SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
I. SCHEDULE 14A INFORMATION
A. Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
| | Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
American Mobile Satellite Corporation
(Name of Registrant as Specified in Its Charter)
Randy S. Segal
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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 O-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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American Mobile Satellite Corporation
10802 Parkridge Boulevard
Reston, Virginia 20191-5416
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
American Mobile Satellite Corporation to be held at 9:00 a.m. on Wednesday, May
20, 1998 at the Sheraton Reston Hotel, 11810 Sunrise Valley Drive, Reston,
Virginia (703/620-9000).
The formal notice of annual meeting and proxy statement are attached to this
letter. This material contains information concerning the business to be
conducted at the meeting and the nominees for election as directors.
Even if you are unable to attend the meeting in person, it is important that
your shares be represented. Therefore, I urge you to complete, date, sign and
return the enclosed proxy card at your earliest convenience. If you choose to
attend the annual meeting, you may, of course, revoke your proxy and cast your
votes personally at the meeting.
Sincerely,
/s/Gary M. Parsons
Chairman of the Board
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[GRAPHIC OMITTED]
American Mobile Satellite Corporation
10802 Parkridge Boulevard
Reston, Virginia 20191-5416
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of American Mobile Satellite Corporation:
The annual meeting of stockholders of American Mobile Satellite Corporation
("American Mobile" or the "Company") will be held at the Sheraton Reston Hotel,
11810 Sunrise Valley Drive, Reston, Virginia, on Wednesday, May 20, 1998, at
9:00 a.m., for the following purposes:
1. To elect ten directors;
2. To consider and act upon a proposal to ratify the appointment of
Arthur Andersen LLP as independent accountants for American Mobile for the year
1998;
3. To approve an amendment to American Mobile's 1989 Stock Option Plan
to increase the number of shares authorized for issue;
4. To consider and act upon a proposal to issue shares of American
Mobile Common Stock and warrants to purchase Common Stock to Motorola, Inc.
("Motorola") in connection with American Mobile's acquisition of ARDIS; and
5. To transact such other business as may be properly brought before
the meeting or any adjournments thereof.
Only holders of record of American Mobile's Common Stock at the close of
business on March 31, 1998, will be entitled to vote at the meeting. A list of
such stockholders will be available at the Company's headquarters, 10802
Parkridge Boulevard, Reston, Virginia for examination during normal business
hours by any stockholder for any purpose germane to the meeting for a period of
ten days prior to the meeting.
Stockholders who do not expect to attend the meeting in person are asked to
date, sign and complete the enclosed proxy and return it without delay in the
enclosed envelope, which requires no postage if mailed in the United States.
By order of the Board of Directors,
Randy S. Segal
Vice President and Secretary
Reston, Virginia
April 27, 1998
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[GRAPHIC OMITTED]
American Mobile Satellite Corporation
10802 Parkridge Boulevard
Reston, Virginia 20191-5416
PROXY STATEMENT
The accompanying proxy is solicited on behalf of the Board of Directors of
American Mobile Satellite Corporation ("American Mobile" or the "Company") for
use at the annual meeting of stockholders to be held on May 20, 1998, and any
adjournments thereof. The stockholder giving the proxy may revoke it at any time
before it is exercised at the meeting by delivering to the Secretary of American
Mobile a written instrument of revocation or a duly executed proxy bearing a
later date. This proxy statement and the accompanying form of proxy are being
first sent to stockholders on or about April 27, 1998.
The only class of securities of American Mobile entitled to vote at the 1998
annual meeting is its Common Stock, of which 30,201,726 shares were outstanding
on March 31, 1998. Only stockholders of record at the close of business on March
31, 1998, will be entitled to vote at the annual meeting. Each stockholder has
one vote for each share of Common Stock held, and in the election of directors
is entitled to cumulate his or her votes. Under cumulative voting, each
stockholder is allowed that number of votes equal to the number of director
positions to be filled (ten) multiplied by the number of shares of Common Stock
owned. The stockholder may distribute those votes among one or more, or all, of
the nominees as the stockholder desires. However, as described below, the
accompanying proxy reserves to the persons named therein the right to distribute
the votes represented by such proxy in their discretion in order to maximize the
likelihood of electing the full slate of directors. Under cumulative voting,
directors are elected by a plurality of votes cast. A withheld vote on any
nominee will not affect the voting results.
With respect to Proposal 2, ratification of the appointment of Arthur Andersen
LLP as independent accountants for American Mobile for the year 1998, and
Proposal 3, approval of the amendment to the 1989 Stock Option Plan (the "1989
Plan") will in each case require the affirmative vote of a majority of the
shares present in person or represented by proxy at the annual meeting and
entitled to vote. Abstentions will be treated as votes present and entitled to
vote and thus will have the effect of a vote against the proposal. With respect
to Proposal 4, approval of issuance of shares of Common Stock and warrants to
purchase Common Stock to Motorola, the affirmative vote of a majority of the
shares present in person or presented by proxy at the annual meeting and
entitled to vote, without reference to the shares currently held by Motorola,
will be required. Abstentions (other than that of Motorola) will be treated as
votes present and entitled to vote and thus will have the effect as a vote
against the proposal.
Brokers who hold shares in street name do not have the authority to vote on
certain matters for which they have not received instructions from beneficial
owners. Such broker non-votes (arising from the lack of instructions from
beneficial owners) will not affect the outcome of the vote on Proposals 2, 3 and
4. Broker non-votes will be counted in determining the existence of a quorum.
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The cost of soliciting proxies in the form enclosed herewith will be borne by
the Company. In addition to the solicitation of proxies by mail, the Company,
through its directors, officers and regular employees, may also solicit proxies
personally or by telephone. The Company also will request persons, firms and
corporations holding Common Stock in their names or in the names of their
nominees, which are beneficially owned by others, to send proxy material to and
obtain proxies from the beneficial owners and will reimburse the holders for
their reasonable expenses in so doing.
1. ELECTION OF DIRECTORS
It is intended that the persons named in the proxy will, unless otherwise
instructed, vote for the election of the ten nominees listed below to serve as
directors until the next annual meeting of stockholders and until their
respective successors are elected and qualified. If for any reason any nominee
should not be available for election or able to serve as a director, the
accompanying proxy may be voted for the election of a substitute nominee
designated by the Board of Directors and will be voted for the election of the
other nominees named therein. In any event, management reserves the right in its
discretion to distribute the total votes represented by the proxies unevenly or
among less than all of the persons named (or their substitutes), as permitted by
cumulative voting, in order to maximize the likelihood of electing the full
slate of directors.
Nominees
- --------
Information with respect to the business experience and affiliations of the
nominees to the Board of Directors is set forth below. The information set forth
below and elsewhere in this proxy statement concerning the nominees and their
security holdings has been furnished by them to American Mobile.
Gary M. Parsons, 47. American Mobile's Chairman of the Board of Directors
and Chief Executive Officer effective March 1998, Mr. Parsons has been an
American Mobile director, the Chief Executive Officer and President of American
Mobile since July 1996. Mr. Parsons joined American Mobile from MCI
Communications Corporation ("MCI") where he served in a variety of executive
roles from 1990 to 1996, including most recently as Executive Vice President of
MCI Communications, and as Chief Executive Officer of MCI's subsidiary MCImetro,
Inc. From 1984 to 1990, Mr. Parsons was one of the principals of Telecom*USA,
which was acquired by MCI.
Douglas I. Brandon, 39. An American Mobile director as of January 1998, Mr.
Brandon is Vice President -- External Affairs & Law, AT&T Wireless Services, Inc
("AT&T Wireless"). Prior to joining AT&T Wireless in 1993, Mr. Brandon was
associated with the law firm of Davis Polk & Wardwell beginning in 1986. Prior
to Davis Polk, Mr. Brandon clerked for the Honorable William H. Timbers of the
United States Court of Appeals for the Second Circuit.
Ho Siaw Hong, 48. An American Mobile director since April 1997 and from
March 1993 to March 1994, Mr. Ho is Assistant Vice President of the Satellite
Services Group of Singapore Telecommunications Ltd. ("Singapore Telecom"). Since
1972 he has held a variety of positions at Singapore Telecom in the areas of
network control and management, cellular radio, paging and satellite system
planning and satellite business development.
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Billy J. Parrott, 62. An American Mobile director since May 1988, Mr.
Parrott is President and Chief Executive Officer of Antifire, Inc., a
manufacturer of non-toxic fire retardants. Mr. Parrott is also the founder and
co-founder of several telecommunications companies, including Private Networks,
Inc., a builder and operator of telecommunications and broadcast properties, and
Roanoke Valley Cellular Telephone Company, a cellular communications company.
Mr. Parrott is owner of a production company where he functions as a writer,
producer, director and marketing consultant to Fortune 500 companies.
Pradeep P. Kaul, 48. Mr. Kaul is Executive Vice President of Hughes Network
Systems ("HNS"), responsible for HNS' efforts in the wireless marketplace,
managing the development and marketing of offerings that include subscriber
terminals, infrastructure networks and digital network services. Prior to 1987,
Mr. Kaul was senior vice president of M/A-Com Telecommunications, Inc.
("M/A-Com"), which was acquired by Hughes Electronics Corporation ("Hughes") in
1987. Prior to that, Mr. Kaul was director of engineering with M/A Com.
Andrew A. Quartner, 44. An American Mobile director since May 1988, Mr.
Quartner also serves as corporate counsel at Nextlink Communications, Inc. and
Vice Chairman of CellPort Labs, Inc. Prior to his present positions, Mr.
Quartner was Senior Vice President, Law, of AT&T Wireless beginning in 1997,
which he joined in November 1985. Prior to joining AT&T Wireless, Mr. Quartner
was associated with the law firm of Debevoise & Plimpton in New York.
Jack A. Shaw, 59. An American Mobile director and formerly Chairman of the
Board of Directors of American Mobile since July 1996, Mr. Shaw is Chairman and
Chief Executive Officer of HNS and Senior Vice President of Hughes. Mr. Shaw is
a member of the Hughes Executive Committee. Previously, Mr. Shaw held senior
management positions with companies including ITT Space Communications, Inc.,
Digital Communications Corporation, and M/A-Com, which was acquired by Hughes in
1987.
Roderick M. Sherwood, III, 44. An American Mobile director since April
1996, Mr. Sherwood is a Vice President of Hughes and Executive Vice President of
DIRECTV International, Inc. Previously, Mr. Sherwood served as Treasurer of
Hughes, Senior Vice President -- Operations and Chief Financial Officer of
Hughes Telecommunications and Space Company, Chairman of Hughes Investment
Management Company, and a member of the Hughes Chairman's Forum. Prior to
joining Hughes in May 1995, Mr. Sherwood served in a variety of financial roles
during his 14-year career with Chrysler Corporation, where he served as
assistant treasurer from 1991 to 1994.
Michael T. Smith, 54. An American Mobile director since April 1996, Mr.
Smith is Chairman and Chief Executive Officer of Hughes. Mr. Smith is a member
of the Hughes Executive Committee. Prior to his current position, Mr. Smith
served as Chairman of Hughes Aircraft Company ("Hughes Aircraft") and Vice
Chairman of Hughes. Mr. Smith served as Executive Vice President and Chief
Financial Officer of Hughes from 1989 until 1992. Mr. Smith was the Chairman of
Hughes Missile Systems Co. from 1992 to 1994. Previously, Mr. Smith served in a
variety of financial management positions with Hughes and General Motors
Corporation, beginning his career in 1968.
Yap Chee Keong, 37. An American Mobile director since May 1997, Mr. Yap is
the Group Financial Controller/Vice President for the Corporate Finance Group of
Singapore Telecom with overall responsibility for the financial management and
control of the Singapore Telecom Group. Prior to joining Singapore Telecom in
1995, he was the General Manager and Group Financial Controller of United Pulp &
Paper Company Limited, and an Audit Manager of KPMG Peat Marwick LLP.
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Board Committees, Meetings and Compensation
- -------------------------------------------
The Board of Directors has an Executive Committee which meets as needed and
generally has full authority to act on behalf of the Board of Directors unless
otherwise prohibited by Delaware law. The Executive Committee includes
representatives from Hughes, AT&T Wireless and Singapore Telecom, and its
members are designated by the Board of Directors in accordance with the terms of
a stockholders' agreement. Under certain circumstances, a stockholder holding a
Threshold Percentage of Common Stock has the right to cause other 5%
stockholders which are parties to the agreement to have such other parties'
representatives on the Board of Directors vote to have the nominee of that
stockholder appointed to the Executive Committee. See "Agreements Among
Stockholders." The current members of American Mobile's Executive Committee are
Messrs. Brandon, Ho, Shaw, Sherwood and Zesiger. Mr. Albert Zesiger, a Board
member, and a member of the Executive Committee and Compensation and Stock
Option Committee, is not standing for reelection as a Board member. See
"Compensation and Stock Option Committee Interlocks and Insider Participation."
The Executive Committee met two times during 1997 and took action by unanimous
written consent one time during 1997.
The Board of Directors also has an Audit Committee which currently consists of
Messrs. Yap, Quartner, and Sherwood. The Audit Committee is responsible for
reviewing the Company's internal auditing procedures and accounting controls and
will consider the selection and independence of the Company's outside auditors.
The Audit Committee met three times during 1997.
The Board of Directors has a Nominating Committee which makes nominations for
the Board of Directors and the Committees of the Board. The current members of
the Nominating Committee are Messrs. Dorfman, Quartner, and Smith. Mr. Steven
Dorfman, a Board member and a member of the Nominating Committee, is not
standing for reelection as a Board member. The Nominating Committee met once
during 1997. The Nominating Committee will consider stockholder proposals of
persons to be nominated for election to the Board made in accordance with the
Company's Bylaws. See "Proposals for 1999," below.
The Board of Directors has a Compensation and Stock Option Committee which is
responsible for administering American Mobile's 1989 Plan, reviewing certain of
American Mobile's compensation programs and making recommendations to the Board
of Directors with respect to compensation. The current members of the
Compensation and Stock Option Committee are Messrs. Quartner, Shaw, Smith and
Zesiger. The Compensation and Stock Option Committee met one time during 1997
and took action by unanimous written consent five times during 1997. See
"Compensation and Stock Option Committee Report."
The Board of Directors met nine times during 1997. All director nominees other
than Messrs. Sherwood and Yap attended 75% or more of all Board meetings and
meetings of committees of which they were members during 1997.
Each non-employee member of the Board of Directors is entitled to receive an
annual retainer of $19,000, and each member of the committees of the Board is
entitled to receive additional amounts as follows: Executive Committee, $3,500
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per year; Audit Committee, $2,500 per year; Nominating Committee, $2,000 per
year; and Compensation and Stock Option Committee, $2,000 per year. Directors
have the right to elect to retain or forego these amounts, or to have them
donated to a charity of their choice. Mr. Parrott elected to have such amounts
paid to him directly. All other directors elected to forego receipt of retainer
and committee fees. Beginning in January 1998, Mr. Quartner elected to have such
amounts paid to him directly. Directors also receive reimbursement for
reasonable expenses incurred in attending meetings of the Board and of Board
committees. During 1997, all directors elected to forego such reimbursement.
Each non-employee member of the Board of Directors (an "Eligible Director") is
entitled to receive options exercisable for the Company's Common Stock as
provided in the Company's 1994 Non-Employee Director Stock Option Plan
("Director Plan"). Pursuant to the Director Plan, each Eligible Director (other
than directors electing not to receive such options) receives an initial option
to purchase 1,000 shares of Common Stock, and automatically receives annually an
option to purchase 500 shares of Common Stock at an exercise price equal to the
fair market value of the Common Stock on the date of grant. Each option expires
on the earlier of (i) ten (10) years from the date of grant or (ii) seven (7)
months after a director's termination of service as a director. Messrs. Brandon,
Dorfman, Ho, Shaw, Sherwood, Smith, Yap and Zesiger have elected to forego
receipt of options under the Director Plan.
Security Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------
The following table and the accompanying notes set forth certain information
concerning the beneficial ownership of American Mobile's Common Stock at March
31, 1998 (except where otherwise indicated), by (i) each person who is known by
American Mobile to own beneficially more than five percent of American Mobile's
Common Stock, (ii) each director, (iii) each Executive Officer named in the
Summary Compensation Table (see "Executive Compensation," below), and (iv) all
directors and Executive Officers as a group. Except as otherwise indicated, each
person listed in the table has informed American Mobile that such person has (i)
sole voting and investment power with respect to such person's shares of Common
Stock and (ii) record and beneficial ownership with respect to such person's
shares of Common Stock.
<TABLE>
<CAPTION>
Name of Beneficial Owner(1) Number of
Shares % of Class
Beneficial Owners of More than 5%
<S> <C> <C>
AT&T Wireless Services, Inc.(2) 3,881,424 12.48%
1150 Connecticut Avenue, N.W.
Washington, DC 20036
Singapore Telecommunications Limited (3) 4,919,046 15.86%
31 Exeter Road, Comcentre
Singapore 239732
Republic of Singapore
Motorola, Inc.(4) 5,025,000 16.64%
1303 East Algonquin Road
Schaumberg, IL 60196
Baron Capital, Inc.(5) 6,153,000 19.84%
767 Fifth Avenue, 24th Floor
New York, NY 10153
Hughes Communications Satellite
Services, Inc.(6) 11,566,622 32.92%
Building S66/D468
Post Office Box 92424
Los Angeles, CA 90009
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Directors and Executive Officers
Douglas I. Brandon..................................0 *
Robert L. Goldsmith(7)(11)....................111,158 *
Ho Siaw Hong........................................0 *
Pradeep P. Kaul.....................................0 *
Billy J. Parrott(8)(9).........................12,000 *
Gary M. Parsons(7)(11)........................256,267 *
Stephen D. Peck(7) (11)........................30,218 *
Walter V. Purnell, Jr.(11)(12).................80,200 *
Andrew A. Quartner(8)(10).......................5,500 *
Jack A. Shaw........................................0 *
Roderick M. Sherwood III............................0 *
Michael T. Smith................................1,000 *
Yap Chee Keong......................................0 *
Randy S. Segal(7) (11)........................133,556 *
All Directors and Executive Officers as a
group (14 persons)(7)(11).....................629,899 2.09%
</TABLE>
* Less than 1%
(1)Certain holders of Common Stock, including each of the beneficial owners
of more than 5% of the Common Stock ("5% Stockholders") listed in the table are
parties to a stockholders' agreement dated December 1, 1993 (the "Stockholders'
Agreement"). The 5% Stockholders who are parties to the Stockholders' Agreement
may be deemed to constitute a group having beneficial ownership of all Common
Stock held by members of such group. See "Agreements Among Stockholders." Each
such 5% Stockholder disclaims beneficial ownership as to shares of Common Stock
held by other 5% Stockholders.
(2)Through its subsidiaries, Transit Communications, Inc. (681,818 shares),
Satellite Communications Investments Corporation (1,344,067 shares), and Space
Technologies Investments, Inc. (1,855,539). Includes 649,347 shares of Common
Stock issuable upon exercise of warrants held by Space Technologies Investments,
Inc., and 230,932 shares of Common Stock issuable upon exercise of warrants held
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by Satellite Communications Investments Corporation. Such warrants are
exercisable at any time through December 20, 1998, at an exercise price of
$21.00 per share, subject to restriction if such exercise would cause the
Company's foreign ownership to exceed the levels permitted by the Communications
Act of 1934, as amended (the "Communications Act").
Transit Communications, Inc. is indirectly 80%-owned by LIN Broadcasting
Corporation, which is an indirect subsidiary of AT&T Wireless. Satellite
Communications Investments Corporation and Space Technologies Investments, Inc.
are direct or indirect subsidiaries of AT&T Wireless.
(3)Singapore Telecom is approximately 80%-owned by Temasek Holdings
(Private) Ltd., a Singapore holding company that is wholly owned by the
Government of Singapore. Includes 812,500 shares of Common Stock issuable upon
exercise of warrants issued in connection with the guaranty of the bank
financings.
(4)Does not include 1,524,217 Purchase Price shares of the Company's Common
Stock and warrants for shares of the Company's Common Stock to Motorola the
issuance of which are subject to Stockholder approval at the 1998 annual
meeting.
(5)Includes 812,500 shares of Common Stock issuable upon exercise of
warrants issued in connection with the guarantees of the bank financings.
(6)Hughes Communications Satellite Services, Inc. ("HCSSI") is an indirect
wholly-owned subsidiary of Hughes, which is a wholly-owned subsidiary of General
Motors Corporation. Includes 25,000 shares of Common Stock issuable upon
exercise of warrants issued to HCSSI on January 19, 1996, in connection with a
prior interim financing facility guarantee and 4,875,000 shares of Common Stock
issuable upon exercise warrants issued in connection with the bank financings.
(7)Includes shares owned through the Company's matching 401(k) Plan and/or
Employee Stock Purchase Plan.
(8)Includes shares issuable upon the exercise of options granted under the
Director Plan which options are vested and exercisable within sixty days after
March 31, 1998, subject to compliance with applicable securities laws.
(9)Includes 7,500 shares owned by Private Networks, Inc., a company in
which Mr. Parrott owns a one-third equity interest. Mr. Parrott disclaims
beneficial ownership as to all such shares of Common Stock.
(10)Includes 1,050 shares owned by trusts for the benefit of each of Mr.
Quartner's three children, of which Mr. Quartner is trustee, and 100 shares
owned by Mr. Quartner's wife. Mr. Quartner disclaims beneficial ownership as to
all such shares of Common Stock.
(11)Includes shares issuable upon the exercise of options granted under the
1989 Plan which options are vested and exercisable within sixty days after March
31, 1998, subject to compliance with applicable securities laws. Also includes
shares of Restricted Stock awarded under the 1989 Plan, which are subject to a
number of conditions of forfeiture.
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(12)Includes 200 shares owned by Mr. Purnell's wife, as to which Mr.
Purnell disclaims beneficial ownership.
Agreements Among Stockholders
- -----------------------------
Stockholders' Agreement
- -----------------------
American Mobile and each holder of shares of Common Stock who acquired such
shares prior to the Company's initial public offering of 8,500,000 shares of
Common Stock, which was completed December 20, 1993, are parties to a
Stockholders' Agreement, amended and restated as of December 1, 1993 (the
"Stockholders' Agreement"). The remaining parties to the Stockholders' Agreement
(principally Hughes, Singapore Telecom, and AT&T Wireless) hold approximately
50% of the outstanding shares of Common Stock, on a fully diluted basis. The
Stockholders' Agreement sets forth agreements among the parties relating to the
governance of the Company, ownership of shares and the voting and
transferability of Common Stock and other matters. The Stockholders' Agreement
limits the Company's activities to engaging in the communications business,
providing, marketing and operating a mobile satellite service and engaging in
activities necessary, appropriate or reasonably related to the foregoing. The
Stockholders' Agreement provides that the parties will not vote to remove
members of the Board of Directors except for cause and that they will not elect
or permit the election of a director who is not a United States citizen, if such
action would cause the Company to violate applicable law, regulations or FCC
policy.
In the Stockholders' Agreement, stockholders who, together with their
affiliates, own in excess of five percent of the Common Stock ("Specified
Stockholders") have also agreed to cause their representatives on American
Mobile's Board of Directors to appoint to the Executive Committee two directors
(and one alternate) nominated by each of the two Specified Stockholders which
are parties to the Stockholders' Agreement that hold the greatest number of
shares of Common Stock and one director (and one alternate) nominated by the
Specified Stockholder that holds the third greatest number of shares of Common
Stock, provided that each Specified Stockholder making such nomination holds at
least 15% (the "Threshold Percentage"), of the outstanding Common Stock.
Notwithstanding the foregoing, regardless of whether any other Specified
Stockholder which is a party to the Stockholders' Agreement holds the Threshold
Percentage of the outstanding shares of Common Stock, during the period that any
single Specified Stockholder or group of affiliated stockholders which are
parties to the Stockholders' Agreement are the record holders of more than 50%
of the outstanding Common Stock, the Specified Stockholders have agreed to cause
their Board representatives to vote for the appointment to the Executive
Committee of nominees of that Specified Stockholder. The Stockholders' Agreement
also provides that no person shall be elected to the Board of Directors if such
election would violate the Communications Act or regulations thereunder.
Furthermore, the Stockholders' Agreement provides that no director shall be
elected to the Executive Committee if such election, in the opinion of counsel
for American Mobile, would raise a reasonable prospect of violating the
Communications Act or regulations thereunder. Moreover, before any Specified
Stockholder may elect a director of American Mobile who is not a United States
citizen, it must first allow Singapore Telecom to elect such a director,
provided Singapore Telecom casts sufficient cumulative votes to elect a
director.
The Communications Act provides that certain FCC licenses may not be held by a
corporation of which more than 20% of its capital stock is directly owned of
record or voted by non-U.S. citizens or entities or their representatives (the
Company's wholly-owned subsidiary, AMSC Subsidiary Corporation ("AMSC
Subsidiary"), as the holder of the FCC license to construct and operate the
Company's mobile satellite services system, is subject to these restrictions).
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Further, the Communications Act provides that certain FCC licenses may not be
held by a corporation controlled by another corporation if more than 25% of the
controlling corporation's capital stock is owned of record or voted by non-U.S.
citizens or entities or their representatives ("Alien Ownership"), if the FCC
finds that the public interest is served by the refusal or revocation of such
license (American Mobile controls AMSC Subsidiary and therefore is subject to
these restrictions). The Stockholders' Agreement contains procedures for
reducing the risk that the Company will fail to comply with the FCC's Alien
Ownership restrictions as a result of the ownership of the stockholders party to
that Agreement or their respective holdings in American Mobile.
The Stockholders' Agreement provides that when a Specified Stockholder transfers
Common Stock not acquired by such Specified Stockholder in the open market, the
transferee shall become a party to the Stockholders' Agreement, and shall assume
all of the transferring Specified Stockholder's rights and obligations under the
Stockholders' Agreement, provided such transferee together with its affiliates
would, giving effect to such transfer, hold in excess of 5% of the issued and
outstanding Common Stock.
The Stockholders' Agreement continues until terminated by the affirmative vote
of the holders of three-fourths of the issued and outstanding Common Stock held
by parties to the Stockholders' Agreement. It may be amended by a three-fourths'
vote of the Specified Stockholders, except that amendments to the provisions
providing for registration rights and certain other matters require the
affirmative vote of the holders of three-fourths of the outstanding Common Stock
held by parties to the Stockholders' Agreement.
Motorola Agreements
- -------------------
In connection with the acquisition of ARDIS from Motorola by the Corporation on
March 31, 1998 (the "Acquisition"), and pursuant to the Stock Purchase Agreement
dated as of December 31, 1997, as amended March 31, 1998 (the "Purchase
Agreement"), American Mobile, Motorola and certain of American Mobile's
principal stockholders (Hughes, Singapore Telecom and AT&T Wireless) (the
"Participating Stockholders") have agreed to certain participation and
registration rights with respect to American Mobile's Common Stock.
Pursuant to the terms of the Participation Rights Agreements entered into on
December 31, 1997 (the "Participation Rights Agreement"), in the event that one
of the Participating Stockholders seeks to transfer its shares of American
Mobile's Common Stock other than in a Rule 144 or public stock exchange or
Nasdaq Stock Market transaction (a "Transfer") at a time at which Motorola
beneficially owns 5% or more of American Mobile's Common Stock, Motorola would
have a right to receive notice of the intended Transfer by such Participating
Stockholder and a right to participate (proportionate to Motorola's
stockholdings relative to those of such Participating Stockholder) in such
contemplated Transfer. Under the Participation Rights Agreement, the
Participating Stockholders would be entitled to similar notice and participation
rights in the event of an intended transfer by Motorola of its interests in
American Mobile's Common Stock.
The Participation Rights Agreement also provides that in connection with the
Acquisition, Motorola would be entitled to certain demand and participation
("piggyback") registration rights with respect to the shares of Common Stock to
be issued to Motorola (directly or following exercise of its warrants) as part
of the purchase price of ARDIS. Pursuant to the Agreement, after the first year
following the Acquisition, Motorola or its transferees would be entitled to two
demand registrations with respect to its shares of American Mobile's Common
Stock, subject to certain registration priorities and postponement rights of
American Mobile. In addition, Motorola would be entitled to piggyback
registration in connection with any registration of securities by American
9
<PAGE>
Mobile (whether or not for its own account) on a form which may be used for
registration of the Common Stock held by Motorola. Under the Participation
Rights Agreement, Motorola's piggyback registration rights would have certain
priorities for sale over those of other parties (including the Participating
Stockholders). Motorola's priority rights, however, would not extend to a
primary registration on behalf of American Mobile or to the registration rights
relating to the 12 1/4% senior notes and related warrants (the "high yield debt
offering") issued by the Company in connection with the Acquisition.
In addition, under the Participation Rights Agreement, the Participating
Stockholders and Baron Capital, Inc. agreed with Motorola to vote their shares
of Common Stock in favor of and take such other action as may be necessary to
approve the Acquisition, including the issuance of shares of American Mobile's
Common Stock to Motorola in connection with the Acquisition.
Executive Officers
- ------------------
Executive Officers of American Mobile are elected by, and serve at the
discretion of, the Board of Directors. As part of their responsibilities,
Executive Officers also currently serve as officers of the subsidiaries of
American Mobile, including AMSC Acquisition Company, Inc., AMSC Subsidiary,
American Mobile Satellite Sales Corporation, Personal Communications Satellite
Corporation, AMSC Sales Corporation, Ltd., American Mobile Radio Corporation,
AMRC Holdings, Inc. (together with American Mobile Radio Corporation, "AMRC"),
AMSC ARDIS, Inc., AMSC ARDIS Acquisition, Radio Data Network Holding
Corporation, ARDIS Company, and ARDIS Holding Company. Executive Officers
receive no additional compensation for these services. Information with respect
to the age, business experience and the affiliations of the Executive Officers
of American Mobile is set forth below.
Gary M. Parsons, Chief Executive Officer and Chairman of the Board of
Directors, joined the Company in July 1996. See "Nominees" for information
regarding Mr. Parson's age, business experience and affiliations.
Walter V. Purnell, Jr., 52. American Mobile's President effective upon the
consummation of the Acquisition in March 1998. Prior to the Acquisition, Mr.
Purnell was President and Chief Executive Officer of ARDIS since September 1995.
Previously, Mr. Purnell had served as the chief financial officer of ARDIS since
its founding in 1990. Prior to 1990, Mr. Purnell held a broad range of senior
executive positions with IBM over 23 years, with financial responsibility over
significant telecommunications and other business divisions, both domestically
and internationally.
Robert L. Goldsmith, 54. American Mobile's Executive Vice President and
Chief Operating Officer since February 1997. Prior to joining American Mobile,
Mr. Goldsmith was the Senior Vice President of Sales and Marketing and General
Manager of the Commercial Services Division for Qwest Communications Company.
Prior to joining Qwest in 1995, Mr. Goldsmith was with MCI for nine years in
various executive sales and marketing positions.
Randy S. Segal, 42. American Mobile's Vice President, General Counsel and
Secretary since October 1992. From October 1983 to October 1992, Ms. Segal was
associated with the law firm of Debevoise & Plimpton in New York, New York.
Prior to joining Debevoise, Ms. Segal clerked for the Honorable Jerre S.
Williams of the United States Court of Appeals for the Fifth Circuit, and for
the Honorable Edmund L. Palmieri for the United States District Court for the
Southern District of New York.
10
<PAGE>
Stephen D. Peck, 53. American Mobile's Vice President and Chief Financial
Officer since July 1997. Mr. Peck was formerly Executive Vice President and
Chief Financial Officer at Phillips Publishing International ("PPI"), which he
joined in 1986. Prior to joining PPI, Mr. Peck was Senior Vice President for
Finance and Administration of the Viguerie Company, which he joined in 1977.
Compensation and Stock Option Committee Report
- ----------------------------------------------
Introduction
- ------------
The Company's compensation policy for 1997 was established by the Compensation
and Stock Option Committee consisting of Messrs. Quartner, Shaw, Smith and
Zesiger. Mr. Zesiger, currently a director of American Mobile, is not standing
for reelection on the Board. In accordance with this policy, which is discussed
in greater detail below, the Compensation and Stock Option Committee set the
base salaries of, and awarded cash bonuses, stock options and shares of
restricted stock to, American Mobile's Executive Officers for 1997. None of the
members of the Compensation and Stock Option Committee are employees of the
Company.
American Mobile's Compensation Policy. American Mobile's compensation policy is
designed to (i) attract and retain a talented and highly motivated executive
corps, (ii) reward those executives for attaining personal, departmental and
company-wide goals, and (iii) align the interests of those executives with the
interests of the Company's stockholders. Each of these objectives is addressed
to a greater or lesser extent by each of the three components of the executive's
compensation - base salary, annual bonus, and equity based awards (restricted
stock awards and stock options).
The Compensation and Stock Option Committee determined in 1997 that merit
increases would not be paid to senior executives, and upon recommendation by Mr.
Parsons, that the Chief Executive Officer's base compensation would be reduced.
Instead, the Committee approved a proportionate increase in at-risk, bonus
compensation to such executives. In view of the economic constraints facing the
Company, the desirability of placing a greater emphasis on performance-based,
at-risk compensation, and the positive message to be derived throughout the
organization by implementation of such a salary reduction or freeze at the most
senior management levels, the Committee believed this base and bonus
reallocation to be a desirable one.
In 1998, the Committee determined that merit increases should again be paid and
returned Mr. Parsons' base salary to its original level of $350,000.
Annual Bonus. American Mobile's Executive Officers are eligible for
discretionary annual bonuses. Performance objectives are set annually for each
executive, with relative values set for attaining each objective. At year end,
the Chief Executive Officer of the Company assesses each executive's success in
obtaining his or her performance objectives, and makes an appropriate
recommendation to the Compensation and Stock Option Committee regarding such
executive's annual bonus. Such recommendations are generally based, in part, on
11
<PAGE>
quantitative factors relating to attainment of corporate objectives and, in
part, on more qualitative factors relating to individual performance.
In 1998, the Committee determined that the corporate performance objectives
originally set had not been achieved. The Committee determined, however, that
additional transactional achievement goals had been set by the Board during the
year. Accordingly, the Committee established a modified objective for the
corporation - the successful consummation of the Acquisition - which if achieved
would provide the basis for payment of the corporate component of the bonus. The
Committee based this determination on the need to provide incentives and
reinforce the corporate objectives, while at the same time recognize critical
alternative achievements by management.
Stock Options. The number of stock options granted to each executive is
determined by the Compensation and Stock Option Committee in its discretion. In
making its determination, the Compensation and Stock Option Committee considers
the executive's position at the Company, his or her individual performance, the
number of options held by the executive (if any) and other factors, including an
analysis of the estimated amount potentially realizable from the options.
In January 1998, the Board of Directors granted restricted stock to senior
management for the first time. These grants include a three-year vesting
schedule as well as specific corporate performance targets related to either the
successful fulfillment of the Company's lease of its satellite, MSAT-2, or the
Company's achievement of positive EBITDA. Unless waived by the Board of
Directors, failure to meet a required performance target would prevent the
vesting of the restricted shares.
On March 27, 1997, the Compensation and Stock Option Committee approved a
repricing of certain options granted to employees pursuant to the 1989 Plan.
Because of a decline in market value of the Company's Common Stock, certain
outstanding options were exercisable at prices that exceeded the market value of
the Common Stock. In view of this decline and in keeping with the Company's
philosophy of utilizing equity incentives to motivate and retain qualified
employees, the Compensation and Stock Option Committee felt that it was
important to regain the incentive intended to be provided by options to purchase
shares of the Company's Common Stock.
Pursuant to the terms of the repricing, 175 option holders, holding options to
purchase an aggregate of 634,361 shares of the Company's Common Stock, that had
an exercise price of over $13.50 per share (the "Existing Options"), were issued
new options to purchase an equal number of shares at an exercise price of $13.00
per share, above the fair market value of $11.065 of the Company's Common Stock
on March 27, 1997, the date of the repricing (the "New Options"). The New
Options modify the exercise price of the Existing Options to which each relates,
and like the Existing Options, are governed by the 1989 Plan. The proportionate
share of vested options and the remaining vesting schedule for the New Options
remains the same as those of the Existing Options. The terms of the New Options
are otherwise the same as the terms of the Existing Options that they replace.
Compensation of the President. The foregoing principles and policies were
applied in determining the compensation of Mr. Parsons, Chief Executive Officer
of American Mobile. During fiscal 1997, Mr. Parsons received a base salary of
$317,692, which was increased $350,000 in January 1998. The Compensation and
Stock Option Committee also awarded Mr. Parsons options to purchase a total of
100,000 shares of the Company's Common Stock.
12
<PAGE>
Tax Deductibility of Executive Compensation. The Internal Revenue Code of 1986,
as amended (the "Code"), limits the federal income tax deductibility of
compensation paid to the Company's chief executive officer and to each of the
other four most highly compensated Executive Officers. The Company may deduct
such compensation only to the extent that during any fiscal year the
compensation does not exceed $1 million or meets certain specified conditions
(such as stockholder approval). Based on the Company's current compensation
plans and policies and recently released regulations interpreting the Code, the
Company and the Compensation and Stock Option Committee believe that, for the
near future, there is little risk that the Company will lose any significant tax
deduction for executive compensation. The Compensation and Stock Option
Committee intends to monitor this issue, and will consider modifications of the
Company's compensation policies as conditions warrant and to the extent
necessary to serve the best interests of the Company.
Andrew A. Quartner Jack A. Shaw Michael T. Smith Albert L. Zesiger
Compensation and Stock Option Committee Interlocks and Insider Participation
- ----------------------------------------------------------------------------
During the fiscal year ended December 31, 1997, the Compensation and Stock
Option Committee of American Mobile's Board of Directors consisted of Andrew A.
Quartner, Jack A. Shaw, Michael T. Smith and Albert L. Zesiger. During 1997, the
Company and AMSC Subsidiary entered into contracts and other transactions with
certain affiliates of Hughes and with Singapore Telecom. All of these contracts
and transactions were approved by American Mobile's Board of Directors or
Executive Committee, and the Company believes that the contracts and
transactions were made on terms substantially as favorable to the Company as
could have been obtained from unaffiliated third parties. The following is a
description of such contracts and transactions.
In 1990, following a competitive bidding process in which there was another
bidder, the Company entered into the contract (the "Satellite Construction
Contract") for the development and construction of the Company's first satellite
(the "Satellite") with Hughes Aircraft. Hughes Aircraft, one of the largest and
most experienced satellite manufacturers in the world, built the Satellite's
bus. The bus is comprised of the spacecraft and the subsystems used to maintain
the proper operation of the communications payload. The Satellite is a Hughes
HS-601 system with a payload specifically designed for the Company's mobile
satellite system by Spar Aerospace, Ltd. ("Spar"). In January 1997, the Company
reached an agreement with Hughes Aircraft to reduce the amount of performance
payments owed by the Company by 27.5%, and to defer all payments otherwise due
until January 1998. In January 1998, the Company reached agreement to further
defer payments otherwise due all the second quarter 1998.
In November 1994, AMSC Subsidiary entered into an agreement with Hughes Network
Systems Limited ("HNS") pursuant to which AMSC Subsidiary was granted an option
to purchase up to six land earth stations (each an "LES") at a price of
$2,700,000 or Less per LES, subject to discount based on the number of LESs
actually purchased. Each LES acts as a switching network and interface between
signals transmitted from the Satellite and the public data network. AMSC
Subsidiary initially exercised an option to purchase five LESs from HNS, two of
which were purchased on behalf of Rockwell International ("Rockwell"), then one
of the Company's wholesale customers. The Company acquired the two Rockwell LESs
in November 1996, in connection with its acquisition of Rockwell's multimode
messaging business. The Company terminated its purchase of one LES, and paid a
13
<PAGE>
$1.67 million terminate charge in accordance with the agreement. HNS has also
agreed to supply to AMSC Subsidiary software maintenance services in support of
the operation of the LESs at an annual rate of $760,000 for the twelve month
period commencing December 1, 1997.
The Company has entered into a reseller agreement with Hughes Space &
Communications Company, through its Hughes Government Services ("HGS") business
unit, whereby American Mobile will sell the Company's services to HGS for resale
by HGS to federal government subscribers at rates to be established by HGS. Like
the Company's other government resellers, HGS will set rates and prices for
services and equipment, respectively and will be responsible for billing and
collecting amounts due from its customers.
The Company has entered into a consulting agreement with HNS to obtain the
services of one HNS employee, formerly the Company Chief Scientist (William
Garner) to be provided to American Mobile on a half-time basis. In the
consulting arrangement, the Company pays one-half of the consulting employee's
salary for the services.
On December 30, 1997, American Mobile entered into a bridge facility (the
"Bridge Facility") with HCSSI in the principal amount of up to $10 million,
secured by a pledge of American Mobile's interest in its 80%- owned subsidiary,
AMRC. The Bridge Facility bore an annual interest rate of 12% and a maturity
date of March 31, 1999, and required mandatory repayment in the event net
proceeds are received from any asset disposition, lease agreement, financing or
equity transaction of American Mobile. The Bridge Facility was fully drawn by
the end of the first quarter of 1998, and was repaid in full with a portion of
the proceeds from the Company's $335 million high yield debt offering on March
31, 1998.
In connection with the Acquisition, the Company, the Acquisition Company and its
subsidiaries renegotiated the existing $200 million Bank Financing (the "Bank
Financing") with Morgan Guaranty Trust Company of New York, Toronto Dominion
Bank, Bank of America National Trust and Savings Association and certain other
lenders (collectively, the "Banks") to provide for two facilities: (i) the
Revolving Credit Facility, a $100 million unsecured five-year reducing revolving
credit facility, and (ii) the Term Loan Facility, a $100 million five-year, term
loan facility with up to three additional one-year extensions subject to the
Banks' approval (collectively, the "New Bank Financing"). The Term Loan Facility
is secured by the stockholdings of the Company, principally its assets in AMRC
and the newly formed subsidiary, in connection with the Acquisition, AMSC
Acquisition Company, Inc. The New Bank Financing is severally guaranteed by
Hughes, Singapore Telecom and Baron Capital Partners, L.P. (collectively, the
"Bank Facility Guarantors").
In exchange for the additional risks undertaken by the Bank Facility Guarantors
in connection with the New Bank Financing, American Mobile has agreed to
compensate the Bank Facility Guarantors, principally in the form of 1 million
additional warrants and repricing of 5.5 million warrants previously issued
(together, the "Guarantee Warrants"). The Guarantee Warrants have an exercise
price of $12.51. The Bank Facility Guarantors have certain demand and piggy-back
registration rights with regard to the unregistered shares of the Company's
Common Stock held by them or issuable upon exercise of the Guarantee Warrants.
Further, in connection with the guarantees, American Mobile has agreed to
reimburse the Bank Facility Guarantors in the event that the Guarantors are
required to make payment under the Revolving Credit Facility guarantees, and, in
connection with this reimbursement commitment has provided the Bank Facility
Guarantors a junior security interest with respect to the assets of the Company,
principally its stockholdings in AMRC and the AMSC Acquisition Company, Inc.
14
<PAGE>
Performance Graph
- -----------------
The graph set forth below shows the cumulative total return to holders of the
Company's Common Stock from December 31, 1993, through December 31, 1997,
computed by dividing (i) the difference between the closing price per share at
the beginning of such period and the last trading day of each month during such
period (the Company did not declare or pay dividends on its Common Stock during
such period) by (ii) the closing share price at the beginning of such period,
and compares such return to the performance during such period of the Center for
Research in Security Prices ("CRSP") Total Return Index for The Nasdaq Stock
Market (U.S. Companies) ("Nasdaq U.S.") and the CRSP Nasdaq Telecommunications
Stock Index ("Nasdaq Telecom"). The Nasdaq U.S. index comprises all domestic
common shares traded on the Nasdaq National Market and the Nasdaq SmallCap
Market, and the Nasdaq Telecom index comprises all such domestic common shares
of companies falling under Standard Industrial Classification Code 48. These
indices are prepared for Nasdaq by the CRSP at the University of Chicago. The
graph assumes $100 invested on December 31, 1993, in the Company's Common Stock
(at $20.50 per share), the Nasdaq U.S. index and the Nasdaq Telecom index.
COMPARISON OF FORTY-EIGHT MONTHS CUMULATIVE TOTAL RETURN
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Dec. '93 Dec. '94 Dec. '95 Dec. '96 Dec. '97
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
American Mobile 100.000 62.195 149.390 59.756 34.146
Nasdaq US 100.000 97.748 138.235 170.040 208.653
Nasdaq Telecom 100.000 83.460 109.283 111.713 165.037
</TABLE>
15
<PAGE>
Executive Compensation
- ----------------------
The following tables set forth (a) the compensation paid or accrued by the
Company to the Company's chief executive officer and its three other most highly
compensated Executive Officers receiving over $100,000 per year (such officers,
the "Named Executive Officers") for services rendered during the fiscal years
ended December 31, 1997, 1996 and 1995 and (b) certain information relating to
options granted to such individuals.
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term All Other
Compensation Compen-
Annual Compensation Awards sation(5)
------------------- ------ ---------
Name and Other Annual Options/
Principal Position Year Salary(1) Bonus Compensation(2) SARs(3)
------------------ ---- --------- -------- --------------- -------
<S> <C> <C> <C> <C> <C> <C>
Gary M. Parsons 1997 $317,692 $158,000 $ 9,600 100,000 $ --
President and 1996 $145,385 $ 87,500 $ 4,026 300,000 --
Chief Executive Officer
Robert L. Goldsmith(5) 1997 $189,807 $ 76,406 $ 8,800 100,000 --
Executive Vice President,
Chief Operating Officer
Randy S. Segal 1997 $191,000 $ 66,850 $ 9,600 25,000 --
Vice President, General 1996 $191,000 $ 52,716 $ 5,619 65,000 --
Counsel and Secretary 1995 $183,750 $ 55,000 $40,341 12,000 $54,493
Stephen D. Peck(5) 1997 $ 88,154 $ 31,318 $ 4,465 50,000 --
Vice President, Chief
Financial Officer
</TABLE>
(1)Effective with the Acquisition, Messrs. Parsons', Purnell's and
Goldsmith's, Ms. Segal's and Mr. Peck's annualized base salaries were
approximately $350,000, $225,000, $219,600, $204,400 and $195,400.
(2)All dollar amounts reported for fiscal year 1995 relate to payments to
cover the Named Executive Officer's increased taxes as a result of relocation
expense reimbursements. All dollar amounts reported for fiscal year 1997 and
1996 relate to the personal use of a company car and/or a car allowance.
(3)The numbers reflect grants of options to purchase shares of Common Stock
under the 1989 Plan. The Company has not granted stock appreciation rights
("SARs").
(4)Relates to relocation expense reimbursements.
(5)Messrs. Goldsmith and Peck joined the Company in February 1997 and July
1997, respectively.
16
<PAGE>
Option/SAR Grants Last Fiscal Year
- ----------------------------------
The following table sets forth each grant of stock options made during fiscal
year 1997 to each of the Named Executive Officers.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
<CAPTION>
Individual Grants Potential Realizable
----------------- Value at Assumed
Annual Rates of
Number of % of Total Stock Price
Securities Options/SARs Appreciation for
Underlying Granted to Exercise or Option Term(3)
Options/SARs Employees/ Base Price
Name Granted(1)(2) Fiscal Year ($/Share) Expiration Date 5% 10%
------------- ----------- --------- --------------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Gary M. Parsons .......... 100,000 7.7373% $12.81 Jan. 23, 2007 $806,021 $2,042,230
Robert L. Goldsmith....... 100,000 7.7373% $12.50 Feb. 3, 2007 $786,118 $1,992,178
Randy S. Segal .......... 25,000 1.9343% $12.81 Jan. 23, 2007 $201,505 $510,558
Stephen D. Peck ......... 50,000 3.8686% $9.06 July 14, 2007 $284,889 $721,965
</TABLE>
(1)Does not include options granted on January 22, 1998, with respect to
fiscal year 1997. The numbers reflect the grant of options to purchase shares of
Common Stock under the 1989 Plan. The Company has not granted SARs.
(2)The options become exercisable in three annual installments, vesting at
the rate of 33 1/3% per year for three years.
(3)Based on actual option term and annual compounding. The actual value a
Named Executive Officer may realize will depend upon the excess of the price of
the Common Stock over the exercise price on the date the option is exercised.
Accordingly, there is no assurance that the value ultimately realized by a Named
Executive Officer, if any, will be at or near the values indicated.
Option/SAR Exercises and Year-End Option Values
- -----------------------------------------------
The following table sets forth, for each of the Named Executive Officers, the
value of unexercised options at fiscal year-end:
17
<PAGE>
<TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values (1)
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at Fiscal in-the-Money Options/SARs
Year-End(#) at Fiscal Year-End($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
<S> <C> <C>
Gary M. Parsons......... 100,000/300,000 $0/$0
Robert L. Goldsmith..... 0/100,000 $0/$0
Randy S. Segal ......... 51,452/72,480 $0/$0
Stephen D. Peck......... 0/50,000 $0/$0
</TABLE>
(1)None of the Named Executive Officers exercised options during the fiscal
year ended December 31, 1997. The Company has not granted SARs.
The following table sets forth each repriced grant of stock options made to each
of the Named Executive Officers.
<TABLE>
OPTION/SAR REPRICINGS
Individual Grants
<CAPTION>
Market Length of
Number of Price of Exercise Original
Securities Stock at Price at Option Term
Underlying Time of Time of New Remaining at
Options/SARs Repricing or Repricing or Exercise Date of Repricing
Name Date Repriced Amendment Amendment Price or Amendment
- ---- ---- -------- --------- --------- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
Randy S. Segal 6/11/96 10,000 $18.75 $27.75 $18.75 9 years 7 months
3/27/97 20,000 $11.07 $18.75 $13.00 8 years 10 months
3/27/97 15,000 $11.07 $18.75 $13.00 9 years 3 months
3/27/97 12,000 $11.07 $14.62 $13.00 7 years 10 months
3/27/97 10,000 $11.07 $21.00 $13.00 6 years 9 months
3/27/97 11,932 $11.07 $21.00 $13.00 5 years 7 months
</TABLE>
Employment Agreements
- ---------------------
At December 1997, the Company was a party to change in control agreements
(collectively the "Change in Control Agreements," and individually a "Change in
Control Agreement") with each of Robert L. Goldsmith, Stephen D. Peck and Randy
S. Segal, as well as with other members of senior management (collectively
"Executives" and individually "Executive"). The Company has also entered into a
Change of Control Agreement with Walter V. Purnell, Jr. Under the Change in
18
<PAGE>
Control Agreements, the Company considers it essential to its best interests and
to the best interests of its stockholders to retain employment of its key
management personnel. If a Change in Control occurs during the term of the
Change in Control Agreement and the Company terminates the employment of the
Executive within two years following the occurrence of such change of control,
(i) the Company will provide to each Executive a lump-sum severance payment
equal to the sum of the Executive's annual base salary and the Executive's
average bonus, (ii) all options to purchase securities of the Company granted to
the Executive pursuant to the Company's 1989 Plan or any other Company plan that
are then held by the Executive will be accelerated to the later of the date of
termination or six months after the date such option was granted, and shall
continue to be exercisable for a two-year period after such acceleration, and
(iii) the Company shall provide the Executive with group term life insurance,
health insurance, accident and long-term disability insurance benefits, which
shall continue for a twelve-month period or until the date the Executive will
reach age sixty-five substantially similar in all respects to those that the
Executive was receiving immediately prior to the termination date. In addition,
the Company will pay to the Executive all reasonable legal fees and expenses
incurred by the Executive as a result of a termination.
The Company also entered into certain arrangements with Gary M. Parsons with
respect to change in control of the companies. Mr. Parsons' agreements,
reflected in an initial employment letter agreement and in his subsequent stock
option and restricted stock agreements, provide that Mr. Parsons would be
entitled to one year's salary in the event his employment terminates following a
Change of Control, and all equity awards would vest upon the occurrence of a
change in control without regard to whether Mr. Parsons' employment were
terminated.
2. RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
On the recommendation of the Audit Committee, the Board of Directors has
appointed Arthur Andersen LLP as independent accountants for the Company for the
year 1998, subject to ratification by the stockholders at the annual meeting.
Arthur Andersen LLP have been the independent accountants for the Company since
1988. A representative of Arthur Andersen LLP will be present at the annual
meeting of stockholders with the opportunity to make a statement if he so
desires and to respond to appropriate questions.
The Board of Directors recommends a vote FOR ratification of the
appointment of Arthur Andersen LLP as independent accountants for the
Company for the year 1998.
19
<PAGE>
3. APPROVAL OF 1989 PLAN AMENDMENT
Proposed Amendment
- ------------------
The American Mobile Satellite Corporation 1989 Plan was approved by the Board of
Directors in December 1989. There are currently 3,500,000 shares of Common Stock
reserved for issuance under the 1989 Plan. On January 21, 1998, the Board of
Directors of the Company approved for submission to stockholders an amendment to
the 1989 Plan which will increase the number of shares of Common Stock reserved
for issuance under the 1989 Plan from 3,500,000 shares to 4,500,000 shares.
As of March 31, 1998, option grants and restricted stock awards for 3,353,841
shares were granted and outstanding, and 81,205 options had been exercised. If
the amendment is approved, there will be 1,064,854 shares of Common Stock
available for grant under the 1989 Plan.
Reason for the Amendment
- ------------------------
The Company utilizes stock option grants as part of its compensation program for
executives and employees. In this way, the Company links compensation at various
levels within the organization to performance and believes that it is
appropriate to continue such practice in the future through the use of stock
options. In addition, the Company believes that the use of stock option grants
to executives and employees helps to provide incentive for their continued
employment and otherwise more closely aligns their interests with those of the
Company's stockholders. As a result, the Board of Directors believes that
1,000,000 additional shares of Common Stock should be made available under the
1989 Plan in order to facilitate the continued use of stock options as a part of
the Company's incentive compensation program.
Terms of the 1989 Plan
- ----------------------
The 1989 Plan is intended to assist the Company in attracting and retaining
employees of outstanding ability and to promote the identification of their
interests with those of the stockholders of the Company. The 1989 Plan permits
the grant of nonstatutory stock options and award of bonus stock covering
3,500,000 authorized but unissued or reacquired shares of Common Stock, subject
to adjustment to reflect events such as stock dividends, stock splits,
recapitalizations, mergers or reorganizations of or by the Company.
As of December 31, 1997, stock options covering 1,676,441 shares of Common Stock
were outstanding, which options were held by 207 persons at a weighted average
exercise price of $13.06 per share. As of March 31, 1998, the market value of
the shares underlying such options (as reflected in the closing price for the
Company's Common Stock as reported through the National Association of
Securities Dealers Automated Quotation system) was $14.25 per share. The
exercise price of all options granted under the 1989 Plan has been at least
equal to the fair market value of the Common Stock on the date of grant, as
determined in good faith by the Board.
See "Option/SAR Grants Last Fiscal Year," above for additional information about
options granted under the 1989 Plan.
20
<PAGE>
Unless sooner terminated by the Board, the 1989 Plan will expire on December 6,
2003. Such termination will not affect the validity of any option grant or stock
award outstanding on the date of termination.
The 1989 Plan is administered by the Compensation and Stock Option Committee of
the Board and is intended to satisfy the requirements of Rule 16b-3 under the
Securities Exchange Act of 1934. Subject to the terms and conditions of the 1989
Plan, the Compensation and Stock Option Committee has the authority to select
the persons to whom grants of options or awards of bonus stock are to be made,
to designate the number of shares of Common Stock to be covered by such grants
or awards, and to make all other determinations and take all other actions
necessary or advisable for the administration of the 1989 Plan.
Subject to the terms and conditions of the 1989 Plan, the Compensation and Stock
Option Committee may modify, extend or renew outstanding options, or accept the
surrender of outstanding options granted under the 1989 Plan or under any other
stock option plan of the Company and authorize the granting of new options
pursuant to the 1989 Plan in substitution therefor. The substituted options may
specify a lower exercise price than the surrendered options, a longer term than
the surrendered options or have any other provisions that are authorized by the
1989 Plan.
The 1989 Plan may be amended by the Board, subject to stockholder approval if
such approval is then required by applicable law or in order for the 1989 Plan
to continue to satisfy the requirements of Rule 16b-3 under the Securities and
Exchange Act.
Stock options and bonus stock may be granted or awarded only to persons
determined by the Compensation and Stock Option Committee to be employees of the
Company. As of February 1, 1998, the Company had approximately 289 employees. An
employee may receive more than one option or award of bonus stock, provided that
no employee may be granted options or bonus stock under the 1989 Plan covering
more than 50% of the shares of Common Stock reserved for issuance under the 1989
Plan as set forth above.
Stock options granted under the 1989 Plan will have exercise prices not less
than the greater of the fair market value of the optioned stock at the date of
grant or the par value of the optioned stock. Generally, options granted under
the 1989 Plan shall not be exercisable until the expiration of six months from
the date of grant or have a term greater than ten years after the date of grant.
Without limiting the Compensation and Stock Option Committee's discretion as to
the terms of stock options granted in accordance with the provisions of the 1989
Plan, options granted under the 1989 Plan generally become exercisable as to
331/3% of the stock covered thereby on each of the first three anniversaries of
the date of grant, generally terminate ten years after the date of grant, and
generally have an exercise price equal to the fair market value of the optioned
stock at the date of grant. The Compensation and Stock Option Committee may in
its discretion provide that options granted under the 1989 Plan expire at
specified times following, or become exercisable in full upon, the occurrence of
certain events, including a change of control, death, disability or retirement.
The 1989 Plan permits the payment of the option exercise price to be made in
cash (which may include an assignment of the right to receive the cash proceeds
from the sale of Common Stock subject to the option pursuant to a "cashless
exercise" procedure) or by delivery of shares of Common Stock valued at their
fair market value on the date of exercise, or by a combination of both cash and
Common Stock. The 1989 Plan also provides, unless otherwise determined by the
Compensation and Stock Option Committee and set forth in an agreement, for
satisfaction of an optionee's or grantee's tax liabilities arising in connection
21
<PAGE>
with the 1989 Plan through retention by the Company of shares of Common Stock
issuable upon the exercise of a nonstatutory stock option or pursuant to an
award of bonus stock or through delivery of shares of Common Stock to the
Company subject to the terms and conditions set forth in the 1989 Plan and under
such other terms and conditions as the Compensation and Stock Option Committee
deems appropriate.
The Compensation and Stock Option Committee may in its discretion provide for
the right of the optionee to surrender to the Company an option (or portion
thereof) that has become exercisable and receive upon such surrender, without
any payment to the Company, that number of shares of Common Stock having an
aggregate fair market value equal to the number of shares subject to the option
being surrendered multiplied by an amount equal to the difference between the
fair market value of a share of Common Stock on the date of surrender and the
option exercise price, plus an amount of cash equal to the fair market value of
any fractional share. The Compensation and Stock Option Committee also may
provide for the grant of a new option to an optionee upon the surrender of
shares of Common Stock to pay the option exercise price of a previously granted
option. The number of shares subject to any such new option shall equal the
number of shares surrendered to pay the option exercise price, and the option
exercise price for any such new option will not be less than the greater of the
fair market value of the optioned stock at the date of grant or the par value of
the optioned stock.
Options granted under the 1989 Plan shall not be transferable otherwise than by
will, by the laws of descent and distribution or pursuant to a qualified
domestic relations order (as defined in the Code), and may be exercised during
the optionee's lifetime only by the optionee or, in the event of the optionee's
legal disability, by the optionee's legal representative.
Bonus stock may also be awarded under the 1989 Plan. A bonus stock award
consists of shares of Common Stock that may be issued from time to time under
such conditions (if any) that the Compensation and Stock Option Committee may
prescribe. Such conditions might include such matters as continued employment
with the Company for a specified period of time or achievement of certain
performance goals.
In January 1998, the Board of Directors granted restricted stock to senior
management for the first time. These grants included both a three-year vesting
schedule as well as specific corporate performance targets relating to
successful fulfillment of the Company's lease of its satellite or the Company's
achievement of positive EBITDA. Unless waived by the Board of Directors, failure
to meet a required performance target would prevent vesting of the restricted
shares.
An optionee will not recognize income on the grant of a nonstatutory stock
option, but generally will recognize ordinary income on the exercise of a
nonstatutory stock option. The amount of income recognized on the exercise of a
nonstatutory stock option generally will be equal to the excess, if any, of the
fair market value of the shares at the time of exercise over the aggregate
exercise price paid for the shares, regardless of whether the exercise price is
paid in cash or in shares. Where ordinary income is recognized by an optionee in
connection with the exercise of a nonstatutory stock option, the Company will be
entitled to a deduction in the amount of ordinary income so recognized, subject
to satisfying tax withholding requirements.
A grantee who is awarded bonus stock that is not subject to restrictions
generally will recognize ordinary income with respect to the shares on the date
of grant. If the shares of bonus stock are subject to a substantial risk of
forfeiture on the date of grant, the grantee is not required to include the
value of such shares in ordinary income until the shares become no longer
22
<PAGE>
subject to a substantial risk of forfeiture, unless the grantee elects to be
taxed on receipt of the shares. In either case, the amount of such income
generally will be equal to the fair market value of the shares at the time the
income is recognized. The Company will be entitled to a deduction in the amount
of ordinary income so recognized, subject to satisfying tax withholding
requirements.
The rules governing the tax treatment of options and bonus stock, and an
optionee's or grantee's receipt of shares in connection with such grants or
awards, are quite technical, so that the above description of tax consequences
is necessarily general in nature and does not purport to be complete. Moreover,
statutory provisions are, of course, subject to change, as are their
interpretations, and their application may vary in individual circumstances.
Finally, the tax consequences under applicable state law may not be the same as
under the federal income tax laws.
Recommendation and Vote Required
- --------------------------------
The affirmative vote of the holders of a majority of the Company's Common Stock
present in person or by proxy and entitled to vote at the annual meeting is
required to approve the amendment to the 1989 Plan.
The Board of Directors recommends a vote FOR the approval of this proposal.
PROXIES WILL BE VOTED FOR THE APPROVAL OF THE AMENDMENT TO THE 1989 PLAN UNLESS
OTHERWISE INDICATED ON THE PROXY.
4. APPROVAL OF ISSUANCE OF STOCK FOR ACQUISITION OF ARDIS
The Acquisition
- ---------------
On March 31, 1998, the Company acquired ARDIS in accordance with the Purchase
Agreement. Subject to certain purchase price adjustments, the Company completed
the Acquisition for a price of $100 million (the "Purchase Price") paid as
follows: (i) $50 million in cash, paid at the closing of the Acquisition, (ii)
approximately $38 million in shares of the Company's Common Stock, paid at the
closing of the Acquisition, and (iii) approximately $12 million in shares of the
Company's Common Stock and warrants for shares of Common Stock ("Warrants"),
payable only if the stockholders approve the issuance of such additional shares
and Warrants (the "Additional Issuance"). The Warrants will have an exercise
price of $.01 per share.
The Company's Common Stock is quoted on the Nasdaq National Market under the
symbol ("SKYC"). Under the rules of the Nasdaq National Market, the Company must
obtain stockholder approval prior to the issuance of Common Stock, or securities
convertible into or exercisable for Common Stock if (a) the issuance of such
securities is in connection with the acquisition of the stock or assets of
another company and (b) either (i) the common stock to be issued in the
transaction will have upon its issuance voting power equal to or in excess of
20% of the voting power of the issuer's common stock outstanding before such
issuance or (ii) the number of shares of common stock to be issued is or will be
equal to or in excess of 20% of the number of shares of common stock outstanding
before such issuance. Accordingly, prior to the Additional Issuance, the Company
must obtain approval from its stockholders, since the shares of Common Stock
paid at the closing, together with the Additional Issuance will represent more
than 20% of the voting power of its Common Stock or more than 20% of the number
of shares of Common Stock outstanding prior to such Additional Issuance.
23
<PAGE>
STOCKHOLDERS ARE NOT BEING ASKED TO APPROVE THE
ACQUISITION. A FAILURE OF THE COMPANY'S STOCKHOLDERS
TO APPROVE THE ADDITIONAL ISSUANCE WILL NOT HAVE ANY
EFFECT ON THE ACQUISITION.
In connection with the Purchase Agreement, the holders of approximately 76% of
the Company's Common Stock (Hughes, Singapore Telecom, Baron Capital, Inc. and
AT&T Wireless) have agreed with Motorola to vote in favor of the Additional
Issuance. Such shares of Common Stock will be sufficient to establish a quorum
and to approve the Additional Issuance without the vote of any other
stockholder.
Reasons for the Acquisition
- ---------------------------
With the Acquisition, the Company is a leading provider of nationwide wireless
communications services, including data, dispatch, and voice services, primarily
to business customers in the United States. The Company now offers a broad range
of end-to-end wireless solutions using a seamless network consisting of the
nation's largest, most fully-deployed terrestrial wireless data network and a
satellite in geosynchronous orbit.
Through its ability to offer a broad range of services on a nationwide scale,
the Company believes that it is well positioned to serve the needs of mobile
workers in the United States. Within its addressable market, the Company is
concentrating its sales and marketing efforts on the transportation, field
services, and emerging two-way messaging markets. The Company believes that its
combination of guaranteed delivery and high reliability, deep in-building
penetration and geographic breadth of coverage provide a significant competitive
advantage over other competing networks.
Pro Forma Summary Financial and Other Data
- ------------------------------------------
The following summary pro forma financial information gives effect to (i) the
Acquisition, (ii) the high yield debt offering and (iii) the New Bank Financing
as if such transactions had been consummated on December 31, 1997 in the case of
the State of Operations Data and Other Financial and Operating Data, and on
January 1, 1997 in the case of the Balance Sheet Data of Operations of the
Company. The pro forma combined financial information is presented for
illustrative purposes only and is not necessarily indicative of what the
Company's actual financial position or results of operations would have been had
the above-referenced transactions been consummated as of the above-referenced
dates or of the financial position or results of operations that may be reported
by the Company in the future.
The following data should be read in conjunction with the Company's Consolidated
Financial Statements and related notes, ARDIS' Combined Financial Statements and
related notes, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and other financial information included elsewhere
herein, as applicable.
24
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1997
----------------------------
(Dollars in thousands, except subscribers and revenue per unit)
<S> <C>
Statement of Operations Data:
Revenues:
Services $ 62,109
Equipment and consulting 25,856
----------
Total revenue 87,965
Operating loss (117,021)
Net loss (176,382)
Other Financial and Operating Data:
Number of subscribers (end of period) (1) 81,300
Average monthly revenue per unit (1) $ 69
EBITDA (2) (56,872)
Depreciation and amortization 59,274
Capital expenditures 10,029
Ratio of earnings to fixed charges (3) --
Balance Sheet Data:
Cash and cash equivalents $ 26,206
Restricted cash (4) 123,000
Property and equipment, net 274,975
Total assets 612,893
Total debt (5) 447,374
Total stockholders' equity 104,631
</TABLE>
(1) Number of subscribers and average monthly revenue per unit calculations
have been adjusted to account for subscribers common to ARDIS and American
Mobile.
(2) "EBITDA" consists of operating income (loss) plus depreciation and
amortization. EBITDA is a financial measure commonly used in the Company's
industry and should not be construed as an alternative to operating income (as
determined in accordance with GAAP) or as a measure of liquidity. EBITDA does
not represent funds available for dividends, reinvestment or other discretionary
activities. EBITDA has been adjusted to include $875,000 of other income from
the licensing of certain technology.
(3) For purposes of calculating the ratio of earnings to fixed charges,
earnings are defined as loss before income taxes and extraordinary items plus
fixed charges. Fixed charges consist of interest expense, amortization of debt
issuance costs, accretion of discount on preferred stock and a reasonable
approximation of the interest factor included in rental payments on operating
leases. Earnings were inadequate to cover fixed charges for the year ended
December 31, 1997 by $176.4 million.
(4)Restricted cash includes pledged securities purchased in connection with
the financing of the Acquisition of $113.0 million and $10.0 million escrowed to
fulfill potential obligations under a customer contract.
(5)Subsequent to December 31, 1997, the Company drew down the remaining
$2.0 million under the certain bank financing, and drew down $10.0 million
available under the bridge facility prior to the closing of the high yield debt
offering. Upon consummation of the high yield debt offering and partial
repayment of the Bank Financing, it is expected that the Company will have
$100.0 million available for borrowing under the Revolving Credit Facility.
25
<PAGE>
ARDIS
- -----
ARDIS, a leading provider of nationwide wireless data service, markets its
service primarily to business customers with a need for reliable, two-way
wireless data communications in the field services and transportation markets.
The ARDIS wireless data network provides the widest breadth of any single
provider of terrestrial wireless service in the United States. The network
incorporates approximately 1,700 radio towers (base stations) that provide
service to 425 of the largest cities and towns in the United States, including
virtually all metropolitan areas. The network was designed and built using
Motorola technology to provide reliable two-way data communications, deep
in-building penetration and efficient frequency usage. The extensive coverage
and deep in-building penetration provided by the ARDIS network is attractive to
customers who desire a single service provider whose nationwide scope extends
from large metropolitan areas to smaller cities and towns. Customers such as
IBM, NCR, Pitney Bowes, and Sears use applications such as service call
dispatch, asset tracking, and peer-to-peer communications to achieve critical
business objectives resulting in increased productivity, profitability and
customer satisfaction.
The executive offices of ARDIS are located at 300 Knightsbridge Parkway, Suite
500, Lincolnshire, Illinois 60069, telephone: (847) 913-1215.
Selected Financial and Other Data
- ---------------------------------
Set forth below is the selected financial data for ARDIS for the five fiscal
years ended December 31, 1997:
<TABLE>
<CAPTION>
(dollars in thousands, except for per share data)
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Unaudited)
-----------
<S> <C> <C> <C> <C> <C>
Revenues $44,249 $45,297 $41,272 $50,907 $46,604
Net Loss (11,742) (18,998) (25,253) (22,504) (40,446)
Net Loss Per Common Share(1) -- -- -- -- --
Dividends on Common Stock(1) -- -- -- -- --
Consolidated Balance Sheet Data:
Cash and Cash Equivalents 2,082 5,289 6,985 16,035 8,896
Property Under Construction -- -- -- -- --
Total Assets 69,830 91,252 103,231 83,368 61,113
Current Liabilities 12,807 13,281 14,569 27,428 12,970
Long-Term Obligations 8,931 12,830 16,395 -- --
Stockholders' Equity 48,092 65,141 72,267 55,940 48,143
</TABLE>
(1)The financial results of ARDIS present the combined financial position
of Motorola ARDIS Acquisition, Inc. ("MAA") and Motorola ARDIS, Inc. ("MAI"),
each wholly-owned subsidiaries of Motorola, Inc. ("Parent"). Each of MAA and MAI
own a 50% partnership interest in ARDIS Holding Company. As such, net loss per
common share and dividends on common stock are not applicable.
26
<PAGE>
ARDIS
Management's Discussion and Analysis of Financial Condition
and Results of Operations
- ------------------------------------------------------------
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
- ---------------------------------------------------------------------
Operating Revenues. Services revenues were $41.9 million for 1997 as
compared to $43.4 million for 1996. The decrease in revenue reflects reduced
usage during 1997 by several large accounts, including UPS which was impacted by
the strike in 1997.
Revenue from the sale of equipment increased to $2.3 million in 1997
compared from $1.9 million in 1996. Devices made available from RIM during 1997
and continued demand for the Motorola PCMCIA modem contributed to the increase.
Costs and Expenses. Total costs and expenses decreased approximately 17%
during 1997 compared to 1996. Cost of services and operations for 1997 were
$31.9 million, a decrease from $32.8 million for 1996. This decline was due
primarily due to continued cost savings derived from the consolidation of
network operations which were commenced during 1996.
The cost of equipment sold for 1997 increased to $2.3 million from $1.4
million for 1996 in relation to the increased revenue from equipment sales.
Sales and marketing expenses for 1997 were $5.9 million, a decline from
$13.7 million for 1996. The decline was attributable primarily to ARDIS' shift
from a consumer market focus in 1996 to its traditional vertical business
markets focus in 1997. Sales and marketing costs as a percentage of revenue were
13% in 1997 and 30% in 1996.
General and administrative expenses in 1997 were $7.0 million, a decline
from $9.4 million in 1996. This decline was attributable primarily to (i)
reduced headcount and personnel related costs which had supported horizontal
marketing efforts (ii) reduced software license expenses and (iii) reduced
reserve requirements. As a percentage of revenue, general and administrative
expenses represented 16% in 1997 and 21% in 1996.
Depreciation and amortization expense in 1997 was $14.6 million, a decline
from $17.3 million in 1996. The decline was attributable to the originally
contributed network assets in 1990 becoming fully depreciated in 1997.
Depreciation and amortization expense as a percentage of revenue was 33% for
1997 and 38% for 1996.
Interest and Other Income. Net interest expense was $1.2 million for 1997,
a decline from $1.4 million in 1996. This decline was as a result of lower
capital lease balances.
Capital Expenditures. Capital expenditures for 1997 were $1.4 million
compared to $3.4 million for 1996. The decrease in capital expenditure amounts
reflects the significant capital expenditures made in 1996 and prior periods
that provided sufficient network capacity and therefore reduced capital
expenditure requirements in 1997.
27
<PAGE>
Certain Effects of the Additional Issuance on Stockholders
- ----------------------------------------------------------
The Additional Issuance will have a dilutive effect on the voting rights of the
holders of Common Stock. In addition, upon exercise of the Warrants, there will
be substantial and immediate dilution to existing stockholders as a result of
the exercise price for such Warrants.
As a result of the Acquisition, Motorola will be the second largest stockholder
of the Company, holding approximately 20.6% of the Company's outstanding Common
Stock, following the Additional Issuance. In addition, in connection with the
Acquisition, Motorola received certain registration rights for its shares of
Common Stock and Common Stock subject to the Warrants. See "Agreements Among
Stockholders -- Motorola Agreements."
Recommendation and Vote Required
- --------------------------------
The affirmative vote of a majority of the total votes cast, excluding shares of
Common Stock held by Motorola, is required to approve the Additional Issuance.
In connection with the Purchase Agreement, the holders of approximately 76% of
the Company's Common Stock (Hughes, Singapore Telecom, Baron Capital, Inc. and
AT&T Wireless) have agreed with Motorola to vote in favor of the Additional
Issuance. Such shares of Common Stock will be sufficient to establish a quorum
and to approve the Additional Issuance without the vote of any other
stockholder.
The Board of Directors unanimously approved the Purchase Agreement and the
closing of the Acquisition. As discussed above, the Company believes that the
Acquisition represents a strategic fit between two companies with similar
business strategies and complementary products and operations. As a result of
the Acquisition, the Company believes that it will be able to capitalize upon
meaningful operational synergies that could expedite the Company's ability to
generate positive operating results. In addition, the Company believes that it
will be able to enhance revenue growth through cross-selling opportunities
between the Company's and ARDIS' sales forces. The Company also expects to
rationalize its cost structure through (i) network optimization and integration,
(ii) office and systems consolidation and (iii) limited personnel reductions.
The Board of Directors recommends a vote FOR the Additional Issuance.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors, its
executive officers, and any persons holding more than ten percent of the
Company's common stock are required to report their ownership of the Company's
common stock and any changes in that ownership to the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. Specific due
dates for these reports have been established and the Company is required to
report in this proxy statement any failure to file by these dates. No person
associated with the Company who was required to file under these rules failed to
file any such required report. In making this statement, the Company has relied
on the written representations of its directors and officers and copies of the
reports that have been filed with the SEC.
28
<PAGE>
OTHER MATTERS
The Board of Directors is not aware of any other matters to be presented at the
annual meeting. If any other matter proper for action at the meeting should be
presented, the holders of the accompanying proxy will vote the shares
represented by the proxy on such matter in accordance with their best judgment.
If any matter not proper for action at the meeting should be presented, the
holders of the proxy will vote against consideration thereof or action thereon.
All shares represented by the accompanying proxy, if the proxy is duly executed
and received by the Company at or prior to the meeting, will be voted at the
meeting in accordance with any instructions specified on such proxy and, where
no instruction is specified, as indicated on such proxy.
PROPOSALS FOR 1999
In accordance with rules promulgated by the SEC, the Company will review for
inclusion in next year's proxy statement stockholder proposals received by
November 30, 1998. Proposals should be sent to the Secretary of the Company,
10802 Parkridge Boulevard, Reston, Virginia 20191-5416. In addition, in
accordance with Article II, Section 13 of the Company's Bylaws, in order to be
properly brought before the 1999 annual meeting of stockholders, a stockholder
submitting a proposal must file a written notice with the Secretary of the
Company which conforms to the requirements of the Bylaws. If the Board of
Directors or a designated committee or officer who will preside at the
stockholders meeting determines that the information provided in such notice
does not satisfy the informational requirements of the Bylaws or is otherwise
not in accordance with law, the stockholder will be notified promptly of such
deficiency and be given an opportunity to cure the deficiency within the time
period prescribed in the Bylaws. Such notice of a stockholder proposal must be
delivered not less than 60 days nor more than 120 days prior to the date of the
annual meeting to be held in 1998 (unless such notice relates to a special
meeting or the annual meeting is called to be held before the date specified in
the Bylaws, in which case the stockholder proposal must be delivered no later
than the close of business on the tenth day following the date on which notice
of the meeting is publicly announced).
29
<PAGE>
1997 ANNUAL REPORT
American Mobile's Annual Report on Form 10-K for the year ended December 31,
1997, including financial statements ("Annual Report"), is being furnished
concurrently with this Proxy Statement to persons who were stockholders of
record as of March 31, 1998, the record date for the Annual Meeting. The
information set forth in the Annual Report under Items 1 through 3 and Items 5
through 9 is incorporated by reference into this Proxy Statement. Except to the
extent so incorporated, the Annual Report does not form part of the material for
the solicitation of proxies.
By order of the Board of Directors,
Randy S. Segal
Vice President and Secretary
Reston, Virginia
April 27, 1998
30
<PAGE>
INDEX
Audited financial statements of ARDIS...................................... F-1
Independent auditors' report............................................... F-2
ARDIS financial statements................................................. F-3
Notes to financial statements.............................................. F-7
<PAGE>
Audited Financial Statements
ARDIS HOLDING COMPANY
Combined Financial Statements
December 31, 1996 and 1997
(With Independent Auditors' Report Thereon)
F-1
<PAGE>
Independent Auditors' Report
The Board of Directors
Motorola, Inc.:
We have audited the accompanying combined balance sheets of ARDIS Holding
Company (Company), a wholly-owned business of Motorola, Inc. (Parent) as
described in Note 2, Basis of Presentation, as of December 31, 1996 and 1997,
and the related combined statements of operations, stockholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of ARDIS Holding
Company as of December 31, 1996 and 1997, and the results of their operations
and their cash flows for each of the years in the three-year period ended
December 31, 1997 in conformity with generally accepted accounting principles.
/s/KPMG Peat Marwick LLP
February 13, 1998
Chicago, Illinois
F-2
<PAGE>
ARDIS HOLDING COMPANY
<TABLE>
Combined Balance Sheets
December 31, 1996 and 1997
(amounts in thousands)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Assets 1996 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,289 $ 2,082
Accounts receivable, less allowance for doubtful
accounts of $754 in 1996 and $264 in 1997,
including amounts due from Parent of $142
in 1996 and $47 in 1997 7,809 7,642
Inventory, including $514 in 1996 and $154 in
1997, acquired from Parent 1,211 342
Prepaid site rent, including, $2,500 in 1996
to Parent 4,418 2,075
Prepaid expenses and other current assets 2,184 1,104
- -------------------------------------------------------------------------------------------------------------------
Total current assets 20,911 13,245
- -------------------------------------------------------------------------------------------------------------------
Property and equipment - net, principally acquired
from Parent 53,302 41,801
- -------------------------------------------------------------------------------------------------------------------
Intangible assets, net 16,303 14,567
Other noncurrent assets 736 217
- -------------------------------------------------------------------------------------------------------------------
$91,252 $69,830
- -------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, including amounts due to Parent
of $340 in 1996 and $471 in 1997 $ 4,011 $ 4,012
Accrued expenses, including amounts due to
Parent of $492 in 1996 and $204 in 1997 2,646 1,717
Accrued payroll and related taxes 2,153 1,070
Capital lease obligation 3,565 3,900
Advance deposits - 1,402
Accrued taxes 906 706
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 13,281 12,807
- -------------------------------------------------------------------------------------------------------------------
Capital lease obligation 12,830 8,931
- -------------------------------------------------------------------------------------------------------------------
Stockholders' equity 65,141 48,092
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $91,252 $69,830
- -------------------------------------------------------------------------------------------------------------------
See accompanying notes to combined financial statements.
</TABLE>
F-3
<PAGE>
ARDIS HOLDING COMPANY
<TABLE>
Combined Statements of Operations
Years ended December 31, 1995, 1996, and 1997
(amounts in thousands)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
1995 1996 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Services, including revenues from Parent of $622, $613, and $294
for the years ended December 31,
1995, 1996, and 1997, respectively. $40,006 $43,413 $41,923
Equipment 1,266 1,884 2,326
- -------------------------------------------------------------------------------------------------------------------
Total revenues 41,272 45,297 44,249
- -------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of service and operations, including costs of providing
services to Parent of $9,180, $7,694, and $7,569 for the
years ended December 31, 1995, 1996, and 1997, respectively. 39,884 32,805 31,940
Cost of equipment sold, including costs of equipment
purchased from Parent of $938, $1,033, and $1,324 for the years
ended December 31, 1995, 1996, and 1997, respectively. 1,878 1,350 2,233
Sales and advertising, including expenses from Parent
of $734, $50, and $54 for the years ended December 31,
1995, 1996, and 1997, respectively. 15,164 13,677 5,888
General and administrative, including expenses related
to Parent of $300, and $150 for the years ended
December 31, 1995 and 1996, respectively. 10,623 9,364 6,970
Depreciation and amortization principally
related to assets acquired from Parent 14,355 17,269 14,586
- -------------------------------------------------------------------------------------------------------------------
81,904 74,465 61,617
- -------------------------------------------------------------------------------------------------------------------
Operating loss (40,632) (29,168) (17,368)
Interest income 481 198 150
Interest expense (688) (1,556) (1,331)
- -------------------------------------------------------------------------------------------------------------------
Loss before income tax benefit (40,839) (30,526) (18,549)
Income tax benefit 15,586 11,528 6,807
- -------------------------------------------------------------------------------------------------------------------
Net loss $(25,253) $(18,998) $(11,742)
- -------------------------------------------------------------------------------------------------------------------
See accompanying notes to combined financial statements.
</TABLE>
F-4
<PAGE>
ARDIS HOLDING COMPANY
<TABLE>
Combined Statements of Stockholders' Equity
Years ended December 31, 1995, 1996, and 1997
(amounts in thousands)
<CAPTION>
- --------------------------------------------------------------------------------
Stockholders'
Equity
- --------------------------------------------------------------------------------
<S> <C>
Balance at January 1, 1995 68,906
Contributions from Parent 44,200
Tax benefit utilized by Parent (15,586)
Net loss (25,253)
- --------------------------------------------------------------------------------
Balance at December 31, 1995 72,267
Contributions from Parent 23,400
Tax benefit utilized by Parent (11,528)
Net loss (18,998)
- --------------------------------------------------------------------------------
Balance at December 31, 1996 65,141
Contributions from Parent 1,500
Tax benefit utilized by Parent (6,807)
Net loss (11,742)
- --------------------------------------------------------------------------------
Balance at December 31, 1997 $48,092
- --------------------------------------------------------------------------------
See accompanying notes to combined financial statements.
</TABLE>
F-5
<PAGE>
ARDIS HOLDING COMPANY
<TABLE>
Combined Statements of Cash Flows
Years ended December 31, 1995, 1996, and 1997
(amounts in thousands)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
1995 1996 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net loss $(25,253) $(18,998) $(11,742)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 14,355 17,269 14,586
Gain on sale of fixed assets - - (33)
Write-off of recorded assets - - 419
Tax benefit utilized by Parent (15,586) (11,528) (6,807)
Changes in assets and liabilities:
Accounts receivable (3,030) 1,240 167
Inventory 1,329 (1,025) 869
Prepaid site rent (685) (1,398) 2,343
Prepaid expenses and other assets 792 (1,432) 1,080
Accounts payable (1,817) (16) 1
Accrued expenses 1,085 (2,556) (929)
Accrued payroll 785 (902) (1,083)
Accrued taxes (1,381) 245 (200)
Advance deposits - - 1,402
Other 1,191 435 520
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (28,215) (18,666) 593
- -------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (18,811) (3,410) (1,431)
Purchases of FCC licenses (4,724) (1,396) (305)
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (23,535) (4,806) (1,736)
- -------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Contributions from Parent 44,200 23,400 1,500
Payments of capital lease obligations (1,500) (1,624) (3,564)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 42,700 21,776 (2,064)
- -------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (9,050) (1,696) (3,207)
Cash and cash equivalents at beginning of year 16,035 6,985 5,289
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $6,985 $5,289 $2,082
- -------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid for interest on capital lease obligations $688 $1,556 $1,331
Supplemental disclosure of noncash activities:
Assets acquired through capital leases $18,831 - -
See accompanying notes to combined financial statements.
</TABLE>
F-6
<PAGE>
ARDIS HOLDING COMPANY
Notes to Combined Financial Statements
- --------------------------------------------------------------------------------
(1) Description of Business
-----------------------
ARDIS Holding Company (Company) is engaged in the operation of a
terrestrial-based wireless data network that provides service coverage to
substantially all areas of the United States, Puerto Rico, and the U.S.
Virgin Islands. This network includes radio frequency towers, or base
stations, for transmitting and receiving radio signals among data
terminals. The network operates in the 800 MHZ frequency band utilizing
licenses owned by the Company. The base stations are located on leased
antenna sites.
The Company provides wireless data services primarily to business customers
in many varying market segments, including field services and
transportation market segments which require nationwide, reliable wireless
data services. The Company derives revenues from monthly variable and fixed
usage charges, as well as access fees, rental fees, and equipment sales.
The Company obtains and supports customers through direct sales efforts and
reseller arrangements.
(2) Basis of Presentation
---------------------
The accompanying financial statements present the combined financial
position, results of operations, and cash flows of Motorola ARDIS
Acquisition, Inc. (MAA) and Motorola ARDIS, Inc. (MAI), each wholly-owned
subsidiaries of Motorola, Inc. (Parent). Each of MAA and MAI own a 50%
partnership interest in ARDIS Holding Company. ARDIS Holding Company was
formed in April, 1990 as a 50/50 joint venture between Motorola, Inc.
(Motorola) and International Business Machine Corporation (IBM) to deploy a
terrestrial based wireless data network in the United States. Hereinafter,
except as otherwise indicated, MAA and MAI are referred to on a combined
basis as ARDIS Holding Company or the Company. In December, 1994 MAA
acquired IBM's partnership interest in ARDIS Holding Company for $33,800.
All significant intercompany transactions and balances have been eliminated
in the combination.
(3) Summary of Significant Accounting Policies
------------------------------------------
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include all highly liquid investments with a
maturity of three months or less when purchased.
Accounts Receivable
-------------------
Accounts receivable includes amounts owed by customers for airtime services
and equipment. A related provision for uncollectible amounts is calculated
based on management's estimates of amounts, which, based upon the credit
risk associated with the various classifications of customer accounts, are
subject to substantial collection risk.
F-7
<PAGE>
Inventory
---------
Inventory consists of reseller hardware devices and is stated at lower of
cost or market. Cost is determined using the weighted average method.
Appropriate consideration is given to obsolescence in evaluating net
realizable value.
Prepaid Expenses and Other Assets
---------------------------------
Prepaid expenses and other assets consists principally of prepaid costs
incurred for airpasses. These airpasses expire beginning in 1999 through
2000. The Company reduces the asset for actual usage each year and performs
an assessment of the net realizable value of the asset based on projected
usage through the expiration period. The current portion of the asset is
reflected as a prepaid expense and the noncurrent portion is reflected as
an other noncurrent asset.
Property and Equipment
----------------------
Property and equipment consists of leasehold improvements, network
equipment, and other equipment and are stated at cost or, for assets
contributed, net book value as of the date of contribution. Depreciation of
furniture and equipment is provided using the straight-line method over the
estimated useful lives of the assets which range from 3 to 10 years.
Leasehold improvements are amortized over the remaining terms of the
respective leases. Maintenance and repairs are expensed as incurred, while
improvements are capitalized.
Intangible Assets
-----------------
Intangible assets, which include license rights and excess of cost over
fair value, are stated at cost. License rights represent costs incurred for
FCC issued licenses and are amortized on a straight-line basis over an
estimated useful life of 10 years. The excess of cost over fair value,
resulting from MAA's acquisition of IBM's interest in the Company, is
amortized on a straight-line basis over an estimated useful life of 10
years. The Company assesses the recoverability of intangible assets by
determining whether the amount of the balances over their remaining lives
can be recovered through undiscounted future operating cash flows of the
operations.
Long-lived Assets
-----------------
Long-lived assets and identifiable intangible assets to be held and used
are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amounts should be evaluated. Impairment is
measured by comparing the carrying value to the estimated undiscounted
future cash flows expected to result from the use of the assets and their
eventual disposition. The Company has determined that as of December 31,
1996 and 1997 there has been no impairment in the carrying values of
long-lived assets.
Income Taxes
------------
ARDIS Holding Company is included in the consolidated U.S. income tax
return of the Parent. The tax benefit of losses have been recorded in the
statements of operations as the benefits are used by the Parent.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) 109, Accounting for Income Taxes.
Cumulative deferred taxes have been settled through stockholders' equity.
F-8
<PAGE>
Revenue Recognition
-------------------
The Company recognizes revenues under service agreements over the period in
which related services are provided. Sales of equipment are recognized upon
delivery. To the extent that management considers certain recognized
revenues to be uncollectible, a provision for doubtful accounts is
recognized as a general and administrative expense in the period such
determination is made.
Use of Estimates
----------------
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities in connection with the preparation of
these financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
Concentration of Customer and Credit Risks
------------------------------------------
The Company's customers are comprised of subscribers which utilize airtime
services and purchase related equipment. Financial instruments which
potentially subject the Company to concentrations of credit risk consist
principally of accounts receivable. As of December 31, 1996 and 1997 three
and five customers' account balances individually accounted for more than
5% of the Company's accounts receivable balance, respectively. In the
aggregate those customers accounted for 42% and 63%, of the total accounts
receivable balance as of December 31, 1996 and 1997, respectively. For the
years ended December 31, 1996 and 1997, four and five customers
individually accounted for more than 5% of the Company's sales,
respectively. In the aggregate, these customers accounted for 62% and 69%
of total sales for the years ended December 31, 1996 and 1997,
respectively.
Accounts receivable are generally unsecured; management believes its
allowance for doubtful accounts is adequate to cover any exposure to loss.
Concentration of Suppliers
--------------------------
The Company currently purchases all of its base station equipment, an
important component of its network, from its Parent. Although there are a
limited number of manufacturers of this particular equipment, management
believes that other suppliers could provide similar equipment on comparable
terms. A change in suppliers, however, could cause a delay in procurement
or deployment of equipment and a possible reduction in the quality of
service, which could affect operating results adversely.
The Company currently leases approximately one-third of its transmission
sites, an important component of its network, from its Parent under
cancelable operating lease agreements. Although there are a limited number
of lessors of transmission sites, management believes that other lessors
could provide acceptable sites on comparable terms. A change in lessors,
however, could cause a possible reduction in the quality of service, which
could affect operating results adversely.
Fair Value of Financial Instruments
-----------------------------------
Financial instruments, including accounts receivable, accounts payable, and
accrued liabilities are reflected in the financial statements at fair
value. The fair values of all financial instruments were not materially
different from their carrying or contract values.
F-9
<PAGE>
(4) Liquidity
-------
Operations for the current and prior year did not generate sufficient cash
flow to cover current obligations. The Parent has funded such obligations
and has made a commitment to continue to provide financing to the Company
until the transaction described in Note (12) is consummated. The Parent's
plans include the planned sale of the Company in exchange for consideration
expected to include a combination of cash and securities of the acquirer.
See Note (12) for a description of this pending transaction.
(5) Property and Equipment
----------------------
Property and equipment as of December 31, 1996 and 1997 consists of the
following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1996 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Network equipment $84,868 $86,765
Construction in progress 5,830 3,836
Personal terminals 5,703 5,826
Computer equipment 20,258 21,263
Leasehold improvements-building 3,255 3,268
Furniture and fixtures 3,458 3,601
- --------------------------------------------------------------------------------
123,372 124,559
Less accumulated depreciation 70,070 82,758
- --------------------------------------------------------------------------------
$53,302 $41,801
- --------------------------------------------------------------------------------
</TABLE>
(6) Intangible Assets
Intangible assets consist of the following at December 31, 1996 and
1997:
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Excess cost over fair value of assets acquired $ 12,966 $ 12,966
FCC licenses 7,462 7,767
20,428 20,773
Less accumulated amortization 4,125 6,166
$ 16,303 $ 14,567
</TABLE>
F-10
<PAGE>
FCC licenses as of December 31, 1996 and 1997 consists of certain FCC
license rights to 800 MHz channel frequencies, for which an agreement
exists to sell these license rights to third parties. The agreement
contains three traunches which provide that a total of eighty-four
frequencies will be sold in three separate transactions. The first
transaction, is expected to be consummated during the first quarter of
1998, and will result in proceeds to the Parent of $5,141. A cash deposit
was received during December, 1997 and is reflected as an advance deposit
at December 31, 1997. The second and third transactions are expected to be
consummated during the last half of 1998 and will result in proceeds of
$976 to the Company. The carrying value of these frequencies is $3,170 and
$3,022 at December 31, 1996 and 1997, respectively. The completion of these
transactions is dependent on obtaining FCC regulatory approval.
(7) Related Party Transactions
--------------------------
The Company engages in transactions with its Parent in the normal course of
its business. These transactions include purchases of services, network
hardware and software maintenance services, facility rentals, and network
gateway fees, among various other transactions as follows:
The Parent owns certain structures and equipment used by the Company in its
operations under operating lease arrangements. Related rental expenses were
approximately $2,500, $2,700, and $2,700 for the years ended December 31,
1995, 1996, and 1997, respectively.
The Parent provides maintenance services under service contracts. The
Company incurred related expenses of $4,735, $4,513, and $4,830, for the
years ended December 31, 1995, 1996, and 1997, respectively.
Network equipment is purchased from the Parent. Purchases aggregated $1,021
and $290 for the years ended December 31, 1996 and 1997, respectively.
Inventory is purchased from the Parent. Purchases aggregated $3,066 and
$880 for the years ended December 31, 1996 and 1997, respectively.
The Parent charges certain payroll and other consulting expenses to the
Company. Charges aggregated $3,234, $649, and $60 for the years ended
December 31, 1995, 1996, and 1997, respectively.
During 1995 the Company expensed $1,727 in amounts paid to Parent, which
were to entitle the Company to participate in a contract to provide its
services to customers through another third party. The agreement was
terminated during 1997.
In management's opinion, the foregoing transactions were consummated based
on amounts agreed upon between the respective parties and are reasonable.
However, the amounts disclosed may not represent the amounts that would
have been reported had these transactions occurred with third parties at
"arms-length."
F-11
<PAGE>
(8) Leases
------
Capital Leases
--------------
The Company is obligated under a capital lease for equipment that expires
on December 31, 2000. The gross amounts of equipment and related
accumulated depreciation recorded under capital lease was as follows for
December 31, 1996 and 1997:
---------------------------------------------------------------------------
1996 1997
---------------------------------------------------------------------------
Network equipment $18,831 18,831
Less accumulated depreciation 5,136 8,560
---------------------------------------------------------------------------
$13,695 $10,271
---------------------------------------------------------------------------
Depreciation of assets held under the capital lease is included with
depreciation expense.
The Company's obligations require monthly payments in varying amounts
through December 31, 2000. The obligations have been discounted to reflect
an implicit interest rates 9.381%.
At December 31, 1997, future minimum lease commitment together with the
present value of obligations under lease that have initial or remaining
noncancelable terms in excess of one year were as follows:
---------------------------------------------------------------------------
Period ended December 31,
---------------------------------------------------------------------------
1998 $4,896
1999 4,896
2000 4,896
---------------------------------------------------------------------------
Total minimum lease payments 14,688
Less amount representing 1,857
---------------------------------------------------------------------------
Present value of minimum lease payments 12,831
Less current portion of capital lease obligations 3,900
---------------------------------------------------------------------------
Noncurrent portion of capital lease obligations $8,931
---------------------------------------------------------------------------
Operating Leases
----------------
The Company leases substantially all of its base station sites through
cancelable operating leases. The majority of these leases provide for
renewal options for various periods at their fair rental value at the time
of renewal. In the normal course of business, operating leases are
generally renewed or replaced by other leases.
In addition, the Company leases certain office space and computers under
non-cancelable operating leases. Future minimum lease payments under such
leases as of December 31, 1997 for each of the next four years and in the
aggregate are as follows:
F-12
<PAGE>
---------------------------------------------------------------------------
1998 $1,340
1999 1,378
2000 1,416
2001 38
---------------------------------------------------------------------------
Total lease obligations $4,172
---------------------------------------------------------------------------
Rent expense under all lease agreements for the years ended December
31, 1995, 1996, and 1997 was $7,791, $8,044, and $8,440, respectively.
(9) Employee Benefits
-----------------
The Company maintains an Individual Accumulation Plan to provide retirement
assistance to all eligible employees. The plan consists of two components,
a defined contribution plan and an employee savings plan. Under the defined
contribution plan, the Company will contribute 5% of each employee's
compensation to the plan. The employee savings plan allows participants to
contribute up to 12% of their compensation as an elective deferral. The
Company matches these contributions up to 4% of the participant's
compensation. Company contributions under both plans were $1,382, $1,409,
and $1,103, for the years ended December 31, 1995, 1996, and 1997,
respectively. Participant contributions are vested at all times.
Contributions made by the Company to all participants commencing employment
prior to or on April 30, 1990 are fully vested. Contributions made by the
Company to all participants commencing employment after April 30, 1990 vest
over three years.
(10) Income Taxes
------------
<TABLE>
Income tax benefit for the years ended December 31, 1995, 1996, and 1997
consists of:
<CAPTION>
---------------------------------------------------------------------------
Current Deferred Total
---------------------------------------------------------------------------
<S> <C> <C> <C>
Year ended December 31, 1995:
U.S. Federal $(14,950) $ 2,123 $(12,827)
State and local (3,215) 456 (2,759)
---------------------------------------------------------------------------
$(18,165) $ 2,579 $(15,586)
---------------------------------------------------------------------------
Year ended December 31, 1996:
U.S. Federal (11,094) 1,606 (9,488)
State and local (2,386) 346 (2,040)
---------------------------------------------------------------------------
$(13,480) $ 1,952 $(11,528)
---------------------------------------------------------------------------
Year ended December 31, 1997:
U.S. Federal (8,061) 2,459 (5,602)
State and local (1,734) 529 (1,205)
---------------------------------------------------------------------------
$ (9,795) $ 2,988 $ (6,807)
---------------------------------------------------------------------------
</TABLE>
F-13
<PAGE>
<TABLE>
Income tax benefit differed from the amounts computed by applying the U.S.
Federal income tax rate of 35% to losses before income tax expense as a
result of the following:
<CAPTION>
---------------------------------------------------------------------------------------------------
1995 1996 1997
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed "expected" tax benefit $(14,294) $(10,684) $(6,492)
Increase (decrease) in tax benefit resulting from:
Amortization of goodwill 454 454 454
State and local income taxes, net of federal benefit (1,793) (1,327) (783)
Other 47 29 14
---------------------------------------------------------------------------------------------------
$(15,586) $(11,528) $(6,807)
---------------------------------------------------------------------------------------------------
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31,
1996 and 1997 are presented below:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
1996 1997
---------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Intangible assets, principally due
to differences in amortization $1,789 $ 1,162
Accruals not deductible for tax purposes 3,096 1,514
Employee benefits, principally
due to accrual for financial
reporting purposes 370 32
Other (16) 1,425
---------------------------------------------------------------------------
Net deferred tax assets 5,239 4,133
---------------------------------------------------------------------------
Deferred tax liabilities:
Property and equipment, principally
due to differences in depreciation (6,770) (8,588)
---------------------------------------------------------------------------
Net deferred tax liabilities (6,770) (8,588)
---------------------------------------------------------------------------
Net deferred tax asset (liability) $(1,531) $(4,455)
---------------------------------------------------------------------------
</TABLE>
At December 31, 1996 and 1997, $(1,531) and $(4,455), respectively,
of cumulative deferred taxes have been settled through stockholders'
equity. At December 31, 1996 and 1997, the basis of excess cost over
fair value of assets acquired for financial reporting purposes exceeds
the basis for tax purposes by $(253) and $(168), respectively.
F-14
<PAGE>
(11) Commitments and Contingencies
-----------------------------
The Company is obligated under the terms of a take-or-pay supplier
agreement entered into in January, 1997 to purchase prior to August 31,
1998, a minimum of $2,375 of product. The agreement requires the Company to
pay certain additional amounts if the Company or certain of its customers
does not purchase a total of $9,500 of product by August 31, 1998. At
December 31, 1997 the Company had purchased a total of $774. The Company
believes that it will fulfill its obligations under the agreement;
accordingly, no amount has been accrued at December 31, 1997 for the
Company's obligation under the agreement.
(12) Stock Purchase Agreement
------------------------
In December 1997 the Parent entered into a Stock Purchase Agreement
(Agreement) with American Mobile Satellite Communications (AMSC) to
transfer ownership of the stock of MAA and MAI in exchange for cash and
shares of AMSC common stock. In connection with this Agreement, the value
exchanged between the Parent and AMSC is subject to adjustment to the
extent that the working capital of the Company, as defined in the
Agreement, differs from the amount stipulated in the Agreement. The
transaction is designed as a tax-free exchange to the Parent and AMSC.
Closing of the Agreement is subject to a number of significant conditions,
including, among others, the receipt of approval from the FCC, the filing
of all necessary reports and documents with the Department of Justice
pursuant to the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976 and
the expiration or termination of all applicable waiting periods thereunder,
other governmental approvals, and the satisfaction of certain other
conditions. The Parent has the right to terminate this Agreement if the
market value of AMSC common stock calculated as of the closing date has
declined by more than 30% from the market value calculated as of the date
of the Agreement.
F-15
<PAGE>
INDEX
Pro forma summary financial and other data...................................P-1
Pro forma unaudited balance sheet as of December 31, 1997....................P-2
Pro forma unaudited income statement as of December 31, 1997.................P-3
Notes to pro forma financial statements......................................P-4
<PAGE>
Pro Forma Summary Financial and Other Data
- ------------------------------------------
The following summary pro forma financial information gives effect to (i)
the Acquisition, (ii) the high yield debt offering and (iii) the New Bank
Financing as if such transactions had been consummated on December 31, 1997
in the case of the Unaudited Pro Forma Consolidated Condensed Balance Sheet
of the Company, and on January 1, 1997 in the case of the Unaudited Pro
Forma Consolidated Statements of Operations of the Company. The pro forma
combined financial information is presented for illustrative purposes only
and is not necessarily indicative of what the Company's actual financial
position or results of operations would have been had the above-referenced
transactions been consummated as of the above-referenced dates or of the
financial position or results of operations that may be reported by the
Company in the future.
The following data should be read in conjunction with the Company's
Consolidated Financial Statements and related notes, ARDIS' Combined
Financial Statements and related notes, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and other
financial information included elsewhere herein, as applicable.
P-1
<PAGE>
AMERICAN MOBILE SATELLITE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
As of December 31, 1997
-----------------------
Pro Forma Pro Forma
--------- ---------
AMSC ARDIS Adjustment Consolidated
---- ----- ---------- ------------
Acquisition Offering
----------- --------
(Dollars in thousands)
Assets:
Current Assets:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 2,106 $ 2,082 $(2,082)(2) $24,100 (1) $ 26,206
Inventory 40,321 342 40,663
Accounts receivable-trade, net of allowance for doubtful
accounts 8,140 7,642 (92)(4) 15,690
Pledged Securities -- -- 41,037 (1) 41,037
Other current assets 14,172 3,179 5,967 (1) 23,318
-------- ------ -------
Total current assets 64,739 13,245 146,914
Property and equipment, net 233,174 41,801 274,975
Goodwill -- -- 68,557 (2) 71,107
2,550 (1)(2)
Deferred charges and other assets, net 13,534 14,784 (14,567)(2) 12,250 (1) 37,934
11,933 (1)
Pledged Securities -- -- 10,000 (1) 71,963 (1) 81,963
-------- ------- -------
Total assets $311,447 $69,830 $612,893
======== ======= ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 35,861 $ 8,907 $ (92)(4) $(2,200) $ 42,476
Current portion of obligations under capital leases 798 3,900 4,698
Current portion of long-term debt 15,254 -- (5,000)(1) 10,254
Other current liabilities 7,520 -- 7,520
-------- ------- --------
Total current liabilities 59,433 12,807 64,948
Long-term liabilities:
Obligations under Bank Facility 198,000 -- (98,000)(1) 100,000(1)
12 1/4% Senior Notes -- -- 326,500 (1) 326,500
Capital lease obligations 3,147 8,931 12,078
Fair value of assets acquired in excess of purchase price 2,725 -- 2,725
Other long-term debt 1,364 -- 1,364
Other long-term liabilities 647 -- 647
-------- ------- --------
Total long-term liabilities 205,883 8,931 443,314
-------- ------- -------
Total liabilities 265,316 21,738 508,262
Stockholders' equity:
Net Assets of ARDIS 48,092 (48,092)(2) --
Preferred Stock, par value $0.01: authorized 200,000
shares; no shares issued -- -- --
Common Stock, voting, par value $0.01: authorized
75,000,000 shares 252 -- 63 (2) 315
Additional paid-in capital 451,892 -- 47,747 (2) 499,639
Common Stock purchase warrants 36,338 -- 2,190 (2) 64,748
8,500 (1)
17,720 (3)
Unamortized Guarantee Warrants (23,586) -- (17,720)(3) (41,306)
Retained loss (418,765) -- (418,765)
--------- ------- ---------
Total stockholders' equity 46,131 48,092 104,631
--------- ------- ---------
Total liabilities and stockholders' equity $311,447 $69,830 $612,893
========= ======= ========
See Notes to Pro Forma Financial Information on following pages.
</TABLE>
P-2
<PAGE>
AMERICAN MOBILE SATELLITE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31, 1997
----------------------------
Pro Forma Adjustments Pro Forma
--------------------- ---------
AMSC ARDIS Acquisition Offering Consolidated
---- ----- ----------- -------- ------------
(Dollars in thousands, except per share data)
Revenues:
<S> <C> <C> <C> <C> <C>
Services $ 20,684 $41,923 $ (498)(9) $ 62,109
Equipment and consulting 23,530 2,326 25,856
-------- ------- --------
Total revenue 44,214 44,249 87,965
Cost of service and operations 31,959 31,940 (498)(9) 63,401
Cost of equipment sold 40,335 2,233 42,568
Sales and advertising 12,066 5,888 17,954
General and administrative 14,819 6,970 21,789
Depreciation and amortization 42,430 14,586 (1,297)(5) 59,274
3,555 (6)
-------- ------- --------
Operating loss (97,395) (17,368) (117,021)
Interest and other (expense) income (179) 150 500 (8) 5,208 (10) 5,679
Interest expense (21,633) (1,331) (42,076)(7) (65,040)
--------- -------- --------
Net loss before income tax benefit (119,207) (18,549) (176,382)
Income tax benefit -- 6,807 (6,807)(12) --
--------- ------- ----------
Net loss $(119,207) $(11,742) $(176,382)
========= ========= ==========
Loss per share of Common Stock $ (4.74) $ (5.62)
========= ==========
Weighted-average common shares outstanding
during the period (000's) 25,131 6,262(11) 31,393
========= ======= ==========
See Notes to Pro Forma Financial Information on following pages.
</TABLE>
P-3
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
The pro forma financial information is based on the following assumptions and
adjustments:
(1) Reflects the $335.0 million in total proceeds from the Offering (comprised
of $326.5 million of proceeds from the issuance of Notes and $8.5 million of
proceeds from the issuance of the Warrants) and application of the proceeds
therefrom as if the Offering, the Acquisition and the New Bank Financing had
occurred on December 31, 1997, as follows:
<TABLE>
<CAPTION>
Amount
------
(Dollars in
thousands)
----------
<S> <C>
Purchase of Pledged Securities $113,000
Cash portion of the Acquisition 50,000
Cash escrow for UPS Guarantee 10,000
Repayment of Bank Financing of American Mobile 98,000 (a)
Pre-funding of three years of interest on the Term Loan 17,900
Facility
Repayment of other deferred obligations 7,200 (b)
Payment of acquisition and financing costs 14,800 (c)
Working capital 24,100 (d)
-------
Gross proceeds from the sale of the Units $335,000
========
</TABLE>
(a) Reflects $98.0 million repayment of the Bank Financing outstanding at
December 31, 1997. It is expected that the Company will have the ability,
subject to certain conditions, to borrow $100.0 million under the Revolving
Credit Facility.
(b) Consists of $2.2 million of accrued expenses and $5.0 million of
deferred vendor financing.
(c) Consists of $12.2 million of financing costs and $2.6 million of
acquisition costs.
(d) Subsequent to December 31, 1997, American Mobile incurred $12.0 million
of additional debt prior to the Offering. Proceeds from the Offering, in
the amount of $10.1 million, will be used to repay the Bridge Financing,
including accrued interest thereon and $2.0 million will be used to repay
additional borrowing made on the Bank Facility.
(2) Reflects the Acquisition. All share and warrant amounts assume final
shareholder approval for the issuance of $50.0 million in shares and warrants.
No assumptions have been made regarding any purchase price adjustments as
outlined in the ARDIS Acquisition Agreement.
Total acquisition costs are anticipated to be as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) Amount
- ---------------------- ------
<S> <C>
6,262,000 shares of American Mobile Satellite Corporation at $7.63 per share (average
of closing price 20 days prior to acquisition agreement) issued to Motorola $ 47,810
287,000 warrants of American Mobile Satellite Corporation at a strike price of
$.01--valued at $7.63 per share issued to Motorola 2,190
Cash payment to Motorola 50,000
Estimated transaction costs 2,550
--------
$102,550
========
</TABLE>
The anticipated acquisition costs have been allocated for pro forma purposes as
follows:
P-4
<PAGE>
<TABLE>
<CAPTION>
(Dollars in thousands) Amount
------
<S> <C>
Current assets $ 11,163
Equipment and fixtures, net 41,801
Other assets, net 217
Excess of purchase price over fair market value 71,107
Accounts payable, accrued expenses and other liabilities (8,907)
Capital leases (12,831)
---------
$102,550
</TABLE>
The above allocation of acquisition costs is preliminary and may change upon
final determination of the fair value of assets acquired. The Company has not
specifically identified amounts to assign to certain intangibles and licenses;
changes in the amounts allocated to such assets could result in changes to the
amount of goodwill recorded. A preliminary amortization period of twenty years
has been selected and utilized in the pro forma financial information which is
expected in all material respects to be representative of the amortization
expense that will result from the ultimate allocation to the specific intangible
assets.
(3) Reflects the re-pricing and extension of life of 5.5 million existing
Guarantee Warrants and issuance of 1.0 million additional Guarantee Warrants in
connection with the restructuring of the Bank Facility. The existing 5.5 million
Guarantee Warrants will be extended an additional 3.75 years and the exercise
price will be changed to reflect a 10% premium over AMSC's closing Common Stock
price on the date of closing of the Offering. The exercise price of the
Guarantee Warrants is $12.51, a 10% premium over AMSC's Common Stock price on
March 25, 1998. The 1.0 million additional Guarantee Warrants will be issued
with a seven-year life and exercise price equal to the new exercise price of the
existing 5.5 million Guarantee Warrants. The Guarantee Warrants will be
amortized over five years (the life of the guarantee) to interest expense.
(4) Reflects the elimination of inter-company balances resulting from
transactions between American Mobile and ARDIS.
(5) Reflects the elimination of goodwill amortization recorded by ARDIS.
(6) Reflects the amortization, over a 20-year life, of the excess of purchase
price of ARDIS over fair market value of assets acquired.
(7) Reflects adjustments to interest expense as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
1997
------------
(Dollars in thousands)
<S> <C>
(a) Adjustment of interest expense and debt costs on New Bank $(10,548)
Financing
(b) Interest expense on the Notes and amortization of debt discount 41,888
(c) Amortization of Note issuance costs 1,225
(d) Amortization of Guarantee Warrants and debt issuance costs 3,544
(e) Amortization of pre-funded interest 5,967
---------
$ 42,076
=========
</TABLE>
P-5
<PAGE>
The assumptions in connection with the above pro forma interest expense
adjustments are as follows:
(a) Reflects the elimination of interest expense applicable to the Bank
Financing and vendor financing which is to be partially repaid with the
proceeds from the sale of the Units.
(b) Reflects interest expense on the Notes at 12 1/4% and amortization of
the $8.5 million debt discount.
(c) Reflects the amortization, over a ten year period, of debt issuance
costs of approximately $12.2 million associated with the Offering and the
New Bank Financing.
(d) Reflects the amortization, over a five year period, of the Guarantee
Warrants and the amortization of capitalized costs related to the New Bank
Financing.
(e) Reflects the interest expense on the New Bank Financing.
(8) Reflects interest earned on funds escrowed in connection with a customer
guarantee at an average interest rate of 5.0%.
(9) Reflects the elimination of revenues and related operating expenses on
transactions between American Mobile and ARDIS.
(10) Reflects interest income earned on the Pledged Securities at an average
interest rate of 5.0%.
(11) Reflects shares issued to Motorola in connection with the Acquisition.
(12) Reflects the elimination of a tax sharing arrangement between ARDIS and
Motorola.
P-6
<PAGE>
This Proxy is Solicited By The Board of Directors of the Company
AMERICAN MOBILE SATELLITE CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
May 20, 1998
The undersigned hereby constitutes and appoints Gary M. Parsons and Walter V.
Purnell, Jr., and each of them, true and lawful agents and proxies ("Proxies"),
with full power of substitution and revocation in each, to attend the Annual
Meeting of Stockholders of American Mobile Satellite Corporation to be held at
9:00 a.m. on Wednesday, May 20, 1998 at the Sheraton Reston Hotel, 11810 Sunrise
Valley Drive, Reston, Virginia, and any adjournments thereof, and thereat to
vote all shares of Common Stock which the undersigned would be entitled to vote
if personally present (i) as designated upon the matters set forth on the
reverse side, and (ii) in their discretion, upon the approval of minutes of
prior meetings of the stockholders and such other business as may properly come
before the meeting. This proxy when properly executed will be voted in the
manner directed herein by the undersigned stockholder. If directed by the
undersigned to vote for the nominees, or if no direction is made, the votes
represented by this proxy will be voted FOR the ten nominees listed below in
such proportions as determined by the Proxies in their discretion so as to
maximize the likelihood of electing all such nominees; provided, however, that
(i) if directed by the undersigned to withhold votes from one or more nominees,
the votes represented by this proxy will be voted FOR the remaining nominees as
set forth above, and (ii) if, prior to the election, any such nominee shall
become unavailable for election or unable to serve, the Proxies may vote for
such other persons as may be nominated. If no direction is made, this proxy will
be voted FOR Proposals 2,3 and 4 set forth on the reverse side. The undersigned
hereby revokes any proxy or proxies heretofore given to vote such shares at said
meeting or any adjournments thereof.
Election of Directors, Nominees:
Douglas I. Brandon, Ho Siaw Hong, Pradeep P. Kaul,
Billy J. Parrott, Gary M. Parsons, Andrew A. Quartner,
Jack A. Shaw, Roderick M. Sherwood, Michael T. Smith
and Yap Chee Keong.
(change of address/comments)
- ----------------------------------------
- ----------------------------------------
- ----------------------------------------
(If you have written in the above space, please mark the corresponding box on
the reverse side of this card.)
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE.
<PAGE>
(REVERSE SIDE)
1. Election of Directors
|_| For All Nominees |_| Withheld From All Nominees
|_| For, except vote withheld from the following nominee(s):
----------------------------------------------------
2. Ratification of the appointment of Arthur Andersen LLP as independent
accountants for the Company for the year 1998.
For |_| Against |_| Abstain |_|
3. Amendment to the Company's 1989 Stock Option Plan to increase the number of
shares authorized for issuance.
For |_| Against |_| Abstain |_|
4. Issuance of shares of the Company's Common Stock to Motorola, Inc.
For |_| Against |_| Abstain |_|
|_| Change of address/comments on reverse side.
INSTRUCTIONS:
1. Please sign exactly as name is printed hereon.
2. If shares are held jointly, each holder should sign.
3. If signing as executor or trustee or in similar fiduciary capacity, please
give full title as such.
4. If a corporation, please sign full corporate name by President or other
authorized officer.
5. If a partnership, please sign partners name by authorized person.
SIGNATURE(S) DATE
<PAGE>
