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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): SEPTEMBER 27, 1996
HIGHWAYMASTER COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-26140 51-0352879
(State of other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
16479 DALLAS PARKWAY, SUITE 710, DALLAS, TEXAS 75248
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (972) 732-2500
NOT APPLICABLE
(Former name or former address if changed from last report)
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ITEM 5. OTHER EVENTS.
INTRODUCTION
This Current Report on Form 8-K (the "Current Report") relates to (i)
certain transactions (the "SBW Transactions") consummated on September 27,
1996 by HighwayMaster Communications, Inc. (the "Company") and Southwestern
Bell Wireless Holdings, Inc. ("SBW"), a wholly owned subsidiary of SBC
Communications Inc. ("SBC"), including, but not limited to, the issuance to
SBW of 1,000 shares of a new series of preferred stock, par value $.01 per
share, of the Company designated as Series D Participating Convertible
Preferred Stock ("Series D Preferred Stock") in consideration of a cash
payment in the amount of $20.0 million (the "Purchase Price"), and (ii)
certain transactions (the "Recapitalization Transactions") consummated on the
same date by the Company, the Erin Mills Stockholders (as defined below), the
Carlyle Stockholders (as defined below) and certain other holders of its
outstanding securities, including, but not limited to, the issuance by the
Company to such security holders of an aggregate of 2,682,018 shares of
common stock, par value $.01 per share ("Common Stock"), of the Company in
consideration of (a) a cash payment in the amount of $10.0 million, (b) the
cancellation of promissory notes in the aggregate principal amount of
approximately $12.7 million issued by the Company and (c) the cancellation of
all outstanding shares of Series B Preferred Stock, par value $.01 per share
("Series B Preferred Stock"), of the Company.
SBW TRANSACTIONS
On September 27, 1996, the Company and SBW consummated the SBW
Transactions. The description of the SBW Transactions set forth below does
not purport to be complete, and such description is qualified in its entirety
by reference to the exhibits to this Current Report which relate to the SBW
Transactions.
SALE OF SERIES D PREFERRED STOCK
In accordance with the terms and conditions set forth in a Purchase
Agreement, dated September 27, 1996 (the "Purchase Agreement"), between the
Company and SBW, the Company sold 1,000 shares of Series D Preferred Stock to
SBW in exchange for the Purchase Price. Immediately upon receipt of the
Purchase Price from SBW, the Company delivered the Purchase Price to Texas
Commerce Bank, N.A., as escrow agent (the "Escrow Agent"), to be held
pursuant to an Escrow Agreement, dated as of September 27, 1996 ("Escrow
Agreement"), among the Company, SBW and the Escrow Agent.
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The Purchase Agreement provides that, if the Antitrust Authorization
Condition (as defined below) is satisfied prior to or on December 31, 1996
and a Governmental Condition (as defined below) does not exist at the time
the Antitrust Authorization Condition is satisfied, the Purchase Price will
promptly be released by the Escrow Agent to the Company. On the other hand,
if the Antitrust Authorization Condition is not satisfied as of December 31,
1996 or a Governmental Condition exists at such time, SBW will be entitled to
determine whether the Purchase Price will be released to the Company or
returned to SBW. If the Purchase Price is returned to SBW, SBW will return
to the Company the certificate evidencing the shares of Series D Preferred
Stock, and the Purchase Agreement and the other agreements and instruments
entered into in connection with the SBW Transactions will be terminated and
will be of no further force or effect. As used herein, (i) the term
"Antitrust Authorization Condition" means a condition to the effect that the
waiting period applicable under the Hart-Scott-Rodino Antitrust Improvements
Act of 1974, as amended, to the issuance to SBW of shares of Class B Common
Stock (as defined below) upon conversion of the shares of Series D Preferred
Stock has expired or early termination has been granted with respect thereto
and (ii) the term "Governmental Condition" means that any governmental or
regulatory authority or body has enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the transactions
contemplated by the Purchase Agreement or that any proceeding seeking any of
the foregoing is pending.
The shares of Series D Preferred Stock issued to SBW pursuant to the
Purchase Agreement are initially convertible into an aggregate of 1,600,000
shares of Common Stock at the option of SBW. In addition, at such time as
Regulatory Relief (as defined below) is obtained, all of the outstanding
shares of Series D Preferred Stock will automatically convert into an equal
number of shares of a new class of the Company's common stock to be
designated as Class B Common Stock, par value $.01 per share ("Class B Common
Stock"). If Regulatory Relief is not obtained on or before September 27,
2001, all of the outstanding shares of Series D Preferred Stock will be
converted into shares of Common Stock at the election of the Company on the
same basis as if they had been voluntarily converted by SBW. If the shares
of Series D Preferred Stock issued to SBW were converted into Common Stock as
of the date of this Current Report, SBW would hold approximately 6.1% of the
outstanding shares of Common Stock. As used herein, the term "Regulatory
Relief" means that SBC or its affiliates have obtained all necessary federal
and state regulatory approvals to provide landline, interLATA long-distance
service pursuant to the Communications Act of 1934, as amended by the
Telecommunications Act of 1996.
The holders of shares of Series D Preferred Stock will be entitled to
receive dividends and distributions equal to the aggregate amount of
dividends and distributions payable on or in respect of the number of shares
of Common Stock into which such shares of Series D Preferred Stock are then
convertible. In the event of a liquidation of the Company, the holders of
shares of Series D Preferred Stock will be entitled to an aggregate
liquidation preference in an amount equal to the greater of (i) $20.0 million
or (ii) the amount of distributions payable in connection with such
liquidation on or in respect of the number of shares of Common Stock into
which such shares of Series D Preferred Stock are then convertible.
Except as required by law or as described below, the holders of Series
D Preferred Stock will not be entitled to vote on any matters submitted to
the stockholders of the Company. However, the holders of Series D Preferred
Stock will be entitled to approve certain transactions that may be proposed
by the Company from time to time, including (i) mergers or consolidations
involving the
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Company that require stockholder approval under the General Corporation Law
of the State of Delaware (the "DGCL"), (ii) sales of all or substantially all
of the assets of the Company that require stockholder approval under the
DGCL, (iii) amendments to the Company's Certificate of Incorporation, (iv)
the dissolution of the Company, (v) the adoption, implementation or
acceptance by the Company of certain anti-takeover provisions, (vi) the
issuance by the Company of equity securities, including securities
convertible into equity securities (subject to specified exceptions), and the
incurrence by the Company of debt obligations in an amount exceeding
$5,000,000 in any year, (vii) the Company entering into certain new lines of
business or entering into certain joint ventures, partnerships or similar
arrangements, (viii) the disposition by the Company of certain assets outside
the ordinary course of business, (ix) any amendment, alteration or repeal of
the terms of the Series D Preferred Stock and (x) any corporate action that
would reduce the number of shares of Common Stock into which a share of
Series D Preferred Stock is convertible to less than 1,600.
Copies of the Purchase Agreement, the Escrow Agreement and the
Certificate of Designation establishing the terms of Series D Preferred Stock
are attached as Exhibits 10a, 10b and 4a hereto, respectively, and are
incorporated by reference herein.
AUTHORIZATION OF CLASS B COMMON STOCK
At a meeting held on September 27, 1996, the Board of Directors of the
Company adopted a resolution declaring the advisability of adopting a
Certificate of Amendment (the "Certificate of Amendment") which would amend
the Certificate of Incorporation of the Company, as amended, in order, among
other things, to create a new series of common stock of the Company to be
designated as Class B Common Stock, par value $.01 per share ("Class B Common
Stock"), into which shares of Series D Preferred Stock will automatically be
converted upon receipt of Regulatory Relief. SBW has solicited consents from
ten of the largest stockholders of the Company (the "Designated Holders"),
including certain Erin Mills Stockholders, Carlyle Stockholders and By-Word
Stockholders (who in the aggregate hold approximately 68.4% of the outstanding
shares of Common Stock) with respect to the approval and adoption of the
Certificate of Amendment, and each Designated Holder has executed and
delivered to SBW a written consent approving the same. The Purchase
Agreement provides that the Company will take all required action under the
DGCL and applicable federal securities laws to effect the corporate action to
which such consents relate. In order to comply with this requirement, the
Company will file an information statement (the "Information Statement") with
the Securities and Exchange Commission pursuant to Regulation 14C under the
Securities Exchange Act of 1934, as amended, and will distribute the
Information Statement to its stockholders in order to notify them of the
adoption and approval of the Certificate of Amendment. As required pursuant
to Regulation 14C, the Company will not file the
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Certificate of Amendment with the Secretary of State of the State of Delaware
until 20 calendar days after the Information Statement has been sent or given
to its stockholders.
Under the terms of the Certificate of Amendment, the outstanding shares
of Class B Common Stock will be convertible into an aggregate of 1,600,000
shares of Common Stock at the option of SBW, provided that no such shares may
be converted into Common Stock unless the holders of all outstanding shares of
Class B Common Stock elect so to convert their shares.
The holders of Class B Common Stock will be entitled to receive
dividends and distributions equal to the dividends and distributions payable
on or in respect of the number of shares of Common Stock into which such
shares of Class B Common Stock are then convertible. In the event of a
liquidation of the Company, the holders of Class B Common Stock will be
entitled to receive the amount of distributions payable in connection with
such liquidation on or in respect of the number of shares of Common Stock
into which such shares of Class B Common Stock are then convertible.
The holders of Common Stock and Class B Common Stock will generally have
identical voting rights and will vote together as a single class, with the
holders of Class B Common Stock being entitled to a number of votes equal to
the number of shares of Common Stock into which the shares of Class B Common
Stock held by them are then convertible. In addition, the holders of Class B
Common Stock will be entitled to elect one director of the Company (or two
directors if SBW and its affiliates beneficially own at least 20% of the
outstanding shares of Common Stock on a fully diluted basis, including shares
issuable upon conversion or exercise of outstanding options, warrants or
rights, but excluding shares issuable upon the conversion or exercise of the
Warrants (as defined below) or of options, warrants or rights issued by any
person other than the Company). The holders of Class B Common Stock will also
be entitled to approve certain transactions that may be proposed by the
Company from time to time, including (i) the approval of any annual budget or
business plan for the Company or any deviation from any annual budget by more
than 5%, (ii) the issuance by the Company of equity securities, including
securities convertible into equity securities (subject to specified
exceptions), and the incurrence by the Company of debt obligations in an
amount exceeding $5,000,000 in any year, (iii) the hiring or termination by
the Company of its chief executive officer, chief operating officer or chief
financial officer, (iv) the Company entering into certain new lines of
business or entering into certain joint venture, partnerships or similar
arrangements, (v) the Company exiting its existing line of business or
disposing of certain assets outside the ordinary course of business, (vi) the
adoption, implementation or acceptance by the Company of certain
anti-takeover provisions and (vii) any corporate action that would reduce the
number of shares of Common Stock into which a share of Class B Common Stock
is convertible to less than 1,600.
A copy of the Certificate of Amendment is attached as Exhibit 3b hereto,
and is incorporated by reference herein.
ISSUANCE OF WARRANTS
In connection with the transactions contemplated by the Purchase
Agreement and the other agreements and instruments relating to the SBW
Transactions, the Company issued to SBW certain warrants (the "Warrants")
evidenced by a Warrant Certificate, dated September 27, 1996 (the "Warrant
Certificate"). The Warrants entitle SBW to purchase from the Company, upon
the terms and subject to the conditions set forth in the Warrant Certificate,
(i) 3,000,000 shares of Common Stock at an exercise price of $14.00 per share
and (ii) 2,000,000 shares of Common Stock at an exercise price of $18.00 per
share, in each case subject to adjustment to prevent dilution. The Warrants
may be exercised by SBW for the cash exercise prices specified above or, at
the option of SBW, may be exercised by SBW without any cash payment for a
number of shares of Common Stock with a current market value equal to the
excess of (i) the current market value of the shares of Common Stock to be
purchased upon exercise over (ii) the exercise price of such shares of Common
Stock. Prior to receipt of Regulatory Relief, the Warrants may be exercised
only to the extent that doing so is consistent with the Communications Act of
1934, as amended by the Telecommunications Act of 1996. If all of the
Warrants were exercised by SBW as of the date of the Current Report, SBW
would hold approximately 16.8% of the outstanding shares of Common Stock.
The Warrants will expire on September 27, 2001.
A copy of the Warrant Certificate is attached as Exhibit 4b hereto, and
is incorporated by reference herein.
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AMENDED STOCKHOLDERS' AGREEMENT
The Company, SBW, the Erin Mills Stockholders, the Carlyle Stockholders,
the By-Word Stockholders and certain other parties entered into an Amended
and Restated Stockholders' Agreement, dated September 27, 1996 (the "Amended
Stockholders' Agreement"), in order to amend and restate in its entirety the
existing Stockholders' Agreement, dated February 4, 1994, among such parties.
The Amended Stockholders' Agreement contains provisions relating to, among
other things, (i) the transfer of shares of Common Stock by certain of the
stockholders who are parties thereto, (ii) the grant of registration rights
by the Company to the stockholders who are parties thereto and (iii) the
election of members of the Company's Board of Directors. As used herein, (i)
the term "Erin Mills Stockholders" means Erin Mills International Investment
Corporation, The Erin Mills Development Corporation and The Erin Mills
Investment Corporation, (ii) the term "Carlyle Stockholders" means Clipper
Capital Associates, L.P., Clipper/Merban, L.P., Clipper/Merchant Partners, L.P.,
Carlyle-HighwayMaster Investors, L.P., Carlyle-HighwayMaster Investors II, L.P.,
Chase Manhattan Investment Holdings, Inc., H.M. Rana Investments Limited and
Archery Partners and (iii) the term "By-Word Stockholders" means William C.
Kennedy, Jr., Donald M. Kennedy, William C. Saunders, Robert S. Folsom and
Robert T. Hayes.
The Amended Stockholders' Agreement provides that, at all times after
October 12, 1996, the parties will take all action (including the voting of
shares of Common Stock owned by them) necessary to ensure that the Board of
Directors of the Company consists of (i) two directors designated by the Erin
Mills Stockholders, (ii) one director designated by the Carlyle Stockholders,
(iii) two directors designated by the By-Word Stockholders and (iv) two
independent directors (except that the addition of a second independent
director to the Board of Directors need not occur until the date of the next
annual meeting of the stockholders of the Company). Prior to the receipt of
Regulatory Relief, SBW will not be entitled to designate a director, but will
have the right to designate a non-voting delegate who will attend all
meetings of the Board of Directors and receive all materials distributed to
directors of the Company. Upon the conversion of Series D Preferred Stock
into Class B Common Stock (which will occur upon receipt of Regulatory
Relief), SBW will be entitled to designate one member of the Board of
Directors of the Company. In addition, if at any time after the conversion
of Series D Preferred Stock into Class B Common Stock SBW and its affiliates
beneficially own 20% or more of the outstanding Common Stock on a fully
diluted basis (including shares issuable upon conversion or exercise of
outstanding options, warrants or rights, but excluding shares issuable upon
the conversion or exercise of the Warrants or of options, warrants or rights
issued by any person other than the Company), SBW will be entitled to
designate a second member of the Board of Directors. No stockholder or group
of stockholders will be entitled to designate any director if the percentage
of the outstanding Common Stock beneficially owned by such stockholder or
group of stockholders falls below 5% (or with respect to the Erin Mills
Stockholders and By-Word Stockholders, 20% for the right to designate two
directors and 5% for the right to designate one director) on a fully diluted
basis (calculated in the manner described above).
Under the terms of the Amended Stockholders' Agreement, the Carlyle
Stockholders, the Erin Mills Stockholders, William C. Kennedy, Jr. and
William C.
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Saunders (the "First Refusal Stockholders") granted a right of first refusal
to SBW with respect to all shares of Common Stock owned by them. Subject to
certain exceptions, such right of first refusal requires that, prior to
selling any shares of Common Stock, a First Refusal Stockholder must offer
such shares for sale to SBW at a price determined in accordance with the
terms of the Amended Stockholders' Agreement.
The Amended Stockholders' Agreement also provides for the grant of
certain demand, piggyback and other registration rights to the stockholders
who are parties thereto. Among other things, such agreement provides that,
with respect to an aggregate of 1,818,018 shares of Common Stock issued to
the Erin Mills Stockholders and the Carlyle Stockholders in connection with
the Recapitalization Transactions, the Company will register one-half of such
shares under the Securities Act of 1933, as amended (the "Securities Act"),
by March 31, 1997 and will register the remainder of such shares under the
Securities Act by September 27, 1997.
A copy of the Amended Stockholders' Agreement is attached as Exhibit 10e
hereto, and is incorporated by reference herein.
OTHER AGREEMENTS
HighwayMaster Corporation, a wholly owned subsidiary of the Company ("HM
Corporation"), entered into a Technical Services Agreement, dated September
27, 1996 (the "Technical Services Agreement"), with SBW pursuant to which SBW
or one or more of its affiliates will provide HM Corporation with certain
technical and advisory services in connection with, among other things, the
operation and improvement of its communications transmission system.
In addition, under the terms of the Purchase Agreement, promptly after
Regulatory Relief is obtained, the Company will cause HM Corporation to enter
into a Voice and Data Services Agreement (the "Voice and Data Services
Agreement") with an affiliate of SBW. The Voice and Data Services Agreement,
if entered into by the parties, will provide that the Company will purchase
long distance and other voice and data services from such affiliate of SBW.
A copy of the Technical Services Agreement is attached hereto as Exhibit
10c hereto, and is incorporated by reference herein.
BYLAW AMENDMENTS
At a meeting held on September 27, 1996, the Board of Directors of the
Company approved certain amendments to the Company's Bylaws (the "Bylaw
Amendments") in connection with the SBW Transactions, including certain
amendments relating to the authorization by the Company of Class B Common
Stock.
A copy of the Bylaw Amendments is attached as Exhibit 3a hereto, and is
incorporated by reference herein.
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RECAPITALIZATION TRANSACTIONS
On September 27, 1996, the Company, the Erin Mills Stockholders, the
Carlyle Stockholders and certain other holders of outstanding securities of
the Company entered into a Recapitalization Agreement, dated as of September
27, 1996 (the "Recapitalization Agreement"), and consummated the
Recapitalization Transactions contemplated thereby. In particular, upon the
terms and conditions set forth in the Recapitalization Agreement, (i) the
Company repaid in full the principal amount of and interest accrued on
certain promissory notes in the aggregate principal amount of $5.0 million
executed in favor of an Erin Mills Stockholder in order to evidence the
Company's obligation to repay certain advances made by such Erin Mills
Stockholder in August and September 1996 to enable the Company to meet its
short-term working capital and other requirements, (ii) the Company issued an
aggregate of 800,000 shares of Common Stock to two Erin Mills Stockholders in
exchange for aggregate cash payments in the amount of $10.0 million, (iii)
the Company issued an aggregate of 864,000 shares of Common Stock to three
Erin Mills Stockholders and two other persons in exchange for the surrender
to the Company for cancellation of all outstanding shares of Series B
Preferred Stock, (iv) the Company paid to the Carlyle Stockholders a portion
of the accrued and unpaid interest on certain promissory notes in the
aggregate principal amount of approximately $12.7 million (the "Carlyle
Notes") executed in favor of the Carlyle Stockholders, and (v) the Company
issued an aggregate of 1,018,018 shares of Common Stock in exchange for the
surrender of the Carlyle Notes for cancellation.
A copy of the Recapitalization Agreement is attached as Exhibit 10d
hereto, and is incorporated by reference herein.
ADDITIONAL INFORMATION
For additional information regarding the SBW Transactions and the
Recapitalization Transactions, reference is made to the Company's press
release dated September 30, 1996, a copy of which is attached as Exhibit 99
hereto.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
3a. Amendments to the Bylaws of the Company, adopted
September 27, 1996
3b. Proposed Certificate of Amendment to Certificate of
Incorporation of the Company
4a. Certificate of Designation Establishing Series D
Convertible Participating Preferred Stock
4b. Warrant Certificate, dated September 27, 1996, issued
to SBW
10a. Purchase Agreement, dated September 27, 1996, between
the Company and SBW
10b. Escrow Agreement, dated September 27, 1996, by and
among the Company, SBW and the Escrow Agent.
10c. Technical Services Agreement, dated September 27, 1996,
between HM Corporation and SBW
10d. Recapitalization Agreement, dated September 27, 1996, by
and among the Company, the Erin Mills Stockholders, the
Carlyle Stockholders and the other persons named therein.
10e. Amended and Restated Stockholders' Agreement, dated
September 27, 1996, by and among the Company, SBW, the
Erin Mills Stockholders, the Carlyle Stockholders, the By-
Word Stockholders and the other persons named therein.
99. Press Release dated September 30, 1996
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
HIGHWAYMASTER COMMUNICATIONS, INC.
(Registrant)
By: /s/ WILLIAM C. SAUNDERS
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William C. Saunders
President
Date: October 4, 1996
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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3a. Amendments to the Bylaws of the Company,
adopted September 27, 1996
3b. Proposed Certificate of Amendment to
Certificate of Incorporation of the Company
4a. Certificate of Designation Establishing
Series D Convertible Participating
Preferred Stock
4b. Warrant Certificate, dated September 27,
1996, issued to SBW
10a. Purchase Agreement, dated September 27,
1996, between the Company and SBW
10b. Escrow Agreement, dated September 27, 1996,
by and among the Company, SBW and the Escrow
Agent
10c. Technical Services Agreement, dated September
27, 1996, between the HM Corporation and SBW
10d. Recapitalization Agreement, dated September
27, 1996, by and among the Company, the Erin
Mills Stockholders, the Carlyle Stockholders
and the other persons named therein
10e. Amended and Restated Stockholders' Agreement,
dated September 27, 1996, by and among the
Company, SBW, the Erin Mills Stockholders, the
Carlyle Stockholders, the By-Word Stockholders
and the other persons named therein.
99. Press Release dated September 30, 1996
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AMENDMENTS TO THE BYLAWS
Add additional sentence to 3.6.
No director who is also an employee of the Company shall receive any
compensation for serving as a director.
5.1.4. NOMINATING COMMITTEE. The Nominating Committee shall, from
time to time, meet to consider the nominees to the Board of Directors to be
elected by the shareholders (and any directors to be elected by the Board of
Directors to fill vacancies), the number of directors and the directors to be
selected for membership on the various board committees, and to report its
findings and recommendations to the Board of Directors for final action. The
Nominating Committee shall not be empowered to approve any corporate action, of
whatever kind or nature, and, other than the number of directors, which the
Nominating Committee is hereby delegated the authority to determine, the
recommendations of the Nominating Committee shall not be binding on the Board of
Directors, except when, pursuant to the provisions of Section 5.2 of these
Bylaws, such power and authority have been specifically delegated to such
committee by the Board of Directors by resolution. In addition to the
foregoing, the specific duties of the Nominating Committee shall be determined
by the Board of Directions by resolution.
Add additional sentence to 6.1.1.
The chairman of the board shall be elected by a majority of the entire
board of directors.
Article XI
Class B Common Stock
For so long as there are outstanding shares of Class B Common Stock,
par value $0.01 per share ("Class B Common Stock"), Sections 2.4, 3.2, 3.3, 3.4,
3.5, 4.3, 5.1.4 and 10.16 of these Bylaws shall not be in effect and the
following Bylaws shall be applicable. Upon the conversion of all Class B Common
Stock into Common Stock, par value $0.01 per share ("Common Stock"), or if all
of the shares of Class B Common Stock issued by the Company cease to be
outstanding for any other reason, these provisions shall
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terminate, Sections 2.4, 3.2, 3.3, 3.4, 3.5, 4.3, 5.1.4 and 10.16 shall
again be applicable and this Article XI shall no longer be applicable.
11.1 QUORUM. The presence at a stockholders' meeting of the holders,
present in person or represented by proxy, of capital stock of the Company
representing a majority of the votes of all capital stock of the Company
entitled to vote thereat (and, if the holders of any class of capital stock are
entitled to vote as a class on any matter to be submitted to a vote at such
stockholders' meeting, a majority of the votes of all capital stock of such
class) shall constitute a quorum at such meeting for the transaction of business
except as otherwise provided by law, the certificate of incorporation or these
Bylaws. If a quorum shall not be present or represented at any meeting of the
stockholders, a majority of the stockholders entitled to vote thereat, present
in person or represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such reconvened meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the reconvened meeting, a notice of said meeting shall
be given to each stockholder entitled to vote at said meeting. The stockholders
present and entitled to vote on a matter submitted to a vote at a duly convened
stockholders' meeting may continue to transact business with respect to such
matter until adjournment, notwithstanding the withdrawal of enough stockholders
to leave less than a quorum.
11.2 CLASSES AND NUMBER OF DIRECTORS. There shall be two classes of
directors, those elected by the Common Stock ("Common Directors") and those
elected by the Class B Common Stock ("Class B Directors"). The rights, duties
and authority of the Common Directors and the Class B Directors shall be
identical in all respects. The number of Common Directors shall be the number
to be determined by the Nominating Committee. The number of Class B Directors
shall be one, except that if Southwestern Bell Wireless Holdings, Inc. ("SBW")
and its Affiliates Beneficially Own (as hereinafter defined) 20% or more of the
outstanding Common Stock, including Common Stock issuable upon conversion of
Class B Common Stock or other convertible securities or upon the exercise of any
outstanding options, warrants, rights or obligations, other than shares issuable
upon the exercise of (i) the 5,000,000 warrants issued on September 27, 1996
(the "Warrants") and (ii) options, warrants, rights or obligations issued by any
entity other than the Company ("Excluded Options"), there shall be two Class B
Directors. For the purposes of the foregoing calculations, the number of
outstanding shares of Common Stock shall include all shares issuable upon
conversion of outstanding convertible securities or upon exercise of outstanding
options, warrants, rights or obligations other than the Warrants, Excluded
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Options and employee stock options. As used herein, an "Affiliate" of SBW is
any person or entity directly or indirectly controlling or controlled by or
under common direct or indirect control with SBW.
As used herein, the term "Beneficially Own" (and correlative terms)
shall mean, with respect to any shares of Common Stock or other securities, to
be entitled, directly or indirectly through one or more intermediaries, to all
material incidents of ownership with respect to such securities, including, but
not limited to, (i) the right to vote such securities (in the case of voting
securities), (ii) subject to any transfer restrictions, the right to dispose of
such securities and to receive any proceeds realized from the disposition
thereof and (iii) the right to receive any dividends and other distributions
with respect to such securities.
11.3 ELECTION. The Common Directors shall be elected by the holders
of Common Stock by a plurality vote and the Class B Directors shall be elected
by the holders of the Class B Common Stock by a plurality vote, in either case
at an annual stockholders meeting, except as hereinafter provided, and each
director shall hold office until his successor has been duly elected and
qualified or his earlier death, resignation or removal.
11.4 VACANCIES. Vacancies in any class of directors and newly
created directorships resulting from any increase in the authorized number of
directors of any class of common stock may be filled by the majority of
directors of such class then in office, though less than a quorum, or by a sole
remaining director so elected and the directors so chosen shall hold office
until the next annual election and until their successors are duly elected and
qualified or until their earlier death, resignation or removal. If there are no
directors in office, then an election of directors may be held in the manner
provided by law. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
or the whole Board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent (10%) of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancy or newly-created directorships, or
to replace the directors chosen by the directors then in office. No decrease in
the size of the Board shall serve to shorten the term of an incumbent director.
11.5 REMOVAL. Unless otherwise restricted by law, the certificate of
incorporation or these Bylaws, any director or the entire Board may be removed,
with or without cause, by a majority vote of the class of common stock entitled
to elect such director or directors.
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11.6 SPECIAL MEETINGS. Special meetings of the Board (i) may be
called by the chairman of the board or president and (ii) shall be called by the
president or secretary on the written request of two directors or the sole
director, as the case may be. Notice of each special meeting of the Board shall
be given, either personally or as hereinafter provided, to each director at
least 24 hours before the meeting if such notice is delivered personally or by
means of telephone, telegram, telex or facsimile transmission and delivery; two
days before the meeting if such notice is delivered by a recognized express
delivery service; and three days before the meeting if such notice is delivered
through the United States mail. Notwithstanding the foregoing, notice must be
actually received by at least one Class B director at his designated address to
be effective. Any and all business may be transacted at a special meeting which
may be transacted at a regular meeting of the Board. Except as may be otherwise
expressly provided by law, the certificate of incorporation or these Bylaws,
neither the business to be transacted at, nor the purpose of, any special
meeting need be specified in the notice or waiver of notice of such meeting.
11.7 NOMINATING COMMITTEE. The Nominating Committee shall, from time
to time, meet to consider the nominees to the Board of Directors to be elected
by the shareholders (and any directors to be elected by the Board of Directors
to fill vacancies), the number of directors and the directors to be selected for
membership on the various board committees, and to report its findings and
recommendations to the Board of Directors for final action. There shall at all
times be three Common Directors and one Class B director on the Nominating
Committee. The Class B Director on the nominating committee shall select any
Class B nominees. The Nominating Committee shall not be empowered to approve
any corporate action, of whatever kind or nature, and, other than the number of
Directors, which the Nominating Committee is hereby delegated to determine, the
recommendations of the Nominating Committee shall not be binding on the Board of
Directors, except when, pursuant to the provisions of Section 5.2 of these
Bylaws, such power and authority have been specifically delegated to such
committee by the Board of Directors by resolution. In addition to the
foregoing, the specific duties of the Nominating Committee shall be determined
by the Board of Directions by resolution.
11.8 AMENDMENTS. These Bylaws may be altered, amended, repealed or
replaced by the stockholders as provided in the certificate of incorporation and
in accordance with applicable law, or when such authority is conferred upon the
Board by the certificate of incorporation, by a majority of the directors,
except that for so long as there shall be shares of Class B Common Stock
outstanding, Article XI (and any other Article if the effect thereof would be
similar to altering, amending, repealing or replacing Article XI) may only be
altered, amended, repealed or replaced by a majority of the
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Common Directors and a majority of the Class B Directors. These Bylaws may
be altered, amended, repealed or replaced at any annual meeting of the
stockholders or annual or regular meeting of the Board, or at any special
meeting of the stockholders or the Board if notice of such alteration,
amendment, repeal or replacement is contained in the notice of such special
meeting. If the power to adopt, amend, repeal or replace these Bylaws is
conferred upon the Board by the certificate of incorporation, the power of
the stockholders to so adopt, amend, repeal or replace these Bylaws shall not
be divested or limited thereby.
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CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
HIGHWAYMASTER COMMUNICATIONS, INC.
HighwayMaster Communications, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY
FIRST: That at a meeting of the Board of Directors of
HighwayMaster Communications, Inc. (the "corporation"), resolutions were duly
adopted setting forth proposed amendments of the Certificate of Incorporation
of the corporation, declaring such amendments to be advisable and directing
that such amendments be presented to the stockholders of the corporation for
consideration thereof. The resolutions setting forth the proposed amendments
are as follows:
RESOLVED, that the second sentence of Article XII of the
corporation's Certificate of Incorporation be deleted and that Article IV of
the corporation's Certificate of Incorporation be amended in its entirety to
read as follows:
The aggregate number of shares of capital stock which the
corporation shall have authority to issue is 50,021,000, consisting of
50,000,000 shares of common stock, par value $0.01 per share (the "Common
Stock"), 1,000 shares of Class B Common Stock, par value $0.01 per share (the
"Class B Common Stock"), and 20,000 shares of preferred stock, par value
$0.01 per share (the "Preferred Stock"). The Common Stock and the Class B
Common Stock are hereinafter collectively referred to as the "Company Common
Stock".
A. COMPANY COMMON STOCK
Except as otherwise expressly provided herein, all shares of Company
Common Stock shall be identical and shall entitle the holders thereof to the
same rights and privileges.
<PAGE>
1. DIVIDENDS
(a) Subject to the rights granted to the holders of any Preferred
Stock that may be outstanding, the holders of Common Stock shall be entitled
to receive dividends and distributions when and as declared by the Board of
Directors of the corporation out of funds legally available therefor.
(b) Subject to the rights of the holders of any Preferred Stock
that may be outstanding, the holders of shares of Class B Common Stock shall
be entitled to receive, when and as declared by the Board of Directors, but
only out of funds legally available therefor, dividends and distributions, on
each date that dividends or other distributions (other than dividends or
distributions payable in Common Stock of the corporation) are payable on or
in respect of Common Stock, in an amount per share of Class B Common Stock
equal to the aggregate amount of dividends or other distributions (other than
dividends or distributions payable in Common Stock of the corporation) that
would be payable on such date to a holder of the Reference Package (as
defined below). Each such dividend and distribution shall be paid to the
holders of record of shares of Class B Common Stock on the date, not
exceeding sixty days preceding such dividend or distribution payment date,
fixed for that purpose by the Board of Directors in advance of payment of
each particular dividend or distribution, which shall be the same record date
as for the payment of dividends or distributions on the Common Stock.
(c) The term "REFERENCE PACKAGE" shall initially mean 1,600 shares
of Common Stock of the corporation. In the event the corporation shall at
any time after the close of business on September 27, 1996 (A) declare or
pay a dividend on or distribution in respect of any Common Stock payable in
Common Stock, (B) subdivide any Common Stock, (C) combine any Common Stock
into a smaller number of shares or (D) change or reclassify the Common Stock
(whether pursuant to a merger or consolidation or otherwise), then and in
each such case the Reference Package after such event shall be the Common
Stock that a holder of the Reference Package immediately prior to such event
would hold thereafter as a result thereof. The Board of Directors may make
such adjustments in the Reference Package, in addition to those required
hereby, as shall be determined by the Board, as evidenced by a Board
resolution, to be necessary and advisable in order to avoid taxation so far
as practicable of any dividend of stock or stock rights or any event treated
as such for Federal income tax purposes to the recipients. Whenever any
adjustment is required in the Reference Package, the corporation shall
forthwith (i) file at the principal office of the corporation a statement
describing in reasonable detail the adjustment and the method of calculation
used, and (ii) cause a copy of such statement to be mailed by first class
mail postage prepaid to the holders of record of the Class B Common Stock as
of the
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effective date of such adjustment. The corporation may obtain the
certificate of any independent firm of public accountants of national
recognition selected by the Board of Directors which, if obtained, shall be
presumptive evidence of the correctness of any computation made under Section
1(c).
2. VOTING RIGHTS
(a) GENERAL. The holders of Common Stock and Class B Common Stock
shall have identical voting rights and vote together as a single class on all
actions to be taken by such holders, except as specified below. Each share
of Common Stock shall, when entitled to vote, have one vote and each share of
Class B Common Stock shall, when entitled to vote, have the number of votes
that a holder of the Reference Package would have.
(b) ELECTION OF DIRECTORS. There shall be two classes of
directors, those elected by the Common Stock ("Common Directors") and those
elected by the Class B Common Stock ("Class B Directors"). The rights,
duties and authority of the Common Directors and the Class B Directors shall
be identical in all respects. The number of Common Directors shall be the
number to be determined by the Nominating Committee of the Corporation. The
number of Class B Directors shall be one, except that if Southwestern Bell
Wireless Holdings, Inc. ("SBW") and its Affiliates Beneficially Own (as
hereinafter defined) 20% or more of the outstanding Common Stock, including
Common Stock issuable upon conversion of Class B Common Stock or other
convertible securities or upon the exercise of any outstanding options,
warrants, rights or obligations, other than shares issuable upon the exercise
of (i) the 5,000,000 warrants issued on September 27, 1996 (the "Warrants"),
and (ii) options, warrants, rights or obligations issued by any entity other
than the corporation ("Excluded Options"), there shall be two Class B
Directors. For the purposes of the foregoing calculations, the number of
outstanding shares of Common Stock shall include all shares issuable upon
conversion of outstanding convertible securities or upon exercise of
outstanding options, warrants, rights or obligations other than the Warrants,
Excluded Options and employee stock options. As used herein, an "Affiliate"
of any specified person or entity means any person or entity directly or
indirectly controlling or controlled by or under direct or indirect common
control with such person. As used herein, the term "Beneficially Own" (and
correlative terms) shall mean, with respect to any shares of Common Stock or
other securities, to be entitled, directly or indirectly through one or more
intermediaries, to all material incidents of ownership with respect to such
securities, including, but not limited to, (i) the right to vote such
securities (in the case of voting securities), (ii) subject to any transfer
restrictions, the right to dispose of such securities and to receive any
proceeds realized from the
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disposition thereof and (iii) the right to receive any dividends and other
distributions with respect to such securities.
The Common Directors shall be elected by the holders of Common
Stock by a plurality vote and the Class B Directors shall be elected by the
holders of the Class B Common Stock by a plurality vote, in either case at an
annual stockholders meeting, except as hereinafter provided, and each
director shall hold office until his successor has been duly elected and
qualified or his earlier death, resignation or removal. Vacancies in any
class of directors and newly created directorships resulting from any
increase in the authorized number of directors of any class of Company Common
Stock may be filled by the majority of directors of such class then in
office, though less than a quorum, or by a sole remaining director so elected
and the directors so chosen shall hold office until the next annual election
and until their successors are duly elected and shall qualify, or until their
earlier death, resignation or removal. If there are no directors in office,
then an election of directors may be held in the manner provided by law. If,
at the time of filling any vacancy or any newly created directorship, the
directors then in office shall constitute less than a majority of the whole
Board (as constituted immediately prior to any such increase), the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten percent (10%) of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancy or newly-created directorships,
or to replace the directors chosen by the directors then in office. Unless
otherwise restricted by law, any director or the entire Board may be removed,
with or without cause, by a majority vote of the class of Company Common
Stock entitled to elect such director or directors. No decrease in the size
of the Board shall serve to shorten the term of an incumbent director.
(c) VOTING RIGHTS OF CLASS B COMMON STOCK. The following actions
shall require the approval of a majority of the outstanding Class B Common
Stock, voting as a single class:
(i) the approval of any annual budget or business plan for
the corporation or any subsidiary of the corporation or the deviation
by the corporation or any such subsidiary from any annual budget for
the corporation or such subsidiary approved by the Board of Directors
by more than five percent (5%);
(ii) issuance by the corporation of any equity securities,
including securities convertible into equity securities (other than
(A) the grant of employee stock options (subject to the proviso set
forth in (D)
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<PAGE>
below), (B) the issuance of equity securities pursuant to
the Purchase Agreement, dated as of September 27, 1996 between the
corporation and SBW (the "Purchase Agreement") or pursuant to any of
the other Transaction Documents (as defined in the Purchase
Agreement), (C) the issuance of equity securities upon the exercise or
conversion of securities or employee stock options that are
outstanding as of September 27, 1996 or (D) the issuance of equity
securities upon the conversion of Class B Common Stock or upon the
exercise of employee stock options granted hereafter, PROVIDED,
HOWEVER, that there shall not be outstanding at any time employee
stock options for more than 1.5 million shares of Common Stock plus
the options granted to William C. Kennedy, Jr. and William C. Saunders
that are outstanding at September 27, 1996) or incurrence of any
indebtedness, provided that the corporation can incur up to $5 million
in indebtedness in any year without the approval of the Class B Common
Stock;
(iii) the hiring or termination by the corporation of
its chief executive officer, chief operating officer or chief
financial officer;
(iv) the corporation's entering into any line of business
other than its Existing Line of Business (as hereinafter defined) or
into any joint ventures, partnerships or similar arrangements;
(v) the corporation's exiting its Existing Line of Business
or disposing of assets (other than telecommunications equipment and
other assets sold in the ordinary course of business) in any year with
a value in excess of $500,000 or which are otherwise material to the
corporation's operations;
(vi) the adoption, implementation or acceptance (including
the failure to opt out) of any Anti-Takeover Provision (as hereinafter
defined) not in effect as of September 27, 1996 that would be
applicable to, and, in the reasonable determination of SBW, adversely
affect, the holders of the Class B Common Stock and their Affiliates;
or
(vii) the taking of any corporate action that would
reduce the number of shares in the Reference Package below 1,600.
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"Anti-Takeover Provision" means (i) any provision of the
certificate of incorporation or bylaws of the corporation or any contract,
agreement or plan to which the corporation is a party or by which it is bound
or any statutory provision enacted after September 27, 1996 which is
applicable to the corporation which the corporation may opt out of if the
effect of such provision would be to materially delay, hinder or prevent a
change in control of the corporation or (ii) a stockholder rights plan or
"poison pill," including the provisions of any preferred stock or common
stock purchase rights issued pursuant thereto; provided, however, that such
term shall not include any customary change of control provisions contained
in employment agreements between the corporation and any of its directors,
officers or other employees or in any plans or agreements relating to stock
options or other awards of equity securities made by the corporation to any
such persons.
"Existing Line of Business" means a non-facilities based, enhanced
service provider that offers fleet management and/or status or information
about vehicles and/or location capabilities through mobile communications
service.
(d) BYLAWS. Any alteration, amendment, repeal or replacement of
Article XI of the corporation's bylaws, or of any other Article of the bylaws
that would have a similar effect, by the stockholders of the corporation
shall require the approval of a majority of the outstanding Class B Common
Stock, voting as a separate class.
3. CONVERSION
(a) OPTIONAL CONVERSION. At the option of the holder thereof,
each share of Class B Common Stock may be converted into the Reference
Package; provided, however, that no shares of Class B Common Stock may be
converted pursuant to this Section 3(a) unless the holders of all outstanding
shares of Class B Common Stock elect to convert such shares into the
Reference Package as of the same date in accordance with the procedures set
forth below.
(b) OPTIONAL CONVERSION PROCEDURES. Any holder of shares of Class
B Common Stock desiring to convert such shares into Common Stock shall
surrender the certificate or certificates evidencing such shares of Class B
Common Stock, at the principal office of the corporation or such other office
as the corporation may designate for such purpose, which certificate or
certificates, if the corporation shall so require, shall be duly endorsed to
the corporation or in blank, or accompanied by proper instruments of transfer
to the corporation or in blank, accompanied by irrevocable written notice to
the corporation that the holder elects so to convert such shares of Class B
Common Stock and specifying
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<PAGE>
the name or names (with address or addresses) in which a certificate or
certificates evidencing shares of Common Stock are to be issued. The
corporation shall, as soon as practicable after such surrender of
certificates evidencing shares of Class B Common Stock accompanied by the
written notice and compliance with any other conditions herein contained,
deliver by first class mail postage prepaid to the holder that surrendered
such shares of Class B Common Stock or to such holder's nominee certificates
evidencing the number of full shares of Common Stock to which such holder
shall be entitled as aforesaid, together with a cash adjustment in respect of
any fraction of a share of Common Stock as provided below. No interest will
be payable with respect to any cash adjustment paid with respect to any
fractional shares of Common Stock as provided below. On the date shares of
Class B Common Stock are surrendered for conversion, dividends shall cease to
accrue on all shares of Class B Common Stock, such shares shall no longer be
deemed outstanding, all rights of the holders thereof as holders of Class B
Common Stock shall cease (other than the right to receive dividends declared
payable to holders of record of Class B Common Stock on a record date prior
to the date of surrender) and thereupon the certificate or certificates
theretofore representing such shares of Class B Common Stock shall represent
only the right to receive the Common Stock deliverable upon conversion in
respect thereof.
(c) FRACTIONAL SHARES; TAXES. No fractional shares or scrip
representing fractional shares shall be issued upon the conversion of Class B
Common Stock. If any such conversion would otherwise require the issuance of
a fractional share, an amount equal to such fraction multiplied by the
Closing Price of the Common Stock on the day of conversion shall be paid to
the holder in cash by the Corporation. The term "Closing Price" on any day
shall mean the reported last sale price per share of Common Stock regular way
on such day or, in case no such sale takes place on such day, the average of
the reported closing bid and asked prices regular way, in each case on the
New York Stock Exchange, or, if the shares of Common Stock are not listed or
admitted to trading on such Exchange, the principal national securities
exchange on which the shares of Common Stock are listed or admitted to
trading, or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, the last quoted sale price or, if not so
quoted, the average of the closing bid and asked prices quoted on the Nasdaq
National Market, or, if not so quoted, the average of the closing bid and
asked prices as furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by the corporation for
that purpose. The corporation will pay any and all stamp taxes, stock
issuance taxes or similar taxes that may be payable in respect of the
issuance or delivery of Common Stock on conversion of shares of Class B
Common Stock; provided, however, that the corporation shall not be required
to pay any tax or other charge that may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name
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<PAGE>
other than that of the record holder of the shares of Class B Common Stock
being converted and in such case the corporation shall not be obligated to
issue or deliver any stock certificate until such tax or charge has been paid
in full or it has been established to the satisfaction of the corporation
that no such tax or charge is due.
(d) AVAILABLE COMMON STOCK. The corporation shall at all times
reserve and keep available out of its authorized but unissued Common Stock,
for the purpose of issuance upon conversion of Class B Common Stock, the full
number of Common Stock then deliverable upon the conversion of all shares of
Class B Common Stock then outstanding.
4. TRANSFER
(a) PROHIBITED TRANSFERS. No holder of shares of Class B Common
Stock shall Transfer any such shares or any interest therein to any Person
(as hereinafter defined) other than SBW or an Affiliate of SBW. As used
herein, the term "Transfer" means any sale, transfer, assignment, disposition
or other means of conveying legal or beneficial ownership of such shares,
whether direct or indirect and whether voluntary or involuntary, and the
terms "Transferred," "Transferable," "Transferor" and "Transferee" have
correlative meanings. As used herein, the term "Person" means any
individual, corporation, partnership, joint stock company, joint venture,
association, trust, unincorporated organization, government or any agency,
department or political subdivision thereof, or any other entity.
(b) EFFECT OF PURPORTED TRANSFERS. Any attempted or purported
Transfer of shares of Class B Common Stock in violation of paragraph (a)
above shall not be effective to Transfer ownership of such shares to the
purported Transferee thereof, who shall not be entitled to any rights as a
stockholder of the corporation with respect to the shares purported to be
Transferred (including, but not limited to, the right to vote such shares or
to receive dividends with respect thereto). All rights with respect to any
shares attempted or purported to be Transferred in violation of the
aforementioned provisions shall remain the property of the stockholder who
initially attempted or purported to transfer such shares in violation
thereof. Upon a determination by the Board of Directors that there has been
or is threatened an attempted or purported Transfer of shares in violation of
the aforementioned provisions, the Board of Directors may take such action as
it deems advisable, including but not limited to refusing to give effect on
the books of the corporation to such attempted or purported Transfer or
instituting legal proceedings to enjoin or rescind the same.
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(c) LEGEND. All certificates evidencing shares of this Series
shall bear a conspicuous legend referencing the restrictions set forth in
this Section 4.
B. PREFERRED STOCK
The Board of Directors of the corporation, by resolution or
resolutions, may at any time and from time to time, divide and establish any
or all of the unissued shares of Preferred Stock not then allocated to any
series of Preferred Stock into one or more series and, without limiting the
generality of the foregoing, fix and determine the designation of each such
share, the number of shares which shall constitute such series and certain
powers, preferences and relative, participating, optional or other special
rights and qualifications, limitations and restrictions and voting rights of
the shares of each series so establishing.
SERIES D PARTICIPATING CONVERTIBLE
PREFERRED STOCK
1. DESIGNATION AND AMOUNT. The distinctive serial designation of
this series shall be "Series D Participating Convertible Preferred"
(hereinafter sometimes referred to as "this Series"). The number of shares
in this Series shall be 1,000, which number may be decreased (but not
increased) by the Board of Directors of the corporation (the "Board of
Directors") without a vote of stockholders; PROVIDED, HOWEVER, that such
number may not be decreased below the number of then currently outstanding
shares of this Series.
2. DIVIDENDS. (a) The holders of shares of this Series shall be
entitled to receive, when and as declared by the Board of Directors, but only
out of funds legally available therefor, dividends and distributions, on each
date that dividends or other distributions (other than dividends or
distributions payable in Common Stock (as defined below)) are payable on or
in respect of Common Stock in an amount per share of this Series equal to the
aggregate amount of dividends or other distributions (other than dividends or
distributions payable in Common Stock of the corporation) that would be
payable on such date to a holder of the Reference Package. Each such
dividend and distribution shall be paid to the holders of record of shares of
this Series on the date, not exceeding sixty days preceding such dividend or
distribution payment date, fixed for the purpose by the Board of Directors in
advance of payment of each particular dividend or distribution.
(b) The term "Reference Package" shall initially mean 1,600 shares
of Common Stock. In the event the corporation shall at any time after the
close of business on September 27, 1996 (A) declare or pay a dividend on
any Common Stock payable in
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Common Stock, (B) subdivide any Common Stock or (C) combine any Common Stock
into a smaller number of shares or (D) change or reclassify the Common Stock
(whether pursuant to a merger or consolidation or otherwise), then and in
each such case the Reference Package after such event shall be the Common
Stock, or new class of shares, that a holder of the Reference Package
immediately prior to such event would hold thereafter as a result thereof.
3. LIQUIDATION PREFERENCE. (a) In the event of any liquidation,
dissolution or winding up of the affairs of the corporation, whether
voluntary or involuntary, the holders of shares of this Series shall be
entitled, before any distribution or payment is made on any date to the
holders of the Common Stock or any other stock of the corporation ranking
junior to this Series upon liquidation, to be paid in full an amount per
share of this Series equal to the greater of (A) $20,000 or (B) the aggregate
amount distributed or to be distributed prior to such date in connection with
such liquidation, dissolution or winding up to a holder of the Reference
Package (such greater amount being hereinafter referred to as the
"Liquidation Preference"), together with accrued dividends to such
distribution or payment date, whether or not earned or declared. If such
payment shall have been made in full to all holders of shares of this Series,
the holders of shares of this Series as such shall have no right or claim to
any of the remaining assets of the corporation.
(b) In the event the assets of the corporation available for
distribution to the holders of shares of this Series upon any liquidation,
dissolution or winding up of the corporation, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which such
holders are entitled pursuant to paragraph (a) of this Section 3, no such
distribution shall be made on account of any shares of any other class or
series of Preferred Stock ranking on a parity with the shares of this Series
upon such liquidation, dissolution or winding up unless proportionate
distributive amounts shall be paid on account of the shares of this Series,
ratably in proportion to the full distributable amounts for which holders of
all such parity shares are respectively entitled upon such liquidation,
dissolution or winding up.
(c) For the purposes of this Section 3, the consolidation or
merger of, or binding share exchange by, the corporation with any other
corporation or the sale of all or substantially all the assets of the
corporation shall not be deemed to constitute a liquidation, dissolution or
winding up of the corporation.
4. CONVERSION PRIVILEGE. (a) Subject to and upon compliance with
the provisions of this Section 4, at the option of the holder of shares of
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this Series, shares of this Series may be converted, in blocks of 250 shares
or any larger integral multiple thereof. Such conversion right shall
commence at the opening of business on September 30, 1996.
(b) Subject to subsection (a) hereof, each share of this Series
shall be convertible into the Reference Package.
(c) The Board of Directors may make such adjustments in the
Reference Package, in addition to those required by Section 2(b), as shall be
determined by the Board, as evidenced by a Board resolution, to be necessary
and advisable in order to avoid taxation so far as practicable of any
dividend of stock or stock rights or any event treated as such for Federal
income tax purposes to the recipients.
(d) Whenever any adjustment is required in the Reference Package,
the corporation shall forthwith (i) file at the principal office of the
corporation a statement describing in reasonable detail the adjustment and
the method of calculation used, and (ii) cause a copy of such statement to be
mailed by first class mail postage prepaid to the holders of record of this
Series as of the effective date of such adjustment.
(e) The corporation shall at all times reserve and keep available
out of its authorized but unissued Common Stock, for the purpose of issuance
upon conversion of this Series, the full number of Common Stock then
deliverable upon the conversion of all shares of this Series then outstanding.
(f) The corporation will pay any and all stamp taxes, stock
issuance taxes or similar taxes that may be payable in respect of the
issuance or delivery of Common Stock on conversion of shares of this Series;
provided, however, that the corporation shall not be required to pay any tax
or other charge that may be payable in respect of any transfer involved in
the issuance and delivery of any certificate in a name other than that of the
record holder of the shares of this Series being converted and in such case
the corporation shall not be obligated to issue or deliver any stock
certificate until such tax or charge has been paid in full or it has been
established to the satisfaction of the corporation that no such tax or charge
is due.
(g) No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of this Series. If any such conversion
would otherwise require the issuance of a fractional share, an amount equal
to such fraction multiplied by the Closing Price of the Common Stock on the
day of conversion shall be paid to the holder in cash by the corporation.
The term "Closing Price" on any day shall mean the reported last sale price
per share of Common Stock regular way on such day or, in case no such sale
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takes place on such day, the average of the reported closing bid and asked
prices regular way, in each case on the New York Stock Exchange, or, if the
shares of Common Stock are not listed or admitted to trading on such
Exchange, the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading, or, if the Common Stock is
not listed or admitted to trading on any national securities exchange, the
last quoted sale price or, if not so quoted, the average of the closing bid
and asked prices quoted on the Nasdaq National Market, or, if not so quoted,
the average of the closing bid and asked prices as furnished by any member of
the National Association of Securities Dealers, Inc. selected from time to
time by the corporation for that purpose.
(h) The corporation may obtain the certificate of any independent
firm of public accountants of national recognition selected by the Board of
Directors, which, if obtained, shall be presumptive evidence of the
correctness of any computation made under Section 2(b).
(i) All shares of this Series surrendered for conversion or
otherwise acquired by the corporation shall be cancelled and thereupon
restored to the status of authorized but unissued preferred stock
undesignated as to series.
5. CONVERSION PROCEDURES. (a) Any holder of shares of this
Series desiring to convert such shares into Common Stock shall surrender the
certificate or certificates evidencing such shares of this Series together
with instructions setting forth the number of shares to be converted, at the
principal office of the corporation or such other office as the corporation
may designate for such purpose, which certificate or certificates, if the
corporation shall so require, shall be duly endorsed to the corporation or in
blank, or accompanied by proper instruments of transfer to the corporation or
in blank, accompanied by irrevocable written notice to the corporation that
the holder elects so to convert such shares of this Series and specifying the
name or names (with address or addresses) in which a certificate or
certificates evidencing shares of Common Stock are to be issued.
(b) The corporation shall, as soon as practicable after such
surrender of certificates evidencing shares of this Series accompanied by the
written notice and compliance with any other conditions herein contained,
deliver by first class mail postage prepaid to the Person that surrendered
such shares of this Series or to such Person's nominee certificates
evidencing the number of full shares of Common Stock to which such Person
shall be entitled as aforesaid, together with a cash adjustment in respect of
any fraction of a share of Common Stock as provided above. No interest will
be payable with respect to any cash adjustment paid with respect to any
fractional shares of Common Stock as provided above.
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<PAGE>
(c) In the event that fewer than all shares of Series D
Participating Convertible Preferred represented by a surrendered certificate
are to be converted hereunder, a new certificate shall be issued at the
expense of the corporation representing the shares of Series D Participating
Convertible Preferred not so converted.
(d) On the date shares of Series D Participating Convertible
Preferred are surrendered for conversion, dividends shall cease to accrue on
any shares of this Series surrendered for conversion, such shares shall no
longer be deemed outstanding, all rights of the holders thereof as preferred
stockholders of the corporation shall cease (other than the right to receive
dividends declared payable to holders of record of this Series on a record
date prior to the date of surrender) and thereupon the certificate or
certificates theretofore representing such shares of Series D Participating
Convertible Preferred shall represent only the right to receive the Common
Stock deliverable upon conversion in respect thereof.
6. MANDATORY CONVERSION. (a) If the Regulatory Relief Date shall
not have occurred on or before September 27, 2001, all of the then
currently outstanding shares of Series D Participating Convertible Preferred
shall, at the election of the corporation at any time after the opening of
business on September 28, 2001 and after notice has been provided as set
forth below, be converted into shares of Common Stock on the basis provided
in Section 4.
(b) If the corporation has elected to convert this Series into
Common Stock pursuant to this Section 6, the corporation will provide notice
of mandatory conversion of shares of Series D Participating Convertible
Preferred pursuant to this Section 6 to holders of record of the Series D
Participating Convertible Preferred to be converted not less than 15 nor more
than 60 days prior to the date fixed for conversion. Such notice shall be
provided by mailing notice of such conversion first class mail postage
prepaid, to each holder of record of the Series D Participating Convertible
Preferred to be converted, at such holder's address as it appears on the
stock register of the corporation.
(c) Effective on the conversion date fixed by the corporation and
notified to the holders of Series D Participating Convertible Preferred
pursuant to subparagraph (b) of this Section 6, each outstanding share of
Series D Participating Convertible Preferred shall be converted into fully
paid and nonassessable shares of Common Stock on the basis provided in
Section 4, automatically and without any action on the part of any holder of
shares of Series D Participating Convertible Preferred, and such shares of
Common Stock shall be deemed outstanding from and after such conversion date.
13
<PAGE>
(d) As of the Regulatory Relief Date, each share of this Series
shall automatically, without any action on the part of the holder thereof,
convert into one share of Class B Common Stock, and as of such date, the
holders thereof shall be treated in all respects as the holders of Class B
Common Stock.
(e) Each holder of shares of Series D Participating Convertible
Preferred to be converted pursuant to Section 6(a) and 6(d) shall surrender
the certificates evidencing such shares to the corporation at the principal
office of the corporation, and shall thereupon be entitled to receive
certificates evidencing shares of Common Stock and to receive any dividends
or other distributions payable on shares of Common Stock payable following
such surrender to the holders of record after the date of such conversion and
any cash payable in lieu of fractional shares.
7. PROVISIONS IN CASE OF CONSOLIDATION OR MERGER. In case of any
consolidation of the corporation with, or merger of the corporation into, any
other Person or any merger of another Person into the corporation (other than
a merger which does not result in any reclassification, conversion, exchange
or cancellation of outstanding shares of Common Stock of the corporation),
the Person formed by such consolidation or resulting from such merger, as the
case may be, shall provide for the conversion of each share of this Series
into the kind and amount of securities, cash and other property receivable
upon such consolidation or merger by a holder of the number of shares of
Common Stock of the corporation into which such share of this Series might
have been converted immediately prior to such consolidation or merger,
assuming such holder of Common Stock of the corporation (i) is not a Person
with which the corporation consolidated or into which the corporation merged
or which merged into the corporation, as the case may be ("Constituent
Person"), or an Affiliate of a Constituent Person and (ii) failed to exercise
his rights of election, if any, as to the kind or amount of securities, cash
and other property receivable upon such consolidation or merger (provided
that if the kind or amount of securities, cash and other property receivable
upon such consolidation or merger is not the same for each share of Common
Stock of the corporation held immediately prior to such consolidation or
merger by others than a Constituent Person or an Affiliate thereof and in
respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this Section 7 the kind and
amount of securities, cash and other property receivable upon such
consolidation or merger by each non-electing share shall be deemed to be the
kind and amount so receivable per share by a plurality of the non-electing
shares). If as a result of the provisions of this Section 7 the shares of
this Series become convertible or exchangeable into securities or assets of a
Constituent Person, such Constituent Person shall provide for adjustments
which, for events subsequent to the effective date of such consolidation,
merger or sale of assets, shall be as nearly equivalent as may be practicable
14
<PAGE>
to the adjustments provided for herein. The above provisions of this Section
7 shall similarly apply to successive consolidation or mergers.
8. REDEMPTION. The shares of this Series shall not be redeemable.
9. VOTING RIGHTS. (a) Except as required by law or as provided
in Section 9(b) below, the holders of shares of this Series shall not be
entitled to vote on any matter submitted to the stockholders of the
corporation.
(b) In addition to any vote of this Series which may be required
by law, the affirmative vote of a majority of the outstanding shares of the
Series D Participating Convertible Preferred, voting as a class, shall be
required to approve the following:
(i) any merger or consolidation of the corporation with or
into any other Person that requires a vote of the stockholders of the
corporation in accordance with the applicable provisions of the
General Corporation Law of the State of Delaware;
(ii) any sale or transfer of all or substantially all of the
assets of the corporation that requires a vote of the stockholders of
the corporation in accordance with the applicable provisions of the
General Corporation Law of the State of Delaware;
(iii) any amendment, alteration or repeal of the
corporation's Certificate of Incorporation, as amended;
(iv) the dissolution of the corporation;
(v) the adoption, implementation or acceptance (including
the failure to opt out) of any Anti-Takeover Provision not in effect
as of September 27, 1996 that would be applicable to, and, in the
reasonable determination of the holders of this Series, adversely
affect, the holders of this Series and their Affiliates;
(vi) issuance by the corporation of any equity securities,
including securities convertible into equity securities (other than
(A) the grant of employee stock options (subject to the proviso set
forth in (D) below), (B) the issuance of equity securities pursuant to
the Purchase Agreement or any of the other Transaction Documents, (C)
the issuance of
15
<PAGE>
equity securities upon the exercise or conversion of
securities or employee stock options that are outstanding as of
September 27, 1996, or upon the conversion of shares of this Series,
or (D) the issuance of equity securities upon the exercise of employee
stock options granted after September 27, 1996, PROVIDED, HOWEVER,
that there shall not be outstanding at any time employee stock options
for more than 1.5 million shares of Common Stock plus the options
granted to William C. Kennedy, Jr. and William C. Saunders that are
outstanding at September 27, 1996) or incurrence of any indebtedness
for borrowed money or evidenced by bonds, notes or debentures,
provided that the corporation can incur up to $5 million in
indebtedness in any one year without a vote of this Series;
(vii) the corporation's entering into any line of
business other than its Existing Line of Business or entering into
joint ventures, partnerships or similar arrangements, which, in each
such case, would require expenditures, individually or in the
aggregate, of more than $3 million;
(viii) any disposal or disposition in any 12-month period
of any asset or assets of the corporation (other than
telecommunications equipment and other assets sold in the ordinary
course of business) of which the sale, or fair market value exceeds in
the aggregate $3 million;
(ix) any amendment, alteration or repeal of the terms of
this Series including, without limitation, any increase in the number
of authorized shares of such series; and
(x) any corporate action that would reduce the number of
shares in the Reference Package below 1,600.
10. TRANSFER.
(a) PROHIBITED TRANSFERS. No holder of shares of this Series
shall Transfer any such shares or any interest therein to any Person other
than SBW or an Affiliate of SBW.
(b) EFFECT OF PURPORTED TRANSFERS. Any attempted or purported
Transfer of shares of this Series in violation of paragraph (a) above shall
not be effective to Transfer ownership of such shares to the purported
Transferee thereof, who shall not be entitled to
16
<PAGE>
any rights as a stockholder of the corporation with respect to the shares
purported to be Transferred (including, but not limited to, the right to vote
such shares or to receive dividends with respect thereto). All rights with
respect to any shares attempted or purported to be Transferred in violation
of the aforementioned provisions shall remain the property of the Person who
initially attempted or purported to transfer such shares in violation
thereof. Upon a determination by the Board of Directors that there has been
or is threatened an attempted or purported Transfer of shares in violation of
the aforementioned provisions, the Board of Directors may take such action as
it deems advisable, including, but not limited to, refusing to give effect on
the books of the corporation to such attempted or purported Transfer or
instituting legal proceedings to enjoin or rescind the same.
(c) LEGEND. All certificates evidencing shares of this Series
shall bear a conspicuous legend referencing the restrictions set forth in
this Section 10.
11. DEFINITIONS. As used herein, the following terms shall have
the following meanings unless the context otherwise requires.
"Purchase Agreement" means the Purchase Agreement, dated as of
September 27, 1996, between the corporation and SBW.
"Regulatory Relief Date" shall mean that date on which SBC
Communications, Inc. or its Affiliates have, in their sole judgment, obtained
all necessary federal and state regulatory approvals to provide landline,
interLATA long-distance service pursuant to the Communications Act of 1934,
as amended by the Telecommunications Act of 1996.
SECOND: That thereafter the necessary number of shares as required
by statute were voted in favor of the amendments.
THIRD: That said amendments were duly adopted in accordance with
the provisions of Sections 228 and 242 of the General Corporation Law of the
State of Delaware.
17
<PAGE>
IN WITNESS WHEREOF, HighwayMaster Communications, Inc. has made
under its corporate seal and the hands of its President and Secretary,
respectively, of such corporation the foregoing certificate, and the said
President and Secretary have hereunto set their hands and caused the
corporate seal of such corporation to be hereunto affixed this ___th day of
__________, 1996.
HIGHWAYMASTER COMMUNICATIONS, INC.
By:
-------------------------------------
President
ATTEST:
- -------------------------------
Secretary
18
<PAGE>
CERTIFICATE OF DESIGNATION
OF
SERIES D PARTICIPATING CONVERTIBLE
PREFERRED STOCK
OF
HIGHWAYMASTER COMMUNICATIONS, INC.
PURSUANT TO SECTION 151 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
HighwayMaster Communications, Inc., a Delaware corporation (the
"corporation"), certifies that pursuant to the authority contained in Article IV
of its Certificate of Incorporation, and in accordance with the provisions of
Section 151 of the General Corporation Law of the State of Delaware, its Board
of Directors has adopted the following resolutions creating a series of its
preferred stock, par value $0.01 per share, designated as Series D Participating
Convertible Preferred:
RESOLVED, that a series of the class of authorized preferred stock,
par value $0.01 per share, of the corporation be hereby created, and that the
designation and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof, are as follows:
1. DESIGNATION AND AMOUNT. The distinctive serial designation of
this series shall be "Series D Participating Convertible Preferred" (hereinafter
sometimes referred to as "this Series"). The number of shares in this Series
shall be 1,000, which number may be decreased (but not increased) by the Board
of Directors of the corporation (the "Board of Directors") without a vote of
stockholders; PROVIDED, HOWEVER, that such number may not be decreased below the
number of then currently outstanding shares of this Series.
2. DIVIDENDS. (a) The holders of shares of this Series shall be
entitled to receive, when and as declared by the Board of Directors, but only
out of funds legally
<PAGE>
available therefor, dividends and distributions, on each date that dividends
or other distributions (other than dividends or distributions payable in
Common Stock (as defined below)) are payable on or in respect of Common Stock
in an amount per share of this Series equal to the aggregate amount of
dividends or other distributions (other than dividends or distributions
payable in Common Stock of the corporation) that would be payable on such
date to a holder of the Reference Package. Each such dividend and
distribution shall be paid to the holders of record of shares of this Series
on the date, not exceeding sixty days preceding such dividend or distribution
payment date, fixed for the purpose by the Board of Directors in advance of
payment of each particular dividend or distribution.
(b) The term "Reference Package" shall initially mean 1,600 shares of
Common Stock, par value $0.01 per share, of the corporation ("Common Stock").
In the event the corporation shall at any time after the close of business on
September 27, 1996 (A) declare or pay a dividend on any Common Stock payable in
Common Stock, (B) subdivide any Common Stock or (C) combine any Common Stock
into a smaller number of shares or (D) change or reclassify the Common Stock
(whether pursuant to a merger or consolidation or otherwise), then and in each
such case the Reference Package after such event shall be the Common Stock, or
new class of shares, that a holder of the Reference Package immediately prior to
such event would hold thereafter as a result thereof.
3. LIQUIDATION PREFERENCE. (a) In the event of any liquidation,
dissolution or winding up of the affairs of the corporation, whether voluntary
or involuntary, the holders of shares of this Series shall be entitled, before
any distribution or payment is made on any date to the holders of the Common
Stock or any other stock of the corporation ranking junior to this Series upon
liquidation, to be paid in full an amount per share of this Series equal to the
greater of (A) $20,000 or (B) the aggregate amount distributed or to be
distributed prior to such date in connection with such liquidation, dissolution
or winding up to a holder of the Reference Package (such greater amount being
hereinafter referred to as the "Liquidation Preference"), together with accrued
dividends to such distribution or payment date, whether or not earned or
declared. If such payment shall have been made in full to all holders of shares
of this Series, the holders of shares of this Series as such shall have no right
or claim to any of the remaining assets of the corporation.
(b) In the event the assets of the corporation available for
distribution to the holders of shares of this Series upon any liquidation,
dissolution or winding up of the corporation, whether voluntary or involuntary,
shall be insufficient to pay in full all amounts to which such holders are
entitled pursuant to paragraph (a) of this Section 3, no such distribution shall
be made on account of any shares of any other class or series of
2
<PAGE>
Preferred Stock ranking on a parity with the shares of this Series upon such
liquidation, dissolution or winding up unless proportionate distributive
amounts shall be paid on account of the shares of this Series, ratably in
proportion to the full distributable amounts for which holders of all such
parity shares are respectively entitled upon such liquidation, dissolution or
winding up.
(c) For the purposes of this Section 3, the consolidation or merger
of, or binding share exchange by, the corporation with any other corporation or
the sale of all or substantially all the assets of the corporation shall not be
deemed to constitute a liquidation, dissolution or winding up of the
corporation.
4. CONVERSION PRIVILEGE. (a) Subject to and upon compliance with
the provisions of this Section 4, at the option of the holder of shares of this
Series, shares of this Series may be converted, in blocks of 250 shares or any
larger integral multiple thereof. Such conversion right shall commence at the
opening of business on September 30, 1996.
(b) Subject to subsection (a) hereof, each share of this Series shall
be convertible into the Reference Package.
(c) The Board of Directors may make such adjustments in the Reference
Package, in addition to those required by Section 2(b), as shall be determined
by the Board, as evidenced by a Board resolution, to be necessary and advisable
in order to avoid taxation so far as practicable of any dividend of stock or
stock rights or any event treated as such for Federal income tax purposes to the
recipients.
(d) Whenever any adjustment is required in the Reference Package, the
corporation shall forthwith (i) file at the principal office of the corporation
a statement describing in reasonable detail the adjustment and the method of
calculation used, and (ii) cause a copy of such statement to be mailed by first
class mail postage prepaid to the holders of record of this Series as of the
effective date of such adjustment.
(e) The corporation shall at all times reserve and keep available out
of its authorized but unissued Common Stock, for the purpose of issuance upon
conversion of this Series, the full number of Common Stock then deliverable upon
the conversion of all shares of this Series then outstanding.
(f) The corporation will pay any and all stamp taxes, stock issuance
taxes or similar taxes that may be payable in respect of the issuance or
delivery of Common Stock on conversion of shares of this Series; provided,
however, that the corporation shall
3
<PAGE>
not be required to pay any tax or other charge that may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the record holder of the shares of this Series being
converted and in such case the corporation shall not be obligated to issue or
deliver any stock certificate until such tax or charge has been paid in full
or it has been established to the satisfaction of the corporation that no
such tax or charge is due.
(g) No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of this Series. If any such conversion
would otherwise require the issuance of a fractional share, an amount equal to
such fraction multiplied by the Closing Price of the Common Stock on the day of
conversion shall be paid to the holder in cash by the corporation. The term
"Closing Price" on any day shall mean the reported last sale price per share of
Common Stock regular way on such day or, in case no such sale takes place on
such day, the average of the reported closing bid and asked prices regular way,
in each case on the New York Stock Exchange, or, if the shares of Common Stock
are not listed or admitted to trading on such Exchange, the principal national
securities exchange on which the shares of Common Stock are listed or admitted
to trading, or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, the last quoted sale price or, if not so quoted,
the average of the closing bid and asked prices quoted on the Nasdaq National
Market, or, if not so quoted, the average of the closing bid and asked prices as
furnished by any member of the National Association of Securities Dealers, Inc.
selected from time to time by the corporation for that purpose.
(h) The corporation may obtain the certificate of any independent
firm of public accountants of national recognition selected by the Board of
Directors, which, if obtained, shall be presumptive evidence of the correctness
of any computation made under Section 2(b).
(i) All shares of this Series surrendered for conversion or otherwise
acquired by the corporation shall be cancelled and thereupon restored to the
status of authorized but unissued preferred stock undesignated as to series.
5. CONVERSION PROCEDURES. (a) Any holder of shares of this
Series desiring to convert such shares into Common Stock shall surrender the
certificate or certificates evidencing such shares of this Series together
with instructions setting forth the number of shares to be converted, at the
principal office of the corporation or such other office as the corporation
may designate for such purpose, which certificate or certificates, if the
corporation shall so require, shall be duly endorsed to the corporation or in
blank, or accompanied by proper instruments of transfer to the corporation or
in blank, accompanied
4
<PAGE>
by irrevocable written notice to the corporation that the holder elects so to
convert such shares of this Series and specifying the name or names (with
address or addresses) in which a certificate or certificates evidencing
shares of Common Stock are to be issued.
(b) The corporation shall, as soon as practicable after such
surrender of certificates evidencing shares of this Series accompanied by the
written notice and compliance with any other conditions herein contained,
deliver by first class mail postage prepaid to the Person that surrendered such
shares of this Series or to such Person's nominee certificates evidencing the
number of full shares of Common Stock to which such Person shall be entitled as
aforesaid, together with a cash adjustment in respect of any fraction of a share
of Common Stock as provided above. No interest will be payable with respect to
any cash adjustment paid with respect to any fractional shares of Common Stock
as provided above.
(c) In the event that fewer than all shares of Series D Participating
Convertible Preferred represented by a surrendered certificate are to be
converted hereunder, a new certificate shall be issued at the expense of the
corporation representing the shares of Series D Participating Convertible
Preferred not so converted.
(d) On the date shares of Series D Participating Convertible
Preferred are surrendered for conversion, dividends shall cease to accrue on any
shares of this Series surrendered for conversion, such shares shall no longer be
deemed outstanding, all rights of the holders thereof as preferred stockholders
of the corporation shall cease (other than the right to receive dividends
declared payable to holders of record of this Series on a record date prior to
the date of surrender) and thereupon the certificate or certificates theretofore
representing such shares of Series D Participating Convertible Preferred shall
represent only the right to receive the Common Stock deliverable upon conversion
in respect thereof.
6. MANDATORY CONVERSION. (a) If the Regulatory Relief Date shall
not have occurred on or before September 27, 2001, all of the then currently
outstanding shares of Series D Participating Convertible Preferred shall, at the
election of the corporation at any time after the opening of business on
September 28, 2001 and after notice has been provided as set forth below, be
converted into shares of Common Stock on the basis provided in Section 4.
(b) If the corporation has elected to convert this Series into Common
Stock pursuant to this Section 6, the corporation will provide notice of
mandatory conversion of shares of Series D Participating Convertible Preferred
pursuant to this
5
<PAGE>
Section 6 to holders of record of the Series D Participating Convertible
Preferred to be converted not less than 15 nor more than 60 days prior to the
date fixed for conversion. Such notice shall be provided by mailing notice
of such conversion first class mail postage prepaid, to each holder of record
of the Series D Participating Convertible Preferred to be converted, at such
holder's address as it appears on the stock register of the corporation.
(c) Effective on the conversion date fixed by the corporation and
notified to the holders of Series D Participating Convertible Preferred pursuant
to subparagraph (b) of this Section 6, each outstanding share of Series D
Participating Convertible Preferred shall be converted into fully paid and
nonassessable shares of Common Stock on the basis provided in Section 4,
automatically and without any action on the part of any holder of shares of
Series D Participating Convertible Preferred, and such shares of Common Stock
shall be deemed outstanding from and after such conversion date.
(d) Each holder of shares of Series D Participating Convertible
Preferred to be converted pursuant to this Section 6 shall surrender the
certificates evidencing such shares to the corporation at the principal office
of the corporation, and shall thereupon be entitled to receive certificates
evidencing shares of Common Stock and to receive any dividends or other
distributions payable on shares of Common Stock payable following such surrender
to the holders of record after the date of such conversion and any cash payable
in lieu of fractional shares.
7. PROVISIONS IN CASE OF CONSOLIDATION OR MERGER. In case of any
consolidation of the corporation with, or merger of the corporation into, any
other Person or any merger of another Person into the corporation (other than a
merger which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the corporation), the
Person formed by such consolidation or resulting from such merger, as the case
may be, shall provide for the conversion of each share of this Series into the
kind and amount of securities, cash and other property receivable upon such
consolidation or merger by a holder of the number of shares of Common Stock of
the corporation into which such share of this Series might have been converted
immediately prior to such consolidation or merger, assuming such holder of
Common Stock of the corporation (i) is not a Person with which the corporation
consolidated or into which the corporation merged or which merged into the
corporation, as the case may be ("Constituent Person"), or an Affiliate of a
Constituent Person and (ii) failed to exercise his rights of election, if any,
as to the kind or amount of securities, cash and other property receivable upon
such consolidation or merger (provided that if the kind or amount of securities,
cash and other property receivable upon such consolidation or merger is not the
same for each share of Common Stock of the corporation held immediately prior to
such consolidation
6
<PAGE>
or merger by others than a Constituent Person or an Affiliate thereof and in
respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this Section 7 the kind and
amount of securities, cash and other property receivable upon such
consolidation or merger by each non-electing share shall be deemed to be the
kind and amount so receivable per share by a plurality of the non-electing
shares). If as a result of the provisions of this Section 7 the shares of
this Series become convertible or exchangeable into securities or assets of a
Constituent Person, such Constituent Person shall provide for adjustments
which, for events subsequent to the effective date of such consolidation,
merger or sale of assets, shall be as nearly equivalent as may be practicable
to the adjustments provided for herein. The above provisions of this Section
7 shall similarly apply to successive consolidation or mergers.
8. REDEMPTION. The shares of this Series shall not be redeemable.
9. VOTING RIGHTS. (a) Except as required by law or as provided in
Section 9(b) below, the holders of shares of this Series shall not be entitled
to vote on any matter submitted to the stockholders of the corporation.
(b) In addition to any vote of this Series which may be required by
law, the affirmative vote of a majority of the outstanding shares of the
Series D Participating Convertible Preferred, voting as a class, shall be
required to approve the following:
(i) any merger or consolidation of the corporation with or into
any other Person that requires a vote of the stockholders of the
corporation in accordance with the applicable provisions of the
General Corporation Law of the State of Delaware;
(ii) any sale or transfer of all or substantially all of the
assets of the corporation that requires a vote of the stockholders of
the corporation in accordance with the applicable provisions of the
General Corporation Law of the State of Delaware;
(iii) any amendment, alteration or repeal of the corporation's
Certificate of Incorporation, as amended;
(iv) the dissolution of the corporation;
(v) the adoption, implementation or acceptance (including the
failure to opt out) of any Anti-Takeover Provision (as hereinafter
defined)
7
<PAGE>
not in effect as of September 27, 1996 that would be applicable to, and, in
the reasonable determination of the holders of the this Series, adversely
affect, the holders of this Series and their Affiliates;
(vi) issuance by the corporation of any equity securities,
including securities convertible into equity securities (other than
(A) the grant of employee stock options (subject to the proviso set
forth in (D) below), (B) the issuance of equity securities pursuant to
the Purchase Agreement (as hereinafter defined) or any of the other
Transaction Documents (as defined in the Purchase Agreement), (C) the
issuance of equity securities upon the exercise or conversion of
securities or employee stock options that are outstanding as of
September 27, 1996, or upon the conversion of shares of this Series or
(D) the issuance of equity securities upon the exercise of employee
stock options granted after September 27, 1996, PROVIDED, HOWEVER,
that there shall not be outstanding at any time employee stock options
for more than 1.5 million shares of Common Stock plus the options
granted to William C. Kennedy, Jr. and William C. Saunders that are
outstanding at September 27, 1996) or incurrence of any indebtedness
for borrowed money or evidenced by bonds, notes or debentures,
provided that the corporation can incur up to $5 million in
indebtedness in any one year without a vote of this Series;
(vii) the corporation's entering into any line of business other than
its Existing Line of Business (as hereinafter defined) or entering into
joint ventures, partnerships or similar arrangements, which, in each such
case, would require expenditures, individually or in the aggregate, of more
than $3 million;
(viii) any disposal or disposition in any 12-month period of any asset
or assets of the corporation (other than telecommunications equipment and
other assets sold in the ordinary course of business) of which the sale, or
fair market, value exceeds in the aggregate $3 million;
(ix) any amendment, alteration or repeal of the terms of the Series D
Preferred including, without limitation, any increase in the number of
authorized shares of such series; and
(x) any corporate action that would reduce the number of shares in
the Reference Package below 1,600.
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10. TRANSFER.
(a) PROHIBITED TRANSFERS. No holder of shares of this Series shall
Transfer any such shares or any interest therein to any Person other than
Southwestern Bell Wireless Holdings, Inc. ("SBW") or an Affiliate of SBW. As
used herein, the term "Transfer" means, with respect to shares of this Series,
any sale, transfer, assignment, disposition or other means of conveying legal or
beneficial ownership of such shares, whether direct or indirect and whether
voluntary or involuntary, and the terms "Transferred," "Transferable,"
"Transferor" and "Transferee" have correlative meanings.
(b) EFFECT OF PURPORTED TRANSFERS. Any attempted or purported
Transfer of shares of this Series in violation of paragraph (a) above shall not
be effective to Transfer ownership of such shares to the purported Transferee
thereof, who shall not be entitled to any rights as a stockholder of the
corporation with respect to the shares purported to be Transferred (including,
but not limited to, the right to vote such shares or to receive dividends with
respect thereto). All rights with respect to any shares attempted or purported
to be Transferred in violation of the aforementioned provisions shall remain the
property of the Person who initially attempted or purported to transfer such
shares in violation thereof. Upon a determination by the Board of Directors
that there has been or is threatened an attempted or purported Transfer of
shares in violation of the aforementioned provisions, the Board of Directors may
take such action as it deems advisable, including, but not limited to, refusing
to give effect on the books of the corporation to such attempted or purported
Transfer or instituting legal proceedings to enjoin or rescind the same.
(c) LEGEND. All certificates evidencing shares of this Series shall
bear a conspicuous legend referencing the restrictions set forth in this
Section 10.
11. DEFINITIONS. As used herein, the following terms shall have the
following meanings unless the context otherwise requires.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person.
"Anti-Takeover Provision" means (i) any provision of the certificate
of incorporation or bylaws of the corporation or any contract, agreement or plan
to which the corporation is a party or by which it is bound or any statutory
provision enacted after September 27, 1996 which is applicable to the
corporation which the corporation may opt
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out of if the effect of such provision would be to materially delay, hinder
or prevent a change in control of the corporation or (ii) a stockholder
rights plan or "poison pill," including the provisions of any preferred stock
or common stock purchase rights issued pursuant thereto; provided, however,
that such term shall not include any customary change of control provisions
contained in employment agreements between the corporation and any of its
directors, officers or other employees or in any plans or agreements relating
to stock options or other awards of equity securities made by the corporation
to any such persons.
"Existing Line of Business" means a non-facilities based, enhanced
service provider that offers fleet management and/or status or information about
vehicles and/or location capabilities through mobile communications service.
"Person" means any individual, corporation, partnership, joint stock
company, joint venture, association, trust, unincorporated organization,
government or any agency, department or political subdivision thereof, or any
other entity.
"Purchase Agreement" means the Purchase Agreement, dated as of
September 27, 1996, between the corporation and SBW.
"Regulatory Relief Date" means that date on which SBC Communications,
Inc. or its Affiliates have, in their sole judgment, obtained all necessary
federal and state regulatory approvals to provide landline, interLATA long-
distance service pursuant to the Communications Act of 1934, as amended by the
Telecommunications Act of 1996.
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IN WITNESS WHEREOF, the undersigned have signed and attested this
certificate on the 27th day of September, 1996.
/s/ WILLIAM C. SAUNDERS
---------------------------------------
William C. Saunders
President
Attest:
/s/ WESLEY E. SCHLENKER
- ---------------------------------
Wesley E. Schlenker
Secretary
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HIGHWAYMASTER COMMUNICATIONS, INC.
WARRANTS FOR THE PURCHASE OF SHARES OF
COMMON STOCK OF HIGHWAYMASTER COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
No. 1A 5,000,000 Warrants
FOR VALUE RECEIVED, HIGHWAYMASTER COMMUNICATIONS, INC., a Delaware
corporation (the "Company"), hereby certifies that Southwestern Bell Wireless
Holdings, Inc., a Delaware corporation ("SBW"), or permitted assigns (the
"Holder") is entitled, subject to the provisions of this warrant certificate
(including any substitute certificate issued pursuant to the terms hereof, this
"Warrant Certificate") representing 5,000,000 warrants ("Warrants"), to purchase
from the Company, at the times specified herein, (i) 3,000,000 fully paid and
non-assessable shares of Common Stock (as hereinafter defined) at a purchase
price per share equal to the First Exercise Price (as hereinafter defined) and
(ii) 2,000,000 fully paid and non-assessable shares of Common Stock, at a
purchase price per share equal to the Second Exercise Price (as hereinafter
defined). The number of shares of Common Stock to be received upon the exercise
of a Warrant and the price to be paid for a share of Common Stock are subject to
adjustment from time to time as hereinafter set forth.
Concurrently with the issuance of the Warrants, the Company and SBW
are entering into a Purchase Agreement, dated the date hereof ("Purchase
Agreement"), pursuant to which SBW is purchasing certain shares of Series D
Participating Convertible Preferred Stock, par value $.01 per share, of the
Company and is depositing the Purchase Price (as defined in the Purchase
Agreement) for such shares into escrow (the "Escrow Fund") pursuant to an escrow
agreement (the "Escrow Agreement").
1. DEFINITIONS. The following terms, as used herein, have the
following meanings:
<PAGE>
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person.
"Common Stock" means the common stock, $0.01 par value, of the
Company, and (in accordance with Section 8 hereof) capital stock of any class or
classes into which such Common Stock or any such other class may thereafter be
changed or reclassified.
"Exercise Prices" means the First Exercise Price and the Second
Exercise Price.
"Expiration Date" means 4:00 p.m., New York City time, on
September 27, 2001; provided, however, that if such day is a day on which
banking institutions in The City of New York are authorized by law to close, the
"Expiration Date" shall be on the next succeeding day that shall not be such a
day.
"First Exercise Price" means $14.00 per share of Common Stock
purchasable upon exercise of a Warrant, such First Exercise Price to be adjusted
from time to time as provided herein.
"Person" means any individual, corporation, partnership, joint stock
company, joint venture, association, trust, unincorporated organization,
government or any agency, department or political subdivision thereof, or any
other entity.
"Regulatory Relief" means that SBC Communications, Inc. or its
Affiliates, in their sole judgment, have obtained all necessary federal and
state regulatory approvals to provide landline, interLATA long-distance service
pursuant to the Communications Act of 1934, as amended by The Telecommunications
Act of 1996.
"Second Exercise Price" means $18.00 per share of Common Stock
purchasable upon exercise of a Warrant, such Second Exercise Price to be
adjusted from time to time as provided herein.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
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<PAGE>
2. EXERCISE AND DURATION OF WARRANTS.
(a) The Holder of this Warrant Certificate shall have the right to
exercise any or all of the Warrants (but not as to a fractional share of Common
Stock and not for less than 1,000,000 Warrants in any one exercise) at any time,
or from time to time until the Expiration Date by presentation and surrender
hereof to the Company with the appropriate Exercise Subscription Form annexed
hereto (an "Exercise Subscription Form") duly executed and accompanied by proper
payment of the First Exercise Price or the Second Exercise Price, as the case
may be, multiplied by the number of shares of Common Stock specified in such
form (the "Aggregate Exercise Price"), all subject to the terms and conditions
hereof. Notwithstanding the foregoing, prior to receipt of Regulatory Relief,
the Holder may only exercise Warrants to the extent that the total equity
securities in the Company held by Holder and its Affiliates is consistent with
the restrictions contained in the Communications Act of 1934, as amended by The
Telecommunications Act of 1996. Each Warrant not exercised prior to the
Expiration Date shall become void and all rights in respect thereof shall cease
as of such time.
(b) The Aggregate Exercise Price must be paid in U.S. dollars in
cash, wire transfer of immediately available funds, bank cashier's check or bank
draft payable to the order of the Company. Upon receipt by the Company of this
Warrant Certificate and a properly executed Exercise Subscription Form, together
with the Aggregate Exercise Price at the Company's office designated for such
purpose, the Holder shall be deemed to be the holder of record of the shares of
Common Stock receivable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder. The Company shall pay any and all documentary, stamp or similar
issue taxes of the United States or any state thereof payable in respect of the
issue or delivery of such shares of Common Stock; provided, however, that the
Company shall not be required to pay any tax or other charge that may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the record holder of the Warrants being
exercised and in such case the Company shall not be obligated to issue or
deliver any stock certificate until such tax or charge has been paid in full or
it has been established to the satisfaction of the Company that no such tax or
charge is due.
(c) Notwithstanding Sections 2(a) and 2(b) above, at the option of
the Holder of Warrants, Warrants may be exercised in the manner set forth in
paragraph (2)(a) above, except that the Holder may, in lieu of paying the
Aggregate Exercise Price in the manner set forth in Section 2(b) above,
exercise, without making any payment in cash, Warrants for that number of shares
of Common Stock determined by dividing (i) the
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<PAGE>
difference between (x) the current market price per share of Common Stock (as
defined in Section 8(d) below) on the day of exercise multiplied by the
number of shares of Common Stock specified in the Exercise Subscription Form
and (y) the Aggregate Exercise Price by (ii) the current market price per
share of Common Stock on the day of exercise.
(d) If the Holder exercises less than all the Warrants, this Warrant
Certificate shall be surrendered by the Holder to the Company and a new Warrant
Certificate of the same tenor and for the unexercised number of Warrants which
was not surrendered shall be executed by the Company. Subject to the provisions
hereof regarding transfer of the Warrants, the Company shall register the new
Warrant Certificate in such name or names as may be directed in writing by the
Holder and deliver the new Warrant Certificate to the person or persons entitled
to receive the same.
(e) Upon surrender of this Warrant Certificate in conformity with the
foregoing provisions, the Company shall transfer to the Holder of this Warrant
Certificate appropriate evidence of ownership of any shares of Common Stock or
other securities or property (including any money) to which the Holder is
entitled, registered or otherwise placed in, or payable to the order of, such
name or names as may be directed in writing by the Holder, and shall deliver
such evidence of ownership and any other securities or property (including any
money) to the person or persons entitled to receive the same, together with an
amount in cash in lieu of any fraction of a share of Common Stock as provided in
Section 5 below.
(f) Notwithstanding anything to the contrary contained herein, no
Holder of these Warrants shall be entitled to exercise the same until the filing
of the Certificate of Amendment contemplated by the Purchase Agreement and
unless, at the time of exercise, (i) a registration statement under the
Securities Act, shall have been filed with, and declared effective by, the
Securities and Exchange Commission or the issuance of shares of Common Stock
upon the exercise of the Warrants is permitted pursuant to an available
exemption from the registration requirements of the Securities Act and (ii) all
applicable requirements under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, with respect to the issuance of shares of Common Stock upon
the exercise of the Warrants shall have been satisfied.
3. RESTRICTIVE LEGEND. Any substitute Warrant Certificate and any
certificates evidencing shares of Common Stock issued pursuant to exercise of
Warrants shall bear the following legend, unless such securities have been
registered under the Securities Act or unless the Company determines otherwise
in compliance with applicable law:
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<PAGE>
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
SECURITIES LAWS OF ANY STATE, AND NEITHER THE SECURITIES NOR ANY
INTEREST THEREIN MAY BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREUNDER."
In addition, any substitute Warrant Certificate shall bear the following legend:
"NO HOLDER OF WARRANTS EVIDENCED BY THIS CERTIFICATE MAY
TRANSFER SUCH WARRANTS OR ANY INTEREST THEREIN TO ANY PERSON
OTHER THAN SOUTHWESTERN BELL WIRELESS HOLDINGS, INC. OR AN
AFFILIATE OF SOUTHWESTERN BELL WIRELESS HOLDINGS, INC."
4. RESERVATION OF SHARES. The Company hereby agrees that at all
times there shall be reserved for issuance and delivery upon exercise of the
Warrants such number of its authorized but unissued shares of its Common Stock
or other securities of the Company from time to time issuable upon exercise of
the Warrants as will be sufficient to permit the exercise in full of the
Warrants. All such shares shall be duly authorized and, when issued upon such
exercise, shall be validly issued, fully paid and non-assessable, free and clear
of all liens, security interests, charges and other encumbrances or restrictions
on sale (other than restrictions on resale imposed under applicable law) and
free and clear of all preemptive or similar rights, except for any of the
foregoing that may be imposed by or through the Holder of the Warrants or the
Person to whom shares of Common Stock or other securities are issued upon the
exercise thereof.
5. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of any Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market price per share of Common Stock on the day of
exercise.
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<PAGE>
6. TRANSFER, LOSS OF WARRANT CERTIFICATE.
(a) Subject to the provisions of this Section 6, the Company will,
from time to time, register the transfer of any outstanding Warrant Certificate
upon its records. Each taker and Holder of this Warrant Certificate by taking
or holding the same, consents and agrees that prior to any transfer of this
Warrant Certificate, the holder hereof shall give written notice to the Company
of such holder's intention to effect such transfer. Each such notice shall
describe the manner and circumstances of the proposed transfer in sufficient
detail. The Company shall register such transfer upon surrender of such Warrant
Certificate to the Company for transfer, accompanied by appropriate instruments
of transfer duly executed by the holder or the holder's duly authorized
attorney. Upon any such registration of transfer, a new Warrant Certificate
shall be issued in the name of the transferee, and the surrendered Warrant
Certificate shall be cancelled. Each Warrant Certificate evidencing the
transferred Warrants shall bear, unless the same has been registered under the
Securities Act, the restrictive legend set forth in Section 3 herein.
(b) Notwithstanding anything to the contrary contained in Section
4(a), the Company shall not be obligated to register the transfer of any
outstanding Warrant Certificate unless a registration statement under the
Securities Act, shall have been filed with, and declared effective by, the
Securities and Exchange Commission with respect to the transfer of the
applicable Warrants or such transfer is permitted pursuant to an available
exemption from the registration requirements of the Securities Act.
(c) No holder of Warrants shall Transfer any such Warrants or any
interest therein to any Person other than SBW or an Affiliate of SBW. As used
herein, the term "Transfer" means, with respect to Warrants, any sale, transfer,
assignment, disposition or other means of conveying legal or beneficial
ownership of such Warrants, whether direct or indirect and whether voluntary or
involuntary, and the terms "Transferred," "Transferable," "Transferor" and
"Transferee" have correlative meanings.
(d) Any attempted or purported Transfer of Warrants in violation of
paragraph 6(c) above shall not be effective to Transfer ownership of such
Warrants to the purported Transferee thereof, who shall not be entitled to any
rights as a Holder with respect to the Warrants purported to be Transferred.
All rights with respect to any Warrants attempted or purported to be Transferred
in violation of the aforementioned provisions shall remain the property of the
Person who initially attempted or purported to transfer such Warrants in
violation thereof. Upon a determination by the Board of Directors of the
Company that there has been or is threatened an attempted or purported Transfer
of Warrants in violation of the aforementioned provisions, the Board of
Directors of the
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<PAGE>
Company may take such action as it deems advisable, including, but not
limited to, refusing to give effect on the books of the corporation to such
attempted or purported Transfer or instituting legal proceedings to enjoin or
rescind the same.
(e) Upon receipt by the Company of evidence satisfactory to it (in
the exercise of its reasonable discretion) of the loss, theft, destruction or
mutilation of this Warrant Certificate, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant Certificate, if mutilated, the Company shall
execute and deliver a new Warrant Certificate of like tenor and date. Any such
new Warrant Certificate executed and delivered shall constitute an additional
contractual obligation on the part of the Company, whether or not the warrant so
lost, stolen, destroyed or mutilated shall be at any time enforceable by anyone.
The provisions of this Section 6 are exclusive and shall preclude (to the extent
lawful) all other rights or remedies with respect to the replacement of
mutilated, lost, stolen, or destroyed Warrant Certificates.
7. RIGHTS OF THE HOLDER. Prior to the exercise of any Warrant, the
Holder shall not, by virtue hereof, be entitled to any rights of a stockholder
of the Company, including, without limitation, the right to vote, to give or
withhold consent to any corporate action of the Company, to receive dividends or
other distributions, to exercise any preemptive or similar right or to receive
any notice of meetings of stockholders or any notice of any proceedings of the
Company except as may be specifically provided for herein.
8. ANTI-DILUTION PROVISIONS. The Exercise Prices in effect at any
time, and the number of shares of Common Stock which may be purchased upon the
exercise hereof, shall be subject to change or adjustment as follows:
(a) In case the Company shall (i) pay a dividend or make any other
distribution on or in respect of its Common Stock in shares of Common Stock,
(ii) subdivide its outstanding Common Stock, (iii) combine its outstanding
Common Stock into a smaller number of shares of Common Stock, or (iv) issue by
reclassification of its Common Stock (whether pursuant to a merger or
consolidation or otherwise) any other shares representing common equity of the
Company, then (x) the number of shares of Common Stock theretofore issuable upon
exercise of a Warrant shall be appropriately adjusted so that the Holder of each
Warrant exercised after the record date fixing stockholders to be affected by
such event shall be entitled to purchase at the Exercise Price, as adjusted
below, the number of shares of Common Stock (or other shares representing common
equity of the Company) which he would have owned or have been entitled to
7
<PAGE>
receive after the happening of any of the events described above, had such
Warrant been exercised immediately prior to such record date and (y) the
Exercise Price shall be adjusted by multiplying the Exercise Price by a
fraction, the numerator of which is equal to the number of shares of Common
Stock purchasable prior to the adjustment specified in (x) above and the
denominator of which is equal to the number of shares of Common Stock
purchasable after such adjustment. An adjustment made pursuant to this
subparagraph shall become effective immediately after the record date in the
case of a dividend or distribution and shall become effective immediately after
the effective date in the case of a subdivision, combination or
reclassification.
(b) In case the Company shall at any time during which the Veto
Provisions (as hereinafter defined) are not in effect issue shares of Common
Stock to any Person, or rights, options or warrants to any Persons entitling
such Persons to subscribe for or purchase shares of Common Stock, at a price per
share less than the current market price per share of Common Stock as of the
issue date of such shares of Common Stock or rights, options or warrants to any
such Person, the Exercise Prices to be in effect after such issuance or date
shall be determined by multiplying the Exercise Prices in effect immediately
prior to such issue date by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding on the date of issuance of such
shares of Common Stock or rights, options or warrants plus the number of shares
of Common Stock which the Aggregate Price (as hereinafter defined) would
purchase at such current market price, and the denominator of which shall be the
number of shares of Common Stock outstanding on the date of issuance of such
shares of Common Stock or rights, options or warrants plus the number of
additional shares of Common Stock issued or issuable upon exercise of the
rights, options or warrants. Aggregate Price shall mean (x) in the case of the
issuance of shares the aggregate offering price paid for the total number of
shares of Common Stock so issued or (y) in the case of rights, options or
warrants to subscribe for or purchase shares of Common Stock, the aggregate of
any amount paid for the issuance of such rights, options or warrants plus the
aggregate exercise price payable to the Company upon exercise thereof. Such
adjustment shall be made successively whenever any such Common Stock or rights,
options or warrants are issued, and shall become effective immediately after
such issue date; provided, however, that in the case of rights, options or
warrants to subscribe for or purchase shares of Common Stock, if all of the
Common Stock deliverable upon exercise or exchange of such securities has not
been issued when such securities expire or are no longer outstanding, then the
Exercise Price shall promptly be readjusted to the Exercise Price that would
have been in effect had the adjustment upon the issuance of such rights, options
or warrants been made only with respect to the number of shares of Common Stock
actually issued upon exercise of such securities. In determining whether any
shares of Common Stock or any rights, options or
8
<PAGE>
warrants entitle the holders to subscribe for or purchase shares of Common
Stock at less than such current market price, and in determining the
aggregate offering price of such shares of Common Stock, there shall be taken
into account any consideration received by the Company for such shares of
Common Stock or such rights, options or warrants, the value of such
consideration, if other than cash, to be determined by the Board of
Directors. For the purposes of this subparagraph, the issuance of rights,
options or warrants to subscribe for or purchase securities convertible into
Common Stock shall be deemed to be the issuance of rights, options or
warrants to purchase the shares of Common Stock into which such securities
are convertible at an aggregate offering price equal to the aggregate
offering price of such securities plus the minimum aggregate amount (if any)
payable upon conversion of such securities into shares of Common Stock.
Notwithstanding anything to the contrary contained herein, the provisions of
this Section 8(b) shall not apply to, and no adjustment is required to be
made in respect of, any of the following: (i) the issuance of shares of
Common Stock upon the exercise of any of the Warrants or the exercise of any
other rights, options or warrants that entitle the holder to subscribe for or
purchase such shares (it being understood that the sole adjustment pursuant
to this Section 8(b) in respect of the issuance of shares of Common Stock
upon exercise of rights, options or warrants shall be made at the time of the
issuance by the Company of such rights, options or warrants); (ii) the
issuance of shares of Common Stock upon conversion or exchange of any other
securities outstanding on the date hereof after giving effect to the
consummation of the transactions contemplated by the Purchase Agreement which
are convertible into or exchangeable for shares of Common Stock; (iii) the
issuance of shares of Common Stock upon conversion of any shares of Class B
Common Stock, par value $.01 per share, that may be issued from time to time
as contemplated by the Purchase Agreement or the other Transactions Documents
(as defined in the Purchase Agreement); (iv) the issuance of shares of Common
Stock to the Company's employees, directors or consultants pursuant to bona
fide benefit plans adopted by the Company's Board of Directors if and to the
extent that the issuance thereof is permitted under the terms of the
Stockholders' Agreement (as defined in the Purchase Agreement); (v) the
issuance of shares of Common Stock in a bona fide public offering pursuant to
a firm commitment offering; (vi) the issuance of shares of Common Stock to
Affiliates of the Company concurrently with an issuance of shares described
in clause (v) above if such issuance results in the receipt by the Company of
at least the same net proceeds per share as the issuance described in such
provision and if all Affiliates have the right to participate in such
issuance pro rata with their equity interest in the Company; and (vii) the
issuance of shares of Common Stock pursuant to any dividend reinvestment or
similar plan adopted by the Company's Board of Directors to the extent that
the applicable discount from the current market price for shares issued under
such plan does not exceed 5%. As used herein, the term "Veto Provisions"
means any provisions of the Transaction Documents to the effect that the
approval of SBW or any of its Affiliates is
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<PAGE>
required in order for the issuance by the Company of any equity securities,
including securities convertible into equity securities (subject to the
exceptions set forth in the applicable Transaction Documents).
(c) In case the Company shall distribute to all holders of shares of
its Common Stock (whether pursuant to a merger or consolidation or otherwise)
evidence of its indebtedness or assets (including securities issued by the
Company or by any other entity, but excluding (x) any shares referred to in
Section 8(a) above, and (y) any shares of Common Stock or rights, options or
warrants referred to in Section 8(b) above), then in each such case the Exercise
Prices to be in effect after such distribution shall be determined by
multiplying the Exercise Prices in effect immediately prior to such record date
by a fraction, the numerator of which shall be the current market price per
share of Common Stock less the then fair market value (as determined by the
Board of Directors in good faith) of the portion of the assets or evidences of
indebtedness so distributed applicable to one share of Common Stock, and the
denominator of which shall be such current market price per share of Common
Stock as of the date of such distribution. Such adjustment shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such distribution.
(d) The "current market price per share of Common Stock" at any date
shall be deemed to be the average of the daily Closing Prices (as defined below)
for 30 consecutive Trading Days (as defined below) immediately preceding the day
in question, after appropriate adjustment for stock dividends, distributions,
subdivisions, combinations or reclassifications occurring within such 30-day
period. The term "Closing Price" on any day shall mean the reported last sale
price per share of Common Stock on such day or, in case no such sale takes place
on such day, the average of the reported closing bid and asked prices, in each
case on the principal national securities exchange on which the Common Stock is
listed or admitted to trading, or, if the Common Stock is not listed or admitted
to trading on any national securities exchange, the last quoted sale price or,
if not so quoted, the average of the closing bid and asked prices quoted on the
Nasdaq National Market or, if not so quoted, the average of the closing bid and
asked prices as furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by the Company for that
purpose; and the term "Trading Day" shall mean a day on which the principal
national securities exchange on which the Common Stock is listed or admitted to
trading or, if the Common Stock is quoted on the Nasdaq National Market, then
the Nasdaq National Market, is open for the transaction of business or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange or quoted on the Nasdaq National Market, a Monday, Tuesday, Wednesday,
Thursday, or Friday on which
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<PAGE>
banking institutions in the City of New York, New York are not authorized or
obligated by law or executive order to close.
(e) In the event that at any time, as a result of an adjustment made
pursuant to Sections 8(a) or 8(b) above, the Holder shall become entitled to
receive any shares of the capital stock of the Company other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of the
Warrants shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 8(a) to 8(d), inclusive, above, and Sections
8(g) or 8(h) below, and the provisions of this Warrant Certificate with respect
to the Common Stock shall apply on like terms to any such other shares.
(f) In case:
(i) the Company shall authorize the issuance to all holders of
its Common Stock of rights or warrants to subscribe for or
purchase shares of its Common Stock or of any other
subscription rights or warrants; or
(ii) the Company shall authorize the distribution to all holders
of its Common Stock (whether pursuant to a merger or
consolidation or otherwise) of evidences of its indebtedness
or assets (other than dividends paid in or distributions of
the Company's capital stock for which the Exercise Prices
shall have been adjusted pursuant to Section 8(a) above); or
(iii) of any capital reorganization or reclassification of
the Common Stock (other than a change in par value of
the Common Stock) or of any consolidation or merger to
which the Company is a party and for which approval of
any stockholders of the Company is required (other than
a consolidation or merger in which the Company is the
continuing corporation and that does not result in any
reclassification or change of the Common Stock
outstanding), or of the conveyance or transfer of the
properties and assets of the Company substantially as
an entirety; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company; or
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(v) the Company proposes to take any action (other than actions
of the character described in Section 8(a) above) that would
require an adjustment of the Exercise Prices pursuant to
this Section 8;
then the Company shall cause to be mailed by registered mail to the Holder, at
the earliest practicable time (and in any event not less than 20 days prior to
the applicable record or effective date hereinafter specified), a notice stating
(A) the date as of which the holders of Common Stock of record to be entitled to
receive any such rights, warrants or distributions are to be determined, or
(B) the date on which any such reorganization, reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding-up is expected
to become effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities or other property, if any, deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding-up.
(g) Whenever reference is made in this Section 8 to the issuance of
shares of Common Stock, the term "Common Stock" shall include any equity
securities of any class of the Company hereafter authorized (excluding the Class
B Common Stock and Series D Preferred Stock, as defined in the Purchase
Agreement) which shall not be limited to a fixed sum or percentage in respect of
the right of the holders thereof to participate in dividends or distributions of
assets upon the voluntary or involuntary liquidation, dissolution or winding-up
of the Company.
(h) Notwithstanding any provision to the contrary in this Section 8,
the Exercise Prices in effect at any time, and the number of shares of Common
Stock which may be purchased upon the exercise hereof, shall not be subject to
change or adjustment in either of the following cases:
(i) In case the Company shall issue shares of Common Stock to
any Person, or rights, options or warrants to any Persons entitling
such Persons to subscribe for or purchase shares of Common Stock, at a
price per share at least equal to or greater than the current market
price per share of Common Stock as of the issue date such shares of
Common Stock or rights, options or warrants to any such Person; or
(ii) In case the Company purchases any assets or securities (a
"Purchase") and provides all or some of the consideration for such
Purchase in shares of Common Stock; PROVIDED, HOWEVER, that any assets
or securities so
12
<PAGE>
purchased by the Company are purchased at a price which is at or
below the fair market value of such assets or securities as
determined in good faith by the Board of Directors of the Company;
and PROVIDED, further, that any shares of Common Stock provided as
consideration by the Company for any such Purchase are issued at a
price or valued at a price at least equal to or greater than the
current market price per share of Common Stock as of the date of
issuance of such shares of Common Stock as determined in good faith
by the Board of Directors of the Company.
Notwithstanding any other provision contained in this Section 8, no adjustment
to the Exercise Price need be made unless the adjustment would require an
increase or decrease of at least 1% in the Exercise Price as then in effect.
Any adjustments that are not made as a result of this Section 8(i) shall be
carried forward and taken into account in any subsequent adjustment.
9. OFFICERS' CERTIFICATE. Whenever any adjustment in the Exercise
Prices is made, the Company (A) shall forthwith file in the custody of its
Secretary at its principal office, a statement describing the adjustment and the
method of calculation used, and may obtain the certificate of any independent
firm of public accountants of national recognition selected by the Board of
Directors of the Company which, if obtained, shall be presumptive evidence of
the correctness of any such calculation that such adjustment was properly
calculated in accordance with the provisions of Section 8 and (B) shall cause a
copy of such statement to be mailed by first class mail postage prepaid to the
Holder.
10. CONSOLIDATION OR MERGER. In case of any consolidation of the
Company with, or merger of the Company into, any other Person or any merger of
another Person into the Company (other than a consolidation or merger in which
the Company is the continuing corporation and that does not result in any
reclassification or change of the Common Stock outstanding), the Holder of this
Warrant Certificate shall have the right thereafter to exercise the Warrants for
the kind and amount of securities, cash and other property receivable upon such
consolidation or merger by a holder of the number of shares of Common Stock of
the Company for which the Warrants may have been exercised immediately prior to
such consolidation or merger, assuming such holder of Common Stock of the
Company (i) is not a Person with which the Company consolidated or into which
the Company merged or which merged into the Company, as the case may be
("Constituent Person"), or an Affiliate of a Constituent Person and (ii) failed
to exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such consolidation or merger
(provided that if the kind or amount of securities, cash and other property
receivable upon such consolidation or merger is not the
13
<PAGE>
same for each share of Common Stock of the Company held immediately prior to
such consolidation or merger by other than a constituent Person or an
Affiliate thereof and in respect of which such rights of election shall not
have been exercised ("non-electing share"), then for the purpose of this
Section 10 the kind and amount of securities, cash and other property
receivable upon such consolidation or merger by each non-electing share shall
be deemed to be the kind and amount so receivable per share by a plurality of
the nonelecting shares). Adjustments for events subsequent to the effective
date of such a consolidation or merger shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Warrant Certificate.
In any such event, effective provisions shall be made in the certificate or
articles of incorporation of the resulting or surviving corporation or
otherwise so that the provisions set forth herein for the protection of the
rights of Warrant holders shall thereafter continue to be applicable; and any
such resulting or surviving corporation shall expressly assume the obligation
to deliver, upon exercise, such shares of stock, other securities, cash and
property. The provisions of this Section 10 shall similarly apply to
successive consolidations or mergers.
11. NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, sent by
facsimile transmission or sent by certified, registered or express mail, postage
prepaid. Any notice shall be deemed given when so delivered personally, sent by
facsimile transmission or, if mailed, three (3) business days after the date of
deposit in the United States mail, by certified mail return receipt requested,
as follows:
If to the Company: HighwayMaster Communications, Inc.
16479 Dallas Parkway, Suite 710
Dallas, Texas 752248
Attention: William C. Kennedy, Jr.
Facsimile: (972) 930-7263
If to the Holder: Southwestern Bell Wireless Holdings, Inc.
17330 Preston Road
Suite 100A
Dallas, Texas 75252
Attention: President
Facsimile: (972) 733-2012
14
<PAGE>
and to: SBC Communications Inc.
175 E. Houston
San Antonio, Texas 78205
Attention: General Attorney, Mergers & Acquisitions
Facsimile: (210) 351-3488
or such other address as shall have been furnished to the party giving or making
such notice, demand or delivery.
12. APPLICABLE LAW. THIS WARRANT CERTIFICATE AND ALL RIGHTS ARISING
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW
OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PROVISIONS THEREOF.
13. AMENDMENTS; WAIVERS. Any provision of this Warrant Certificate
may be amended or waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by the Holder and the Company, or in
the case of a waiver, by the party against whom the waiver is to be effective.
No failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
14. AGREEMENT OF HOLDER. By acceptance of this Warrant Certificate
and the Warrants represented thereby the Holder hereby agrees to be bound by the
terms and conditions contained herein.
15. TERMINATION. In the event that the Escrow Fund is released to
SBW pursuant to the terms of the Escrow Agreement, this Warrant Certificate
shall thereafter become void and have no effect, and neither the Company nor the
Holder shall have any liability to the other or its Affiliates by virtue of the
provisions of this Warrant Certificate or in connection with the transactions
contemplated hereby, and except that the Holder shall be obligated to promptly
deliver this Warrant Certificate and the certificates evidencing any shares of
Common Stock acquired upon the exercise of the Warrants to the Company for
cancellation and return any dividends received during the period it held such
shares to the Company.
15
<PAGE>
IN WITNESS WHEREOF, the Company has duly caused this Warrant
Certificate to be signed and attested by its duly authorized officers and to be
dated as of September 27, 1996.
HIGHWAYMASTER COMMUNICATIONS,
INC.
By: /s/ William C. Saunders
---------------------------------------
Name: William C. Saunders
------------------------------
Title: President
------------------------------
Attest:
By: /s/ Wesley E. Schlenker
-------------------------------------------
Name: Wesley E. Schlenker
---------------------------------------
Title: Secretary
--------------------------------------
Consented to and Accepted:
SOUTHWESTERN BELL WIRELESS HOLDINGS, INC.
By: /s/ Stan Sigman
-------------------------------------------
Name: Stan Sigman
----------------------------------------
Title: President & Chief Executive Officer
---------------------------------------
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
SECURITIES LAWS OF ANY STATE, AND NEITHER THE SECURITIES NOR ANY INTEREST
THEREIN MAY BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN APPLICABLE EXEMPTION THEREUNDER. NO HOLDER OF WARRANTS EVIDENCED BY THIS
CERTIFICATE MAY TRANSFER SUCH WARRANTS OR ANY INTEREST THEREIN TO ANY PERSON
OTHER THAN SOUTHWESTERN BELL WIRELESS HOLDINGS, INC. OR AN AFFILIATE OF
SOUTHWESTERN BELL WIRELESS HOLDINGS, INC.
16
<PAGE>
ASSIGNMENT FORM
(To be executed if Holder desires to transfer a Warrant)
For Value Received, the undersigned hereby sells, assigns and
transfers to __________________________________ an Affiliate of Southwestern
Bell Wireless Holdings, Inc. in accordance with Section 6 of the Warrant
Certificate.
- -------------------------------------------------------------------------------
Please insert social security or other identifying number
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address including zip code)
Warrants represented by this Warrant Certificate, and does hereby irrevocably
appoint ______________________________________________ Attorney, to transfer
such rights on the books of the Company with full power of substitution.
Date: .
-----------------------------------
(1)
----------------------------------------
(Signature of Owner)
------------------------------------------
(Street Address)
------------------------------------------
(City) (State) (Zip Code)
(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
1
<PAGE>
EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise for cash of Warrants at the First Exercise
Price)
To: HighwayMaster Communications, Inc.
The undersigned irrevocably exercises Warrants for the purchase of
_______ shares of common stock, $0.01 par value, of HighwayMaster
Communications, Inc. (the "Common Stock") at the First Exercise Price and
herewith makes payment of $___________ (such payment being made in U.S.
dollars in cash, wire transfer of immediately available funds, bank cashier's
check or bank draft payable to the order of HighwayMaster Communications,
Inc.), all on the terms and conditions specified in the attached Warrant
Certificate, and surrenders this Warrant Certificate and all right, title and
interest in the Warrants exercised hereby to HighwayMaster Communications,
Inc. and directs that the shares of Common Stock deliverable upon the
exercise of these Warrants be registered or placed in the name and at the
address specified below and delivered thereto.
Date: .
-------------------------------------
(1)
-------------------------------------
(Signature of Owner)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
1
<PAGE>
I. Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the
within Warrant Certificate to be issued to:
[(an Affiliate of Southwestern Bell Wireless Holdings, Inc. in accordance with
Section 6 of the Warrant Certificate)]
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
2
<PAGE>
EXERCISE SUBSCRIPTION FORM
(To be executed only upon cashless exercise of Warrants at the First Exercise
Price)
To: HighwayMaster Communications, Inc.
The undersigned irrevocably exercises Warrants for the purchase of
_______ shares of common stock, $0.01 par value, of HighwayMaster
Communications, Inc. (the "Common Stock") at the First Exercise Price without
any cash payment pursuant to Section 2(c) of the attached Warrant Certificate
and on the other terms and conditions specified therein, and surrenders this
Warrant Certificate and all right, title and interest in the Warrants
exercised hereby to HighwayMaster Communications, Inc. and directs that the
shares of Common Stock deliverable upon the exercise of these Warrants be
registered or placed in the name and at the address specified below and
delivered thereto.
Date: .
-------------------------------------
(1)
-------------------------------------
(Signature of Owner)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
1
<PAGE>
II. Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the
within Warrant Certificate to be issued to:
[(an Affiliate of Southwestern Bell
Wireless Holdings, Inc. in accordance with
Section 6 of the Warrant Certificate)]
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
2
<PAGE>
EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise for cash of Warrants at the Second Exercise
Price)
To: HighwayMaster Communications, Inc.
The undersigned irrevocably exercises Warrants for the purchase of
_________ shares of common stock, $0.01 par value, of HighwayMaster
Communications, Inc. (the "Common Stock") at the Second Exercise Price and
herewith makes payment of $___________ (such payment being made in U.S.
dollars in cash, wire transfer of immediately available funds, bank cashier's
check or bank draft payable to the order of HighwayMaster Communications,
Inc.), all on the terms and conditions specified in the attached Warrant
Certificate, and surrenders this Warrant Certificate and all right, title and
interest in the Warrants exercised hereby to HighwayMaster Communications,
Inc. and directs that the shares of Common Stock deliverable upon the
exercise of these Warrants be registered or placed in the name and at the
address specified below and delivered thereto.
Date: .
-------------------------------------
(1)
-------------------------------------
(Signature of Owner)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
1
<PAGE>
III. Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the
within Warrant Certificate to be issued to:
[(an Affiliate of Southwestern Bell Wireless
Holdings, Inc. in accordance with
Section 6 of the Warrant Certificate)]
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
2
<PAGE>
EXERCISE SUBSCRIPTION FORM
(To be executed only upon cashless exercise of Warrants at the Second Exercise
Price)
To: HighwayMaster Communications, Inc.
The undersigned irrevocably exercises Warrants for the purchase of
_______ shares of common stock, $0.01 par value, of HighwayMaster
Communications, Inc. (the "Common Stock") at the Second Exercise Price
without any cash payment pursuant to Section 2(c) of the attached Warrant
Certificate and on the other terms and conditions specified therein and
surrenders this Warrant Certificate and all right, title and interest in the
Warrants exercised hereby to HighwayMaster Communications, Inc. and directs
that the shares of Common Stock deliverable upon the exercise of these
Warrants be registered or placed in the name and at the address specified
below and delivered thereto.
Date: .
-------------------------------------
(1)
-------------------------------------
(Signature of Owner)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
1
<PAGE>
IV. Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the
within Warrant Certificate to be issued to:
[(an Affiliate of Southwestern Bell Wireless
Holdings, Inc. in accordance with
Section 6 of the Warrant Certificate)]
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
2
<PAGE>
PURCHASE AGREEMENT
BY AND BETWEEN
HIGHWAYMASTER COMMUNICATIONS, INC., AS ISSUER
AND
SOUTHWESTERN BELL WIRELESS HOLDINGS, INC.,
AS INVESTOR
SEPTEMBER 27, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. Issuance and Sale of Series D Preferred Stock . . . . . . . . . 9
SECTION 3. Representations and Warranties of Company . . . . . . . . . . .10
(a) Organization; Corporate Power . . . . . . . . . . . . . . . . .10
(b) Capital Stock and Related Matters . . . . . . . . . . . . . . .11
(c) Subsidiaries; Investments . . . . . . . . . . . . . . . . . . .12
(d) Authorization; No Breach. . . . . . . . . . . . . . . . . . . .13
(e) Company Reports; Financial Statements . . . . . . . . . . . . .13
(f) Absence of Undisclosed Liabilities. . . . . . . . . . . . . . .14
(g) No Material Adverse Change. . . . . . . . . . . . . . . . . . .14
(h) Absence of Certain Developments . . . . . . . . . . . . . . . .15
(i) Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
(j) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . .17
(k) Contracts and Commitments . . . . . . . . . . . . . . . . . . .19
(l) Intellectual Property Rights. . . . . . . . . . . . . . . . . .21
(m) Litigation, etc.. . . . . . . . . . . . . . . . . . . . . . . .22
(n) Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . .23
(o) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .23
(p) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . .23
(q) Employee Benefits Matters . . . . . . . . . . . . . . . . . . .24
(r) Compliance with Laws. . . . . . . . . . . . . . . . . . . . . .24
(s) Environmental Matters . . . . . . . . . . . . . . . . . . . . .25
(t) Affiliated Transactions . . . . . . . . . . . . . . . . . . . .25
SECTION 4. Representations and Warranties of the Investor. . . . . . . . .26
(a) Execution; Authorization; No Contravention. . . . . . . . . . .26
(b) Securities Act. . . . . . . . . . . . . . . . . . . . . . . . .26
(c) Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . .27
SECTION 5. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . .27
(a) Inspection Rights . . . . . . . . . . . . . . . . . . . . . . .27
(b) Confidentiality . . . . . . . . . . . . . . . . . . . . . . . .27
(c) Compliance with Agreements. . . . . . . . . . . . . . . . . . .28
(d) Debt Offering . . . . . . . . . . . . . . . . . . . . . . . . .28
i
<PAGE>
(e) Approval by the Company's Stockholders. . . . . . . . . . . . .28
(f) Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
(g) Reservation of Common Stock . . . . . . . . . . . . . . . . . .30
(h) Further Assurances. . . . . . . . . . . . . . . . . . . . . . .30
(i) Voice and Data Services Agreement . . . . . . . . . . . . . . .30
(j) Mobile Carrier. . . . . . . . . . . . . . . . . . . . . . . . .30
(k) Technical Services Agreement. . . . . . . . . . . . . . . . . .31
SECTION 6. Survival and Indemnification . . . . . . . . . . . . . . . . . . .31
(a) Survival of Representations, Warranties, Covenants and
Agreements; Knowledge of Breach; Indemnification. . . . . . . .31
(b) Indemnification for Third Party Claims; Method of Asserting
Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
SECTION 7. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . .33
(a) Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . .33
(b) Public Disclosure . . . . . . . . . . . . . . . . . . . . . . .34
(c) Successors and Assigns; Assignment. . . . . . . . . . . . . . .34
(d) Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . .34
(e) Amendments and Waivers. . . . . . . . . . . . . . . . . . . . .34
(f) Severability. . . . . . . . . . . . . . . . . . . . . . . . . .35
(g) Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .35
(h) Descriptive Headings. . . . . . . . . . . . . . . . . . . . . .35
(i) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .35
(j) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
(k) Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . .36
(l) Definition of Knowledge . . . . . . . . . . . . . . . . . . . .36
ii
<PAGE>
PURCHASE AGREEMENT
This Purchase Agreement (the "AGREEMENT") is entered into as of
September 27, 1996 by and between HIGHWAYMASTER COMMUNICATIONS, INC., a Delaware
corporation (the "COMPANY"), and SOUTHWESTERN BELL WIRELESS HOLDINGS, INC., a
Delaware corporation (the "INVESTOR").
RECITALS:
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Company, the Investor and certain other stockholders of the
Company have entered into an Amended and Restated Stockholders' Agreement (the
"STOCKHOLDERS' AGREEMENT");
WHEREAS, simultaneously with the execution and delivery of this
Agreement, certain parties to the Stockholders' Agreement have consummated the
transactions contemplated by subsections (a) and (b) of Section 2 of the
Stockholders' Agreement (the "RECAPITALIZATION TRANSACTIONS");
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Company and the Investor have entered into an agreement set forth
as Exhibit C hereto (the "ESCROW AGREEMENT") relating to the deposit of the
Purchase Price (as defined herein) into escrow (the "ESCROW FUND") with the
Escrow Agent (as defined herein);
WHEREAS, simultaneously with the execution and delivery of this
Agreement, HM Corporation (as hereinafter defined) and the Investor have entered
into a technical services agreement, dated as of the date hereof (the "TECHNICAL
SERVICES AGREEMENT");
WHEREAS, the Company has agreed to cause HM Corporation to enter into
a Voice/Data Agreement (as hereafter defined) with Southwestern Bell
Communications Services, Inc., a Delaware corporation ("SBCS"), upon receipt of
Regulatory Relief (as defined herein), and to cause HM Corporation to perform
its obligations under, the Voice/Data Agreement (as defined herein) pursuant to
Section 5(i) of this Agreement;
WHEREAS, the Company has agreed to cause HM Corporation to procure
cellular services from Southwestern Bell Mobile Systems, a Delaware corporation
1
<PAGE>
("SBMS"), from and after the date hereof in accordance with Section 5(j) of this
Agreement;
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Company has granted the Investor the Warrants (as defined herein)
pursuant to the Warrant Certificate (the "WARRANT CERTIFICATE"), dated as of the
date hereof, by and between the Company and the Investor; and
WHEREAS, the Company desires to issue and sell to the Investor, and
the Investor desires to purchase and acquire from the Company the shares of
Series D Preferred Stock (as defined herein).
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby agree as follows:
SECTION 1. DEFINITIONS.
1.1 DEFINED TERMS. For the purposes of this Agreement, the following
terms have the meanings set forth below:
"AFFILIATE" means any Person that directly or indirectly, through one
or more intermediaries, has control of or is controlled by, or is under common
control with, the Person specified.
"AFFILIATED GROUP" means any affiliated group as defined in IRC
Section 1504 that has filed a consolidated return for federal income tax
purposes (or any similar group under state, local or foreign law) for a period
during which any of the Company or any of its Subsidiaries was a member of such
group.
"AGREEMENT" shall have the meaning set forth in the first paragraph of
this Agreement.
"ANTITRUST AUTHORIZATION CONDITION" shall have the meaning set forth
in Section 2(b).
2
<PAGE>
"ANTITRUST DIVISION" shall mean the Antitrust Division of the United
States Department of Justice.
"AUDIT DATE" shall have the meaning set forth in Section 3(e).
"BUSINESS" means all business operations and activities currently
conducted by the Company and its Subsidiaries.
"BY-LAW AMENDMENT" shall have the meaning set forth in Section
3(b)(iii).
"CERTIFICATE OF AMENDMENT" shall have the meaning set forth in Section
3(b)(iii).
"CLASS B COMMON STOCK" means the new class of the Company's common
stock to be created upon the adoption of the Certificate of Amendment, the terms
of which are set forth in Exhibit B hereto.
"COMMON STOCK" means the Common Stock, par value $0.01 per share, of
the Company.
"COMPANY" shall have the meaning set forth in the first paragraph of
this Agreement.
"COMPANY REPORTS" shall have the meaning set forth in Section 3(e).
"DEDUCTIBLE" shall have the meaning set forth in Section 6(a).
"DGCL" means the Delaware General Corporation Law.
"EMPLOYEE" means a current or former employee of the Company or an
ERISA Affiliate thereof.
"ENVIRONMENTAL LAWS" means any federal, state, territorial, provincial
or local law, common law doctrine, rule, order, decree, judgment, injunction,
license, permit or regulation relating to environmental matters, including those
pertaining to land use, air, soil, surface water, ground water (including the
protection, cleanup, removal, remediation or damage thereof), public or employee
health or safety, microwave emissions or any other environmental matter,
together with any other laws (federal, state, territorial, provincial or local)
relating to emissions, discharges, releases or threatened releases of any
pollutant or
3
<PAGE>
contaminant including, without limitation, medical, chemical, biological,
biohazardous or radioactive waste and materials, into ambient air, land,
surface water, groundwater, personal property or structures, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation, discharge or handling of any contaminant,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601 ET SEQ.), the
Hazardous Material Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 ET SEQ.), the
Clean Air Act (42 U.S.C. Section 1251 ET SEQ.), the Toxic Substances Control
Act (15 U.S.C. Section 2601 ET SEQ.), and the Occupational Safety and Health
Act (29 U.S.C. Section 651 ET SEQ.), as such laws have been interpreted by
government agencies and as amended, modified or supplemented heretofore and
regulations promulgated thereunder.
"ERISA" shall have the meaning set forth in Section 3(q).
"ERISA AFFILIATE" means any Person that is (or at any relevant time
was) a member of a "controlled group of corporations" with or under "common
control" with the Company as defined in Section 414(b) or (c) of the Code.
"ESCROW AGENT" shall mean Texas Commerce Bank, N.A.
"ESCROW AGREEMENT" shall have the meaning set forth in the Recitals.
"ESCROW FUND" shall have the meaning set forth in the Recitals.
"FTC" shall mean the Federal Trade Commission.
"GAAP" shall have the meaning set forth in Section 3(e).
"GOVERNMENTAL CONDITION" shall have the meaning set forth in Section
2(b).
"HAZARDOUS MATERIALS" means those substances which are regulated or
form the basis of liability under any Environmental Laws, including, without
limitation, petroleum products, radon and asbestos.
"HM CORPORATION" shall have the meaning set forth in Section 5(i).
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
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"INDEMNIFIED PARTY" shall have the meaning set forth in Section 6(b).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 6(b).
"INFORMATION STATEMENT" shall have the meaning set forth in Section
5(e).
"INTELLECTUAL PROPERTY RIGHTS" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, logos and corporate names and registrations and
applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof and (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and information).
"INVESTOR" shall have the meaning set forth in the first paragraph of
this Agreement.
"IRC" OR "CODE" means the Internal Revenue Code of 1986, as amended,
and any reference to any particular IRC or Code section shall be interpreted to
include any revision of or successor to that section regardless of how numbered
or classified.
"LATEST BALANCE SHEET" shall have the meaning set forth in Section
3(e).
"LIEN" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof), any filing
or agreement to file a financing statement as debtor under the Uniform
Commercial Code or any similar statute other than to reflect ownership by a
third party of property leased to the Company or any Subsidiaries under a lease
which is not in the nature of a conditional sale or title retention agreement.
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"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
financial condition, operating results, assets or operations of the Company and
its Subsidiaries taken as a whole.
"MATERIAL AGREEMENTS" means those contracts, agreements and leases to
which the Company or any Subsidiary is a party which are required to be listed
on Schedule 3(k) hereto.
"PERMITTED LIENS" means:
(i) tax liens with respect to taxes not yet due and payable or
which are being diligently contested in good faith by appropriate
proceedings and for which appropriate reserves have been established in
accordance with generally accepted accounting principles, consistently
applied;
(ii) interests or title of a lessor as lessor under any lease
disclosed in writing to the Investor;
(iii) mechanics', materialmen's, contractors', carriers',
warehousemen's or repairmen's liens or encumbrances or any similar lien or
restriction, if the underlying obligations are not overdue for a period of
more than 60 days;
(iv) deposits made in the ordinary course of business to secure
contractual or other obligations of the Company if the underlying
obligations are not overdue for a period of more than 60 days;
(v) easements, rights-of-way, restrictions and other similar
charges and encumbrances on real property not materially interfering with
the conduct of the business of the Company or any of its Subsidiaries or
materially detracting from the value or use and enjoyment of its real
property;
(vi) other liens in existence on the date hereof which are
described in the Schedules to this Agreement; and
(vii) other Liens which do materially interfere with the
operations of the Company and its Subsidiaries or the value and use and
enjoyment of their properties and assets.
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"PERSON" means any individual, partnership, corporation, association,
joint stock company, trust, joint venture, unincorporated organization or
governmental entity or department, agency or political subdivision thereof.
"PURCHASE PRICE" shall have the meaning set forth in Section 2(a).
"RECAPITALIZATION TRANSACTIONS" shall have the meaning set forth in
the Recitals.
"SBCS" shall have the meaning set forth in the Recitals.
"SBMS" shall have the meaning set forth in the Recitals.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
"SERIES D PREFERRED STOCK" means the Series D Convertible
Participating Preferred Stock, par value $.01 per share, of the Company, having
the rights and preferences set forth in Exhibit A hereto.
"STOCKHOLDERS' AGREEMENT" shall have the meaning set forth in the
Recitals.
"SUBSEQUENT FINANCIAL INFORMATION" shall have the meaning set forth in
Section 3(e).
"SUBSIDIARY" of any specified person or entity means a corporation or
other entity of which the majority of the voting power of the equity securities
or other equity interests is owned, directly or indirectly, by such specified
person or entity or any Subsidiary of such specified person or entity.
"TAX RETURN" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
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"TAX" or "TAXES" means federal, state, county, local, foreign or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"TECHNICAL SERVICES AGREEMENT" shall have the meaning set forth in the
Recitals.
"TRANSACTION DOCUMENTS" means this Agreement, the Stockholders'
Agreement, the Voice/Data Services Agreement, the Technical Services Agreement,
the Warrant Certificate, the Escrow Agreement, the agreements relating to the
Recapitalization Transactions and each other agreement contemplated by any of
the foregoing.
"WARRANT CERTIFICATE" shall have the meaning set forth in the
Recitals.
"WARRANTS" shall mean the warrants to purchase up to an aggregate of
three million shares of Common Stock at an exercise price of $14 per share and
two million shares of Common Stock at an exercise price of $18 per share,
evidenced by the Warrant Certificate issued to the Investor.
1.2 OTHER TERMS. Other terms may be defined elsewhere in the text of
this Agreement and, unless otherwise indicated, shall have such meaning
indicated throughout this Agreement.
1.3 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof", "herein",
and "hereunder" and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement.
(b) The terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States Dollars.
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SECTION 2. ISSUANCE AND SALE OF SERIES D PREFERRED STOCK.
(a) Immediately upon the execution and delivery of this Agreement,
(i) the Company will issue and sell to the Investor 1,000 shares of Series D
Preferred Stock and will deliver to the Investor the certificate(s) for such
shares and (ii) the Investor will purchase such shares from the Company for
consideration consisting of $20,000,000 (the "PURCHASE PRICE") and will pay the
Purchase Price by certified check to the Company, which shall immediately
thereafter endorse over to the Escrow Agent such certified check to be held
pursuant to the terms of the Escrow Agreement. Payment of the Escrow Fund to
the Company or return of the Escrow Fund to Investor shall be made pursuant to
and in accordance with the terms of the Escrow Agreement.
(b) In the event that the Antitrust Authorization Condition (as
hereinafter defined) is satisfied prior to or on December 31, 1996 and a
Governmental Condition (as hereinafter defined) shall not exist at the time the
Antitrust Authorization Condition is satisfied, the Investor shall take all
action required in order to cause the Escrow Agent promptly to deliver the
Escrow Fund to the Company. In the event that the Antitrust Authorization
Condition is not satisfied as of December 31, 1996 (other than as a result of
the failure on the part of the Investor to comply with its obligations under
Section 5(f) hereof) or a Governmental Condition shall exist at such time, the
Investor shall be entitled to elect, by written notice to be delivered to the
Company prior to or on January 31, 1997, whether the Escrow Fund shall be paid
to the Company or returned to the Investor. If the Investor elects to have the
Escrow Fund returned to the Investor, the Company shall take all action required
in order to cause the Escrow Agent promptly to deliver the Escrow Fund to the
Investor. Both parties hereto shall execute the certificate contemplated by
Section 2.1(b) of the Escrow Agreement. As used herein, the term "Antitrust
Authorization Condition" shall mean the condition to the obligation of the
Investor to cause the Escrow Fund to be delivered to the Company to the effect
that the waiting period applicable under the HSR Act to the issuance to the
Investor of shares of Class B Common Stock upon conversion of the shares of
Series D Preferred Stock shall have expired or early termination shall have been
granted with respect thereto. As used herein "Governmental Condition" shall
mean that any governmental or regulatory authority, agency, commission, body,
court or other governmental entity has enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins, or otherwise prohibits consummation of the transactions
contemplated by the Purchase Agreement (collectively, an "ORDER"), or that any
proceeding seeking an Order is pending.
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(c) In the event that the Escrow Fund is released to the Investor
pursuant to subsection (b) above, this Agreement shall thereafter become void
and have no effect, and no party hereto shall have any liability to the other
party hereto or their respective Affiliates, directors, officers or employees by
virtue of the provisions of this Agreement or in connection with the
transactions contemplated hereby, except for the obligations of the parties
hereto contained in Sections 7(a) and 7(b) hereof, and except that nothing
herein will relieve any party from liability for any breach of Section 5(f)
hereof prior to such termination, and except that the Investor shall be
obligated to promptly deliver the shares of Series D Preferred Stock purchased
hereunder and return any dividends received during the period which it held such
shares to the Company.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF COMPANY.
As a material inducement to the Investor to enter into this Agreement
and purchase the Series D Preferred Stock hereunder, the Company hereby
represents and warrants that:
(a) ORGANIZATION; CORPORATE POWER. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business in every jurisdiction in which it is
required to be qualified, except where the failure to so qualify has not had and
would not reasonably be expected to have a Material Adverse Effect. The Company
possesses all requisite corporate power and authority and all licenses, permits
and authorizations necessary to own and operate its properties, to carry on the
Business and to enter into, and perform its obligations under the Transaction
Documents (except (i) in the case of licenses, permits and authorizations
necessary for the Company to own and operate its property and carry on the
Business, where the failure to possess such licenses, permits and authorizations
has not had and is not reasonably expected to have a Material Adverse Effect and
(ii) in the case of licenses, permits and authorizations necessary for the
Company to perform its obligations under the Transaction Documents, for the
authorizations and related actions and filings that are described in Section
5(e) and (f) or are required under the Securities Act or state securities or
"blue sky" laws in order for the Company to fulfill its obligations under
Section 5(d) and any other authorizations if the failure to obtain such
authorizations would not reasonably be expected to have a Material Adverse
Effect or prejudice in any material respect the rights of the Investor under any
of the Transaction Documents). Schedule 3(a) hereof sets forth correct and
complete copies of the Company's and its Subsidiaries' charter documents and
bylaws reflecting all amendments made thereto at any time prior to the date of
this Agreement.
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(b) CAPITAL STOCK AND RELATED MATTERS.
(i) The authorized capital stock of the Company consists of
50,000,000 shares of Common Stock, of which 22,069,871 shares are outstanding as
of the date hereof after giving effect to the Recapitalization Transactions, and
20,000 shares of preferred stock, par value $0.01 per share, of which 1,000
shares have been designated as Series D Preferred Stock, none of which were
outstanding prior to the date hereof. Except as set forth on Schedule 3(b) or
in the written notice to the Investor referred to therein, neither the Company
nor any Subsidiary has outstanding any stock or securities convertible or
exchangeable for any shares of its capital stock or containing any profit
participation features, nor does it have outstanding any rights, options or
warrants to subscribe for or to purchase its capital stock or any stock or
securities convertible into or exchangeable for its capital stock or any stock
appreciation rights or phantom stock plans, nor has it reserved any shares of
capital stock (other than as described in Section 3(b)(iii) hereof or as
contemplated by any of the Transaction Documents) for issuance upon exercise or
conversion of any rights, options or warrants to subscribe for or to purchase
its capital stock or any stock or securities convertible into or exchangeable
for its capital stock. Neither the Company nor any Subsidiary is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or any warrants, options or other rights
to acquire its capital stock, except as set forth on Schedule 3(b) hereof. All
of the outstanding shares of the Company's capital stock are, and the shares of
Series D Preferred Stock to be issued hereunder shall be upon such issuance and
receipt by the Company of payment therefor in accordance with Section 2(a), duly
authorized, validly issued, fully paid and nonassessable.
(ii) There are no statutory stockholders preemptive rights or
similar contractual rights to which the Company is subject or, except as set
forth in the Stockholders' Agreement, rights of refusal to which the Company is
subject with respect to the issuance of capital stock of the Company. Except as
set forth on Schedule 3(b) hereto, (A) to its knowledge, the Company has not
violated any applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its capital stock, and (B) the offer, sale and
issuance of the Series D Preferred Stock hereunder do not require registration
under the Securities Act or any applicable state securities laws or "blue sky"
laws, assuming the Investor's representation in Section 4(b) is true in all
respects. There are no agreements to which the Company or, to the knowledge of
the officers of the Company, any holders of the capital stock of the Company is
a party with respect to the voting or transfer of the Company's capital stock
except for the Stockholders' Agreement.
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(iii) The Company has authorized the issuance and sale to the
Investor of the number of shares of Series D Preferred Stock being sold to the
Investor pursuant to Section 2 hereof. The Series D Preferred Stock will have
the terms, rights and preferences set forth in Exhibit A hereto. The Company
has filed with the Office of the Secretary of State of the State of Delaware a
Certificate of Designation in the form set forth in Exhibit A hereto. The board
of directors of the Company has adopted a resolution declaring the advisability
of the amendment to the Company's certificate of incorporation set forth on
Exhibit B hereto (the "CERTIFICATE OF AMENDMENT") and directing that such
amendment be considered by the stockholders of the Company. The board of
directors of the Company has adopted an amendment to the Company's By-laws as
set forth on Exhibit B to the Stockholders' Agreement (the "BY-LAW AMENDMENT").
The board of directors of the Company has reserved 6,600,000 shares of Common
Stock for issuance upon conversion of the Series D Preferred Stock and exercise
of the Warrants.
(iv) According to the Company's share register, the stockholders
listed on Appendix D to the Stockholders' Agreement own the shares of Common
Stock listed on such appendix for which they have granted irrevocable proxies to
the Investor and signed irrevocable written consents authorizing the Certificate
of Amendment and the issuance of Common Stock in connection with the exercise of
any Warrants.
(c) SUBSIDIARIES; INVESTMENTS. Schedule 3(c) hereto correctly sets
forth the name of each Subsidiary, the jurisdiction of its incorporation and the
Persons owning the outstanding capital stock of such Subsidiary. Each
Subsidiary is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, possesses all requisite corporate
power and authority and, except as set forth in Schedule 3(c) and with such
other exceptions as have not had and are not reasonably expected to have a
Material Adverse Effect, all licenses, permits and authorizations necessary to
own its properties and to carry on its businesses as now being conducted and,
other than as set forth on Schedule 3(c), is qualified to do business in every
jurisdiction in which it is required to be qualified, except where the failure
to so qualify has not had and is not reasonably expected to have a Material
Adverse Effect. All of the outstanding shares of capital stock of each
Subsidiary are duly authorized, validly issued, fully paid and nonassessable,
and all such shares are owned by the Company or another Subsidiary free and
clear of any Lien and not subject to any option, right or warrant to purchase
any such shares. Except as set forth on Schedule 3(c), no Subsidiary has
outstanding any rights, warrants or options to subscribe for or to purchase its
capital stock or any stock or securities convertible into or exchangeable for
any shares of its capital stock, and neither the Company nor any Subsidiary owns
or holds the right to acquire any shares of stock or any other security or
interest in any other Person.
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(d) AUTHORIZATION; NO BREACH. The execution, delivery and
performance of the Transaction Documents by the Company have been duly
authorized by the Company. Each of the Transaction Documents has been duly
executed by the Company and constitutes a valid and legally binding obligation
of the Company, enforceable in accordance with its terms subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles. Except as set forth on Schedule 3(d) hereto, the execution
and delivery of the Transaction Documents, and the fulfillment of and compliance
with the respective terms hereof and thereof by the Company and each Subsidiary
that is a party thereto, do not and shall not (i) conflict with or result in a
breach of the terms, conditions or provisions of, (ii) constitute a default
under, (iii) result in the creation of any Lien upon the Company's or any
Subsidiary's capital stock or assets pursuant to, (iv) give any third party the
right to modify, terminate or accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption or
other action by or notice or declaration to, or filing with, any court or
administrative or governmental body or agency or other Person pursuant to, the
charter or bylaws of the Company or any Subsidiary, or any law, statute, rule,
regulation, order, judgment, decree, agreement or instrument to which the
Company or any Subsidiary is subject, except for (A) any such conflict, breach,
default, Lien or right of modification, termination or acceleration (other than
any of the foregoing arising pursuant to the charter or bylaws of the Company)
which would not reasonably be expected to have a Material Adverse Effect or
prejudice in any material respect the rights of the Investor under any of the
Transaction Documents and (B) the requirement to obtain any authorizations or
take or make any related actions and filings that are described in Section 5(e)
and (f) or are required under the Securities Act or state securities or "blue
sky" laws in order for the Company to fulfill its obligations under Section 5(d)
or to obtain any other authorization, consent, approval, action, notice,
declaration or filing if the failure to do so would not reasonably be expected
to have a Material Adverse Effect or prejudice in any material respect the
rights of the Investor under any of the Transaction Documents.
(e) COMPANY REPORTS; FINANCIAL STATEMENTS. The Company has delivered
or made available to the Investor (i) each registration statement, report, proxy
statement or information statement filed with the SEC since December 31, 1995
(the "AUDIT DATE"), including the Company's Annual Report on Form 10-K for the
year ended December 31, 1995 in the form (including exhibits, annexes and any
amendments thereto) filed with the SEC (collectively, the "COMPANY REPORTS") and
(ii) an unaudited balance sheet as of the end of the month for each month
subsequent to the date of the latest Company Report through and including the
month ended July 31, 1996 which included a consolidated balance sheet and the
related consolidated statements of income and of
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changes in financial position for the month(s) then ended (collectively, the
"SUBSEQUENT FINANCIAL INFORMATION," and the latest of such unaudited
consolidated balance sheets included therein being referred to as the "LATEST
BALANCE SHEET"). As of their respective dates, the Company Reports did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not
misleading. Each of the consolidated balance sheets included in or
incorporated by reference into the Company Reports (including the related
notes and schedules) and each of the unaudited balance sheets included in the
Subsequent Financial Information fairly presents in all material respects the
consolidated financial position of the Company and its Subsidiaries as of its
date and each of the consolidated statements of income and of changes in
financial position included in or incorporated by reference into the Company
Reports and the Subsequent Financial Information (including any related notes
and schedules) fairly presents in all material respects the results of
operations, retained earnings and changes in financial position, as the case
may be, of the Company and its Subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to the absence of notes and
normal year-end audit adjustments), in each case in accordance with generally
accepted accounting principles ("GAAP") consistently applied during the
periods involved, except as may be noted therein.
(f) ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
Schedule 3(f) hereto or any liabilities disclosed on other schedules to this
Agreement, the Company and its Subsidiaries do not have any material obligation
or liability (whether accrued, absolute, contingent, unliquidated or otherwise,
whether or not known to the Company or any Subsidiary, whether due or to become
due and regardless of when or whether asserted) other than: (i) liabilities set
forth on the financial statements included in the Company Reports and the
Subsequent Financial Information, (ii) obligations and liabilities incurred
after the date of the Latest Balance Sheet in the ordinary course of business,
(iii) liabilities and obligations under contracts, agreements and instruments
set forth on the Schedule 3(k) hereto (none of which is a liability resulting
from breach of contract, breach of warranty, tort, infringement, claim or
lawsuit), (iv) liabilities and obligations under contracts, agreements and
instruments not required to be set forth on Schedule 3(k) hereto (none of which
is a liability resulting from breach of contract, breach of warranty, tort,
infringement, claim or lawsuit) and (v) other liabilities and obligations
expressly disclosed in the other Schedules to this Agreement.
(g) NO MATERIAL ADVERSE CHANGE. Except as disclosed in the Company
Reports or the Subsequent Financial Information or as set forth on Schedule 3(g)
hereto, since the Audit Date, there has been no material adverse change in the
financial condition,
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operating results, assets, operations, employee relations or customer or
supplier relations of the Company or any of its Subsidiaries.
(h) ABSENCE OF CERTAIN DEVELOPMENTS.
(i) Except as expressly contemplated by the Transaction
Documents or as disclosed in the Company Reports or the Subsequent Financial
Information or as set forth on Schedule 3(h) hereto since the Audit Date,
neither the Company nor any Subsidiary of the Company has:
(A) issued any notes, bonds or other debt securities or any
capital stock or other equity securities or any securities
convertible, exchangeable or exercisable into any capital stock or
other equity securities (other than employee stock options and shares
of Common Stock issued upon the exercise thereof);
(B) borrowed any amount or incurred or become subject to any
liabilities, except liabilities incurred in the ordinary course of
business and liabilities under contracts entered into in the ordinary
course of business;
(C) discharged or satisfied any material Lien or paid any
material obligation or liability, other than in the ordinary course of
business;
(D) declared or made any payment or distribution of cash or
other property to its stockholders with respect to its capital stock
or other equity securities or purchased or redeemed any shares of its
capital stock or other equity securities (including, without
limitation, any warrants, options or other rights to acquire its
capital stock or other equity securities);
(E) mortgaged or pledged any of its properties or assets or
subjected them to any Lien, except Permitted Liens and Liens which
have been discharged or satisfied prior to the date hereof;
(F) sold, assigned or transferred any material tangible assets,
except in the ordinary course of business;
(G) sold, assigned or transferred any material trademarks,
service marks, trade names, corporate names, copyrights or copyright
registrations, trade secrets or other intangible assets, or disclosed
any proprietary
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confidential information to any Person (other than any such
disclosure in the ordinary conduct of business operations or which
disclosure was subject to a confidentiality agreement, which in either
case does not have a Material Adverse Effect);
(H) suffered any extraordinary losses, waived any rights of
material value or canceled any material debts or claims, whether or
not in the ordinary course of business or consistent with past
practice;
(I) made capital expenditures or commitments therefor that
aggregate in excess of $100,000, except in accordance with the capital
budget for the current fiscal year furnished to the Investor;
(J) made any loans or advances in excess of $100,000 in the
aggregate to, guarantees for the benefit of, or any investments (other
than temporary cash investments in the ordinary course of business)
in, any Persons;
(K) made any charitable contributions or pledges which in the
aggregate exceed $50,000;
(L) suffered any damage, destruction or casualty loss not
covered by insurance which in the aggregate exceed $40,000;
(M) entered into any other material transaction or agreement
other than in the ordinary course of business;
(N) changed its accounting principles, practices or methods,
except as required by GAAP;
(O) suffered any loss, or threatened loss, of any supplier or
customer or group of related suppliers or customers which is
reasonably expected to have a Material Adverse Effect;
(P) suffered any labor dispute, other than routine matters;
(Q) except for increases or amendments in the ordinary and usual
course of business consistent with past practice or as required by
law, increased the compensation payable or to become payable by the
Company
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or any Subsidiary to any of its directors, officers or employees or
increased the benefits under, or adoption of, any bonus, insurance,
pension or other employee benefit plan, payment or arrangement, for or
with any such directors, officers or employees (other than pursuant to
the terms of any such plan or arrangement); or
(R) otherwise operated other than in the ordinary course in a
manner that has had or could be reasonably expected to have a Material
Adverse Effect.
(ii) Neither the Company nor its Subsidiaries has at any time
made any payments for political contributions or made any bribes, kickback
payments or other illegal payments. No officer, director, employee or agent of
the Company or any of its Subsidiaries has been or is authorized to make or
receive, and the Company does not know of any such Person making or receiving,
any bribe, kickback or other illegal payment.
(i) ASSETS. Except as set forth on Schedule 3(i) hereto, the Company
and each Subsidiary have good and valid title to, or a valid leasehold interest
in, the properties and assets used by them, located on their premises or
disclosed on the financial statements included in the Company Reports or the
Subsequent Financial Information, free and clear of all Liens, except for
Permitted Liens. Except as described on Schedule 3(i), the Company's and each
Subsidiary's buildings, equipment and other tangible assets are in good
operating condition in all material respects (normal wear and tear excepted).
(j) TAX MATTERS.
(i) Except as set forth in Schedule 3(j) hereto, the Company and
each of its Subsidiaries and each Affiliated Group have timely filed all U.S.
federal income Tax Returns, and all other material Tax Returns, which they are
required to file under applicable laws and regulations; all such filed Tax
Returns are complete and correct in all material respects and have been prepared
in compliance with all applicable laws and regulations; the Company and each of
its Subsidiaries and each Affiliated Group have timely paid all material Taxes
due and owing by them (whether or not such Taxes are required to be shown on a
Tax Return) and have withheld and paid over to the appropriate taxing authority
all Taxes which they are required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third party, except where the amounts
that have not been withheld and paid over do not, in the aggregate, exceed
$20,000; neither the Company nor any Subsidiary of the Company nor any
Affiliated Group has waived any statute of limitations with respect to any Taxes
or agreed to any extension of time with
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respect to any Tax assessment or deficiency; the most recent
consolidated financial statements contained in the Company Reports
reflect an adequate reserve for all material Taxes payable by the
Company and each of its Subsidiaries for all taxable periods and
portions thereof through the date of such financial statements; the
accrual for Taxes set forth on the Latest Balance Sheet (excluding any
amount recorded which is attributable solely to timing differences
between book and Tax income) would be adequate to pay all material Tax
liabilities of the Company and its Subsidiaries if their current tax
year-were treated as ending on the Latest Balance Sheet; since the date
of the Latest Balance Sheet, neither the Company nor any of its
Subsidiaries has incurred any liability for Taxes other than in the
ordinary course of business; no foreign, federal, state or local tax
audits or administrative or judicial proceedings are pending or being
conducted with respect to the Company, any of its Subsidiaries or any
Affiliated Group, and no written notice from any foreign, federal, state
or local taxing authority indicating an intent to open or resume an
audit or other review has been received by the Company, any of its
Subsidiaries or any member of an Affiliated Group; and there are no
material unresolved questions or claims of which the Company knows or
has reason to know concerning the Company's or any of its Subsidiaries'
or any Affiliated Group's Tax liability. To the Company's knowledge, no
claim has ever been made by an authority in a jurisdiction where either
the Company, any of its Subsidiaries or any member of an Affiliated
Group does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction.
(ii) Neither the Company nor any of its Subsidiaries has made
an election under IRC Section 341(f). Neither the Company nor any of its
Subsidiaries is liable for the Taxes of another Person that is not a
Subsidiary in a material amount under (A) Treas. Reg. Section 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor or (C) by contract or indemnity. Neither the Company nor any of
its Subsidiaries is a party to any tax sharing agreement. The Company, each
of its Subsidiaries and each Affiliated Group have adequately disclosed on
their federal income Tax Returns or in a statement attached thereto any
position taken for which substantial authority (within the meaning of IRC
Section 6662(d)(2)(B)(i)) did not exist at the time the return was filed.
Neither the Company, nor any of its Subsidiaries has made any payment, is
obligated to make payment or is a party to an agreement that could obligate
it to make any payment that would constitute a "parachute payment" to a
"disqualified individual" as those terms are defined in IRC Section 280G
(determined without regard to whether such payment is reasonable compensation
for services rendered or to be rendered in the future).
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(k) CONTRACTS AND COMMITMENTS.
(i) Except as set forth on Schedule 3(k) hereto and except for the
Transaction Documents, neither the Company nor any Subsidiary is a party to or
bound by any written or oral:
(A) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or
arrangement, or any collective bargaining agreement or any other
contract with any labor union, or severance agreements, programs,
policies or arrangements;
(B) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or
other basis (other than an at-will employment arrangement) providing
annual compensation in excess of $75,000;
(C) any contract relating to loans to officers, directors or
Affiliates; or contract under which the Company or any Subsidiary has
advanced or loaned any other Person amounts in the aggregate exceeding
$50,000, other than down payments and prepayments under the Company's
or such Subsidiary's ordinary course operating agreements;
(D) agreement or indenture relating to borrowed money or other
indebtedness or the mortgaging, pledging or otherwise placing a Lien
(other than a Permitted Lien) on any assets of the Company or its
Subsidiaries;
(E) guarantee of any material obligation;
(F) lease or agreement under which the Company, or any of its
Subsidiaries is lessee of or holds or operates any property, real or
personal, owned by any other party, except for any lease of real or
personal property under which the aggregate annual rental payments do
not exceed $100,000;
(G) lease or agreement under which the Company or any of its
Subsidiaries is lessor of or permits any third party to hold or
operate, any property, real or personal, owned or controlled by the
Company or any
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Subsidiary, except for leases of real or personal property under which
the aggregate annual rental payments do not exceed $100,000;
(H) contract or group of related contracts with the same party
or group of affiliated parties the performance of which involves the
payment or receipt of consideration in any year in an amount in excess
of $150,000;
(I) assignment, license (other than licenses included as a
standard provision in service agreements or other contracts with
customers of the Company) or indemnification or agreement with respect
to any material Intellectual Property;
(J) warranty agreement with respect to its services rendered or
its products sold or leased, except any agreement entered into in the
ordinary course of business;
(K) agreement under which it has granted any Person any
registration rights (including, without limitation, demand and
piggyback registration rights);
(L) any material sales, distribution or franchise agreement not
entered into in the ordinary course of business;
(M) contract or agreement prohibiting it from freely engaging in
any business or competing anywhere in the world; or
(N) any other agreement which involves a total consideration in
excess of $250,000 or is otherwise material to its operations and
business prospects, except for any agreement which is terminable by
the Company or any Subsidiary upon less than 60 days' notice without
penalty.
(ii) All of the contracts, agreements and instruments required to
be set forth on Schedule 3(k) are valid and legally binding obligations of the
Company or its Subsidiaries, as the case may be, and, to the knowledge of the
Company, the other parties thereto, enforceable in accordance with their terms
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles. Except as set forth on
Schedule 3(k), the Company and each Subsidiary has performed in all material
respects all obligations required to be performed by them under the contracts,
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agreements and instruments required to be set forth on Schedule 3(k) and are not
in material default under or in material breach of any material contract,
agreement or instrument required to be listed on Schedule 3(k) or in receipt of
any claim of such default or breach; no event has occurred which with the
passage of time or the giving of notice or both would result in a material
default, material breach or event of material noncompliance by the Company or
any of its Subsidiaries under any contract, agreement or instrument required to
be listed on Schedule 3(k); except as previously disclosed in writing to the
Investor or its representatives, neither the Company nor any Subsidiary has any
present expectation or intention of not fully performing all its material
obligations under the contracts, agreements and instruments required to be
listed on Schedule 3(k); neither the Company nor any Subsidiary has knowledge of
any material breach or anticipated material breach by the other parties to any
contract, agreement or instrument required to be listed on Schedule 3(k);
neither the Company nor any Subsidiary has any written notice or other
communication to the effect that any other party to any contract, agreement or
instrument required to be listed on Schedule 3(k) intends to terminate such
contract, agreement or instrument prior to the expiration of the maximum stated
term of such contract, agreement or instrument.
(iii) A true and correct copy of each of the written instruments,
plans, contracts and agreements and an accurate description of each of the oral
arrangements, contracts and agreements which are referred to on Schedule 3(k),
together with all amendments, waivers or other changes thereto has been supplied
or made available to the Investor.
(l) INTELLECTUAL PROPERTY RIGHTS.
(i) Schedule 3(l) hereto contains a complete and accurate list
of all (A) registered Intellectual Property Rights owned or used by the Company
or any Subsidiary, (B) applications for registrations of Intellectual Property
Rights filed by the Company or any Subsidiary, (C) unregistered trade names and
corporate names owned or used by the Company or any Subsidiary, and (D) material
unregistered trademarks and service marks owned or used by the Company or any
Subsidiary, in each case which are material to the financial condition,
operating results, assets or operations of the Company or any of its
Subsidiaries. Schedule 3(l) also contains a complete and accurate list of all
licenses (other than licenses included as a standard provision in service
agreements or other contracts with customers of the Company) granted by the
Company or any of its Subsidiaries to any third party with respect to any
material Intellectual Property Rights and all licenses granted by any third
party to the Company or any of its Subsidiaries with respect to any material
Intellectual Property Rights, in each case, identifying the subject
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Intellectual Property Rights. Except as set forth on Schedule 3(l), the
Company or one of its Subsidiaries owns all right, title and interest to, or
has the right to use pursuant to a valid license, all Intellectual Property
Rights identified on such schedule. The Company and its Subsidiaries have
taken all actions which in the judgment of the Company's management are
reasonably necessary to maintain and protect the Intellectual Property Rights
which they own, subject to such exceptions as have not had and are not
reasonably expected to have a Material Adverse Effect.
(ii) Except as set forth on Schedule 3(l), (A) there have been no
claims made against the Company or any of its Subsidiaries in writing asserting
the invalidity, misuse or unenforceability of any Intellectual Property Rights
listed on such schedule, (B) neither the Company nor any of its Subsidiaries has
received any notices of any infringement or misappropriation by, or conflict
with, any third party with respect to such Intellectual Property Rights
(including, without limitation, any demand or request that the Company or any of
its Subsidiaries license any rights from a third party), (C) to the Company's
knowledge, the conduct of the Business has not infringed, misappropriated or
conflicted with and does not infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons, and (D) to the Company's
knowledge, the Intellectual Property Rights owned by or licensed to the Company
or any Subsidiary have not been infringed, misappropriated or conflicted by
other Persons, except in the case of the clause (B), (C) or (D) above for any
infringement, misappropriation or conflict that has not had and is not
reasonably expected to have a Material Adverse Effect. Except as set forth in
Schedule 3(l), the transactions contemplated by the Transaction Documents shall
have no material adverse affect on the Company's or any Subsidiary's right,
title and interest in and to the Intellectual Property Rights listed on such
schedule.
(m) LITIGATION, ETC. Except as set forth on Schedule 3(m) hereto,
there are no actions, suits, proceedings, orders, investigations or claims
pending (other than any such actions, suits, proceedings, orders, investigations
and claims which may be pending but of which neither the Company, its
Subsidiaries nor their respective representatives have received notice) or, to
the Company's knowledge, threatened (or pending and of which neither the
Company, its Subsidiaries nor their respective representatives have received
notice) against the Company or any of its Subsidiaries (or to the Company's
knowledge, pending or threatened against any of the officers or directors of the
Company and its Subsidiaries) at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality
which seek to enjoin or prevent the consummation of or otherwise relate
specifically to the transactions contemplated by the Transaction Documents or
which have had or are reasonably expected to have a Material Adverse Effect;
neither the Company nor any of its subsidiaries is subject to any arbitration
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proceedings under collective bargaining agreements or otherwise or, to the
Company's knowledge, any governmental investigations or inquiries (including,
without limitation, inquiries as to the qualification to hold or receive any
license or permit) which have had or are reasonably expected to have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries is subject to
any judgment, order or decree of any court or other governmental agency that
requires or prohibits any conduct on the part of the Company or any of its
Subsidiaries that affects the Business in any material respect.
(n) BROKERAGE. Except as set forth on Schedule 3(n) hereto, there
are no claims for brokerage commissions, finders' fees or similar compensation
in connection with the transactions contemplated by the Transaction Documents
for which the Investor will have any liability or responsibility based on any
arrangement or agreement binding upon the Company or any of its Subsidiaries.
(o) INSURANCE. Schedule 3(o) hereto contains a summary of the amount
and scope of coverage provided under (but not of the exceptions to) each
insurance policy maintained by the Company and its Subsidiaries with respect to
its properties, assets and businesses, and each such policy in full force and
effect. Neither the Company nor any Subsidiary is in default in any material
respect with respect to its obligations under any insurance policy maintained by
it. To the knowledge of the Company, the insurance coverage of the Company and
its Subsidiaries is customary for corporations of similar size engaged in
similar lines of business. Except as set forth on Schedule 3(o), the Company
and its Subsidiaries do not have any self-insurance programs, and the reserves
set forth on the financial statements included in the Company Reports and the
Latest Balance Sheet are adequate to cover all reasonably anticipated
liabilities in respect of such programs.
(p) EMPLOYEES. The Company has not received any oral or written
notice or other assertion that any executive or key employee of the Company or
any Subsidiary or any significant group of employees of the Company or any
Subsidiary has any plans to terminate employment with the Company or any
Subsidiary. The Company and its Subsidiaries have complied in all material
respects with all laws relating to the employment of labor (including, without
limitation, provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes), and
the Company has no knowledge that it or any Subsidiary has any material labor
relations problems (including, without limitation, any union organization
activities, threatened or actual strikes or work stoppages or material
grievances). Except as set forth on Schedule 3(p) hereto, to the Company's
knowledge, none of its or its Subsidiaries' employees is subject to any
noncompete, nondisclosure, confidentiality, employment, consulting or similar
agreements relating to, affecting or in conflict with the present or
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proposed business activities of the Company and its Subsidiaries, except for
agreements between the Company and its employees.
(q) EMPLOYEE BENEFITS MATTERS. Except as set forth on Schedule 3(k),
neither the Company nor any of its Subsidiaries has ever maintained, sponsored
or contributed to, or been obligated to contribute to, any employee pension
benefit plan as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and neither the Company nor any of
its Subsidiaries has incurred any liability under any employee pension benefit
plan maintained, sponsored or contributed to by any ERISA Affiliate. All other
employee benefit plans (as defined in Section 3(3) of ERISA) and all benefits
arrangements that have been maintained, sponsored or contributed to by the
Company or any of its Subsidiaries or any ERISA Affiliate have been maintained
in all material respects in compliance with their terms and, both as to form and
operation, with the requirements prescribed by any and all statutes, orders,
rules and regulations which are applicable to such plans, including but not
limited to ERISA and the Code. Neither the Company nor any of its Subsidiaries
nor any ERISA Affiliate has any present or future obligations to make any
payment to or with respect to any present or former employee of the Company or
its Subsidiaries or any ERISA Affiliate pursuant to any retiree medical or
retiree life benefit plan. Each welfare plan as defined in Section 3(1) of
ERISA has been operated in compliance with the applicable provisions of Part 6
of Title I of ERISA and Sections 162(k) and 4980B of the Code at all times. A
schedule of employee benefit plans is set forth on Schedule 3(k) hereto.
(r) COMPLIANCE WITH LAWS. Neither the Company, nor any of its
Subsidiaries has violated any law or any governmental rule, order or regulation
or requirement which violation through the date hereof has had or would
reasonably be expected to have a Material Adverse Effect, and neither the
Company nor any Subsidiary has received notice of any such violation. To the
knowledge of the Company, except as set forth in Schedule 3(r), the operation of
the Business by the Company and its Subsidiaries complies and has complied in
all material respects with the Communications Act of 1934, as amended, and the
rules, orders, regulations and other applicable requirements of the Federal
Communications Commission and the public utility commissions of the states in
which the Business is conducted having jurisdiction over the Company and its
Subsidiaries; provided, however, that no representation or warranty is made
regarding the effect of future pronouncements or rulings by any applicable
governmental body.
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(s) ENVIRONMENTAL MATTERS.
(i) (A) The property, assets and operations of the Business are
and have been in material compliance with all applicable Environmental Laws;
(B) there are no Hazardous Materials stored or otherwise located in, on or under
any of the property or assets of the Company or its Subsidiaries, except in
compliance with and as would not be expected to result in liability under any
Environmental Law; and (C) there have been no releases or threatened releases of
Hazardous Materials by the Company or its Subsidiaries in, on or under any
property currently or formerly owned or operated by the Company or its
Subsidiaries.
(ii) To the knowledge of the Company, none of the assets or
operations of the Company or its Subsidiaries is the subject of any federal,
state or local investigation evaluating whether (A) any remedial action is
needed to respond to a release or threatened release of any Hazardous Materials
into the environment or (B) any release or threatened release of any Hazardous
Materials into the environment is in contravention of any Environmental Law.
(iii) Neither the Company, nor any of its Subsidiaries has
received any notice or claim, nor are there pending or, to the knowledge of the
Company, threatened lawsuits or proceedings against them, with respect to
violations of or liability under any Environmental Law or in connection with the
presence of or exposure to any Hazardous Materials in the environment or any
release or threatened release of any Hazardous Materials into the environment.
(iv) Neither the Company, nor its Subsidiaries has any present or
contingent liability in connection which the presence either on or off the
property or assets of the Company or its Subsidiaries of any Hazardous Materials
or any release or threatened release of any Hazardous Materials into the
environment, except for any liability which would not have a Material Adverse
Effect.
(t) AFFILIATED TRANSACTIONS. Except as disclosed in the Company
Reports or as set forth on Schedule 3(t) hereto, no officer, director or
Affiliate of the Company or any Subsidiary or, to the knowledge of the Company,
any individual related by blood, marriage or adoption to any such individual or
any entity in which any such Person or individual owns a greater than 10%
beneficial interest in the Company or any Subsidiary, is a party to any
agreement, contract, commitment or transaction with the Company or any
Subsidiary that is material to the Company or such Subsidiary or has any
material interest in any material property used by the Company or any
Subsidiary.
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
As a material inducement to the Company to enter into this Agreement
and issue and sell the Series D Preferred Stock hereunder, the Investor hereby
represents and warrants that:
(a) EXECUTION; AUTHORIZATION; NO CONTRAVENTION. The Investor has
duly executed and delivered to the Company each Transaction Document to which it
is a party, and each such Transaction Document constitutes a valid and legally
binding obligation of the Investor, enforceable against the Investor in
accordance with its terms subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
The execution, delivery and performance by the Investor of each Transaction
Document to which it is a party and the consummation of the transactions
contemplated thereby: (a) are within the Investor's corporate power and
authority and have been duly authorized by all necessary corporate action on the
part of the Investor; (b) do not and will not conflict with or contravene the
terms of or require any consent, authorization or approval pursuant to the
Investor's certificate of incorporation or bylaws; (c) do not and will not
violate, conflict with or result in any breach or contravention of or require
any consent, authorization, approval, exemption or other action by or notice or
declaration to, or filing with, any court or administrative or governmental body
or agency or other Person pursuant to (i) any material agreement, lease or
contract of such Investor, or (ii) any applicable statute or any rule or
regulation of any governmental authority or any order or decree applicable to
such Investor (other than as required by the HSR Act or Section 271 of the
Communications Act of 1934, as amended by the Telecommunications Act of 1996).
(b) SECURITIES ACT. The Investor is acquiring the Series D Preferred
Stock solely for the purpose of investment and not with a view to, or for sale
in connection with, any distribution thereof in violation of the Securities Act.
The Investor acknowledges that the shares of Series D Preferred Stock are not
registered under the Securities Act or any applicable state securities law, and
that such shares may not be transferred or sold except pursuant to the
registration provisions of such Securities Act or pursuant to an applicable
exemption therefrom and pursuant to state securities laws and regulations as
applicable and are subject to substantial restrictions on transferability under
the terms of the Stockholders' Agreement. The Investor is knowledgeable,
sophisticated and experienced in business and financial matters of the type
contemplated by the Transaction Documents and is able to bear the economic risks
associated with its investment in the Company. The Investor has been afforded
access to information regarding the Company and its Subsidiaries and their
respective financial condition, operating results, properties, liabilities,
operations and
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management sufficient to enable it to evaluate the risks and merits of its
investment in the Company.
(c) BROKERAGE. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by the Transaction Documents for which the Company will have any
liability or responsibility based on any arrangement or agreement binding upon
the Investor.
SECTION 5. COVENANTS.
(a) INSPECTION RIGHTS. The Company shall permit, and cause its
Subsidiaries to permit, the representatives designated by the Investor so long
as (i) the Investor and its Affiliates together beneficially own 1,600,000
shares of Common Stock (including Common Stock issuable upon conversion of
Series D Preferred Stock, Class B Common Stock or other convertible securities
or upon the exercise of any outstanding options, warrants, rights or
obligations, other than the Warrants) or (ii) the representation and warranties
of the Company set forth in Section 3 hereof survive, upon reasonable notice and
during normal business hours, to (x) visit and inspect any of the properties of
the Company and its Subsidiaries, (y) examine the corporate and financial
records of the Company and its Subsidiaries and to make copies thereof, and (z)
discuss the affairs, finances and accounts of any such corporations with the
directors, officers, key employees and (with the prior consent of the Company,
which will not be unreasonably withheld) independent accountants of the Company
and its Subsidiaries.
(b) CONFIDENTIALITY. The Investor shall hold in confidence all
information and data obtained by it from the Company or its Subsidiaries
(whether in connection with the negotiation of the transactions contemplated by
the Transaction Documents, pursuant to Section 5(a) or otherwise) and shall not
disclose such information to any Person without the prior written consent of the
Company (except that the Investor may disclose such information to those of its
Affiliates, directors, officers and other representatives who require access to
such information in order to enable the Investor to exercise its rights under
the Transaction Documents or for any other proper purpose contemplated thereby
and who agree to be subject to the restrictions set forth in this Section 5(b));
provided, however, that the provisions of this Section 5(b) shall not apply to
any information or data that can be shown (i) to be generally available to the
public through no fault of the Investor or its Affiliates, directors, officers
and other representatives or (ii) to have been lawfully obtained by the Investor
from other sources not subject to a confidentiality obligation to the Company.
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(c) COMPLIANCE WITH AGREEMENTS. The Company shall perform and
observe all of its obligations to each holder of the Series D Preferred Stock
issued hereunder that are set forth in the Transaction Documents, the
Certificate of Amendment and the By-law Amendment.
(d) DEBT OFFERING. The Company shall use its reasonable best efforts
to raise at least $50,000,000 in debt no later than twelve months from the date
hereof which debt securities shall not be convertible into equity securities of
the Company; PROVIDED, FURTHER, that the Company shall not be obligated to
pursue, approve or effectuate any public debt offering which the Board of
Directors of the Company determines in good faith (whether based on prevailing
market conditions or other relevant factors) is not on commercially reasonable
terms or is not in the best interest of the Company and its stockholders.
(e) APPROVAL BY THE COMPANY'S STOCKHOLDERS. (i) Subject to the last
sentence of this subparagraph (i), the Company will take all action necessary in
connection with the irrevocable written consents delivered by the stockholders
listed on Appendix D to the Stockholders' Agreement (including the completion
and mailing of an information statement relating to the approval of the
Certificate of Amendment and the issuance of Common Stock in connection with the
exercise of any Warrants (the "INFORMATION STATEMENT")) in accordance with and
subject to the applicable provisions of the DGCL and the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder and
its certificate of incorporation and bylaws to notify the holders of the
Company's shares as promptly as practicable of the approval of the Certificate
of Amendment and the issuance of Common Stock in connection with the exercise of
any Warrants. The record date for purposes of determining the holders of record
entitled to consent is pursuant to this subparagraph (i) shall be as determined
pursuant to Section 213(b) of the DGCL without any action being taken by the
Company or its board of directors with respect to setting such record date.
Notwithstanding the foregoing and notwithstanding any other provision of this
Agreement to the contrary, to the extent the Company is unable or it becomes
reasonably impractical for the Company, pursuant to the rules and regulations of
the SEC and/or of the Nasdaq National Market to obtain the requisite stockholder
approval for this Agreement, by means of the irrevocable written consents and as
contemplated by this subparagraph, the Company shall and shall be entitled to
seek to obtain such stockholder approval pursuant to subparagraph (ii) below.
(ii) To the extent required as contemplated by the last sentence
of subparagraph (i) above, the Company will take all action necessary (including
the completion and mailing of a proxy statement) in accordance with and subject
to the
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applicable provisions of the DGCL and the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder and its
Certificate of Incorporation and bylaws to convene a meeting of holders of
shares of the Company's Common Stock as promptly as practicable to consider
and vote upon the approval of the Certificate of Amendment and the issuance
of Common Stock in connection with the exercise of any Warrants. To the
extent the Company shall determine it to be necessary or appropriate, in
respect of any such meeting, to solicit proxies in order to obtain the
requisite stockholder approval, such solicitation shall be made in accordance
with Regulation 14A of the SEC. Subject to fiduciary duty requirements of
applicable law, in the event of such a proxy solicitation, the Board of
Directors of the Company shall recommend such approval and the Company shall
use its best efforts to solicit such approval.
(iii) The Information Statement or the proxy statement, as the
case may be, as of the date that it is first mailed to the Company's
stockholders, will not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; PROVIDED, HOWEVER, that the foregoing shall not apply
to the extent that any such untrue statement of a material fact or omission
to state a material fact was made by the Company in reliance upon information
furnished to the Company by the Investor specifically for use in the
Information Statement.
(iv) Neither a preliminary nor a definitive Information Statement
(nor proxy statement) shall be filed, and no amendment or supplement to a
preliminary or definitive Information Statement (nor proxy statement) will be
made by the Company, without consultation with the Investor and its counsel.
The Information Statement shall contain the notices and other information
required by Section 228(d) of the DGCL as applicable.
(f) FILINGS. On the twentieth day following the mailing of the
Information Statement to the Company's stockholders in compliance with
Regulation 14C promulgated under the Securities Exchange Act of 1934, the
Company will file the Certificate of Amendment with the Secretary of State of
the State of Delaware. The Company and the Investor will promptly file with the
FTC and the Antitrust Division a notification and report form in connection with
the transactions contemplated by the Transaction Documents and will promptly
file documentary materials if and when required by the HSR Act in connection
with any of the transactions contemplated by this Agreement and the Transaction
Documents and promptly file any additional information requested as soon as
reasonably practicable after receipt of request thereof. Each of the Company
and the Investor will use their reasonable best efforts to obtain as promptly as
practicable after
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the date hereof early termination or expiration of any waiting period
applicable under the HSR Act to the issuance to the Investor of shares of
common stock upon conversion of the shares of Series D Preferred Stock and
exercise of the Warrants.
(g) RESERVATION OF COMMON STOCK. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of the conversion of the shares of Series D
Preferred Stock, the number of shares of its Common Stock issuable upon the
conversion of such shares of Series D Preferred Stock. All shares of Common
Stock which are so issuable shall, when issued upon the conversion of the Series
D Preferred Stock, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges.
(h) FURTHER ASSURANCES. If at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement or
the Transaction Documents, the proper officers or directors of the Company or
the Investor, as the case may be, shall execute and deliver any further
instruments or documents and take all such necessary action that may reasonably
be requested by the other party.
(i) VOICE AND DATA SERVICES AGREEMENT. Upon receipt of Regulatory
Relief, the Company shall cause HM Corporation promptly, and in no event later
than three days after receipt of Regulatory Relief (as hereinafter defined), to
enter into the Voice and Data Services Agreement (the "Voice/Data Agreement")
with SBCS substantially in the form attached as Exhibit 5(i) to this Agreement.
The Company shall cause HM Corporation to perform its obligations under the
Voice/Data Agreement entered into pursuant to this Section 5(i). HM Corporation
shall provide to SBCS, on a confidential basis, complete monthly call detail
records including, without limitation, information on where calls made by,
through or to HM Corporation originate or terminate by LATA and/or country and
the length of call. As used herein, "HM Corporation" shall mean HighwayMaster
Corporation, a Delaware corporation, and its successors and assigns and any
other subsidiary or other Affiliate controlled by the Company which purchases
Long Distance Service and/or Other Services, as those terms are defined in the
Voice/Data Agreement. "Regulatory Relief" means that SBC Communications, Inc.
or its Affiliates, in their sole judgment, have obtained all necessary federal
and state regulatory approvals to provide landline, interLATA long-distance
service pursuant to the Communications Act of 1934, as amended by The
Telecommunications Act of 1996. This covenant shall survive until the
Voice/Data Agreement is terminated or expires in accordance with its terms.
(j) MOBILE CARRIER. From and after the date of this Agreement, the
Company shall cause HM Corporation to procure cellular services from SBMS as
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HM Corporation's primary carrier in any U.S. market in which SBMS has a
cellular network. Such cellular services will be provided at rates and on
terms and conditions comparable to those in the existing contract between HM
Corporation and SBMS for provision of cellular services (dated originally as
of June 7, 1993 as amended, which has been renewed and remains in effect as
of September 27, 1996), provided that such terms and conditions shall be no
less favorable to HM Corporation than those prevailing in the same market at
the same time. The Company shall cause HM Corporation to enter into and to
perform its obligations under any and all agreements required to effect the
foregoing obligation. This covenant shall survive as long as Sections 3(b)
and 3(c) to the Stockholders' Agreement survive. To the extent that the
foregoing obligation of HM Corporation to treat SBMS as the primary carrier
in any U.S. market in which SBMS has a cellular network would conflict with
an existing agreement for cellular services with another cellular carrier
("Existing Agreement"), the provision of cellular services by SBMS to HM
Corporation shall commence upon the termination of such Existing Agreement.
The Company shall cause all Existing Agreements (to the extent they provide
that a cellular provider other than SBMS will be the primary carrier for HM
Corporation in any market in which SBMS has a cellular network) to terminate
as soon as practicable, but only to the extent that no breach or penalty
results from termination of any such Existing Agreement. In the event that
termination of an Existing Agreement will result in penalties to HM
Corporation, the Company will allow such Existing Agreement to expire in
accordance with its terms and will take no action to renew, continue or
extend such Existing Agreement.
(k) TECHNICAL SERVICES AGREEMENT. The Company shall cause HM
Corporation to perform its obligations under the Technical Services Agreement.
SECTION 6. SURVIVAL AND INDEMNIFICATION.
(a) SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS; KNOWLEDGE OF BREACH; INDEMNIFICATION. Notwithstanding any otherwise
applicable statute of limitations, the representations and warranties of each of
the Investor and the Company, respectively, included or provided for herein
shall survive the execution and delivery of this Agreement until the expiration
of nine months after the receipt by the Investor or the Company, as the case may
be, of audited consolidated financial statements for the other party, as of and
for the year ending December 31, 1996, together with a report thereon by the
other party's independent public accountants PROVIDED, HOWEVER, that any
representation, warranty, covenant or agreement contained in Sections 3(j), 3(n)
and 4(c) shall survive the execution and delivery of this Agreement until the
expiration of the applicable statute of limitations (including any waivers or
extensions thereof) with respect to such matters; provided, however, that the
provisions of this Section 6 shall constitute the
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exclusive remedy on the part of any party hereto in respect of a breach of
the representations and warranties of the other party contained in this
Agreement. The covenants and other agreements contained in this Agreement
shall survive the execution and delivery of this Agreement except that
covenants or agreements with a term specified therein shall terminate at the
end of such term. Investor and the Company shall indemnify each other for
breaches of the foregoing representations, warranties and covenants as to
which the indemnified party has given notice during the periods of survival
set forth above, PROVIDED, THAT, in no event shall the Investor be liable to
the Company or the Company be liable to the Investor, as the case may be,
pursuant to this Section 6(a), for any breach of the representations,
warranties, covenants and agreements included or provided for herein or in
any schedule or certificate or other document delivered pursuant to this
Agreement, unless and until all claims for which damages are recoverable
hereunder by the Investor or the Company, as the case may be, exceed $250,000
(the "DEDUCTIBLE"), in which case the Investor or the Company, as the case
may be, shall be entitled to damages equal to such excess, but not more than
the Purchase Price plus the charges and expenses (including reasonable
attorneys' fees and expenses) incurred by the party sustaining such damages
in connection with this Agreement and the Transaction Documents and the
transactions contemplated hereby and thereby. Any payments pursuant to this
Section 6(a) shall be treated as an adjustment to the Purchase Price for all
Tax purposes. The indemnification provided for by this Section 6(a) shall
apply notwithstanding any investigation made by or on behalf of any party.
(b) INDEMNIFICATION FOR THIRD PARTY CLAIMS; METHOD OF ASSERTING
CLAIMS. (i) The Company on the one hand, or the Investor, on the other hand
(the "INDEMNIFYING PARTY"), shall indemnify respectively the Investor, on the
one hand, or the Company, on the other hand, as the case may be (the
"INDEMNIFIED PARTY"), against and in respect of all losses, damages,
liabilities, costs and expenses (including reasonable attorneys' fees and
expenses incurred in investigating, preparing or defending any claims covered
hereby) sustained or incurred arising out of any claims against the
Indemnified Party by a third party arising out of any breaches of the
Indemnifying Party's representations, warranties, covenants and agreements
set forth in this Agreement. The indemnification provided for by this
Section 6(b) shall apply notwithstanding any investigation made by or on
behalf of any party.
(ii) In the event that an Indemnified Party shall assert a claim for
indemnity under this Section 6(b), the Indemnified Party will promptly after the
receipt of notice of the commencement of any action, investigation, claim,
demand or other proceeding by a third party against such Indemnified Party in
respect of which indemnity may be sought from any Indemnifying Party under this
Section 6, notify the Indemnifying
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Party in writing of the commencement thereof; PROVIDED, that the omission of
the Indemnified Party to so notify such Indemnifying Party of any such action
shall not relieve such Indemnifying Party from any liability which it may
have to such Indemnified Party under this Section 6(b) unless, and only to
the extent that, such omission prejudices the ability of the Indemnifying
Party to defend such action, investigation, claim, demand or other proceeding
or to reduce or mitigate its liability hereunder, whether as a result of the
forfeiture of substantive rights or defenses or otherwise. In case any such
action, claim or other proceeding shall be brought against the Indemnified
Party such Indemnified Party shall notify the applicable Indemnifying Party
of the commencement thereof, the Indemnifying Party shall be entitled to
assume the defense thereof at its own expense, with counsel satisfactory to
such Indemnified Party in its reasonable judgment, PROVIDED that the
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense. Notwithstanding the foregoing, in any action,
claim or proceeding in which both the Indemnifying Party, on the one hand,
and an Indemnified Party, on the other hand, are, or are reasonably likely to
become, a party, such Indemnified Party shall have the right to employ
separate counsel at the Indemnifying Party's expense and to control its own
defense of such action, claim or proceeding if, in the reasonable opinion of
counsel to such Indemnified Party, a conflict or potential conflict exists
between the Indemnifying Party, on the one hand, and such Indemnified Party,
on the other hand, that would prevent the representation of the Indemnified
Party by counsel selected by and subject to the control of the Indemnifying
Party under applicable law or codes of professional responsibility. Each of
the Company and the Investor agrees that it will not, without the prior
written consent of the Indemnified Party, settle, compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding relating to the matters contemplated hereby (if the Indemnified
Party is a party thereto or has been actually threatened to be made a party
thereto) unless such settlement, compromise or consent includes an
unconditional release of the Indemnified Party from all liability arising or
that may arise out of such claim, action or proceeding.
SECTION 7. MISCELLANEOUS.
(a) EXPENSES. The Company shall (i) reimburse the Investor for stamp
and other stock issuance or similar taxes which may be payable in respect of the
execution and delivery of this Agreement or the issuance, delivery or
acquisition of any shares of Series D Preferred Stock to be issued hereunder and
(ii) bear all costs and expenses of printing and mailing the Information
Statement or proxy statement, and any filing and other fees paid to this the SEC
in connection with the filing of such Information Statement, and all costs and
expenses incurred in connection with the convening of a special meeting of the
stockholders of the Company pursuant to Section 5(e)(ii). Except as otherwise
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expressly provided in this Agreement, the parties shall bear their own
respective expenses (including, but not limited to, all compensation and
expenses of counsel, financial advisors, consultants, actuaries and
independent accountants) incurred in connection with this Agreement and the
transactions contemplated hereby and by the Transaction Documents.
(b) PUBLIC DISCLOSURE. Each of the parties to this Agreement hereby
agrees with the other parties hereto that, except as may be required to comply
with the requirements of applicable law or the rules and regulations of each
stock exchange or of the Nasdaq National Market or other automated quotation
system upon which the securities of one of the parties is listed or to which
such securities are admitted for trading, no press release or similar public
announcement or communication will be made or caused to be made concerning the
execution or performance of this Agreement unless specifically approved in
advance by both parties hereto; PROVIDED, HOWEVER, that to the extent that
either party to this Agreement is required by law or the rules and regulations
of any stock exchange or of the Nasdaq National Market or other automated
quotation system upon which the securities of one of the parties is listed or to
which such securities are admitted for trading, to make such a public
disclosure, such public disclosure shall only be made after prior consultation
with the other party to this Agreement.
(c) SUCCESSORS AND ASSIGNS; ASSIGNMENT. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written consent of
the other party hereto, except that the Investor may designate, by written
notice to the Company, an Affiliate to purchase the shares of Series D Preferred
Stock hereunder; provided, however, that no such designation shall relieve the
Investor of its obligations under this Agreement.
(d) REMEDIES. Any Person having any rights under any provision of
this Agreement will be entitled to proceed to enforce such rights specifically,
to recover damages by reason of any breach of any provision of this Agreement
and to exercise all other rights granted by law.
(e) AMENDMENTS AND WAIVERS. This Agreement and any of the terms
contained herein may only be amended or modified by the Company and the Investor
in writing.
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(f) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby.
(g) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to constitute one and the same agreement.
(h) DESCRIPTIVE HEADINGS. The headings of the sections contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not affect the meaning or interpretation of
this Agreement.
(i) GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware without
giving effect to the conflict of laws provisions thereof.
(j) NOTICES. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to the Investor and to the Company at the addresses
indicated below:
IF TO THE INVESTOR, TO: Southwestern Bell Wireless Holdings, Inc.
17330 Preston Road
Suite 100A
Dallas, Texas 75252
Attention: President
Facsimile: (972) 733-2012
and to:
SBC Communications Inc.
175 E. Houston
San Antonio, Texas 78205
Attention: General Attorney, Mergers & Acquisitions
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Facsimile: (210) 351-3488
WITH A COPY TO: Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Janet T. Geldzahler
Facsimile: (212) 558-3588
IF TO THE COMPANY, TO: HighwayMaster Communications, Inc.
16479 Dallas Parkway, Suite 710
Dallas, Texas 75248
Attention: William C. Kennedy, Jr.
Facsimile: (972) 930-7263
WITH A COPY TO: Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201
Attention: Geoffrey L. Newton
Facsimile: (214) 953-6503
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(k) ENTIRE AGREEMENT. This Agreement and the Schedules hereto and
the other Transaction Documents represent the entire agreement between the
Investor and the Company with respect to the subject matter hereof, and such
agreements supersede all prior agreements between such parties with respect to
the subject matter hereof.
(l) DEFINITION OF KNOWLEDGE. For the purpose of this Agreement,
"knowledge" or "known" or a similar phrase shall mean the knowledge, after
reasonable inquiry, of the executive officers of the Company or its Subsidiaries
(which reasonable inquiry shall be limited to such executive officer's own
knowledge obtained in the performance of his duties and inquiry of employees of
the Company).
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IN WITNESS WHEREOF, the undersigned parties have duly executed this
Agreement as of the date first above written.
HIGHWAYMASTER COMMUNICATIONS, INC.
By: /s/ William C. Saunders
---------------------------------------
Name: William C. Saunders
-------------------------------------
Title: President
-----------------------------------
SOUTHWESTERN BELL WIRELESS HOLDINGS, INC.
By: /s/ Stan Sigman
---------------------------------------
Name: Stan Sigman
-------------------------------------
Title: President & Chief Executive Officer
-----------------------------------
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ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of September 27, 1996 (this "Agreement"),
by and between SOUTHWESTERN BELL WIRELESS HOLDINGS, INC. ("Investor"),
HIGHWAYMASTER COMMUNICATIONS, INC. ("the Company") and TEXAS COMMERCE BANK, N.A.
(the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Company and Investor have simultaneously with the
execution and delivery of this Agreement entered into a Purchase Agreement dated
as of September 27, 1996 (the "Purchase Agreement");
WHEREAS, pursuant to Section 2 of the Purchase Agreement, Investor and
the Company have agreed that the aggregate sum of $20,000,000 paid by the
Investor to the Company (which represents the Purchase Price, as defined in the
Purchase Agreement) shall be deposited by the Company in escrow with the Escrow
Agent until the Release Date (as defined herein);
NOW, THEREFORE, in consideration of the foregoing and of the promises
contained herein, the parties, intending legally to be bound, agree as follows:
SECTION 1
ESCROW FUND
1.1 DELIVERY. Immediately following the delivery by the Company to
the Investor of a certificate representing the 1,000 shares of Series D
Participating Convertible Preferred Stock and the payment by the Investor to the
Company of the consideration of $20,000,000 therefor in accordance with
Section 2 of the Purchase Agreement, the Company shall endorse over to the
Escrow Agent the certified check for such $20,000,000 (such amount is
hereinafter referred to as the "Escrow Fund", PROVIDED, that such term shall
not include any interest or other earnings or profits upon or in respect of
the investment of the Escrow Fund) to be held by the Escrow Agent pursuant to
the terms of this Agreement.
<PAGE>
1.2 RECEIPT. The Escrow Agent agrees to hold and disburse the Escrow
Fund in accordance with the terms and conditions of this Agreement and for the
uses and purposes stated herein.
1.3 INVESTMENT AND INCOME. After receipt of the Escrow Fund, the
Escrow Agent shall, pending termination of the Escrow Fund pursuant to
Section 2.2 of this Agreement, invest the Escrow Fund in the Fidelity
Institutional Government Fund (Fidelity Fund No. 57) and shall reinvest the
Escrow Fund upon receipt of written instructions signed by Investor. In no
event shall any part of the Escrow Fund be commingled with any other funds
held by the Escrow Agent or any of its parents, subsidiaries or affiliates.
The Escrow Agent shall pay to the Investor all interest and other earnings
and profits upon or in respect of the investment of the Escrow Fund on a
monthly basis.
SECTION 2
2.1 RELEASE OF ESCROW FUND. (a) The Escrow Agent shall retain
custody of the Escrow Fund and make no delivery or other disposition of any
property then held by it under this Agreement until receipt by the Escrow Agent
of the certificate contemplated by Section 2.1(b) hereof (the date of such
receipt, the "Release Date").
(b) Upon the receipt of a certificate from an officer of Investor and
an officer of the Company which shall instruct the Escrow Agent to pay to the
party designated in such notice the amount remaining in the Escrow Fund, the
Escrow Agent shall pay, within three days, the Escrow Fund to the designated
person and any interest to Investor, by wire transfer of immediately available
funds to such persons and accounts at such banks as Investor and the Company
shall designate in such certificate.
2.2 TERMINATION. The Escrow Fund and the Escrow Agent's obligations
under this Agreement shall be deemed to be terminated at such time on and after
the Release Date that the Escrow Agent shall have delivered all remaining funds
from the Escrow Fund and interest pursuant to Section 2.1(b) under this
Agreement.
2.3 STATEMENT OF DISBURSEMENTS. Upon the disbursement of any funds
of the Escrow Fund pursuant to Section 2.1, the Escrow Agent shall send a
written statement to each of Investor and the Company stating the amount of the
disbursement.
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<PAGE>
SECTION 3
ESCROW AGENT
3.1 APPOINTMENT. Investor and the Company hereby appoint the Escrow
Agent to serve hereunder and the Escrow Agent hereby accepts such appointment
and agrees to perform all duties which are expressly set forth in this
Agreement.
3.2 COMPENSATION. The fees of the Escrow Agent shall be determined
in accordance with, and shall be payable one-half by the Company and one-half by
Investor as specified in, the Schedule of Fees for Escrow Services addressed by
the Escrow Agent to each of the Company and Investor, receipt of a copy of which
is hereby acknowledged by each party. The Escrow Agent shall also be reimbursed
one-half by the Company and one-half by Investor for any reasonable expenses
incurred in connection with this Agreement, including but not limited to the
actual cost of legal services should the Escrow Agent deem it necessary to
retain counsel. The Escrow Agent shall have a first lien on the Fund for the
payment of such fees and expenses.
3.3 LIABILITY. The Escrow Agent shall not be liable for any action
taken or omitted by the Escrow Agent in good faith in accordance with the advice
of counsel and in no event shall the Escrow Agent be liable or responsible
except for its own gross negligence, bad faith or willful misconduct. The
Escrow Agent shall not be responsible for any loss to the Escrow Fund resulting
from the investment thereof in accordance with the terms of this Agreement. In
no event shall the Escrow Agent be responsible or liable for any loss due to
forces beyond its control, including, but not limited to, acts of God, flood,
fire, nuclear fusion, fission or radiation, war (declared or undeclared),
terrorism, insurrection, revolution, riot, strikes or work stoppages for any
reason, embargo, government action, including any laws, ordinances, regulations
or the like which restrict or prohibit the providing of the services
contemplated by this Agreement, inability to obtain equipment or communications
facilities, or the failure of equipment or communications facilities, and other
causes whether or not of the same class or kind as specifically named above. In
the event that the Escrow Agent is unable substantially to perform for any of
the reasons described in the immediately preceding sentence, it shall so notify
the other parties hereto as soon as reasonably practicable. Investor and the
Company agree that they shall each be liable severally, but not jointly, to hold
the Escrow Agent harmless from, and to indemnify and reimburse the Escrow Agent
for, one-half of all claims, liabilities, losses, and expenses (including out-
of-pocket and incidental expenses and reasonable legal fees) arising in
connection with any action, suit or claim arising under this Agreement, provided
that the
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Escrow Agent has not acted with gross negligence, bad faith or willful
misconduct with respect to any of the events relating to such claims,
liabilities, losses or expenses.
3.4 NO SECURITY INTEREST. The Company warrants to and agrees with
Investor and the Escrow Agent and Investor warrants to and agrees with the
Company and the Escrow Agent that, unless otherwise expressly set forth in this
Agreement, there is no security interest in the Escrow Fund or any part thereof
created by it or in respect of any of its obligations or liabilities; neither
the Company nor the Investor know of any financing statement under the Uniform
Commercial Code which is on file in any jurisdiction claiming a security
interest in or describing (whether specifically or generally) the Escrow Fund or
any part thereof; and the Escrow Agent shall have no responsibility at any time
to ascertain whether or not any security interest exists in the Escrow Fund or
any part thereof or to file any financing statement under the Uniform Commercial
Code with respect to the Escrow Fund or any part thereof.
3.5 DUTIES. The Escrow Agent shall not be bound in any way by any
agreement or contract between the Company and Investor (whether or not the
Escrow Fund has knowledge thereof), and its only duties and responsibilities
shall be to hold the Escrow Fund and to invest and dispose of the Escrow Fund in
accordance with the terms of this Agreement or as otherwise specified in writing
by Investor and the Company in accordance with the terms of this Agreement. The
Escrow Agent shall not be responsible for enforcing compliance by Investor or
the Company with the terms of this Agreement, the Purchase Agreement or any
other agreement related thereto. It is understood and agreed that should any
dispute arise with respect to the payment and/or ownership or right of
possession of the Escrow Fund, the Escrow Agent is authorized and directed to
retain in its possession, without liability to anyone, all or any part of the
Escrow Fund until such dispute shall have been settled either by mutual
agreement by the parties concerned or by the final order, decree or judgment of
any court or other tribunal of competent jurisdiction in the United States of
America and time for appeal has expired and no appeal has been perfected, but
the Escrow Agent shall be under no duty whatsoever to institute or defend any
such proceedings.
3.6 AUTHORITY TO SIGN. Investor and the Company have satisfied
themselves as to the authority of any persons signing this Agreement in a
representative capacity. Should it be necessary for the Escrow Agent to accept
or act upon any instructions, directions, documents or instruments signed or
issued by or on behalf of any corporation, partnership, trade-name, fiduciary or
individual, it shall not be necessary for the Escrow Agent to inquire into the
authority of the signer(s) unless and to the extent expressly provided in this
Agreement.
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<PAGE>
SECTION 4
OTHER PROVISIONS
4.1 AMENDMENT; RESIGNATION; REMOVAL. This Agreement may be altered
or amended only with the consent of all the parties hereto. Should Investor or
the Company or both attempt to change this Agreement in a manner which the
Escrow Agent in its sole discretion deems undesirable, the Escrow Agent may
resign as Escrow Agent by notifying the other parties hereto in writing. The
Escrow Agent may resign at any time upon thirty (30) days' prior written notice
to each of Investor and the Company; in such event, the successor Escrow Agent
shall be such person, firm or corporation as shall be mutually selected by
Investor and the Company. It is understood and agreed that the resignation of
the Escrow Agent shall not be effective until a successor agrees to act
hereunder. Investor and the Company, acting jointly, may remove the Escrow
Agent at any time upon thirty (30) days' prior written notice, signed by both
Investor and the Company, to the Escrow Agent. In the event that the Escrow
Agent submits a notice of resignation, its only duty, until a successor Escrow
Agent shall have been appointed and shall have accepted such appointment, shall
be to hold, invest and dispose of the Escrow Fund in accordance with this
Agreement, but without regard to any notices, requests, instructions, demands or
the like received by it from the other parties hereto after such notice of
resignation shall have been given, unless the same is a direction that the
Escrow Fund be paid or delivered in its entirety to one of the other parties
hereto.
4.2 NOTICES. (a) Any notice required to be given hereunder shall be
effective when delivered by messenger, or dispatched by facsimile, to the
respective party at its address specified below, namely:
IF TO INVESTOR:
Southwestern Bell Wireless Holdings, Inc.
Suite 100A
17330 Preston Road
Dallas, Texas 75252
Attention: President
Telephone No.: (972) 733-5555
Telecopier No.: (972) 733-2012
5
<PAGE>
and to:
SBC Communications Inc.
175 E. Houston
San Antonio, Texas 78205
Attention: General Attorney, Mergers and Acquisitions
Telephone No.: (210) 351-3476
Telecopier No.: (210) 351-3488
With a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Janet T. Geldzahler, Esq.
Telephone No.: (212) 558-4000
Telecopier No.: (212) 558-3588
IF TO THE COMPANY:
HighwayMaster Communications, Inc.
16479 Dallas Parkway, Suite 710
Dallas, Texas 75248
Attention: William C. Kennedy, Jr.
Telephone No.: (972) 732-2500
Telecopier No.: (972) 930-7263
With a copy to:
Baker & Botts, L.L.P.
2001 Ross Avenue
Suite 700
Dallas, Texas 75201-2980
Attention: Geoffrey L. Newton
Telephone No.: (214) 953-6500
Telecopier No.: (214) 953-6503
6
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IF TO THE ESCROW AGENT:
Texas Commerce Bank, N.A.
711 Navarro
San Antonio, Texas 78205
Attention: Angelita T. Bendele
Telephone No.: (210) 271-8042
Telecopier No.: (210) 271-8099
or such other address as such party may have furnished to the Escrow Agent and
to the other party in writing. Any notice to the Escrow Agent shall be
effective when received at its address above, when delivered by messenger, or
dispatched by cable or facsimile, addressed to the attention of the Escrow
Division.
(b) With respect to written or telephonic instructions or
instructions sent by facsimile transmission to release or transfer any funds
from the Escrow Fund in accordance herewith (such instructions hereafter called
"Transfer Instructions"), the security procedure agreed upon for verifying the
authenticity of Transfer Instructions is a callback by the Escrow Agent to any
of the persons designated below, whether or not any such person has issued such
Transfer Instructions. (It is recommended that the persons designated below not
be persons who generally issue Transfer Instructions; whenever possible, the
Escrow Agent will endeavor to call someone other than the issuer of the Transfer
Instruction.)
Telephone Number/
Name and Title Telecopier Number
For the Company: Steve Tacke (972) 732-2545/
acting Chief Financial Officer (972) 930-7231
For Investor: Wayne Watts (210) 351-3476/
(210) 351-3488
4.3 GOVERNING LAW; ASSIGNMENT. This Agreement shall be
construed in accordance with and governed by the law of the State of Texas,
without regard to choice of law rules, and shall be binding upon the Escrow
Agent, the Company, and Investor and each of their respective successors and
assigns in accordance with its terms; provided that
7
<PAGE>
any assignment or transfer by either Investor or the Company of its rights
under this Agreement or with respect to the Escrow Fund shall be void as
against the Escrow Agent, except that the Investor may assign to any
affiliate of Investor its rights under this Agreement or with respect to the
Escrow Fund, PROVIDED that it gives (i) written notice of such assignment or
transfer to the Escrow Agent and the Company and (ii) the assignee or
transferee shall have agreed in writing to be bound by the provisions of this
Agreement.
4.4 BUSINESS DAY. Business day shall mean a day on which the
Escrow Agent is open for business, excluding Saturdays or Sundays.
4.5 COMPLIANCE WITH LAW. The Escrow Agent is hereby authorized
to comply with any judicial order or legal process which stays, enjoins, directs
or otherwise affects the transfer or delivery of any securities or proceeds
thereof and shall incur no liability for any delay or loss which may occur as a
result of such compliance.
4.6 COUNTERPARTS. This Agreement may be signed upon any number
of counterparts with the same effect as if signature on all counterparts are
upon the same instruments.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the day and year first above written.
Investor:
SOUTHWESTERN BELL WIRELESS
HOLDINGS, INC.
By: /s/ Stan Sigman
---------------------------------------
Name: Stan Sigman
-------------------------------------
Title: President & Chief Executive Officer
------------------------------------
The Company:
HIGHWAYMASTER COMMUNICATIONS,
INC.
By: /s/ William C. Saunders
---------------------------------------
Name: William C. Saunders
-------------------------------------
Title: President
------------------------------------
Escrow Agent:
TEXAS COMMERCE BANK, N.A.
By: /s/ John Jones
---------------------------------------
Name: John Jones
-------------------------------------
Title: Vice-President
------------------------------------
9
<PAGE>
TECHNICAL SERVICES
AGREEMENT
BETWEEN
HIGHWAYMASTER CORPORATION
AND
SOUTHWESTERN BELL WIRELESS HOLDINGS, INC.
<PAGE>
TECHNICAL SERVICES AGREEMENT
This Agreement ("Agreement") is made this 27th day of September, 1996,
by and between HighwayMaster Corporation, a Delaware corporation
("HighwayMaster"), having its principal office at 16479 Dallas Parkway, Suite
710, Dallas, Texas 75240, and Southwestern Bell Wireless Holdings, Inc.
("Wireless Holdings"), a Delaware corporation having its principal office at
17330 Preston Road, Suite 100A, San Antonio, Texas 75252.
WITNESSETH
WHEREAS, HighwayMaster sells enhanced communications and information
services to the trucking industry;
WHEREAS, HighwayMaster seeks a telecommunications provider to offer
technical support to assist HighwayMaster with its communications services;
WHEREAS, HighwayMaster wishes to receive and Wireless Holdings or one
or more of its Affiliates is willing to provide technical and advisory
assistance subject to the terms hereof; and
WHEREAS, Wireless Holdings intends to acquire an equity interest in
HighwayMaster Communications, Inc., a Delaware corporation ("HMCI") of which
HighwayMaster is a wholly-owned subsidiary, and in furtherance of that intent,
the Parties have negotiated Transaction Documents outlining the terms of their
transaction;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth below, the Parties agree as follows:
1. DEFINITIONS
For the purpose of this Agreement, the following terms shall have the
following meanings:
a) "Affiliate" means any person that directly or indirectly, through one
or more of its intermediaries, has control of or is controlled by, or is
under common control with, the Person specified.
b) "Closing" means the final transfer of an ownership interest in HMCI to
Wireless Holdings on September 27, 1996 pursuant to the Transaction
Documents.
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<PAGE>
c) "Employee" or "Employees" means an employee or the employees of
Wireless Holdings or its Affiliates who perform services pursuant to this
Agreement.
d) "Party" or "Parties" means any or all of the parties hereto, either
individually or collectively, as the case may be and as the context
requires.
e) "Person" means any individual, partnership, corporation, association,
joint stock company, trust, joint venture, unincorporated organization or
governmental entity or department, agency or political subdivision thereof.
f) "Person-month" shall be 22 work days in any calendar month.
g) "Project" means the provisioning by Wireless Holdings and one or more
of its Affiliates of Technical Assistance and Technical Information to
HighwayMaster to assist HighwayMaster in the operation and improvement of
its communications transmission system.
h) "Regulatory Relief" means that SBC Communications Inc. or its
Affiliates, in their sole judgment, have obtained all necessary federal and
state regulatory approvals to provide landline, interLATA long-distance
service pursuant to the Communications Act of 1934, as amended by The
Telecommunications Act of 1996.
i) "Technical Assistance" means advisory services to be made available
pursuant to Section 2 hereof, but only to the extent that Wireless Holdings
can provide such advisory services rendered to HighwayMaster by Employees.
j) "Technical Information" means technical or test data, know-how,
manuals, and training materials (but not including material or technology
protected by copyrights or patents) employed and owned by Wireless
Holdings, or which become employed or owned by Wireless Holdings during the
term of this Agreement, and which in the sole discretion of Wireless
Holdings will be useful for the Project. Technical Information does not
include any such information in which any third party, other than an
Affiliate of Wireless Holdings, has legally enforceable rights which would
be contravened by the transfer of such information by Wireless Holdings to
HighwayMaster.
k) "Transaction Documents" shall mean (i) the Purchase Agreement,
(ii) the Certificate of Amendment to the HMCI's Certificate of
Incorporation setting forth the terms of the Class B Common Stock and the
Series D Participating Convertible Preferred Stock of HMCI and the
Amendments to HMCI's Bylaws, in each case adopted by HMCI's Board of
Directors on September 27, 1996; and (iii) the Amended and Restated
Stockholders' Agreement, among HMCI and the stockholders
-3-
<PAGE>
parties thereto, the Warrant Certificate executed by HMCI in favor of
Wireless Holdings, and the Escrow Agreement among HMCI, Wireless Holdings
and Texas Commerce Bank, N.A., in each case dated as of September 27, 1996.
2. TECHNICAL ASSISTANCE SERVICES
Wireless Holdings will provide HighwayMaster with the non-exclusive
right to use in the HighwayMaster organization and in support of
HighwayMaster operations the Technical Information for and to obtain
Technical Assistance in the Project during the term hereof unless such
right is earlier terminated. The Technical Information and Technical
Assistance to be provided by Wireless Holdings or its Affiliates shall
include information and assistance relating to the following:
A. Operational and Technical Assistance
1. Engineering design, performance and specifications.
2. Operations and maintenance procedures and standards.
3. Procurement of necessary equipment.
4. Emergency operational and technical matters.
B. Financial Management Assistance
1. Financial management and accounting procedures.
2. Treasury and cash management.
3. Design of accounting controls.
C. Personnel Assistance
1. Recruitment of staff.
D. Data Processing Assistance
1. Design, procurement, operation and maintenance of computerized
billing and accounting systems.
2. Preliminary planning, design, specification and evaluation
associated with software and hardware upgrades and expansion.
-4-
<PAGE>
E. Marketing Plan Assistance
1. Development, marketing and distribution of telecommunications
products and services. Neither Wireless Holdings nor any of its
Affiliates will perform marketing or distribution on behalf of
HighwayMaster for any product or service.
2. Development of tariff structures and negotiations.
3. Development of distribution outlets.
4. Development of distribution agreements, including service
provider and agency contracts.
5. Development of customer care provisions and monitoring
procedures.
6. Development of public relations and promotions programs.
7. Development of media advertising, including radio, print and
television.
F. System Planning
1. Planning of HighwayMaster's communications transmission system,
including long distance and cellular service and assistance in
the billing of those services to ultimate consumers;
2. Clarifying and improving procedures for installing
HighwayMaster's equipment for communications transmission;
3. Avoiding saturation and bottlenecks in HighwayMaster's
communications transmission system;
4. Monitoring and offering assistance on the quality of
HighwayMaster's communications transmission system.
3. STANDARD OF PERFORMANCE
The Technical Information and Technical Assistance provided by Wireless
Holdings shall be as technologically advanced and current as that used by
Wireless Holdings or its Affiliates in their operations in North America at the
time the Technical Information and Technical Assistance are conveyed to
HighwayMaster; PROVIDED, HOWEVER, that Wireless
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<PAGE>
Holdings shall have the discretion to provide less advanced or less current
technology if such technology is deemed by Wireless Holdings to be more
appropriate or more suitable for HighwayMaster's needs.
4. SUPPORT OF HIGHWAYMASTER PERSONNEL
All aspects of the Technical Assistance shall be accomplished in
cooperation with the personnel of HighwayMaster, with the objective of
supporting such personnel in operations which are the subject of the Project.
HighwayMaster will promptly supply to Wireless Holdings and its Affiliates all
information determined by Wireless Holdings or its Affiliates to be necessary or
useful in evaluating the assistance needs of HighwayMaster. HighwayMaster
acknowledges that such cooperation is crucial to achieving the goals of this
Agreement and, therefore, any failure to cooperate shall constitute a material
breach of this Agreement.
5. REQUEST FOR TECHNICAL ASSISTANCE BEYOND THE SCOPE OF THIS AGREEMENT
Wireless Holdings shall keep the Board of Directors of HighwayMaster
reasonably informed of the progress of the Technical Assistance. Any technical
support outside the scope of the Technical Assistance set forth in paragraph 2
shall be provided upon mutual agreement of the Parties and may be subject to a
separate obligation by HighwayMaster to compensate Wireless Holdings for the
reasonable expenses of the additional technical support subject to separate
billing.
6. OPERATIONAL SUPPORT AND IMPLEMENTATION
a) The Chief Executive Officer (CEO) of HighwayMaster or his or her
designee shall have the responsibility to implement this Agreement in the
HighwayMaster organization. In performing this responsibility, the CEO of
HighwayMaster or his or her designee shall work closely with the person
appointed by Wireless Holdings to coordinate the Technical Assistance.
b) As necessary and appropriate, HighwayMaster shall provide Employees
with all local administrative support, including, but not limited to,
office space, clerical assistance, telephones, and office supplies, at no
cost to Wireless Holdings.
7. SUBCONTRACTING AND OUT-SOURCING
Wireless Holdings will provide Technical Assistance through Employees. To
the extent that any form of Technical Assistance cannot be provided by an
Employee, Wireless Holdings will assist HighwayMaster in obtaining
subcontractors or other outside sources, but all costs associated with such
subcontractors or other outside sources will be the sole
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<PAGE>
obligation of HighwayMaster. Wireless Holdings shall not be liable for any
loss, damages, claims or breach of contract associated with the activities of
subcontractors or other outside sources for services.
8. AVAILABILITY OF EMPLOYEES
During the term of this Agreement, Wireless Holdings agrees to make
available Employees at a rate of no more than a total of 24 Person-months per
year. The particular Employee or Employees who provide Technical Assistance
shall be chosen in the sole discretion of Wireless Holdings or its Affiliates,
based upon the availability of such Employees, the needs of HighwayMaster, and a
determination by Wireless Holdings or its Affiliates that making such Employees
available will not disrupt other operations of Wireless Holdings or its
Affiliates.
9. REIMBURSEMENT FOR EMPLOYEES
a) Wireless Holdings or its Affiliates will be solely responsible for the
salary and benefits of Employees who provide Technical Assistance on a temporary
basis (as to any Employee, equal to or less than 45 continuous work days or
parts thereof, after accounting for intervening weekends and holidays) and
HighwayMaster will not be responsible for reimbursing Wireless Holdings for such
Employee salary and benefits. However, HighwayMaster will be responsible for
all out-of-pocket expenses that Wireless Holdings, its Affiliates or Employees
incur in providing Technical Assistance on a temporary basis including, but not
limited to:
1. Travel (including business flights), lodging, and food;
2. The full cost of all materials and supplies used in the
performance of the Technical Assistance;
3. The cost for reproduction of plans, reports, specifications, and
other data or documents;
4. Charges for long-distance and cellular telephone calls and
facsimile transmissions;
5. Any taxes levied on payments made by HighwayMaster to Wireless
Holdings under this Agreement (including appropriate gross-ups)
needed to ensure total cost recovery for Wireless Holdings;
6. Other reasonable out-of-pocket costs and expenses.
-7-
<PAGE>
b) Should any Employee provide Technical Assistance in excess of 45
continuous work days, HighwayMaster shall become responsible to reimburse
Wireless Holdings or its Affiliates for each work day or part thereof (including
travel days) the Employee actually expended in performing the Technical
Assistance beyond the 45th work day, including the Employee's fully loaded
salary, benefits, overhead and appropriate gross up for taxes, in addition to
the out-of-pocket expenses set forth in paragraph 9a. This Agreement does not
contemplate that any Employee will permanently relocate to provide Technical
Assistance.
c) To the extent that HighwayMaster seeks Technical Assistance or
Technical Information from Wireless Holdings or any Employees which request
requires Employees to be available for more than 24 person-months per year,
HighwayMaster and SBC will separately negotiate the terms of such additional
assistance.
10. EMPLOYMENT RELATIONSHIP
a) Each Employee involved in the Project under this Agreement shall
remain an employee of Wireless Holdings or its Affiliates, and Wireless
Holdings and its Affiliates shall remain solely responsible to the Employee
for all salary, benefits, taxes, and expenses. This is not intended to
negate HighwayMaster's obligations to Wireless Holdings or its Affiliates
as set forth in paragraph 9.
b) Wireless Holdings' and its Affiliates' obligations under this
Agreement shall be subordinate to and subject to the obligations Wireless
Holdings and its Affiliates have to any Employee.
11. INDEMNITY
a) Solely in connection with this Agreement and the services provided
hereunder, and except as provided in this paragraph 11 and its subparts,
Wireless Holdings, its Affiliates and Employees shall have no liability to
HighwayMaster or to HighwayMaster employees, representatives, suppliers or
contractors, or to any other person or entity for any claim, loss, damage,
liability, attorney's fees or expenses of any kind whatsoever incurred by
reason of or arising out of any act or omission, including gross or simple
negligence, on the part of HighwayMaster, its Affiliates or employees or
Wireless Holdings, its Affiliates or Employees who provide Technical
Assistance Services under this Agreement.
b) HighwayMaster shall indemnify Wireless Holdings, its Affiliates and
Employees against all claims, losses, damages, liabilities, attorney's
fees, and expenses of any kind whatsoever to the extent incurred by reason
of or to the extent
-8-
<PAGE>
arising out of any act or omission, including gross and simple negligence,
on the part of HighwayMaster, its Affiliates or employees.
c) HighwayMaster shall indemnify Wireless Holdings and its Affiliates
against any claims, losses, damages, liabilities, attorney's fees, or
expenses of any kind whatsoever incurred by Wireless Holdings or its
Affiliates (collectively "Claim"), where such Claim is made by an Employee
to the extent such Claim arises out of any act or omission, including gross
or simple negligence, on the part of HighwayMaster, its Affiliates or its
employees.
d) Except as described in Subsection (e) below, HighwayMaster agrees not
to implead or bring any action against Wireless Holdings, its Affiliates or
any Employees based on claims lodged against HighwayMaster by any entity or
person arising out of or alleged to arise out of Technical Assistance
Services furnished or performed by Wireless Holdings, its Affiliates or
Employees, or any subcontractor or outside source for any work arising out
of or in any way related to this Agreement to the extent that such claims
arise out of any act or omission, including gross and simple negligence on
the part of HighwayMaster, its Affiliates or employees.
e) Nothing in this paragraph 11 shall prevent HighwayMaster from bringing
an action against Wireless Holdings for breach of this Agreement.
12. PROPRIETARY INFORMATION OF WIRELESS HOLDINGS OR ITS AFFILIATES, NON-
DISCLOSURE TO THIRD PARTIES, AND USE OF TECHNICAL ASSISTANCE SERVICES AND
TECHNICAL INFORMATION
The Parties agree that all Technical Information disclosed by Wireless
Holdings, its Affiliates or Employees to HighwayMaster in connection with this
Agreement and any advice, report or other information delivered orally or in
writing by Wireless Holdings, its Affiliates or Employees to HighwayMaster is
owned by Wireless Holdings or its Affiliates, subject only to the right to use
granted by this Agreement (and similar agreements made by Wireless Holdings with
third parties), and shall be treated as trade secrets and proprietary and
confidential information. Such information shall be used only to the extent
necessary to implement the Technical Information into the HighwayMaster
organization and operations.
a) HighwayMaster shall not disclose such information to any person or
entity other than HighwayMaster personnel with an operational need to know,
except as may be authorized by Wireless Holdings or its Affiliates in
writing. HighwayMaster shall safeguard the Technical Information at least
to the extent that it would safeguard its own trade secrets and proprietary
and confidential information.
b) HighwayMaster undertakes the obligation to maintain in a confidential
manner the Technical Information, related materials provided by Wireless
Holdings,
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<PAGE>
its Affiliates or Employees, and the provisions of this Agreement
for the term of this Agreement and thereafter for a period of five (5)
years. Upon termination of this Agreement by reason of a breach or
substantial default by HighwayMaster, HighwayMaster shall immediately
return all Technical Information that is in HighwayMaster's possession or
under its control.
c) HighwayMaster shall immediately notify Wireless Holdings of any
request by any third person, court, or administrative body that the
Technical Information be disclosed and shall cooperate with Wireless
Holdings in its efforts to protect the Technical Information from
disclosure.
d) The non-disclosure obligations of HighwayMaster shall not apply to:
1) Information which is now in or hereafter enters the public domain
without breach of this Agreement;
2) Information known to HighwayMaster prior to the time of
disclosure by Wireless Holdings, its Affiliates or Employees or
independently developed by HighwayMaster without access to the
Technical Information; or
3) Information disclosed in good faith to HighwayMaster by third
persons legally entitled to disclose the same.
e) HighwayMaster agrees that effective enforcement of this Paragraph 12
requires that the remedies available for breach of HighwayMaster's non-
disclosure obligations include, but are not limited to, injunctive relief.
Therefore, HighwayMaster waives its rights to object to any applications
for injunctions based on this Agreement.
13. PROPRIETARY INFORMATION OF HIGHWAYMASTER AND NON-DISCLOSURE TO THIRD
PARTIES
The parties agree that all information disclosed by HighwayMaster to
Wireless Holdings, its Affiliates or Employees in connection with this Agreement
and any advice, report or other information delivered orally or in writing by
HighwayMaster to Wireless Holdings, its Affiliates or Employees under this
Agreement ("HighwayMaster Information") is owned by HighwayMaster and shall be
treated as trade secrets and proprietary and confidential information.
HighwayMaster Information shall be used only to the extent necessary to
implement the Agreement.
a. Wireless Holdings, its Affiliates and Employees shall not disclose
HighwayMaster Information to any person or entity other than Employees with
an
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<PAGE>
operational need to know, except as may be authorized by HighwayMaster
in writing. Wireless Holdings and its Affiliates shall safeguard the
HighwayMaster Information at least to the extent that it would safeguard
its own trade secrets and proprietary and confidential information.
b. Wireless Holdings and its Affiliates undertake the obligation to
maintain in a confidential manner the HighwayMaster Information, related
materials provided by HighwayMaster, and the provisions of this Agreement
for the term of this Agreement and thereafter for a period of five (5)
years. Upon termination of this Agreement by reason of a breach or
substantial default by Wireless Holdings, Wireless Holdings, its Affiliates
and Employees shall immediately return to HighwayMaster all HighwayMaster
Information that is in Wireless Holdings', its Affiliates' or Employees'
possession or under their control.
c. Wireless Holdings shall immediately notify HighwayMaster of any
request by any third person, court, or administrative body that the
HighwayMaster Information be disclosed and shall cooperate with
HighwayMaster in its efforts to protect the HighwayMaster Information from
disclosure.
d. The non-disclosure obligations of Wireless Holdings and its Affiliates
shall not apply to:
1) Information which is now in or hereafter enters the public domain
without breach of this Agreement;
2) Information known to Wireless Holdings, its Affiliates or
Employees prior to the time of disclosure by HighwayMaster or
independently developed by Wireless Holdings or its Affiliates without
access to the HighwayMaster Information; or
3) Information disclosed in good faith to Wireless Holdings, its
Affiliates or Employees by third persons legally entitled to disclose
the same.
e. Wireless Holdings agrees that effective enforcement of this Paragraph
13 requires that the remedies available for breach of Wireless Holdings'
non-disclosure obligations include, but are not limited to, injunctive
relief. Therefore, Wireless Holdings waives its rights to object to any
application for injunction based on this Agreement.
14. OWNERSHIP OR USE OF PROPRIETARY INFORMATION
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<PAGE>
All Technical Information shall be and remain the exclusive property of
Wireless Holdings or its Affiliates, and such Technical Information shall not be
used by HighwayMaster for any purpose other than the Project. No license of
such Technical Information is granted except as expressly provided in this
Agreement.
All HighwayMaster Information shall be and remain the exclusive property of
HighwayMaster and such HighwayMaster Information shall not be used by Wireless
Holdings or its Affiliates for any purpose other than the Project. No license
of such HighwayMaster Information is granted except as expressly provided in
this Agreement.
15. COMPLIANCE WITH LAWS
Wireless Holdings and HighwayMaster shall each comply with the provisions
of all applicable laws in connection with activities relating to the Technical
Assistance. In particular, the Parties shall cooperate to secure any necessary
approvals required for the transactions contemplated hereby. Nothing in this
Agreement shall be construed to obligate or require Wireless Holdings or its
Affiliates to:
a) Perform any service or engage in any activity which would cause
Wireless Holdings, any Affiliate or any Employee to be in violation of any
U.S., state or local statute or regulation.
b) Perform any service or engage in any activity, which in Wireless
Holdings' or its Affiliates' sole judgment, would cause Wireless Holdings
or any Affiliate to fail to comply with obligations under the
Communications Act of 1934, as amended.
c) Render any advice or provide any information, equipment, materials or
other property if doing so would cause Wireless Holdings or its Affiliates
to be in breach of a duty owed to a third party or would contravene the
rights of a third party in such information, equipment, materials or other
property; or
d) Grant any patent or copyright license or sublicense.
16. TECHNICAL IMPROVEMENTS
If during the term of this Agreement, HighwayMaster or any Affiliate of
HighwayMaster discovers or comes into possession of any improvements to the
Technical Information or the design, engineering, marketing and operation of the
same (hereafter collectively called "Wireless Holdings Improvements"),
HighwayMaster shall immediately furnish Wireless Holdings with information on
such Wireless Holdings Improvements, and shall grant Wireless Holdings a non-
exclusive, perpetual right to use, free of charge, such Wireless Holdings
Improvements.
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<PAGE>
If during the term of this Agreement, Wireless Holdings or its Affiliates
discover or come into possession of any improvements to the HighwayMaster
Information or the design, engineering, marketing and operation of the same
(hereafter collectively called "HighwayMaster Improvements"), Wireless Holdings
or its Affiliates shall immediately furnish HighwayMaster with information on
such HighwayMaster Improvements, and shall grant HighwayMaster a non-exclusive,
perpetual right to use, free of charge, such HighwayMaster Improvements.
17. ASSIGNMENT
Wireless Holdings shall have the right to assign its rights and obligations
under this Agreement to its Affiliates. Otherwise, neither Party shall assign
or otherwise transfer its rights or obligations under this Agreement without the
prior written consent of the other Party.
18. NO AGENCY
This contract does not establish a partnership or agency relationship
between Wireless Holdings and HighwayMaster. Neither Wireless Holdings, its
Affiliates or its Employees can obligate HighwayMaster, enter into contracts for
HighwayMaster, incur debts for HighwayMaster, or in any other way bind
HighwayMaster to third parties.
Likewise, HighwayMaster cannot obligate Wireless Holdings or its
Affiliates, enter into contracts for Wireless Holdings or its Affiliates, incur
debts for Wireless Holdings or its Affiliates or in any way bind Wireless
Holdings or its Affiliates to third parties.
19. SURVIVAL OF OBLIGATIONS
The Parties' obligations under this Agreement, which by their nature would
continue beyond the termination, cancellation or expiration of the Agreement,
shall survive any such termination, cancellation or expiration.
20. DISPUTE RESOLUTION
The Parties shall undertake in good faith to settle or compromise all
disputes, controversies, or differences which may arise between the Parties out
of the operation of this Agreement ("Disputes") by means of amicable
discussions. Except as set forth in paragraphs 12e and 13e, and except for
HighwayMaster's failure to make payments due under paragraph 9, and except for
matters requiring immediate injunctive relief, all Disputes which cannot be so
settled or compromised shall be dealt with as follows:
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<PAGE>
a) Neither of the Parties hereto shall be deemed to be in breach of any
of the terms of this Agreement and neither party shall seek or be entitled
to enforce any remedy for any breach, unless said breach is not cured or
corrected within thirty (30) calendar days following receipt of written
notice of claimed breach by the Party against whom such breach is claimed.
b) If the Dispute is not resolved during the first 30 days following
receipt of written notice of the Dispute as set forth in subparagraph (a)
above or the provisions of subparagraph (a) do not apply for any reason,
any Party may notify the other Party of its desire to have a Dispute
mediated by sending notice of such intention to the other Party. The
Parties will use their best efforts to agree on a mediator within 20 days
of receipt of the notice of the desire to have the Dispute mediated. If
the Parties cannot so agree, the matter shall be referred to the American
Arbitration Association ("AAA") for appointment of a mediator pursuant to
AAA's commercial mediation rules.
b) Promptly upon selection of a mediator, the Parties shall provide to
the mediator copies of the Parties' notices and shall request that the
mediator meet with the Parties within twenty (20) days to consider and
propose a resolution or a procedure for reaching a resolution.
c) The mediator shall devise a resolution on the basis of fairness and
practicality with reference to this Agreement and the fact situation
leading to the Dispute, and the Parties shall use their best efforts to
have the mediator propose a resolution to the Parties within ten (10) days
of the date of their first meeting.
d) Each Party shall, within ten (10) days after receiving the mediator's
proposed resolution, notify the other Party of its acceptance or non-
acceptance of the proposed resolution.
In case any Dispute cannot be resolved by the mediation procedures set
forth above, any Party may demand arbitration thereof, and the Dispute shall be
finally settled by arbitration according to the rules of the AAA. The Parties
agree that service of any document relating to such arbitration to their
addresses specified herein, shall be valid and sufficient. Each Party waives to
the fullest extent possible at law any entitlement it might otherwise have to
seek judicial review of any such arbitration award.
21. FORCE MAJEURE
Neither Party to this Agreement shall be liable for any default or delay
caused by any contingency beyond its reasonable control, including without
limitation war, strikes, lockouts, civil disturbances, unavoidable accidents,
natural calamities, orders of any national,
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<PAGE>
state municipal or other governmental authority or restraining orders or
decrees of any governmental bodies having jurisdiction of the Parties or this
Agreement. In the event of such force majeure event, the Party invoking this
section shall promptly give written notice to the other Party together with
full details.
22. ENTIRE AGREEMENT
This Agreement constitutes the full and complete understanding of the
Parties and supersedes all prior written or oral agreements or understandings or
agreements purporting to modify or vary the terms of this Agreement. No
modifications or additions to the Agreement shall be binding unless hereafter
made in writing and signed by a duly authorized representative of the Party to
be bound.
23. TERM
This Agreement shall be effective from the day it is signed and shall
terminate three (3) years after Closing.
24. HEADINGS
Section headings as to the contents of the particular sections are for
convenience only and are in no way to be construed as part of this Agreement or
as a limitation of the scope of the particular sequence to which they refer.
25. SEVERABILITY
In the event any term or provision of this Agreement shall for any reason
be held invalid, illegal or unenforceable in any respect, such invalidity,
illegally or unenforceability shall not affect any other term or provision of
the Agreement, and this Agreement shall be interpreted and construed as if such
term or provisions, the extent they are invalid, illegal or unenforceable, had
never been contained in this Agreement, provided, however, such invalidity
illegally or unenforceability shall not result in a material change of this
Agreement.
26. NOTICE
Any notice or other communication required or permitted to be given
under this Agreement shall be in writing and shall be deemed sufficiently
given if delivered by hand, by facsimile, by registered mail or by prepaid,
first class mail addressed as follows:
If to HighwayMaster: HighwayMaster Communications, Inc.
16479 Dallas Parkway, Suite 710
Dallas, Texas 75248
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Attention: William Saunders,
Chief Executive Officer
Fax Number: 972-250-0182
If to Wireless Holdings: Southwestern Bell Wireless Holdings, Inc.
17330 Preston Road
Suite 100A
Dallas, Texas 75252
Fax Number: 972-733-2012
ATTENTION: President
or to such addressee or addresses as may be specified from time to time in
a written notice given by such party in the above specified manner. Any
notice shall be deemed to be served on the day on which personally served,
or if given by facsimile, on the second business day following the date of
confirmed receipt of such communications, or if given by prepaid mail or
prepaid registered or certified mail on the fourth (4th) day after being
posted or on the date of actual receipt, whichever date is later. The
Parties agree to acknowledge receipt of any notice delivered by hand.
27. BINDING EFFECT
This Agreement shall inure to the benefit of and be binding upon the
Parties hereto and their respective successors and permitted assigns.
28. CHOICE OF LAW
This Agreement shall be governed by and construed in accordance with the
laws of Texas without regard to that state's conflict of laws rules.
29. TERMINATION.
In the event that the Escrow Fund (as defined in a separate Escrow
Agreement among Wireless Holdings, HMCI and Texas Commerce Bank, N.A. dated as
of September 27, 1996 (the "Escrow Agreement")) is released to Wireless
Holdings, pursuant to the terms of the Escrow Agreement, this Agreement shall
thereafter become void and have no effect, and neither HighwayMaster nor
Wireless Holdings shall have any liability to the other or its Affiliates by
virtue of the provisions of this Agreement or in connection with the
transactions contemplated hereby.
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IN WITNESS WHEREOF, the Parties have executed this Agreement on this
27th day of September, 1996.
HIGHWAYMASTER CORPORATION
By: /s/ William Saunders
-----------------------------------------
Title: President
--------------------------------------
Date: 9/27/1996
---------------------------------------
SOUTHWESTERN BELL WIRELESS HOLDINGS, INC.
By: /s/ Stan Sigman
-----------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
Date: 9/27/1996
---------------------------------------
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RECAPITALIZATION AGREEMENT
This RECAPITALIZATION AGREEMENT (the "AGREEMENT"), entered into as
of September 27, 1996, by and between HIGHWAYMASTER COMMUNICATIONS, INC., a
Delaware corporation (the "COMPANY"), and each of the entities and persons
listed on EXHIBIT A attached to this Agreement as Carlyle stockholders (the
"CARLYLE STOCKHOLDERS") and each of the entities and persons listed on
Exhibit A attached to this Agreement as Erin Mills Stockholders (the "ERIN
MILLS STOCKHOLDERS").
BACKGROUND
Certain of the Carlyle Stockholders beneficially own approximately
10.3% of the issued and outstanding shares of common stock, par value $.01
per share (the "COMMON STOCK"), of the Company.
Certain of the Erin Mills Stockholders beneficially own
approximately 37.6% of the issued and outstanding shares of Common Stock.
The Erin Mills Investment Corporation ("EMIC") is the holder of
promissory notes dated August 23, 1996 and September 16, 1996 in the
aggregate original principal amount of $5,000,000 (the "BRIDGE NOTES") issued
pursuant to a Note Purchase Agreement dated August 23, 1996 between the
Company and EMIC (the "BRIDGE NOTE AGREEMENT").
The Erin Mills Development Corporation is the holder of 459.6
shares of Series B Preferred Stock, par value $.01 per share (the "SERIES B
PREFERRED STOCK"), of the Company. The Erin Mills Investment Corporation
("EMIC") is the holder of 120.0 shares of Series B Preferred Stock. Erin
Mills International Investment Corporation ("EMIIC") is the holder of 349.505
shares of Series B Preferred Stock. Robert S. Folsom is the holder of 42.85
shares of Series B Preferred Stock. Robert T. Hayes is the holder of
108.0450 shares of Series B Preferred Stock. The holders of shares of
Series B Preferred Stock are collectively referred to as the "SERIES B
PREFERRED STOCKHOLDERS."
Clipper Capital Associates, L.P. is the holder of promissory notes
dated June 28, 1995 in the original aggregate principal amount of $29,871.76
(together, "CARLYLE NOTE NO. 1") issued by the Company pursuant to the Note
Exchange and Amendments Agreement dated May 26, 1995 (the "NOTE EXCHANGE
AGREEMENT"). Clipper/Merban, L.P.
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is the holder of promissory notes dated June 28, 1995 in the original
aggregate principal amount of $1,684,009.32 (together, "CARLYLE NOTE NO. 2")
issued by the Company pursuant to the Note Exchange Agreement.
Clipper/Merchant Partners, L.P. is the holder of promissory notes dated June
28, 1995 in the original aggregate principal amount of $1,662,712.05
(together, "CARLYLE NOTE NO. 3") issued by the Company pursuant to the Note
Exchange Agreement. Carlyle-HighwayMaster Investors, L.P. is the holder of
promissory notes dated June 28, 1995 in the original aggregate principal
amount of $5,187,536.53 (together, "CARLYLE NOTE NO. 4") issued by the
Company pursuant to the Note Exchange Agreement. Carlyle-HighwayMaster
Investors II, L.P. is the holder of promissory notes dated June 28, 1995 in
the original aggregate principal amount of $488,604.30 (together, "CARLYLE
NOTE NO. 5") issued by the Company pursuant to the Note Exchange Agreement.
Chase Manhattan Investment Holdings, Inc. is the holder of promissory notes
dated June 28, 1995 in the original aggregate principal amount of
$1,241,756.43 (together, "CARLYLE NOTE NO. 6") issued by the Company pursuant
to the Note Exchange Agreement. H.M. Rana Investments Limited is the holder
of promissory notes dated June 28, 1995 in the original aggregate principal
amount of $2,110,316 (together, "CARLYLE NOTE NO. 7") issued by the Company
pursuant to the Note Exchange Agreement. Archery Partners is the holder of
promissory notes dated June 28, 1995 in the original aggregate principal
amount of $215,218.08 (together, "CARLYLE NOTE NO. 8") issued by the Company
pursuant to the Note Exchange Agreement. The Carlyle Note No. 1, Carlyle
Note No. 2, Carlyle Note No. 3, Carlyle Note No. 4, Carlyle Note No. 5,
Carlyle Note No. 6, Carlyle Note No. 7 and Carlyle Note No. 8 are
collectively referred to as the "CARLYLE NOTES." The holders of the Carlyle
Notes are hereinafter collectively referred to as the "CARLYLE NOTEHOLDERS."
Concurrently with the execution and delivery of this Agreement, the
Company is entering into certain transactions (the "INVESTMENT TRANSACTIONS")
with Southwestern Bell Wireless Holdings, Inc. (the "INVESTOR"). The
Investment Transactions include, but are not limited to, (i) the issuance and
sale by the Company of 1,000 shares of its Series D Participating Convertible
Preferred Stock, par value $.01 per share, to the Investor pursuant to a
Purchase Agreement (the "PURCHASE AGREEMENT") in exchange for a payment in
the amount of $20,000,000, (ii) the execution and delivery of an Amended and
Restated Stockholders' Agreement (the "STOCKHOLDERS' AGREEMENT") among the
Company, the Carlyle Stockholders, the Erin Mills Stockholders, the Investor
and certain other stockholders of the Company, (iii) the agreement on the
part of the Investor to provide certain services to the Company pursuant to a
Technical Services Agreement (the "TECHNICAL SERVICES AGREEMENT") and (iv)
the issuance by the Company to the Investor of 5,000,000 warrants to purchase
shares of Common Stock evidenced by a Warrant Certificate (the "WARRANT
CERTIFICATE"). The Purchase Agreement, the Stockholders'
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Agreement, the Technical Services Agreement, and the Warrant Certificate are
collectively referred to as the "INVESTMENT DOCUMENTS." Copies of the
Investment Documents have been provided by the Company to each of the other
parties to this Agreement.
In order, among other things, to induce the Investor to enter into
the Investment Transactions, (i) Erin Mills International Investment
Corporation ("EMIIC") and The Erin Mills Development Corporation ("EMD") are
willing to invest $8,000,000 and $2,000,000, respectively, in cash in Common
Stock; (ii) the Series B Preferred Stockholders are willing to exchange the
shares of Series B Preferred Stock owned by them for shares of Common Stock
on the basis described in this Agreement; and (iii) the Carlyle Noteholders
are willing to exchange the Carlyle Notes for shares of Common Stock on the
basis described in this Agreement, in each case upon the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, and agreements set forth
in this Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
agree as follows:
SECTION 1. RECAPITALIZATION.
(a) Concurrently with the execution and delivery of this
Agreement, the Company will repay in full the principal amount of, and all
interest accrued on, the Bridge Notes and EMIC will surrender the Bridge
Notes to the Company for cancellation.
(b) Concurrently with the execution and delivery of this
Agreement, the Company will issue, sell, and deliver (against payment of the
A Purchase Price (as defined below)) to EMIIC and EMD, and EMIIC and EMD will
purchase, accept, and receive from the Company, 640,000 and 160,000 shares,
respectively, of Common Stock, free and clear of all liens, claims and
encumbrances. The purchase price (the "A PURCHASE PRICE") for such shares of
Common Stock to be paid by EMIIC and EMD will be $8,000,000 and $2,000,000,
respectively, which will be paid to the Company in immediately available
funds on the date of this Agreement.
(c) Concurrently with the execution and delivery of this
Agreement, the Company will issue, sell and deliver (against payment of the B
Purchase Price (as defined below)) to the several Erin Mills Stockholders set
forth on EXHIBIT B attached to this Agreement, and such Erin Mills
Stockholders severally will purchase, accept and receive from the Company,
the number of shares of Common Stock set forth opposite their names
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on such exhibit (the "B STOCK"), free and clear of all liens, claims and
encumbrances. The purchase price (the "B PURCHASE PRICE") for the B Stock
will be paid by the several Erin Mills Stockholders on the date of this
Agreement by surrender to the Company of the number of shares of Series B
Preferred Stock set forth on EXHIBIT B attached to this Agreement, duly
endorsed in blank or accompanied by duly executed blank stock powers, which
shares will be free and clear of all liens, claims, and encumbrances.
(d) Concurrently with the execution and delivery of this
Agreement, the Company will issue, sell, and deliver (against payment of the
C Purchase Price (as defined below)) to the Carlyle Noteholders, and the
Carlyle Noteholders severally will purchase, accept and receive from the
Company, the number of shares of Common Stock determined by dividing (i) the
sum of the principal amount of the Carlyle Notes held by each Carlyle
Noteholder as set forth in the recitals to this Agreement and the amount of
interest accrued and unpaid on each Carlyle Note set forth on EXHIBIT C
hereto (the "EXCLUDED INTEREST") by (ii) $12.50 (the "C SHARES"), free and
clear of all liens, claims, and encumbrances. The purchase price (the "C
PURCHASE PRICE") for the C Shares will be paid by the several Carlyle
Stockholders on the date of this Agreement by surrender to the Company of
each of the Carlyle Notes for cancellation, which notes will be free and
clear of all liens, claims, and encumbrances. No fractional shares or scrip
representing fractional shares will be issued upon the exchange of the
Carlyle Notes for the C Shares in accordance with this SECTION 1(d). If any
such exchange would require the issuance of a fractional share, an amount
equal to such fraction multiplied by the Closing Price (as defined below) of
the Common Stock on the trading day immediately preceding the date of this
Agreement will be paid to the holder in cash by the Company. In addition,
concurrently with the execution and delivery of this Agreement, the Company
will pay to the Carlyle Noteholders in cash on the date hereof all accrued
and unpaid interest on the Carlyle Notes, other than the Excluded Interest.
As used herein, the term "Closing Price" shall mean on any day the reported
last sale price per share of Common Stock regular way on such day or, in case
no such sale takes place on such day, the average of the reported closing bid
and asked prices regular way, in each case on the New York Stock Exchange,
or, if the shares of Common Stock are not listed or admitted to trading on
such Exchange, the principal national securities exchange on which the shares
of Common Stock are listed or admitted to trading, or, if the Common Stock is
not listed or admitted to trading on any national securities exchange, the
last quoted sale price or, if not so quoted, the average of the closing bid
and asked prices quoted on the Nasdaq National Market, or, if not so quoted,
the average of the closing bid and asked prices as furnished by any member of
the National Association of Securities Dealers, Inc. selected from time to
time by the corporation for that purpose.
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(e) The closing of the transactions provided for in this SECTION 1
(the "CLOSING") will take place at the offices of the Company (or at such
other place as is specified by the Company) on the date of this Agreement.
SECTION 2. TERMINATED DOCUMENTS. Effective upon the execution
and delivery of this Agreement and without any other action, each of the
Carlyle Stockholders and the Erin Mills Stockholders, severally and not
jointly, hereby (a) agrees that the Terminated Documents (as defined below)
will terminate and be of no further force and effect and that it will have no
further rights thereunder; and (b) represents and warrants with respect to
itself that it has not transferred any of its rights or interests under or in
respect of the Terminated Documents and that such party has the sole right,
capacity, and exclusive authority to terminate its rights under the
Terminated Documents. As used in this Agreement, the term "TERMINATED
DOCUMENTS" means (i) the Subscription Agreement dated as of February 4, 1994
by and among the Company (formerly known as HM Holding Corporation) and the
other parties named in such agreement, as amended to the date of this
Agreement; (ii) the Bridge Note and the Bridge Note Agreement; and (iii) the
Carlyle Notes.
SECTION 3. INVESTMENT INTENT. Each of the Carlyle Stockholders
and the Erin Mills Stockholders hereby severally and not jointly represents
and warrants to the Company that the shares of Common Stock to be acquired by
such party pursuant to this Agreement are to be acquired for the such party's
own account for investment and not with a view to, or for resale in
connection with, any distribution of such shares within the meaning of the
Securities Act of 1933, as amended (the "SECURITIES ACT").
SECTION 4. INVESTOR STATUS. In connection with the purchase of
the shares of Common Stock, each of the Erin Mills Stockholders and the
Carlyle Stockholders hereby severally and not jointly represents and warrants
to the Company with respect to itself as follows:
(a) Such party acknowledges that the shares of Common Stock are
not registered under the Securities Act or any applicable state securities
law, and that such shares may not be transferred or sold except pursuant to
the registration provisions of the Securities Act or pursuant to an
applicable exemption therefrom and pursuant to such state securities laws and
regulations as may be applicable.
(b) Such party is knowledgeable, sophisticated, and experienced in
business and financial matters of the type contemplated by this Agreement and
is able to bear the economic risks associated with its investment in the
Company. Such party has
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been afforded access to information regarding the Company and its
subsidiaries and their respective financial condition, operating results,
properties, liabilities, operations, and management sufficient to enable it
to evaluate the risks and merits of its investment in the Company.
SECTION 5. OTHER REPRESENTATIONS OF THE ERIN MILLS
STOCKHOLDERS. Each of the Erin Mills Stockholders hereby further severally
and not jointly represents and warrants to the Company with respect to itself
as follows:
(a) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated by this Agreement have been
duly authorized by such Erin Mills Stockholder. This Agreement has been duly
executed by such Erin Mills Stockholder and constitutes a valid and binding
obligation of such Erin Mills Stockholder, enforceable in accordance with its
terms.
(b) The execution, delivery, and performance by such Erin Mills
Stockholder of this Agreement and the consummation of the transactions
contemplated by this Agreement: (i) is within such Erin Mills Stockholder's
corporate or partnership power and authority and has been duly authorized by
all necessary corporate or partnership action on the part of such Erin Mill
Stockholder, as appropriate; (ii) does not and will not conflict with or
contravene the terms of or require any consent, authorization, or approval
pursuant to such Erin Mills Stockholder's certificate of incorporation or
bylaws, partnership agreement or similar organizational document; (iii) does
not and will not violate, conflict with, or result in any breach or
contravention of or require any consent, authorization, approval, exemption,
or other action by or notice or declaration to, or filing with, any court or
administrative or governmental body or agency or other person pursuant to (A)
any material agreement, lease, or contract of such Erin Mills Stockholder, or
(B) any applicable statute or any rule or regulation of any governmental
authority or any order or decree applicable to such Erin Mills Stockholder.
SECTION 6. OTHER REPRESENTATIONS OF THE CARLYLE STOCKHOLDERS.
Each of the Carlyle Stockholders hereby further severally and not jointly
represents and warrants to the Company with respect to itself as follows:
(a) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated by this Agreement have been
duly authorized by such Carlyle Stockholder. This Agreement has been duly
executed by such Carlyle Stockholder and constitutes a valid and binding
obligation of such Carlyle Stockholder, enforceable in accordance with its
terms.
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(b) The execution, delivery, and performance by such Carlyle
Stockholder of this Agreement and the consummation of the transactions
contemplated by this Agreement: (i) is within such Carlyle Stockholder's
corporate or partnership power and authority and has been duly authorized by
all necessary corporate or partnership action on the part of such Carlyle
Stockholder, as appropriate; (ii) does not and will not conflict with or
contravene the terms of or require any consent, authorization, or approval
pursuant to such Carlyle Stockholder's certificate of incorporation or
bylaws, partnership agreement or similar organizational document; (iii) does
not and will not violate, conflict with, or result in any breach or
contravention of or require any consent, authorization, approval, exemption,
or other action by or notice or declaration to, or filing with, any court or
administrative or governmental body or agency or other person pursuant to (A)
any material agreement, lease, or contract of such Carlyle Stockholder, or
(B) any applicable statute or any rule or regulation of any governmental
authority or any order or decree applicable to such Carlyle Stockholder.
SECTION 7. REPRESENTATIONS OF THE COMPANY. The Company hereby
represents and warrants to each of the Carlyle Stockholders and the Erin
Mills Stockholders as follows:
(a) The execution, delivery, and performance of this Agreement and
the consummation of the transactions contemplated by this Agreement have been
duly authorized by the Company. This Agreement has been duly executed by the
Company and constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms. All outstanding shares of the
Company's capital stock are, and the shares of Common Stock to be issued to
the several Carlyle Stockholders and Erin Mills Stockholders will be upon
such issuance and receipt by the Company of payment therefor, duly
authorized, fully paid, and nonassessable. The offer, sale, and issuance of
the Common Stock to the several Carlyle Stockholders and the Erin Mills
Stockholders under this Agreement do not require registration under the
Securities Act or any applicable state securities laws or blue sky laws,
assuming that all representations made by the Carlyle Stockholders and the
Erin Mills Stockholders in SECTIONS 3 and 4 are true.
(b) Each of the representations made by the Company in Section 3
of the Purchase Agreement is true and correct and is incorporated by this
reference into this Agreement, except that (i) the Company makes no
representation to the Erin Mills Stockholders or the Carlyle Stockholders as
to the matters set forth in the first two sentences of Section 3(b)(iii) or
in Section 3(b)(iv) of the Purchase Agreement; and (ii) each reference to
"prejudice in any material respect the rights of the Investor under any of
the Transaction Documents" will be deemed to read as "prejudice in any
material respect
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the rights of the Carlyle Stockholders or the Erin Mills Stockholders under
this Agreement."
SECTION 8. SURVIVAL AND INDEMNIFICATION.
(a) SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS, AND
AGREEMENTS; KNOWLEDGE OF BREACH. Notwithstanding any otherwise applicable
statute of limitation, the representations and warranties of the Company
included or provided for in this Agreement will survive the execution and
delivery of this Agreement until the expiration of nine months after the
receipt by the Erin Mills Stockholders and the Carlyle Stockholders of
audited consolidated financial statements for the Company, as of and for the
year ending December 31, 1996, together with a report thereon by the
Company's independent public accountants; PROVIDED, HOWEVER, that any
representation, warranty, covenant, or agreement contained in Sections 3(j)
and 3(n) of the Purchase Agreement and incorporated by reference in this
Agreement will survive the execution and delivery of this Agreement until the
expiration of the applicable statute of limitations (including any waivers or
extensions thereof) with respect to such matters; PROVIDED, FURTHER, that the
provisions of this SECTION 8 will constitute the exclusive remedy on the part
of the Erin Mills Stockholders and the Carlyle Stockholders in respect of a
breach of the representations and warranties of the Company contained in this
Agreement. The covenants and other agreements contained in this Agreement
will survive the execution and delivery of this Agreement until the date or
dates specified in such covenant or agreement or the expiration of the
applicable statute of limitations (including any waivers or extensions
thereof) with respect to such matters, whichever is later. In no event will
the Company be liable (i) to the Carlyle Stockholders for any breach of the
representations, warranties, covenants, and agreements included or provided
for in this Agreement or other document delivered pursuant to this Agreement,
unless and until all claims for which aggregate damages are recoverable under
this Agreement by the Carlyle Stockholders exceed the product of (x)
$250,000 and (y) a fraction the numerator of which is the total numbers of
shares of Common Stock issued to the Carlyle Stockholders pursuant to this
Agreement and the denominator is the total number of shares issued by the
Company pursuant to this Agreement (the "CARLYLE STOCKHOLDER DEDUCTIBLE") or
(ii) to the Erin Mills Stockholders for any breach of the representations,
warranties, covenants, and agreements included or provided for in this
Agreement or other document delivered pursuant to this Agreement, unless and
until all claims for which aggregate damages are recoverable under this
Agreement by the Erin Mills Stockholders exceed the product of (x) $250,000
and (y) a fraction the numerator of which is the total numbers of shares of
Common Stock issued to the Erin Mills Stockholders pursuant to this Agreement
and the denominator is the total number of shares issued by the Company
pursuant to this Agreement (the "ERIN MILLS
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STOCKHOLDER DEDUCTIBLE"), in which case such party will be entitled to
damages equal to such excess, but, in the case of the Carlyle Stockholders
and the Erin Mills Stockholders, not more than the purchase price paid by
such party for the Common Stock acquired under this Agreement by such party
plus the charges and expenses (including reasonable attorneys' fees and
expenses) incurred by such party sustaining such damages in connection with
this Agreement and the transactions contemplated hereby;
(b) INDEMNIFICATION. For a period commencing on the date of this
Agreement and ending, as the case may be, upon the expiration of the periods
specified in SECTION 8(a), the Company, on the one hand, and each Erin Mills
Stockholder or Carlyle Stockholder, as applicable, on the other, (the
"INDEMNIFYING PARTY"), will, subject to the limitations set forth in SECTION
8(a), indemnify the Erin Mills Stockholders or the Carlyle Stockholders, on
the one hand, or the Company on the other, as the case may be (the
"INDEMNIFIED PARTY"), against and in respect of all losses, damages,
liabilities, costs, and expenses (including reasonable attorneys' fees and
expenses) incurred in investigating, preparing or defending any claims
covered by this SECTION 8(b) sustained or incurred arising out of any
breaches by such Indemnifying Party of its representations, warranties,
covenants, and agreements set forth in this Agreement (it being understood
and agreed that no Carlyle Stockholder or Erin Mills Stockholder shall be
obligated to indemnify the Company pursuant to this SECTION 8(b) as a result
of a breach of any representation, warranty, covenant, or agreement on the
part of any other party hereto). The indemnification provided for by this
SECTION 8(b) will apply notwithstanding any investigation made by or on
behalf of any party. Any payments pursuant to this SECTION 8(b) will be
treated as an adjustment to the purchase price for all tax purposes.
(c) METHOD OF ASSERTING CLAIMS. In the event that an Indemnified
Party shall assert a claim for indemnity under this SECTION 8, (i) the
Indemnified Party will promptly after the receipt of notice of the
commencement of any action, investigation, claim, demand or other proceeding
by a third party against such Indemnified Party in respect of which indemnity
may be sought from any Indemnifying Party under this Section 8, notify the
Indemnifying Party in writing of the commencement thereof or (ii) if the
claim is other than such a third party claim, the Indemnified Party will
notify the Indemnifying Party promptly following its discovery of the facts
or circumstances giving rise thereto; PROVIDED, that in either case (i) or
(ii), no such notice need be provided by the Company to an Indemnifying Party
who is a Carlyle Stockholder or an Erin Mills Stockholder if the Carlyle
Stockholder Deductible or Erin Mills Stockholder Deductible, as applicable,
has not been exceeded and will not be exceeded by such claim or demand and
the omission of the Indemnified Party to so notify such Indemnifying Party of
any such action will not relieve such Indemnifying Party from any liability
that it may have to such Indemnified
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Party under this SECTION 8(c) unless, and only to the extent that, such
omission prejudices the ability of the Indemnifying Party to defend such
action, investigation, claim, demand, or other proceeding or to reduce or
mitigate its liability under this SECTION 8, whether as a result of the
forfeiture of substantive rights or defenses or otherwise. In case any such
action, claim, or other proceeding is brought against the Indemnified Party
such Indemnified Party will notify the applicable Indemnifying Party of the
commencement thereof, the Indemnifying Party will be entitled to assume the
defense thereof at its own expense, with counsel satisfactory to such
Indemnified Party in its reasonable judgment, PROVIDED that the Deductible
has been or will be exceeded; PROVIDED, FURTHER, that the Indemnified Party
may, at its own expense, retain separate counsel to participate in such
defense. Notwithstanding the foregoing, in any action, claim or proceeding in
which both the Indemnifying Party, on the one hand, and an Indemnified Party,
on the other hand, is, or is reasonably likely to become, a party, such
Indemnified Party shall have the right to employ separate counsel at the
Indemnifying Party's expense and to control its own defense of such action,
claim or proceeding if, in the reasonable opinion of counsel to such
Indemnified Party, a conflict or potential conflict exists between the
Indemnifying Party, on the one hand, and such Indemnified Party, on the other
hand, that would prevent the representation of the Indemnified Party by
counsel selected by and subject to the control of the Indemnifying Party
under applicable law or codes of professional responsibility. Each of the
Company, the Erin Mills Stockholders, and the Carlyle Stockholders agrees
that it will not, without the prior written consent of the Indemnified Party,
settle, compromise, or consent to the entry of any judgment in any pending or
threatened claim, action, or proceeding relating to the matters contemplated
by this SECTION 8 (if the Indemnified Party is a party thereto or has been
actually threatened to be made a party thereto) unless such settlement,
compromise, or consent includes an unconditional release of the Indemnified
Party from all liability arising or that may arise out of such claim, action
or proceeding.
SECTION 9. COVENANTS.
(a) INSPECTION RIGHTS. The Company will permit, and cause its
subsidiaries to permit, the representatives designated by the Erin Mills
Stockholders and the Carlyle Stockholders so long as (i) the Erin Mills
Stockholders and the Carlyle Stockholders and their affiliates together
beneficially own 1,600,000 shares of Common Stock or (ii) the representation
and warranties of the Company set forth in this Agreement survive, upon
reasonable notice and during normal business hours, to (x) visit and inspect
any of the properties of the Company and its subsidiaries, (y) examine the
corporate and financial records of the Company and its subsidiaries and to
make copies thereof, and (z) discuss the affairs, finances and accounts of
any such entities with the directors, officers,
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key employees, and (with the prior consent of the Company, which will not be
unreasonably withheld) independent accountants of the Company and its
subsidiaries.
(b) CONFIDENTIALITY. Each of the Erin Mills Stockholders and
the Carlyle Stockholders will hold in confidence all information and data
obtained by it from the Company or its subsidiaries (whether in connection
with the negotiation of the transactions contemplated by this Agreement,
pursuant to SECTION 9(a) or otherwise) and will not disclose such information
to any person or entity without the prior written consent of the Company
(except that the Erin Mills Stockholders and the Carlyle Stockholders may
disclose such information to their affiliates, directors, officers, and other
representatives who require access to such information in order to enable
them to exercise their rights under this Agreement or for any other proper
purpose contemplated thereby and who agree to be subject to the restrictions
set forth in this SECTION 9(b)); PROVIDED, HOWEVER, that the provisions of
this SECTION 9(b) will not apply to any information or data that can be shown
(i) to be generally available to the public through no fault of such party or
its affiliates, directors, officers, and other representatives or (ii) to
have been lawfully obtained by the Erin Mills Stockholders or the Carlyle
Stockholders from other sources not subject to a confidentiality obligation
to the Company.
SECTION 10. APPLICABLE LAW. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO ANY CONFLICTS OF LAW PRINCIPLES THAT WOULD REQUIRE THE APPLICATION
OF THE LAWS OF ANY OTHER JURISDICTION.
SECTION 11. PARTIES IN INTEREST; ASSIGNMENT. This Agreement
will be binding on and will inure to the benefit of the parties to this
Agreement and their respective successors and permitted assigns. No party
may assign this Agreement or its rights and benefits under this Agreement or
delegate and duties under this Agreement to any other person or entity
without the prior written consent of the other parties.
SECTION 12. AMENDMENT; WAIVER. The provisions of this Agreement
may be amended only by a written instrument executed by each of parties to
this Agreement, and compliance with the provisions of this Agreement may be
waived only by a written instrument executed by each party entitled to the
benefits of such provision. No failure on the part of any party to exercise
any right, power, or privilege granted under this Agreement will operate as a
waiver of such right, power, or privilege, nor will any single or partial
exercise of such right, power, or privilege preclude any other or further
exercise of such right, power, or privilege or the exercise of any other
right, power or privilege granted under this Agreement.
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SECTION 13. FURTHER ASSURANCES. Each party agrees to do, or
cause to be done, such further acts and to execute and deliver, or to cause
to be executed and delivered, such further agreements, instruments,
certificates, and other documents as may be necessary or appropriate to
effectuate and carry out the purposes of this Agreement.
SECTION 14. NOTICES AND OTHER COMMUNICATIONS. All notices and
other communications under this Agreement will be in writing and will be
given by delivery in person, by registered or certified mail (return receipt
requested and with postage prepaid thereon) or by cable, telex or facsimile
transmission to the parties at the following addresses (or at such other
address as either party will have furnished to the other in accordance with
the terms of this SECTION 14):
if to the Company, to:
HighwayMaster Communications, Inc.
16479 Dallas Parkway
Suite 710
Dallas, Texas 75248
Attention: William C. Kennedy, Jr.
if to any of the Erin Mills Stockholders, to:
Erin Mills International Investment Corporation
Trident House, Suite 204(a)
Broad Street
Bridgetown, Barbados
West Indies
Attention: Stephen Greaves
if to any of the Carlyle Stockholders (except for the Carlyle Stockholders
that are Clipper Stockholders (as defined in the Stockholders' Agreement)),
to:
The Carlyle Group, L.P.
1001 Pennsylvania Avenue
Suite 220 South
Washington, D.C. 20004-2505
Attention: Mark D. Ein
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if to any Clipper Stockholders, to:
The Clipper Group, L.P.
12 East 49th Street
New York, New York 10017
Attention: Daniel V. Cahillane
All notices and other communications under this Agreement that are addressed
as provided in or pursuant to this SECTION 14 will be deemed duly and validly
given (a) if delivered in person, upon delivery, (b) if delivered by
registered or certified mail (return receipt requested and with postage paid
thereon), 72 hours after being placed in a depository of the United States
mails; and (c) if delivered by cable, telex, or facsimile transmission, upon
transmission thereof and receipt of the appropriate answer back.
SECTION 15. ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement and understanding of the parties to this Agreement with
respect to the subject matter of this Agreement and supersedes any prior or
contemporaneous oral and prior written agreements or understandings between
the parties with respect to the subject matter of this Agreement.
SECTION 16. HEADINGS. The section headings contained in this
Agreement are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
SECTION 17. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which will be deemed an original and all of
which together will constitute one and the same instrument.
SECTION 18. NO GROUP OR BENEFICIAL OWNERSHIP. Nothing in this
Agreement will be deemed to constitute any party to this Agreement as member
of a "group" for the purposes of the Securities Exchange Act of 1934, as
amended, or to be an admission that any party to this Agreement beneficially
owns any of the securities of any other party to this Agreement.
SECTION 19. EXPENSES. The Company will (i) reimburse each of the
Carlyle Stockholders and the Erin Mills Stockholders for stamp and other
stock issuance or similar taxes that may be payable in respect of the
execution and delivery of this Agreement or the issuance, delivery, or
acquisition of any shares of Common Stock to be issued under this Agreement
(but excluding any income or similar state of federal taxes).
-13-
<PAGE>
Except as otherwise expressly provided in this Agreement, the parties will
bear their own respective expenses (including, but not limited to, all
compensation and expenses of counsel, financial advisors, consultants,
actuaries, and independent accountants) incurred in connection with this
Agreement and the transactions contemplated by this Agreement or the
Investment Documents.
SECTION 20. LIMITATION ON COMPANY REPRESENTATIONS.
Notwithstanding any provision of this Agreement to the contrary, the Company
makes no representation or warranty, and will have no obligation to indemnify
or liability for damages for, any matter to the extent that the material
facts with respect to such matter are known to any Carlyle Stockholders or
Erin Mills Stockholders as of the date of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
-14-
<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed as of the date first above written.
HIGHWAYMASTER COMMUNICATIONS, INC.
By: /s/ William C. Saunders
------------------------------------------
Name: William C. Saunders
------------------------------------------
Title: President
------------------------------------------
CLIPPER CAPITAL ASSOCIATES, L.P.
By: CLIPPER CAPITAL ASSOCIATES, INC.
Its: General Partner
By: /s/ Daniel V. Cahillane
-------------------------------------
Name: Daniel V. Cahillane
-------------------------------------
Title: Treasurer & Secretary
-------------------------------------
CLIPPER/MERBAN, L.P.
By: CLIPPER CAPITAL ASSOCIATES, L.P.
Its: General Partner
By: CLIPPER CAPITAL ASSOCIATES, INC.
Its: General Partner
By: /s/ Daniel V. Cahillane
-------------------------------------
Name: Daniel V. Cahillane
-------------------------------------
Title: Treasurer & Secretary
-------------------------------------
-15-
<PAGE>
CLIPPER/MERCHANT PARTNERS, L.P.
By: CLIPPER CAPITAL ASSOCIATES, L.P.
Its: General Partner
By: CLIPPER CAPITAL ASSOCIATES, INC.
Its: General Partner
By: /s/ Daniel V. Cahillane
--------------------------------------------
Name: Daniel V. Cahillane
--------------------------------------------
Title: Treasurer & Secretary
--------------------------------------------
CARLYLE-HIGHWAYMASTER INVESTORS, L.P.
By: T.C. GROUP, L.L.C.
Its: General Partner
By: /s/ Mark D. Ein
---------------------------------------------
Name: Mark D. Ein
---------------------------------------------
Title: Vice-President of Managing Member of TC Group
---------------------------------------------
CARLYLE-HIGHWAYMASTER INVESTORS II, L.P.
By: T.C. GROUP, L.L.C.
Its: General Partner
By: /s/ Mark D. Ein
---------------------------------------------
Name: Mark D. Ein
---------------------------------------------
Title: Vice-President of Managing Member of TC Group
---------------------------------------------
CHASE MANHATTAN INVESTMENT HOLDINGS,
INC.
By: /s/ Jeffrey C. Walker
---------------------------------------------
Name: Jeffrey C. Walker
---------------------------------------------
Title: Chief Executive Officer
---------------------------------------------
-16-
<PAGE>
H.M. RANA INVESTMENTS LIMITED
By: --------------------------------------
By: /s/ Fahad A. Almubarak
-------------------------------------
Name: Fahad A. Almubarak
-------------------------------------
Title: President
-------------------------------------
ARCHERY PARTNERS
By: --------------------------------------
Its: General Partner
By: /s/ Jeffrey C. Walker
-------------------------------------
Name: Jeffrey C. Walker
-------------------------------------
Title: Managing Partner
THE ERIN MILLS INVESTMENT CORPORATION
By: /s/ G. C. Quinn
-----------------------------------------
Name: G. C. Quinn
-----------------------------------------
Title: President
-----------------------------------------
THE ERIN MILLS DEVELOPMENT CORPORATION
By: /s/ G. C. Quinn
-----------------------------------------
Name: G. C. Quinn
-----------------------------------------
Title: Executive Vice-President
-----------------------------------------
ERIN MILLS INTERNATIONAL INVESTMENT
CORPORATION
By: /s/ S. L. Greaves
-----------------------------------------
Name: Stephen L. Greaves
-----------------------------------------
Title: General Manager
-----------------------------------------
-17-
<PAGE>
/s/ Robert T. Hayes by Douglas Dunlap Attorney-in-fact
----------------------------------------------------------
Robert T. Hayes
/s/ Robert S. Folsom by Haddon O. Winkler Attorney-in fact
----------------------------------------------------------
Robert S. Folsom
-18-
<PAGE>
EXHIBIT A
1. CARLYLE STOCKHOLDERS.
Clipper Capital Associates, L.P.
Clipper/Merban, L.P.
Clipper/Merchant Partners, L.P.
Carlyle-HighwayMaster Investors, L.P.
Carlyle-HighwayMaster Investors II, L.P.
Chase Manhattan Investment Holdings, Inc.
H.M. Rana Investments Limited
Archery Partners
2. ERIN MILLS STOCKHOLDERS.
The Erin Mills Investment Corporation
The Erin Mills Development Corporation
Erin Mills International Investment Corporation
Robert T. Hayes
Robert S. Folsom
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<PAGE>
EXHIBIT B
NAME NUMBER OF SHARES OF B NUMBER OF SHARES OF SERIES
STOCK TO BE RECEIVED B PREFERRED STOCK TO BE
SURRENDERED
The Erin Mills Development 367,680 459.6
Corporation
The Erin Mills Investment 96,000 120.0
Corporation
Erin Mills International 279,604 349.505
Investment Corporation
Robert T. Hayes 86,436 108.0450
Robert S. Folsom 34,280 42.85
------- ----------
TOTALS 864,000 1,080
------- ----------
------- ----------
-20-
<PAGE>
EXHIBIT C
NAME EXCLUDED INTEREST
Clipper Capital Associates, L.P. $ 148.96
Clipper/Merban, L.P. 8,396.97
Clipper/Merchant Partners, L.P. 8,290.78
Carlyle-HighwayMaster Investors, L.P. 25,866.62
Carlyle-HighwayMaster Investors II, L.P. 2,436.33
Chase Manhattan Investment Holdings, Inc. 6,191.77
H.M. Rana Investments Limited 10,522.67
Archery Partners 1,282.93
----------
$63,137.03
----------
----------
-21-
<PAGE>
----------------------------------------------------------------------
----------------------------------------------------------------------
HIGHWAYMASTER COMMUNICATIONS, INC.
AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
DATED AS OF
SEPTEMBER 27, 1996
----------------------------------------------------------------------
----------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
Page
Section 1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. The Recapitalization; Amendment of Certificate of
Incorporation . . . . . . . . . . . . . . . . . . . . . . 6
Section 3. Transfer of Securities . . . . . . . . . . . . . . . . . . 7
Section 4. Registration Rights. . . . . . . . . . . . . . . . . . . 10
Section 5. Governance . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 35
ii
<PAGE>
AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
This AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT ("AGREEMENT"), dated
as of September 27, 1996, amends and restates in its entirety that Stockholders'
Agreement, dated as of February 4, 1994 (the "Original Agreement"), by and among
HIGHWAYMASTER COMMUNICATIONS, INC., a Delaware corporation (previously named HM
HOLDING CORPORATION) (the "COMPANY"), and the other Persons (as hereinafter
defined) identified in Appendix A hereto, as the Original Agreement has been
amended by the amendments and addenda set forth in Appendix B hereto, adds an
additional party hereto, Southwestern Bell Wireless Holdings, Inc., a Delaware
corporation ("SBW") and provides that the Persons identified in Appendix C
hereto shall no longer be parties hereto.
RECITALS:
A. Simultaneously with the execution hereof, SBW is acquiring
certain shares of Series D Preferred Stock (as hereinafter defined) of the
Company pursuant to the Purchase Agreement dated as of the date hereof, by and
between the Company and SBW (the "PURCHASE AGREEMENT") and agreeing to provide
certain services to the Company pursuant to a separate technical services
agreement.
B. Certain of the parties hereto have effected, or agreed to effect,
the Recapitalization reflected in Sections 2(a), (b) and (c) hereof.
C. Pursuant to Section 7(h) of the Original Agreement with respect
to the terms hereof generally and Section 4(k) of the Original Agreement with
respect to the registration rights provisions, holders of a sufficient number of
Shares (as hereinafter defined) have executed this Agreement thereby amending
and restating the Original Agreement, as amended to date, in its entirety as set
forth herein, for the purpose of regulating certain aspects of the Stockholders'
relationships with regard to each other and the Company.
D. Immediately after the execution hereof, the Stockholders (as
hereinafter defined) will consist of (i) Carlyle HighwayMaster Investors, L.P.,
Carlyle HighwayMaster Investors II, L.P., H.M. Rana Investments Limited, TC
Group, L.L.C., Mark D. Ein, Chase Manhattan Investment Holdings, Inc. and
Archery Partners (the "CARLYLE ENTITIES"), (ii) Clipper/Merban, L.P.,
Clipper/Merchant Partners, L.P. and Clipper
1
<PAGE>
Capital Associates, L.P. (the "CLIPPER ENTITIES"), (iii) Erin Mills
International Investment Corporation, The Erin Mills Investment Corporation
and The Erin Mills Development Corporation (the "ERIN MILLS COMPANIES"), (iv)
William C. Kennedy, Jr., Donald M. Kennedy, William C. Saunders, Robert S.
Folsom and Robert T. Hayes and (v) SBW.
E. Simultaneously with the execution hereof, the Company is issuing
to SBW a warrant certificate for warrants (the "Warrants") for 5,000,000 shares
of Common Stock (as hereinafter defined) in consideration for SBW entering into
the transactions contemplated by the Purchase Agreement and the other
Transaction Documents (as hereinafter defined).
AGREEMENT:
NOW THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the Company and
Stockholders agree as follows:
Section 1. DEFINITIONS. As used herein, the following terms shall
have the following meanings:
"AFFILIATE" of any specified person or entity means any person or
entity directly or indirectly controlling or controlled by or under direct or
indirect common control with such person or entity.
"ANTI-TAKEOVER PROVISION" shall have the meaning set forth in Section
5(g) hereto.
"BENEFICIALLY OWN" (and correlative terms) means, with respect to any
shares of Common Stock or other securities, to be entitled, directly or
indirectly through one or more intermediaries, to all material incidents of
ownership with respect to such securities, including, but not limited to, (i)
the right to vote such securities (in the case of voting securities), (ii)
subject to any transfer restrictions, the right to dispose of such securities
and to receive any proceeds realized from the disposition thereof and (iii) the
right to receive any dividends and other distributions with respect to such
securities.
"BY-WORD STOCKHOLDER" means each of William C. Kennedy, Jr., Donald M.
Kennedy, William C. Saunders, Robert T. Hayes and Robert S. Folsom.
"CARLYLE ENTITIES" shall have the meaning set forth in the Recitals
hereto.
2
<PAGE>
"CARLYLE STOCKHOLDER" means each of the Carlyle Entities and any
Permitted Assign (as hereinafter defined) who acquires shares of Common Stock
directly or indirectly from a Carlyle Stockholder and who executes a
supplemental agreement as contemplated in Section 6(b) hereof, in his, her or
its capacity as a holder of Common Stock.
"CLASS B COMMON STOCK" means the new class of Company Common Stock,
par value $0.01 per share, to be authorized as contemplated in Section 2(e)
hereof, the terms of which are set forth on Exhibit B to the Purchase Agreement.
"CLIPPER ENTITIES" shall have the meaning set forth in the Recitals
hereto.
"CLIPPER STOCKHOLDER" means each of the Clipper Entities.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Common Stock, par value $.01 per share, of
the Company and any other capital stock of the Company into which such Common
Stock is reclassified or reconstituted.
"COMPANY COMMON STOCK" means the Common Stock and the Class B Common
Stock.
"DEMAND REGISTRATION" shall have the meaning set forth in Section 4(b)
hereof.
"DIRECTOR" means a member of the Board of Directors of the Company.
"ERIN MILLS COMPANIES" shall have the meaning set forth in the
Recitals hereto.
"ERIN MILLS STOCKHOLDER" means each of the Erin Mills Companies and
any Permitted Assign who acquires shares of Common Stock directly or indirectly
from an Erin Mills Company and who executes a supplemental agreement as
contemplated in Section 6(b) hereof and, solely for purposes of Section 4
hereof, Robert S. Folsom and Robert T. Hayes, in each case in his, her or its
capacity as a holder of Common Stock.
"EXCLUDED OPTIONS" means options, warrants, rights or obligations to
acquire Common Stock issued by any Person other than the Company.
3
<PAGE>
"EXCLUDED RELATED PARTY" means, with respect to any Stockholder, a
Related Party of such Stockholder which either (i) is a natural person or (ii)
is not an Affiliate of such Stockholder.
"EXEMPT TRANSFER" shall mean the meaning set forth in Section 3(d)
hereof.
"EXISTING LINE OF BUSINESS" shall have the meaning set forth in
Section 5(g) hereof.
"INCENTIVE STOCK OPTION PLAN" means the HM Holding Corporation 1994
Incentive Stock Option Plan, as adopted by the Company's Board of Directors and
as amended from time to time, providing for the grant to certain management
employees of the Company and its Subsidiaries of options to purchase shares of
Common Stock.
"MAJORITY IN INTEREST" means, with respect to any specified group of
Stockholders, Stockholders included in such group which hold more than fifty
percent (50%) of the aggregate shares of Common Stock held collectively by such
group of Stockholders on a Fully Diluted Basis (as hereinafter defined).
"ON A FULLY DILUTED BASIS" with respect to the Company's Common Stock
means on a basis that takes into account the number of shares of Common Stock
which are issued and outstanding plus the number of shares of Common Stock
issuable upon conversion of any outstanding Series D Preferred Stock and, once
authorized and issued, Class B Common Stock or pursuant to outstanding options,
warrants, rights or obligations to purchase or subscribe for shares of Common
Stock or securities of the Company which are exchangeable or exercisable into
shares of Common Stock as of the applicable date of determination, other than
the Warrants, Excluded Options and employee stock options.
"PERMITTED ASSIGN" shall have the meaning set forth in Section 6(b)
hereof.
"PERSON" means any individual, partnership, corporation, association,
joint stock company, trust, joint venture, unincorporated organization or
governmental entity or department, agency or political subdivision thereof.
"PIGGYBACK REGISTRATION" shall have the meaning set forth in
Section 4(a) hereof.
4
<PAGE>
"PUBLIC TRANSFEREE" means any subsequent holder of Common Stock who
acquires Shares from a Stockholder pursuant to an effective registration
statement under the Securities Act (as hereinafter defined) or pursuant to
Rule 144 promulgated thereunder.
"RECAPITALIZATION AGREEMENT" means the Recapitalization Agreement,
dated as of the date hereof, among the Company, certain Erin Mills Stockholders,
Carlyle Stockholders and Clipper Stockholders, a copy of which is attached as
Exhibit A hereto.
"RECAPITALIZATION SHARES" shall have the meaning set forth in
Section 4(c) hereof.
"REGULATORY RELIEF" means that SBC Communications, Inc. or its
Affiliates, in their sole judgment, have obtained all necessary federal and
state regulatory approvals to provide landline, interLATA long-distance service
pursuant to the Communications Act of 1934, as amended by The Telecommunications
Act of 1996.
"RELATED PARTY" with respect to any Stockholder means: (A) an
Affiliate of such Stockholder; (B) a trust, corporation, partnership or other
entity, the beneficiaries, stockholders, partners, or owners, or persons holding
a controlling interest of which consist of such Stockholder and/or its
Affiliates; (C) with respect to any Stockholder who is an individual, such
Stockholder's spouse, siblings, children or parents; (D) with respect to any
Stockholder which is a partnership, such Stockholders' partners as of the date
hereof; and (E) with respect to any Stockholder which is a corporation, such
Stockholder's stockholders as of the date hereof.
"SBW STOCKHOLDER" means SBW and any Affiliate of SBW who acquires
Shares from SBW and who executes a supplemental agreement as contemplated in
Section 6(b) hereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
"SERIES D PREFERRED STOCK" means the Series D Participating
Convertible Preferred Stock, par value $.01 per share, of the Company, the
Certificate of Designation for which is set forth in Exhibit A to the Purchase
Agreement.
"SHARES" means (i) any shares of the capital stock of the Company and
(ii) any securities convertible into, and any rights, options or warrants
exchangeable or
5
<PAGE>
exercisable for, any of the shares of the capital stock of the Company, in
either case, at any time outstanding.
"STOCKHOLDERS" means the By-Word Stockholders, the Carlyle
Stockholders, the Clipper Stockholders, the Erin Mills Stockholders and the SBW
Stockholders.
"SUBSIDIARY" of any specified person or entity means a corporation or
other entity of which a majority of the voting power of the equity securities or
other equity interests is owned, directly or indirectly, by such specified
person or entity or any Subsidiary of such specified person or entity.
"TRANSACTION DOCUMENTS" shall have the meaning set forth in the
Purchase Agreement.
"TRANSFER" shall have the meaning set forth in Section 3(a) hereof.
"WARRANTS" shall have the meaning set forth in the Recitals hereto.
Section 2. THE RECAPITALIZATION; AMENDMENT OF CERTIFICATE OF
INCORPORATION.
(a) ERIN MILLS COMPANIES.
(1) $10 MILLION INVESTMENT. Simultaneously with the execution
hereof, Erin Mills International Investment Corporation and one of its
affiliates are investing $10.0 million in cash in the Company in
exchange for 800,000 shares of Common Stock, as provided in the
Recapitalization Agreement.
(2) SERIES B PREFERRED STOCK. Simultaneously with the execution
hereof, the Series B Preferred Stock owned by The Erin Mills
Development Corporation and certain of its affiliates and by Robert S.
Folsom and Robert T. Hayes is being exchanged for 864,000 shares of
Common Stock, as provided in the Recapitalization Agreement.
(b) CARLYLE AND CLIPPER ENTITIES. Simultaneously with the execution
hereof, the promissory notes in the aggregate principal amount of approximately
$12.7 million held by certain Carlyle Stockholders and the Clipper Stockholders
together with accrued and unpaid interest in the amount of approximately
$63,000, which were issued by the Company pursuant to the Note Exchange and
Amendments Agreement, dated
6
<PAGE>
as of May 26, 1995, are being converted into shares of Common Stock at a
price of $12.50 per share, as provided in the Recapitalization Agreement.
(c) TERMINATION OF SUBSCRIPTION AGREEMENT. Simultaneously with the
execution hereof, the Company, certain Carlyle Stockholders and the Clipper
Stockholders are terminating certain provisions of the Subscription Agreement,
dated as of February 4, 1994, as provided in the Recapitalization Agreement.
(d) BYLAWS. Simultaneously with the execution hereof, the Company
has amended the Bylaws as set forth as Exhibit B hereto.
(e) AMENDMENT OF CERTIFICATE OF INCORPORATION. The Stockholders
listed on Appendix D have granted written consents and irrevocable proxies to
SBW covering the shares of Common Stock owned by them with respect to the
amendment of the Certificate of Incorporation as set forth on Exhibit B to the
Purchase Agreement and the issuance of the Common Stock pursuant to the exercise
of the Warrants, and SBW has delivered to the Company written consents covering
such shares, and immediately following the issuance of the Series D Preferred
Stock, will deliver to the Company a written consent covering such shares, each
approving such amendment. On the twentieth day following the mailing of an
information statement to the Company's stockholders in compliance with
Regulation 14C promulgated under the Securities Exchange Act of 1934, the
Company will cause the Certificate of Amendment to be filed with the Secretary
of State of the State of Delaware.
Section 3. TRANSFER OF SECURITIES
(a) GENERAL PROHIBITION ON TRANSFER. None of the Stockholders
shall sell, assign, transfer, pledge, encumber or in any way dispose
of ("TRANSFER") any Shares unless (i) such Stockholder shall have
delivered to the Company an opinion of counsel to such Stockholder, in
form and substance reasonably satisfactory to the Company, to the
effect that such Transfer is exempt from the registration requirements
of the Securities Act or (ii) the registration requirements of the
Securities Act have been complied with in connection with such
Transfer, provided, however, that the Company shall be entitled in its
sole discretion to waive the requirement that an opinion of counsel be
delivered pursuant to this Section 3(a) if it determines that a
Transfer is in accordance with applicable law.
(b) TRANSFER BY FIRST REFUSAL STOCKHOLDERS. None of the Carlyle
Stockholders, the Erin Mills Stockholders (other than Robert S. Folsom
and
7
<PAGE>
Robert T. Hayes), William C. Kennedy, Jr. or William C. Saunders
(collectively the "First Refusal Stockholders") shall Transfer any
Shares unless (i) such First Refusal Stockholder has complied with the
provisions of this Section 3(c) to the extent applicable to such
Transfer and (ii) the transferee (if other than a Public Transferee or
an Excluded Related Party) has agreed to become a party to, and be
bound by the terms of, Section 3 of this Agreement pursuant to a
supplemental agreement hereto in form and substance reasonably
satisfactory to the Company and SBW, executed by such transferee
(provided, however, that the requirement set forth in this clause (ii)
shall not apply to any transferee (other than a Permitted Assign or a
transferee pursuant to Section 3(d) who is not an Excluded Related
Party) acquiring Shares from a Seller (as hereinafter defined) after
the earlier of (A) the date of Regulatory Relief and (B) September 27,
1997 pursuant to a sale effected by such Seller in compliance with the
provisions of subsection (c) below). Notwithstanding the foregoing,
no First Refusal Stockholder shall be required to execute a
supplemental agreement.
(c) RIGHT OF FIRST REFUSAL.
(i) If any First Refusal Stockholder (a "SELLER") receives
a bona fide offer, which the Seller desires to accept ("Offer") to
purchase any or all of the Shares (the "TRANSFER STOCK") then owned by
such Seller from any person (an "Offeror"), such Seller shall notify
SBW in writing of the terms of such Offer, which notice shall identify
the Offeror, the price offered, and all the other material terms and
conditions of such Offer. In addition, if a Seller wishes to sell to
the public pursuant to a registration statement under the Securities
Act or pursuant to Rule 144 promulgated thereunder (a "Public Sale"),
the Seller shall notify SBW in writing of the proposed terms of the
Public Sale, which Public Sale shall also constitute an Offer for the
purposes hereof. The Seller shall provide a written notice (the
"NOTICE") of an Offer to SBW promptly, but in no event later than five
(5) business days following the determination by the Seller that it
desires to accept an Offer which does not relate to a Public Sale.
The Notice shall contain an irrevocable offer to sell the Transfer
Stock to SBW at a price equal to the price and upon substantially the
same terms as the terms contained in such Offer; provided, however,
that (A) if such Offer shall relate to a proposed Public Sale, the
Notice shall offer to sell the Transfer Stock at a price determined by
the Seller (which in the case of a registered public offering shall
not be higher than the price the Seller in good faith
8
<PAGE>
believes can be obtained in such offering), minus, in the case of a
registered public offering pursuant to a firm commitment underwriting,
customary underwriting commissions, and (B) if the terms of the Offer
entitle the Offeror to purchase the Transfer Stock for securities of
such Offeror (the "OFFERED SECURITIES") or other property, SBW shall be
entitled to purchase the Transfer Stock for an amount of cash equal to
the fair market value of the Offered Securities or such other property.
SBW shall have the irrevocable right and option (the "RIGHT OF FIRST
REFUSAL"), to accept such irrevocable offer as to all Shares as to which
the Offer is made (except in the event of a Public Sale pursuant to Rule
144, in which event SBW may accept as to any number of Shares) by
providing the Seller with an irrevocable written notice of acceptance
within fifteen (15) business days, or, in the case of a Public Sale
pursuant to Rule 144, five (5) business days, after the date the Notice
is received (the "NOTICE PERIOD"). The closing of the purchases of the
Transfer Stock by SBW shall take place at the principal office of SBW no
later than the fifth (5th) business day after the acceptance by SBW. At
such closing, SBW shall deliver a certified check or checks or wire
transfer in the appropriate amount to the Seller against delivery of
certificates representing the Transfer Stock so purchased, duly endorsed
in blank by the person or persons in whose name a stock certificate is
registered or accompanied by a duly executed assignment separate from
the certificate with the signatures thereon guaranteed by a commercial
bank or trust company. If SBW does not elect to purchase the Transfer
Stock during the Notice Period or if SBW fails or refuses for any reason
(including, but not limited to, the existence of any requirement that
SBW obtain any required regulatory approval) to complete the closing of
the purchase of any Transfer Stock upon the day specified above, the
Seller shall have ninety (90) days from the end of the Notice Period
(the "SALES PERIOD") in which to Transfer all of the Transfer Stock
pursuant to the Offer to the Offeror or in a Public Sale, it being
understood that (A) in a registered public offering the sales price may
be greater than or less than the Offer price and (B) in any other
transaction the sales price and other terms of the Transfer may be more
favorable to the Seller than those set forth in the Notice. In
addition, Seller may not knowingly make a Public Sale to any purchaser
which Seller knows to own in excess of 5% of the Common Stock, provided
that this restriction shall not create any duty of inquiry on the part
of the Seller. Promptly after any sale pursuant to this Section 3(c),
the Seller shall notify SBW of the consummation thereof and shall
furnish such evidence of the completion (including time of completion)
of such sale
9
<PAGE>
and of the terms thereof as SBW may reasonably request. If, at the
termination of the Sales Period, the Seller has not completed the sale
of the Transfer Stock to the Offeror or in a Public Sale, all of the
restrictions on Transfer contained in this Section 3(c) shall again be
in effect with respect to all such Seller's Transfer Stock.
(d) EXEMPT TRANSFER. The following transactions shall
constitute "EXEMPT TRANSFERS" for the purpose of Section 3 and shall
be exempt from the requirements of subsection (c), but not subsections
(a) and (b): (i) a Transfer of Shares by a First Refusal Stockholder
to SBW, (ii) a Transfer by a Stockholder of Shares by will or
intestate succession to such Stockholder's executors, administrators,
testamentary trustees, legatees or beneficiaries, (iii) a Transfer of
Shares by a Stockholder to any Related Party of such Stockholder and
(iv) a Transfer of Shares (A) by any Carlyle Stockholder to any other
Carlyle Stockholder or to any Clipper Stockholder, (B) by any Erin
Mills Stockholder to any other Erin Mills Stockholder or (C) by
William C. Kennedy, Jr. or William C. Saunders to any By-Word
Stockholder, or (vi) a Transfer of Shares that has been approved in
writing by SBW as an Exempt Transfer.
(e) RESTRICTIONS ON SBW. No SBW Stockholder shall Transfer any
Series D Preferred Stock or Class B Common Stock except to an
Affiliate of SBW.
Section 4. REGISTRATION RIGHTS.
(a) PIGGYBACK REGISTRATION RIGHTS.
(1) RIGHT TO PIGGYBACK. Subject to the last sentence of this
subsection (1), whenever the Company proposes to register any shares
of Common Stock (or securities convertible into or exchangeable for,
or options, warrants or other rights to acquire, Common Stock) with
the Securities and Exchange Commission (the "COMMISSION") under the
Securities Act (other than (A) registrations on Form S-4 or Form S-8
and (B) the registration of the Recapitalization Shares (as
hereinafter defined) pursuant to subsection (c) below) and the
registration form to be used may be used for the registration of the
Registrable Securities (as defined in subsection (k) below) (a
"PIGGYBACK REGISTRATION"), the Company will give written notice to all
Stockholders, at least thirty-five (35) days prior to the
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anticipated filing date, of its intention to effect such a registration,
which notice will specify the proposed offering price, the kind and
number of securities proposed to be registered, the distribution
arrangements and such other information that at the time would be
appropriate to include in such notice, and will, subject to subsection
(a)(2) below, include in such Piggyback Registration all Registrable
Securities with respect to which the Company has received written
requests for inclusion therein within fifteen (15) business days after
the effectiveness of the Company's notice. Except as may otherwise be
provided in this Agreement, Registrable Securities with respect to which
such request for registration has been timely received will be
registered by the Company and offered to the public in a Piggyback
Registration pursuant to this Section 4 on terms and conditions at least
as favorable as those applicable to the registration of shares of Common
Stock (or securities convertible into or exchangeable or exercisable for
Common Stock) to be sold by the Company and by any other person selling
under such Piggyback Registration.
(2) PRIORITY ON PIGGYBACK REGISTRATIONS. If the managing
underwriter or underwriters, if any, advise the holders of Registrable
Securities in writing that in its or their reasonable opinion or, in
the case of a Piggyback Registration not being underwritten, the
Company shall reasonably determine (and notify the holders of
Registrable Securities of such determination), after consultation with
an investment banker of nationally recognized standing, that the
number or kind of securities proposed to be sold in such registration
(including Registrable Securities to be included pursuant to
subsection (a)(1) above) will materially adversely affect the success
of such offering (including, without limitation, a material impact on
the selling price), the Company will include in such registration the
number of securities, if any, which, in the opinion of such
underwriter or underwriters, or the Company, as the case may be, can
be sold, without having a material adverse effect on the success of
such offering, as follows: (i) first, the shares the Company proposes
to sell, (ii) second, the Registrable Securities requested to be
included in such registration by SBW, the Carlyle Stockholders, the
Clipper Stockholders and the Erin Mills Stockholders, pro rata among
such requesting Stockholders on the basis of their respective holdings
of Common Stock on a Fully Diluted Basis, and (iii) third, the
Registrable Securities requested to be included in such registration
by the By-Word Stockholders, pro rata among such requesting
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Stockholders on the basis of their respective holdings of Common Stock
on a Fully Diluted Basis.
(3) SELECTION OF UNDERWRITERS. If any Piggyback Registration is
an underwritten offering, the Company (by action of the Board of
Directors) will select a managing underwriter or underwriters to
administer the offering, which managing underwriter or underwriters
will be of nationally recognized standing and reasonably acceptable to
the holders of a majority of the Registrable Securities included
therein.
(b) DEMAND REGISTRATION RIGHTS.
(1) RIGHT TO DEMAND REGISTRATION. Each of (A) the Carlyle
Stockholders and the Clipper Stockholders as a group; (B) the Erin
Mills Stockholders as a group and (C) SBW (each referred to herein as
a "DEMANDING GROUP") shall have the right on the number of occasions
set forth in subsection (b)(2) to make a written request of the
Company for registration with the Commission, under and in accordance
with the provisions of the Securities Act, of all or part of their
Registrable Securities (a "DEMAND REGISTRATION"); PROVIDED, that (x)
the Company shall not effect a Demand Registration unless such Demand
Registration has been requested by persons holding at least a majority
of the Registrable Securities held by the Demanding Group on the date
of such written request and unless the number of Shares to be sold in
such Demand Registration by the Demanding Group is at least 1,000,000
shares of Common Stock, (y) if the Board of Directors determines in
the exercise of its reasonable judgment that, due to a pending or
contemplated acquisition or disposition, to effect such Demand
Registration at such time would have a material adverse effect on the
Company, the Company may defer such Demand Registration for a single
period not to exceed one hundred eighty (180) days (but if the Company
elects to defer any Demand Registration pursuant to the terms of this
sentence, no Demand Registration shall be deemed to have occurred for
purposes of this Agreement) and (z) the Company shall be obligated to
effect only the number of Demand Registrations set forth in subsection
4(b)(2) below. Within ten (10) days after receipt of the request for
a Demand Registration, the Company will send written notice (the
"NOTICE") of such registration request and its intention to comply
therewith to all Stockholders who are holders of Registrable
Securities and, subject to subsection (3) below, the Company will
include in such registration all
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Registrable Securities of such Stockholders with respect to which the
Company has received written requests for inclusion therein within
twenty (20) business days after the effectiveness of the Notice. All
requests made pursuant to this subsection (b)(1) will specify the
aggregate number of Registrable Securities requested to be registered
and will also specify the intended methods of disposition thereof.
(2) NUMBER OF DEMAND REGISTRATIONS. Each Demanding Group shall
be entitled to two (2) Demand Registrations, and the expenses of each
(including the fees and expenses of a total of one counsel for the
Demanding Group in accordance with subsection (f)(2) below) shall be
borne by the Company. A Demand Registration shall not be counted as a
Demand Registration hereunder until such Demand Registration has been
declared effective by the Commission and maintained continuously
effective for a period of at least three months or such shorter period
when all Registrable Securities included therein have been sold in
accordance with such Demand Registration.
If the Company elects to issue and sell and ultimately sells any
equity securities pursuant to any Registration Statement filed in
connection with a Demand Registration, then such Registration shall be
deemed not to be a Demand Registration for purposes of determining the
number of Demand Registrations granted by this Agreement.
(3) PRIORITY ON DEMAND REGISTRATIONS. If in any Demand
Registration the managing underwriter or underwriters thereof (or in
the case of a Demand Registration not being underwritten, the holders
of a majority of the Registrable Securities held by the Demanding
Group after consultation with an investment banker of nationally
recognized standing), advise the Company in writing that in its or
their reasonable opinion the number of securities proposed to be sold
in such Demand Registration exceeds the number that can be sold in
such offering without having a material adverse effect on the success
of the offering (including, without limitation, an impact on the
selling price), the Company will include in such registration only the
number of securities that, in the reasonable opinion of such
underwriter or underwriters (or such holders of Registrable Securities
held by the Demanding Group, as the case may be) can be sold without
having a material adverse effect on the success of the offering, as
follows: (i) first, the Registrable Securities requested to be
included in such Demand
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Registration by the Demanding Group, pro rata, among such Stockholders
on the basis of their respective holdings of Common Stock on a Fully
Diluted Basis, (ii) second, the Registrable Securities requested to be
included in such Demand Registration by the Erin Mills Stockholders and
SBW (if the Demanding Group is the Carlyle Stockholders and the Clipper
Stockholders), or the Carlyle Stockholders and the Clipper Stockholders,
as a group, and SBW (if the Demanding Group is the Erin Mills
Stockholders), or the Carlyle Stockholders and the Clipper Stockholders,
as a group, and the Erin Mills Stockholders (if the Demanding Group is
SBW), in all such cases pro rata among such Stockholders on the basis of
their respective holdings of Common Stock on a Fully Diluted Basis,
(iii) third, shares to be issued and sold by the Company and requested
to be included in such Demand Registration, and (iv) fourth, the
Registrable Securities requested to be included in such Demand
Registration by the By-Word Stockholders, pro rata among such requesting
Stockholders on the basis of their respective holdings of Common Stock
on a Fully Diluted Basis.
(4) SELECTION OF UNDERWRITERS. If a Demand Registration is an
underwritten offering, the holders of a majority of the Registrable
Securities to be included in such Demand Registration held by members
of the Demanding Group that initiated such Demand Registration will
select a managing underwriter or underwriters of recognized national
standing to administer the offering, which managing underwriter or
underwriters shall be reasonably acceptable to the Company.
(c) REGISTRATION OF RECAPITALIZATION SHARES. Within a reasonable
period prior to each Registration Date (as hereinafter defined), the Company
shall prepare and file with the Commission a registration statement on an
appropriate form in order to register the Recapitalization Shares under the
Securities Act for sale in one or more privately negotiated transactions or in
open market transactions effected on any stock exchange on which the Common
Stock is then listed, or if not so listed, on any automated quotation system to
which the Common Stock is then admitted to trading; provided, however, that if
the Board of Directors determines in the exercise of its reasonable judgment
that, due to a pending or contemplated acquisition or disposition, to effect
such registration at such time would have a material adverse effect on the
Company, the Company may defer such registration for a single period not to
exceed ninety (90) days. The Company shall use its reasonable best efforts to
have each such registration statement declared effective by the Commission as
promptly as reasonably practicable after the filing thereof with the Commission;
provided, however, that (i) no sales of Recapitalization Shares shall be
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effected pursuant to any such registration statement prior to March 31, 1997 and
(ii) sales of an aggregate of no more than one-half of the total number of
Recapitalization Shares shall be effected pursuant to any such registration
statement prior to September 27, 1997, such dates being referred to as the
"Registration Dates". In addition, the Company shall use its reasonable best
efforts to keep such registration statement effective for a period of at least
three months after the applicable Registration Date. As used herein, the term
"Recapitalization Shares" shall mean the shares of Common Stock issued pursuant
to the Recapitalization Agreement to Erin Mills International Investment
Corporation as described in Section 2(a)(1) hereof and to certain Carlyle
Stockholders and Clipper Stockholders as described in Section 2(b) hereof.
(d) REGISTRATION PROCEDURES. With respect to any Piggyback
Registration or Demand Registration and (except as expressly provided in
subsection (c) above) the registration to be effected pursuant to subsection (c)
above (generically, a "REGISTRATION"), the Company will, subject to subsections
4(a)(2) and 4(b)(3), as expeditiously as practicable:
(1) prepare and file with the Commission, within 60 days after
mailing the applicable Notice, a registration statement or
registration statements (the "REGISTRATION STATEMENT") relating to the
applicable Registration on any appropriate form under the Securities
Act, which form shall be available for the sale of the Registrable
Securities in accordance with the intended method or methods of
distribution thereof; PROVIDED that the Company will include in any
Registration Statement on a form other than Form S-1 all information
that the holders of the Registrable Securities so to be registered
shall reasonably request and shall include all financial statements
required by the Commission to be filed therewith, cooperate and assist
in any filings required to be made with the National Association of
Securities Dealers, Inc. ("NASD") or any securities exchange on which
the Common Stock may then be listed, and use its reasonable best
efforts to cause such Registration Statement to become effective
promptly; PROVIDED, FURTHER, that before filing a Registration
Statement or prospectus related thereto (a "PROSPECTUS") or any
amendments or supplements thereto, the Company will furnish to the
holders of the Registrable Securities covered by such Registration
Statement and the underwriters, if any, copies of all such documents
proposed to be filed, which documents will be subject to the
reasonable review of such holders and underwriters and their
respective counsel, and the Company will not file any Registration
Statement or amendment thereto or any Prospectus or any supplement
thereto to which
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the holders of a majority of the Registrable Securities covered by such
Registration Statement, the Demanding Group, if a Demand Registration,
or the underwriters, if any, shall reasonably object;
(2) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep each Registration Statement effective for the
applicable period, or such shorter period which will terminate when
all Registrable Securities covered by such Registration Statement have
been sold; cause each Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act; and comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement
to the Prospectus, PROVIDED, that the Company shall not be deemed to
have used its reasonable best efforts to keep a Registration Statement
effective during the applicable period if it voluntarily takes any
action that would result in selling holders of the Registrable
Securities covered thereby not being able to sell such Registrable
Securities during that period unless such action is required under
applicable law, and PROVIDED, FURTHER that the foregoing shall not
apply to actions taken by the Company in good faith and for valid
business reasons, including without limitation the acquisition or
divestiture of assets, so long as the Company promptly thereafter
complies with the requirements of subsection (11) of this subsection
(d), if applicable;
(3) notify the selling holders of Registrable Securities and the
managing underwriters, if any, promptly, and (if requested by any such
person or entity) confirm such advice in writing, (A) when the
Prospectus or any Prospectus supplement or post-effective amendment
has been filed, and, with respect to the Registration Statement or any
post-effective amendment, when the same has become effective, (B) of
any request by the Commission for amendments or supplements to the
Registration Statement or the Prospectus or for additional
information, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose, (D) if at any time the
representations and warranties of the Company contemplated by
subsection (14) below cease to be true and correct, (E) of
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the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding
for such purpose, (F) of any other correspondence from the Commission
with respect to the Registration and (G) of the happening of any event
which makes any statement made in the Registration Statement, the
Prospectus or any document incorporated therein by reference untrue in
any material respect or which requires the making of any changes in the
Registration Statement, the Prospectus or any document incorporated
therein by reference in order to make the statements therein not
materially misleading;
(4) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at
the earliest possible moment;
(5) if requested by the managing underwriter or underwriters or
a holder of Registrable Securities being sold in connection with an
underwritten offering, promptly incorporate in a Prospectus supplement
or post-effective amendment such information as the managing
underwriters and either the holders of a majority of the Registrable
Securities being sold or the Demanding Group, if a Demand
Registration, agree should be included therein relating to the plan of
distribution with respect to such Registrable Securities, including,
without limitation, information with respect to the number of
Registrable Securities being sold to such underwriters the purchase
price being paid therefor by such underwriters and with respect to any
other terms of the underwritten (or best efforts underwritten)
offering of the Registrable Securities to be sold in such offering;
and make all required filings of such Prospectus supplement or post-
effective amendment promptly following notification of the matters to
be incorporated in such Prospectus supplement or post-effective
amendment;
(6) furnish to each selling holder of Registrable securities and
each managing underwriter, without charge, at least one signed copy of
the Registration Statement and any amendment thereto, including
financial statements and schedules, all documents incorporated therein
by reference and all exhibits (including those incorporated by
reference);
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(7) deliver to each selling holder of Registrable Securities and
the underwriters, if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment
or supplement thereto as such selling holder of Registrable Securities
and underwriters may reasonably request; the Company consents to the
use in accordance with applicable law of each Prospectus or any
amendment or supplement thereto by each of the selling holders of
Registrable Securities and the underwriters, if any, in connection
with the offering and sale of the Registrable Securities covered by
such Prospectus or any amendment or supplement thereto;
(8) prior to any public offering of Registrable Securities,
register or qualify or cooperate with the selling holders of
Registrable Securities, the underwriters, if any, and their respective
counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or
"blue sky" laws of such jurisdictions as any seller or underwriter
reasonably requests in writing, considering the amount of Registrable
Securities proposed to be sold in each such jurisdiction, and do any
and all other acts or things necessary or reasonably advisable to
enable the disposition in such jurisdictions of the Registrable
Securities covered by the Registration Statement; PROVIDED that the
Company will not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject;
(9) cooperate in all reasonable respects with the selling
holders of Registrable Securities and the managing underwriters, if
any, to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any
restrictive legends and to be in such denominations and registered in
such names as the managing underwriters may request at least two
business days prior to any sale of Registrable Securities to the
underwriters;
(10) use its reasonable best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers
thereof or the underwriters, if any, to consummate the disposition of
such Registrable Securities;
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(11) upon the occurrence of any event contemplated by subsection
(3)(F) above, prepare a supplement or post effective amendment to the
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(12) cause all Registrable Securities covered by any Registration
Statement to be listed on each securities exchange on which similar
securities issued by the Company are then listed, or cause such
Registrable Securities to be authorized for trading on the Nasdaq
National Market if any similar securities issued by the Company are
then so authorized, if requested by the holders of a majority of such
Registrable Securities, the Demanding Group, if a Demand Registration,
or the managing underwriters, if any;
(13) provide a CUSIP number for all Registrable Securities, not
later than the effective date of the applicable Registration
Statement;
(14) enter into such agreements (including an underwriting
agreement) and take all such other actions in connection therewith in
order to expedite or facilitate the disposition of such Registrable
Securities and in such connection, whether or not an underwriting
agreement is entered into and whether or not the Registration is an
underwritten Registration (A) make such representations and warranties
to the holders of such Registrable Securities and the underwriters, if
any, in form, substance and scope as are customarily made by issuers
to underwriters in primary underwritten offerings; (B) obtain opinions
of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any, and the holders of
a majority of the Registrable Securities being sold) addressed to each
selling holder and the underwriters, if any, covering the matters
customarily covered in opinions requested in underwritten offerings
and such other matters as may be reasonably requested by such holders
and underwriters; (C) obtain "cold comfort" letters and updates
thereof from the Company's independent certified public accountants
addressed to the selling holders of Registrable Securities and the
underwriters, if any, such
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letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by underwriters in connection
with primary underwritten offerings; (D) if an underwriting agreement is
entered into, the same shall set forth in full the indemnification
provisions and procedures set forth in subsection (f) below with respect
to all parties to be indemnified pursuant to said subsection; and (E) the
Company shall deliver such documents and certificates as may be requested
by the holders of a majority of the Registrable Securities being sold and
the managing underwriters, if any, to evidence compliance with subsection
3(G) of this subsection (d) and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the Company.
The above shall be done at each closing under such underwriting or similar
agreement or as and to the extent required thereunder;
(15) make available (at reasonable times and places) for
inspection by a representative of the holders of a majority of the
Registrable Securities, any underwriter participating in any
disposition pursuant to such Registration, and any attorney or
accountant retained by the sellers or underwriter, all financial and
other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with
such Registration Statement; PROVIDED, that any records, information
or documents that are designated by the company in writing as
confidential shall be kept confidential by such Persons unless
disclosure of such records, information or documents is required by
court or administrative order or any regulatory body having
jurisdiction;
(16) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, earnings statements satisfying the
provisions of Section 11(a) of the Securities Act, no later than
forty-five (45) days after the end of any twelve (12)-month period (or
ninety (90) days, if such period is a fiscal year) (A) commencing at
the end of any fiscal quarter in which Registrable Securities are sold
to underwriters in a firm or best efforts underwritten offering, or
(B) if not sold to underwriters in such an offering, beginning with
the first month of the Company's first fiscal quarter commencing after
the effective date of the Registration Statement, which statements
shall cover said twelve (12)-month periods; and
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(17) promptly prior to the filing of any document that is to be
incorporated by reference into any Registration Statement or
Prospectus (after initial filing of the Registration Statement),
provide copies of such document to counsel to the selling holders of
Registrable Securities and to the managing underwriters, if any, make
the Company's representatives available for discussion of such
document and make such changes in such document prior to the filing
thereof as counsel for such selling holders or underwriters may
reasonably request.
The Company may require each seller of Registrable Securities as
to which any Registration is being effected to furnish to the Company
such information regarding the proposed distribution of such
securities as the Company may from time to time reasonably request in
writing.
Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the
Company of the happening of any event of the kind described in
subsection (3)(G) of this subsection (d), such holder will forthwith
discontinue disposition of Registrable Securities pursuant to the
Registration Statement until such holder's receipt of copies of the
supplemented or amended Prospectus as contemplated by subsection (11)
of this subsection (d), or until it is advised in writing (the
"ADVICE") by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus, and, if
so directed by the Company, such holder will deliver to the Company
(at the Company's expense) all copies, other than permanent file
copies then in such holder's possession, of the Prospectus covering
such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the time
periods referred to in subsection (2) of this subsection (d) shall be
extended by the number of days during the period from and including
the date of the giving of such notice to and including the date when
each seller of Registrable Securities covered by such Registration
Statement shall have received the copies of the supplemented or
amended prospectus contemplated by subsection (11) of this subsection
(d) or the Advice.
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(e) RESTRICTIONS ON PUBLIC SALE.
(1) PUBLIC SALE BY HOLDERS OF REGISTRABLE SECURITIES. To the
extent not inconsistent with applicable law, each Stockholder, if
requested by the managing underwriter or underwriters for any Demand
Registration or Piggyback Registration, agrees not to effect any
public sale or distribution of Common Stock (or securities convertible
into or exchangeable or exercisable for Common Stock), including a
sale pursuant to Rule 144 (or any similar provision then in force)
under the Securities Act, during the 15 business days prior to, and
during the ninety (90)-day period (or such shorter period as may be
agreed to by such holders) beginning on, the effective date of the
applicable Registration Statement (except as part of such
Registration).
(2) PUBLIC SALE BY THE COMPANY AND OTHERS. If requested by the
managing underwriter or underwriters for any underwritten Demand
Registration or Piggyback Registration, (i) the Company will not
effect any public sale or distribution of Common Stock (or securities
convertible into or exchangeable or exercisable for Common Stock)
during the fifteen (15) business days prior to, and during the ninety
(90)-day period beginning on the effective date of such Registration
and (ii) the Company will cause each holder of Common Stock (or
securities convertible into or exchangeable or exercisable for Common
Stock) purchased from the Company at any time after the date of this
Agreement (other than in a registered public offering) to agree not to
effect any public sale or distribution of any such securities during
such period described in clause (i) above (except as part of such
Registration, if otherwise permitted).
(3) OTHER REGISTRATIONS. If the Company has previously filed a
Registration Statement with respect to Registrable Securities, and if
such previous Registration has not been withdrawn or abandoned, the
Company will not file or cause to be effected any other registration
of any of its Common Stock (or securities convertible into or
exchangeable or exercisable for Common Stock) under the Securities Act
(except on Form S-8 or any similar successor form), whether on its own
behalf or at the request of any holder or holders of Common Stock (or
securities convertible into or exchangeable or exercisable for Common
Stock), until a period of at least three (3) months has elapsed from
the effective date of such previous Registration; provided, that if
the holders of fifty percent (50%) or
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more of the aggregate number of Registrable Securities included in such
previous Registration shall agree in writing, such period may be shortened
to a period specified by such holders.
(f) REGISTRATION EXPENSES.
(1) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company,
including, without limitation, all registration and filing fees, the
fees and expenses of the counsel and accountants for the Company
(including the expenses of any "cold comfort" letters and special
audits required by or incident to the performance of such persons),
all other costs and expenses of the Company incident to the
preparation, printing and filing under the Securities Act of the
Registration Statement (and all amendments and supplements thereto)
and furnishing copies thereof and of the Prospectus included therein,
the costs and expenses incurred by the Company in connection with the
qualification of the Registrable Securities under the state securities
or "blue sky" laws of various jurisdictions, the costs and expenses
associated with filings required to be made with the NASD (including,
if applicable, the fees and expenses of any "qualified independent
underwriter" and its counsel as may be required by the rules and
regulations of the NASD), the costs and expenses of listing the
Registrable Securities for trading on a securities exchange or
authorizing them for trading on NASDAQ and all other costs and
expenses incurred by the Company in connection with any Registration
hereunder; PROVIDED, that, except as otherwise provided in subsection
(2) below, each Stockholder shall bear the costs and expenses of any
underwriters' commissions, brokerage fees or transfer taxes relating
to the Registrable Securities sold by such Stockholders and the fees
and expenses of any counsel, accountants or other representative
retained by Stockholder.
(2) Notwithstanding the foregoing and except as provided below,
in connection with each Registration hereunder, the Company will
reimburse the Stockholders who are holders of Registrable Securities
being registered in any Registration hereunder for (i) the reasonable
fees and disbursements of not more than one counsel, which counsel
shall be chosen (x) by the holders of a majority of the Registrable
Securities to be included therein that are held by the Demanding
Group, in the case of a Demand Registration and (y) otherwise, by the
holders of a majority of all
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Registrable Securities to be included therein, and (ii) the reasonable
out-of-pocket expenses (including travel costs) of the holders of
Registrable Securities in connection with such Registration.
(g) INDEMNIFICATION.
(1) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify, to the full extent permitted by law, each Stockholder, its
officers, directors, partners and agents and each person who controls
such Stockholder (within the meaning of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")),
against all losses, claims, damages, liabilities and expenses caused
by any untrue or alleged untrue statement of a material fact contained
in any Registration Statement, Prospectus or preliminary Prospectus or
any omission or alleged omission to state therein a material fact
necessary to make the statements therein (in the case of a Prospectus
or any preliminary Prospectus, in light of the circumstances under
which they were made) not misleading, except insofar as the same are
caused by or contained in any information with respect to such
Stockholder furnished in writing to the Company by such Stockholder in
its capacity as a selling Stockholder expressly for use therein. The
Company will also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating
in the distribution, their officers and directors and each person who
controls such persons (within the meaning of the Securities Act) to
the same extent as provided above with respect to the indemnification
of the holders of Registrable Securities; PROVIDED, HOWEVER, if
pursuant to an underwritten public offering of Registrable Securities,
the Company and any underwriters enter into an underwriting or
purchase agreement relating to such offering that contains provisions
relating to indemnification and contribution between the Company and
such underwriters, such provisions shall be deemed to govern
indemnification and contribution as between the Company and such
underwriters.
(2) INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. In
connection with any Registration in which a Stockholder is
participating, each such Stockholder will furnish to the Company in
writing such information with respect to such Stockholder as the
Company reasonably requests for use in connection with any
Registration Statement or Prospectus and agrees to indemnify, to the
full extent permitted by law, the
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Company, the directors and officers of the Company signing the Registration
Statement and each person who controls the Company (within the meaning of
the Securities Act and the Exchange Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue statement of a
material fact or any omission to state a material fact required to be
stated therein or necessary to make the statements in the Registration
Statement or Prospectus or preliminary Prospectus (in the case of the
Prospectus or any preliminary Prospectus, in light of the circumstances
under which they were made) not misleading, to the extent, but only to the
extent, that such untrue statement or omission is contained in any
information with respect to such Stockholder so furnished in writing by
such Stockholder in its capacity as a selling Stockholder specifically for
inclusion therein. In no event shall the liability of any selling
holder of Registrable Securities hereunder be greater in amount than
the dollar amount of the net proceeds received by such holder upon the
sale of the Registrable Securities giving rise to such indemnification
obligation. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in the distribution, to the same
extent as provided above with respect to information with respect to
such persons or entities so furnished in writing by such persons or
entities or their representatives specifically for inclusion in any
Prospectus or Registration Statement.
(3) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person or
entity entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party after the receipt by the
indemnified party of a written notice of the commencement of any
action, suit, proceeding or investigation or threat thereof made in
writing for which such indemnified party will claim indemnification or
contribution pursuant to this Agreement; PROVIDED, HOWEVER, that the
failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under the
preceding subparagraphs (1) and (2), except to the extent that the
indemnifying party is actually prejudiced by such failure to give
notice and (ii) unless in such indemnified party's reasonable judgment
a conflict of interest may exist between such indemnified and
indemnifying parties with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. Whether or not such
defense is assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement
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made without its consent (but such consent will not be unreasonably
withheld). No indemnifying party will consent to the entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a release from all liability in respect of such
claim or litigation. An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay
the fees and expenses of more than one counsel in any one jurisdiction for
all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party
a conflict of interest may exist between such indemnified party and
any other of such indemnified parties with respect to such claim, in
which event the indemnifying party shall be obligated to pay the fees
and expenses of such additional counsel or counsels.
(4) CONTRIBUTION. If for any reason the indemnification
provided for in the preceding subparagraphs (1) and (2) is unavailable
to an indemnified party as contemplated by the preceding clauses (1)
and (2), then the indemnifying party in lieu of indemnification shall
contribute to the amount paid or payable by the indemnified party as a
result of such loss, claim, damage, liability or expense in such
proportion as is appropriate to reflect not only the relative benefits
received by the indemnified party and the indemnifying party, but also
the relative fault of the indemnified party and the indemnifying
party, as well as any other relevant equitable considerations,
provided that no Stockholder shall be required to contribute in an
amount greater than the difference between the net proceeds received
by such Stockholder with respect to the sale of any Shares and all
amounts already contributed by such Stockholder with respect to such
claims, including amounts paid for any legal or other fees or expenses
incurred by such Stockholder.
(h) RULE 144. The Company agrees that at all times after it has
filed a registration statement pursuant to the requirements of the Securities
Act relating to any class of equity securities of the Company, it will file in a
timely manner all reports required to be filed by it pursuant to the Securities
Act and the Exchange Act and will take such further action as any holder of
Registrable Securities may reasonably request in order that such holder may
effect sales of Common Stock pursuant to Rule 144. At any reasonable time and
upon request of any Stockholder, the Company will furnish such Stockholder and
others with such information as may be necessary to enable the Stockholder to
effect sales
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of Common Stock pursuant to Rule 144 under the Securities Act and will
deliver to such Stockholder a written statement as to whether it has complied
with such requirements. Notwithstanding the foregoing, the Company may
deregister any class of its equity securities under Section 12 of the
Exchange Act or suspend its duty to file reports with respect to any class of
its securities pursuant to Section 15(d) of the Exchange Act if it is then
permitted to do so pursuant to the Exchange Act and the rules and regulations
thereunder.
(i) PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Stockholder may
participate in any underwritten Registration hereunder unless such Stockholder
(i) agrees to sell its Registrable Securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to select
the underwriter pursuant to subsections 4(a)(3) and (4)(b)(4) above, and (ii)
accurately completes in a timely manner and executes all questionnaires, powers
of attorney, underwriting agreements and other documents customarily required
under the terms of such underwriting arrangements.
(j) OTHER REGISTRATION RIGHTS. The Company will not grant to any
person (including the Stockholders) any demand or piggyback registration rights
with respect to the Common Stock of the Company (or securities convertible into
or exchangeable or exercisable for Common Stock) other than piggyback
registration rights that are not inconsistent with the terms of this Section 4.
To the extent that the Company grants to any person registration rights with
respect to any securities of the Company having provisions more favorable to the
holders thereof than the provisions contained in this Agreement, the Company
will confer comparable rights to the holders of Registrable Securities under
this Agreement. Except as provided herein, the Company will not grant any
registration rights that would permit any person or entity the right to
piggyback on any Demand Registration.
(k) DEFINITION OF REGISTRABLE SECURITIES. "REGISTRABLE SECURITIES"
means the shares of Common Stock now owned or hereafter acquired by any
Stockholder, but with respect to any share, only until such time as such share
(i) has been effectively registered under the Securities Act and disposed of in
accordance with the Registration Statement covering it or (ii) has been sold to
the public pursuant to Rule 144 (or any similar provision then in force) under
the Securities Act and the Legend referred to in Section 6(a) has been removed
from the certificate representing such share (at which time such share shall
cease to be a Registrable Security).
(l) AMENDMENTS AND WAIVERS. The provisions of this Section 4,
including the provisions of this sentence, may not be amended, modified or
supplemented,
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and waivers of or consents to departures from the provisions hereof may not be
given unless approved by the Company in writing and the Company has obtained
the written consent of Stockholders holding at least eighty-five percent
(85%) of the then outstanding Registrable Securities (including for such
purposes all securities convertible into or exchangeable for Registrable
Securities, other than the Warrants). Notwithstanding the foregoing, any
amendment, waiver or consent that materially and adversely affects any of the
By-Word Stockholders as a group, the Erin Mills Stockholders as a group, the
Carlyle Stockholders as a group, the Clipper Stockholders as a group or SBW
differently from the other Stockholders, shall require the prior written
approval of the holders of at least a Majority in Interest of Stockholders
who are then members of the group or the entity so affected.
Section 5. GOVERNANCE.
(a) Within fifteen days after the execution hereof, the total number
of members of the Board of Directors will be reduced to six, which number shall
be adjusted from time to time in order to give effect to the provisions of
subsection (b) below. The Company and the Stockholders hereby agree to take, at
any time and from time to time, all action necessary (including, without
limitation, voting the shares of Company Common Stock owned or controlled by
such Stockholder, calling special meetings of stockholders, executing and
delivering written consents and requiring designees to resign) to establish the
number of total number of directors as provided herein.
(b) At all times from and after fifteen days after the execution
hereof (except for the addition of a second Independent Director, which shall
occur no later than the date of the next annual meeting of the stockholders of
the Company), the Board of Directors of the Company (the "BOARD") shall be
composed of Directors to be designated in the manner set forth below. The
Company and each Stockholder hereby agree to take, at any time and from time to
time, all action necessary (including, without limitation, voting the shares of
the Company Common Stock owned or controlled by such Stockholder, calling
special meetings of stockholders and executing, delivering written consents and
requiring designees to resign) to elect Directors as provided herein. Prior to
the receipt of Regulatory Relief, the Board shall be composed of seven (7)
members, of which two (2) Directors shall be persons designated by a Majority in
Interest of the Erin Mills Stockholders, two (2) Directors shall be persons
designated by a Majority in Interest of the By-Word Stockholders (one of which
shall be the chief executive officer of the Company), one (1) Director shall be
a person designated by a Majority in Interest of the Carlyle Stockholders and
two (2) additional Directors (or, if determined by the Nominating Committee as
hereinafter provided, three (3) additional Directors) shall be persons who are
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not employed by the Company or affiliated with any party to this Agreement
("Independent Directors"). SBW shall be entitled to designate one non-director
delegate who shall be entitled to receive notice of, in accordance with the
provisions of Section 11.6 of the Bylaws with respect to Class B Directors, and
to attend all meetings of the Board and to receive all materials received by
Directors, but who shall not be a member of the Board of Directors, shall have
no fiduciary duties to the Company, to the Board or stockholders of the Company
and shall not be entitled to vote at meetings of the Board. Upon the conversion
of the Series D Preferred Stock into Class B Common Stock, the number of
Directors shall be increased by one who shall be a person designated by SBW and
the right to a non-director delegate shall terminate. If SBW and its Affiliates
Beneficially Own 20% or more of the Common Stock (including Common Stock
issuable upon conversion of Series D Preferred Stock or Class B Common Stock or
other convertible securities or upon the exercise of any outstanding options,
warrants, rights or obligations, other than shares issuable upon exercise of the
Warrants and Excluded Options) on a Fully Diluted Basis, the number of Directors
shall further be increased by one and the additional Director shall also be a
designee of SBW. For so long as SBW or its Affiliates hold Class B Common
Stock, one or both of SBW's designees will be elected by SBW as the holder of
the Class B Common Stock and will be Class B Directors, with the rights set
forth in the terms of such Class B Common Stock and the Bylaws, and which
directors will have the corporate authority to sign a stockholder consent of SBW
on behalf of each of the SBW Stockholders.
All Independent Directors shall be nominated by a committee consisting
of one Director designated by the Erin Mills Stockholders, one Director
designated by the By-Word Stockholders, one Director designated by the Carlyle
Stockholders and, following receipt of Regulatory Relief, one Director
designated by SBW (the "Nominating Committee"). The Nominating Committee also
shall determine whether to increase the number of Independent Directors to
three (3).
Notwithstanding the foregoing, no Stockholder or group of Stockholders
shall be entitled to designate any Director or have such designee serve on the
Nominating Committee if the percentage of Common Stock (including Common Stock
issuable upon conversion of outstanding securities or upon the exercise of any
outstanding options, warrants, rights or obligations other than the Warrants and
Excluded Options) Beneficially Owned by such Stockholder or group of
Stockholders falls below 5% (or, with respect to the Erin Mills Stockholders and
By-Word Stockholders, 20% for the right to designate two Directors and 5% for
the right to designate one Director) on a Fully Diluted Basis. If By-Word has
only one designee, it shall be the chief executive officer of the Company if the
chief executive officer is a By-Word Stockholder. Upon the failure of any
Stockholder or
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group of Stockholders to maintain the required percentage, the Stockholder or
group of Stockholders shall require its designee to resign and the size of
the Board may, in the determination of the Nominating Committee, either be
reduced to eliminate such the resulting vacancy on the Board or remain the
same (in which case, the resulting vacancy on the Board will be filled by a
Director nominated by the Nominating Committee), provided that the
Stockholders agree that if the chief executive officer is not a By-Word
designee, in accordance with the provisions hereof, the chief executive
officer shall be nominated by the Nominating Committee.
(c) Pursuant to Article VII of the Incentive Stock Option Plan, the
Board shall appoint a three-person Compensation Committee to administer the
Incentive Stock Option Plan. Following receipt of Regulatory Relief, a Director
designated by SBW shall serve on the Compensation Committee. The Compensation
Committee shall be comprised of only non-management Directors serving on the
Board. Each Stockholder hereby agrees to take, at any time and from time to
time, all action necessary (including, without limitation, voting the shares of
the Common Stock owned or controlled by such Stockholder, calling special
meetings of stockholders and executing and delivering written consents) to cause
the Board to appoint to the Compensation Committee the number of persons meeting
the requirements of this subsection.
(d) The Stockholders agree that no Director may be removed except at
the request of the holders of a majority of the shares of Common Stock entitled
to appoint such Director in accordance with Section 5(b), and each Stockholder
hereby agrees to take all action necessary (including, without limitation,
voting the shares of Common Stock owned or controlled by such Stockholder,
calling special meetings of stockholders and executing and delivering written
consents) for the purpose of accomplishing the purposes of this Agreement. If a
vacancy on the Board occurs by reason of the death, removal, resignation,
retirement or election not to serve of a designee, the remaining Directors and
the Company shall cause the vacancy thereby created to be filled by a new
designee as soon as possible (the "REPLACEMENT DIRECTOR"), who is designated in
the same manner and by the same persons specified in Section 5(b) as the
Director being replaced had been, and the Company and each Stockholder hereby
agrees to take, at any time and from time to time, all actions necessary to
accomplish the same; PROVIDED, HOWEVER, that if any group fails to designate a
representative in accordance with Section 5(b) above for a period of thirty (30)
consecutive days, then such vacancy shall be filled by the Nominating Committee
until such time as the Replacement Director is designated in accordance with
Section 5(b), at which time the term of the Director not elected in accordance
with Section 5(b) shall expire.
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(e) In addition to any compensation to which the members of the Board
may be entitled, the Company shall reimburse each Director for the reasonable
out-of-pocket expenses incurred by such Director (including, without limitation,
reasonable fees and expenses of counsel, accountants, or representatives, if
any) involved with such Director's services as a member of the Company. In
addition, the Company shall obtain and maintain at all times during which this
Agreement remains in effect, at the cost and expense of the Company, director
liability insurance policies covering each member of the Board. Such director
liability insurance policies shall be provided by a reputable nationally
recognized insurance carrier and shall provide coverage in such amounts and on
such terms as may be reasonably acceptable to each member of the Board. Should
SBW so request, the Company will enter into contractual indemnification
arrangements with the Director reasonably satisfactory to SBW.
(f) In addition to any vote or consent of the Board of Directors or
its stockholders required by law or the Certificate of Incorporation, including
the terms of Series D Preferred Stock and the Class B Common Stock, the
affirmative vote of a majority of the entire Board of Directors (not merely a
quorum) shall be necessary for authorizing, effecting or validating the
following actions:
(i) the approval of any annual budget or business plan for the
Company or any Subsidiary of the Company or the deviation by the
Company or any such Subsidiary from any annual budget for the Company
or such Subsidiary approved by the Board of Directors by more than
five percent (5%);
(ii) any capital expenditure or expenditures by the Company or
any Subsidiary of the Company which, individually or in the aggregate,
exceeds $1,000,000;
(iii) the hiring or termination by the Company or any
Subsidiary of the Company of any officer or senior management employee
of the Company or such Subsidiary;
(iv) directly or indirectly redeem, purchase or make any payments
with respect to any stock appreciation rights, phantom stock plans or
similar rights or plans;
(v) (A) sell, lease, transfer or otherwise convey, or permit any
Subsidiary to sell, lease, transfer or otherwise convey, any assets
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representing five percent (5%) or more of the consolidated assets of
the Company and its Subsidiaries, (B) consolidate or merge with, or
permit any Subsidiary to consolidate or merge with, any Person, (C)
reclassify or otherwise change, or permit any Subsidiary to reclassify
or otherwise change, any capital stock of the Company or any
Subsidiary or (D) dissolve, liquidate or wind-up the Company or permit
any Subsidiary to dissolve, liquidate or wind up such Subsidiary.
(vi) except as expressly contemplated by the Purchase Agreement
or the any of the Transaction Documents, authorize, issue or enter
into any agreement providing for the issuance, or permit any
Subsidiary to authorize, issue or enter into any agreement providing
for the issuance (contingent or otherwise) in excess of an aggregate
of $5,000,000 (A) any notes or debt securities containing equity
features (including, without limitation, any note or debt securities
convertible into or exchangeable for capital stock or other equity
securities, issued in connection with the issuance of capital stock or
other equity securities, or containing profit participation features)
or (B) any capital stock or other equity securities, or any securities
convertible into or exchangeable for any capital stock or other equity
securities, other than issuances pursuant to the Incentive Stock
Option Plan;
(vii) acquire, or permit any Subsidiary to acquire, in one
transaction or a series of related transactions, any capital stock,
other equity interests or assets of any Person for aggregate
consideration in excess of $5,000,000;
(viii) enter into, or permit any Subsidiary to enter into, any
agreement, contract, lease or commitment on the part of the Company or
such Subsidiary involving the payment or provision of consideration by
or to the Company or such Subsidiary, the fair market value of which
exceeds $1,000,000;
(ix) make any capital expenditure, or permit any Subsidiary to
make any capital expenditure, in excess of $1,000,000;
(x) except as expressly contemplated by the Purchase Agreement,
amend the Certificate of Incorporation, or the Company's bylaws or
file any resolution of the board of directors with the Secretary of
State of the State
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of Delaware containing any provisions which would adversely affect or
otherwise impair the rights of the holders of the Common Stock;
(xi) enter into, or permit any Subsidiary to enter into, any
agreement, transaction, commitment or arrangement with any of its or
any Subsidiary's officers, directors, employees, stockholders or
Affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which such
Person or individual own, in the aggregate, a more than 10% beneficial
interest, except for (A) customary employment arrangements and benefit
programs on arms' length terms and (B) agreements, transactions,
commitments or arrangements on arms' length terms and approved by a
majority of the Company's disinterested directors; or
(xii) enter into, or permit any Subsidiary to enter into, any
agreement to do or effect any of the foregoing.
(g) Following the receipt of Regulatory Relief, if SBW does not hold any
Series D Preferred Stock or Class B Common Stock but does own at least
1.6 million shares of Common Stock (including Common Stock issuable upon
conversion of outstanding securities or upon the exercise of any outstanding
options, warrants, rights or obligations, other than the Warrants and Excluded
Options) on a Fully Diluted Basis, the approval of SBW shall be required for the
following actions:
(i) the approval of any annual budget or business plan for the
Company or any Subsidiary of the Company or the deviation by the
Company or any such Subsidiary from any annual budget for the Company
or such Subsidiary approved by the Board of Directors by more than
five percent (5%);
(ii) issuance by the Company of any equity securities, including
securities convertible into equity securities (other than (A) the
grant of employee stock options (subject to the proviso set forth in
(D) below), (B) the issuance of equity securities in accordance with
the terms of the Purchase Agreement or any of the other Transaction
Documents), (C) the issuance of equity securities upon the exercise or
conversion of securities or employee stock options that are
outstanding as of the date hereof or (D) the issuance of equity
securities after giving effect to the consummation of the transactions
contemplated hereby or employee stock options granted
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hereafter, PROVIDED, HOWEVER, that there shall not be outstanding at
any time employee stock options for more than 1.5 million shares of
Common Stock plus the options granted to William C. Kennedy, Jr. and
William C. Saunders that are outstanding at September 27, 1996) or
incurrence of any indebtedness for borrowed money or evidenced by
bonds, notes or debentures, provided that the Company can incur up to
$5 million in indebtedness in any year without the consent of SBW;
(iii) the hiring or termination by the Company of its chief
executive officer, chief operating officer or chief financial officer;
(iv) the Company's entering into any lines of business which is
not its Existing Line of Business (as hereinafter defined) or any
joint ventures, partnerships or similar arrangements;
(v) the Company's exiting its Existing Line of Business (as
hereinafter defined) or disposing of assets (other than
telecommunications equipment and other assets sold in the ordinary
course of business) in any year with a value in excess of $500,000 or
which are otherwise material to the Company's operations;
(vi) the adoption, implementation or acceptance (including the
failure to opt out) of any Anti-Takeover Provision not in effect as of
the date hereof that would be applicable to, and, in the reasonable
determination of SBW, adversely affect, SBW and its Affiliates; or
(vii) the taking of any corporate action that would reduce
the number of Shares held by SBW and its Affiliates to fewer than 1.6
million shares of Common Stock such that SBW no longer has the right
to approve any of the actions specified in this subsection (g).
As used in this subsection (g), the terms set forth below shall have
the following respective meanings;
"Anti-takeover Provision" means (i) any provision of the certificate
of incorporation or bylaws of the Company or any contract, agreement or plan to
which the Company is a party or by which it is bound or any statutory provision
enacted after the date hereof which is applicable to the Company which the
Company may opt out of if the effect of such provision would be to materially
delay, hinder or prevent a change in control of the
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Company or (ii) a stockholder rights plan or "poison pill," including the
provisions of any preferred stock or common stock purchase rights issued
pursuant thereto; provided, however, that such term shall not include any
customary change of control provisions contained in employment agreements
between the Company and any of its directors, officers or other employees or
in any plans or agreements relating to stock options or other awards of
equity securities made by the Company to any such persons.
"Existing Line of Business" means a non-facilities based, enhanced
service provider that offers fleet management and/or status or information about
vehicles and/or location capabilities through mobile communications service.
(h) The Board shall hold, during the term of this Agreement,
regularly scheduled, in-person meetings no less frequently than six times per
year.
(i) At all times during which this Agreement remains in effect, each
Stockholder hereby agrees to take all action necessary (including, without
limitation, voting the shares of the Company's Common Stock owned or controlled
by such Stockholder, calling special meetings of stockholders and executing and
delivering written consents) to ensure that the By-Laws of the Company provide
that the information listed on Schedule A hereto shall be provided to each
member of the Board of Directors, at the time and in the manner required by the
provisions of Schedule A.
(j) The Company and each Stockholder agrees not to, and to cause its
designees on the Board not to, without the prior approval of SBW, alter, amend,
repeal or replace the Bylaws set forth on Exhibit B hereto or to enact any
Bylaws inconsistent therewith.
(k) For the purpose of this Section 5, Chase Manhattan Investment
Holdings, Inc., Archery Partners and their respective assigns shall not be
considered Carlyle Stockholders.
Section 6. MISCELLANEOUS.
(a) LEGEND. The certificates representing the capital stock of the
Company held by each of the Stockholders shall bear the following legend
(provided that with respect to SBW and any certificates issued after the date
hereof such legend shall refer to this Agreement):
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"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT COVERING SUCH SECURITIES OR SUCH SALE OR TRANSFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT
AND ANY SIMILAR REQUIREMENTS OF ANY APPLICABLE STATE SECURITIES LAW. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS SET FORTH IN A STOCKHOLDERS AGREEMENT DATED AS OF FEBRUARY 4,
1994, A COPY OF WHICH IS AVAILABLE UPON REQUEST FROM THE SECRETARY OF THE
COMPANY."
If any capital stock of the Company becomes eligible for sale
pursuant to Rule 144(k) promulgated under the Securities Act, the Company
shall, subject to applicable law and upon the request of any holder of such
capital stock, remove the legend set forth in this Section 6(a) from the
certificates evidencing the shares of such capital stock held by such holder.
In addition, (i) in connection with any Transfer of shares of any capital
stock of the Company pursuant to any public offering registered under the
Securities Act or pursuant to Rule 144 (or any similar rule or rules then in
effect promulgated under the Securities Act) if such rule is available or
(ii) if the holder of any shares of capital stock of the Company delivers to
the Company an opinion of counsel reasonably acceptable to the Company that
no subsequent Transfer of such shares shall require registration under the
Securities Act, the Company shall promptly upon such Transfer deliver new
certificates for such shares which do not bear the legend set forth in this
Section 6(a).
(b) SUCCESSORS, ASSIGNS AND TRANSFEREES. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, their respective
legal representatives, heirs, legatees, successors and permitted assigns. The
only permitted assigns (each, a "Permitted Assign") are as follows: (i) each of
the Clipper Stockholders shall be entitled to assign any of its rights under
this Agreement to any other Clipper Stockholder; (ii) each of the Carlyle
Stockholders shall be entitled to assign any of its rights under this Agreement
to any other Carlyle Stockholder or any Related Party of a Carlyle Stockholder
(other than an Excluded Related Party); (iii) each of the By-Word Stockholders
shall be entitled to assign any of its rights under this Agreement to any other
By-Word Stockholder; (iv) each of the Erin Mills Stockholders shall be entitled
to assign any of its rights under this Agreement to any other Erin Mills
Stockholder or any Related Party of an Erin Mills Stockholder (other than an
Excluded Related Party) and (v) SBW shall be entitled to assign any of its
rights under this Agreement to any of its Affiliates. No party hereto shall be
entitled to assign any of its rights under this Agreement to any Person which
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is otherwise a Permitted Assign hereunder unless, concurrently with such
assignment, such party is Transferring all or a portion of the Shares owned
by it to such Person in compliance with the terms and provisions set forth
herein and such Person executes a supplemental agreement hereto in form and
substance reasonably satisfactory to the Company pursuant to which such
Person agrees to become a party to, and be bound by, this Agreement.
(c) SPECIFIC PERFORMANCE, ETC. The Company and each Stockholder, in
addition to being entitled to exercise all rights provided herein, in the
Company's Certificate of Incorporation or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company and each Stockholder agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Agreement and hereby agrees to waive the defense in
any action for specific performance that a remedy at law would be adequate.
(d) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal law of the State of Delaware without giving
effect to the conflict of laws provisions thereof.
(e) INTERPRETATION. The headings of the sections contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not affect the meaning or interpretation of this
Agreement.
(f) NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, sent by
facsimile transmission or sent by certified, registered or express mail, postage
prepaid. SBW agrees to give the Company written notice when Regulatory Relief
has been obtained. Any such notice shall be deemed given when so delivered
personally, sent by facsimile transmission or, if mailed, three (3) business
days after the date of deposit in the United States mail, by certified mail
return receipt requested, as follows:
(i) If to the Company to:
HighwayMaster Communications, Inc.
16479 Dallas Parkway, Suite 710
Dallas, Texas 75248
Attention: William Kennedy
Telecopier: (972) 930-7263
37
<PAGE>
with a copy (which shall not constitute notice) to:
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201
Attention: Geoffrey L. Newton
Telecopier: (214) 953-6503
(ii) If to any of the Carlyle Entitles, to
c/o The Carlyle Group, L.P.
1001 Pennsylvania Avenue, N.W.
Suite 220 South
Washington, D.C. 20004-2505
Attention: Mark D. Ein
Telecopier: (202) 347-1818
with a copy (which shall not constitute notice) to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004-2505
Attention: Bruce E. Rosenblum, Esq.
Telecopier: (202) 637-2201
38
<PAGE>
(iii) If to any of the Clipper Entities, to
The Clipper Group, L.P.
12 East 49th Street
New York, N.Y. 10017
Attention: Daniel V. Cahillane
Telecopier: (212) 318-1360
with a copy (which shall not constitute notice) to:
Weil, Gotshal & Manges, LLP
767 Fifth Avenue
New York, N.Y. 10153
Attention: Howard Chatzinoff
Telecopier: (212) 310-8007
(iv) If to any of the Erin Mills Companies, to
Erin Mills International
Trident House, Suite 204(a)
Broad Street
Bridgetown, Barbados
West Indies
Attention: Stephen Greaves
Telecopier: (809) 436-2120
with a copy (which shall not constitute notice) to:
7501 Keele Street, Suite 500
Concord, Ontario L4K 1Y2
Canada
Attention: Gerry C. Quinn
Telecopier: (416) 736-8373
39
<PAGE>
(v) If to any of the By-Word Stockholders, to:
HighwayMaster Communications, Inc.
16479 Dallas Parkway
Suite 710
Dallas, Texas 75248
Attention: William Kennedy
Telecopier: (972) 930-7263
(vi) If to Chase Manhattan Investment Holdings, Inc. or Archery
Partners:
The Chase Manhattan Bank
One Chase Plaza
New York, NY 10081
Attention: William K. Luby
Telecopier: (212) 552-2958
with a copy (which shall not constitute notice) to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Emile Karafiol
Telecopier: (312) 861-2200
40
<PAGE>
(vii) If to Southwestern Bell Wireless Holdings, Inc.
Southwestern Bell Wireless Holdings, Inc.
17330 Preston Road
Suite 100A
Dallas, Texas 75252
Attention: President
Telecopier: (972) 733-2012
and to:
SBC Communications, Inc.
175 E. Houston
San Antonio, Texas 78205
Attention: General Attorney, Mergers & Acquisitions
Telecopier: (210) 351-3488
with a copy (which shall not constitute notice) to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Janet T. Geldzahler
Telecopier: (212) 558-3588
Any party may change its address for notice by written notice to the other
parties in accordance with this provision.
(g) TERMINATION. This Agreement will terminate and the Original
Agreement, as in effect on the date prior to the date hereof, will be deemed to
be in effect if the Purchase Agreement is terminated pursuant to Section 2(c)
thereof. Sections 3(b) and (c) hereof shall terminate at that time that SBW and
its Affiliates cease to own at least 1.6 million shares of Common Stock
(including Common Stock issuable upon conversion of outstanding securities or
upon the exercise of any outstanding options, warrants, rights or obligations,
other than the Warrants and Excluded Options).
41
<PAGE>
(h) INSPECTION AND COMPLIANCE WITH LAW. Copies of this Agreement
will be available for inspection or copying by any Stockholder at the offices of
the Company through the Secretary of the Company.
(i) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this paragraph (h), may not be amended, modified or
supplemented, and waivers of or consents to departures from the provisions
hereof may not be given, except by a written instrument executed by (i) the
Company, (ii) a Majority in Interest of the By-Word Stockholders, (iii) a
Majority in Interest of the Carlyle Stockholders and the Clipper Stockholders
acting as a group, (iv) a Majority in Interest of the Erin Mills Stockholders
and (v) SBW; PROVIDED, HOWEVER, that amendments of or modification to Section 4
will be subject to the requirements of Section 4(k). No action taken pursuant
to this Agreement, including, without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as waiver of any preceding or
succeeding breach and no failure by any party to exercise any right or privilege
hereunder shall be deemed a waiver of such party's rights or privileges
hereunder or shall be deemed a waiver of such party's rights to exercise the
same at any subsequent time or times hereunder.
(j) TRANSFER VOID. Any Transfer of any security of the Company in
violation of this Agreement shall be null and void and the Company covenants and
agrees that it will not register or otherwise recognize a Transfer (whether for
the purposes of shareholder voting or in connection with the distribution of
dividends or other corporate assets) of any securities which it has reason to
believe was effected in violation of this Agreement.
(k) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, by the original parties hereto and any successor in interest, each
of which shall be deemed to be an original and all of which together shall be
deemed to constitute one and the same agreement.
(l) ATTORNEYS' FEES. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
(m) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or
42
<PAGE>
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be in any way impaired
thereby.
43
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
HIGHWAYMASTER COMMUNICATIONS, INC.,
By: /s/ WILLIAM C. SAUNDERS
------------------------------------------------
Name: William C. Saunders
----------------------------------------------
Title: President
---------------------------------------------
SOUTHWESTERN BELL WIRELESS HOLDINGS, INC.
By: /s/ STAN SIGMAN
------------------------------------------------
Name: Stan Sigman
----------------------------------------------
Title: President & Chief Executive Officer
---------------------------------------------
CARLYLE-HIGHWAYMASTER INVESTORS, L.P.
By: TC Group, L.L.C., its General Partner
By: /s/ MARK D. EIN
------------------------------------------------
Name: Mark D. Ein
----------------------------------------------
Title: Vice-President of Managing Member of TC Group
---------------------------------------------
CARLYLE-HIGHWAYMASTER INVESTORS II, L.P.
By: TC Group, L.L.C., its General Partner
By: /s/ MARK D. EIN
------------------------------------------------
Name: Mark D. Ein
----------------------------------------------
Title: Vice-President of Managing Member of TC Group
---------------------------------------------
44
<PAGE>
H.M. RANA INVESTMENTS LIMITED
By: /s/ Fahad A. Almubarak
-----------------------------------------
By:
--------------------------------------
Name: Fahad A. Almubarak
-------------------------------
Title: President
------------------------------
TC GROUP, L.L.C.
By: /s/ MARK D. EIN
-----------------------------------------
Name: Mark D. Ein
-----------------------------------
Title: Vice-President of Managing Member
----------------------------------
/s/ MARK D. EIN
--------------------------------------------
Mark D. Ein
CHASE MANHATTAN INVESTMENT HOLDINGS, INC.
By: /s/ JEFFREY C. WALKER
-----------------------------------------
Name: Jeffrey C. Walker
---------------------------------------
Title: Chief Executive Officer
--------------------------------------
ARCHERY PARTNERS
By: /s/ JEFFREY C. WALKER, Managing Partner
-----------------------------------------
its General Partner
By:
--------------------------------------
Name: Jeffrey C. Walker
---------------------------------
Title: Managing Partner
--------------------------------
45
<PAGE>
CLIPPER CAPITAL ASSOCIATES, L.P.
By: Clipper Capital Associates, Inc.
its General Partner
By: /s/ DANIEL V. CAHILLANE
------------------------------------
Name: Daniel V. Cahillane
-------------------------------
Title: Treasurer & Secretary
------------------------------
CLIPPER/MERCHANT PARTNERS, L.P.
By: Clipper Capital Associates, L.P.,
its General Partner
By: Clipper Capital Associates, Inc.
its General Partner
By: /s/ DANIEL V. CAHILLANE
-------------------------------
Name: Daniel V. Cahillane
-----------------------------
Title: Treasurer & Secretary
----------------------------
CLIPPER/MERBAN, L.P.
By: Clipper Capital Associates, L.P.
its General Partner
By: Clipper Capital Associates, Inc.
its General Partner
By: /s/ DANIEL V. CAHILLANE
-------------------------------
Name: Daniel V. Cahillane
-----------------------------
Title: Treasurer & Secretary
----------------------------
ERIN MILLS INTERNATIONAL INVESTMENT
CORPORATION
By: /s/ STEPHEN L. GREAVES
-----------------------------------------
Name: Stephen L. Greaves
-----------------------------------
46
<PAGE>
Title: General Manager
----------------------------------
THE ERIN MILLS DEVELOPMENT CORPORATION
By: /s/ G. C. QUINN
-----------------------------------------
Name: G. C. Quinn
-----------------------------------
Title: Executive Vice-President
----------------------------------
THE ERIN MILLS INVESTMENT CORPORATION
By: /s/ G. C. QUINN
-----------------------------------------
Name: G. C. Quinn
-----------------------------------
Title: President
----------------------------------
/s/ WILLIAM C. KENNEDY, JR.
--------------------------------------------
William C. Kennedy, Jr.
--------------------------------------------
Donald M. Kennedy
/s/ WILLIAM C. SAUNDERS
--------------------------------------------
William C. Saunders
/s/ ROBERT T. HAYES by Douglas Dunlap
attorney-in-fact
--------------------------------------------
Robert T. Hayes
/s/ ROBERT S. FOLSOM by Haddon O. Winckler
attorney-in-fact
--------------------------------------------
Robert S. Folsom
47
<PAGE>
The undersigned are executing this Agreement solely for the purpose of
evidencing their approval of the amendment and restatement of the Original
Agreement (as amended from time to time) in its entirety as set forth herein,
it being understood that the undersigned shall not be deemed Stockholders for
purposes of this Agreement and shall not have any rights or obligations
hereunder.
/s/ MARGARET D. FOLSOM
--------------------------------------------
Margaret D. Folsom
/s/ R. STEPHEN FOLSOM
--------------------------------------------
Steven R. Folsom
--------------------------------------------
Joann Hayes
/s/ CYNTHIA ANN HAYES
--------------------------------------------
Cynthia Ann Hayes
/s/ ALICIA ELLEN HAYES
--------------------------------------------
Alicia Ellen Hayes
48
<PAGE>
APPENDIX A
ORIGINAL PARTIES
Carlyle-HighwayMaster Investors, L.P.
Carlyle-HighwayMaster Investors II, L.P.
Chase Manhattan Investment Holdings, Inc.
Clipper/Merban, L.P.
Clipper/Merchant Partners, L.P.
Clipper Capital Associates, L.P.
Erin Mills International Investment Corporation
FU Enterprises Ltd.
By-Word Technologies, Inc.
Robert S. Folsom
Robert T. Hayes
A-1
<PAGE>
APPENDIX B
AMENDMENTS AND ADDENDA
1. Addendum No. 1 to Subscription Agreement and Stockholders
Agreement by and among HM Holding Corporation, Carlyle-HighwayMaster Investors,
L.P., Carlyle-HighwayMaster Investors II, L.P., H.M. Rana Investments Limited,
TC Group, L.L.C., Chase Manhattan Investment Holdings, Inc., Clipper/Merban,
L.P., Clipper Merchant Partners, L.P., Clipper Capital Associates, L.P., Erin
Mills International Investment Corporation, FU Enterprises Ltd., By-Word
Technologies, Inc., Robert S. Folsom and Robert T. Hayes.
2. Consent of Security Holders of HM Holding Corporation and Second
Amendment to Stockholders' Agreement, dated November, 1994, among HM Holding
Corporation, By-Word Technologies, Inc., the former shareholders of By-Word
Technologies, Inc. listed on EXHIBIT A, Clipper/Merban, L.P., Clipper Merchant
Partners, L.P., Clipper Capital Associates, L.P., Carlyle-HighwayMaster
Investors, L.P., Carlyle-HighwayMaster Investors II, L.P., TC Group, L.L.C.,
H.M. Rana Investments Limited, Chase Manhattan Investment Holdings, Inc., Erin
Mills International Investment Corporation, Robert S. Folsom and Robert T.
Hayes.
3. Joinder Agreement to Stockholders Agreement executed as of January 3,
1995 by Mark D. Ein.
4. Third Amendment to Stockholders Agreement, dated as of April 28, 1995,
among HighwayMaster Communications, Inc., Archery Partners, Chase Manhattan
Investment Holdings, Inc., Carlyle-HighwayMaster Investors, L.P., Carlyle-
HighwayMaster Investors II, L.P., H.M. Rana Investments Limited, TC Group,
L.L.C., Clipper/Merban, L.P., Clipper Merchant Partners, L.P., Clipper Capital
Associates, L.P., Erin Mills International Investment Corporation, Robert S.
Folsom, Margaret D. Folsom, R. Stephen Folsom, Robert T. Hayes, Cynthia Ann
Hayes, Alicia Ellen Hayes, Joann Hayes, William C. Saunders, William C. Kennedy,
Jr. and Donald M. Kennedy.
5. Note Exchange and Amendments Agreement, dated as of May 26, 1995,
among HighwayMaster Communications, Inc., Archery Partners, Chase Manhattan
Investment Holdings, Inc., Carlyle-HighwayMaster Investors, L.P., Carlyle-
HighwayMaster Investors II, L.P., H.M. Rana Investments Limited, TC Group,
L.L.C., Clipper/Merban, L.P., Clipper Merchant Partners, L.P., Clipper Capital
Associates, L.P.,
B-1
<PAGE>
Erin Mills International Investment Corporation, Robert S. Folsom, Margaret
D. Folsom, R. Stephen Folsom, Robert T. Hayes, Cynthia Ann Hayes, Alicia
Ellen Hayes, Joann Hayes, William C. Saunders, William C. Kennedy, Jr.,
Donald M. Kennedy, Mark D. Ein and The Erin Mills Investment Corporation.
B-2
<PAGE>
APPENDIX C
FORMER PARTIES
Margaret D. Folsom
R. Stephen Folsom
Joann Hayes
Cynthia Ann Hayes
Alicia Ellen Hayes
C-1
<PAGE>
APPENDIX D
CERTAIN STOCKHOLDERS NUMBER OF SHARES
Erin Mills International Investment Corporation 8,141,706
William C. Kennedy, Jr. 2,029,318
Carlyle-HighwayMaster Investors, L.P. 1,805,727
William C. Saunders 892,015
Clipper/Merban, L.P. 530,930
Clipper/Merchant Partners, L.P. 524,209
H.M. Rana Investments Limited 423,802
T.C. Group, L.L.C. 291,315
Robert S. Folsom 280,000
Carlyle-HighwayMaster Investors II, L.P. 170,071
D-1
<PAGE>
FOR IMMEDIATE RELEASE CONTACT: Barb Catlin
Director of Public Relations
(972) 732-2516
HIGHWAYMASTER ANNOUNCES STRATEGIC ALLIANCE
WITH SBC COMMUNICATIONS
DALLAS, SEPT. 30, 1996 -- HighwayMaster Communications Inc. (NASDAQ:
HWYM) today announced that it has reached agreement with SBC Communications
Inc. (NYSE: SBC) on a $20 million equity investment in HighwayMaster. As part
of a strategic relationship that is expected to strengthen wireless efforts
on behalf of both companies, SBC's initial investment will be preferred
stock, which is convertible into common at the rate of $12.50 per share.
In addition to its preferred stock, SBC will receive 5 million warrants
- - 3 million of which are exercisable for common stock at $14 per share, with
the remaining 2 million exercisable at $18 per share. SBC's preferred stock,
if converted to common shares, would represent approximately a 6 percent
stake in HighwayMaster. Upon exercise of all of the associated warrants,
SBC's percent ownership would rise to approximately 20 percent.
In addition to the equity investment by SBC, two of HighwayMaster's
original investors have elected to participate in a recapitalization of the
company. The Erin Mills Group has invested an additional $10 million in
common stock and has converted $10.8 million of existing preferred stock to
common. Further, The Carlyle Group, The Clipper Group, and related investors
have converted $12.7 million of debt due to mature on Dec. 31, 1996, to
common stock. Consistent with the SBC arrangement, each of these transactions
has been completed at $12.50 per share.
Combining all of the above transactions, HighwayMaster has succeeded in
raising $30 million in cash (while eliminating all long-term debt) and, in
the process, has increased
<PAGE>
shareholder equity by more than $50 million. The $20 million investment by
SBC has been escrowed pending Hart-Scott-Rodino review.
"The alliance with SBC provides both significant working capital and a
clean balance sheet at a time when we need both," said Bill Saunders,
president and CEO of HighwayMaster. "More importantly though, we will receive
a wealth of technical support, marketing and management savvy, and also a
crucial ingredient that is hard to put a value on -- credibility in the
marketplace."
"We consider this a superior investment that strongly supports our
domestic business strategy of developing high-potential growth opportunities
in wireless and, ultimately, long-distance," said James S. Kahan, SBC senior
vice president -- corporate development. "HighwayMaster is a promising
service provider with tremendous growth potential, both in its existing
product line and through expansion into new market segments."
Dallas-based HighwayMaster Corp., a wholly-owned subsidiary of
HighwayMaster Communications Inc., sells and markets the patented
HighwayMaster-Registered Trademark- Mobile Communications and Information
System throughout the United States and Canada with regional offices in
Atlanta, Philadelphia, Chicago and Salt Lake City.
The HighwayMaster system is the only nationwide mobile communications
system that offers the trucking industry both voice and data communications,
combined with the highly accurate Global Positioning System (satellite)
vehicle location technology.
HighwayMaster offers mobile communications, information systems, and
fleet management services with a wireless and long-distance network covering
approximately 95 percent of the U.S. interstate highway system.
SBC Communications Inc. is one of the world's leading diversified
telecommunications companies and the second largest wireless communications
company based in the United States.
<PAGE>
SBC provides innovative telecommunications products and services under the
Southwestern Bell and Cellular One brands. Its businesses include wireline and
wireless services and equipment in the United States and interests in
wireless businesses in Europe, Latin America, South Africa and Asia; cable
television in both domestic and international markets; and directory advertising
and publishing.
###
