100
3/96 90 100 97
6/96 86 114 89
9/96 68 105 56
12/96 65 118 40
3/97 29 118 25
6/97 19 127 33
9/97 20 145 44
12/97 13 145 34
</TABLE>

- ---------------

(1) Based on initial public offering price of $10.00.
(2) The Custom Peer Group includes Arch Communications Group, Inc., Metrocall,
Inc., PageMart Wireless, Inc., Paging Network, Inc., and Teletouch
Communications, Inc.

16
<PAGE> 20

COMPENSATION COMMITTEE REPORT TO STOCKHOLDERS

Compensation and benefit practices of the Company are established and
governed by the Compensation Committee which is made up entirely of independent
members of the Board of Directors. The Compensation Committee establishes the
general compensation policy of the Company, establishes the compensation of the
Chief Executive Officer of the Company, approves the compensation of other
executive officers of the Company and administers the Company's stock option
plans and other employee stock plans.

Compensation Philosophy. The Compensation Committee has determined that
the Company's compensation program should be directed to rewarding performance
which creates value for stockholders. The Compensation Committee's policies
focus on attracting, motivating and assisting in the retention of key employees
who demonstrate high levels of ability and talent. The compensation program
looks both to the short and long term, balancing compensation to reward
executive officers for past performance of the Company with incentives for
contributions to a superior future performance of the Company over the long
term. The Compensation Committee utilizes base salary, cash bonuses and stock
options as part of its program.

Base Salary Program. Base salaries were initially determined primarily by
evaluating the responsibilities of the position held by, and the experience of,
each executive officer in addition to competitive comparisons with like
industries and companies in the geographic area. For 1998, executive officers'
salaries will increase based on the parameters set forth above.

Bonus Compensation Program. Executive officers are eligible to receive
annual cash bonuses based upon criteria established annually by the Compensation
Committee based upon the operating performance of the Company. For 1998, the
Compensation Committee has established annual incentive targets based upon the
performance of the Company, including earnings before interest expense, interest
income, taxes, depreciation and amortization ("EBITDA"), a standard performance
measure in the paging industry, and growth in net revenues. If the Company
achieves its performance objectives, each eligible executive officer would be
entitled to a bonus equal to twenty-five percent of base salary.

Stock Incentive Program. Awards of stock options under the Company's stock
option plans are intended to reward contributions by executive officers,
managers and key employees to the Company's performance and to align the
long-term interests of such persons with those of the stockholders. The
Compensation Committee also considers options to be an important method of
providing an incentive for executive officers to remain with, and to continue to
make significant contributions to, the Company. In awarding options, the
Compensation Committee considers the number and value of options held by each
executive officer which will vest in future periods and seeks to maintain
equitable relationships among executive officers who have similar levels of
responsibility.

Option Repricing. On April 7, 1997, the Committee approved the repricing
of certain options to purchase the Company's Common Stock granted pursuant to
the 1995 Stock Option Plan, as amended. The original stock option grants
provided for vesting on the third anniversary of the date of grant with exercise
prices in the range of $6.50 to $10.61. The Compensation Committee provided for
the repricing of the options at $2.50, which was the closing price of the
Company's Common Stock as of April 18, 1997, with the options vesting at the
rate of one third per year beginning one year from April 18, 1997. The
Compensation Committee determined that this repricing was necessary to provide
an incentive for employees to remain with the Company.

CEO Compensation. Mr. Dunaway, the Company's Chief Executive Officer, was
entitled to a base salary of $242,016 in 1997 pursuant to the terms of an
employment agreement. Of this amount, $51,639 was accrued for the months of
April through December, 1997, and paid in 1998. The Committee concluded that the
1997 base salary and paid incentive compensation of Mr. Dunaway were reasonable
in amount and consistent with industry practices. Mr. Dunaway is also a
participant in the Company's 1998 bonus program for executive officers, as set
forth above. Mr. Dunaway's long-term incentive compensation, which consists
entirely of stock options, is set forth in an employment agreement, which
provides for the award of additional options at December 31, 1998 in the event
certain financial objectives are met. The Compensation Committee

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will consider additional long-term incentive compensation awards to Mr. Dunaway
based upon achievement of the Company's operational and financial objectives.

Compliance with Code Section 162(m). Section 162(m) of the Code generally
disallows a tax deduction to public companies for compensation over $1 million
paid to the corporation's chief executive officer and four other most highly
compensated executive officers. Qualified performance-based compensation under
Section 162(m) of the Code and the applicable regulations is not subject to the
deduction limit if certain requirements are met. The Compensation Committee
believes that options granted under the Company's 1995 Stock Option Plan have
been exempt from the limitations as performance-based compensation as a result
of certain transition rules adopted when Section 162(m) was instituted and
because of the approval of the 1995 Stock Option Plan by the stockholders in
1997. The Company intends to take all actions necessary so that these stock
options continue to qualify as performance-based compensation and are therefore
exempt from the Section 162(m) limit. The Company believes that other
compensation expected to be paid in 1998 will not exceed the Section 162(m)
limitations.

William H. Bang
Robert Van Degna

The above report will not be deemed to be incorporated into any filing by
the Company under the Securities Act of 1933, as amended or the Exchange Act,
except to the extent that the Company specifically incorporates the same by
reference.

CERTAIN TRANSACTIONS

On June 17, 1997, the Company issued 10.0 million shares of Class A
Preferred, and warrants to purchase up to 11.5 million shares of Common Stock at
an exercise price of $1.50 per share, for a total purchase price of $15.0
million (the "Class A Offering"), to certain existing shareholders of the
Company and their affiliates. On March 16, 1998, the Company issued 5,333,336
shares of Class B Preferred, and warrants to purchase up to 5.4 million shares
of Common Stock at an exercise price of $1.50 per share, for a total purchase
price of $8 million (the "Class B Offering"). In the Class A Offering, units
consisting of one share of Class A Preferred and a warrant to acquire 1.15
shares of Common Stock (at an exercise price of $1.50 per share of Common Stock)
were sold for a purchase price of $1.50 in cash. In the Class B Offering, units
consisting of one share of Class B Preferred and a warrant to acquire 1.0125
shares of Common Stock (at an exercise price of $1.50 per share of Common Stock)
were sold for a purchase price of $1.50 in cash.

Centennial Fund IV, L.P., a significant shareholder of the Company which
may be deemed to be an affiliate of director Jeffrey H. Schutz, purchased
3,133,333 shares of Class A Preferred and warrants to acquire 3,603,333 shares
of Common Stock in the Class A Offering, and 112,667 shares of Class B Preferred
and warrants to acquire 114,075 shares of Common Stock in the Class B Offering.

Fleet Venture Resources, Inc., a significant shareholder of the Company
which may be deemed to be an affiliate of director Robert Van Degna, and
entities affiliated with Fleet Venture Resources, Inc., purchased 2,398,000
shares of Class A Preferred and warrants to acquire 2,757,000 shares of Common
Stock in the Class A Offering, and 386,205 shares of Class B Preferred and
warrants to acquire 391,032 shares of Common Stock in the Class B Offering.

Saugatuck Capital Company Limited Partnership III, a significant
shareholder of the Company which may be deemed to be an affiliate of director
Richard P. Campbell, purchased 1,200,000 shares of Class A Preferred and
warrants to acquire 1,380,000 shares of Common Stock in the Class A Offering,
and 386,205 shares of Class B Preferred and warrants to acquire 391,032 shares
of Common Stock in the Class B Offering.

PNC Capital Corp., a significant shareholder of the Company, purchased
1,133,333 shares of Class A Preferred and warrants to acquire 1,303,333 shares
of Common Stock in the Class A Offering, and 154,849 shares of Class B Preferred
and warrants to acquire 156,785 shares of Common Stock in the Class B Offering.

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<PAGE> 22

Primus Capital Fund III Limited Partnership, a significant shareholder of
the Company, purchased 1,133,333 shares of Class A Preferred and warrants to
acquire 1,303,333 shares of Common Stock in the Class A Offering, and 193,408
shares of Class B Preferred and warrants to acquire 195,826 shares of Common
Stock in the Class B Offering.

Mark H. Dunaway, Chairman of the Board and Chief Executive Officer of the
Company, purchased 66,667 shares of Class B Preferred and warrants to acquire
67,500 shares of Common Stock in the Class B Offering.

John J. Hurley, a director of the Company, purchased 66,667 shares of Class
B Preferred and warrants to acquire 67,500 shares of Common Stock in the Class B
Offering. Mr. Hurley is also a director of the Company, and is Vice Chairman and
a member of the Board of Directors of Glenayre Technologies, Inc. ("Glenayre"),
a leading manufacturer of network equipment for the wireless industry. Since
January 1, 1997, the Company has purchased approximately $2,900,000 of equipment
from Glenayre or its affiliates and has borrowed approximately $2,700,000 under
an equipment financing agreement with Glenayre.

Family members of Kathryn Loev Putnam, Senior Vice President and Chief
Financial Officer of the Company, purchased an aggregate of 66,667 shares of
Class B Preferred and warrants to acquire 67,500 shares of Common Stock in the
Class B Offering.

Alta Communications VI, L.P., a significant shareholder of the Company
which may be deemed to be an affiliate of director Robert F. Benbow, and an
entity affiliated with Alta Communications VI, L.P., purchased 3,666,667 shares
of Class B Preferred and warrants to acquire 3,712,500 shares of Common Stock in
the Class B Offering. Prior to the Class B Offering, neither Alta Communications
VI, L.P., Mr. Benbow, nor their affiliates were shareholders of, or otherwise
affiliated with, the Company.

OTHER MATTERS

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of a registered class
of the Company's equity securities, to file reports (Forms 3, 4 and 5) of stock
ownership and changes in ownership with the SEC. Executive officers, directors
and beneficial owners of more than ten percent of the Company's stock are
required to furnish the Company with copies of all forms that they file.

Based solely on the Company's review of copies of Forms 3, 4 and 5 and the
amendments thereto received by the Company, or written representations from
reporting persons that no Forms 5 were required to be filed by those persons,
the Company believes that during the year ended December 31, 1997, all filing
requirements were complied with by its executive officers, directors and
beneficial owners of more than ten percent of the Company's stock.

RELATIONSHIP WITH INDEPENDENT PUBLIC AUDITORS

The Board of Directors, upon recommendation of the Audit Committee, has
selected Ernst & Young LLP as independent auditors for the Company for 1998.
Ernst & Young LLP have been the independent public auditors for the Company
since October 26, 1995. Representatives of Ernst & Young LLP are expected to be
present at the Meeting and will have an opportunity to make a statement if they
desire to do so and will be able to respond to appropriate questions.

STOCKHOLDERS' PROPOSALS

Proposals of stockholders intended to be presented at the Company's Annual
Meeting of Stockholders to be held in 1999 must be received at the Company no
later than November 30, 1998 to be included in the proxy statement for such
meeting. Proposals must comply with the requirements as to form and substance
established by the SEC for proposals in order to be included in the proxy
statement.

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OTHER BUSINESS

As of the date of this Proxy Statement, the Company knows of no other
business that will come before the Meeting for action. If any other matter is
properly presented for consideration and action at the Meeting, however, the
proxies will be voted with respect to those matters in accordance with the best
judgment and in the discretion of the proxy holders.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ MARK B. JONES

April 28, 1998 Mark B. Jones
Secretary

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EXHIBIT A

PREFERRED NETWORKS, INC.

1995 STOCK OPTION PLAN
(AS AMENDED)

1. PURPOSE

This PREFERRED NETWORKS, INC. 1995 STOCK OPTION PLAN (the or this "Plan"),
as amended, provides for the grant of Stock Options and stock appreciation
rights ("SARs") to employees and consultants of Preferred Networks, Inc., a
Georgia corporation (the "Company"), and its present and future subsidiaries (a
"Subsidiary"), as defined in Section 424(f) of the Internal Revenue Code of
1986, as amended (the "Code"), in order to advance the interests of the Company
and its subsidiaries through the motivation, attraction and retention of key
personnel and consultants.

2. INCENTIVE STOCK OPTIONS AND NON-QUALIFIED STOCK OPTIONS

The Stock Options granted under the Plan may be either Incentive Stock
Options ("ISOs") which are intended to be "Incentive Stock Options" as that term
is defined in Section 422 of the Code; or non-qualified stock options ("NSOs")
which are intended to be options that do not qualify as "Incentive Stock
Options" under Section 422 of the Code.

All Stock Options shall be ISOs unless the Option Agreement clearly
designates the Stock Options granted thereunder, or a specified portion thereof,
as NSOs. Subject to the other provisions of the Plan, a Participant may receive
ISOs and NSOs at the same time, provided that the ISOs and NSOs are clearly
designated as such, and the exercise of one does not affect the exercise of the
other.

Except as otherwise expressly provided herein, all of the provisions and
requirements of the Plan relating to Stock Options shall apply to ISOs and NSOs.
As used herein "Stock Incentives" refers to ISOs, NSOs and SARs.

3. ADMINISTRATION

The Plan shall be administered by the Board of Directors of the Company or
a committee (the "Committee") of two or more members of the Board of Directors.
As used herein, any reference to the Committee shall be deemed to refer to
either the Board or the Committee, whichever is appropriate. The Committee shall
have full authority to administer the Plan, including authority to interpret and
construe any provision of the Plan and any Stock Incentives granted thereunder,
and to adopt such rules and regulations for administering the Plan as it may
deem necessary in order to comply with the requirements of the Code or in order
that Stock Options that are intended to be ISOs will be classified as ISOs under
the Code, or in order to conform to any regulation or to any law or change in
any law or regulation applicable thereto.

All actions taken and all determinations and interpretations made by the
Committee in good faith shall be final and binding upon all Participants, the
Company and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan, and all members of the Committee shall, in
addition to their rights as directors, be fully protected by the Company with
respect to any such action, determination or interpretation.

4. CERTAIN DEFINITIONS

4.1 "Common Stock." Common Stock means authorized but unissued or
reacquired Common Stock of the Company.

4.2 "Corporate Transaction." "Corporate Transaction" shall mean one or
more of the following transactions, unless persons who were holders of
securities issued by the Company which are outstanding immediately prior to such
transaction are (based on such holdings of securities of the Company) holders of

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more than 50% of the outstanding voting common stock of the surviving or
acquiring entity (or equivalent equity interest if the entity is not a
corporation): (i) a merger or consolidation; (ii) a share exchange (with or
without a stockholder vote) in which 95% or more of the outstanding capital
stock of the Company is exchanged for capital stock of another corporation; or
(iii) the sale, transfer or other disposition of all or substantially all of the
Company's assets. In determining whether more than 50% of the voting common
stock is so held: (i) convertible preferred stock shall be calculated on an "as
converted" basis; (ii) convertible debt shall be calculated on an "as exchanged"
basis; and (iii) warrants, options and other purchase rights shall not be
counted for any purpose.

4.3 "Employee." An Employee is an employee of the Company or any
Subsidiary.

4.4 "Fair Market Value." If the Common Stock is traded on the Nasdaq
National Market, the Fair Market Value of a share of Common Stock on any date
shall be the closing price, as quoted on the Nasdaq National Market for the date
in question, or, if the Common Stock is listed on a national stock exchange, the
closing price on such exchange on the date in question. If the Common Stock is
not traded on the Nasdaq National Market or on such an exchange, the Fair Market
Value of a share of Common Stock on any date, or the method for determining such
value, shall be determined in good faith by the Committee.

4.5 "Participant." A Participant is an Employee or consultant of the
Company or any Subsidiary to whom a Stock Incentive is granted.

4.6 "Stock Option." A Stock Option is the right granted under the Plan to
an Employee or consultant to purchase, at such time or times and at such price
or prices (the "Option Price") as are determined by the Committee, the number of
shares of Common Stock determined by the Committee.

5. ELIGIBILITY AND PARTICIPATION

Grants of ISOs, NSOs and SARs may be made to Employees of the Company or
any Subsidiary. Grants of NSOs and SARs may be made to consultants to the
Company or any Subsidiary. The Committee shall from time to time determine the
Participants to whom Stock Incentives shall be granted, the number of shares of
Common Stock subject to each Stock Incentive and the terms and provisions of all
Stock Incentives, all as provided in this Plan.

6. TERMS OF STOCK OPTIONS

6.1 Maximum Number. The maximum aggregate number of shares of Common Stock
that may be issued pursuant to Stock Incentives shall be 3,374,450 shares. If a
Stock Option or SAR expires or terminates for any reason without being exercised
in full, the unpurchased shares of Common Stock subject to such Stock Option or
the shares to which the SAR is not exercised shall again be available for
purposes of the Plan. To the extent that the aggregate Fair Market Value
(determined as of the time the ISO is granted) of the stock with respect to
which ISOs are exercisable for the first time by any individual during any
calendar year under all plans of the Company and its parent and Subsidiaries
exceeds $100,000, such options shall be treated as options which are not ISOs.
During any calendar year, no employee or consultant shall be granted any Stock
Incentives that relate to more than 200,000 shares of Common Stock.

6.2 Price. The Option Price per share of any ISO shall be not less than
the Fair Market Value of a share of Common Stock on the date on which the Stock
Option is granted. With respect to each grant of a NSO, the Option Price per
share shall not be less than 50% of the fair market value of a share of Common
Stock on the date on which the Stock Option is granted. If an ISO is granted to
an Employee who then owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or Subsidiary
of the Company, the Option Price per share of such ISO shall be at least 110% of
the Fair Market Value of the Common Stock subject to the ISO at the time such
ISO is granted, and such ISO shall not be exercisable after five years after the
date on which it was granted. Each Stock Option shall be evidenced by a written
agreement (an "Option Agreement") containing such terms and provisions as the
Committee may determine, subject to the provisions of the Plan.

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6.3 Time of Exercise. Subject to the provisions of the Plan, the
Committee, in its discretion, shall determine the time when a Stock Incentive,
or a portion of a Stock Incentive, shall become exercisable, and the time when a
Stock Incentive, or a portion of a Stock Incentive, shall expire. Each Stock
Option granted under the Plan shall be exercisable at such time or times, or
upon the occurrence of such event or events, including, without limitation, the
surrender of another Stock Option or stock award, and in such amounts, as the
Committee shall specify in the particular Option Agreement, except that no Stock
Option when initially granted shall provide that it may be exercisable to any
extent within the first six months following the date of grant. Notwithstanding
the foregoing, subsequent to the grant of a Stock Option, the Committee, at any
time before complete termination of such Stock Option, may accelerate the time
or times at which such Stock Option may be exercised in whole or in part. The
Company may also require as a condition of exercise that the Participant will
agree, if requested by the Company in connection with a public offering of the
Company's securities, to adhere to lock-up arrangements between the Company and
an underwriter involved in such public offering.

6.4 Term. A Stock Option shall have such term as the Committee shall
determine, except that no ISO shall be exercisable after the expiration of ten
years from the date such Stock Option is granted or five years if required by
section 422 of the Code or any successor provision.

6.5 Payment. Payment for all shares purchased pursuant to exercise of a
Stock Option shall be made in cash or, if the Option Agreement so provides, by
delivery of Common Stock of the Company valued at its Fair Market Value on the
date of delivery. Subject to the provisions of section 6.7, such payment shall
be made at the time that the Stock Option or any part thereof is exercised, and
no shares of Common Stock shall be issued or delivered until full payment
therefor has been made.

6.6 Withholding. Whenever the Company is required to issue or transfer
shares of Common Stock under the Plan, the Company shall have the right to
require the Participant to remit to the Company an amount sufficient to satisfy
any federal, state and local withholding tax requirements prior to the delivery
of any certificate or certificates for such shares. If a Participant surrenders
shares of Common Stock acquired pursuant to the exercise of an ISO in payment of
the option price of a Stock Option and such surrender constitutes a
disqualifying disposition for purposes of obtaining ISO treatment under the
Code, the Company shall have the right to require the Participant to remit to
the Company an amount sufficient to satisfy any federal, state and local
withholding tax requirements prior to the delivery of any certificate or
certificates for such shares. Whenever under the Plan payments are to be made in
cash, such payments shall be net of an amount sufficient to satisfy any federal,
state and local withholding tax requirements. A recipient may elect with respect
to any Stock Option (other than an ISO) or SAR which is paid in whole or part in
stock to surrender or authorize the Company to withhold shares of Common Stock
(valued at their fair market value on the date of surrender or withholding of
such shares) in satisfaction of all such withholding requirements in accordance
with any rules established by the Committee, including such rules required to
satisfy Section 16 of the Securities Exchange Act of 1934 (the "Act"), or any
successor provision.

6.7 Special Procedure for Certain Credit Assisted Transactions. To the
extent not inconsistent with the other terms and conditions of the particular
Option Agreement or any other agreement between the Participant and the Company
and to the extent not inconsistent with the provisions of section 422 of the
Code or any successor provision or the provisions of Rule 16b-3 or any successor
rule, if applicable, any Participant desiring to obtain credit from a broker,
dealer or other "creditor" as defined in Regulation T issued by the Board of
Governors of the Federal Reserve System (provided such broker, dealer or
creditor has been approved by the Committee) to assist in exercising a Stock
Option may deliver to such creditor a written exercise notice executed by such
holder with respect to such Stock Option, together with written instructions to
the Company to deliver the Common Stock issued upon such exercise of the Stock
Option to the creditor for deposit into an account designated by the
Participant. Upon receipt of such exercise notice and instructions in a form
acceptable to the Company, the Company shall confirm to the creditor that it
will deliver to the creditor on behalf of the Participant the Common Stock
issued upon such exercise of the Stock Option and covered by such instructions
promptly following receipt of the exercise price from the creditor. To the
extent not inconsistent with the provisions of section 422 of the Code or any
successor provision or the provisions of Rule 16b-3 or any successor rule, if
applicable, upon written request, the Company may in its discretion, but
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shall not be obligated to, deliver to the creditor on behalf of the Participant
shares of Common Stock resulting from such a credit assisted exercise prior to
receipt of the exercise price for such shares if the creditor has delivered to
the Company, in addition to the other documents contemplated by this section
6.7, the creditor's written agreement to pay the Company such exercise price in
cash within three days after delivery of such shares. The credit assistance
contemplated by this section 6.7 may include a margin loan by the creditor
secured by the Common Stock purchased upon exercise of a Stock Option or an
immediate sale of some or all of such Common Stock by the creditor to obtain or
recover the exercise price which the creditor has committed to pay to the
Company on behalf of the Participant.

6.8 Termination of Employment or Death. Upon any termination of employment
of the Participant for any reason other than death or disability, except as
otherwise provided in the particular Option Agreement, and except as otherwise
provided in section 16(a) with respect to termination for cause, any Stock
Option held at the date of such employment termination may, to the extent
exercisable, be exercised within three months after the date of such employment
termination. Upon any termination of employment of the Participant by reason of
disability, within the meaning of section 22(e)(3) of the Code or any successor
provision, except as otherwise provided in the particular Option Agreement, any
Stock Option held at the date of such employment termination may, to the extent
exercisable, be exercised within twelve months after the date of such employment
termination. If the Participant dies, except as otherwise provided in the
particular Option Agreement, any Stock Option held at the date of death may, to
the extent exercisable, be exercised by a legatee or legatees of the Participant
under the Participant's last will, or by the Participant's personal
representatives or distributees, within twelve months after the Participant's
death. This section 6.8 shall not extend the term of the Stock Option specified
pursuant to section 6.4. For purposes of this section 6.8, employment of a
Participant shall not be deemed terminated so long as the Participant is
employed by the Company, by a Subsidiary or by another corporation (or a parent
or subsidiary corporation of such other corporation) which has assumed the Stock
Option of the Participant in a transaction to which section 424(a) of the Code
or any successor provision is applicable. For purposes of this section 6.8, the
extent to which a Stock Option is exercisable shall be determined as of the date
of termination of employment. This section 6.8 shall not apply to a consultant
unless, and only to the extent, determined by the Committee and specified in the
particular Option Agreement.

6.9 Changes in Capitalization; Merger; Liquidation. The number of shares
of Common Stock as to which Stock Options and SARs may be granted, the number of
shares covered by each outstanding Stock Option and SAR, and the price per share
of each outstanding Stock Option or used in determining the amount payable upon
exercise of each outstanding SAR shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a subdivision or combination of shares or the payment of a stock dividend
in shares of Common Stock to holders of outstanding shares of Common Stock or
any other increase or decrease in the number of such shares effected without
receipt of consideration by the Company. If the Company shall be the surviving
corporation in any merger or consolidation (other than as a subsidiary of
another corporation), recapitalization, reclassification of shares or similar
reorganization, the holder of each outstanding Stock Option shall be entitled to
purchase, at the same times and upon the same terms and conditions as are then
provided in the Stock Option, the number and class of shares of stock or other
securities to which a holder of the number of shares of Common Stock subject to
the Stock Option at the time of such transaction would have been entitled to
receive as a result of such transaction, and a corresponding adjustment shall be
made in connection with determining the value of each outstanding SAR. In the
event of any such changes in capitalization of the Company, the Committee may
make such additional adjustments in the number and class of shares of Common
Stock or other securities with respect to which outstanding Stock Options and
SARs are exercisable and with respect to which future Stock Incentives may be
granted as the Committee in its sole discretion shall deem equitable or
appropriate, subject to the provisions of section 16 hereof, to prevent dilution
or enlargement of rights. Any adjustment pursuant to this section 6.9 may
provide, in the Committee's discretion, for the elimination of any fractional
shares that might otherwise become subject to any Stock Incentive without
payment therefor. In the event of a dissolution or liquidation of the Company, a
sale of all or substantially all of the stock or all or substantially all of the
assets of the Company, a direct or indirect merger or consolidation in which the
Company is not the surviving corporation or survives only as a subsidiary of
another corporation, or any other transaction having a similar
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result or effect, each outstanding Stock Incentive shall terminate except to the
extent that another corporation assumes such Stock Incentive or substitutes
another stock incentive therefor. In the event of a change of the Company's
shares of Common Stock with $0.001 par value into the same number of shares with
no par value or a different par value, the shares resulting from any such change
shall be deemed to be the Common Stock within the meaning of the Plan. Except as
expressly provided in this section 6.9, the holder of a Stock Option or SAR
shall have no rights by reason of any subdivision or combination of shares of
Common Stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of Common Stock of any class or by
reason of any dissolution, liquidation, merger or consolidation or distribution
to the Company's shareholders of assets or stock of another corporation. Except
as expressly provided herein, any issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to any Stock Incentive.
The existence of the Plan and the Stock Incentives granted pursuant to the Plan
shall not affect in any way the right or power of the Company to make or
authorize any adjustment, reclassification, reorganization or other change in
its capital or business structure, any merger or consolidation of the Company,
any issue of debt or equity securities having preferences or priorities as to
the Common Stock or the rights thereof, the dissolution or liquidation of the
Company, any sale or transfer of all or any part of its business or assets, or
any other corporate act or proceeding.

7. SARS

Subject to the following provisions, all SARs shall be in such form and
upon such terms and conditions as the Committee in its discretion may from time
to time determine.

7.1 Award. SARs may be granted in connection with all or any portion of a
previously or contemporaneously granted Stock Option or not in connection with a
Stock Option. An SAR shall entitle the grantee to receive upon exercise the
excess of (a) the fair market value of a specified number of shares of the
Common Stock at the time of exercise over (b) a specified price which shall be
not less than the Stock Option exercise price in the case of an SAR granted in
connection with a previously or contemporaneously granted Stock Option, or in
the case of any other SAR not less than 50% of the Fair Market Value of the
Common Stock at the time the SAR was granted.

7.2 Terms. An SAR shall be granted for a period of not less than one year
nor more than ten years, and shall be exercisable in whole or in part, at such
time or times during its term and subject to terms and conditions as shall be
prescribed by the Committee at the time of grant and to all of the following:

(a) No SAR shall be exercisable in whole or in part during the first
six months of its term. Notwithstanding the foregoing, subsequent to the
grant of an SAR, the Committee, at any time before complete termination of
such SAR, may accelerate the time or times at which such SAR may be
exercised in whole or in part.

(b) Except as otherwise provided in the particular SAR agreement, SARs
will be exercisable only during a Participant's employment by the Company
or one of its Subsidiaries, or within thirty days following the termination
of such employment, except as otherwise provided in section 16(a) with
respect to termination for cause. Except as otherwise provided in the
particular SAR agreement, if the grantee of an SAR dies, the grantee's
legal successor shall have the right to exercise the SAR during its term
and not longer than thirty days after death of the grantee. SARs may
contain such other limitations with respect to the time when such rights
may be exercised as the Committee may determine and such limitations may
vary. This section 7.2(b) shall not apply to a consultant unless, and only
to the extent, determined by the Committee and specified in the particular
SAR agreement.

7.3 Payment. Upon exercise of an SAR, payment shall be made in cash or
Common Stock (at Fair Market Value on the date of exercise) as provided in the
particular SAR agreement or, in the absence of such provision, as the Committee
may determine.

A-5
<PAGE> 29

8. SPECIAL PROVISIONS FOR CERTAIN SUBSTITUTE OPTIONS

Any Stock Option issued by the Company pursuant to the Plan in substitution
for an option previously issued by another entity, which substitution occurs in
connection with a transaction to which section 424(a) of the Code or any
successor provision is applicable, may provide for an exercise price computed in
accordance with such Code section and the regulations thereunder and may contain
such other terms and conditions as the Committee may prescribe to cause such
substitute Stock Option to contain as nearly as possible the same terms and
conditions (including the applicable vesting and termination provisions) as
those contained in the previously issued option being replaced thereby.

9. NO CONTRACT OF EMPLOYMENT; LEAVES OF ABSENCE

Nothing in this Plan shall confer upon a Participant the right to continue
in the employ of the Company or any Subsidiary, nor shall it interfere in any
way with the right of the Company, or any such Subsidiary, to discharge a
Participant at any time for any reason whatsoever, with or without cause.
Nothing in this Plan or any Stock Incentive shall effect any rights or
obligations of the Company or any Participant under any written contract of
employment. Except as otherwise provided by law or regulation with respect to
ISOs, the Committee may in its discretion determine whether any leave of absence
constitutes a termination of employment for purposes of the Plan and the impact,
if any, of such leave of absence on Stock Incentives previously granted to a
holder who takes a leave of absence.

10. NO RIGHTS AS A STOCKHOLDER

A Participant shall have no rights as a stockholder with respect to any
shares of Common Stock subject to a Stock Option. Except as provided in section
6.9, no adjustment shall be made in the number of shares of Common Stock issued
to a Participant, or in any other rights of the Participant upon exercise of a
Stock Option by reason of any dividend, distribution or other right granted to
stockholders for which the record date is prior to the date of exercise of the
Participant's Stock Option.

11. COMPLIANCE WITH CODE; COMPLIANCE WITH RULE 16B-3

All ISOs granted under this Plan are intended to comply with section 422
and, to the extent applicable, section 424 of the Code or any successor
provision, and all provisions of this Plan and all ISOs granted hereunder shall
be construed in such manner as to effectuate that intent. With respect to
persons subject to Section 16 of the Act, transactions under the Plan are
intended to comply with all applicable conditions of Rule 16b-3 or any successor
provision. To the extent any provision of the Plan or action by the Committee
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Committee.

12. ASSIGNABILITY

No Stock Incentive granted under this Plan shall be assignable or
transferable by a Participant, other than by will or the laws of descent and
distribution, and Stock Incentives issued to a Participant are exercisable
during his lifetime only by him.

13. CORPORATE TRANSACTIONS

At least ten (10) days prior to the consummation of a Corporate
Transaction, the Company shall give Participants written notice of the proposed
Corporate Transaction, and, unless otherwise provided in the particular Stock
Option or SAR agreement, the vesting schedules of all Stock Incentives shall be
accelerated so that all of the Stock Incentives outstanding under this Plan
immediately prior to the consummation of the Corporate Transaction shall for all
purposes under this Plan, become exercisable as of such time; provided however,
that any exercise of such Stock Incentive shall be conditioned upon the
consummation of such transaction. All Stock Incentives, to the extent not
previously exercised, shall terminate upon the consummation of such Corporate
Transaction, except to the extent that another corporation assumes such Stock
Incentives or substitutes other stock incentives therefor.
A-6
<PAGE> 30

14. NONEXCLUSIVITY OF THE PLAN

Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to stockholders of the Company for approval shall be
construed as creating any limitations on the power or authority of the Board of
Directors to adopt such other or additional incentive or other compensation
arrangements of whatever nature as the Board of Directors may deem appropriate
or preclude or limit the continuation of any other plan, practice or arrangement
for the payment of compensation or fringe benefits to Employees generally, or to
any class or group of Employees, which the Company or a Subsidiary has lawfully
put into effect, including, without limitation, any retirement, pension, savings
and stock purchase plan, insurance, death and disability benefits and executive
short-term incentive plans.

15. RESTRICTIONS ON DELIVERY AND SALE OF SHARES

Each Stock Incentive granted under the Plan is subject to the condition
that if at any time the Committee, in its discretion, shall determine that the
listing, registration or qualification of the shares covered by such Stock
Incentive upon any securities exchange or under any state or federal law is
necessary or desirable as a condition of or in connection with the granting of
such Stock Incentive or the purchase or delivery of shares thereunder, the
delivery of any or all shares pursuant to such Stock Incentive may be withheld
unless and until such listing, registration or qualification shall have been
effected. If a registration statement is not in effect under the Securities Act
of 1933 or any applicable state securities laws with respect to the shares of
Common Stock purchasable or otherwise deliverable under Stock Incentives then
outstanding, the Committee may require, as a condition of exercise of any Stock
Incentive, that the Participant represent, in writing, that the shares received
pursuant to the Stock Incentive are being acquired for investment and not with a
view to distribution and agree that the shares will not be disposed of except
pursuant to an effective registration statement, unless the Company shall have
received an opinion of counsel that such disposition is exempt from such
requirement under the Securities Act of 1933 and any applicable state securities
laws. The Company may endorse on certificates representing shares delivered
pursuant to a Stock Incentive such legends referring to the foregoing
representations or restrictions or any other applicable restrictions on resale
as the Company, in its discretion, shall deem appropriate.

16. TERMINATION AND AMENDMENT OF THE PLAN

The Plan may be terminated, modified or amended by the stockholders or the
Board of Directors of the Company; provided, however, that:

(a) no such termination, modification or amendment without the consent
of the holder of a Stock Incentive shall adversely affect his rights under
such Stock Incentive, except the Committee may terminate a particular Stock
Incentive if the employment of the holder of the Stock Incentive is
terminated for cause; and

(b) any modification or amendment which would require shareholder
approval in order for the Plan to continue to meet the requirements of Rule
16b-3 or any successor rule, if Rule 16b-3 or any successor rule is
applicable, or any other legal or regulatory requirements, shall be
effective only if it is approved by the shareholders of the Company in the
manner required thereby.

17. EFFECTIVE DATE

This Plan was adopted by the Board of Directors and became effective on
August 23, 1995, subject to the approval of the Company's stockholders within
twelve months thereafter. All ISOs must be granted within ten years from August
23, 1995.

A-7
<PAGE> 31
APPENDIX B

PREFERRED NETWORKS, INC.
850 CENTER WAY
NORCROSS, GEORGIA 30071

PROXY SOLICITED BY THE BOARD OF DIRECTORS OF PREFERRED NETWORKS, INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS
MAY 28, 1998
The undersigned stockholder of Preferred Networks, Inc. hereby appoints Mark
H. Dunaway and Michael J. Saner with full power of substitution, acting jointly
or by either one of them, attorney and proxies to represent and vote in the
manner specified below the shares of stock which the undersigned could vote if
personally present at the Annual Meeting of Stockholders to be held on May 28,
1998, or at any adjournment thereof.

I. Election of Four Directors:

(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
THROUGH THE NOMINEE NAME.)

A. Election of Two Directors for a Three Year Term by the holders of the Common
Stock, Class A Redeemable Preferred Stock, and Class B Senior Redeemable
Preferred Stock.

<TABLE>
<S> <C>
[ ] FOR all nominees listed below (except as marked to the [ ] WITHHOLD AUTHORITY to vote for all nominees listed below
contrary below)
</TABLE>

Jeffrey H. Schutz Robert Van Degna

B. Election of One Director for a Three Year Term by the holders of Class B
Senior Redeemable Preferred Stock.

<TABLE>
<S> <C>
[ ] FOR the nominee listed below [ ] WITHHOLD AUTHORITY to vote for the nominee listed below
</TABLE>

Robert F. Benbow

C. Election of One Director for a One Year Term by the holders of Class A
Redeemable Preferred Stock.

<TABLE>
<S> <C>
[ ] FOR the nominee listed below [ ] WITHHOLD AUTHORITY to vote for the nominee listed below
</TABLE>

Richard P. Campbell, Jr.

(Continued and to be signed on other side)

(Continued from other side)

II. Proposal to approve the Preferred Networks, Inc. 1995 Stock Option Plan as
amended

FOR [ ] AGAINST [ ] ABSTAIN [ ]

III. In their discretion upon such other business as may properly come before
the meeting

IF NO DIRECTION TO THE CONTRARY IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF EACH OF THE FOUR NOMINEES FOR DIRECTOR NAMED ABOVE AND FOR THE
PROPOSAL TO APPROVE THE 1995 STOCK OPTION PLAN AS AMENDED.

Dated:____________________, 1998

________________________________
Signature(s) of Stockholder

________________________________
Signature if signing jointly

Please sign exactly as name
appears hereon. If shares are
held jointly, each stockholder
should sign. When signing for a
corporation or partnership or
other entity or as attorney,
executor, administrator,
trustee, guardian or custodian,
please indicate the capacity in
which you are signing.

PLEASE FILL IN, DATE AND SIGN THE PROXY AND RETURN IT IN THE ENCLOSED POSTPAID
ENVELOPE.