<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Heartland Wireless Communications, Inc.
- --------------------------------------------------------------------------------
(NAME of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
HEARTLAND WIRELESS COMMUNICATIONS, INC.
200 CHISHOLM PLACE, SUITE 200
PLANO, TEXAS 75075
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Heartland Wireless Communications, Inc., a Delaware corporation
(the "Company"), will be held at the Omni Richardson Hotel, Salons A, B and C,
First Floor, 701 E. Campbell, Richardson, Texas 75081, on June 12, 1998, at
9:00 a.m. (local time) for the following purposes:
1. To elect six directors of the Company to serve until the next
Annual Meeting of Stockholders of the Company and until their successors are
duly elected and qualified;
2. To ratify the selection of KPMG Peat Marwick LLP as auditors for
the Company for the fiscal year ending December 31, 1998; and
3. To transact such other business as may properly come before the
Meeting or any adjournment(s) thereof.
Only stockholders of record at the close of business on April 24,
1998, are entitled to notice of and to vote at the Meeting.
By Order of the Board of Directors,
/s/ J. CURTIS HENDERSON
J. Curtis Henderson
General Counsel and Secretary
Plano, Texas
April 30, 1998
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED AT THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE READ THE
ENCLOSED PROXY STATEMENT AND SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE
ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED FROM WITHIN THE UNITED
STATES.
<PAGE> 3
HEARTLAND WIRELESS COMMUNICATIONS, INC.
200 CHISHOLM PLACE, SUITE 200
PLANO, TEXAS 75075
===========================
PROXY STATEMENT
===========================
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 12, 1998
This Proxy Statement is being mailed to you in connection with the
solicitation of proxies by the Board of Directors ("Board of Directors") of
Heartland Wireless Communications, Inc., a Delaware corporation (the "Company")
for use at the Company's Annual Meeting of Stockholders (the "Meeting") to be
held on June 12, 1998, at 9:00 a.m. (local time), at the Omni Richardson Hotel,
Salons A, B and C, First Floor, 701 E. Campbell, Richardson, Texas 75081, and
any adjournment(s) thereof.
SOLICITATION OF PROXIES
All shares represented by duly executed proxies in the form enclosed
herewith received by the Company prior to the Meeting will be voted as
instructed at the Meeting. If a stockholder does not intend to attend the
Meeting in person, any proxy or notice should be returned to the Company for
receipt by the Company not later than the close of business on Thursday, June
11, 1998. IF NO INSTRUCTIONS ARE GIVEN, THE PERSONS NAMED IN THE ACCOMPANYING
PROXY INTEND TO VOTE FOR THE SIX NOMINEES NAMED HEREIN AS DIRECTORS OF THE
COMPANY AND FOR RATIFICATION OF THE SELECTION OF THE AUDITORS NAMED HEREIN.
The Board of Directors does not know of any matter other than as set forth
herein that is expected to be presented for consideration at the Meeting.
However, if other matters properly come before the Meeting, the persons named
in the accompanying proxy (each of whom is an officer and employee of the
Company) intend to vote thereon in accordance with their judgment. The
Company's Annual Report and Form 10-K for the fiscal year ended December 31,
1997 (the "Annual Report"), including audited financial statements, is enclosed
herewith. The Annual Report does not form any part of the material for the
solicitation of proxies.
Any stockholder may revoke a previously executed proxy at any time
prior to its exercise by (i) delivering a later-dated proxy, (ii) giving
written notice of revocation to the Secretary of the Company at the address set
forth above at any time before such proxy is voted or (iii) voting in person at
the Meeting. No proxy will be voted if the stockholder attends the Meeting and
elects to vote in person. Revocation will not affect a vote on any matters
taken prior to the receipt of such revocations. Mere attendance at the Meeting
will not of itself revoke the proxy.
This Proxy Statement, the accompanying proxy card and the Annual
Report containing financial statements of the Company for the fiscal year ended
December 31, 1997 were first mailed to stockholders on or about April 30, 1998.
The mailing address of the Company's principal executive offices is 200
Chisholm Place, Suite 200, Plano, Texas 75075.
<PAGE> 4
RECORD DATE, OUTSTANDING VOTING SECURITIES
AND VOTES REQUIRED
The Company's common stock, par value $.001 per share ("Common
Stock"), is the only outstanding class of voting securities of the Company.
The record date for determining the holders of Common Stock entitled to vote on
the actions to be taken at the Meeting is the close of business on April 24,
1998 (the "Record Date"). As of the Record Date, 19,724,603 shares of Common
Stock were outstanding. Each holder of Common Stock on the Record Date is
entitled to cast one vote per share of Common Stock at the Meeting. The Common
Stock does not have cumulative voting rights.
Holders of a majority of the shares entitled to vote must be present
at the Meeting, in person or by proxy, so that a quorum may be present for the
transaction of business. Assuming the presence of a quorum, the affirmative
vote of the holders on the Record Date of a plurality of the shares of Common
Stock outstanding, represented in person or by proxy at the Meeting, is
necessary for the election of directors of the Company. The affirmative vote
of the holders on the Record Date of a majority of the shares of Common Stock
outstanding, represented in person or by proxy at the Meeting, is required for
ratification of the selection of KPMG Peat Marwick LLP as auditors for the
Company.
Abstentions and broker nonvotes, if any, are counted for the purposes
of determining the presence or absence of a quorum for the transaction of
business. However, abstentions and broker nonvotes do not have any effect on
the election of directors. With respect to the other matter(s) presented
herein, abstentions are counted essentially as votes "against" in tabulations
of the votes cast on proposals presented to stockholders, whereas broker
nonvotes, if any, are not counted for purposes of determining whether a
proposal has been approved.
- 2 -
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS, DIRECTORS AND MANAGEMENT
The following table sets forth, as of April 1, 1998, certain
information regarding the ownership of Common Stock with respect to (i) each
person known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each of the Company's directors and nominees for
director, (iii) the Named Executive Officers as such term is defined in
"Executive Compensation and Related Information" and (iv) all directors and
executive officers as a group. The table is based on information filed
pursuant to the Securities Exchange Act of 1934 or otherwise provided to the
Company. The Company believes that, unless otherwise indicated, each person
listed in the following table has sole voting and investment power with respect
to the shares indicated. Unless otherwise indicated, the address for each
person listed in the table is c/o the Company, 200 Chisholm Place, Suite 200,
Plano, Texas 75075.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF COMMON
STOCK
-------------------------------
NUMBER
NAME OF OF PERCENT
BENEFICIAL OWNER SHARES OF CLASS (1)
- ---------------- ------ ------------
<S> <C> <C>
Hunt Capital Group, L.L.C. (2) . . . . . . . . . . . . . . . . 4,000,000 20.3%
Jupiter Partners L.P. (3) . . . . . . . . . . . . . . . . . . . 3,485,148 17.7%
L. Allen Wheeler . . . . . . . . . . . . . . . . . . . . . . . 2,009,800 10.2%
David E. Webb (4) . . . . . . . . . . . . . . . . . . . . . . . 1,150,810 5.8%
Carroll D. McHenry (5) . . . . . . . . . . . . . . . . . . . . 145,000 *
John A. Fanning (6) . . . . . . . . . . . . . . . . . . . . . . 32,000 *
Jack R. Crosby . . . . . . . . . . . . . . . . . . . . . . . . -- --
J. R. Holland, Jr. (7) . . . . . . . . . . . . . . . . . . . . -- --
Terry S. Parker . . . . . . . . . . . . . . . . . . . . . . . . -- --
John A. Sprague (8) . . . . . . . . . . . . . . . . . . . . . . 1,500 *
Marjean Henderson . . . . . . . . . . . . . . . . . . . . . . . 10,000 *
Christopher P. Dailledouze (9) . . . . . . . . . . . . . . . . 10,000 *
J. Curtis Henderson (10) . . . . . . . . . . . . . . . . . . . 13,000 *
Randall C. May (11) . . . . . . . . . . . . . . . . . . . . . . 20,413 *
Wayne M. Taylor (12) . . . . . . . . . . . . . . . . . . . . . 16,200 *
All executive officers and directors as a group
(13 persons) (13) . . . . . . . . . . . . . . . . . . . . . . . 2,233,048 11.3%
</TABLE>
- --------------------
* Less than 1%.
(1) Based on 19,715,267 shares of Common Stock outstanding on April 1,
1998.
(2) Address is 4000 Thanksgiving Tower, 1601 Elm Street, Dallas, Texas
75201.
(3) Address is 30 Rockefeller Plaza, Suite 4525, New York, New York 10112.
Jupiter Partners L.P. ("Jupiter") is the holder of $40.0 million
original principal amount of the Company's 9% convertible
subordinated discount notes (the "Convertible Notes") due 2004. Each
Convertible Note is convertible into the number of shares of Common
Stock computed by dividing (i) the principal amount of the Convertible
Note (after taking into account accretions in value) by (ii) the
conversion price then in effect. The current conversion price is
$15.34 per share.
(4) Address is 200 Chisholm Place, Suite 202, Plano, Texas 75075.
- 3 -
<PAGE> 6
(5) Includes 70,000 shares that Mr. McHenry has the right to acquire upon
the exercise of stock options exercisable within 60 days.
(6) Includes 32,000 shares that Mr. Fanning has the right to acquire upon
the exercise of stock options exercisable within 60 days.
(7) Mr. Holland is the sole Manager and President of Hunt Capital Group,
L.L.C. ("Hunt Capital"). Hunt Capital is owned by trusts, of which
Mr. Holland serves as a trustee. Mr. Holland disclaims beneficial
ownership of the shares of Common Stock owned by Hunt Capital.
(8) Mr. Sprague is indirectly a controlling general partner of Jupiter.
Accordingly, Mr. Sprague may be deemed to be a beneficial owner of the
shares issuable to Jupiter on conversion of the Convertible Notes.
Mr. Sprague shares voting and investment power over such shares with
Terry J. Blumer. Mr. Sprague disclaims beneficial ownership of such
shares. Includes 1,500 shares that Mr. Sprague has the right to
acquire upon the exercise of stock options exercisable within 60 days.
(9) Includes 10,000 shares that Mr. Dailledouze has the right to acquire
upon the exercise of stock options exercisable within 60 days.
(10) Includes 13,000 shares that Mr. Henderson has the right to acquire
upon the exercise of stock options exercisable within 60 days.
(11) Includes 18,500 shares that Mr. May has the right to acquire upon the
exercise of stock options exercisable within 60 days.
(12) Includes 12,000 shares that Mr. Taylor has the right to acquire upon
the exercise of stock options exercisable within 60 days.
(13) Includes 125,000 shares that six directors and executive officers have
the right to acquire upon the exercise of stock options and other
rights exercisable within 60 days.
ITEM 1 ON PROXY
ELECTION OF DIRECTORS
At the Meeting, six persons will be elected to serve as directors
until the Company's next Annual Meeting of Stockholders and until their
successors have been duly elected and qualified as provided in the Company's
Restated Certificate of Incorporation and Restated Bylaws. The number of
directors currently comprising the Board of Directors is seven, as determined
by the Board of Directors. As of the date of this Proxy Statement, the Board
of Directors had not completed its search for the additional nominee to the
Board of Directors. Accordingly, the Board of Directors will not solicit
proxies for a greater number of persons than the number of nominees set forth
below. If such nominee is named after the mailing of this Proxy Statement, the
Company anticipates that the nominee will be presented to the Board of
Directors for appointment by the Board of Directors under the Company's Bylaws,
to serve until the next Annual Meeting of Stockholders.
The following persons have consented to be nominated and, if elected,
to serve as directors of the Company. All the nominees are presently members
of the Company's Board of Directors.
Carroll D. McHenry, 55, joined the Company as Chairman of the Board,
President, Chief Executive Officer and Acting Chief Financial Officer in April
1997. Mr. McHenry currently serves as Chairman of the Board, President and
Chief Executive Officer. Prior to assuming his positions at the Company, Mr.
McHenry was a senior executive at Alltel, Inc., a national communications
holding company, most recently serving as President of Alltel's Communications
Services Group, and serving as President of Alltel Mobile Communications, Inc.
from July 1992 to May 1995. From 1991 to 1992, Mr. McHenry was Vice President
of Cellular Business Development at Qualcomm, Inc. From 1989 to 1991, Mr.
McHenry was President, Chief Executive Officer and Chairman of the Board of
Celluland, Inc., a franchisor of cellular telephone stores. From 1980 to 1989,
Mr. McHenry served in various capacities with Mobile Communications Corporation
of America ("MCCA") and as President and Chief Executive Officer of American
Cellular Communications, a joint venture between MCCA and BellSouth. Mr.
McHenry currently is a director of Wireless One, Inc. ("Wireless One") and CS
Wireless Systems, Inc. ("CS Wireless").
Jack R. Crosby, 71, became a director of the Company in September
1997, and is a member of the Compensation and Audit Committees of the Board of
Directors. Mr. Crosby is the managing general partner of The Rust Group, L.P.,
a private investment partnership, President of Rust Capital, Ltd., a Small
Business
- 4 -
<PAGE> 7
Investment Corporation and Chairman and CEO of Tescorp, Inc., a cable
television company. Mr. Crosby currently is a director of Tescorp, Inc.,
National Dentex Corporation, DSI Toys, Inc. and CinemaStar Luxury Theatres,
Inc.
J. R. Holland, Jr., 54, began advising the Company as a consultant in
October 1992 and was Chairman of the Board of Directors from October 1993 until
March 1997. Mr. Holland is a member of the Audit Committee of the Board of
Directors. Mr. Holland has been employed as President and Chief Executive
Officer of Unity Hunt, Inc. ("Unity Hunt") since September 1991. Unity Hunt is
a large international, private holding company with interests in entertainment,
retail, investments, real estate, natural resources and energy businesses. Mr.
Holland is also the President and Chief Executive Officer of Hunt Capital, the
Company's largest single stockholder. See "Security Ownership of Certain
Beneficial Owners, Directors and Management." From November 1988 to September
1991, Mr. Holland was Chairman of the Board and Chief Executive Officer of
Nedinco, Inc., a large diversified, international holding company. Prior to
November 1988, Mr. Holland was President and a director of KSA Industries,
Inc., a private, diversified company involved in entertainment, retail,
transportation and energy businesses, and President and a director of Western
Services International, Inc., a company involved in energy services, equipment
and chemicals. Mr. Holland began his career with Booz-Allen & Hamilton, Inc.,
a major management consulting firm. Mr. Holland currently is a director of
Optical Securities Group, Inc. and TNP Enterprises, Inc.
Terry S. Parker, 53, became a director of the Company in April 1998.
Mr. Parker currently is an independent consultant in the telecommunications
industry. From March 1995 to July 1996, Mr. Parker was President and Chief
Operating Officer for CellStar Corporation, a domestic cellular
telecommunications distributor. From October 1993 to March 1995, Mr. Parker
was a Senior Vice President for GTE Corporation ("GTE"), a diversified
telecommunications company, as well as the President of GTE Personal
Communications Services, GTE's cellular telecommunications division. From
August 1990 to October 1993, Mr. Parker was President of GTE Telecommunications
Products and Services, a diversified telecommunications services and systems
division of GTE. Mr. Parker currently is a director of CellStar Corporation,
Illinois Super Conductor, Inc. and Highway Master Corporation.
John A. Sprague, 45, became a director of the Company in January 1995,
and is a member of the Compensation Committee of the Board of Directors. Since
March 1994, Mr. Sprague has been the managing partner of Jupiter Partners L.P.,
an investment firm. See "Security Ownership of Certain Beneficial Owners,
Directors and Management." From January 1993 until February 1994, Mr. Sprague
was an independent investor. Prior to January 1993, Mr. Sprague served as a
General Partner of Forstmann Little & Co., an investment firm.
L. Allen Wheeler, 65, co-founder of the Company, has served as a
director of the Company since its formation in September 1990 and was Vice
Chairman of the Board of Directors from February 1996 until February 1997.
From January 1997 until February 1997, Mr. Wheeler served as the acting
President and Chief Executive Officer of the Company. Mr. Wheeler is a member
of the Compensation Committee of the Board of Directors. Mr. Wheeler has owned
and managed diversified investments through Allen Wheeler Management, Inc., a
personal holding company, for over 20 years. Mr. Wheeler's investments have
emphasized the media/communications industries. Mr. Wheeler has been a
shareholder, director and officer of several media/communications companies
involved in network and independent television stations, AM and FM radio
stations, paging and telephony. Mr. Wheeler currently is a director of
Wireless One and Texoma Medical Center, Inc.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION
OF THE INDIVIDUALS NOMINATED FOR ELECTION AS DIRECTORS.
- 5 -
<PAGE> 8
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF
THE BOARD OF DIRECTORS; COMPENSATION OF DIRECTORS
During the fiscal year ended December 31, 1997, the Board of Directors
met 13 times. The Company's Compensation Committee met six times in 1997. The
Compensation Committee makes recommendations to the Board of Directors on
general compensation and benefit levels, determines the compensation and
benefits for the Company's executive officers and administers the Company's
stock option and incentive compensation plans and programs. The Compensation
Committee currently is comprised of Messrs. Crosby, Sprague and Wheeler. The
Company's Audit Committee met twice in 1997. The Audit Committee oversees the
activities of the Company's independent auditors and internal accounting
controls. The Audit Committee currently is comprised of Messrs. Crosby and
Holland. The Board of Directors does not have a standing nominating committee
or any committee performing a similar function. Each director attended at
least 75% of the aggregate of all Board of Directors meetings and all meetings
of committees of which he was a member held during 1997 while he was in office.
Non-employee directors receive an annual fee of $5,000 and a meeting
fee of $500 per Board of Directors and Committee meeting attended, plus
reimbursement of out-of-pocket expenses, for their services as directors of the
Company. In addition, each non-employee director of the Company is entitled to
receive stock options under the Company's Stock Option Plan for Non-Employee
Directors for his services as a director. Directors who are also employees of
the Company do not receive any additional compensation for their services as
directors.
EXECUTIVE OFFICERS
The following table sets forth the executive officers of the Company.
See "Election of Directors" for a description of the business experience of Mr.
McHenry.
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------- --- -------------------------------------------------
<S> <C> <C>
Carroll D. McHenry . . . . . . 55 Chairman of the Board, President, Chief
Executive Officer
Marjean Henderson . . . . . . . 47 Senior Vice President, Chief Financial Officer
and Assistant Secretary
Christopher P. Dailledouze . . 39 Vice President -- Technical Services
Candice A. Farley . . . . . . . 45 Vice President -- Human Resources
J. Curtis Henderson . . . . . . 35 Vice President, General Counsel and Secretary
Randall C. May . . . . . . . . 36 Vice President -- Operations
Wayne M. Taylor . . . . . . . . 52 Vice President -- Administration
</TABLE>
Marjean Henderson joined the Company in August 1997 as Senior Vice
President and Chief Financial Officer. Ms. Henderson was appointed Assistant
Secretary in December 1997. From April 1996 to April 1997, Ms. Henderson
served as Senior Vice President and Chief Financial Officer for Panda Energy
International, Inc., a global energy concern. From December 1993 to October
1995, Ms. Henderson served as Senior Vice President and Chief Financial Officer
for Nest Entertainment, Inc., a home video and movies concern. From October
1987 to December 1993, Ms. Henderson served as Vice President, Chief Financial
Officer and Treasurer for RCL Enterprises, the Lyons Group, Lyrick Studios and
Big Feet Productions.
Christopher P. Dailledouze joined the Company in March 1996 as
Director of Engineering and was appointed Vice President -Technical Services in
April 1997. From March 1992 to March 1996, Mr. Dailledouze was Director of
Engineering for American Wireless Systems, Inc. From April 1988 to March 1992,
Mr. Dailledouze was Chief Engineer for Galaxy Cablevision, Inc.
- 6 -
<PAGE> 9
Candice A. Farley joined the Company in November 1997 as Vice
President - Human Resources. Prior to joining Heartland, Ms. Farley was
Director of Human Resources for Heritage Media Corporation, a broadcasting and
marketing company, from September 1995 to November 1997. Ms. Farley was
Director of Human Resources for Pizza Inn, Inc. from July 1993 through
September 1995 and was Vice President-Compensation and Benefits for American
Federal Bank from July 1992 through July 1993.
J. Curtis Henderson joined the Company in May 1996 as Vice President,
General Counsel and Secretary. From July 1994 to April 1996, Mr. Henderson was
Senior Vice President, General Counsel and Secretary of ZuZu, Inc., a
restaurant and franchising company in Dallas, Texas. Prior to his employment at
ZuZu, Mr. Henderson was an associate with the Dallas law firm of Locke Purnell
Rain Harrell for five years.
Randall C. May joined the Company in October 1994 as a Regional
Manager. Mr. May was appointed Director of System Development in March 1995 and
Vice President - Operations in February 1996. From December 1988 to October
1994, Mr. May worked for Post-Newsweek Cable, most recently serving as General
Manager of certain cable television and radio properties. From 1983 to 1988,
Mr. May served as Vice President -Area Manager for Sooner Cable Television
Inc., an independent cable television company.
Wayne M. Taylor joined the Company in February 1996 as Vice President
- - Administration. From May 1989 to February 1996, Mr. Taylor was a Group
Controller at Borden, Inc. From 1972 to 1989 Mr. Taylor was employed by Frito
Lay, most recently as a Group Manager- Finance.
Executive officers of the Company are appointed by, and serve at the
discretion of, the Board of Directors. Employment agreements with the
executive officers are described in "Executive Compensation and Related
Information." There are no family relationships between members of the Board of
Directors or any executive officers of the Company.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following sets forth a summary of compensation paid to or earned
by the following individuals during the three-year period ended December 31,
1997 for services rendered in all capacities to the Company: (1) the Company's
current Chief Executive Officer, (2) all other individuals who served in the
capacity of the Company's Chief Executive Officer during 1997, (3) the four
most highly compensated executive officers (other than the Chief Executive
Officer) who were serving in such capacities at the end of 1997 and whose total
annual compensation exceeded $100,000, and (4) the Company's Chief Financial
Officer (collectively, the "Named Executive Officers").
- 7 -
<PAGE> 10
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------------- --------------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING
NAME AND COMPENSATION STOCK AWARD(S) OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) (1) ($) (#) COMPENSATION ($) (2)
------------------ ---- ---------- --------- ------- --- ---- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Carroll D. McHenry (3) 1997 205,768 204,326 (4) 53,347 (5) 154,688 (6) 350,000 990
Chairman, Chief
Executive Officer and
President
David E. Webb (7) 1997 10,000 80,000 (8) 155
Former Chief Executive 1996 120,000 80,000 11,304 923
Officer and President
1995 120,000 6,088
L. Allen Wheeler (9) 1997 30,070 1,400 408
Former Interim Chief 1996 120,000 8,400 572
Executive Officer and
President
John A. Fanning (10) 1997 30,000 70,000 (11) 32,000
Former Interim Chief
Executive Officer and
President
Marjean Henderson (12) 1997 60,923 20,000 14,375 (13) 100,000
Senior Vice President,
Chief Financial Officer
and Assistant Secretary
J. Curtis Henderson (14) 1997 105,992 24,469 8,400 40,000
Vice President, General
Counsel and Secretary
Randall C. May (15) 1997 102,075 22,137 4,707 60,000 1,889
Vice President -- 1996 92,038 20,000 2,492 700
Operations
Wayne M. Taylor (16) 1997 97,499 21,466 40,000 1,950
Vice President --
Administration
Christopher P. 1997 78,755 15,300 660 40,000
Dailledouze (17)
Vice President --
Technical Services
</TABLE>
- --------------
(1) Unless otherwise noted, "Other Annual Compensation" is comprised of
car allowance.
- 8 -
<PAGE> 11
(2) Represents matching contributions made by the Company under the
Company's 401(k) Plan.
(3) Mr. McHenry assumed the positions of Chairman, Chief Executive Officer
and President of the Company on April 24, 1997 at an annual base
salary of $300,000.
(4) Includes (a) signing bonus of $50,000 paid to Mr. McHenry in 1997 in
connection with his hiring and listed in the Company's Proxy Statement
dated July 7, 1997, and (b) bonus of $154,326 paid for performance in
1997.
(5) Relocation expense payment paid in 1997 in connection with Mr.
McHenry's hiring and listed in the Company's Proxy Statement dated
July 7, 1997.
(6) Restricted stock grant of 75,000 shares of Common Stock granted to Mr.
McHenry in connection with his hiring. The closing price of the
Company's Common Stock on the NASDAQ Stock Market's National Market on
April 23, 1997 (the day before hiring) was $2.0625.
(7) Mr. Webb resigned as President and Chief Executive Officer of the
Company in January 1997.
(8) Paid pursuant to Consulting Agreement that expired in July 1997.
(9) Mr. Wheeler became Vice Chairman of the Company in March 1996, and
served as interim Chief Executive Officer and President in January and
February 1997. Mr. Wheeler did not receive any compensation from the
Company, other than certain rental income paid by the Company to an
affiliate for its operating and marketing offices and warehouse space,
during the year ended December 31, 1995. See "Certain Transactions
and Relationships." Mr. Wheeler resigned from his position as Vice
Chairman of the Board in February 1997, having received approximately
$95,000 in salary to such date.
(10) Mr. Fanning served as interim President and Chief Executive Officer
from February 28, 1997 to April 23, 1997.
(11) Paid pursuant to Consulting Agreement that expired in July 1997.
(12) Ms. Henderson became Senior Vice President and Chief Financial Officer
in August 1997 at an annual salary of $180,000. Ms. Henderson was
appointed Assistant Secretary in December 1997. Ms. Henderson's
current annual salary is $200,000.
(13) Restricted stock grant of 10,000 shares of Common Stock granted to Ms.
Henderson. The closing price of the Company's Common Stock on the
NASDAQ Stock Market's National Market on January 22, 1998 (the date of
grant) was $1.4375.
(14) Mr. Henderson became Vice President, General Counsel and Secretary in
May 1996 and did not earn more than $100,000 prior to fiscal year
1997.
(15) Mr. May became Vice President-Operations in February 1996 and did not
earn more than $100,000 prior to fiscal year 1996.
(16) Mr. Taylor became Vice President-Administration in February 1997 and
did not earn more than $100,000 prior to fiscal year 1997. Mr. Taylor
received a bonus of $10,000 in 1997 for services rendered in 1996.
(17) Mr. Dailledouze became Vice President-Technical Services in April 1997
and did not earn more than $100,000 prior to fiscal year 1997. Mr.
Dailledouze received a bonus of $25,500 in 1997 for services rendered
in 1996.
The following table sets forth the number of individual grants of
stock options made during the fiscal year ended December 31, 1997 to each of
the Named Executive Officers. No stock options were granted to Messrs. Webb
and Wheeler during such period. All options were granted pursuant to the
Company's Employee Option Plan at an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant.
- 9 -
<PAGE> 12
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (1)
----------------------------------------------------------- -----------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION 5% 10%
NAME GRANTED (#) FISCAL YEAR (%) ($/SH) DATE ($) ($)
---- ------------ --------------- ------ ---- ---- ---
<S> <C> <C> <C> <C> <C> <C>
Carroll D. 350,000 (2) 42.7 2.0625 4/23/2004 293,874 684,854
McHenry
Marjean Henderson 100,000 (2) 12.2 1.9375 8/26/2004 78,875 183,813
Randall C. May 60,000 (2) 7.3 2.3750 3/25/2004 58,011 135,192
Christopher P. 40,000 (2) 4.9 2.3750 3/25/2004 38,674 90,128
Dailledouze
J. Curtis 40,000 (2) 4.9 2.3750 3/25/2004 38,674 90,128
Henderson
Wayne M. Taylor 40,000 (2) 4.9 2.3750 3/25/2004 38,674 90,128
John A. Fanning 22,000 (3) 2.87 2.1250 12/31/1999 4,792 9,818
John A. Fanning 10,000 (4) 1.2 2.1250 12/31/1999 2,178 4,463
</TABLE>
- ---------------
(1) Potential realizable value is based on the assumption that the price
of the Company's Common Stock appreciates at the annual rate shown,
compounded annually, from the date of grant until the end of the
applicable option term. The values are calculated in accordance with
rules promulgated by the Securities and Exchange Commission ("SEC")
and do not reflect the Company's estimate of future stock price
appreciation.
(2) Represents non-qualified options granted at an exercise price equal to
fair market value on the date of grant. Such options vest at a rate
of 20% per year, subject to acceleration upon the death of the
optionee or termination of the optionee following a Change of Control
(as defined in the option agreements), and have a term of seven years
from the date of grant.
(3) Represents non-qualified options granted at an exercise price equal to
fair market value on the date of grant. Fifty percent of such options
vested on the date of grant and 50% vested six months thereafter. The
options expire on December 31, 1999 unless sooner exercised. The
options were amended in April 1997 to reduce the exercise price from
$9.375 per share to $2.125 per share, the fair market value on the
date of such amendment. See "Report on Repricing of Options."
(4) Represents non-qualified options granted at an exercise price equal to
fair market value on the date of grant. Fifty percent of such options
vested on the date of grant and 50% vested three months thereafter.
The options expire on December 31, 1999 unless sooner exercised.
- 10 -
<PAGE> 13
The following table sets forth information with respect to the number
of options held at fiscal year end and the aggregate value of in-the-money
options held at fiscal year end by the Named Executive Officers. None of the
Named Executive Officers exercised any stock options during fiscal 1997.
Messrs. Webb and Wheeler held no options at the end of fiscal 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END
(#) ($)
EXERCISABLE/ EXERCISABLE/
------------ ------------
NAME UNEXERCISABLE UNEXERCISABLE
---- ------------- -------------
<S> <C> <C>
Carroll D. McHenry 0/350,000 $0/$0
John A. Fanning 32,000/0 $0/$0
Marjean Henderson 0/100,000 $0/$0
Christopher P. Dailledouze 2,000/48,000 $0/$0
J. Curtis Henderson 2,500/50,000 $0/$0
Randall C. May 4,250/67,000 $0/$0
Wayne M. Taylor 2,000/48,000 $0/$0
</TABLE>
EMPLOYMENT AGREEMENTS
The Company entered into an Employment Agreement with Carroll D.
McHenry for a term of three years, beginning on March 6, 1998. Under the
Employment Agreement, the Company has agreed to pay Mr. McHenry an annual base
salary of not less than $300,000. On each anniversary of the effective date,
the term is automatically extended for one additional year; provided, however,
that either the Company or Mr. McHenry may terminate any such one-year
extension by giving notice to the other party at least 90 days before the
applicable anniversary of the effective date. Additionally, if Mr. McHenry's
employment is terminated by the Company other than for cause (as defined in the
Employment Agreement) or on account of Mr. McHenry's death or permanent
disability, or if Mr. McHenry resigns for good reason (as defined in the
Employment Agreement), then the Company has agreed to pay Mr. McHenry a
severance payment equal to his then-current annual base salary (excluding any
bonuses) for the balance of the term of Employment Agreement.
In addition, the Company entered into Employment Agreements with
Marjean Henderson, Christopher P. Dailledouze, Candice A. Farley, J. Curtis
Henderson, Randall C. May and Wayne M. Taylor (collectively, the "Officers"),
effective April 8, 1998. The Employment Agreements for Ms. Henderson and Mr.
Henderson each are for a term of two years. The Employment Agreements for
Messrs. Dailledouze, May, Taylor and Ms. Farley each are for a term of one
year. Under the Employment Agreements, the Company has agreed to pay each
Officer an annual base salary of not less than his or her current annual base
salary (Ms. Henderson - $200,000; Mr. Henderson - $144,000; Mr. May - $125,000;
Mr. Taylor - $108,000; Ms. Farley - $96,000; Mr. Dailledouze - $90,000). On
each anniversary of the effective date of each Employment Agreement, the term
is automatically extended for one additional year; provided, however, that
either the Company or the respective Officer may terminate any such one-year
extension by giving notice to the other party at least 90 days before any such
anniversary of the effective date. Additionally, if an Officer's employment is
terminated by the Company other than for cause (as defined in each Employment
- 11 -
<PAGE> 14
Agreement) or on account of the Officer's death or permanent disability, or if
the Officer resigns for good reason (as defined in each Employment Agreement),
then the Company is required to pay the Officer a severance payment equal to
his or her then-current annual base salary (excluding any bonuses) for the
balance of the term of the applicable Employment Agreement.
None of the employment agreements discussed above provide for a bonus
payment in addition to the Officer's annual base salary. The Officers are
eligible, independent of the employment agreements, to participate in and
receive bonuses or awards under, the Company's Performance Incentive
Compensation Plan, Employee Stock Option Plan and Employee Retention Program
(except for Mr. McHenry, who is not eligible to receive a bonus under the
Employee Retention Program).
REPORT ON REPRICING OF OPTIONS
The Compensation Committee of the Board of Directors hereby submits
its report on repricing of stock options of the Company, as set forth in the
table below.
In August 1997, the Compensation Committee of the Board of Directors
authorized the Company to offer to amend the terms of all stock options that
had been granted with an exercise price of $20.00 or greater to (1) lower the
exercise price of these options to $1.9375 per share (the fair market value on
the date of approval of the amendments) and (2) reduce the number of shares
underlying such options to an amount equal to 25% of the original grant.
Because of the decline in the Company's stock price during 1996 and 1997, the
Compensation Committee authorized the amendment to motivate and retain key
employees and return out-of-the-money stock options to the Company's Employee
Stock Option Plan. The holders of 99.7% of all options subject to the offer
accepted the offer and returned 123,750 options to the Employee Stock Option
Plan in exchange for the amended exercise price on the options retained by
them.
In addition, in April 1997 the Company amended the terms of a stock
option held by John A. Fanning to reduce the exercise price of options
originally granted in January 1997 in connection with a Consulting Agreement
with Mr. Fanning from $9.375 per share to $2.125 per share. The new exercise
price was based on the closing price of the Company's common stock on the
NASDAQ Stock Market's National Market as of the effective date of the
amendment.
The following table sets forth the amendment of the exercise price of
options held by executive officers of the Company during the last 10 completed
fiscal years.
- 12 -
<PAGE> 15
<TABLE>
<CAPTION>
SECURITIES EXERCISE
UNDERLYING PRICE AT LENGTH OF ORIGINAL
NUMBER OF MARKET PRICE OF TIME OF OPTION TERM
DATE OF OPTIONS STOCK AT TIME REPRICING OR NEW REMAINING AT DATE OF
REPRICING REPRICED OR OF REPRICING OR AMENDMENT EXERCISE REPRICING OR
NAME AMENDMENT AMENDED (#) AMENDMENT ($) ($) PRICE ($) AMENDMENT
---- --------- ----------- ------------- --- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
John A. 4/23/97 22,000 2.125 9.375 2.1250 27 months
Fanning
David D. 8/12/97 10,000 1.9375 25.50 1.9375 66 months
Hagey
J. Curtis 8/12/97 50,000 1.9375 26.50 1.9375 68 months
Henderson
Randall C. 8/12/97 5,000 1.9375 25.50 1.9375 66 months
May
Robert R. 8/12/97 13,000 1.9375 22.125 1.9375 60 months
Story
Wayne M. 8/12/97 40,000 1.9375 25.50 1.9375 66 months
Taylor
</TABLE>
JACK R. CROSBY
JOHN A. SPRAGUE
L. ALLEN WHEELER
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 1997, the Compensation
Committee of the Board of Directors was comprised of Max E. Bobbitt, John A.
Sprague and L. Allen Wheeler. Mr. Sprague is indirectly a controlling general
partner of Jupiter, the holder of $40.0 million original principal amount of
the Company's Convertible Notes.
The Company leases an aggregate of approximately 51,345 square feet
for its operating and marketing offices and warehouse space in Durant and
Lindsay, Oklahoma from affiliates of Mr. Wheeler. The per annum rent for such
space is approximately $156,000. In addition, the Company leases approximately
12,430 square feet for its installation and operating offices in Durant,
Oklahoma from an affiliate of Mr. Wheeler. The per annum rent for such space
is approximately $62,000. The Company believes that such rents are at or below
market rates and the terms of such leases are at least as favorable as those
the Company would be able to otherwise obtain through arms-length negotiation
with an unaffiliated third party.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee makes recommendations to the Board of
Directors with respect to general compensation and benefit levels, determines
the compensation and benefits for the Company's executive officers and
administers the Company's Employee Stock Option Plan, Non-Employee Directors
Stock Option Plan and Incentive Compensation Plan.
General Compensation Philosophy
The Company's compensation philosophy is to link executive pay to
Company performance and to provide an incentive to manage the business with a
principal view of enhancing the enterprise value of the Company. Compensation
criteria are evaluated annually to ensure that they are appropriate and
consistent with the Company's business and strategic objectives. The Company's
policies and programs are intended
- 13 -
<PAGE> 16
to (i) provide rewards contingent upon Company and individual performance, (ii)
link executive compensation to sustainable increases in and the preservation of
enterprise value, (iii) retain a strong management team and (iv) encourage
personal and professional development and growth.
Effective January 1, 1998, the Company adopted a Performance Incentive
Compensation Plan (the "Incentive Compensation Plan" or "ICP"). The ICP
provides incentive compensation opportunities to the Company's executive
officers and other key employees based solely on achievement of predetermined
financial goals (such as consolidated earnings before interest, taxes,
depreciation and amortization ("EBITDA")) as well as quantitative individual
objectives, such as improvements in churn, collections and service calls. Not
more than 50% of a target award may be based on individual objectives. Under
the ICP, target awards for the Chief Executive Officer may range from 25% to
75% of his or her annual salary, and between 12.5% and 52.5% of other executive
officers' salaries. ICP bonuses are in addition to any amounts paid under the
Employee Retention Program described below.
The Company intends to continue to use stock options as a significant
element of its compensation philosophy.
Executive Officer Compensation
Total cash compensation for executive officers for fiscal 1997 is
comprised of base salary, bonus and other annual compensation. Compensation
levels for 1997 were based on a variety of factors, including the executive's
then current responsibilities, specific experience and performance, competitive
compensation practices at other similarly situated companies and the
Compensation Committee's assessment of the executive's overall contribution to
the business and strategic objectives of the Company. Bonuses paid for 1997
performance were based solely on the achievement of predetermined EBITDA
objectives as well as quantitative individual objectives, such as improvements
in churn, collections and service calls.
Effective April 8, 1998, the Company entered into one and two-year
employment agreements with its executive officers that provide for minimum
annual salaries equal to such officers' then-current respective salaries.
Chief Executive Officer Compensation
The annual base salary, signing bonus and relocation expense paid to
Mr. McHenry for fiscal 1997 were determined by a search committee of the Board
of Directors under the authority of the Board of Directors and in consultation
with an independent national executive search and consulting firm. Effective
March 6, 1998, Mr. McHenry signed a three-year employment agreement with the
Company that provides for a minimum annual salary of $300,000 (his starting
annual salary). Mr. McHenry's bonus for 1997 was based solely on the
achievement of predetermined EBITDA objectives set by the Compensation
Committee.
Employee Retention Program
Effective April 8, 1998, the Board of Directors approved an employee
retention program (the "ERP") for executive officers and other key employees as
designated by the Chief Executive Officer. Under the ERP, the Board of
Directors authorized the Company to offer a retention bonus of between 15% and
25% of a participant's annual base salary if such individual remained in the
Company's employment through April 30, 1999.
JACK R. CROSBY
JOHN A. SPRAGUE
L. ALLEN WHEELER
- 14 -
<PAGE> 17
PERFORMANCE GRAPH
The following performance graph compares the cumulative total
stockholder returns for (1) the Common Stock, (2) the Nasdaq Stock Market -
U.S. Companies Index ("Nasdaq-U.S. Index"), (3) the Nasdaq Telecommunications
Stocks Index ("Nasdaq-Telecom Index") and (4) a Company-Determined Peer Group
Index (the "Peer Index") over the period of April 29, 1994 to December 31,
1997. The Peer Index includes the following four companies, each of which
operates multiple wireless cable television systems: American Telecasting,
Inc., CAI Wireless Systems, Inc., People's Choice TV Corp. and Wireless One.
The returns for each of the members of the Peer Index have been weighted
according to each member's stock market capitalization. The graph and table
assume the investment of $100 in each of the Common Stock, the Nasdaq-U.S.
Index, the Nasdaq-Telecom Index and the Peer Index on April 29, 1994 (the
Common Stock commenced public trading on April 22, 1994, and April 29, 1994
represents the first month-end date that the Common Stock was publicly traded)
and the reinvestment of all dividends. Total stockholder returns for prior
periods are not an indication of future performance.
[Graph]
<TABLE>
<CAPTION>
APRIL DECEMBER DECEMBER DECEMBER DECEMBER
29, 30, 29, 31, 31,
1994 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Heartland Wireless Communications, Inc. . . $100.00 $115.91 $270.45 $119.32 $15.91
Nasdaq-U.S. Index . . . . . . . . . . . . . $100.00 $103.38 $146.20 $179.84 $220.67
Nasdaq-Telecom Index . . . . . . . . . . . $100.00 $100.12 $131.10 $134.01 $197.98
Peer Index . . . . . . . . . . . . . . . . $100.00 $62.48 $97.64 $33.90 $11.98
</TABLE>
As of April 24, 1998, the closing sales price for the Common Stock as
reported on the Nasdaq Stock Market's National Market was $0.69 per share.
Stockholders are urged to obtain current market price information concerning
the Company's Common Stock.
- 15 -
<PAGE> 18
STOCK OPTION PLANS
Employee Stock Option Plan. Effective upon consummation of its
initial public offering in April 1994, the Company adopted its 1994 Employee
Stock Option Plan, which provides for the grant to officers and employees of
both "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, and stock options that are
non-qualified for Federal income tax purposes. The total number of shares of
Common Stock for which options currently may be granted is 1,950,000. A Stock
Option Subcommittee of the Compensation Committee or, for option grants to
purchase 25,000 or more shares of Common Stock, the entire Board of Directors,
determines which of the Company's officers and employees receive options, the
time when options are granted, whether the options are incentive stock options
or nonqualified stock options, the terms of such options, the exercise date of
any options and the number of shares subject to options.
The exercise price of options granted under the Employee Stock Option
Plan may not be less than 100% of the fair market value of the Common Stock at
the time of grant. As of April 1, 1998, options to purchase an aggregate of
1,455,367 shares to 34 employees were outstanding at a weighted average
exercise price of $5.95 per share.
Options granted pursuant to the Employee Stock Option Plan are
nontransferable and, with certain exceptions in the event of the death or
disability of an optionee, may be exercised by the optionee only during
employment. Options are exercisable at such rate as may be determined by the
Stock Option Subcommittee or Board of Directors, as applicable. Options
typically vest in equal annual installments over a five-year period, although
certain options have been granted with shorter vesting periods.
In the event of a Change in Control of the Company (as defined below),
an option granted to an employee will become fully exercisable if, within one
year of such Change of Control, such employee ceases for any reason to be an
employee of the Company. A Change of Control will be deemed to have occurred
if (a) there is consummated (i) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which shares of Common Stock are converted into cash, securities or other
property, other than a merger of the Company in which the holders of Common
Stock immediately prior to the merger have the same proportionate ownership of
common stock of the surviving corporation immediately after the merger, or (ii)
any sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Company; (b) the shareholders approve any plan or proposal for the liquidation
or dissolution of the Company, (c) any person (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) becomes the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of 30% or more of the outstanding Common Stock; or (d)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the entire Board of Directors cease for any reason to
constitute a majority thereof unless the election, or the nomination for
election by the Company's stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period. Any exercise of an option permitted
in the event of a Change of Control must be made within 180 days of the related
employee's termination as an employee of the Company.
Stock Option Plan for Non-Employee Directors. The Company adopted the
1994 Stock Option Plan for Non-Employee Directors, also effective upon the
consummation of the Company's initial public offering.
- 16 -
<PAGE> 19
Directors of the Company who are not, and who have not been during the
immediately preceding 12-month period, employees of the Company or any
subsidiary of the Company are automatically participants in the Non-Employee
Directors Plan. Each Non-Employee Director who is in office on November 15 of
any year (commencing with November 1995) will, on the immediately succeeding
January 1, automatically be granted an option to acquire 2,000 shares of Common
Stock at an exercise price equal to the fair market value of the Common Stock
on the date of grant.
A maximum of 50,000 shares of Common Stock may be issued through the
exercise of options granted pursuant to the Non-Employee Directors Plan. The
Non-Employee Directors Plan is administered by the Board of Directors. Options
granted pursuant to the Non-Employee Directors Plan, except as discussed below,
are exercisable in installments of 25% upon each anniversary of the date of
grant. The term of each option, except as discussed below, is for a period not
exceeding seven years from the date of grant. Options may not be assigned or
transferred except by will or by operation of the laws of descent and
distribution.
In the event of a Change of Control of the Company, an option granted
to a Non-Employee Director will become fully exercisable if, within one year of
such Change in Control, such Non-Employee Director ceases for any reason to be
a member of the Board of Directors. Any exercise of an option permitted in the
event of a Change of Control must be made within 180 days of the related
Non-Employee Director's termination as a director of the Company.
INCENTIVE COMPENSATION PLANS
Performance Incentive Compensation Plan. Effective January 1, 1998,
the Company adopted a Performance Incentive Compensation Plan ("ICP") for
officers and key employees. The ICP is administered by the Compensation
Committee. The ICP provides incentive compensation opportunities to the
Company's executive officers and other key employees based solely on
achievement of predetermined financial goals (such as EBITDA) as well as
quantitative individual objectives. Not more than 50% of a target award may be
based on individual objectives. Under the ICP, target awards for the Chief
Executive Officer may range from 25% to 75% of his or her annual salary; target
awards for other executive officers may range between 12.5% and 52.5% of their
annual salaries; and target awards for other key employees may range from 7.5%
to 30% of their annual salaries.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
During the year ended December 31, 1997, the Company paid
approximately $95,000 to an accounting firm affiliated with Mr. Webb for
subscriber and payroll services rendered to the Company.
The Company leases an aggregate of approximately 51,345 square feet
for its operating and marketing offices and warehouse space in Durant and
Lindsay, Oklahoma from affiliates of Messrs. Webb and Wheeler. The per annum
rent for such space is approximately $156,000. The Company leases approximately
12,430 square feet for its installation and operating offices in Durant,
Oklahoma from an affiliate of Messrs. Story, Webb and Wheeler. The per annum
rent for such space is approximately $62,000.
- 17 -
<PAGE> 20
The terms of the leases described above were determined by the
parties, and the Company believes that such transactions involving affiliates
were on terms no less favorable to the Company than could have been obtained
from unaffiliated third parties. All future transactions between the Company
and its officers, directors, principal stockholders and affiliates will be on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties and will be approved by a majority of the disinterested members
of the Board of Directors.
In February 1997, the Company, CS Wireless, Wireless One and CAI
Wireless Systems, Inc. formed Wireless Enterprises, LLC ("Wireless
Enterprises"). Carroll D. McHenry is one of four managers of Wireless
Enterprises. Wireless Enterprises is a programming cooperative that negotiates
programming and marketing services with suppliers of programming. In 1997, the
Company paid approximately $15.5 million to Wireless Enterprises as
reimbursement of programming expenses and for other administrative services.
ITEM 2 ON PROXY
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors of the Company has selected the firm of KPMG
Peat Marwick LLP, independent certified public accountants, to serve as
auditors for the Company for the fiscal year ending December 31, 1998. KPMG
Peat Marwick LLP has served as the Company's auditors since the Company's
inception. The Company expects that a representative of KPMG Peat Marwick LLP
will be present at the Meeting and will be available to make a statement (if he
or she desires to do so) and to respond to appropriate questions at the
Meeting. If the stockholders do not ratify the selection of KPMG Peat Marwick
LLP, the Board of Directors may consider selection of other independent
certified public accountants to serve as independent auditors, but no
assurances can be made that the Board of Directors will do so or that any other
independent certified public accountants would be willing to serve. The vote
of a majority of the shares of Common Stock represented in person or by proxy
at the Meeting is required to ratify the selection of auditors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF THIS SELECTION.
ITEM 3 ON PROXY
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
The Board of Directors of the Company knows of no matters other than
those referred to in the accompanying Notice of Annual Meeting of Stockholders
which properly may come before the Meeting. However, if any other matter
should be properly presented for consideration and voting at the Meeting or any
adjournment(s) thereof, the persons named as proxies on the enclosed form of
proxy card intend to vote the proxy cards in accordance with their judgement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who are beneficial
owners of 10% or more of the Common Stock, to file reports of ownership and
changes in ownership of the Company's securities with the SEC. Officers,
directors and greater than 10% beneficial owners are required by applicable
regulations to furnish the Company with copies of all forms they file pursuant
to Section 16(a).
- 18 -
<PAGE> 21
Based solely upon a review of the copies of the forms furnished to the
Company, and written representations from certain reporting persons that no
Form 5's were required, the Company believes that during the fiscal year ended
December 31, 1997, all filing requirements applicable to its officers,
directors and 10% beneficial owners were satisfied on a timely basis.
STOCKHOLDER PROPOSALS
The Company presently contemplates that the 1999 Annual Meeting of
Stockholders will be held on or about June 12, 1999. Proposals by stockholders
intended for inclusion in the Proxy Statement to be furnished to all
stockholders entitled to vote at the next Annual Meeting of Stockholders of the
Company must be received at the Company's principal executive offices not later
than December 31, 1998. In order to curtail controversy as to the date on
which a proposal was received by the Company, the Company suggests that
proponents submit their proposals by certified mail, return receipt requested.
Any such proposal must also meet the other requirements of the rules of the SEC
relating to stockholder proposals.
EXPENSES AND SOLICITATION
The Company will bear the cost of soliciting proxies, including
expenses in connection with the preparation and mailing of this Proxy Statement
and all papers which now accompany or may hereafter supplement it. Solicitation
of proxies will be primarily by mail. However, proxies may also be solicited
by directors, officers and regular employees of the Company (who will not be
specifically compensated for such services) by telephone or otherwise.
Brokerage houses and other custodians, nominees and fiduciaries will be
requested to forward proxies and proxy material to the beneficial owners of
Common Stock, and the Company will reimburse them for their expenses.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON BEING SOLICITED
BY THIS PROXY STATEMENT, UPON WRITTEN REQUEST, A COPY OF THE COMPANY'S 1997
ANNUAL REPORT AND FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997, FILED
WITH THE SEC. ALL SUCH REQUESTS SHOULD BE DIRECTED TO HEARTLAND WIRELESS
COMMUNICATIONS, INC., 200 CHISHOLM PLACE, SUITE 200, PLANO, TEXAS 75075,
ATTENTION: CORPORATE SECRETARY.
By Order of the Board of Directors,
/s/ J. Curtis Henderson
J. Curtis Henderson
General Counsel and Secretary
Plano, Texas
April 30, 1998
- 19 -
<PAGE> 22
HEARTLAND WIRELESS COMMUNICATIONS, INC.
200 CHISHOLM PLACE, SUITE 200
PLANO, TEXAS 75075
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Carroll D. McHenry and J. Curtis Henderson, or
either of them, as proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and vote, as designated below, all
of the shares of the Common Stock, par value $.001 per share, of Heartland
Wireless Communications, Inc. (the "Company") held of record by the undersigned
at the close of business on April 24, 1998, at the Annual Meeting of
Stockholders to be held on June 12, 1998, or any adjournment(s) thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE ELECTION OF THE NOMINEES UNDER PROPOSAL 1, "FOR" THE PROPOSAL
TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY UNDER PROPOSAL 2, AND, PURSUANT TO PROPOSAL 3, AT
THE DISCRETION OF THE PROXIES WITH RESPECT TO ANY OTHER MATTER THAT IS PROPERLY
PRESENTED AT THE MEETING.
IMPORTANT: TO BE SIGNED AND DATED ON THE REVERSE SIDE
<PAGE> 23
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<S> <C>
HEARTLAND WIRELESS COMMUNICATIONS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY [X]
[ ]
WITHHOLD
AUTHORITY
FOR all to vote for FOR all nominees, except
nominees all nominees vote withheld for those listed on the following lines:
1. Proposal to elect as directors of the Company [ ] [ ] [ ]
the following persons, to hold office until
the next annual meeting of stockholders of the -------------------------------------
Company or until their respective successors
have been duly elected and qualified. -------------------------------------
Carroll D. McHenry Terry S. Parker -------------------------------------
Jack R. Crosby John A. Sprague Nominee Exceptions
J.R. Holland, Jr. L. Allen Wheeler
2. Proposal to ratify the appointment of KPMG FOR AGAINST ABSTAIN
Peat Marwick LLP as independent public [ ] [ ] [ ]
accountants of the Company for the fiscal
year ending December 31, 1998.
3. In their discretion, the proxies are FOR AGAINST ABSTAIN
authorized to vote upon such other business [ ] [ ] [ ]
as may properly come before the meeting or
at any adjournment(s) thereof.
Please execute this proxy as your name appears hereon.
When shares are held by joint tenants, both should
sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full
corporate name by the president or other authorized
officer. If a partnership, please sign in partnership
name by authorized person. PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
------------------------------------------------------
Signature Date
------------------------------------------------------
Signature (joint owner) Date
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