<PAGE> 1
- --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
HighwayMaster Communications, Inc.
(Name of Registrant as Specified in Its Charter)
HighwayMaster Communications, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box)
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1. Title of each class of securities to which transaction applies:_________
___________________
2. Aggregate number of securities to which transaction applies: ___________
__________________
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): _____________
___________________________________________________
4. Proposed maximum aggregate value of transaction: _______________________
____________
5. Total Fee Paid: ________________________________________________________
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid: ________________________________________________
2. Form, Schedule or Registration Statement No.: __________________________
3. Filing Party: __________________________________________________________
4. Date Filed: ____________________________________________________________
- --------------------------------------------------------------------------------
<PAGE> 2
[HIGHWAYMASTER LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 1998
TO THE STOCKHOLDERS OF HIGHWAYMASTER COMMUNICATIONS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
HighwayMaster Communications, Inc. (the "Company") will be held in the Addison
Room at Hotel Inter-Continental Dallas, 15201 Dallas Parkway, Dallas, Texas
75248, on Tuesday, the 26th day of May, 1998, at 1:30 p.m., for the following
purposes:
1. To elect five directors to hold office until the next Annual
Meeting of Stockholders and until their respective successors
shall have been duly elected and qualified.
2. To ratify the selection of Price Waterhouse LLP as the
Company's independent accountants for the Company's fiscal
year ending December 31, 1998.
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 6, 1998
as the record date (the "Record Date") for the determination of stockholders of
the Company entitled to notice of and to vote at this Annual Meeting and at any
adjournment or postponement thereof. A holder of shares of the Company's Common
Stock is entitled to one vote, in person or by proxy, for each share of Common
Stock on all matters properly brought before the Annual Meeting.
ALL STOCKHOLDERS OF THE COMPANY ARE INVITED TO ATTEND THE ANNUAL
MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING,
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD ENCLOSED WITH
THIS NOTICE IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING. EVEN IF YOU
HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
By Order of the Board of Directors
/s/ WESLEY E. SCHLENKER
Wesley E. Schlenker
Secretary
Dallas, Texas
April 27, 1998
16479 Dallas Parkway, Suite 710, Dallas, Texas 75248
o 972-732-2500, 800-828-4696
<PAGE> 3
[HIGHWAYMASTER LOGO]
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 1998
GENERAL
General Information
This Proxy Statement is being furnished to stockholders of record of
HighwayMaster Communications, Inc. (the "Company") as of April 6, 1998 in
connection with the solicitation by the Board of Directors of the Company of
proxies to be voted at the Annual Meeting of Stockholders (the "Annual Meeting")
to be held in the Addison Room at Hotel Inter-Continental Dallas, 15201 Dallas
Parkway, Dallas, Texas 75248, on Tuesday, May 26, 1998, at 1:30 p.m., or at any
adjournments thereof, for the purposes stated in the accompanying Notice of
Annual Meeting. The approximate date of the mailing of this Proxy Statement and
enclosed form of proxy to stockholders is Monday, April 27, 1998.
RECORD DATE AND VOTING
The Board of Directors of the Company has fixed the close of business
on April 6, 1998, as the record date (the "Record Date") for the Annual Meeting.
Only holders of record of the outstanding shares of Common Stock at the close of
business on the Record Date are entitled to notice of, and to vote at, the
Annual Meeting or any adjournments thereof. As of the close of business on the
Record Date, the Company had outstanding 24,898,986 shares of Common Stock, par
value $0.01 per share ("Common Stock"). Each share of Common Stock is entitled
to one vote, in person or by proxy, on all matters properly presented at the
Annual Meeting. The Common Stock is the only class of stock entitled to vote at
the Annual Meeting. The presence, in person or by proxy, of the holders of a
majority of the issued and outstanding shares of Common Stock entitled to vote
at the Annual Meeting or any adjournments thereof is necessary to constitute a
quorum to transact business. Abstentions and broker non-votes will count in
determining whether a quorum is present at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for
the meeting. ChaseMellon Shareholder Services, LLC has been selected as the
inspector of election for this meeting and it will separately tabulate
affirmative and negative votes, abstentions and broker non-votes. Shares
represented by duly executed proxies in the accompanying form will be tabulated
as votes in accordance with the instructions indicated on such proxies, and, if
no such instructions are indicated thereon, will be voted in favor of the
nominees for election as directors named below and for the other proposals
referred to below.
In accordance with the Company's Bylaws, the directors will be elected
by a plurality of the shares of Common Stock present, in person or by proxy, and
entitled to vote at the Annual Meeting. In accordance with the Company's Bylaws,
the ratification of the selection of the Company's independent accountants
requires the affirmative vote of a majority of the shares of Common Stock
present and entitled to vote at the Annual Meeting. For purposes of the election
of directors, neither abstentions nor broker non-votes will have any effect on
the outcome of the vote. For purposes of the ratification of the selection of
the Company's independent accountants, abstentions will have the same effect as
votes against the proposal and broker non-votes will not have any effect on the
outcome of the vote.
16479 Dallas Parkway, Suite 710, Dallas, Texas 75248
o 972-732-2500, 800-828-4696
<PAGE> 4
PROXY SOLICITATION, REVOCATION AND EXPENSES
All proxies that are properly completed, signed and returned prior to
the Annual Meeting will be voted. A stockholder giving a proxy may revoke it at
any time before it is voted at the Annual Meeting (i) by filing with the
Secretary of the Company at the Company's address shown on the accompanying
Notice of Annual Meeting an instrument revoking the proxy, (ii) by delivering a
duly executed proxy bearing a later date or (iii) by appearing at the Annual
Meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
The cost of preparing, assembling, printing and mailing this Proxy
Statement and the enclosed proxy form and the cost of soliciting proxies related
to the Annual Meeting will be borne by the Company. The Company will also
reimburse brokers or other persons holding stock in their names or in the names
of their nominees for their reasonable expenses in forwarding proxy material to
beneficial owners of Common Stock, in accordance with applicable Securities and
Exchange Commission requirements.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1999 Annual Meeting of Stockholders must be received by the Company at
its principal executive offices not later than December 27, 1998.
PROPOSAL 1
ELECTION OF DIRECTORS
The following table lists the name of each person nominated for
election as a director and the year in which each nominee first served as a
director of the Company.
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
NOMINEE SINCE
- ------- -----
<S> <C>
William C. Kennedy, Jr. 1992
William C. Saunders 1992
Stephen L. Greaves 1994
Terry S. Parker 1995
Gerry C. Quinn 1992
</TABLE>
Biographical information regarding each nominee and certain other
information relating to the Board of Directors is set forth under the caption
"Directors and Executive Officers." See "Certain Relationships and Related
Transactions -- Amended Stockholders' Agreement -- Election of Directors" for a
discussion of an agreement that governs the composition of the Board of
Directors.
Shares represented by duly executed proxies will be voted, unless
otherwise specified, in favor of the five nominees for the Board of Directors
named above. The proxies cannot be voted for more than five nominees. The
nominees have indicated that they are able and willing to serve as directors. If
any such persons should be unable to serve, the persons named in the enclosed
proxy will vote the shares covered thereby for such substitute nominee (or
nominees) as the Board of Directors may select. Stockholders may withhold
authority to vote for any nominee by entering the name of such nominee in the
space provided for such purpose on the proxy card.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NOMINEE NAMED ABOVE.
2
<PAGE> 5
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP as the
Company's independent accountants for the fiscal year ending December 31, 1998
and has further directed that management submit the selection of independent
accountants for ratification by the stockholders at the Annual Meeting. Price
Waterhouse LLP has audited the Company's financial statements since its
inception in 1992. Representatives of Price Waterhouse LLP are expected to be
present at the Annual Meeting and will have the opportunity to make a statement
if they so desire. In addition, they will be available to respond to appropriate
questions.
Stockholder ratification of the selection of Price Waterhouse LLP as
the Company's independent accountants is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Price Waterhouse
LLP to the stockholders for ratification as a matter of good corporate practice.
If the stockholders fail to ratify the selection, the Board and the Audit
Committee will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Board and the Audit Committee in their discretion may
direct the appointment of a different independent accounting firm at any time
during the year if they determine that such a change would be in the best
interests of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
William C. Kennedy, Jr. 58 Chairman of the Board
William C. Saunders 51 President, Chief Executive Officer and Director
Stephen L. Greaves 39 Director
Terry S. Parker 53 Director
Gerry C. Quinn 49 Director
Gordon D. Quick 50 Executive Vice President and Chief Operating Officer
J. Philip McCormick 56 Executive Vice President and Chief Financial Officer
G. Tracy Griffin 53 Treasurer and Senior Vice President of HighwayMaster
Corporation
Robert W. LaMere 45 Senior Vice President, Transportation Systems
William H. McCausland 37 Senior Vice President and General Manager, AutoLink
Brad E. Popoff 43 Senior Vice President, Customer Service Operations
Thomas D. Russell 38 Senior Vice President, Strategic Business Development
Wesley E. Schlenker 35 General Counsel and Secretary
Stephen P. Tacke 51 Vice President and Controller
Kenneth R. Westerlage 37 Senior Vice President, Engineering & Technology
Development
Jeffrey G. Wisocki 42 Senior Vice President, Customer Development
</TABLE>
Set forth below are descriptions of the backgrounds and principal
occupations of each of the Company's executive officers and directors.
3
<PAGE> 6
WILLIAM C. KENNEDY, JR., age 58, has served as Chairman of the Board of
Directors of the Company since its inception in 1992, and as Chief Executive
Officer of the Company from its inception until December 1994. Mr. Kennedy
founded Instacom, Inc., serving as its Chairman and President from 1970 until
its merger with Comdata Network, Inc. in 1983. Instacom and Comdata provide
computerized money transfer services for trucking companies and their drivers.
Mr. Kennedy served as the Chairman of Comdata Network, Inc. from 1983 to 1985.
He also served as the Chairman, President and Chief Executive Officer of By-Word
from 1988 to 1994, a company which was engaged in the engineering and
development of voice recognition and communication products until it became a
partner in the predecessor partnership to the Company in 1992. By-Word was
dissolved in 1994. From 1993 until its merger with Nextel Communications, Inc.
in 1997, Mr. Kennedy served as a Director of Pittencrieff Communications, Inc.,
a specialized mobile radio provider.
WILLIAM C. SAUNDERS, age 51, has served as President and a Director of
the Company since its inception in 1992, and as Chief Executive Officer since
December 1994. Mr. Saunders served for more than 20 years as President and
Chairman of the Board of Saunders, Lubinski & White, Inc., an advertising and
marketing firm, where his background included significant experience in
advertising and marketing targeted at the trucking industry. Mr. Saunders
provided advertising and marketing services to Instacom and Comdata in the 1970s
and 1980s. From 1991 to 1994, Mr. Saunders served as a Director of By-Word.
During 1997 prior to its merger with Madison Dearborn Partners, Mr. Saunders
served as a Director of Tuesday Morning, Inc., North America's largest operator
of deep-discount closeout gift stores.
STEPHEN L. GREAVES, age 39, has served as a Director of the Company
since June 1994. He has served as President of Erin Mills International
Investment Corporation, a private venture capital fund and a stockholder of the
Company, since February 1997 and General Manager from April 1993 to February
1997. From January 1992 until March 1993, Mr. Greaves worked as a private
marketing consultant. From January 1989 to December 1991, Mr. Greaves served as
Marketing Planner for Esso Standard Petroleum Oil. Mr. Greaves also serves as a
director of Erin Mills International Investment Corporation, MotorVac
Technologies, Inc. ("MotorVac"), a producer of a system which cleans fuel
injection engines, NewMed Corporation and several other privately held
companies.
TERRY S. PARKER, age 53, has served as a Director of the Company since
April 1995. Mr. Parker served as President and Chief Operating Officer of
CellStar Corporation, a cellular distributor, from March 1995 to July 1996. From
October 1993 until March 1995, Mr. Parker served as President of GTE Personal
Communications Services and as Senior Vice President of GTE Mobile Comm, a
cellular service provider. From January 1989 until October 1993, Mr. Parker
served as President of GTE-TP&S, a telecommunications company. Mr. Parker also
serves as a Director of Illinois Superconductor, Inc.
GERRY C. QUINN, age 49, has served as a Director of the Company
(including its former affiliates, Eighteen Wheeler Corporation and The F.B.R.
Eighteen Corporation) since its inception in 1992, and served as President of
The Eighteen Wheeler Corporation and The F.B.R. Eighteen Corporation from April
1992 until February 1994. Mr. Quinn has served as President of The Erin Mills
Investment Corporation, a private venture capital fund and stockholder of the
Company, since July 1989, and as Executive Vice President of The Erin Mills
Development Corporation, a real estate development company and a stockholder of
the Company, since September 1989. Prior to joining Erin Mills, Mr. Quinn served
as a senior officer in Magna International Inc. and Barrincorp, both publicly
traded companies, and he served as a partner in the public accounting practice
of Ernst & Young. Currently Mr. Quinn is also a Director of Synsorb Biotech
Inc., a biotechnology research and development company, and of MotorVac.
GORDON D. QUICK, age 50, has served as Executive Vice President and
Chief Operating Officer of the Company since January 1995. Prior to joining the
Company, Mr. Quick served for more than 20 years in various
4
<PAGE> 7
positions with GTE Corporation ("GTE"), where, among other things, he held a
variety of marketing, planning and general management positions with the
Telephone Operations Group and the Information Services Group. In 1990, he was
named Vice President of Marketing and Business Development, and in January 1992
he was named Vice President and General Manager of GTE-Telecommunications
Services, Inc. ("GTE-TSI"), a principal business unit of GTE. Mr. Quick was
involved in developing the initial services provided to the Company under
contract with GTE-TSI.
J. PHILIP MCCORMICK, age 56, joined the Company in August 1997 as
Executive Vice President and Chief Financial Officer. Prior to joining the
Company, Mr. McCormick was a senior officer with units of ENSERCH Corporation
from 1991 to 1997, most recently senior vice president and chief financial
officer of Enserch Exploration, Inc. from 1995 to 1997. Prior to joining ENSERCH
Corporation he practiced public accounting for 26 years and was a partner of
KPMG Peat Marwick and KMG Main Hurdman, serving in management positions and on
the Boards of each firm.
G. TRACY GRIFFIN, age 53, has served as Treasurer of the Company since
June 1992 and was named Senior Vice President of HMC, the Company's operating
subsidiary, in January 1995. From 1982 until June 1992, Mr. Griffin served as
Controller and Vice President of Saunders, Lubinski & White, an advertising and
marketing company with expertise in the trucking industry and a former affiliate
of the Company. Mr. Griffin is the first cousin of Mr. Saunders.
ROBERT W. LAMERE, age 45, joined the Company in March 1997 as Senior
Vice President of Transportation Systems. Prior to joining the Company, Mr.
LaMere served for 14 years in various information systems positions at
Burlington Motor Carriers ("Burlington"), a trucking company. Mr. LaMere served
since 1990 as its Vice President of Information Systems and since 1993 as its
General Manager of Spirit Systems, the predecessor to the Company's Platinum
Service, which was the systems division of Burlington responsible for all of its
data and telecommunications needs as well as providing support and services to
other transportation companies.
WILLIAM H. MCCAUSLAND, age 37, has served as Senior Vice President and
General Manager, AutoLink since March 1998. From September 1996 to March 1998,
Mr. McCausland served the Company as Senior Vice President, Network Operations
and from January 1996 to September 1996 as Vice President, Business Alliances.
From May 1993 to January 1996, Mr. McCausland was employed by GTE-TSI initially
as Director of Industry Relations and was an Assistant Vice President and
General Manager when he left to join the Company. Prior to his employment at
GTE-TSI, Mr. McCausland worked for CommNet Cellular, Inc. (formerly known as
Cellular, Inc.) from May 1987 to May 1993, where he was employed in a variety of
positions with his most recent being that of Vice President of Customer Support
Services. From May 1984 to May 1987, Mr. McCausland worked in a variety of
management positions for a cellular reseller acquired by Southwestern Bell
Mobile Systems.
BRAD E. POPOFF, age 43, has served as Senior Vice President, Customer
Service Operations since September 1996. Mr. Popoff served the Company as Senior
Vice President, Marketing from November 1993 to September 1996, as Vice
President, Operations and Engineering from December 1992 until November 1993, as
Vice President, Operations, from September 1992 until December 1992, and as
Director of Marketing from April 1992 until September 1992. From 1986 until
April 1992, Mr. Popoff was employed as Vice President of Sales and Marketing of
Burlington, where he was responsible for the 22 western states in the United
States and Mexico. Mr. Popoff held various operations, sales and sales
management positions with Schneider National, Inc. ("Schneider"), a trucking
company, from 1980 until 1986, and served as Manager of Operations of Mead Paper
Corporation's private fleet, where he was employed from 1974 until 1980.
5
<PAGE> 8
THOMAS D. RUSSELL, age 38, has served as Senior Vice President,
Strategic Business Development since September 1996. Mr. Russell served the
Company as Senior Vice President, Engineering and Information Technology from
November 1993 to September 1996. Mr. Russell has over 13 years of experience in
engineering and information technology. From June 1990 to November 1993, Mr.
Russell served as Director in the areas of Asia Logistics and Systems Planning
and Development for Sea Land Service, Inc., a global steamship and container
service company. From September 1985 through June 1990, Mr. Russell served in
various capacities, including Director, Marketing and Telecommunications,
Manager of Management Services and as Quantitative Business Analyst for
Burlington. Prior to his employment at Burlington, Mr. Russell also served as
Management Analyst at the University of Missouri and Application Engineer at
National Supply Company.
WESLEY E. SCHLENKER, age 35, has served as General Counsel of the
Company since June 1994 and as Secretary of the Company since April 1995. Mr.
Schlenker was an associate attorney in the Dallas, Texas and Brussels, Belgium
offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P. between March 1991 and June
1994. Prior to his formal legal training, Mr. Schlenker was employed by
Electronic Data Systems Corporation as a Systems Engineer, primarily developing
systems for Saturn Corporation.
STEPHEN P. TACKE, age 51, has served as Vice President and Controller
of the Company since August 1995. From August 1996 to August 1997, Mr. Tacke
also served as acting Chief Financial Officer of the Company. From July 1991
through August 1995, Mr. Tacke performed financial consulting services and
managed his personal investments. Prior to July 1991, Mr. Tacke practiced public
accounting for 22 years with Price Waterhouse, last serving as an audit partner.
KENNETH R. WESTERLAGE, age 37, has served as Senior Vice President,
Engineering & Technology Development of the Company since September 1996. Mr.
Westerlage served the Company as Vice President of Software Development from
November 1995 to September 1996 and as Director of Software Development from
September 1991 to November 1995. Prior to Mr. Westerlage's employment at the
Company, he was employed for over eight years in the aerospace industry at
General Dynamics working in a variety of systems design and development
capacities.
JEFFREY G. WISOCKI, age 42, has served as Senior Vice President,
Customer Development since September 1996. Mr. Wisocki served the Company as
Senior Vice President, Operations/Customer Service from November 1993 to
September 1996. Mr. Wisocki has 16 years experience in various positions in the
trucking industry. Mr. Wisocki was employed by Burlington or its affiliates from
April 1987 to November 1993, serving in several capacities, including Vice
President of Customer Service and Senior Vice President, Operations of
Burlington. Mr. Wisocki held various management positions with Schneider from
1982 to 1987.
Except as described above, there are no family relationships among the
directors and executive officers of the Company.
ORGANIZATION OF THE BOARD OF DIRECTORS AND MEETINGS
General. The entire Board of Directors is currently comprised of five
directors, four of whom are employees of the Company or representatives of
certain of the principal beneficial owners of Common Stock of the Company, and
one who is a consultant. See "Security Ownership of Certain Beneficial Owners
and Management" and "Certain Relationships and Related Transactions -- Amended
Stockholders' Agreement -- Election of Directors." All directors serve until the
next annual meeting of the stockholders or until their respective successors are
duly elected and qualified.
6
<PAGE> 9
During the fiscal year ended December 31, 1997, the Board of Directors
held eight meetings. The standing committees of the Board currently consists of
a Compensation Committee, an Audit Committee and a Nominating Committee. The
Executive Committee was formally eliminated on February 11, 1998 since the
Board, consisting of only five members, is able to deliberate effectively
without reliance on an Executive Committee.
The Compensation Committee has been delegated the task of the
administration of, and the determination of strategy and policy matters related
to, the Amended and Restated 1994 Stock Option Plan (the "Stock Option Plan")
and is composed of William C. Saunders, Gerry C. Quinn, Terry S. Parker and
Stephen L. Greaves. The Compensation Committee met two times during the 1997
fiscal year.
A subcommittee of the Compensation Committee, composed of Stephen
Greaves and Gerry Quinn, was formed to make awards under the Stock Option Plan
and to review the future compensation of Terry S. Parker, William C. Kennedy,
Jr. and William C. Saunders. Neither of the subcommittee members is an officer
or employee of the Company or holds options granted under the Company's Stock
Option Plan. The Compensation Subcommittee met three times during the 1997
fiscal year.
The Audit Committee meets with management and the Company's independent
accountants to determine the adequacy of internal controls and other financial
reporting matters. The Audit Committee, composed of William C. Kennedy, Jr.,
Terry S. Parker and Gerry C. Quinn, met two times during the 1997 fiscal year.
The Executive Committee, comprised of Gerry C. Quinn and Terry S.
Parker, conducted no meetings in 1997 and was formally eliminated in February
1998 as noted above.
The Nominating Committee was formed pursuant to the Stockholders'
Agreement which required the Board to select a three-member Nominating Committee
composed of one "Erin Mills" director, one "By-Word" director and one "Carlyle"
director for the purpose of nominating additional outside directors for election
by the Board and for the purpose of determining whether the number of outside
directors should be expanded to three. The Nominating Committee composed of
Gerry Quinn as the Erin Mills member, Willliam Saunders as the By-Word member
and Terry Parker to replace the Carlyle member until such time, if any, Carlyle
selects a board member who is appointed to the Nominating Committee. The
Nominating Committee held no meetings during the 1997 fiscal year.
During the fiscal year ended December 31, 1997, each Board member
attended at least 75% of the aggregate of the meetings of the Board and of the
committees on which he served.
Indemnification. The Company's Certificate of Incorporation and Bylaws
require the Company to indemnify each person who is or was a director, officer,
employee or agent of the Company, or is or was serving at the Company's request
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses, judgments, fines and
amounts incurred in such capacity if such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Company or, with respect to criminal proceedings, not unlawful.
The Company will also advance to such persons payments incurred in defending a
proceeding to which indemnification might apply provided the recipient provides
an undertaking agreeing to repay all such advanced amounts if it is ultimately
determined that such person is not entitled to be indemnified. In addition, the
Bylaws specifically provide that the indemnification rights granted thereunder
are nonexclusive. In accordance with the Bylaws and the Amended Stockholders'
Agreement (as defined below), the Company has purchased insurance on behalf of
its directors and officers in amounts it believes to be reasonable.
COMPENSATION OF DIRECTORS
Pursuant to the Bylaws of the Company, the Board of Directors has the
authority to fix the compensation of directors. The Bylaws and the Amended
Stockholders' Agreement provide that directors may be reimbursed for their
reasonable expenses, if any, for their services to the Company, including
attendance at each Board meeting, and may be paid either a fixed sum for
attendance at each Board meeting or a stated salary as director. The Company
currently
7
<PAGE> 10
reimburses its Board members for travel expenses. The Company has granted Terry
Parker an option to purchase 3,798 shares of Common Stock at an exercise price
of $7.58 per share. This option was not granted pursuant to the Company's Stock
Option Plan.
In addition to his services as a director, Mr. Parker performs
consulting services for the Company in connection with the AutoLink venture and
related cellular communications matters. Pursuant to this consulting
arrangement, Mr. Parker received $250,000.00 in fees during 1997. Mr. Parker
will receive approximately $20,833 per month in fees during 1998 for continuing
consulting services he is providing to the Company.
COMPENSATION OF CERTAIN EXECUTIVE OFFICERS
General. The following table sets forth, for each of the last three
fiscal years, compensation awarded, paid to or earned by the Company's Chief
Executive Officer and its other four most highly compensated executive officers
(the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
------------
Annual Compensation(2) Awards
------------------------------- ------------
Securities
Underlying
Name and Options/ All Other
Principal Position(1) Year Salary Bonus SARs (shares) Compensation
--------------------- ---- ------ ----- ------------- ------------
<S> <C> <C> <C> <C> <C>
William C. Kennedy, Jr.(3) 1997 $439,230.00 $0 0 $0
Chairman of the Board 1996 $399,300.00 $0 0 $0
1995 $363,000.00 $0 0 $0
William C. Saunders(3) 1997 $439,230.00 $0 0 $0
President and Chief 1996 $399,300.00 $0 0 $0
Executive Officer 1995 $363,000.00 $0 0 $0
Gordon D. Quick(3) 1997 $331,489.74 $0 0 $ 34,088.54(4)
Executive Vice President 1996 $301,354.25 $0 40,000 $0
and Chief Operating 1995 $263,541.82 $ 6,400.00 0 $116,214.95(5)
Officer
William H. McCausland(3) 1997 $127,083.48 $35,000.00 0 $0
Senior Vice President and 1996 $104,602.72 $15,000.00 30,000 $ 65,000.00(6)
General Manager, 1995 - - - -
AutoLink
Jeffrey G. Wisocki 1997 $158,260.16(7) $0 0 $0
Senior Vice President, 1996 $119,166.78 $0 10,000 $0
Customer Development 1995 $107,500.08 $0 0 $0
Peter A. Talbert(8) 1997 $210,700.00(9) $0 0 $ 7,715.82(11)
Former Senior Vice 1996 $171,618.18(10) $ 9,841.56 25,000 $0
President, Sales & 1995 - - - -
Marketing
</TABLE>
8
<PAGE> 11
- ----------------------
(1) Certain Named Executive Officers included in this table are employees
of the Company's operating subsidiary, HighwayMaster Corporation.
(2) The Named Executive Officers did not receive any annual compensation
not properly categorized as salary or bonus, except for certain
perquisites and other personal benefits which are not shown because the
aggregate amount of such compensation, if any, for each of the Named
Executive Officers during the fiscal year did not exceed the lesser of
$50,000 or 10% of his total reported salary and bonus.
(3) For information regarding the annual base salaries and bonuses received
by certain Named Executive Officers pursuant to employment contracts
with the Company, see "-- Employment Contracts with Executive
Officers."
(4) Represents relocation expenses, including $9,295.63 paid to Mr. Quick
related to taxes on moving expenses paid on his behalf by the Company.
(5) Represents relocation expenses, including $43,684.00 paid to Mr. Quick
related to taxes on moving expenses paid on his behalf by the Company.
(6) Represents relocation expenses paid to Mr. McCausland pursuant to his
employment agreement with the Company and which number includes monies
related to taxes on moving expenses paid on his behalf by the Company.
(7) Includes $33,260.00 in sales commissions paid to Mr. Wisocki.
(8) Mr. Talbert served as Senior Vice President of Marketing and Sales from
February 1997 until his death in July 1997. Had Mr. Talbert's service
as an executive officer continued throughout 1997, he would have been
included in this table as one of the five most highly compensated
executive officers and therefore is included in this proxy statement
for historical purposes as requested by Item 402(a)(3)(iii) of
Regulation S-K under the Securities and Exchange Act of 1934.
(9) Includes $135,900.00 in sales commissions paid to Mr. Talbert.
10) Includes $56,609.59 in sales commissions paid to Mr. Talbert.
11) Represents relocation expenses, including $1,155.06 paid to Mr. Talbert
related to taxes on moving expenses paid on his behalf by the Company.
Stock Options. The Company grants options to certain of its executive
officers under the Stock Option Plan. As of December 31, 1997, options to
purchase a total of 2,157,309 shares had been granted and were outstanding under
the Stock Option Plan and options to purchase 121,850 shares remained available
for grant thereunder.
No options were granted to the Named Executive Officers during the year
ended December 31, 1997.
The following table sets forth the number of options exercised by the
Named Executive Officers during the year ended December 31, 1997 and the number
of options and the value of unexercised and exercised options held by them as of
December 31, 1997.
9
<PAGE> 12
AGGREGATED OPTION EXERCISES AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Option Exercises Unexercised Options In-the-Money Options
During 1997 at December 31, 1997 at December 31, 1997(1)
-------------------------- ------------------------------ -------------------------------
Number of
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William C. Kennedy, Jr. - - 593,478 0 $0 $0
William C. Saunders - - 593,478 0 $0 $0
Gordon D. Quick - - 129,044 52,261 $0 $0
William H. McCausland - - 12,000 18,000 $0 $0
Jeffrey G. Wisocki - - 39,579.20 17,394.80 $0 $0
Peter A. Talbert(2) 10,000 $11,025.00 0 0 - -
</TABLE>
- -----------
(1) Represents the closing price per share of the Common Stock on the last
day of the fiscal year less the option exercise price multiplied by the
number of shares. The closing value per share was $5 11/16 on the last
trading day of the fiscal year as reported on the Nasdaq National
Market. No options of Named Executive Officers were In-the-Money at
December 31, 1997.
(2) Mr. Talbert's estate exercised certain vested stock options formerly
belonging to Mr. Talbert in a transaction within the applicable
triggering time period after his death.
Savings Plan. The Company has established a 401(k) Retirement
Investment Profit-Sharing Plan (the "Savings Plan") covering all of its
employees when they become eligible to participate. Pursuant to the Savings
Plan, employees may elect to contribute up to 20% of their pre-tax earnings. The
maximum amount of contributions and forfeitures which may be added to the
account of a particular employee each year is $10,000. The Company is not
required to make any contributions to the Savings Plan and, did not make any
such contributions during the year ended December 31, 1997.
EMPLOYMENT CONTRACTS WITH EXECUTIVE OFFICERS
Each of William C. Kennedy, Jr. and William C. Saunders has entered
into an employment contract with HMC effective February 4, 1994 and continuing
through the fifth anniversary of the consummation of the Initial Public
Offering, unless terminated earlier in the event of death, permanent disability,
for "cause" or, under certain conditions, voluntarily. The terms of Messrs.
Kennedy's and Saunders' contracts provide for an annual base salary of $330,000
for each officer, with annual increases each year during the term of such
contracts, commencing with the first month of the second year of such term, in
an amount equal to 10% of the salary paid to each officer during the immediately
preceding employment year. Each officer shall also receive annual bonuses during
the term of his contract of .75 of one percent of an amount which is equal to
the first $1,000,000 of the pretax consolidated taxable income of HighwayMaster
Corporation, if any, for the preceding taxable year ended December 31 (the
"Income Base") and one percent of pre-tax consolidated taxable income above such
Income Base. In addition, Messrs. Kennedy and Saunders may receive additional
discretionary bonuses during the terms of their contracts, at the sole
discretion of the board of directors of HighwayMaster Corporation. The
employment contracts provide for a severance payment equal to the remaining
amount of salary payable under the contract in the event of termination other
than for "cause". The employment
10
<PAGE> 13
contracts also provide that each of Messrs. Kennedy and Saunders is subject to a
covenant not to compete during the period that compensation is paid under his
employment agreement and for 24 months thereafter.
Gordon D. Quick entered into an employment contract with HM Corporation
effective November 23, 1994 and continuing through the fifth anniversary of the
consummation of the Initial Public Offering, unless terminated earlier in the
event of death, permanent disability, for "cause" or, under certain conditions,
voluntarily. Pursuant to the employment contract, Mr. Quick receives an annual
base salary of $275,000, with annual increases, annual bonuses and discretionary
bonuses set on the same terms as those of Messrs. Kennedy and Saunders. The
employment contract also provides for a signing bonus in the amount of $6,400
and payment of reasonable expenses estimated to be in the amount of $100,000 in
connection with Mr. Quick's relocation at the time he joined the Company. In the
event of a termination by the Company with notice or by Mr. Quick due to the
Company's breach, Mr. Quick will be entitled to the remaining amount of salary
and the minimum bonus that would be payable under the employment contract absent
the termination. In the event of a termination by Mr. Quick with notice (other
than as set forth in the preceding sentence), Mr. Quick will be entitled to the
salary payable for the remaining term of the contract or 90 days, whichever is
less. Other than in the case of a termination by Mr. Quick due to a breach by
the Company, or a termination by the Company with notice, the contract provides
that Mr. Quick is subject to a covenant not to compete for a period of 12 months
after the termination of his employment.
William C. McCausland entered into an employment agreement with HMC
effective January 29, 1996 and continuing through January 29, 1999, unless
earlier terminated in which case Mr. McCausland would receive severance of one
year's base salary. Additionally, Mr. McCausland received $65,000 in connection
with his relocation and 30,000 stock options in the Company. Mr. McCausland is
eligible for a discretionary $15,000 bonus every six months during the term of
the agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
William C. Saunders, the President and Chief Executive Officer and
member of the Board of Directors, Gordon D. Quick, the Executive Vice President
and Chief Operating Officer, and J. Philip McCormick, the Executive Vice
President and Chief Financial Officer, annually review and adjust the salary
structures of executive officers who are not subject to employment agreements
and such decisions are subject to review by the Board of Directors. William C.
Kennedy, Jr., the Chairman of the Board of Directors and former Chief Executive
Officer of the Company, participated in such Board deliberations concerning
executive compensation.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
AMENDED STOCKHOLDERS' AGREEMENT
General. As of February 4, 1994, the Company, the Erin Mills
Stockholders, the Carlyle Stockholders, the ByWord Stockholders, and certain
other parties entered into a Stockholders' Agreement. In connection with the
transactions with SBC Communications, Inc. ("SBC") consummated on September 27,
1996, such agreement was amended and restated in order, among other things to
add SBC as a party thereto. 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, (a) the term "Erin Mills Stockholders" means Erin Mills International
Investment Corporation, The Erin Mills Development Corporation and The Erin
Mills Investment Corporation, (b) the term "Carlyle Stockholders" means the
Clipper Stockholders (as defined below), Carlyle-HighwayMaster Investors, L.P.,
Carlyle-HighwayMaster Investors II, L.P., TC Group, L.L.C., Mark D. Ein, Chase
Manhattan Investment Holdings, Inc., H.M. Rana Investments Limited and Archery
Partners, (c) the term "Clipper Stockholders" means Clipper Capital Associates,
L.P., Clipper/Merban, L.P. and Clipper/Merchant Partners, L.P. and (d) the term
"By-Word Stockholders" means William C. Kennedy, Jr., Donald M. Kennedy, William
C. Saunders, Robert S. Folsom and Robert T. Hayes.
11
<PAGE> 14
Election of Directors. The Amended Stockholders' Agreement provides
that 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 (other than the Clipper
Stockholders), (iii) two directors designated by the By-Word Stockholders (one
of which will be the chief executive officer of the Company) and (iv) two
independent directors (except that the addition of a second independent director
to the Board of Directors is not required to occur until the date of the next
annual meeting of the stockholders of the Company after September 27, 1996). The
Carlyle Stockholders have declined to exercise their right to designate a
director. Terry S. Parker serves as an independent director. The Company has not
yet identified a second independent director but intends to do so as promptly as
practicable. The Erin Mills Stockholders have designated Gerry C. Quinn and
Stephen Greaves and the By-Word Stockholders have designated William C. Kennedy,
Jr. and William C. Saunders to serve as directors. Prior to the receipt of
Regulatory Relief, SBC 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), SBC 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 SBC and its affiliates beneficially own 20% or more of the
outstanding Common Stock (including shares issuable upon conversion of Series D
Preferred Stock or Class B Common Stock or other convertible securities or upon
the exercise of outstanding options, warrants or rights, but excluding shares
issuable upon the exercise of the SBC Warrants or any Excluded Options) on a
fully diluted basis, SBC 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
(including shares issuable upon conversion of outstanding securities or upon the
exercise of outstanding options, warrants or rights, but excluding shares
issuable upon the exercise of the SBC Warrants or any 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.
Right of First Refusal. Under the terms of the Amended Stockholders'
Agreement, the Carlyle Stockholders (other than the Clipper Stockholders), the
Erin Mills Stockholders, William C. Kennedy, Jr. and William C. Saunders (the
"First Refusal Stockholders") granted a right of first refusal to SBC 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 SBC in accordance with the terms of the Amended Stockholders' Agreement.
Registration Rights. The Amended Stockholders' Agreement also provides
for the grant of certain demand, piggyback or other registration rights to the
stockholders who are parties thereto. In particular, such agreement provides
that, with respect to an aggregate of 1,818,018 shares of Common Stock issued to
the Erin Mills Stockholders and certain of the Carlyle Stockholders in
connection with the Recapitalization Transactions, the Company will register
one-half of such shares under the Securities Act, for sale on or after March 31,
1997 and will register the remainder of such shares under the Securities Act for
sale on or after September 27, 1997. The Erin Mills Stockholders and the Carlyle
Stockholders waived the right to cause the Company to register one-half of such
shares for sale on or after March 31, 1997, although they have reserved the
right to revoke such waiver at any time. Registration of such shares is not
currently scheduled.
In addition, under the Amended Stockholders' Agreement, a majority of
certain stockholders have the right to demand that the shares of Common Stock
held by them be registered under the Securities Act on up to two separate
occasions. However, if the Board of Directors of the Company reasonably
determines that, due to a pending or contemplated acquisition or disposition,
such a demand registration would have a material adverse effect on the Company,
the Company may defer such registration for a period not to exceed 180 days.
Furthermore, if the managing underwriter or underwriters or the holders of a
majority of the registerable securities held by the stockholders demanding
12
<PAGE> 15
the registration determine that the number of shares of Common Stock proposed to
be sold pursuant to the demand registration provisions exceeds the amount that
can be sold without having a material adverse effect on the proposed offering,
the Company may exclude certain shares from the offering.
The Amended Stockholders' Agreement also grants piggyback registration
rights to certain stockholders. Accordingly, 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)
under the Securities Act (other than registrations on Form S-4 or Form S-8), the
holder of shares of Common Stock have the right to include the shares of Common
Stock held by them in any such registration, including the shelf registration
statement to be filed pursuant to the Warrant Registration Rights Agreement.
However, if the inclusion of shares of Common Stock pursuant to the piggyback
registration provisions is reasonably determined by the managing underwriter or
underwriters to materially adversely affect the success of the proposed
offering, the Company may exclude certain shares from the offering.
SBC TRANSACTIONS
Sale of Series D Preferred Stock. On September 27, 1996, the Company
and SBC entered into a purchase agreement (the "SBC Purchase Agreement"),
pursuant to which the Company sold 1,000 shares of a new series of its preferred
stock, par value $.01 per share, designated as Series D Participating
Convertible Preferred Stock ("Series D Preferred Stock") to SBC in consideration
of a cash payment in the amount of $20.0 million.
Authorization of Class B Common Stock. As required under the terms of
the SBC Purchase Agreement, the Company amended its Certificate of Incorporation
in January 1997 to authorize the creation of Class B Common Stock, which is a
new class of common stock into which shares of Series D Preferred Stock are
convertible.
Issuance of SBC Warrants. On September 27, 1996, the Company issued
certain warrants (the "SBC Warrants") to SBC. The SBC Warrants entitle SBC to
purchase from the Company (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.
Other Agreements. On September 27, 1996, HMC entered into a Technical
Services Agreement with SBC pursuant to which SBC or one or more of its
affiliates will provide HMC 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 SBC Purchase Agreement, promptly
after Regulatory Relief is obtained, the Company will cause HMC to enter into a
Voice and Data Services Agreement (the "Voice and Data Services Agreement") with
an affiliate of SBC. The Voice and Data Services Agreement, if entered into by
the parties, will provide that HMC will purchase long distance and other voice
and data services from such affiliate of SBC.
OTHER AGREEMENTS
The Company has entered into a lease involving 65,613 square feet of
office space in Dallas, Texas, at an average price of $14.88 per square foot per
year, which the Company uses for its headquarters. The lessor of such property
is Folsom Investments, Inc., a Texas corporation which is wholly-owned by Robert
S. Folsom, a stockholder of the Company.
The Company has assumed the rights and obligations of a certain Agency
Agreement, dated as of February 1, 1993 (the "Agency Agreement"), by and between
a predecessor partnership to the Company and Saunders, Lubinski
13
<PAGE> 16
& White, Inc., now known as Saunders Ream (the "Agency"). The Agency Agreement
provides that in consideration for its advertising services, the Agency will
receive a 5% profit on all services provided to the Company, subject to future
negotiation, in addition to media, production and other reasonable expenses. The
Agency Agreement may be terminated, with or without cause, at any time by either
party, with 90 days notice. William C. Saunders, President and Chief Executive
Officer and a director of the Company, was a principal stockholder and officer
of the Agency until January 1997. Mr. Saunders will continue to receive deferred
payments based upon a portion of the gross income of the Agency with respect to
new clients over the next five years. During 1993, 1994, 1995, 1996 and 1997,
the Company paid $0.8 million, $1.2 million, $1.4 million, $0.4 million and $.06
million respectively, under the Agency Agreement.
In 1997, an affiliate of SBC provided a limited guarantee of certain
contractual obligations of the Company in order to ensure that the Company would
receive payment of certain funds owing to it as of an earlier date than such
funds would otherwise become available. The affiliate received no payment of any
kind for providing the guarantee. This guarantee terminated upon the
consummation of a units offering consisting of $125 million in Senior Notes and
Warrants undertaken by the Company in September 1997.
In early August 1997, the Company entered into an agreement with the
Erin Mills Stockholders pursuant to which the Erin Mills Stockholders agreed to
fund the Company's short-term working capital requirements up to a maximum of
$5.0 million. This agreement terminated upon the consummation of the units
offering mentioned in the previous paragraph, and no amounts were actually
funded to the Company.
FUTURE TRANSACTIONS
From time to time, the Company may enter into other transactions and
agreements with its affiliates. Although the Company intends that the terms of
any such future transactions and agreements will be at least as favorable to the
Company as could be obtained from unaffiliated third parties, there can be no
assurance that this will be the case. Any such future transactions that are
material to the Company will be approved by a majority of the Company's
independent directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of December 31,
1997, regarding beneficial ownership of the Common Stock and the percentage of
total voting power held by (i) each stockholder who is known by the Company to
own more than five percent of the outstanding Common Stock, (ii) each director,
(iii) each Named Executive Officer and (iv) all directors and executive officers
as a group. Unless otherwise noted, the persons named below have sole voting and
investment power with respect to such shares.
14
<PAGE> 17
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENT OF CLASS
NAME OF HOLDER BENEFICIALLY OWNED BENEFICIALLY OWNED
- -------------- ------------------ ------------------
<S> <C> <C>
Erin Mills Stockholders(1)................................. 9,833,206 39.5%
7501 Keele Street
Suite 500
Concord, Ontario L4K1YZ, Canada
Southwestern Bell Wireless Holdings, Inc. (2).............. 6,600,000 21.0%
17330 Preston Road
Suite 100A
Dallas, Texas 75252
Carlyle Stockholders (3)................................... 2,723,468 10.9%
1001 Pennsylvania Avenue, N.W.
Suite 220 South
Washington, D.C. 20004-2505
The Clipper Stockholders (4)............................... 1,336,016 5.4%
Tower 49
12 East 49th Street
New York, New York 10017
William C. Kennedy, Jr. (5)................................ 2,622,796 10.3%
William C. Saunders (6).................................... 1,485,493 5.8%
Gerry C. Quinn (7)......................................... - -
Stephen Greaves (7)........................................ - -
Terry S. Parker (8)........................................ 3,798 *
Gordon D. Quick (9)........................................ 129,044 *
William H. McCausland (10)................................. 18,000 *
Jeffrey G. Wisocki (11).................................... 39,579.20 *
All directors and executive officers as a group
(16 persons) (12).................................. 4,479,788.80 16.9%
</TABLE>
- -----------
* Less than 1%
(1) Represents (i) 9,061,310 shares of Common Stock owned of record by Erin
Mills International Investment Corporation, (ii) 527,680 shares owned
of record by The Erin Mills Development Corporation, and (iii) 244,216
shares owned of record by The Erin Mills Investment Corporation. This
beneficial ownership information is based on the most recent Schedule
13D filed with the Securities and Exchange Commission (the
"Commission") by the beneficial owners named above.
15
<PAGE> 18
(2) Represents (i) 1,600,000 shares of Common Stock issuable to SBW upon
the conversion of shares of Series D Preferred Stock and (ii) 5,000,000
shares of Common Stock issuable to SBW upon the exercise of the
Warrants. SBW may be deemed to share voting and dispositive power with
respect to the foregoing shares of Common Stock with SBC. Information
regarding beneficial ownership of shares of Common Stock by SBW and SBC
is based on the most recent Schedule 13D filed with the Commission by
the beneficial owners named above.
(3) Represents (i) 2,222,799 shares owned of record by
Carlyle-HighwayMaster Investors, L.P., (ii) 209,354 shares owned of
record by Carlyle-HighwayMaster Investors II, L.P. and (iii) 291,315
shares of record owned by TC Group, L.L.C. Carlyle-HighwayMaster
Investors, L.P., TC Group, L.L.C. and TCG Holdings, L.L.C., the
managing member of TC Group, L.L.C., are deemed to share beneficial
ownership of the shares owned of record by Carlyle-HighwayMaster
Investors, L.P. Carlyle-HighwayMaster Investors II, L.P., TC Group,
L.L.C. and TCG Holdings, L.L.C. are deemed to share beneficial
ownership of the shares owned of record by Carlyle- HighwayMaster
Investors II, L.P. TC Group, Inc., L.L.C., TCG Holdings, L.L.C., and TC
Group Investment Holdings, L.L.C., an affiliate of TC Group, L.L.C. and
TCG Holdings, L.L.C., are deemed to share beneficial ownership of the
shares owned of record by TC Group, L.L.C . This beneficial ownership
information is based on the most recent Schedule 13D filed with the
Commission by the beneficial owners named above.
(4) Represents (i) 666,322 shares beneficially owned by Clipper/Merban,
L.P., (ii) 657,889 shares beneficially owned by Clipper/Merchant
Partners, L.P. and (iii) 11,805 shares are beneficially owned by
Clipper Capital Associates, L.P. Clipper Capital Associates, L.P. is
the sole general partner of Clipper/Merchant Partners, L.P. Pursuant to
certain limited partnership agreements between Clipper Capital
Associates, L.P., Clipper Curacao Inc. and Clipper/Merban, L.P.,
Clipper Capital Associates, L.P. is the investment general partner of
Clipper/Merban, L.P., with sole investment authority and power to vote
or direct the vote. Clipper Capital Associates, Inc. is the sole
general partner of Clipper Capital Associates, L.P. This beneficial
ownership information is based on the most recent Schedule 13G filed
with the Commission by the beneficial owners named above.
(5) Includes 593,478 shares of Common Stock that may be acquired by Mr.
Kennedy upon exercise of currently exercisable options granted under
the Stock Option Plan.
(6) Includes 593,478 of such shares that may be acquired by Mr. Saunders
upon exercise of currently exercisable options granted under the Stock
Option Plan.
(7) Messrs. Quinn and Greaves of the Erin Mills Stockholders. Pursuant to
an agreement entered into with the Erin Mills Stockholders, Mr. Quinn
has a right to acquire up to 3% of the interest in the Company held by
such stockholders.
(8) Represents vested Common Stock Options totaling 3,798 shares.
(9) Includes 129,044 of such shares that may be acquired by Mr. Quick upon
exercise of currently exercisable options granted under the Stock
Option Plan.
(10) Includes 18,000 of such shares that may be acquired by Mr. McCausland
upon exercise of currently exercisable options granted under the Stock
Option Plan.
(11) Includes 39,579.20 of such shares that may be acquired by Mr. Wisocki
upon exercise of currently exercisable options granted under the Stock
Option Plan.
(12) Includes 1,555,345.80 shares subject to options granted under the Stock
Option Plan or otherwise that are exercisable within 60 days of
December 31, 1997 by a total of 16 directors and executive officers.
16
<PAGE> 19
The Company is a party to the Amended Stockholders' Agreement by and
among the Carlyle Stockholders, the Clipper Stockholders, the Erin Mills
Stockholders, SBC, Willam C. Kennedy, Jr., William C. Saunders, Robert T. Hayes
and Robert S. Folsom. The parties to the Amended Stockholders' Agreement have
agreed to vote the shares of Common Stock held by them with respect to certain
matters as specified therein, and accordingly, may be deemed to beneficially own
all the shares of Common Stock subject to the terms of the Amended Stockholders'
Agreement. In total 18,397,454 shares of Common Stock, representing 73.89% of
the outstanding shares of Common Stock at December 31, 1997, are subject to the
Amended Stockholders' Agreement. All of the parties to the Amended Stockholders'
Agreement who have filed Schedule 13Ds or Schedule 13Gs with the Securities and
Exchange Commission have disclaimed beneficial ownership to any shares of Common
Stock held by any other party to the Amended Stockholders' Agreement as a result
of such agreement.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities to file with the Commission initial
statements of beneficial ownership of securities and subsequent changes in
beneficial ownership of the Company. Officers, directors and
greater-than-ten-percent stockholders are required by the Commission's
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, its
officers, directors and greater-than-ten-percent beneficial owners timely
complied with all section 16(a) filing requirements applicable to them with the
exception of a brief delay in filing of certain Form 3's of Mr. McCausland, Mr.
Westerlage, Mr. Tacke, Mr. Talbert, and Mr. McCormick which were filed within 10
days after the end of the month in which they were designated executive officers
of the Company rather than filed within 10 days after the event, as specified in
the Exchange Act.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Board of Directors (in this report, the "Board") has prepared its
report on 1997 executive compensation as required by rules of the Commission,
which provides specific information regarding compensation of the Company's
President and Chief Executive Officer and its executive officers as a group.
COMPENSATION POLICIES
Compensation of the Company's executives is structured in a manner that
is intended to be competitive in the marketplace, to recognize personal risks
that were inherent in the early start-up phase of the Company and to link
compensation to the long-term business objectives of the Company and the
enhancement of stockholder value. Certain executives have been retained pursuant
to long-term employment contracts which govern their compensation and others are
evaluated on an ongoing basis. See "Directors and Executive Officers --
Employment Contracts with Executive Officers." Factors considered in determining
an executive's total compensation package include both objective and subjective
criteria. Such factors may include improvements in overall corporate or business
unit performance, increases in installed customer base, development efforts that
result in greater efficiency or competitive advantages to the Company, the level
of responsibility, prior experience, satisfaction of individual performance
goals and comparable industry compensation levels for an equivalent position.
Decisions concerning compensation of executive officers with employment
contracts have been made by the Board. Those executives whose salaries are not
established by employment contract are set by the Chief Executive Officer, the
Chief Operating Officer or the Chief Financial Officer and are subject to review
by the Board. A committee of the Board, the Compensation Committee, consisting
of William C. Saunders, Gerry C. Quinn, Terry S. Parker and Stephen L. Greaves,
has been delegated the task of the discussion of strategy and policy matters
related to the Stock
17
<PAGE> 20
Option Plan, although it also reviews other forms of compensation from time to
time. A subcommittee of the Compensation Committee, composed of Stephen Greaves
and Gerry Quinn, is charged with making awards under the Stock Option Plan and
reviewing the future compensation of Terry S. Parker, William C. Kennedy, Jr.
and William C. Saunders. Neither of the subcommittee members is an officer or
employee of the Company or holds options granted under the Stock Option Plan.
COMPONENTS OF COMPENSATION
Compensation that the Company offers to executive officers includes
base salary, short-term cash incentive compensation in the form of a bonus, if
appropriate, and long-term incentive compensation in the form of stock option
grants. These elements are addressed separately.
Base Salaries. Those executives whose salary structures are not
established by employment agreements are subject to annual adjustment by the
Chief Executive Officer, the Chief Operating Officer or the Chief Financial
Officer and are subject to review by the Board. The review is based on the
compensation policies described above. Market competition, inflation and other
equity considerations may also be factored into executive salary decisions.
Salary increases reflect job changes, promotions, market adjustment reviews and
ordinary increases. Executive salary increases in 1997 ranged from 0% to 25%,
except for Mr. Kennedy, Mr. Saunders and Mr. Quick, whose 10% increases were
subject to employment contracts. See "Directors and Executive Officers -
Employment Contracts with Executive Officers."
Short-term Incentives - Cash Bonuses and Commissions. If the Company's
performance warrants the awarding of cash bonuses in a given year, they may be
awarded on a company-wide or a case-by-case basis. Bonuses of the Chairman of
the Board, the Chief Executive Officer, the Chief Operating Officer and the
Chief Financial Officer are tied to the profitability of the Company under the
terms of their employment arrangements with the Company and they did not receive
any bonuses in 1997. Mr. McCausland's bonus arrangement is tied to performance
and is discretionary. Mr. McCausland, who was responsible for the Company's
Network Operations during 1997, and among other things successfully oversaw the
Company's Network Switching Center ("NSC") and the transition of all Company
customers from the AT&T switching center to the Company's NSC, received the full
1997 discretionary bonus of $30,000 available to him under his employment
agreement with the Company plus an additional $5,000. See "Directors and
Executive Officers -- Employment Contracts with Executive Officers." Mr. Wisocki
and Mr. Talbert, who were responsible for various areas of customer development
and sales during 1997, each were rewarded for new and increased business to the
Company through their receipt of sales commissions paid in addition to their
base salaries. See "Compensation of Certain Executive Officers - Summary
Compensation Table".
Long-term Incentives - Stock Option Grants. Certain executive officers
of the Company or its operating subsidiary are selected by the Compensation
Committee to receive stock options to purchase shares of Common Stock, which
include both incentive stock options and nonqualified stock options pursuant to
the terms of the Stock Option Plan. The Compensation Committee administers the
Stock Option Plan and has delegated to a subcommittee the power and discretion
to determine those officers or other employees to whom options will be granted
under the Stock Option Plan and to prescribe the terms and conditions of such
options, which need not be identical even for similarly situated employees.
By issuing long-term incentive options to its executive officers, the
Board and its Compensation Committee intend to further the interests of the
Company's stockholders by tying a substantial portion of executive compensation
to the market value of Common Stock. Further, the Stock Option Plan is designed
to support the Company's ability to attract and retain qualified management and
other personnel necessary for the success and progress of the Company.
New options totaling 81,000 shares were granted to executive officers
during 1997.
William C. Saunders, the Company's Chief Executive Officer, is retained
by the Company under a long term employment agreement which was executed in
February 1994 and extended for a five year term from the date of the
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<PAGE> 21
Initial Public Offering in June 1995. See "Directors and Executive Officers --
Employment Contracts with Executive Officers." The contract terms were
negotiated and entered into in consideration of certain of the factors mentioned
above and are consistent with the overall goals for the Company's executive
compensation packages. During 1997, the Board did not reevaluate the terms of
this employment contract, but in certain circumstances the Board and
subcommittee of the Compensation Committee expect that they would do so in the
future.
Mr. Saunders' base salary was increased from $399,300 to $439,230
during 1997 to reflect the 10% increase per annum specified in his employment
contract with the Company. Under Mr. Saunders employment contract, certain short
term incentive cash bonuses are tied to the Company's income levels. Since these
thresholds were not reached, no corresponding bonus was paid to Mr. Saunders in
1997. Although the Board has the discretion to award other bonuses to Mr.
Saunders, none were awarded in 1997.
Although the Board granted fully-vested long term incentive stock
options in 1994 to Mr. Saunders, none were granted in 1997. The relative worth
of the stock option grants fluctuates as the Company's stock price fluctuates
and thus Mr. Saunders' supplemental long-term compensation is tied to the
objective of maximizing stockholder value.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
Section 162(m) of the Code generally limits the U.S. corporate income
tax deduction for compensation paid to each executive officer named in the
summary compensation table in the proxy statement of a public company to $1
million for each year, unless certain requirements are met. For fiscal 1997, the
limitation imposed by Section 162(m) did not apply to the compensation paid to
any executive officers. Therefore, the Board has taken no action in response to
Section 162(m). The Board will consider actions to qualify compensation for
deduction should it appear that the limits of 162(m) will be exceeded, but will
retain the discretion to pay non-deductible compensation if that would be in the
best interests of the Company and shareholders under the circumstances.
SUMMARY
The Board believes that the Company's executive compensation policies
and actions provide the Company's executive officers with the appropriate
incentives to achieve the Company's short and long-term goals and to enhance
stockholder value.
BOARD OF DIRECTORS
Stephen L. Greaves
William C. Kennedy, Jr.
Terry S. Parker
Gerry C. Quinn
William C. Saunders
PERFORMANCE GRAPH
The following graph compares total stockholder returns of the Company
since its initial public offering of Common Stock on June 22, 1995 to two
indices: the NASDAQ CRSP Total Return Index for the NASDAQ Stock Market, U.S.
companies (the "NASDAQ-US Index"), and the NASDAQ CRSP Total Return Index for
Telecommunications Stocks (the "NASDAQ-Industry Index"). The total return for
the Company's stock and for each index assumes $100 invested on June 22, 1995 in
the Company's Common Stock, the NASDAQ-US Index and the NASDAQ-Industry Index,
including the reinvestment of dividends, although cash dividends have never been
declared on the Company's stock. The Company's Common Stock is traded on the
NASDAQ National Market and is a component of both the NASDAQ-US Index and the
NASDAQ-Industry Index.
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<PAGE> 22
COMPARISON OF CUMULATIVE TOTAL RETURN ON INVESTMENT SINCE
THE COMPANY'S INITIAL PUBLIC OFFERING ON JUNE 22, 1995
[GRAPH]
<TABLE>
<CAPTION>
06/22/95 06/30/95 09/30/95 12/31/95 03/31/96 06/30/96 09/30/96 12/31/96 03/31/97 06/30/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nasdaq Telcomm 100.00 103.54 116.67 118.49 124.62 128.56 120.98 121.14 112.59 141.33
Nasdaq US 100.00 99.31 111.27 112.63 117.88 127.50 132.04 138.52 131.02 155.03
HWYM 100.00 77.22 65.82 52.53 30.38 70.89 83.54 91.77 66.46 77.22
<CAPTION>
09/30/97 12/31/97
<S> <C> <C>
Nasdaq Telcomm 164.07 178.93
Nasdaq US 181.26 169.99
HWYM 41.14 28.80
</TABLE>
The closing price of the Common Stock on the last trading day of the
1997 fiscal year was $5 11/16 per share. Historical stock price performance is
not necessarily indicative of future price performance.
THE MATERIAL IN THE REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION AND THE PERFORMANCE GRAPH IS NOT "SOLICITING MATERIAL," IS NOT
DEEMED FILED WITH THE COMMISSION AND IS NOT TO BE INCORPORATED BY REFERENCE INTO
ANY FILING OF THE COMPANY UNDER THE SECURITIES ACT OR THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED, WHETHER MADE BEFORE OR AFTER THE DATE HEREOF AND
IRRESPECTIVE OF ANY GENERAL INCORPORATION LANGUAGE IN ANY FILING.
ANNUAL REPORT ON FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1997, FILED BY THE COMPANY WITH THE COMMISSION, WITHOUT
EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY PERSON REQUESTING A COPY
THEREOF IN WRITING AND STATING THAT SUCH PERSON IS A BENEFICIAL HOLDER OF SHARES
OF COMMON STOCK OF THE COMPANY ON THE RECORD DATE FOR THE ANNUAL MEETING.
REQUESTS AND INQUIRIES SHOULD BE ADDRESSED TO HIGHWAYMASTER COMMUNICATIONS,
INC., 16479 DALLAS PARKWAY, SUITE 710, DALLAS, TEXAS 75248.
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OTHER MATTERS
The Board of Directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
/s/ WESLEY E. SCHLENKER
WESLEY E. SCHLENKER
Secretary
April 17, 1998
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<PAGE> 24
PROXY
HIGHWAYMASTER COMMUNICATIONS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 26, 1998
THIS PROXY IS SOLICITED ON BEHALF OF HIGHWAYMASTER COMMUNICATIONS, INC.'S
BOARD OF DIRECTORS
The undersigned hereby appoints William C. Saunders and Wesley E.
Schlenker, and each of them, proxies for the undersigned with full power of
substitution, to vote all shares of HighwayMaster Communications, Inc.'s Common
Stock which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of HighwayMaster Communications, Inc., Dallas, Texas, on Tuesday,
May 26, 1998 at 1:30 P.M., or at any adjournment thereof, upon the matters set
forth on the reverse side and described in the accompanying Proxy Statement
and upon such other business as may properly come before the meeting or any
adjournment thereof.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE ON ANY
ITEM. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS, PLEASE SIGN THE REVERSE SIDE, NO BOXES NEED TO BE CHECKED.
- ----------------------------------------
COMMENTS/ADDRESS CHANGE: PLEASE MARK
COMMENT/ADDRESS BOX ON REVERSE SIDE (CONTINUED AND TO BE SIGNED ON
OTHER SIDE)
- FOLD AND DETACH HERE -
<PAGE> 25
<TABLE>
<S> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2. PLEASE MARK [X]
YOUR VOTES AS
INDICATED IN
THIS EXAMPLE
WITHHELD
FOR FOR ALL FOR AGAINST ABSTAIN
Item 1-ELECTION OF DIRECTORS Item 2-RATIFICATION OF THE
William C. Kennedy, Jr., William C. Saunders, APPOINTMENT OF PRICE [ ] [ ] [ ]
Stephen L. Greaves, Terry S. Parker, Gerry C. Quinn WATERHOUSE LLP AS THE
COMPANY'S INDEPENDENT
WITHHELD FOR ONE OR MORE NOMINEES: (Write that nominee's AUDITORS FOR 1998.
name in the space provided below).
I PLAN TO ATTEND THE MEETING [ ]
COMMENTS/ADDRESS CHANGE
- ----------------------------------------------------------- Please mark this box if you have [ ]
written comments/address change
- ----------------------------------------------------------- on the reverse side.
- ----------------------------------------------------------- Receipt is hereby acknowledged of the [ ]
HighwayMaster Communications, Inc. Notice of
Meeting and Proxy Statement.
Signature(s) Date
--------------------------------------------------------------------------------------------- -----------
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such.
- FOLD AND DETACH HERE -
</TABLE>
