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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _______ TO _______
COMMISSION FILE NO. 0-28196
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WEBLINK WIRELESS, INC.
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C>
DELAWARE 75-2575229
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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3333 LEE PARKWAY, SUITE 100
DALLAS, TEXAS 75219
(Address of principal executive offices)
(Registrant's telephone number, including area code): (214) 765-4000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS
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Class A Common Stock, par value $0.0001 per share
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based upon the closing sale price of the Class A Common Stock on
January 31, 2000 as listed on The Nasdaq Stock Market(R), was approximately
$215,334,767. Shares of Common Stock held by each executive officer and director
and by each person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status for this purpose is not necessarily a conclusive
determination for other purposes.
As of January 31, 2000, there were 36,942,624; 3,809,363; and 211,750
shares of the Registrant's Class A, Class B and Class D common stock
outstanding, respectively. There were no shares of the Registrant's Class C
common stock outstanding at January 31, 2000.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Proxy Statement for its Annual Meeting of
Shareholders scheduled to be held on April 5, 2000 are incorporated by reference
into Part III (items 11, 12 and 13) hereof.
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PART I
ITEM 1. BUSINESS
Unless the context otherwise requires, references to the "Company" are to
WebLink Wireless, Inc. and its subsidiaries on a consolidated basis. References
to "WebLink Wireless" are to WebLink Wireless, Inc. on a non-consolidated basis.
WebLink Wireless changed its name from PageMart Wireless, Inc. on December 1,
1999. References to "PageMart, Inc." are to PageMart, Inc., a wholly-owned
subsidiary of WebLink Wireless that was merged into WebLink Wireless on January
28, 1998.
FORWARD LOOKING STATEMENTS
This Form 10-K and the Annual Report to Stockholders contain statements
that constitute forward-looking statements. In addition to statements that speak
to a time in the future, the words "estimate," "project," "plan," "expect,"
"believe" and similar expressions are intended to identify forward-looking
statements. Readers are cautioned that such forward-looking statements involve
risks and uncertainties, and are subject to change based on various important
factors. The factors set forth herein under "Risk Factors" and in other filings
with the Securities and Exchange Commission, as well as the following factors,
could affect the Company's financial performance and could cause actual results
to differ materially from those expressed in such forward-looking statements:
economic conditions and consumer confidence generally in the United States; the
ability of the Company to manage its high outstanding indebtedness; the impact
of technological change in the telecommunications industry; the future cost and
availability of network infrastructure and subscriber devices; the impact of
competition and pricing of wireless data and paging services; the timely market
acceptance of new products and services such as two-way messaging; changes in
regulation by the Federal Communications Commission ("FCC") and various state
regulatory agencies; and potential technical problems relating to the Company's
wireless data network. See "Risk Factors."
GENERAL
The Company is a leading provider of two-way wireless data and traditional
one-way paging services. During 1999, the Company continued to position itself
to move aggressively into wireless data services, building upon the vision of
the Company as a provider of services using the World Wide Web to link people to
information and other people in ways that make their lives more fun, informative
or productive. In April 1999, the Company substantially completed the
construction of its nationwide Internet protocol ("IP") based, two-way wireless
data network that covers approximately 90% of the U.S. population. This was the
culmination of over four years of development efforts and over $540 million in
capital expenditures and expenses. In December 1999, the Company changed its
name to WebLink Wireless, Inc., reflecting its strategic move toward
Internet-based products and services in which wireless Internet subscriber
devices are used for sending and receiving messages and information.
The Company provides two-way wireless data services and enhanced messaging
services through its Wireless Data Division. In February 2000, the Company began
offering full two-way wireless data services upon the arrival of the first
shipments of two-way subscriber devices from a manufacturer. Two-way messaging
provides capabilities such as device-to-device communications allowing people to
converse in an unobtrusive near real time manner, and wireless e-mail allowing
people to send and receive short e-mail messages to or from any Internet e-mail
address. In addition, the Company's web site serves as a portal through which
customers can order Internet-based information which will be automatically
forwarded to their devices periodically. The wireless data network also serves
as a portal through which customers, from their devices, can request a wide
variety of Internet-based information such as stock quotes, airline schedules,
weather, entertainment and other information. The ability to demand information
can be extended to a business customer's enterprise application systems,
providing information such as inventory levels, delivery dates and other mission
critical information. Through the Wireless Data Division, the Company also
provides enhanced one-way services. These services store messages that are not
received by a subscriber device and later forwards them when the device can
receive messages.
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The Company provides traditional one-way numeric and word paging services
through its Traditional Paging Division. Since its inception in 1989, the
Company has been an innovative leader in the traditional paging business. The
Company built its strategy around the concepts of diversified distribution
channels, exclusive nationwide frequencies, efficient and flexible network
architecture, and centralized control of the network and administrative
functions. The result was rapid subscriber growth that was generated internally
rather than through acquisition of other paging carriers. However, the Company
believes the traditional paging industry stopped growing in 1998. As a result,
while the traditional paging business is expected to continue to produce
significant cash flow for the foreseeable future, the Company expects this
business to have a negative long-term growth rate and, as a result, to decline
in importance to the Company.
The Company also provides its U.S. domestic customers with seamless
traditional one-way paging services across the Americas, including Canada,
Mexico, much of the Caribbean and Central America, and parts of South America.
Through network affiliation agreements with owners of foreign networks, the
Company's network is interconnected with foreign networks operating on a common
frequency, thus providing roaming capabilities for the Company's customers in
the foreign countries and for the customers of the foreign networks in the
United States. In 1999, the Company expanded services into Nicaragua, Puerto
Rico and Trinidad and Tobago. In February 2000, the Company sold its interest in
a Canadian one-way paging network to a subsidiary of Bell Canada, which then
entered into a 10-year exclusive network affiliation agreement with the Company
and committed to construct a two-way wireless data network in Canada by the end
of 2000. See "International Strategy."
The Company is currently the fifth largest wireless messaging carrier in
the United States, based on 2,662,995 units in service at December 31, 1999. For
more information about the Company, go to its web site at
www.weblinkwireless.com.
BUSINESS AND OPERATING STRATEGY
In 1994, the Company embarked upon the strategy that has moved it from
simply being a traditional one-way paging carrier to a wireless data services
carrier. The Company believes that wireless data services will become an
increasingly dominant part of the telecommunications services used by both
consumers and businesses. The Company expects the shift to wireless data
services will be epitomized by growth in the use of wireless Internet devices
for sending and receiving messages and information.
The Company believes it is well positioned to take advantage of the
expected growth of wireless data services. In 1994 and 1995, the Company
acquired narrowband personal communications services licenses for a total of
100kHz of forward frequency and 50kHz of return frequency nationwide (the
"narrowband PCS Licenses"). The Company is one of four companies in the United
States with 150kHz or more of narrowband PCS frequency nationwide. After
conducting market research and developing the technical network design, the
Company began the principal construction phase of its wireless data network in
late 1997. Construction was substantially completed in April 1999. Virtually all
of the Company's development expenditures over the past two years have been
dedicated to creating its wireless data network and related applications for
Internet appliance portable devices. The Company's investments in wireless data
included IP infrastructure, content relationships, middleware software
alliances, new distribution agreements, billing systems and telemetry
interfaces.
The Company's network design and construction strategy provide several
benefits. The wireless data network also serves as the transmission
infrastructure for the Company's traditional one-way paging services. The use of
one network to serve both of the Company's business divisions creates a key
economic advantage without sacrificing service coverage or quality. As the
Company's traditional paging base declines, there will be no stranded assets
since almost all network assets can be utilized to provide additional capacity
for wireless data services.
Construction cost of the Company's wireless data network compared to the
cost incurred in building a digital PCS voice network is another key economic
advantage. All inclusive capital expenditures, including costs of the narrowband
PCS Licenses, for construction of the Company's network were approximately $1.50
per population covered for approximately 90% population coverage. This cost is
about 2% to 3% of the
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construction cost of a digital PCS voice network of comparable scale. As a
result, the Company will receive positive economic returns at much lower market
penetration rates.
The Company also expects to continue to reap the benefits of its successful
traditional paging operating strategy. The Company attributes much of the growth
and success of its traditional paging business to the principles which have
guided its operations. The Company expects that these operating principles will
be equally important as the market for wireless data services continues to
develop. The Company has positioned itself also to utilize the following
principles in its wireless data business:
- Diversified Distribution Channels. Management believes that a diversified
approach to distribution through direct marketing to individuals and
corporations, as well as indirect marketing through strategic alliances
with large telecommunications carriers, national and regional "bricks and
mortar" retailers and resellers and Internet retailers and resellers, is
critical to the maintenance of traditional paging and the development and
growth of wireless data services. In addition, the Company sells its
products and services through its own worldwide web site. See "Sales and
Marketing."
- Exclusive Nationwide Frequency Utilization. The construction of a network
utilizing common exclusive frequencies nationwide has enabled the Company
to offer strategic advantages to its strategic alliance partners,
retailers and resellers not available from all the Company's competitors.
The use of common frequencies with its foreign network affiliates permits
the Company's domestic customers to travel throughout North America, much
of the Caribbean and Central America and parts of South America without
changing devices. The Company also believes that its spectrum-rich
frequency position allows for capacity that enables the Company to
attract and retain national retailers, strategic alliance partners and
other messaging service providers.
- Efficient and Flexible Network Architecture. The Company's efficient
network architecture permits service to both wireless data and
traditional paging customers over the same network infrastructure.
Therefore, as traditional paging declines, there are no stranded assets,
as virtually all infrastructure assets are utilized for additional
wireless data capacity. In addition, use of satellite communications to
control transmitters and receivers results in a flexible range of
coverage options and efficient use of frequencies.
- Centralized Administration and Customer Service. The Company has
centralized information systems, inventory control, distribution,
customer service, finance and marketing functions which support both the
wireless data and traditional paging businesses. Management's focus on
development of industry-leading customer service capabilities has led to
high caliber customer service capabilities critical for success in
wireless data and traditional paging services. The Company's existing
customer service capabilities have been designed to expand as the
wireless data customer base grows.
PRODUCTS AND SERVICES
WIRELESS DATA SERVICES. The Company's wireless data services include the
following:
Two-way Messaging. With two-way messaging, subscribers may use the
following services:
- E-Messaging. Two-way device to device messaging allows mobile subscribers
to send and receive messages to or from other wireless data devices and
digital phones in an unobtrusive near real-time manner. Subscribers may
send messages to other subscribers that have either one-way or two-way
subscriber devices, and to any other device that has an e-mail address,
even if it is not a device receiving service on the Company's network.
Subscribers can originate messages either from the subscriber device
keyboard or by using standard responses preprogrammed in the subscriber
device or by choosing one of multiple responses embedded in a received
message.
- Wireless E-Mail. Subscribers may send and receive e-mail messages to or
from any Internet e-mail address. In addition, subscribers with Internet
or corporate e-mail, fax and voicemail boxes may receive notification of
receipt of e-mails, faxes and voicemails.
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- Information on Demand. Subscribers may, from their devices, request a
wide variety of information. The Company's wireless data network serves
as a portal to Internet-based information such as stock quotes, flight
schedules, weather, entertainment, auction status and a staggering array
of other information. The ability to demand information can be extended
to corporate Intranet-based information such as inventory levels,
delivery dates, prices and other mission critical information.
- Periodic Information. Subscribers may order information residing on the
Internet to be automatically forwarded to their subscriber devices
periodically. Subscribers may submit personalized orders through the
Company's portal at
www.weblinkwireless.com/products/servicesoverview.htm. In addition, an
increasing number of other web sites will be providing the capability to
forward information to subscriber devices.
Enhanced One-Way Paging. With enhanced one-way paging service, if a
subscriber device does not acknowledge receipt of a message, the network will
store the message and forward it later. For example, if a subscriber travels
outside the network coverage area or the subscriber device is turned off, the
network will store messages for a fixed period of time. When the subscriber
returns to a coverage area or turns on the subscriber device, the subscriber
device registers with the network and the stored messages are automatically
re-transmitted. The Company currently offers both local and nationwide auto-roam
enhanced one-way paging services.
Enterprise Solutions. In 1999, the Company introduced its Enterprise
Solutions Partner Program to ally with leading software developers, information
technology and business solutions companies and consultants to integrate
computing with wireless technology to expand corporate customers' enterprise
applications using two-way wireless data technology. The Company's Enterprise
Solutions Partner Program is creating solutions that bring professionals in the
field access to corporate databases, systems, Intranets and e-mail via the
Company's wireless data network. Program members provide a broad range of
communications services including network monitoring, e-business and information
technology management consulting, as well as communications hardware supply,
data warehousing and systems integration. Companies already in the program
include Abstract Data Technologies, Corsoft, DMR Consulting Group, eLoyalty,
MobilityLink, KEWi.net, MobileSys, Telamon, 3SI, Timebills.com, Vitria
Technology and JP Systems, among others. The Company anticipates that the
program will allow the Company to offer business-to-business solutions such as
dispatch, asset tracking, help desk, field service automation and sales force
automation.
Telemetry. The Company plans to introduce telemetry services when
commercial devices become available, which is expected in the second half of
2000. Telemetry services allow computer-based devices to transmit and receive
data wirelessly over the Company's nationwide wireless data network. See "Sales
and Marketing -- Telemetry."
The Company had 61,575 wireless data devices in service at December 31,
1999.
TRADITIONAL ONE-WAY PAGING SERVICES. The Company offers traditional one-way
numeric and word paging services. Numeric paging provides the subscriber with
the telephone number of the person who is seeking to contact the subscriber.
Word paging offers the subscriber the ability to receive a word message rather
than simply a numeric message.
The Company currently offers local, regional and nationwide one-way numeric
and word paging services. The Company also offers a feature called Nationwide
TODAY(SM) that allows subscribers with local coverage to expand to nationwide
coverage as needed, simply by calling their own pager number and accessing their
personal options. This service gives the Company's customers the ability to take
local coverage with them when they travel to major communities in the United
States, Canada, Mexico, Central and South America and the Caribbean.
The Company had 2,559,353 traditional one-way paging devices in service at
December 31, 1999.
ADDITIONAL VALUE-ADDED SERVICES. The Company offers subscribers a number of
additional value-added services, including voice mail services that allow
subscribers to retrieve voice messages from persons attempting to contact the
subscriber, and a message retrieval service which allows a traditional paging
service
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subscriber to retrieve messages that were sent at a time when the subscriber was
outside of his or her service area. Other optional services include operator
dispatch services, nationwide toll-free access numbers for subscribers, a
customized voice prompt that allows subscribers to record a personal greeting,
maintenance agreements and loss protection programs. During 1999, approximately
24% of the Company's recurring revenues were derived from these additional
services.
SUBSCRIBER DEVICES. The Company's messaging and information services are
delivered to pocket-sized subscriber devices which the Company sells or leases
to its subscribers. The Company's operating model for traditional paging
services emphasizes a strategy of selling rather than leasing subscriber
devices. The Company believes that by following a Customer Owned and Maintained
("COAM") strategy for traditional paging services it can achieve significantly
better capital efficiency than if it were to follow a lease strategy. The
Company believes that its COAM strategy for traditional paging services provides
additional benefits, including reduced risk of technological obsolescence and
avoidance of the credit risk associated with leasing subscriber devices to
end-users. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
By contrast, the Company expects that it will lease a higher proportion of
its wireless data devices. The higher price per unit for these devices is
expected to make leasing an attractive alternative to purchasing. In addition,
the Company expects that the strongest market demand for wireless data services
will come initially from corporate and business customers, which often prefer to
lease subscriber devices.
One-way devices are available from a number of manufacturers. Wireless data
subscriber devices are currently available only from Motorola, Inc. ("Motorola")
and Wireless Access, a subsidiary of Glenayre Technologies, Inc. ("Glenayre").
The Company's two-way wireless data services currently utilize the Motorola
PageWriter 2000X device. The Company anticipates that the Glenayre AccessLink II
will be available in March 2000. Both Motorola and Glenayre are currently
developing smaller, less expensive two-way wireless data devices. The first of
these new devices, the Motorola Talkabout T900, is expected to be available
around the middle of 2000. The Company anticipates that at least one other
prominent consumer electronics manufacturer will introduce a two-way wireless
data device in 2000.
The Company expects to purchase wireless data devices from Motorola and
Glenayre under existing volume purchase agreements. The Company could be
adversely affected if the new two-way devices are not of sufficient quality to
be certified for use on the Company's network or if the Company is unable to
obtain them on satisfactory terms by planned delivery dates. See "Risk
Factors -- We Depend on Key Suppliers."
PRODUCT DEVELOPMENT. The Company anticipates that growth in wireless data
services will be enhanced through new wireless alliances with software companies
and electronic equipment manufacturers to develop additional word messaging
products and services. Computers, personal organizers and personal digital
assistants ("PDAs") are being equipped with built-in wireless messaging
capability. The Company expects that in the year 2000, at least two PDA
manufacturers will announce devices capable of operating on WebLink's wireless
data network.
SALES AND MARKETING
The Company's customers include individuals, corporations and other
organizations that desire affordable communication and information services
offering substantial mobility and accessibility. The Company utilizes a number
of distribution channels to market its products and services, including
marketing directly through its national accounts sales force and field sales
force, and indirectly through strategic alliances with other communications
providers, national and regional retailers, on-line retailers, and regional and
local resellers. Management believes that a diversified approach to distribution
is important to the Company's growth by creating and satisfying demand for
wireless data services in multiple segments of the market. This diversification
is a key element of the Company's strategy of expanding its subscriber base to
increase profitability and cash flow through greater utilization of its
nationwide wireless data network. The Company is not dependent on any single
customer or a few customers, the loss of which would have a material adverse
effect on the Company.
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Each of the following distribution channels is managed by one of the
Company's strategic business units ("SBU"):
CARRIER SERVICES. Through its Carrier Services SBU, the Company has
established numerous strategic relationships with large communications
providers, such as GTE Corporation, Southwestern Bell Mobile Systems, BellSouth
Cellular Corp., Ameritech Mobile Services, Inc., MCI WorldCom Network Services,
Inc., EXCEL Communications, Inc., ALLTEL Communications, Bluegrass Cellular,
Inc. and First Cellular of Southern Illinois. These companies utilize their
brand awareness and billing and distribution efficiencies to market private
brand subscriber devices and services using the Company's transmission network.
The business unit is positioned to support carriers in the bundling and
integration of messaging services into an extended portfolio of communications
services.
In addition, the Company has entered into agreements with Arch
Communications Group, Inc. ("Arch"), Metrocall, Inc. ("Metrocall") and AirTouch
Paging ("AirTouch"), the second, third and fourth largest messaging carriers,
respectively, in the United States as of year-end 1999. The agreements are
organized into two phases. Currently, Arch, Metrocall and AirTouch are marketing
their switch-based wireless data services utilizing the Company's wireless data
network. During the second phase, Arch, Metrocall and AirTouch will install
their own networks leveraging the Company's infrastructure and sites. AirTouch
has elected to enter the second phase of the agreement in a limited part of the
United States. Under these agreements, the companies share certain capital and
operating expenses, which will significantly lower costs for all companies.
As market demand for wireless data services continues to develop, the
Company expects its carrier services distribution channel to grow in
significance. The Company believes that a limited number of wireless data
networks will be built nationwide. The Company believes that its wireless data
network is a low cost, high functionality network compared to the networks of
its current competitors, which will make reselling of the Company's services
attractive to other paging companies and communications providers. These
companies will resell such services under their own brand names.
At December 31, 1999, the Carrier Services SBU accounted for approximately
45% of the Company's domestic units in service.
RESELLERS. The Company's Reseller SBU sells products and services to
third-party resellers in bulk quantities at wholesale monthly rates that are
lower than the Company's regular retail rates. Resellers then resell the
products and services under their own name. At December 31, 1999, the Reseller
SBU accounted for approximately 24% of the Company's domestic units in service.
NATIONAL RETAIL. Since early 1993, the Company has been an industry pioneer
in developing the retail distribution channel through sales arrangements with
regional and national retail chains that sell electronic and business equipment
or consumer goods. The Company's National Retail SBU sells subscriber devices to
a retailer who then sells them at retail. The purchaser can activate the
subscriber device and subscribe for service directly with the Company over the
Internet, or by calling the toll-free number identified on the device. Because
the Company's subscriber devices operate on a common nationwide frequency, they
can be sold in any retail store located in the Company's nationwide coverage
area. By contrast, competitors that use multiple frequencies across markets
require retailers to maintain many more stock keeping devices to serve each
local market that utilizes a different frequency.
The Company has entered into sales arrangements with a number of large
national retail chains such as RadioShack, Target Stores, Best Buy, the good
guys!, OfficeMax, 7-Eleven and Fry's Electronics. Retail distribution also
allows the Company to sell subscriber devices in markets that would not support
a direct sales office but in which it has installed the necessary network
equipment required for providing services. The Company can thus enter new
markets by capitalizing on its existing network infrastructure with the only
incremental expense being the procurement of local access phone lines.
At December 31, 1999, the number of retail store locations selling the
Company's products was approximately 14,000.
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In October 1999, the Company introduced the e-pager, a wireless device with
an Internet e-mail address instead of a phone number. The e-pager provides
customers with Internet short message and e-mail service, e-mail alerts,
personalized information and information updates, such as sports, weather and
stock quotes. A customer can activate an e-pager on-line at www.e-pager.com and
choose the information and services that he or she wants delivered to the
e-pager.
The Company believes that an increasing number of wireless data devices and
services will be purchased over the Internet. The Company has created its own
on-line site where customers can purchase wireless data and traditional paging
devices and services, activate devices and select service and coverage options.
In addition, the Company has entered into arrangements with some of its current
national retailers as well as several online retailers to resell the Company's
products and services over their web sites. The online retailers typically earn
a commission or referral fee on the sale of the Company's products and services.
The National Retail SBU accounted for approximately 20% of the Company's
domestic units in service.
FIELD SALES. The Company's Field Sales SBU sells the Company's products and
services primarily directly to small to medium-size businesses. The Company
markets its equipment and services through its field sales force operating from
sales offices in many major cities across the country and through related
marketing activities such as telemarketing and advertisements in radio, print
media and telephone company yellow pages. Direct sales representatives are
compensated in large part by sales commissions for each unit sold or placed in
service. The Company also markets its equipment and services through agents, who
establish customers which are billed directly by the Company. Agents typically
sell subscriber devices for their own account and earn a commission or fee on
the sale of the service. At December 31, 1999, the Field Sales SBU accounted for
approximately 8% of the Company's domestic units in service.
NATIONAL ACCOUNTS. The National Accounts SBU sells the Company's products
and services directly to major corporate accounts through its national accounts
sales force. The Company expects that initially the strongest market demand for
wireless data services will be from large, geographically dispersed corporate
accounts because of the growing need of business customers for mobile,
reasonably priced access to communication and information services with wide
area coverage and because of the ability of business customers to pay the higher
cost of wireless data subscriber devices. In addition, the solutions and
applications being developed through the Enterprise Solutions Partner Program
should be ideally suited to the Company's corporate accounts. The National
Accounts SBU emphasizes sales of wireless data services as a solution to
business messaging needs. At December 31, 1999, the National Accounts SBU
accounted for approximately 3% of the Company's domestic units in service.
TELEMETRY. In the third quarter of 1998, the Company announced the
formation of its Wireless Control Systems (formerly the Telemetry) SBU. The
Wireless Control Systems SBU was chartered to develop cutting-edge,
standards-based, cost-effective technology for any industry, business or
consumer with the need to transport machine-originated data over a wireless
network. The Wireless Control Systems SBU will offer customized, integrated,
end-to-end solutions with software applications that allow computer-based
devices to transmit and receive data wirelessly over the Company's nationwide
wireless data network.
The Company plans to provide telemetry services over its network utilizing
"transceiver" two-way devices such as the Creatalink2XT being developed by
Motorola. The Company expects commercial availability of transceiver devices in
the second quarter of 2000.
The Company believes that its wireless technology is superior to
alternative wireless technologies for telemetry applications. In late 1998 and
throughout 1999, the Company announced strategic alliances with companies in
various industries such as Interactive Technologies, Inc. (home security),
Pentech Energy Solutions, Inc. (environmental control systems), Criticom
International (vending machines), and Monitel Products Corp. (office machine
monitoring). In addition, the Company is working with other companies on
telemetry applications for the vending, multimedia, home automation and vehicle
location and tracking industries, among others. Although the Company does not
expect the Telemetry SBU to originate any units in service until the second half
of 2000, as market demand for wireless telemetry services develops, the Company
expects its Telemetry SBU to grow in significance. However, there can be no
assurance that wireless telemetry services over wireless data networks will be
commercially viable or that the proposed telemetry solutions will
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be possible, and the success of wireless telemetry services could be affected by
matters beyond the Company's control such as the availability and viability of
transceiver devices.
TRANSMISSION NETWORK
GENERAL. The Company substantially completed construction of its nationwide
wireless data network in April 1999. The Company's network covers approximately
90% of the population of the United States as of December 31, 1999. The
Company's network utilizes the ReFLEX25(R) protocol, which is a second
generation ReFLEX(R) technology developed by Motorola for wireless data
services. The network utilizes the FLEX and POCSAG protocols for its traditional
paging services.
A wireless data network employs both radio transmission and receiving
equipment throughout the network. Wireless data subscriber devices contain not
only a receiver, but also a transmitter that broadcasts its identity and other
data to the network receivers. As a result, when a subscriber device is within
the network coverage area, the subscriber device registers with the network, and
the network can identify the approximate location of the subscriber device. If a
subscriber travels outside the coverage area of the network, the network stores
the message for a fixed period of time until the subscriber returns to the
coverage area and then transmits the message. This functionality also permits
efficient utilization of the network since only the transmitters in a zone
around the subscriber device are needed to transmit messages to the device.
One-way paging services utilize only the transmission part of the network.
One-way subscriber devices contain only a receiver. Since the network cannot
determine the location of a subscriber device, each message must be broadcast
from every transmitter in the subscriber's chosen coverage area. If the
subscriber device is not in its coverage area when a message is broadcast, the
message will be lost unless the subscriber has purchased message retrieval
service.
INFRASTRUCTURE EQUIPMENT. The infrastructure of the Company's network
consists of a home terminal, encoders, satellite access controllers ("SACs"),
very small aperture satellite terminal ("VSATs"), radio transmitters and
receivers, switches, RF controllers and ancillary equipment, such as coaxial
cable and antennas. The Company purchases infrastructure equipment (other than
SACs, VSATs and ancillary equipment) from Glenayre, the industry's leading
equipment supplier. The Company believes that Glenayre is the only qualified
supplier of certain infrastructure equipment. Receivers are available from
several suppliers. As a result, the Company is dependent on Glenayre for much of
its other infrastructure equipment. The Company understands that Motorola and
Glenayre have cross-licensed the relevant FLEX and ReFLEX protocols. The Company
purchases infrastructure equipment from Glenayre under an existing volume
purchase agreement. The Company also has a volume purchase agreement with ITC
Deltacom to purchase SACs, VSATs and related equipment. See "Risk Factors -- We
Depend on Key Suppliers."
SATELLITE SERVICES. The Company uses satellite communications to control
the transmitters and receivers in its networks in a flexible and efficient
manner. The Company leases satellite services pursuant to agreements with ITC
Deltacom and SpaceCom Systems, Inc. ("SpaceCom"). The agreements subject the
Company to monthly service charges based on the amount and types of services
used and expire on July 1, 2003 and July 31, 2003, respectively. The agreements
may be terminated upon certain failures of the Company to pay monthly service
fees. The agreements do not include any renewal provisions. Management believes
that the services provided by ITC Deltacom and SpaceCom are sufficient to meet
the Company's foreseeable needs and that there are alternative satellite
resources available to the Company on comparable terms and conditions. As a
result, the Company does not believe the loss of its relationship with its
current satellite suppliers would have a material adverse long-term effect on
its business and operations.
INTERNATIONAL STRATEGY
The Company continues to implement a systematic plan to provide messaging
services in selected countries on a seamless international network. The
Company's international strategy is initially to pursue opportunities in North
America, Central America, the Caribbean and South America. The Company pursues
international opportunities through network affiliation agreements with the
owners of foreign networks. Network affiliation agreements provide, with minimal
incremental capital investment by the Company,
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interconnection between the Company's network and the foreign network on a
common frequency, thus permitting the Company's subscribers to roam to the
foreign country and the foreign subscribers to roam to the U.S.
The Company has expanded its network to include 16 countries in North,
Central and South America and the Caribbean. WebLink has 10-year exclusive
network affiliation agreements with leading paging companies in Canada, Mexico,
El Salvador, Guatemala, Nicaragua, Costa Rica, Panama, Columbia, Venezuela,
Peru, the Dominican Republic, Cayman Islands, Trinidad and Tabago, and Haiti.
The Company owns a network in Puerto Rico, the U.S. Virgin Islands and the
Bahamas. The same nationwide 929MHz frequency used by the Company has been
licensed by the Company's network affiliates in each country. The common
frequency allows the Company and its network affiliates in each country to
provide customized coverage that extends beyond the borders of the serving
country, using the same subscriber device. For example, a subscriber in New York
could choose New York and Toronto or Mexico City coverage. There can be no
assurance, however, that in each country in which the Company seeks to expand
coverage that a frequency will be available that is common to one of the
Company's U.S. nationwide frequencies.
On February 1, 2000, the Company sold its interest in PageMart Canada
Limited, which owned a traditional paging network covering the large
metropolitan areas of Canada, to Bell Mobility, a subsidiary of Bell Canada.
Bell Mobility entered into an exclusive 10-year network affiliation agreement
with the Company.
In 1997, the Company entered into an exclusive 10-year network affiliation
agreement with Telefonos de Mexico ("TelMex") through its wholly owned
subsidiary, Buscatel. Buscatel's network covers 33 metropolitan areas in Mexico.
The two companies jointly market services and co-brand subscriber devices where
appropriate.
The network affiliations with Bell Canada and TelMex give the Company the
leading NAFTA-wide traditional paging network. The Company expects to extend its
leading position to the wireless data network. Bell Mobility has committed to
construct a nationwide wireless data network in Canada by the end of 2000.
TelMex has indicated that it expects to obtain the necessary licenses and begin
constructing a wireless data network in Mexico during 2000. In addition, the
Company provides wireless data coverage on the Company's nationwide frequency in
Puerto Rico and the U.S. Virgin Islands.
COMPETITION
The Company competes primarily on the basis of its equipment and wireless
services prices, quality of service, and coverage capability. Its competitors
include both companies which provide wireless data, paging or other mobile
communications services in local markets and regional and nationwide service
providers. Other wireless data carriers providing two-way services include MCI
WorldCom SkyTel ("SkyTel"), BellSouth Wireless Data, American Mobile Satellite
and Paging Network ("PageNet"). Other paging carriers include regional telephone
companies and both small and large paging service providers, such as PageNet,
Metrocall, AirTouch, Arch and SkyTel. Certain of these companies have
substantially greater financial, technical and other resources than the Company.
In addition, a number of telecommunications carriers (including providers of
broadband PCS) have constructed or are in the process of constructing nationwide
wireless networks providing services that will compete with the Company's
services, including wireless data services. SkyTel introduced the first
nationwide wireless data network and other carriers, such as PageNet, have
announced plans to provide services over their own wireless data networks.
Management believes that the Company's low cost structure and service offerings
will enable it to continue to compete effectively.
A number of competing technologies, including cellular telephone service,
broadband and narrowband personal communication services, specialized mobile
radio, low speed data networks and mobile satellite services, are used in, or
projected to be used for, wireless data services. Cellular telephone technology
and broadband personal communications services provide an alternative
communications system for customers who are frequently away from fixed-wire
communications systems (i.e., ordinary telephones). Compared to cellular
telephone service and broadband service, wireless data and paging services are
generally less expensive, offer longer battery life, provide better in-building
penetration, extend over wider coverage areas,
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and are more transportable. For those cellular customers for whom convenience
and price are considerations, wireless data and paging services can compete
successfully by complementing their cellular usage. Management believes that
wireless data and paging will remain one of the lowest-cost forms of wireless
messaging due to the low cost infrastructure associated with wireless data and
paging systems, as well as advances in technology that are expected to reduce
service costs. Broadband personal communications services technologies are
similar to cellular technology and offer messaging services in a single handset.
This technology will offer greater capacity for wireless data services and,
accordingly, is expected to result in greater competition.
Technological advances in the telecommunications industry have created, and
are expected to continue to create, new services and products competitive with
the wireless services currently provided by the Company. In addition, certain
companies are developing one-way and wireless data services which may compete
with the one-way and wireless data services which the Company expects to
provide. See "Risk Factors -- Risks of Technological Changes."
GOVERNMENT REGULATION
Wireless messaging operations are subject to regulation by the FCC under
the Communications Act of 1934, as amended (the "Communications Act"), including
the amendments contained in the Telecommunications Act of 1996 (the "1996 Act").
The Company provides wireless data and traditional paging services directly
to subscribers over its own transmission facilities. The Company (through
subsidiaries) holds three exclusive nationwide one-way licenses (the "929 MHz
Licenses"), as well as exclusive licenses on various one-way frequencies in
certain metropolitan areas, including New York, Los Angeles and Chicago.
Additionally, the Company holds a 50kHz unpaired nationwide narrowband PCS
license (the "Nationwide Narrowband License") and five 50/50kHz paired regional
narrowband PCS licenses (the "Regional Narrowband Licenses"); the latter five
licenses authorize the Company to operate regional two-way wireless data systems
on the same frequencies throughout the continental United States. The Nationwide
Narrowband License was granted on September 29, 1994, and the Regional
Narrowband Licenses were granted on January 27, 1995. The Nationwide Narrowband
License and the Regional Narrowband Licenses are utilized in connection with the
Company's two-way wireless data network.
Under FCC rules governing regulation of commercial mobile radio services
("CMRS"), licensees such as the Company must not engage in any unreasonably
discriminatory practices and are subject to complaints regarding any unlawful
practices. The Company is also subject to provisions that authorize the FCC to
provide remedial relief to an aggrieved party upon finding a violation of the
Communications Act and related customer protection provisions.
The Company's licenses described above (the "Licenses") authorize the
Company to use the radio frequencies necessary to conduct its operations. The
Licenses prescribe the technical parameters, such as power output and tower
height, under which the Company is authorized to use those frequencies. The
Licenses are for varying terms of up to 10 years, at the end of which time
renewal applications must be submitted to the FCC for approval. The Nationwide
Narrowband License will expire on September 29, 2004 unless renewed by the
Company. The Regional Narrowband Licenses will expire on January 27, 2005 unless
otherwise renewed. FCC renewals are routinely granted in most cases upon a
demonstration of compliance with FCC regulations and adequate service to the
public. Although the Company is unaware of the existence of any circumstances
which would prevent the grant of any pending or future renewal applications, no
assurance can be given that the Licenses will be renewed by the FCC in the
future. Furthermore, although revocation and involuntary modification of
licenses are extraordinary regulatory measures, the FCC has the authority to
restrict the operation of licensed facilities or to revoke or modify licenses.
No License of the Company has ever been revoked or modified involuntarily.
The Communications Act requires licensees such as the Company to obtain
prior approval from the FCC for the assignment of any station license or the
transfer of control of any entity holding such licenses (in February 1998, the
FCC amended its rules to exempt pro forma transactions from this requirement).
The FCC has approved each transfer of control for which the Company has sought
approval. The Company also
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regularly applies for FCC authority to use frequencies, modify the technical
parameters of existing licenses, expand its service territory and provide new
services. Although there can be no assurance that any requests for approval or
applications filed by the Company will be approved or acted upon in a timely
manner by the FCC, or that the FCC will grant the relief requested, the Company
has no reason to believe any such requests, applications or relief will not be
approved or granted.
The Omnibus Budget Reconciliation Act of 1993 (the "Budget Act") imposed a
structure of regulatory fees which the Company is required to pay with respect
to its Licenses. The FCC increased these fees for fiscal year 1998, and left
them unchanged for fiscal year 1999. The Company believes that these regulatory
fees will not have a material adverse effect on the Company's business.
The Company has complied with FCC requirements with respect to the buildout
of its existing one-way messaging network. There are separate FCC buildout
requirements with respect to the Company's Nationwide and Regional Narrowband
Licenses. As a nationwide narrowband PCS licensee, the Company must construct
base stations that provide coverage to a composite area of 750,000 square
kilometers or serve 37.5% of the United States population within five years of
the initial license grant date and must construct base stations that provide
coverage to a composite area of 1,500,000 square kilometers or serve 75% of the
United States population within ten years of the initial license grant date.
Additionally, as a regional narrowband PCS licensee, the Company must construct
base stations that provide coverage to a composite area of 150,000 square
kilometers or serve 37.5% of the population of the service area within five
years of its initial license grant date and must construct base stations that
provide coverage to a composite area of 300,000 square kilometers or serve 75%
of its service area population within ten years of the initial license grant
date. Failure to meet the construction requirements will result in forfeiture of
the license and ineligibility to regain it. In 1999, the Company met the
five-year construction requirements for all of its Nationwide and Regional
Narrowband Licenses, and on October 1, 1999, certified this compliance to the
FCC.
In 1997, the FCC released a Report and Order establishing competitive
bidding rules for the remaining narrowband PCS spectrum as well as a Further
Notice of Proposed Rulemaking seeking commentary on proposals to (a) license
narrowband PCS spectrum that had previously been held in reserve, (b) modify the
existing spectrum allocation plan to aggregate smaller geographic license areas
in order to create additional nationwide narrowband PCS licenses, and (c) modify
or eliminate the PCS buildout requirements. Adoption of either of the first two
of these proposals would increase the amount of nationwide narrowband PCS
spectrum available to the public and might negatively impact the value of the
nationwide narrowband PCS licenses held by the Company. To date, there has been
no further FCC action on these proposals.
The FCC also released a Report and Order in 1997, establishing a system of
competitive bidding ("auctions") to issue licenses for 929 MHz frequencies for
which there are mutually exclusive applications. Under the FCC proposal,
licenses for individual 929 MHz paging channels for which there are mutually
exclusive applications would be auctioned on a geographic basis. In defining the
area within which existing users would be protected from interference from the
auction winners or neighboring licensees (an area known as an "interference
contour"), the FCC created a new methodology that in many instances reduces the
size of the area within existing licensees' interference contours. This change,
however, does not have an impact on licensees with nationwide exclusivity (such
as the Company, with respect to its 929 MHz Licenses), because no other operator
has the right to apply for such licensees' exclusive frequencies.
The FCC also issued a Further Notice of Proposed Rulemaking in which the
FCC sought commentary on whether it should impose coverage requirements (similar
to those discussed above for Nationwide and Regional Narrowband Licenses) on
licensees with nationwide exclusivity in portions of the 929 MHz band (such as
the Company), whether these coverage requirements should be imposed on a
nationwide or regional basis, and whether -- if such requirements are
imposed -- failure to meet the requirements should result in a revocation of the
entire nationwide license or just a portion of the license.
In a rulemaking proceeding pertaining to interconnection between local
exchange carriers ("LECs") and CMRS providers, the FCC has concluded that LECs
are required to compensate CMRS providers for the reasonable costs incurred by
such providers in terminating traffic that originates at the LEC's facilities,
and vice versa. With regard to the negotiation of these mutual compensation
arrangements, the FCC has
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concluded that states have the authority under certain circumstances to mandate
a "bill and keep" arrangement on negotiating parties (i.e., the LEC and the CMRS
provider would charge each other a rate of zero for the termination of the
other's traffic). The Company believes that "bill and keep" arrangements, if
applied to its services, would not have a material adverse effect on the
Company's business.
Consistent with this ruling mandating compensation for carriers terminating
LEC-originated traffic, the FCC has determined that LECs may not charge a CMRS
provider or other carrier for terminating LEC-originated traffic. Some LECs have
in the past been reluctant to comply with the FCC orders. These carriers have at
various points refused to pay the Company for terminating calls originating on
their networks and have threatened to terminate interconnection arrangements
with the Company if it does not pay for dedicated facilities used to terminate
LEC-originated traffic. The Company has in the past made certain payments to the
LECs under protest and has maintained reserves for payments that the LECs were
claiming were due. The FCC's staff has made it clear that under the FCC's
current rules, LECs may not charge CMRS providers for such facilities, although
these rules are being reconsidered and could be modified in the future. In
addition, the U.S. Court of Appeals for the Ninth Circuit recently ruled that,
under the Communications Act and the FCC's rules implementing it, paging
carriers are entitled to reciprocal compensation for terminating calls that
originate on a LEC's network. The Court ruled, as telecommunication carriers,
paging providers should be required to pay charges for traffic originating on
other carriers' networks. The Company believes that this ruling will have a
positive effect on its continuing efforts to secure and maintain beneficial
interconnection agreements with the LECs in its service area.
With regard to interconnection agreements, the 1996 Act requires LECs to
make available to any requesting carrier any interconnection service provided to
another carrier, on the same terms and conditions as provided to the other
carrier. Pursuant to this provision, the Company has entered into
interconnection agreements with Ameritech, Bell Atlantic, U.S. West and Bell
South. These agreements all require the LECs to make payments to the Company for
the termination of calls originating on the LECs' networks. These agreements
have terms ranging from one to two years.
As a result of the enactment of the 1996 Act, the Company will face
additional financial obligations. In November 1996, in response to a directive
in the 1996 Act, the FCC adopted new rules that govern compensation to be paid
to pay phone providers. After the FCC's rules in this area were twice vacated by
the U.S. Court of Appeals for the D.C. Circuit, the FCC released an order
mandating that long distance carriers compensate pay phone providers 24c for
each 800 number, similar toll-free-to-the-caller number and access code
(collectively, "800 Number") call during a two-year interim period. The long
distance carriers are expected either to pass this cost through to the paging
companies that provide 800 Number service to their subscribers or to block pay
phone calls to 800 Numbers. This could increase the cost of providing certain
800 Number messaging services or limit the utility of 800 Number service. The
FCC's decision to set the payphone compensation rate at 24c is currently being
challenged in the D.C. Circuit.
Also, in response to changes made by the 1996 Act, the FCC has adopted new
rules regarding payments by telecommunications firms into a revamped fund that
will provide for the widespread availability of telecommunications services,
including to low-income consumers ("Universal Service"). Prior to the
implementation of the 1996 Act, Universal Service obligations largely were met
by local telephone companies. Under the new rules, all telecommunications
carriers, including paging companies, are required to contribute to the
Universal Service Fund. Payments into the fund will likely increase the cost of
doing business and could make the Company's service less competitive with the
other services. The mechanism to be used by paging providers in allocating
revenues between interstate and intrastate jurisdictions has not been fully
resolved. Pending the issuance of a final mechanism, the FCC recently
established a "safe harbor" percentage of 12% for paging carriers that the
agency believes reasonably approximates the percentage of interstate revenues
generated by such carriers.
From time to time, legislation and regulations which could potentially
adversely affect the Company are proposed by federal and state legislators and
regulators. Legislation is currently in effect in Texas requiring companies to
contribute a portion of their taxable telecommunications revenues to a
Telecommunication Infrastructure Fund created by the state legislature.
Management does not believe that the Texas law will have
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a material adverse effect on the Company's operations and is not aware of any
other currently pending legislation or regulations which will have a material
adverse impact on the Company's operations. See "Risk Factors -- Risk of Change
in Regulatory Environment."
INTELLECTUAL PROPERTY
The Company has established an intellectual property program to protect its
investment in its messaging and wireless data services and related proprietary
technologies.
The Company has obtained both United States trademark and service mark
registrations for its PageMart word mark and is pursuing federal registration
for its WebLink Wireless mark. The Company owns registrations for 19 of its
other marks in the United States. These federal registrations may be renewed as
long as the marks continue to be used in interstate commerce. At December 31,
1999, the Company had 44 service mark/trademark applications pending before the
United States Patent and Trademark Office. The Company has also obtained, or is
in various stages of applying for, registrations for its PageMart and WebLink
Wireless marks and several of its other marks in approximately 28 other
countries or jurisdictions where the Company conducts or anticipates expanding
its international business. The Company has also taken steps to reserve
corporate names in certain foreign countries where the Company anticipates
expanding its international business.
The Company is the owner of a portfolio of United States and foreign patent
applications. The inventions claimed in those patent applications cover aspects
of the Company's current and possible future messaging systems and related
proprietary technologies. The Company is in the process of preparing other
United States patent applications. The Company's present intention is not to
rely primarily on intellectual property rights to protect or establish further
its market position; however, the Company is committed to developing a portfolio
of patents that it anticipates may be of value in negotiating intellectual
property rights with others in the industry. The Company does not currently
intend to broadly license its intellectual property rights.
RISK FACTORS
In this section, "we," "our" and "us" refer to the Company and its
subsidiaries.
RISKS OF IMPLEMENTATION OF WIRELESS DATA SERVICES. We cannot assure you
that wireless data services will be accepted in the marketplace and be
commercially viable. Wireless data services could be affected by matters beyond
our control. These matters include the degree of market acceptance, the future
availability and cost of subscriber devices, technological changes affecting
wireless data services, marketing and pricing strategies of competitors,
regulatory developments and general economic conditions.
We expect to incur significant additional operating losses during the
start-up phase for such services. We expect the wireless data operations to
require at least $20 million to fund operations and marketing in 2000 as the
wireless data customer base grows, and possibly more if market growth warrants.
Our ability to incur indebtedness is limited by the covenants contained in our
debt indentures, our vendor financing arrangement and our credit facility. As a
result, any additional financing may need to be in the form of new equity
capital. We cannot assure you that sufficient financing will be available and,
if available, on attractive terms. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
RISK OF LONG HISTORY OF OPERATING LOSSES. We sustained consolidated
operating losses from inception through 1997. Although we recognized a $2.5
million operating profit in 1998, we sustained an aggregate $32.9 million
operating loss for the three year period ended December 31, 1999. We expect to
incur consolidated operating losses for the next two years. Although the Company
had positive EBITDA of $27.3 million for 1997, $45.9 million for 1998 and $45.4
million for 1999, prior to 1996 the Company had negative EBITDA in each year of
its operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations-General" for the definition of EBITDA. The Company's
operating losses and negative EBITDA resulted principally from expenditures
associated with the establishment of the Company's traditional paging
infrastructure and the growth of its subscriber base.
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Although we expect that our traditional paging operations will continue to
generate EBITDA, we will incur substantial additional operating losses and
negative EBITDA during the start-up phase for wireless data services. EBITDA
generated from our traditional paging operations will be used primarily to fund
our wireless data operations for the next several years. We cannot assure you
that our consolidated operations will become profitable or continue to generate
EBITDA. If we cannot do so, we may not be able to make required debt service
payments.
RISKS OF HIGH LEVERAGE; DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES;
RESTRICTIVE COVENANTS. We are highly leveraged, primarily as a result of debt
financing incurred to fund the construction of our nationwide wireless data
network, the growth of our subscriber base and the acquisition of the narrowband
PCS Licenses. At December 31, 1999, our long-term debt was $538.2 million and
our stockholders' deficit was $188.4 million. In addition, the accretion of
original issue discount on our outstanding indebtedness will cause a substantial
increase in indebtedness. Our deficiency of earnings before fixed charges to
cover fixed charges for each of 1997, 1998, and 1999, was $43.9 million, $70.5
million and $97.6 million, respectively.
The indentures pursuant to which our 11 1/4% Senior Subordinated Discount
Exchange Notes due 2008 and 15% Senior Discount Exchange Notes due 2005 were
issued and our credit facility contain restrictive covenants. The restrictions
affect, and in many respects significantly limit or prohibit, our ability to
incur additional indebtedness, make prepayments of certain indebtedness, pay
dividends, make investments, engage in transactions with affiliates, issue
capital stock of certain subsidiaries, create liens, sell assets and engage in
mergers and consolidations. The limitations in the indentures are subject to a
number of important qualifications and exceptions. In particular, while the
indentures will generally restrict our ability to incur indebtedness by
requiring compliance with specified leverage ratios, they will permit an
unlimited amount of additional indebtedness to finance the acquisition of
equipment, inventory and network assets. However, one indenture prohibits us
from securing more than $175 million of indebtedness (other than intercompany
indebtedness). We may not be able to make required payments on our outstanding
indebtedness and may have to refinance our outstanding indebtedness in order to
repay such obligations. We cannot assure you that we will be able to refinance
our outstanding indebtedness.
OUR GROWTH STRATEGY MAY NOT BE ACHIEVED. The successful implementation of
our strategy to increase cash flow through the expansion of our subscriber base
by marketing wireless data services is necessary for us to meet our capital
expenditures, working capital and debt service requirements. We expect to incur
consolidated operating losses for the next two years. Our strategy assumes that
the wireless data services industry will grow rapidly. We cannot assure you that
we will be able to achieve the growth contemplated by our business strategy.
WE OPERATE IN A HIGHLY COMPETITIVE MARKET. We face significant competition
in all of our markets. Many of our competitors, which include regional and
national paging companies, providers of broadband PCS and certain regional
telephone companies, possess significantly greater financial, technical and
other resources. If any of such companies were to devote additional resources to
the wireless data or paging business or focus its strategy on our marketing and
product niches, our results of operations could be adversely affected. For
competitive and marketing reasons, we may sell new subscriber units for less
than their acquisition cost. In addition, a number of telecommunications
companies (including PCS providers) have constructed or are in the process of
constructing nationwide networks that offer services similar to our services,
including the provision of wireless data services such as two-way messaging. See
"Competition."
Industry reports indicate, and we believe, that the retail distribution of
subscriber units has become increasingly common in the traditional paging
industry. If the Company is unable to maintain its current sales relationships
with retail distributors or obtain new sales relationships with other retail
distributors, we may not be able to achieve our projected growth.
RISK OF ADVERSE EFFECT OF SUBSCRIBER DISCONNECTIONS. Our results of
operations are significantly affected by subscriber disconnections. In order to
realize net growth in units in service, disconnected users must be replaced, and
additional users must be added. However, the sales and marketing costs
associated with attracting new subscribers are substantial relative to the costs
of providing service to existing customers. Expenses associated with each new
unit placement exceed the sales price and service initiation fee. For 1997,
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1998 and 1999, disconnection rates were 2.5%, 3.2% and 3.1%, respectively. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General" for a discussion of the calculation of average monthly
disconnect rates. Further increases in our rate of disconnections may adversely
affect our results of operations.
WE DEPEND ON KEY PERSONNEL. Our success is dependent, to a significant
extent, upon the continued services of our key executive officers. We have a
retention agreement only with John D. Beletic, our Chairman and Chief Executive
Officer. All current executive officers have entered into non-competition
agreements with the Company. The loss or unavailability of one or more of our
executive officers or the inability to attract or retain key employees in the
future could have an adverse effect upon our operations.
RISK OF INABILITY TO MANAGE GROWTH. Our future performance will depend upon
our ability to manage our growth effectively. We need to improve and expand our
operating, financial, accounting, information and customer service systems, and
to expand, train and manage our employee base. Any inability to expand in
accordance with our plans or to manage our growth could have a material adverse
effect on our business, financial condition and results of operations.
RISKS OF RAPID TECHNOLOGICAL CHANGES. The telecommunications industry is
characterized by rapid technological change. Future technology advances in the
industry may result in the availability of new services or products that could
compete directly with our wireless data and paging services. Changes in
technology could also lower the cost of competitive products and services to a
level where our products and services become less competitive or we are required
to reduce the prices of our services.
WE DEPEND ON KEY SUPPLIERS. We do not manufacture any of the subscriber
units or infrastructure equipment used in our operations. We buy subscriber
units primarily from Motorola and Glenayre and are dependent on such
manufacturers to obtain sufficient inventory for new subscriber and replacement
needs. We purchase terminals, transmitters, receivers and other infrastructure
equipment primarily from Glenayre, and are dependent on Glenayre for sufficient
infrastructure equipment to meet our expansion and replacement requirements. We
are dependent on the manufacturers' ability to meet their manufacturing
schedules and anticipated release dates for new products. We experienced delays
in the release of two-way wireless data devices in 1999. We could be adversely
affected if we were unable to obtain additional infrastructure equipment or
subscriber devices on satisfactory terms by planned delivery dates.
RISK OF CHANGE IN REGULATORY ENVIRONMENT. We and the rest of the wireless
communications industry are subject to regulation by the FCC and various state
regulatory agencies. From time to time, legislation and regulations which could
potentially adversely affect us are proposed by federal and state legislators.
Federal or state legislation or regulations could be adopted that would
adversely affect our business.
EMPLOYEES
At December 31, 1999, the Company had 1,997 full-time employees. No
employees of the Company are covered by a collective bargaining agreement, and
management believes the Company's relationship with its employees is good.
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EXECUTIVE OFFICERS AND DIRECTORS OF REGISTRANT
The Company's Board of Directors may be increased or decreased from time to
time so long as there are no fewer than three nor more than twelve members. The
directors, the executive officers who must report transactions in the stock of
the Company to the Securities and Exchange Commission, their positions with the
Company, and their ages as of January 31, 2000 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
John D. Beletic....................... 48 Chairman and Chief Executive Officer
N. Ross Buckenham..................... 42 President
Frederick G. Anderson................. 48 V.P., General Counsel and Secretary
Douglas S. Glen....................... 42 V.P., Business Sales Division
Jack D. Hanson........................ 56 V.P., Network Services
John R. Hauge(3)...................... 48 V.P., Finance, Chief Financial Officer
and Treasurer
Sandra D. Neal........................ 51 V.P., Customer Care Operations
Richard S. Nelson..................... 51 V.P., International; President of
WebLink
International, Inc.
W. Wayne Stargardt.................... 47 V.P., Carrier Services Division
David Swift........................... 53 V.P., Consumer Division
Paul L. Turner........................ 41 V.P., Customer Service
E. Russell Villemez................... 40 V.P., Information Technology and Chief
Information Officer
Leigh J. Abramson(1)(2)............... 31 Director
Albert C. Black, Jr.(3)............... 40 Director
Guy L. de Chazal(1)................... 52 Director
Steven B. Dodge....................... 54 Director
Michael C. Hoffman.................... 37 Director
Arthur H. Patterson (1)(3)............ 56 Director
Alejandro Perez Elizondo(2)(3)........ 50 Director
Pamela D.A. Reeve(1)(2)............... 50 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee as of January 31, 2000.
(2) Member of Audit Committee as of January 31, 2000.
(3) Mr. Hauge joined the Company and Mr. Black was first elected to the Board of
Directors in February 2000. Mr. Patterson and Mr. Perez will not stand for
reelection at the 2000 Annual Stockholders Meeting of the Company.
John D. Beletic, Chairman and Chief Executive Officer. Mr. Beletic joined
the Company as President and a director in March 1992. Mr. Beletic became Chief
Executive Officer of the Company in February 1994 and Chairman of the Company's
Board in August 1994. In November 1997, Mr. Beletic continued as the Chairman
and Chief Executive Officer with Mr. Buckenham assuming the position of
President. Prior to joining the Company, Mr. Beletic spent a year in venture
capital, and he served for five years as President and Chief Executive Officer
of The Tigon Corporation ("Tigon"), a leading voice mail service provider. Tigon
was acquired by Ameritech Development Corporation, a wholly-owned subsidiary of
American Information Technologies Corporation in 1988. Mr. Beletic earned his
MBA from Harvard Business School. Mr. Beletic currently serves as a director of
TESSCO Technologies, Inc., iPass, Inc. and Triton PCS Holdings, Inc. Within the
messaging industry, Mr. Beletic currently serves as a director of the Personal
Communications Industry Association.
N. Ross Buckenham, President. Mr. Buckenham joined the Company in January
1996 as Vice President, PCS Strategy, was promoted to Vice President and General
Manager, PCS in September 1996, was promoted to Executive Vice President,
General Manager, PCS in May 1997 and was promoted to President in November 1997.
Prior to joining the Company, Mr. Buckenham was President of Touchtone
Solutions, Inc., a telecommunications and interactive voice response software
and services company from 1992 to 1996. From
16
<PAGE> 18
1984 to 1991, Mr. Buckenham was with Aquanautics Corporation, initially as Vice
President of Development then as its President. From 1981 to 1984, Mr. Buckenham
was with Bain & Co. as a senior consultant to companies in the voice processing,
technology, finance and health care industries. Mr. Buckenham holds an MBA
degree from Harvard Business School. Mr. Buckenham currently serves as a
director of Retek, Inc.
Frederick G. Anderson, Vice President, General Counsel and Secretary. Mr.
Anderson joined the Company in August 1997 as Vice President, General Counsel
and Secretary. Prior to joining the Company, Mr. Anderson was Senior Vice
President, General Counsel and Secretary of American Eagle Group, Inc., a public
specialty property and casualty insurance holding company, from March 1992
through July 1997. American Eagle's principal subsidiary, American Eagle
Insurance Company, was placed in receivership by the Texas Department of
Insurance in December 1997. Prior to joining American Eagle Group, Inc., Mr.
Anderson was engaged in the private practice of law as a partner in the
corporate and securities section of Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
an international law firm. Mr. Anderson has a JD degree from The University of
Texas at Austin.
Douglas S. Glen, Vice President, Business Sales Division. Mr. Glen rejoined
the Company in May 1999 as Vice President, Corporate Development and became Vice
President, Business Sales Division in January 2000. Prior to rejoining the
Company, Mr. Glen was Executive Vice President and Chief Operating Officer of
Personal Security and Safety Systems, Inc., a wireless technology company, from
May 1998 until April 1999. Prior thereto, Mr. Glen held a number of positions
with the Company. Mr. Glen was named Vice President in July 1989 and was
promoted to Executive Vice President, Strategic Alliances Business Unit in May
1997, and to President of the newly organized Carrier Services Division in
December 1997. Formerly, Mr. Glen was Regional Manager and Director of Finance
and Administration for Multicom, Inc., a subsidiary of PacTel Personal
Communications, for three years. Additionally, Mr. Glen was manager of financial
control with PepsiCola Bottling Group and a consultant with Arthur Andersen &
Co. Mr. Glen served as a director of PCIA, the industry trade association, and
Chairman of the Paging and Narrowband PCS Alliance from 1995 to 1997. Mr. Glen
has an MBA degree from The University of Texas at Austin.
Jack D. Hanson, Vice President, Network Services. Mr. Hanson joined the
Company in October 1993 as Vice President of Network Operations. Prior to
joining the Company, Mr. Hanson was Director of Engineering for Spectradyne,
Inc. from June 1992 to October 1993. Previously, he held senior engineering
positions with VMX, Inc. from December 1984 to June 1992, most recently as Vice
President of National Account Support.
John R. Hauge, Vice President, Finance, Chief Financial Officer and
Treasurer. Mr. Hauge joined the Company as Vice President, Finance, Chief
Financial Officer and Treasurer. Prior to joining the Company, Mr. Hauge was
Group Executive, Financial Strategies for FIRSTPLUS Financial Group, Inc., a
mortgage lender, from April 1998 to February 2000. Previously, Mr. Hauge had
senior finance responsibilities for Perot Systems Corporation, an international
information technology services company, from 1993 to 1998. Mr. Hauge earned his
MA from Oxford University and his MBA from Harvard Business School.
Sandra D. Neal, Vice President, Customer Care Operations. Ms. Neal joined
the Company as Vice President in July 1992. She was promoted to Executive Vice
President, Administration in January 1996 and became Executive Vice President,
Strategic Projects in January 1998 and Vice President, Customer Care Operations
in January 2000. Prior to joining the Company, Ms. Neal was Vice President of
Customer Service for Tigon, a voice messaging service provider, from 1989 to
1992. Previously, Ms. Neal held the positions of Vice President of Finance and
Controller at Tigon from 1986 to 1989. Before joining Tigon, Ms. Neal was a
practicing certified public accountant from 1979 to 1986.
Richard S. Nelson, Vice President, International; President of WebLink
International, Inc. Mr. Nelson joined the Company as Vice President, Marketing
in June 1992. Mr. Nelson was named Vice President of International in March
1996. Before joining the Company, Mr. Nelson was Vice President of Marketing for
American Eagle, at American Airlines, where he held various staff positions from
1972 to May 1992. Mr. Nelson earned his MBA degree from Northwestern University.
17
<PAGE> 19
W. Wayne Stargardt, Vice President, Carrier Services Division. Mr.
Stargardt joined the Company in May 1996 as Vice President, Marketing. Mr.
Stargardt has been Vice President of Carrier Services since May 1998. Prior to
joining the Company, Mr. Stargardt served as Vice President of Marketing for
Pinpoint Communications Inc., a venture-funded start-up company developing a
wireless radiolocation-based mobile data network, from 1991 to January 1996.
Pinpoint Communications, Inc. filed a petition under the federal bankruptcy laws
in January 1996. Mr. Stargardt has an MBA degree from Harvard Business School.
David Swift, Vice President, Consumer Division. Mr. Swift joined the
Company in May 1997 as Director of National Retail Marketing. He was promoted to
Vice President of National Retail in May 1998. Prior to joining the Company, Mr.
Swift was President of Sampling Plus, Inc., a promotional marketing company,
from June 1994 until May 1997. He was Senior Vice President, Marketing of
Greyhound Lines, Inc., a national bus line, from April 1993 through May 1994.
Prior thereto Mr. Swift held several marketing positions with Frito-Lay, most
recently as Marketing Director.
Paul L. Turner, Vice President, Customer Service. Mr. Turner joined the
Company as Vice President, Customer Service in March 1994. Before joining the
Company, Mr. Turner was with MCI from 1984 to 1994 in positions of increasing
responsibility. From 1990 to 1994 he held various management positions, the most
recent being Senior Manager, MCI Consumer Markets.
E. Russell Villemez, Vice President, Information Technology and Chief
Information Officer. Mr. Villemez joined the Company in September 1998 as Vice
President of Information Technology and Chief Information Officer. From April
1996 to September 1998, Mr. Villemez was an independent consultant in the area
of information technology strategy for telecommunications companies such as AT&T
and Bell Atlantic. Prior to that, Mr. Villemez directed information technology
consulting in the telecommunications industry for A.T. Kearney from August 1993
to April 1996. Mr. Villemez has also been Director of Distributed Systems
Architecture for Sprint, and was employed at Andersen Consulting prior to that.
Mr. Villemez has a MBA degree from Vanderbilt University.
Leigh J. Abramson, Director. Mr. Abramson has been a Director of the
Company since August 1994. He is currently a Principal of Morgan Stanley & Co.
Incorporated ("Morgan Stanley") and of Morgan Stanley Dean Witter Capital
Partners. Mr. Abramson has been with Morgan Stanley since 1990, first in the
Corporate Finance Division and, since 1992, in the Private Equity Division. Mr.
Abramson is also a Director of Silgan Holdings. Mr. Abramson was designated by
Morgan Stanley Capital Partners III, L.P. pursuant to the Amended and Restated
Stockholders Agreement among the Company and certain stockholders of the Company
dated as of May 10, 1996, as amended (the "Stockholders Agreement").
Albert C. Black, Jr., Director. Mr. Black has been a director of the
Company since February 2000. He is currently Chairman of the Board, President
and Chief Executive Officer of On-Target Supplies & Logistics, Ltd., a privately
held distributor of office supplies and equipment and administrator of
warehousing and delivery. Mr. Black is also Chairman of the Board of the Greater
Dallas Chamber of Commerce, a director of the Dallas Black Chamber of Commerce
and Chase Bank of Texas, and the Finance Chairman of the Board of Regents of
Texas Southern University.
Guy L. de Chazal, Director. Mr. de Chazal has been a Director of the
Company since June 1989. Mr. de Chazal is a Managing Director of Morgan Stanley
and is President and a general partner of Morgan Stanley Dean Witter Venture
Partners. Mr. de Chazal joined Morgan Stanley in 1984. Mr. de Chazal is also a
director of several private companies. Mr. de Chazal was designated by Morgan
Stanley Venture Capital Fund, L.P. pursuant to the Stockholders Agreement.
Steven B. Dodge, Director. Mr. Dodge has been a Director of the Company
since November 1998. Mr. Dodge is Chairman and Chief Executive Officer of
American Tower Corporation ("ATC"), a leading independent owner and operator of
wireless communications towers in the United States. Prior to joining ATC, Mr.
Dodge founded and was the Chairman of the Board, President and CEO of American
Radio Systems Corporation ("ARS"), an independent owner and operator of radio
stations, a position he occupied from ARS' founding in November 1993 until its
merger with CBS Corporation. In addition, Mr. Dodge founded Atlantic Radio, L.P.
in 1988, which was one of the predecessor entities of ARS. Prior to forming
18
<PAGE> 20
Atlantic Radio, L.P., Mr. Dodge founded and served as Chairman and CEO of
American Cablesystems Corporation, a cable television company. Currently, Mr.
Dodge is also a Director of TD Waterhouse Group and Sensitech, Inc.
Michael C. Hoffman, Director. Mr. Hoffman has been a Director of the
Company since March 1999. Mr. Hoffman is a Managing Director of Morgan Stanley
and of Morgan Stanley Dean Witter Capital Partners. Mr. Hoffman joined Morgan
Stanley in 1986. Mr. Hoffman is also a director of OrbLynx, Inc. and eAccess
Limited. Mr. Hoffman was designated by The Morgan Stanley Leveraged Equity Fund
II, L.P. pursuant to the Stockholders Agreement.
Arthur Patterson, Director. Mr. Patterson has been a Director of the
Company since June 1989 and a Managing Partner of Accel Partners, a venture
capital company since 1984. Mr. Patterson is also a director of VIASOFT, Unify,
Portal Software and the AIM Funds as well as several private software and
telecommunications companies. Mr. Patterson was designated by Accel Partners
pursuant to the Stockholders Agreement.
Alejandro Perez Elizondo, Director. Mr. Perez has been a Director of the
Company since August 1994. Since 1987, Mr. Perez has been associated with
Pulsar, a diversified Mexican company with interests in the insurance,
agriculture, telecommunications, finance and other industries, and is currently
Vice President of Diversification of Pulsar Internacional, S.A. de C.V. Mr.
Perez is also a director of Ionica L3 Ltd. (a public telephone services company
located in the U.K.), Novaweb Technologies, Inc. (a California modem
manufacturing company), Encanto Networks Inc. (a California Internet company),
Fomento Empresarial Regiomontano, S.A. de C.V. (a Mexico-based holding company
with investments in telecommunications companies), and Merkafon (a Mexico-based
communications engineering company). Mr. Perez was designated by Pulsar pursuant
to the Stockholders Agreement.
Pamela D. A. Reeve, Director. Ms. Reeve has been a Director of the Company
since April 1996. Ms. Reeve is President, Chief Executive Officer and Director
of Lightbridge, Inc. ("Lightbridge") and has been with Lightbridge since 1989.
Lightbridge develops and manages software used by wireless telecommunications
companies across the United States to support sales and marketing applications.
Prior to joining Lightbridge, Ms. Reeve spent eleven years at The Boston
Consulting Group, with senior operating responsibility for the firm's Boston
office. Prior to joining The Boston Consulting Group, Ms. Reeve worked with the
National Endowment for the Humanities managing educational projects and with
real estate development and manufacturing firms, primarily in operations and
marketing. Ms. Reeve is also a director of Natural Microsystems, Inc.
CORPORATE STRUCTURE
PageMart, Inc. was incorporated as a Delaware corporation on May 8, 1989.
In January 1995, PageMart, Inc. effected a corporate reorganization pursuant to
which PageMart Nationwide, Inc., a Delaware corporation, became the holding
company parent of PageMart, Inc. In December 1995, the name of PageMart
Nationwide, Inc. was changed to PageMart Wireless, Inc. On January 28, 1998,
PageMart, Inc. was merged into PageMart Wireless, Inc. with PageMart Wireless,
Inc. as the surviving corporation. On December 1, 1999, the name of PageMart
Wireless, Inc. was changed to WebLink Wireless, Inc.
ITEM 2. PROPERTIES
The principal tangible assets of the Company are its messaging network
equipment, which includes switching terminals, transmitters, receivers and a
host of related equipment such as satellite and digital link controllers,
satellite dishes, antennas, cable, etc. The Company continues to add equipment
to its network as it expands to new service areas. To date, it has not
experienced any material difficulty or delay in obtaining network equipment as
needed.
The Company acquired the narrowband PCS Licenses, utilized in its wireless
data network, in auctions held by the FCC. The narrowband PCS Licenses permit
the nationwide operation of the wireless data network with 100kHz of outbound
capacity and 50kHz of return capacity.
19
<PAGE> 21
The Company generally leases the locations used for its transmission and
receiving facilities under operating leases. These leases are generally for five
years or less. The Company does not anticipate material difficulty in renewing
these leases or finding equally suitable alternate facilities on acceptable
terms. The Company leases approximately 178,500 square feet of office space for
its corporate headquarters in Dallas, Texas. The lease has a cost in 2000 of
approximately $3.5 million, and is subject to annual escalations during its
term. The lease expires on January 31, 2008, and the Company has a renewal
option for an additional five year term. The Company leases varying amounts of
space for local offices, call centers and other facilities at various locations.
Aggregate annual rental charges under site and office leases were approximately
$31.1 million for 1999.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various lawsuits arising in the normal course of
business. In management's opinion, the ultimate outcome of these lawsuits will
not have a material adverse effect on the results of operations or financial
condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS
The Company's Class A Common Stock, $0.0001 par value, is listed on The
Nasdaq Stock Market(R) System under the symbol WLNK. There currently is no
public market for the Company's Class B, Class C or Class D Common Stock. Class
A Common Stock is convertible by certain holders thereof into either Class B or
C Common Stock. Classes B, C and D Common Stock are convertible into Class A
Common Stock. The following table indicates the high and low sales prices for
the Company's Class A Common Stock for the last two years:
<TABLE>
<S> <C> <C>
1998:
First Quarter..................................... $10 7/16 $7
Second Quarter.................................... 10 7/8 8 7/16
Third Quarter..................................... 10 1/16 6 1/4
Fourth Quarter.................................... 8 3/4 5
1999:
First Quarter..................................... $ 7 1/4 $4 13/16
Second Quarter.................................... 7 9/16 3 3/4
Third Quarter..................................... 8 1/8 4 5/8
Fourth Quarter.................................... 18 5/8 5
</TABLE>
As of January 31, 2000, the Company's Class A, Class B and Class D Common
Stock was held by approximately 208, 8 and 7 holders of record, respectively.
There were no shares of Class C Common Stock outstanding. Management believes
there were approximately 5,300 beneficial holders at January 31, 2000.
The Company has not paid dividends on the common stock since its
organization in 1989. The Company currently intends to retain future earnings
for the development of its business and does not anticipate paying cash
dividends on its common stock in the foreseeable future. The Company's future
dividend policy will be determined by its Board of Directors on the basis of
various factors, including the Company's results of operations, financial
condition, capital requirements and investment opportunities. In addition, the
Company's debt instruments substantially restrict (and currently prohibit) the
payment of cash dividends.
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<PAGE> 22
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth summary historical financial information and
operating data for each of the five fiscal years ended December 31, 1999. The
financial information and operating data were derived from, and should be read
in conjunction with, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
of the Company and the Notes thereto included elsewhere in this report.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT UNIT, PER SHARE AND ARPU DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Recurring revenues......................... $ 101,503 $ 153,041 $ 206,907 $ 254,814 $ 260,602
Equipment revenues......................... 57,688 68,551 70,871 56,838 64,563
---------- ---------- ---------- ---------- ----------
Total revenues............................. 159,191 221,592 277,778 311,652 325,165
Cost of equipment sold..................... 63,982 78,896 86,175 69,150 72,035
---------- ---------- ---------- ---------- ----------
95,209 142,696 191,603 242,502 253,130
Operating expenses......................... 118,557 155,265 194,194 240,052 285,890
---------- ---------- ---------- ---------- ----------
Operating income (loss).................... (23,348) (12,569) (2,591) 2,450 (32,760)
Interest expense........................... (30,720) (35,041) (38,499) (43,798) (65,310)
Interest income............................ 1,997 1,140 501 3,187 579
Other...................................... (1,042) (2,128) (3,298) (3,549) (2,376)
---------- ---------- ---------- ---------- ----------
Loss before extraordinary item............. $ (53,113) $ (48,598) $ (43,887) $ (41,710) $ (99,867)
========== ========== ========== ========== ==========
Loss before extraordinary item per common
share.................................... $ (1.53) $ (1.30) $ (1.10) $ (1.03) $ (2.47)
Weighted average number of common shares
and share equivalents outstanding........ 34,653 37,462 39,922 40,246 40,500
BALANCE SHEET DATA (AT PERIOD END):
Current assets............................. $ 62,535 $ 70,572 $ 84,133 $ 74,537 $ 63,895
Total assets............................... 263,829 313,620 361,876 494,055 451,930
Current liabilities........................ 56,508 62,503 104,973 120,750 101,526
Long-term debt, less current maturities.... 219,364 240,687 289,344 462,079 538,185
Stockholders' equity (deficit)............. (12,043) 10,430 (32,441) (90,022) (188,440)
OTHER DATA:
Units in service (at period end)........... 1,240,024 1,859,407 2,530,737 2,651,004 2,662,995
Net subscriber additions................... 467,294 619,383 671,330 120,267 11,991
ARPU(1).................................... $ 8.62 $ 8.04 $ 7.80 $ 8.06 $ 8.17
EBITDA..................................... (10,076) 8,623 27,261 45,870 45,387
Capital expenditures....................... 33,503 63,804 67,506 168,546 45,736
Dividends paid/declared.................... -- -- -- -- --
Depreciation and amortization.............. 13,272 21,192 29,852 43,420 78,147
Deficiency of earnings to fixed
charges(2)(3)............................ (53,113) (48,598) (43,887) (70,511) (97,579)
</TABLE>
- ---------------
(1) Average monthly revenue per unit ("ARPU") is calculated by dividing (i)
domestic recurring revenues, consisting of fees for airtime, voice mail,
customized coverage options, excess usage fees and other recurring revenues
and fees associated with the subscriber base, for the quarter by (ii) the
average number of domestic units in service for the quarter. ARPU is stated
as the monthly average for the final quarter of the period.
(2) For purposes of calculating the deficiency of earnings to fixed charges, (i)
earnings is defined as net loss plus fixed charges and (ii) fixed charges as
interest expense plus amortization of debt issuance costs and the interest
portion of rental and lease expense.
(3) The 1998 deficiency of earnings to fixed charges is increased by $17.6
million in extraordinary items and $11.4 million of capitalized interest.
21
<PAGE> 23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion of the results of operations and financial
condition of the Company for the three years ended December 31, 1999. This
discussion should be read in conjunction with the Company's Consolidated
Financial Statements and the Notes thereto included elsewhere in this report.
Certain prior years' amounts have been reclassified to conform with the current
year presentation.
This Form 10-K contains statements that constitute forward-looking
statements. In addition to statements that speak to a time in the future, the
words "estimate," "project," "plan," "expect," "believe" and similar expressions
are intended to identify forward-looking statements. Readers are cautioned that
such forward-looking statements involve risks and uncertainties, and are subject
to change based on various important factors. The factors set forth under
"Business -- Risk Factors" and in other filings with the Securities and Exchange
Commission, as well as the following factors, could affect the Company's
financial performance and could cause actual results for 2000 and beyond to
differ materially from those expressed in any such forward-looking statements:
economic conditions and consumer confidence generally in the United States; the
ability of the Company to manage its high outstanding indebtedness; the impact
of technological change in the telecommunications industry; the future cost and
availability of network infrastructure and subscriber devices; the impact of
competition and pricing of paging and wireless data services; the timely market
acceptance of new products and services such as two-way messaging; change in
regulation by the FCC and various state regulatory agencies; and the potential
technical problems relating to the Company's wireless data network.
GENERAL
Through its Wireless Data Division, the Company has constructed and
operates a wireless data network as an overlay of its one-way network, which
covers approximately 90% of the U.S. population. The Company has incurred
significant capital expenditures and expects to incur additional capital
expenditures and operating losses associated with the implementation and
deployment of its wireless data services. Management does not expect the
Wireless Data Division to generate positive EBITDA (defined below) until early
2001. Through its Traditional Paging Division, the Company provides paging and
other one-way wireless messaging services to its subscribers.
EBITDA represents earnings (loss) before interest, taxes, depreciation,
amortization, other (income) expense and extraordinary items. EBITDA is a
financial measure commonly used in the Company's industry. EBITDA is not derived
pursuant to generally accepted accounting principles ("GAAP"), and therefore
should not be construed as an alternative to operating income, as an alternative
to cash flows from operating activities (as determined in accordance with GAAP)
or as a measure of liquidity. The calculation of EBITDA does not include
commitments of the Company for capital expenditures and payment of debt and
should not be deemed to represent funds available to the Company.
The Company sells or leases wireless messaging end-user devices to
subscribers, retailers and resellers. The Company earns recurring revenues from
subscribers in the form of fixed periodic fees and incurs substantial operating
expenses in offering its services, including technical, customer service and
general and administrative expenses.
Since commencing operations in 1990, the Company has invested heavily in
its wireless communications network and administrative infrastructure in order
to establish nationwide coverage, sales offices in major metropolitan areas,
centralized customer service call centers and administrative support functions.
The Company incurs substantial fixed operating costs related to its wireless
communications infrastructure, which is designed to serve a larger subscriber
base than the Company currently serves in order to accommodate growth. In
addition, the Company incurs costs associated with each new subscriber addition.
The Company sustained consolidated operating losses in each year of operations
from inception through 1997. Although the Company recognized a $2.5 million
operating profit in 1998, the Company sustained an aggregate $32.9 million
operating loss from 1997 through 1999. The Wireless Data Division generated
operating losses in 1997, 1998 and 1999 and management expects this trend to
continue into 2001. In the third quarter of 1997, the Company began generating
operating profits in its Traditional Paging Division and management expects this
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<PAGE> 24
trend to continue through 2001. Nevertheless, the Company expects to incur
consolidated operating losses through 2001.
The Company's strategy is to expand its subscriber base to increase
profitability and cash flow through greater utilization of its nationwide
wireless communications network. From January 1, 1992 to December 31, 1999, the
number of units in service increased from 52,125 to 2,662,995. This includes
61,575 from the Wireless Data Division, 2,559,353 from the Traditional Paging
Division, and 42,067 from the Company's proportional share in its Canadian
affiliate. None of the Company's growth is attributable to acquisitions. The
Company intends to achieve unit growth by promoting its wireless data services
through its sales force, national retail distribution channels, private brand
strategic alliances with telecommunication companies such as BellSouth Cellular
Corp., GTE Corporation, Southwestern Bell Mobile Systems, Sprint, Ameritech
Mobile Services, Inc., MCI WorldCom Network Services, Inc., EXCEL
Communications, Inc., ALLTEL Communications, Inc., Bluegrass Cellular, Inc. and
First Cellular of Southern Illinois, and wireless data network alliances with
companies such as Arch Communications Group, Inc., Metrocall, Inc. and AirTouch
Paging.
The Company has historically sold, rather than leased, substantially all
subscriber units used by its subscribers. As a result, the Company has had much
less capital invested in subscriber units than other paging carriers since it
has recouped a substantial portion of subscriber unit costs upon sale to
retailers and subscribers. This has resulted in significantly lower capital
expenditures and depreciation expense than if the Company had leased units to
its subscribers. In addition, the Company's financial results are much different
than other paging carriers that lease subscriber units because the Company
recognizes the cost of subscriber units sold in connection with adding new
subscribers at the time of sale rather than capitalizing and depreciating the
cost of subscriber units over periods ranging from three to four years. In
addition, the Company's retail distribution strategy results in the recognition
of expenses associated with subscriber unit sales and other sales and marketing
expenses in advance of new subscribers being added to the base and generating
revenues due to the inventory carried by retailers. However, the Company expects
to lease a substantial portion of its wireless data subscriber units as initial
sales of wireless data services are expected to be dominated by business and
corporate customers and because of the high cost of wireless data subscriber
units compared to traditional paging units. In 1998 and 1999 the Company's
capital expenditures for subscriber units has increased as the result of the
Company's increased units in wireless data services.
The Company sells and leases its subscriber units through the following
distribution channels: (i) private brand strategic alliances and wireless data
network alliances through its Carrier Services Strategic Business Unit ("SBU"),
(ii) third party local resellers through its Reseller SBU, (iii) national and
regional retail stores through its National Retail SBU and (iv) direct sales
through its Field Sales and National Accounts SBU's. At December 31, 1999, 45%
of the Company's domestic units in service originated from the Carrier Services
SBU, 24% from the Reseller SBU, 20% from the National Retail SBU and 11%
originated from the Field Sales and the National Accounts SBU. In the third
quarter of 1998, the Company announced the formation of its Wireless Control
Systems (formerly Telemetry) SBU. The Company expects this SBU to begin
generating revenues in the first half of 2000.
For competitive and marketing reasons, the Company generally sells each new
unit to retailers for less than its acquisition cost. The Company's accounting
practices result in selling and marketing expenses and loss on sales of
equipment being recorded at the time a unit is sold. The Company expects its
costs of subscriber units on a per unit basis generally to remain constant or
decline somewhat as sales volume increases. Units sold by the Company during a
given month may exceed units activated and in service due to inventory stocking
and distribution strategies of retailers.
The Company derives its recurring revenue primarily from fixed periodic
fees for services that are not generally dependent on usage. Consequently, the
Company's ability to recoup its initial selling and marketing costs, to meet
operating expenses and to achieve profitability is dependent on the average
length of each customer's subscription period. As long as a subscriber continues
to utilize the Company's service, operating results benefit from the recurring
payments of the fixed fees without the incurrence of additional selling expenses
by the Company. Conversely, operating results are adversely affected by customer
disconnections. Each month a percentage of the Company's existing customers have
their service terminated for a variety of
23
<PAGE> 25
reasons, including failure to pay for service, dissatisfaction with service and
switching to a competing service provider. The Company's average monthly
disconnection rates for the years ended December 31, 1997, 1998 and 1999 were
2.5%, 3.2% and 3.1%, respectively. Average monthly disconnect rates are
calculated by dividing (a) the sum of (i) subscriber disconnections from all
direct sales and national retail channels, (ii) net subscriber disconnections
from the local reseller channel, taken as a whole and (iii) the subscriber
disconnections from each of the Carrier Services SBU's strategic alliance
partners, to the extent that each partner has net disconnections, by (b) the
total number of units in service at the beginning of the period. Disconnect
rates are stated as the monthly average of each period presented.
Approximately 85% of the Company's average revenue per unit ("ARPU") is
attributable to fixed fees for airtime, coverage options and features. A portion
of the remainder is dependent on usage. Management anticipates that the
Company's consolidated ARPU will increase as subscriber additions in the
Wireless Data Division increase, since wireless data services yield a
significantly higher ARPU than traditional paging services. Management
anticipates that the Company's Traditional Paging Division's ARPU will remain
constant or decline slightly in the foreseeable future due to a continued higher
mix of subscribers added through private brand strategic alliance programs,
which yield lower ARPU because strategic alliance partners are generally high
volume customers that are charged wholesale airtime rates. However, because
private brand strategic alliance partners are responsible for selling and
marketing costs, billing, collection and other administrative costs associated
with end-users, the Company incurs substantially lower marketing and
administrative costs with respect to such subscribers.
RESULTS OF OPERATIONS
Certain of the following financial information is presented on a per
subscriber unit per month basis. Management of the Company believes that such a
presentation is useful in understanding the Company's results because it
provides a meaningful comparison period-to-period, given the Company's
subscriber base and the significant differences in the number of subscribers of
other wireless data companies.
FISCAL YEARS 1997, 1998 AND 1999
WIRELESS DATA DIVISION
The Company's Wireless Data Division is expected to fuel the growth of the
Company in the future. Nationwide coverage was first offered on December 15,
1998 with coverage to 70% of the U.S. population. When the wireless data network
was substantially completed in April 1999, approximately 90% of the U.S.
population was covered. The following discussion analyzes the results of the
Company's Wireless Data Division's operations, unless otherwise indicated. The
periods compared below are fiscal years 1999 and 1998, since minimal operating
activities occurred in fiscal year 1997.
Units in Service
The Company had 775 units in service as of December 31, 1998 compared to
61,575 as of December 31, 1999. Management believes that wireless data units in
service will increase in 2000. However, wireless data net subscriber additions
during the fourth quarter of 1999 were below the third and second quarter 1999
levels, as they were negatively affected by the unavailability of acceptable
two-way subscriber devices from manufacturers. The Company received its first
shipments of full two-way wireless data devices in February 2000. Significant
wireless data unit additions are not expected until the second quarter of 2000.
Revenues
Revenues for 1998 were $96,000 compared to $13.4 million for 1999.
Recurring revenues for 1998 and 1999 were $46,000 and $5.5 million,
respectively. Revenues from equipment sales for 1998 and 1999 were $50,000 and
$7.9 million, respectively. ARPU for the Wireless Data Division was $19.85 for
the three months ended December 31, 1998 compared to $16.94 for the three months
ended December 31, 1999, reflecting a higher percentage of units sold in the
fourth quarter of 1999 on a wholesale basis. Management expects Wireless Data
ARPU to vary somewhat throughout 2000 as the timing of additions throughout the
year from
24
<PAGE> 26
wholesale-priced distribution channels and additional local service subscribers
contribute to wireless data unit growth.
Cost of Equipment Sold
The cost of equipment sold for 1998 was $0.2 million compared to $8.3
million for 1999. Management expects a substantial portion of new wireless data
units will be leased, rather than sold, resulting in a lower cost of equipment
sold and higher capital expenditures.
Operating Expenses
Technical expenses were $4.4 million for 1998 compared to $27.0 million for
1999. Management expects technical costs to increase in 2000 as the Company
plans to add transmitters and receivers to improve and expand its coverage.
General and administrative expenses (including costs associated with
customer service, field administration and corporate headquarters) for 1998 and
1999 were $2.2 million and $5.7 million, respectively. As the number of wireless
data units in service grows, the Wireless Data Division will require additional
resources to be allocated to support those customers, some or all of which will
be shifted from the Traditional Paging Division. This is expected to cause an
increase in general and administrative expenses.
Selling expenses for 1998 were $2.0 million compared to $6.1 million for
1999. Management expects to aggressively market wireless data services, and
selling expenses are expected to increase as a result. If market growth
warrants, selling expenses may increase significantly in the future.
Depreciation and amortization was $5.8 million for 1998 compared to $35.2
million for 1999. The nationwide buildout of the Company's wireless data network
was substantially completed in April 1999. As a result, the increase was due to
the Company recording six months of higher depreciation expense in the last half
of 1999.
TRADITIONAL PAGING DIVISION
The Company's principal operations to date are the domestic one-way paging
operations of its Traditional Paging Division. This division is a mature
business requiring only a maintenance level of capital investment and producing
reliable EBITDA, operating income and net income. Management expects EBITDA from
this division to decline slowly over time from the level experienced in the
fourth quarter of 1999. The following discussion analyzes the results of the
Company's Traditional Paging Division's operations, unless otherwise indicated.
Units in Service
Units in service from domestic one-way paging operations were 2,513,337,
2,618,527 and 2,559,353 as of December 31, 1997, 1998 and 1999, respectively. In
addition, for 1997, 1998 and 1999, PageMart Canada's units in service were
29,000, 52,836 and 70,111, respectively. As a result of its ownership interest
in PageMart Canada, the Company's proportional share of the units in service of
PageMart Canada was 17,400, 31,702 and 42,067 units at December 31, 1997, 1998
and 1999, respectively. On February 1, 2000, the Company sold its ownership
interest in PageMart Canada; therefore, the Company will no longer report a
proportional share of the units in service of PageMart Canada. See Note 19 to
the Consolidated Financial Statements of the Company.
The Company's one-way operations experienced a net decrease of 59,174 units
in service in 1999. This is a continued trend from 1998 when the Company
experienced historically weak fiscal quarters in terms of net subscriber
additions in the third and fourth quarters, with the fourth quarter of 1998
resulting in a net loss of subscribers. Management believes there is a declining
market for traditional one-way paging services, and demand appears to be
shifting to the higher quality and greater benefits of wireless data services.
Management expects the Traditional Paging Division to continue experiencing net
subscriber losses in 2000, due to, among
25
<PAGE> 27
other things, more severe volatility in local reseller and strategic alliance
channels and an increase in disconnect rates.
Revenues
Total revenues for 1997, 1998 and 1999 were $277.6 million, $311.5 million
and $311.2 million, respectively. Recurring revenues for airtime, voice mail and
other services for the same periods were $206.9 million, $254.8 million and
$255.1 million, respectively. Revenues from equipment sales for 1997, 1998 and
1999 were $70.7 million, $56.7 million and $56.1 million, respectively.
Recurring revenues increased from 1997 to 1998 primarily due to the increase in
the total number of units in service and remained relatively constant from 1998
to 1999. The decrease in equipment sales during 1998 was primarily due to a
decline in the rate of growth in national retail outlets. Equipment revenue
decreased from 1998 to 1999 primarily due to lower unit shipments in the
National Retail distribution channel.
The Company's ARPU was $7.80, $8.06 and $7.98 in the final quarter of 1997,
1998 and 1999, respectively. The increase in ARPU in 1998 is primarily
attributable to an increase in alphanumeric services in the traditional one-way
paging operation, as well as a decrease in the number of subscriber units
deployed in the local reseller distribution channel, which generally has low
ARPU. The decline in 1999 resulted primarily from a decrease in subscribers in
the National Retail distribution channel, which generally has a higher ARPU.
This decrease in ARPU was offset partially by a higher mix of higher revenue
multi-city, regional and nationwide services as well as increased sales of other
value-added services such as voice mail and toll-free numbers. Over the past
year, the Company's ARPU has varied by less than 5 percent. Management expects
ARPU to remain relatively stable in the foreseeable future with minor variations
from changes in distribution and product mix.
Cost of Equipment Sold
The cost of equipment sold in 1997, 1998 and 1999 was $86.0 million, $68.9
million and $63.3 million, respectively. The decrease in 1998 was primarily
attributable to the decline in the rate of growth in national retail outlets.
The further decrease in 1999 was chiefly due to lower unit shipments to national
retailers. The Company expects subscriber device costs to generally remain
constant. The loss on equipment sold (equipment revenue less cost of equipment
sold) is recognized when subscriber devices are shipped to the retailers,
usually before the devices are placed into service. The Company has historically
sold rather than leased the majority of devices in the Traditional Paging
Division.
Operating Expenses
Technical expenses were $46.5 million, $52.2 million and $49.6 million in
1997, 1998 and 1999, respectively. The increase in 1998 was primarily due to
increased telecommunications and site expenses associated with servicing the
Company's expanded network and larger subscriber base. The decrease in 1999 was
primarily due to the decrease in the subscriber base and the maturation of the
Traditional Paging Division's operations. Management expects technical expenses
to remain relatively constant in the future. Based on an average monthly cost
per unit in service, technical expenses were $1.78, $1.69 and $1.60 in 1997,
1998 and 1999, respectively. The per unit decreases were the result of increased
operating efficiencies.
General and administrative expenses (including costs associated with
customer service, field administration and corporate headquarters) in 1997, 1998
and 1999 were $66.4 million, $82.6 million and $75.0 million, respectively. The
increase in 1998 was attributable to the Company's expansion of its customer
service call centers, information systems and administrative capabilities to
support the domestic one-way subscriber base and anticipated growth of the
wireless data subscriber base which required additional office space,
administrative personnel and customer service representatives. The decrease in
1999 was largely due to headcount reductions, initiated in the first quarter of
1999, largely as a result of certain productivity oriented technology
enhancements in the Company's information systems and call centers. On an
average cost per month per unit in service basis, general and administrative
expenses were $2.54, $2.68 and $2.41 for fiscal years 1997, 1998
26
<PAGE> 28
and 1999, respectively. Management expects general and administrative costs to
decline as resources are transferred to the wireless data division.
Selling expenses in 1997, 1998 and 1999 were $50.8 million, $52.6 million
and $43.6 million, respectively. From 1997 to 1998, the increase resulted from
greater marketing and advertising costs related to a larger base of retail
outlets. The decrease from 1998 to 1999 is the result of the maturation of the
Traditional Paging Division's operations. Management expects this number to
remain relatively constant in the near future. During 1999, the Company incurred
$0.6 million in selling expenses associated with international operations.
Depreciation and amortization in 1997, 1998 and 1999 was $29.7 million,
$37.6 million and $43.0 million, respectively. The increases resulted from the
expansion of the Company's network infrastructure including transmitter and
terminal equipment, as well as the purchase and development of computer hardware
and software associated with the Company's administrative system. Because only
maintenance levels of capital expenditures are expected in the Traditional
Paging Division, depreciation and amortization should remain relatively constant
in the future. As an average cost per month per unit in service, depreciation
and amortization was $1.13, $1.22 and $1.38 for 1997, 1998 and 1999,
respectively.
Interest Expense
Consolidated interest expense increased from $38.5 million in 1997 to $43.8
million in 1998 to $65.3 million in 1999. The increase in 1998 was primarily the
result of interest expense related to the 11 1/4% Senior Subordinated Discount
Exchange Notes Due 2008 (the "11 1/4% Notes") and increased interest expense
related to the 15% Senior Discount Exchange Notes due 2005 (the "15% Notes").
The increase in 1999 was primarily the result of the increased interest related
to the 15% Notes, the 11 1/4% Notes and the four-year credit agreement with
Bankers Trust Company and Morgan Stanley Senior Funding, Inc. which provides for
a $100 million credit facility (the "Credit Facility"). Interest expense related
to the 12 1/4% Senior Discount Notes due 2003 (the "12 1/4% Notes"), which were
retired in January 1998, was $15.1 million and $1.2 million in 1997 and 1998,
respectively. Interest expense related to the 15% Notes was $21.2 million, $24.7
million and $28.5 million in 1997, 1998 and 1999, respectively. Interest expense
related to the 11 1/4% Notes was $27.0 million and $32.3 million in 1998 and
1999, respectively. Interest expense related to a vendor financing arrangement
was $0.9 million in 1997, $0.6 million in 1998 and $0.4 million in 1999.
Interest expense related to the Credit Facility was $0.3 million in 1997 and
1998 and $3.5 million in 1999. Total interest expense for 1998 was reduced by
the capitalization of $11.4 million of interest related to the construction of
the Company's advanced messaging network. Interest expense of $16.8 million and
$48.5 million was allocated to Traditional Paging and Wireless Data Divisions,
respectively, in 1999.
Net Loss
The Company sustained consolidated losses in 1997 and 1999 of $43.9 million
and $99.9 million, respectively, and consolidated losses before extraordinary
items in 1998 of $41.7 million. One-time extraordinary charges of $13.8 million
during the first quarter of 1998 related to the early retirement of the 12 1/4%
Notes and a one-time extraordinary charge of $3.8 million was recognized during
the second quarter of 1998 related to the interruption in service experienced by
the Company when the Galaxy IV satellite failed. Including the extraordinary
items, the Company's consolidated net loss for 1998 was $59.3 million. The
increased losses in 1998 was principally due to the cost of funding the growth
rate of the Company's subscriber base. The increase in losses in 1999 was
primarily due to increased operating expenses associated with the start-up
operations of the Wireless Data Division.
Allocation of Debt to Divisions
The Company has allocated long-term debt between its Wireless Data and
Traditional Paging Divisions. The methodology the Company follows results in the
attribution of the proceeds of each offering based on the specific capital and
operating requirements of each division. Positive free cash flow (defined as
EBITDA less capital expenditures) generated by a division is utilized to reduce
its respective debt allocation. As of December 31, 1999, $72.5 million and
$157.3 million of equity and $439.1 million and $99.1 million of debt has been
allocated to the Wireless Data and Traditional Paging Divisions, respectively.
27
<PAGE> 29
SELECTED QUARTERLY RESULTS OF OPERATIONS
The table below sets forth management's presentation of the results of the
Wireless Data and Traditional Paging Divisions' operations and other data on a
quarterly basis for the eight most recent fiscal quarters. This presentation
should be read in conjunction with the Consolidated Financial Statements of the
Company and the Notes thereto included elsewhere in this report and the
Company's quarterly reports on Form 10-Q for the corresponding periods below,
and should not be considered in isolation or as an alternative to results of
operations that are presented in accordance with GAAP.
WIRELESS DATA DIVISION
(IN THOUSANDS, EXCEPT OTHER DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- --------- -------- --------- -------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RECURRING REVENUES........... $ -- $ -- $ 14 $ 32 $ 207 $ 675 $ 1,811 $ 2,809
Equipment revenues........... -- -- 6 44 446 2,873 3,760 806
----- ------- ------- ------- -------- -------- -------- --------
-- -- 20 76 653 3,548 5,571 3,615
Cost of equipment sold..... -- -- 6 181 574 3,053 3,725 942
----- ------- ------- ------- -------- -------- -------- --------
NET REVENUES................. -- -- 14 (105) 79 495 1,846 2,673
Technical expenses........... 135 219 1,308 2,742 6,144 7,297 6,818 6,736
General and administrative
expenses................... 432 527 523 695 1,195 1,270 1,445 1,804
Selling expenses............. 254 318 381 1,066 1,183 1,481 1,537 1,927
Depreciation and amortization
expense.................... 120 131 1,601 3,963 7,725 8,128 9,390 9,951
----- ------- ------- ------- -------- -------- -------- --------
OPERATING LOSS (EBIT)........ $(941) $(1,195) $(3,799) $(8,571) $(16,168) $(17,681) $(17,344) $(17,745)
===== ======= ======= ======= ======== ======== ======== ========
EBITDA....................... $(821) $(1,064) $(2,198) $(4,608) $ (8,443) $ (9,553) $ (7,954) $ (7,794)
===== ======= ======= ======= ======== ======== ======== ========
OTHER DATA:
Ending units in service...... -- -- 287 775 4,259 24,416 49,001 61,575
ARPU(2)...................... $ -- $ -- $ 32.52 $ 19.85 $ 27.37 $ 15.69 $ 16.44 $ 16.94
</TABLE>
TRADITIONAL PAGING DIVISION
(IN THOUSANDS, EXCEPT OTHER DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RECURRING REVENUES... $ 60,872 $ 63,537 $ 65,205 $ 65,154 $ 64,516 $ 64,006 $ 64,549 $ 62,029
Equipment revenues... 16,289 13,164 13,546 13,702 8,186 16,329 17,052 14,514
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
77,161 76,701 78,751 78,856 72,702 80,335 81,601 76,543
Cost of equipment
sold............. 20,590 15,915 16,416 15,976 10,269 18,556 18,827 15,656
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NET REVENUES......... 56,571 60,786 62,335 62,880 62,433 61,779 62,774 60,887
Technical expenses... 12,359 13,464 13,364 12,993 12,571 13,146 12,674 11,229
General and
administrative
expenses........... 19,728 20,524 20,862 21,452 19,883 18,102 18,809 18,211
Selling expenses..... 13,476 13,716 12,907 12,519 12,576 10,346 10,315 10,411
Depreciation and
amortization
expense............ 8,482 9,046 9,808 10,269 10,925 10,949 10,572 10,507
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
OPERATING INCOME
(EBIT)............. $ 2,526 $ 4,036 $ 5,394 $ 5,647 $ 6,478 $ 9,236 $ 10,404 $ 10,529
========== ========== ========== ========== ========== ========== ========== ==========
EBITDA............... $ 11,008 $ 13,082 $ 15,202 $ 15,916 $ 17,403 $ 20,185 $ 20,976 $ 21,036
========== ========== ========== ========== ========== ========== ========== ==========
OTHER DATA:
EBIT MARGIN(1)....... 4.5% 6.6% 8.7% 9.0% 10.4% 15.0% 16.6% 17.3%
EBITDA MARGIN(1)..... 19.5% 21.5% 24.4% 25.3% 27.9% 32.7% 33.4% 34.5%
Ending units in
service............ 2,652,443 2,752,580 2,767,742 2,618,527 2,527,595 2,564,053 2,622,530 2,559,353
ARPU(2).............. $ 7.86 $ 7.84 $ 7.87 $ 8.06 $ 8.36 $ 8.38 $ 8.30 $ 7.98
</TABLE>
- ---------------
(1) Calculated by dividing quarterly EBIT or EBITDA by net revenues.
(2) Calculated by dividing recurring revenues for the quarter by the simple
average number of units in service during that quarter. Stated as the
monthly average for the quarter.
28
<PAGE> 30
SUPPLEMENTARY INFORMATION
The following table sets forth supplementary financial information related
to the Company's various operations (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------
WIRELESS TRADITIONAL
DATA PAGING INTERNATIONAL CONSOLIDATED
--------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues....................................... $ -- $277,605 $ 173 $277,778
Operating loss................................. (207) (1,887) (497) (2,591)
Interest expense............................... 19,820 18,679 -- 38,499
Interest income................................ 436 65 -- 501
Net loss....................................... (19,591) (20,987) (3,309) (43,887)
EBITDA......................................... (16) 27,774 (497) 27,261
Total assets................................... 185,943 175,359 574 361,876
Capital expenditures........................... 35,337 32,169 -- 67,506
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1998
------------------------------------------------------
WIRELESS TRADITIONAL
DATA PAGING INTERNATIONAL CONSOLIDATED
--------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues....................................... $ 96 $311,469 $ 87 $311,652
Operating income (loss)........................ (14,506) 17,603 (647) 2,450
Interest expense............................... 25,162 18,636 -- 43,798
Interest income................................ 3,145 42 -- 3,187
Loss before extraordinary items................ (37,284) (893) (3,533) (41,710)
EBITDA......................................... (8,691) 55,208 (647) 45,870
Total assets................................... 325,118 166,766 2,171 494,055
Capital expenditures........................... 128,032 40,386 128 168,546
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1999
------------------------------------------------------
WIRELESS TRADITIONAL
DATA PAGING INTERNATIONAL CONSOLIDATED
--------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues....................................... $ 13,387 $311,181 $ 597 $325,165
Operating income (loss)........................ (68,938) 36,647 (469) (32,760)
Interest expense............................... 48,498 16,812 -- 65,310
Interest income................................ 552 27 -- 579
Net income (loss).............................. (117,068) 19,544 (2,343) (99,867)
EBITDA......................................... (33,744) 79,600 (469) 45,387
Total assets................................... 324,615 124,449 2,866 451,930
Capital expenditures........................... 27,666 18,070 -- 45,736
</TABLE>
SEASONALITY
Device usage is slightly higher during the spring and summer months, which
is reflected in higher incremental usage fees earned by the Company. Only the
Company's retail sales are generally subject to seasonal fluctuations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations have historically required substantial capital
investment for the development and installation of its wireless communications
network, the procurement of subscriber units, and expansion into new and
existing markets. To date, these investments by the Company have been funded by
the proceeds from the issuance of common stock, preferred stock, the 12 1/4%
Notes, the 15% Notes and the 11 1/4% Notes, as well as borrowings under the
Revolving Credit Agreement, Credit Facility and Vendor Financing Arrangement
(all defined herein).
29
<PAGE> 31
Capital expenditures (excluding capitalized interest) were $67.5 million,
$168.5 million and $45.7 million for 1997, 1998 and 1999, respectively. Capital
expenditures for 1997 include approximately $35.3 million related to the
development of the wireless data network, $22.7 million for the Company's
traditional paging network and $9.5 million for the development of the Company's
new administrative system. Capital expenditures for the year ended 1998 include
approximately $128.0 million related to the development of its wireless data
network, $8.8 million for the Company's traditional paging network, $18.4
million for computer hardware and software, $2.3 million for corporate expansion
and relocation and $8.1 million for subscriber devices. Capital expenditures for
1999 include approximately $20.3 million related to the development and
expansion of its wireless data network, $3.3 million for the Company's
traditional paging network, $1.3 million for facilities, $10.6 million for
computer hardware and software and $10.2 million for leased subscriber units.
During December 1995, the Company committed to purchase $40 million in network
infrastructure equipment from Motorola from December 1, 1995 to October 31,
1999. The agreement was amended to extend the commitments to June 30, 2001 and
include ReFLEX25 wireless data subscriber units. Through December 31, 1999, the
Company had purchased $36.7 million of network infrastructure and ReFLEX25
wireless data subscriber units.
The Company capitalized approximately $11.4 million of interest expense for
the narrowband PCS licenses and wireless data network costs for those markets
under construction during 1998. With the launch of the Company's nationwide
wireless data network in December 1998, the Company is no longer capitalizing
interest costs associated with the wireless data network buildout.
The Company's net cash provided by operating activities for 1997, 1998 and
1999 was $37.2 million, $75.6 million and $24.1 million, respectively. Net cash
used in investing activities was $68.5 million, $168.7 million and $44.7 million
for 1997, 1998 and 1999, respectively, and were primarily for capital
expenditures. Net cash provided by financing activities was $17.0 million,
$102.3 million and $13.6 million for 1997, 1998 and 1999, respectively. Cash
provided by financing activities resulted in 1997 from borrowings of $17.1
million under a vendor financing arrangement, in 1998 primarily from the receipt
of $107.8 million of net proceeds from the issuance of the 11 1/4% Notes and the
retirement of the 12 1/4% Notes, and in 1999 primarily from the borrowing of
$25.0 million under the Credit Facility.
On January 28, 1998, the Company completed an offering of 11 1/4% Notes
(the "Offering") resulting in approximately $249.7 million in gross proceeds.
Simultaneously, with the closing of the Offering, the Company refinanced certain
of its outstanding indebtedness, and modified its corporate structure (the
"Refinancing"). The Refinancing consisted of: (i) purchasing all of the
outstanding 12 1/4% Notes ($136.5 million principal amount at maturity), (ii)
amending certain terms of the covenants and agreements in the indenture relating
to the 15% Notes; and (iii) merging PageMart, Inc. into WebLink Wireless, Inc.,
with WebLink Wireless, Inc. as the surviving corporation.
Approximately $130.7 million of the gross proceeds of the Offering was used
to purchase all of the outstanding 12 1/4% Notes. The approximately $107.8
million remaining after offering expenses and refinancing were used to fund the
construction of the wireless data network and for general corporate purposes. In
connection with the Refinancing, the Company incurred an extraordinary charge of
approximately $13.8 million related to the early retirement of debt.
The 11 1/4% Notes, which are unsecured senior subordinated obligations of
the Company, mature in 2008 and were issued at a substantial discount from their
principal amount at maturity. The accretion of original issue discount on the
11 1/4% Notes will cause an increase in indebtedness from December 31, 1999 to
February 1, 2003 of $123.7 million. From and after August 1, 2003, interest on
the 11 1/4% Notes will be payable semiannually, in cash.
The 15% Notes, which are unsecured senior obligations of the Company,
mature in 2005 and were issued at a substantial discount from their principal
amount at maturity. The accretion of original issue discount on the 15% Notes
will cause an increase in indebtedness from December 31, 1999 to February 1,
2000 of $2.4 million. From and after August 1, 2000, interest on the 15% Notes
will be payable semiannually, in cash. Management believes it has the necessary
resources, including the availability under the Credit Facility (as defined,
herein), to meet the cash requirements of the interest payments in August 2000
and February 2001.
30
<PAGE> 32
In March 1997, the Company entered into a vendor financing arrangement with
an infrastructure vendor (the "Vendor Financing Arrangement"), providing for the
financing of traditional paging or wireless data services infrastructure
equipment over a period of 60 months up to a maximum aggregate amount of $30
million. Borrowings under the Vendor Financing Arrangement are secured by the
equipment purchased. The interest rate applicable to such financing is equal to
the sum of 7% and the London Interbank Offered Rate ("LIBOR") for three-month
maturities as published in The Wall Street Journal or the sum of 4.25% and the
U.S. prime rate of interest as published in The Wall Street Journal. The
weighted average interest rate for borrowings outstanding during the three
months ended March 31, 1999 was 12.54%.
During the first quarter ended March 31, 1998, the Company modified the
agreement to provide $30 million of available financing, in aggregate, during
the period from September 1, 1998 through December 31, 2000. During the first
quarter ended March 31, 1999, the Company repaid the total amount outstanding of
$10.0 million on the Vendor Financing Arrangement with proceeds from the Credit
Facility. As of December 31, 1999, the Company had no amounts outstanding under
the Vendor Financing Arrangement.
In March 1999, the Company entered into a four-year credit agreement with
Bankers Trust Company and Morgan Stanley Senior Funding, Inc. which provides for
a $100 million credit facility (the "Credit Facility"). The Credit Facility
replaced the $50 million revolving line of credit the Company established on May
11, 1995 with BT Commercial Corporation, as Agent, and Bankers Trust Company, as
issuing bank (the "Revolving Credit Agreement") which was simultaneously
terminated. The Credit Facility provides for $75 million of multi-draw term
loans (the "Term Loans") and $25 million of revolving loans (the "Revolving
Loans"). On March 24, 1999, the Company borrowed $25 million in Term Loans under
the Credit Facility. Approximately $12 million of the initial borrowing was used
to repay amounts outstanding under the Vendor Financing Arrangement and to fund
the fees and expenses of the Credit Facility. As of December 31, 1999, total
availability under the Credit Facility was $75 million, of which $25 million was
outstanding in the form of Term Loans. Further availability of the Credit
Facility above the current $75 million is based on the Company's achievement of
certain minimum targets for wireless data subscriber units in service. The
Credit Facility bears interest at the U.S. prime rate plus 2.75% or at LIBOR
plus 3.75%. The weighted average interest rate on the amounts borrowed for the
period from March 24, 1999 to December 31, 1999 was 9.6%.
As of December 31, 1999, the Company's indebtedness was $308.3 million
under the 11 1/4% Notes, $204.9 million under the 15% Notes and $25 million
under the Credit Facility.
The indenture under which the 15% Notes were issued, the indenture under
which the 11 1/4% Notes were issued, the Vendor Financing Arrangement and the
Credit Facility contain certain restrictive covenants that, among other things,
limit the ability of the Company to incur indebtedness, pay dividends,
repurchase capital stock, engage in transactions with stockholders and
affiliates, create liens, sell assets, enter into leases and engage in mergers
and consolidations, and the Credit Facility requires the Company to maintain
certain operating and financial performance measures and limits the ability of
the Company to make capital expenditures.
During 1999, the Company reported $45.4 million of consolidated EBITDA and
$45.7 million of consolidated capital expenditures. The Company anticipates that
the Wireless Data Division will require approximately $55 to $65 million of
capital to fund operations and capital expenditures during 2000, funded entirely
by the excess EBITDA over capital expenditures from the Traditional Paging
Division during 2000. The Traditional Paging Division is expected to generate
around $80 million of EBITDA and require approximately $10 to $15 million of
capital expenditures in 2000, thus generating excess EBITDA of approximately $65
to $70 million.
As of December 31, 1999, the Company had approximately $10.4 million in
cash and cash equivalents. At December 31, 1999 the borrowings available under
the Vendor Financing Arrangement were approximately $30 million, and additional
borrowings available under the Credit Facility were $50 million, based on
certain minimum targets on advanced messaging subscriber units in service. The
Company anticipates that its cash balance and amounts available under the Credit
Facility and Vendor Financing Arrangement, combined
31
<PAGE> 33
with anticipated excess cash flows from the Company's Traditional Paging
Division, will be sufficient to fund the Company's consolidated operations,
capital expenditures and all cash interest costs through 2000.
From time to time, the Company will selectively consider potential
opportunities to make acquisitions intended to enhance its strategic position in
the wireless messaging industry. If the Company were to pursue any such
acquisitions, the Company would expect to obtain any necessary financing through
additional borrowings and/or equity financing and would need to successfully
integrate the acquired business into the existing operations.
Future revenues, costs, product mix and new product acceptance are all
influenced by a number of factors which are inherently uncertain and difficult
to predict. Therefore, no assurance can be given that financing for such
investments will be available. No assurance can be given that the Company's
strategy will be implemented as currently planned or that the Company's
operations will generate positive cash flows.
YEAR 2000 DISCLOSURE
The Company has not experienced any problems related to the Year 2000 date
change, nor have its suppliers with respect to the products and services
provided to the Company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's investment policy requires investments in high-quality
investment grade securities including obligations of the U.S. Government
guaranteed by the United States of America, money market deposits and corporate
commercial paper. The Company typically invests its surplus cash in these types
of securities for periods of relatively short duration. Although the Company is
exposed to market risk related to changes in short-term interest rates on these
investments, the Company manages these risks by closely monitoring market
interest rates and the duration of its investments. Due to the short-term
duration and the limited dollar amounts exposed to market interest rates,
management believes that fluctuations in short-term interest rates will not have
a material adverse effect on the Company's results of operations. The Company
does not enter into financial investments for speculation or trading purposes
and is not a party to any financial or commodity derivatives.
The Credit Facility bears interest at the U.S. prime rate plus 2.75% or at
LIBOR plus 3.75%. Therefore, the Credit Facility is subject to short-term
interest rate risk. At December 31, 1999, the balance outstanding under the
Credit Facility was $25.0 million. Consequently, a 100 basis point increase in
the U.S. prime rate or LIBOR would result in a $250,000 increase in interest
expense over a twelve month period.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are included in this report
beginning on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information required by this item is contained in this report under the
caption "Item 1. Business -- Executive Officers and Directors of the
Registrant."
ITEM 11. EXECUTIVE COMPENSATION
See "Executive Compensation" in the Company's definitive proxy statement
related to the Company's annual meeting of stockholders to be held on April 5,
2000, which is incorporated herein by reference.
32
<PAGE> 34
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See "Security Ownership of Certain Beneficial Owners and Management" in the
Company's definitive proxy statement related to the Company's annual meeting of
stockholders to be held on April 5, 2000, which is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Certain Relationships and Related Transactions" in the Company's
definitive proxy statement related to the Company's annual meeting of
stockholders to be held on April 5, 2000, which is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this 10-K:
(1) Financial Statements. See Index to Consolidated Financial
Statements and Financial Statement Schedule on Page F-1 hereof.
(2) Financial Statement Schedules. See Index to Consolidated Financial
Statements and Financial Statement Schedule on Page F-1 hereof.
(3) Exhibits Required by Item 601 of Regulation S-K. See Exhibit Index
on Page E-1 hereof.
(b) Reports on Form 8-K
The following current reports on Form 8-K were filed by WebLink
Wireless, Inc. during the quarter ended December 31, 1999:
Current Report on Form 8-K dated December 1, 1999, disclosing under Item
5 "Other Event" the merger of WebLink Wireless, Inc. into PageMart
Wireless, Inc. and the name change to WebLink Wireless, Inc.
Current Report on Form 8-K dated December 27, 1999, disclosing under
Item 5 "Other Events" the Company's Letter to Investors on Strategic
Repositioning, Opportunities and Risks.
33
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: February 29, 2000
WEBLINK WIRELESS, INC.
(Registrant)
By: /s/ JOHN D. BELETIC
----------------------------------
John D. Beletic
Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JOHN D. BELETIC Chairman and Chief Executive February 29, 2000
- ----------------------------------------------------- Officer (Principal Executive
John D. Beletic Officer)
/s/ JOHN R. HAUGE Vice President, Finance, February 29, 2000
- ----------------------------------------------------- Chief Financial Officer and
John R. Hauge Treasurer (Principal
Financial and Accounting
Officer)
/s/ LEIGH J. ABRAMSON Director February 29, 2000
- -----------------------------------------------------
Leigh J. Abramson
/s/ ALBERT C. BLACK Director February 29, 2000
- -----------------------------------------------------
Albert C. Black
/s/ GUY DE CHAZAL Director February 29, 2000
- -----------------------------------------------------
Guy L. De Chazal
/s/ STEVEN B. DODGE Director February 29, 2000
- -----------------------------------------------------
Steven B. Dodge
/s/ MICHAEL C. HOFFMAN Director February 29, 2000
- -----------------------------------------------------
Michael C. Hoffman
Director February , 2000
- -----------------------------------------------------
Arthur C. Patterson
/s/ ALEJANDRO PEREZ ELIZONDO Director February 29, 2000
- -----------------------------------------------------
Alejandro Perez Elizondo
/s/ PAMELA D.A. REEVE Director February 29, 2000
- -----------------------------------------------------
Pamela D.A. Reeve
</TABLE>
34
<PAGE> 36
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.1 -- Restated Certificate of Incorporation of PageMart
Wireless, Inc. (filed as an exhibit to the Registration
Statement on Form S-1 of the Company (Reg. No. 33-03012),
and incorporated herein by reference).
3.2 -- Certificate of Amendment to Restated Certificate of
Incorporation of PageMart Wireless, Inc. dated December
28, 1995 (filed as an exhibit to the Registration
Statement on Form S-1 of the Company (Reg. No. 33-03012),
and incorporated herein by reference).
3.3 -- By-laws of PageMart Wireless, Inc. (filed as an exhibit
to the Form 10-K of the Company for the fiscal year ended
December 31, 1997, and incorporated herein by reference.)
3.4 -- Certificate of Amendment to Restated Certificate of
Incorporation of PageMart Wireless, Inc. dated May 9,
1996 (filed as an exhibit to the Registration Statement
on Form S-1 of the Company (Reg. No. 33-03012), and
incorporated herein by reference).
3.5 -- Certificate of Ownership and Merger merging PageMart,
Inc. into PageMart Wireless, Inc. (filed as an exhibit to
the Form 10-K of the Company for the year ended December
31, 1998, and incorporated herein by reference).
3.6 -- Certificate of Ownership and Merger merging WebLink
Wireless, Inc. into PageMart Wireless, Inc. (filed as an
exhibit to the Form 8-K of the Company dated December 1,
1999, and incorporated herein by reference).
4.1 -- Indenture, dated as of January 28, 1998, between PageMart
Wireless, Inc. and United States Trust Company of New
York, as Trustee, relating to the 11 1/4% Senior
Subordinated Discount Notes due 2008. (filed as an
exhibit to the Form 10-K of the Company for the fiscal
year ended December 31, 1997, and incorporated herein by
reference).
4.2 -- Indenture, dated as of January 17, 1995, between PageMart
Wireless, Inc. and United States Trust Company of New
York, as Trustee, relating to the 15% Senior Discount
Notes due 2005. (filed as an exhibit to the Registration
Statement on Form S-1 of the Company (Reg. No. 33-91142),
and incorporated herein by reference).
4.3 -- First Supplemental Indenture, dated as of December 31,
1997, among PageMart Wireless, Inc. and United States
Trust Company of New York, as Trustee (filed as an
exhibit to the Form 8-K of the Company dated January 28,
1998, and incorporated herein by reference).
10.1 -- Warrant Agreement, dated as of October 19, 1993, between
PageMart, Inc. and United States Trust Company of New
York, as Warrant Agent, relating to the Warrants to
purchase Common Stock of the Company (filed as an exhibit
to the Form 10-K of the Company for the fiscal year ended
December 31, 1994, and incorporated herein by reference).
10.2 -- Second Amended and Restated Satellite Services
Supplemental Agreement, dated as of July 1, 1998, between
PageMart Wireless, Inc. and AvData Systems, Inc. (filed
as an exhibit to the Form 10-K of the Company for the
year ended December 31, 1998, and incorporated herein by
reference)(1)
10.3 -- Satellite Services and Space Segment Lease Agreement,
dated January 2, 1995, between PageMart, Inc. and
SpaceCom Systems, Inc. (filed as an exhibit to the
Registration Statement on Form S-1 of the Company (Reg.
No. 33-91142), and incorporated herein by reference).
</TABLE>
E-1
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.4 -- Credit Agreement, dated as of March 23, 1999, by and
among PageMart Wireless, Inc., and the Lenders and Agents
named therein (filed as an exhibit to the Form 10-K of
the Company for the year ended December 31, 1998, and
incorporated herein by reference).
10.5 -- Security Agreement, dated as of March 23, 1999, among
PageMart Wireless, Inc., and the Lenders and Agent named
therein (filed as an exhibit to the Form 10-K of the
Company for the year ended December 31, 1998, and
incorporated herein by reference).
10.6 -- Pledge Agreement, dated as of March 23, 1999 among
PageMart Wireless, Inc. and the Lenders and Collateral
Agent named therein (filed as an exhibit to the Form 10-K
of the Company for the year ended December 31, 1998, and
incorporated herein by reference).
10.7 -- Promissory Note and Security Agreement, dated May 21,
1997, between PageMart, Inc. and Glenayre Electronics,
Inc. (filed as an exhibit to the Form 10-Q of the Company
for the quarter ended June 30, 1997, and incorporated
herein by reference).
10.8 -- Modification and Reaffirmation Agreement, dated March 12,
1998, between PageMart Wireless, Inc. and Glenayre
Electronics, Inc. (filed as an exhibit to the Form 10-Q
of the Company for the quarter ended March 31, 1998, and
incorporated herein by reference).
10.9 -- Amended and Restated Agreement Among Certain Stockholders
of PageMart Nationwide, Inc. dated as of September 19,
1995 (filed as an exhibit to the Form 8-K of the Company
dated October 6, 1995, and incorporated herein by
reference).
10.10 -- Amendment No. 1 to Amended and Restated Agreement Among
Certain Stockholders, dated as of October 1, 1997, among
PageMart Wireless, Inc. and certain of its stockholders
(filed as an exhibit to the Form 10-K of the Company for
the fiscal year ended December 31, 1997, and incorporated
herein by reference).
10.11 -- Letter, dated January 27, 2000, regarding the agreement
of certain stockholders to vote for the approval of the
2000 Flexible Incentive Plan.
10.12 -- Equipment Purchase Agreement, dated as of January 26,
1996, between Motorola, Inc. and PageMart Wireless, Inc.
(filed as an exhibit to the Form 10-K of the Company for
the fiscal year ended December 31, 1995, and incorporated
herein by reference)(1).
10.13 -- Amendment No. 1 to Equipment Purchase Agreement between
Motorola, Inc. and the Company dated June 15, 1998.
10.14 -- Amendment No. 2 to Equipment Purchase Agreement between
Motorola, Inc. and the Company dated August 5, 1998.
10.15 -- Amendment No. 3 to Equipment Purchase Agreement dated
September 20, 1999 between Motorola, Inc. and the
Company.
10.16 -- Technology Asset Agreement, dated as of December 1, 1995,
between Motorola, Inc. and PageMart Wireless, Inc. (filed
as an exhibit to the Form 10-K of the Company for the
fiscal year ended December 31, 1995, and incorporated
herein by reference)(1).
10.17 -- PageMart Wireless, Inc. Employee Stock Purchase Plan
(filed as an exhibit to the Registration Statement on
Form S-1 of the Company (Reg. No. 33-03012), and
incorporated herein by reference).
10.18 -- WebLink Wireless, Inc. Nonqualified Formula Stock Option
Plan for Non-Employee Directors, as amended.
</TABLE>
E-2
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.19 -- Office Lease Agreement, dated as of November 26, 1996,
between Crescent Real Estate Equities Limited and
PageMart Wireless, Inc. (filed as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, and incorporated herein by
reference).
10.20 -- WebLink Wireless, Inc. Fifth Amended and Restated 1991
Stock Option Plan, as amended.
10.21 -- Severance and Reimbursement Agreement, dated September
12, 1997, between PageMart Wireless, Inc. and N. Ross
Buckenham (filed as an exhibit to the Form 10-Q of the
Company for the quarter ended September 30, 1997, and
incorporated herein by reference).
10.22 -- Resale Agreement, dated September 1, 1998, between
PageMart Wireless, Inc. and GTE Communications System
Corporation (filed as an exhibit to the Form 10-K of the
Company for the year ended December 31, 1998, and
incorporated herein by reference)(1)
10.23 -- Amended and Restated Strategic Alliance Agreement No. 1,
dated as of April 22, 1999, between GTE Communication
Systems Corporation and PageMart Wireless, Inc.
10.24 -- Amended and Restated Strategic Alliance Agreement No. 2,
dated as of April 22, 1999, between GTE Communication
Systems Corporation and PageMart Wireless, Inc.
10.25 -- Resale Agreement, dated as of December 12, 1997, between
PageMart Wireless, Inc. and GTE Communications
Corporation (filed as an exhibit to the Form 10-K of the
Company for the fiscal year ended December 31, 1997, and
incorporated herein by reference).(1)
10.26 -- Third Amended and Restated 1991 Stock Issuance Plan
(filed as an exhibit to the Registration Statement on
Form S-8 (Reg. No. 33-98116), and incorporated herein by
reference).
10.27 -- Retention Agreement, dated as of January 3, 2000, between
the Company and John D. Beletic.
10.28 -- WebLink Wireless, Inc. 2000 Flexible Incentive Plan.
11.1 -- Computation of per share earnings (loss) for the three
months ended December 31, 1999.
11.2 -- Computation of per share earnings (loss) for the three
months ended December 31, 1998.
11.3 -- Computation of per share earnings (loss) for the year
ended December 31, 1999.
11.4 -- Computation of per share earnings (loss) for the year
ended December 31, 1998.
12.1 -- Computation of Ratio of Earnings to Fixed Charges for
years ended December 31, 1994, 1995, 1996, 1997, 1998 and
1999 and the three months ended December 31, 1999.
21.1 -- WebLink Wireless, Inc. Subsidiaries.
23.1 -- Consent of Arthur Andersen LLP.
27.1 -- Financial Data Schedule for the year ended December 31,
1999.
</TABLE>
- ---------------
(1) The Company has requested confidential treatment for certain portions of
this agreement.
E-3
<PAGE> 39
WEBLINK WIRELESS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1998 and 1999.......................... F-4
Consolidated Statements of Stockholders' (Deficit) Equity
for the Years Ended December 31, 1997, 1998 and 1999...... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1998 and 1999.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 40
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of WebLink Wireless, Inc.:
We have audited the accompanying consolidated balance sheets of WebLink
Wireless, Inc. (a Delaware corporation, formerly PageMart Wireless, Inc.) and
subsidiaries as of December 31, 1998 and 1999, and the related consolidated
statements of operations, stockholders' (deficit) equity and cash flows for each
of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of WebLink Wireless, Inc. and
subsidiaries as of December 31, 1998 and 1999, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States.
[Arthur Andersen LLP Signature]
Dallas, Texas,
February 2, 2000
(except with respect to the matters
discussed in Note 19, as to
which the date is February 24, 2000)
F-2
<PAGE> 41
WEBLINK WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1999
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 17,476 $ 10,440
Short-term investments.................................... 1,000 --
Accounts receivable (net of allowance for doubtful
accounts of $2,580 and $8,333 at December 31, 1998 and
1999, respectively)..................................... 38,723 39,857
Inventories............................................... 6,747 5,941
Other current assets...................................... 10,591 7,657
--------- ---------
Total current assets............................... 74,537 63,895
PROPERTY AND EQUIPMENT (net of accumulated depreciation of
$116,326 and $188,934 at December 31, 1998 and 1999,
respectively)............................................. 274,179 245,596
NARROWBAND LICENSES (net of accumulated amortization of $510
and $3,837 at December 31, 1998 and 1999, respectively)... 132,555 129,228
OTHER ASSETS (net of accumulated amortization of $5,391 and
$8,099 at December 31, 1998 and 1999, respectively)....... 12,784 13,211
--------- ---------
Total assets....................................... $ 494,055 $ 451,930
========= =========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 38,703 $ 21,918
Deferred revenue.......................................... 57,512 54,836
Current maturities of long-term debt...................... 1,238 --
Other current liabilities................................. 23,297 24,772
--------- ---------
Total current liabilities.......................... 120,750 101,526
LONG-TERM DEBT.............................................. 462,079 538,185
OTHER LONG-TERM LIABILITIES................................. 1,248 659
COMMITMENTS AND CONTINGENCIES (SEE NOTE 9)
STOCKHOLDERS' (DEFICIT) EQUITY:
Common Stock, $.0001 par value per share, 75,000,000
shares authorized:
Class A Convertible Common Stock, 34,536,512 shares
issued and outstanding at December 31, 1998;
36,017,082 shares issued and 36,009,082 shares
outstanding at December 31, 1999...................... 3 3
Class B Convertible Non-Voting Common Stock, 3,809,363
shares issued and outstanding at December 31, 1998 and
December 31, 1999..................................... 1 1
Class C Convertible Non-Voting Common Stock, 1,428,472
and 728,472 shares issued and outstanding at December
31, 1998 and 1999..................................... -- --
Class D Convertible Non-Voting Common Stock, 623,945 and
217,350 shares issued and outstanding at December 31,
1998 and 1999......................................... -- --
Treasury Stock, at cost, no and 8,000 shares at December
31, 1998 and 1999, respectively......................... -- (68)
Additional paid-in capital................................ 228,438 229,847
Accumulated deficit....................................... (317,891) (417,758)
Stock subscriptions receivable............................ (573) (465)
--------- ---------
Total stockholders' (deficit) equity............... (90,022) (188,440)
--------- ---------
Total liabilities and stockholders' (deficit)
equity............................................ $ 494,055 $ 451,930
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 42
WEBLINK WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Recurring revenues........................................ $206,907 $254,814 $260,602
Equipment revenues........................................ 70,871 56,838 64,563
-------- -------- --------
Total revenues.................................... 277,778 311,652 325,165
COST OF EQUIPMENT SOLD...................................... 86,175 69,150 72,035
-------- -------- --------
191,603 242,502 253,130
OPERATING EXPENSES:
Technical................................................. 46,513 56,584 76,615
General and administrative................................ 66,458 84,743 80,719
Selling................................................... 51,371 55,305 50,409
Depreciation and amortization............................. 29,852 43,420 78,147
-------- -------- --------
Total operating expenses.......................... 194,194 240,052 285,890
-------- -------- --------
Operating (loss) income........................... (2,591) 2,450 (32,760)
OTHER (INCOME) EXPENSE:
Interest expense.......................................... 38,499 43,798 65,310
Interest income........................................... (501) (3,187) (579)
Other..................................................... 3,298 3,549 2,376
-------- -------- --------
Total other (income) expense...................... 41,296 44,160 67,107
-------- -------- --------
LOSS BEFORE EXTRAORDINARY ITEMS:............................ (43,887) (41,710) (99,867)
EXTRAORDINARY ITEMS:
Early retirement of debt.................................. -- (13,808) --
Satellite failure......................................... -- (3,798) --
-------- -------- --------
NET LOSS.................................................... $(43,887) $(59,316) $(99,867)
======== ======== ========
NET LOSS PER SHARE (Basic and Diluted)
LOSS BEFORE EXTRAORDINARY ITEMS............................. $ (1.10) $ (1.03) $ (2.47)
EXTRAORDINARY ITEMS......................................... -- (0.44) --
-------- -------- --------
NET LOSS.................................................... $ (1.10) $ (1.47) $ (2.47)
======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (Basic and
Diluted).................................................. 39,922 40,246 40,500
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 43
WEBLINK WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
TREASURY STOCK COMMON STOCK
------------------ ------------------- ADDITIONAL STOCK
NUMBER OF NUMBER OF PAID-IN ACCUMULATED SUBSCRIPTIONS
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT RECEIVABLE TOTAL
--------- ------ ---------- ------ ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996...... -- $ -- 39,804,932 $4 $225,661 $(214,688) $(547) $ 10,430
Common stock issued under the
stock option/stock issuance
plan/employee stock
purchase plan.............. -- -- 179,705 -- 804 -- (45) 759
Exercise of common stock
warrants................... -- -- 48,300 -- 157 -- -- 157
Repayment of stock
subscriptions receivable... -- -- -- -- -- -- 100 100
Net loss...................... -- -- -- -- -- (43,887) -- (43,887)
----- ---- ---------- -- -------- --------- ----- ---------
BALANCE, December 31, 1997...... -- -- 40,032,937 4 226,622 (258,575) (492) (32,441)
Common stock issued under the
stock option/stock issuance
plan/employee stock
purchase plan.............. -- -- 364,205 -- 1,813 -- (139) 1,674
Exercise of common stock
warrants................... -- -- 1,150 -- 3 -- -- 3
Repayment of stock
subscriptions receivable... -- -- -- -- -- -- 58 58
Net loss...................... -- -- -- -- -- (59,316) -- (59,316)
----- ---- ---------- -- -------- --------- ----- ---------
BALANCE, December 31, 1998...... -- -- 40,398,292 4 228,438 (317,891) (573) (90,022)
Common stock issued under the
stock option/stock issuance
plan/employee stock
purchase plan.............. -- -- 291,500 -- 1,397 -- (6) 1,391
Exercise of common stock
warrants................... -- -- 81,063 -- -- -- -- --
Repayment of stock
subscriptions receivable
and purchase of treasury
stock...................... 8,000 (68) 1,412 -- 12 -- 114 58
Net loss...................... -- -- -- -- -- (99,867) -- (99,867)
----- ---- ---------- -- -------- --------- ----- ---------
BALANCE, December 31, 1999...... 8,000 $(68) 40,772,267 $4 $229,847 $(417,758) $(465) $(188,440)
===== ==== ========== == ======== ========= ===== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 44
WEBLINK WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1997 1998 1999
-------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(43,887) $ (59,316) $(99,867)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Extraordinary items..................................... -- 17,606 --
Depreciation and amortization........................... 29,852 43,420 78,147
Provision for bad debts................................. 10,910 11,130 7,565
Loss on sale of property and equipment.................. -- -- 192
Accretion of discount on Senior Discount Notes.......... 35,431 40,284 58,964
Amortization of deferred debt issuance costs............ 846 2,489 1,911
Changes in certain assets and liabilities:
(Increase) decrease in accounts receivable............ (38,717) 12,021 (8,699)
Decrease (increase) in inventories.................... 6,343 (1,388) 806
(Increase) decrease in other current assets........... (6,363) (2,028) 2,934
Decrease (increase) in other assets................... 3,105 (543) 117
Increase (decrease) in accounts payable............... 4,823 10,694 (16,785)
Increase (decrease) in deferred revenue............... 26,422 4,043 (2,676)
Increase (decrease) in other current liabilities...... 8,470 (2,820) 1,475
-------- --------- --------
Net cash provided by operating activities........... 37,235 75,592 24,084
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (67,506) (168,546) (45,736)
Proceeds from the sale of property and equipment.......... -- -- 106
Purchase of short-term investments........................ -- (1,000) --
Sale of short term investments............................ -- -- 1,000
Other..................................................... (992) 801 (52)
-------- --------- --------
Net cash used in investing activities............... (68,498) (168,745) (44,682)
-------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock under the stock
option/stock issuance plan/ employee stock purchase
plan.................................................... 759 1,674 1,391
Retirement of 12 1/4% Senior Discount Notes............... -- (130,689) --
Proceeds from issuance of 11 1/4% Senior Subordinated
Discount Notes.......................................... -- 249,700 --
Offering Costs related to issuance of 11 1/4% Senior
Subordinated Discount Notes and retirement of 12 1/4%
Senior Discount Notes................................... -- (12,158) --
Borrowings under Revolving Credit Agreement/Credit
Facility................................................ 3,000 -- 25,000
Payments under Revolving Credit Agreement................. (3,000) -- --
Costs related to renegotiation of credit agreement with
Banker's Trust Company and Morgan Stanley Senior
Funding, Inc. .......................................... -- -- (3,202)
Borrowings from vendor financing arrangements............. 17,053 15,097 539
Payments on vendor financing arrangements................. (1,072) (21,393) (10,224)
Other..................................................... 257 61 58
-------- --------- --------
Net cash provided by financing activities........... 16,997 102,292 13,562
-------- --------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........ (14,266) 9,139 (7,036)
CASH AND CASH EQUIVALENTS, beginning of period.............. 22,603 8,337 17,476
-------- --------- --------
CASH AND CASH EQUIVALENTS, end of period.................... $ 8,337 $ 17,476 $ 10,440
======== ========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest................................................ $ 1,306 $ 969 $ 3,046
Income taxes............................................ $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 45
WEBLINK WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
PageMart, Inc. ("PageMart") was incorporated as a Delaware corporation on
May 8, 1989, to provide wireless messaging products and services. In January
1995, PageMart effected a corporate reorganization pursuant to which PageMart
Nationwide, Inc., a Delaware corporation, became the holding company parent of
PageMart. In December 1995, the name of PageMart Nationwide, Inc. was changed to
PageMart Wireless, Inc. ("Wireless"). On January 28, 1998, PageMart was merged
into Wireless with Wireless as the surviving corporation. On December 1, 1999,
the name of Wireless was changed to WebLink Wireless, Inc. ("WebLink"). WebLink
and its subsidiaries are referred to herein as the "Company." The consolidated
financial statements of the Company include the accounts of PageMart PCS, Inc.,
PageMart II, Inc., PageMart Operations, Inc., WebLink International, Inc. and
certain other direct and indirect subsidiaries of WebLink. Each of these
companies is a wholly-owned subsidiary of WebLink. PageMart PCS, Inc. holds
certain narrowband personal communications services licenses. PageMart II, Inc.
and PageMart Operations, Inc. hold certain Federal Communications Commission
("FCC") licenses. At December 31, 1999, WebLink International, Inc. held certain
investments in an international operation in Canada (see Note 19). Other than
these licenses and international investments, the subsidiaries of WebLink have
no significant assets or liabilities.
The Company has incurred substantial losses from consolidated operations
since inception and is highly leveraged. Although operating income was reported
in 1998, the Company reported operating losses in 1999 and management expects to
continue to incur consolidated operating losses in 2000. In the third quarter of
1997, the Company began generating operating profits in its Traditional Paging
Division and management expects the Traditional Paging Division to continue
generating operating profits in 2000. The Company's consolidated operating
losses are driven by its investments in its new wireless data capabilities and
the associated investment in the growth of its subscriber base for such
services. The Company's business plan calls for substantial growth in its
subscriber base in order for the Company to achieve overall operating
profitability.
There can be no assurance that the Company will meet its business plan or
achieve operating profitability. If the Company cannot achieve operating
profitability, it may not be able to make the required payments on existing or
future obligations or realize its cost in developing the wireless data network.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
WebLink and its wholly-owned subsidiaries. All significant intercompany balances
and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
The Company includes as cash and cash equivalents cash on hand, cash in
banks and highly liquid investments with original maturities of three months or
less.
SHORT-TERM INVESTMENTS
The Company includes as short-term investments, investments with maturities
greater than three months and less than one year.
INVENTORIES
Inventories consist of subscriber devices held for resale and are stated at
the lower of cost or market. Cost is determined by using the average cost
method, which approximates the first-in, first-out method. The Company purchases
a majority of its subscriber devices from Motorola, Inc.
F-7
<PAGE> 46
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated using the
straight-line method for financial reporting purposes and accelerated methods
for tax reporting purposes over estimated useful lives ranging from three to
seven years. Depreciation expense totaled approximately $28,690,000, $42,541,000
and $74,021,000 for 1997, 1998 and 1999, respectively. The Company purchases a
majority of its network equipment from Motorola, Inc. and Glenayre Technologies,
Inc. Maintenance and repair costs are charged to expense as incurred.
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1999
--------- ---------
<S> <C> <C>
Network equipment........................................... $ 306,503 $ 339,430
Computer equipment.......................................... 65,273 75,414
Furniture and equipment..................................... 18,729 19,686
--------- ---------
390,505 434,530
Less: Accumulated depreciation.............................. (116,326) (188,934)
--------- ---------
$ 274,179 $ 245,596
========= =========
</TABLE>
REVENUE RECOGNITION
The Company recognizes equipment revenue upon the shipment of subscriber
devices adjusted by allowances for normal returns. Recurring revenues, including
revenue from airtime charges and fees for other services such as voice mail,
customized coverage options and toll-free numbers, are recognized in the month
in which the service is provided. All expenses related to the sale of equipment
are recognized at the time of sale. Deferred revenue represents advance billings
for services not yet performed. Such revenue is deferred and recognized in the
month in which the service is provided. Patent licensing revenues are recognized
on a straight-line basis over the period of benefit (see Note 9). Patent
licensing revenues of $4,596,000 are included in recurring revenues in fiscal
years 1997 and 1998 and $285,000 in 1999.
ADVERTISING EXPENSES
Advertising expenses are expensed as incurred.
EARNINGS PER SHARE
Net loss per share amounts as reflected on the statements of operations are
based upon the weighted average number of common shares outstanding.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128 replaces the
primary earnings per share calculation with a basic earnings per share
calculation and modifies the calculation of diluted earnings per share. The
Company adopted SFAS 128 for the fiscal year ended December 31, 1997; its
adoption has not affected the calculation of earnings per share for the Company.
Under the provisions of SFAS 128, dilutive securities are excluded from the
calculation of earnings per share when there is a net loss because their
inclusion would be anti-dilutive. The securities listed below were not included
in the computation of diluted loss per share, since the effect from the
conversion would be anti-dilutive.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Stock Options................................... 4,300,496 5,700,971 6,190,848
Warrants........................................ 786,348 785,198 640,758
--------- --------- ---------
5,086,844 6,486,169 6,831,606
========= ========= =========
</TABLE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
F-8
<PAGE> 47
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform with the current year presentation.
ACCOUNTING FOR LONG-LIVED ASSETS
In March 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of "
("SFAS 121"). SFAS 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used, and long-lived assets and certain identifiable
intangibles to be disposed of. SFAS 121 requires that those assets to be held
and used be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable through
future cash flows. SFAS 121 requires that those assets to be disposed of be
reported at the lower of the carrying amount or the fair value less cost to
sell. The Company adopted SFAS 121 for 1996; its adoption did not affect the
Company's results of operations for 1997, 1998 and 1999. The Company will
continue to evaluate the effect of SFAS 121 in subsequent periods.
3. NARROWBAND PERSONAL COMMUNICATIONS SERVICES LICENSES
During July and December 1994, the Company participated in auctions of
Narrowband Personal Communications Services ("NPCS") licenses conducted by the
FCC. As a result of the auctions, the Company was awarded two nationwide NPCS
licenses for a total purchase price of approximately $133 million. Amortization
of the NPCS licenses commenced in 1998 for those markets placed in service. The
NPCS licenses are amortized over a period of 40 years. Amortization expense for
1997, 1998 and 1999 were $0, $510,000 and $3,327,000, respectively.
4. CAPITALIZED INTEREST
In accordance with the FASB Statement No. 34, "Capitalization of Interest
Cost", the Company capitalizes interest on certain qualifying assets during the
construction period. Interest costs attributable to the construction of the
Company's wireless data network of $11.4 million was capitalized for 1998. The
Company did not capitalize any interest costs for 1997 or 1999.
5. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
Effective November 15, 1995, WebLink International, Inc. (formerly PageMart
International, Inc.) purchased 200,000 shares of common stock of PageMart Canada
Limited ("PageMart Canada") which represents 20% of the ownership of PageMart
Canada. The remaining 800,000 shares is held by PageMart Canada Holding
Corporation ("Canada Holding"). Canada Holding is owned 50% (1,000,000 shares of
Class A Common Stock) by third-party Canadian investors unrelated to PageMart
and 50% (1,000,000 shares of Class B Common Stock) by WebLink International,
Inc. The common shares have identical economic rights. However, voting control
of Canada Holding is held by the Class A Common Stockholders as the Class A
shares have two votes per share. The Company accounts for its investments in
PageMart Canada and Canada Holding under the equity method. Such investments are
included in Other Current Assets in the Consolidated Balance Sheets.
The Agreement Among Stockholders of PageMart Canada, dated July 28, 1995
(the "Agreement Among Stockholders") contains provisions which restrict the
transfer of Canada Holding shares and PageMart Canada shares for periods ranging
from three to five years. During the two years following the third anniversary
of the transactions, the third-party Canadian investors may exchange the
1,000,000 Class A common shares they hold in Canada Holding for 714,286 shares
of voting common stock of WebLink, subject to certain United States and Canadian
ownership requirements. WebLink is ultimately responsible for effectuating the
exchange within the United States and Canadian ownership regulations. Such
exchange may
F-9
<PAGE> 48
be accelerated in the event WebLink enters into an agreement to be acquired.
After the third anniversary of the transactions, WebLink will have the right to
purchase the shares held by the third-party Canadian investors at their fair
market value provided regulatory ownership requirements permit such purchase.
On November 26, 1998, the Company received notification from the third
party Canadian investor, which represents the controlling shareholder interest
in PageMart Canada, of its intent to exchange its 1,000,000 shares of Class A
Common Stock in Canada Holding for shares of WebLink (pursuant to its rights
contained in the Agreement Among Stockholders. The Agreement Among Stockholders
permits the Company to find a replacement for the Canadian investors in order to
comply with Canadian regulations governing ownership of Canadian paging
licenses. See Note 19 Subsequent Events.
6. OTHER CURRENT ASSETS
Other current assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1999
------- ------
<S> <C> <C>
Prepaid assets.............................................. $ 5,138 $4,897
Canada investment........................................... 1,790 2,625
Patent agreements........................................... 3,423 --
Other current assets........................................ 240 135
------- ------
$10,591 $7,657
======= ======
</TABLE>
7. OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1998 1999
------- -------
<S> <C> <C>
Accrued payroll and employee benefits....................... $ 6,572 $ 9,642
Accrued taxes............................................... 6,829 8,277
Other current liabilities................................... 9,896 6,853
------- -------
$23,297 $24,772
======= =======
</TABLE>
8. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
15% Senior Discount Exchange Notes, face amount $207,270 due
February 1, 2005, at accreted value....................... $177,270 $204,858
11 1/4% Senior Subordinated Discount Exchange Notes, face
amount $432,000 due February 1, 2008, at accreted value... 276,362 308,327
Vendor Financing Arrangement of $30 million, bearing
interest at the sum of 7.00% and LIBOR for three month
maturities, or 4.25% and the U.S. prime rate.............. 9,685 --
Credit Facility of $100 million, bearing interest at the sum
of the U.S. prime rate and 2.75% or LIBOR and 3.75%....... -- 25,000
-------- --------
Total debt........................................ 463,317 538,185
Less: Current maturities.......................... (1,238) --
-------- --------
Long-term debt.................................... $462,079 $538,185
======== ========
</TABLE>
On January 28, 1998, the Company received approximately $249.7 million in
gross proceeds from the sale of its 11 1/4% Senior Subordinated Discount Notes
due 2008 (the "Offering"). Simultaneously with the closing of the Offering, the
Company refinanced certain of its outstanding indebtedness and modified its
corporate structure (the "Refinancing"). The Refinancing consisted of: (i)
purchasing all of the Company's outstanding
F-10
<PAGE> 49
12 1/4% Senior Discount Notes due 2003 (the "12 1/4% Notes"); (ii) amending
certain terms of the covenants and agreements in the indenture relating to the
Company's 15% Senior Discount Notes due 2005; and (iii) merging PageMart, Inc.
into WebLink (formerly known as PageMart Wireless, Inc.), with WebLink as the
surviving corporation.
Approximately $130.7 million of the net proceeds of the Offering was used
to finance the retirement of the 12 1/4% Notes. The proceeds remaining after
expenses of the Offering and Refinancing were approximately $107.8 million. In
connection with the Refinancing, the Company incurred an extraordinary charge of
approximately $13.8 million in the first quarter of 1998 related to the early
retirement of debt.
The 11 1/4% Senior Subordinated Discount Notes due 2008 (the "11 1/4%
Notes") have a principal amount at maturity of $432.0 million with an initial
accreted value of $249.7 million. The 11 1/4% Notes mature on February 1, 2008.
From and after August 1, 2003, interest on the 11 1/4% Notes will be paid
semiannually in cash. The 11 1/4% Notes are redeemable at any time on or after
February 1, 2003, at the option of the Company in whole or in part, at 105.625%
of their principal amount at maturity, plus accrued and unpaid interest,
declining to 100% of their principal amount at maturity plus accrued interest on
and after February 1, 2006. In addition, at any time prior to February 1, 2001,
up to 35% of the accreted value of the 11 1/4% Notes may be redeemed at a
redemption price of 111.25% of their accreted value on the redemption date at
the option of the Company in connection with a public offering of its common
stock, provided that at least $280.8 million aggregate principal amount at
maturity of the 11 1/4% Notes remains outstanding after each redemption.
In April 1998, the Company commenced an exchange offer pursuant to an
effective registration statement whereby all outstanding 11 1/4% Notes were
exchanged for the Company's 11 1/4% Senior Subordinated Discount Exchange Notes
due 2008 (the "11 1/4% Exchange Notes"). The terms and conditions of the 11 1/4%
Exchange Notes are equivalent to the 11 1/4% Notes in all material respects.
In January 1995, the Company completed an offering of 15% Senior Discount
Notes due 2005 and 725,445 shares of non-voting common stock, par value $.0001
per share (the "Unit Offering"). Net proceeds from the Unit Offering were
approximately $100 million, of which approximately $5.1 million was allocated to
the non-voting common stock. The 15% Senior Discount Notes due 2005 (the "15%
Notes") have a principal amount at maturity of $207.3 million with an initial
accreted value of $100 million. The 15% Notes mature on February 1, 2005. From
and after August 1, 2000, interest on the 15% Notes will be payable semiannually
in cash. Management expects to fund the August 2000 and February 2001 payments
from operating cash flow and amounts available from the Credit Facility (defined
below). The 15% Notes are redeemable at any time on or after February 1, 2000,
at the option of the Company in whole or in part, at 105% of their principal
amount at maturity, plus accrued and unpaid interest, declining to 100% of their
principal amount at maturity plus accrued interest on and after February 1,
2002.
In June 1995, the Company commenced an exchange offer pursuant to an
effective registration statement whereby all outstanding 15% Notes were
exchanged for the Company's 15% Senior Discount Exchange Notes due 2005 (the
"15% Exchange Notes"). The terms and conditions of the 15% Exchange Notes are
equivalent to the 15% Notes in all material respects.
In March 1999, the Company entered into a four-year credit agreement with
Bankers Trust Company and Morgan Stanley Senior Funding, Inc. which provides for
a $100 million credit facility (the "Credit Facility"). The Credit Facility
replaced the $50 million revolving line of credit the Company established on May
11, 1995 with BT Commercial Corporation, as Agent, and Bankers Trust Company, as
issuing bank which was simultaneously terminated. The Credit Facility provides
for $75 million of multi-draw term loans (the "Term Loans") and $25 million of
revolving loans. On March 24, 1999, the Company borrowed $25 million in Term
Loans, of which approximately $12 million of the initial borrowing was used to
repay amounts outstanding under the Vendor Financing Arrangement and to fund the
fees and expenses of the Credit Facility. As of December 31, 1999, total
availability under the Credit Facility was $75 million, of which $25 million was
outstanding in the form of Term Loans. Further availability of the Credit
Facility above the current $75 million is based on the Company's achievement of
certain minimum targets for advanced messaging subscriber units in service. The
Credit Facility bears interest at the U.S. prime rate plus 2.75% or at the
London Interbank Offering Rate ("LIBOR") plus 3.75%. The weighted average
interest rate on the amounts borrowed for the period from March 24, 1999 to
December 31, 1999 was 9.6%.
F-11
<PAGE> 50
The 11 1/4% Exchange Notes, the 15% Exchange Notes and the Credit Facility
carry certain covenants that, among other things, limit the ability of the
Company to incur indebtedness, pay dividends, prepay subordinated indebtedness,
repurchase capital stock, create liens, sell assets, engage in mergers and
consolidations, and enter into transactions with any holder of 5% or more of any
capital stock of the Company or any of its affiliates. In addition, the Credit
Facility also requires the Company to maintain certain operating and financial
performance measures and limits the ability of the Company to make capital
expenditures. The Company was in compliance with all such covenants at December
31, 1999.
In March 1997, the Company entered into a vendor financing arrangement with
an infrastructure vendor (the "Vendor Financing Arrangement"), providing for the
financing of infrastructure equipment over a period of 60 months up to a maximum
aggregate amount of $30 million. Borrowings under the Vendor Financing
Arrangement are secured by the equipment purchased. The interest rate applicable
to such financing is equal to the sum of 7.00% and LIBOR for three-month
maturities as published in The Wall Street Journal or the sum of 4.25% and the
U.S. prime rate of interest as published in The Wall Street Journal. The
weighted average interest rate for borrowings outstanding during the three
months ended March 31, 1999 was 12.54%. During the first quarter ended March 31,
1998, the Company modified the agreement to provide $30 million of available
financing, in aggregate, during the period from September 1, 1998 through
December 31, 2000. As of December 31, 1999, the Company had no borrowings
outstanding.
Maturities of long-term debt, at accreted value, and amounts outstanding
under the Vendor Financing Agreement are as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDING
DECEMBER 31,
-------------------
<S> <C>
2000................................................... $ --
2001................................................... --
2002................................................... --
2003................................................... 25,000
2004................................................... --
Thereafter............................................. 513,185
--------
$538,185
========
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
The Company has entered into various operating lease agreements for office
space, office equipment and transmission equipment sites. Total rent expense for
1997, 1998 and 1999 was approximately $18,379,000, $26,749,000 and $32,377,000
respectively.
Future minimum lease payments related to the Company's operating leases are
as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDING OPERATING
DECEMBER 31, LEASES
------------------- ---------
<S> <C>
2000................................................... $ 26,424
2001................................................... 22,502
2002................................................... 19,193
2003................................................... 12,617
2004................................................... 5,981
Thereafter............................................. 13,621
--------
$100,338
========
</TABLE>
The Company is party to various legal proceedings, claims and disputes
arising out of the ordinary course of business. The Company believes, based on
the advice of legal counsel, that there is no proceeding, either threatened or
pending, against the Company that could result in a material adverse effect on
the results of operations or financial condition of the Company.
F-12
<PAGE> 51
In December 1995, the Company transferred certain intellectual property to
Motorola in exchange for certain benefits which were recognized over the period
of benefit. The Company also committed to purchase $40 million in network
infrastructure equipment over a forty-seven month period as part of this
transaction (see Note 2). The agreement has been amended to extend the
commitment to June 30, 2001 and include wireless data subscriber devices.
Through December 31, 1999, the Company had purchased $36.7 million of network
infrastructure under this purchase commitment.
10. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating the fair value disclosures for its financial instruments. For cash
and cash equivalents, the carrying amounts reported in the Consolidated Balance
Sheets are equal to fair value. For debt, the estimated fair value is based upon
quoted market prices for publicly traded debt and based on the appropriate
interest rate at year-end for all other debt.
The carrying amounts and fair values of the Company's financial instruments
at December 31, 1998 and 1999, are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1999
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents.................. $ 17,476 $ 17,476 $ 10,440 $ 10,440
Long-term debt............................. $463,317 $381,157 $538,185 $349,871
</TABLE>
11. STOCKHOLDERS' (DEFICIT) EQUITY
PREFERRED STOCK
Under the Company's Certificate of Incorporation, the Board of Directors
has the power to authorize the issuance of one or more classes or series of
preferred stock and to fix the designations, powers, preferences and relative,
participating, optional or other rights, if any, and the qualifications,
limitations or restrictions thereof, if any. At December 31, 1998 and 1999, 10
million shares of preferred stock were authorized with a par value of $.0001;
none were issued and outstanding.
COMMON STOCK
In October 1993 in connection with issuance of the 12 1/4% Notes (see Note
8), the Company issued warrants to purchase 627,900 shares of its common stock
for $3.26 per share. The warrants were valued at $5.50 per share at the date
issued. The warrants may be exercised at any time prior to December 31, 2003 or
they expire. As of December 31, 1999, 434,010 of the warrants were outstanding.
In October 1995, the Company's Certificate of Incorporation was amended
(the "Amended Certificate") and at that time the Amended and Restated Agreement
Among Certain Stockholders of PageMart Nationwide, Inc. dated September 19, 1995
(as subsequently amended, the "Stockholders Agreement"),
F-13
<PAGE> 52
became effective. The Amended Certificate provides that the Company will have
four classes of outstanding common stock, summarized as follows:
<TABLE>
<CAPTION>
SHARES ISSUED SHARES OUTSTANDING
----------------------- -----------------------
DECEMBER 31, DECEMBER 31,
SHARES ----------------------- -----------------------
AUTHORIZED 1998 1999 1998 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Class A Convertible Common
Stock, $.0001 par value per
share (the "Class A Common
Stock").................... 60,000,000 34,536,512 36,017,082 34,536,512 36,009,082
Class B Convertible
Non-Voting Common Stock,
$.0001 par value per share
(the "Class B Common
Stock").................... 12,000,000 3,809,363 3,809,363 3,809,363 3,809,363
Class C Convertible
Non-Voting Common Stock,
$.0001 par value per share
(the "Class C Common
Stock").................... 2,000,000 1,428,472 728,472 1,428,472 728,472
Class D Convertible
Non-Voting Common Stock,
$.0001 par value per share
(the "Class D Common
Stock").................... 1,000,000 623,945 217,350 623,945 217,350
---------- ---------- ---------- ---------- ----------
75,000,000 40,398,292 40,772,267 40,398,292 40,764,267
========== ========== ========== ========== ==========
</TABLE>
Upon filing of the Amended Certificate, all shares of previously
outstanding voting common stock were automatically converted into shares of
Class A Common Stock, and all shares of previously outstanding non-voting common
stock issued in the Unit Offering were converted into shares of Class D Common
Stock. Additionally, pursuant to the Stockholders' Agreement, a number of shares
of Class A Common Stock owned by certain institutional investors were
automatically converted into shares of Class B Common Stock and Class C Common
Stock.
Classes A, B and C Common Stock are convertible by certain institutional
investors subject to voting control and regulatory restrictions at any time at
the option of the holder, in accordance with the terms of the Amended
Certificate. Class A Common Stock is convertible by certain holders into either
Class B or C Common Stock. Classes B, C and D Common Stock are convertible to
Class A Common Stock.
The Stockholders' Agreement provides that the parties thereto ("Holders")
shall collectively have the right to "demand" registrations at any time.
Pursuant to these "demand" rights, Holders of common stock (the "Registrable
Securities") may request in writing that the Company file a registration
statement under the Securities Act of 1933, as amended, covering the
registration of a number of shares equal to at least three million shares or a
lesser number if such number represents a majority of the Registrable Securities
then outstanding.
On March 20, 1995, the Company granted to a strategic partner warrants to
purchase a total of 206,748 shares of the Company's common stock at an exercise
price of $10.00, all of which are outstanding at December 31, 1999. The warrants
may be exercised in whole or in part starting on March 20, 1997 and expire on
March 21, 2005.
On June 19, 1996, the Company issued an aggregate of 6,000,000 shares of
Class A Common Stock in an initial public offering at a price of $13.00 per
share. The Company received proceeds from the initial public offering of
approximately $70.5 million after deducting underwriting discounts, commissions,
fees and expenses associated with the initial public offering. Upon receipt of
the net proceeds, the Company retired vendor debt of approximately $12.9 million
and repaid approximately $11.9 million of loans outstanding under the Company's
Revolving Credit Agreement.
F-14
<PAGE> 53
Following is a schedule of common stock reserved at December 31, 1999:
<TABLE>
<CAPTION>
SHARES
---------
<S> <C>
Exercise of common stock warrants........................... 640,758
Exchange of Canada Holding shares........................... 714,286
Stock option................................................ 7,903,069
Employee Stock Purchase Plan................................ 354,263
Non-Employee/Director Stock Option Plan..................... 100,000
---------
9,712,376
=========
</TABLE>
TREASURY STOCK
In 1999, the Company purchased 8,000 shares of common stock for $68,000.
These shares may be reissued by the Company.
12. STOCK OPTION/STOCK ISSUANCE/STOCK PURCHASE PLANS
STOCK COMPENSATION PLANS
At December 31, 1999, the Company had three stock-based compensation plans:
the Fifth Amended and Restated 1991 Stock Option Plan ("1991 Plan"), the 1996
Nonqualified Formula Stock Option Plan for Non-Employee Directors ("Directors
Plan"), and the Employee Stock Purchase Plan. The Company applies Accounting
Principles Board Opinion 25 and related Interpretations to account for expenses
related to its plans. Accordingly, no compensation costs have been recognized
for its fixed option plans or its employee stock purchase plan. If compensation
costs for these plans had been determined based on the fair value at the grant
dates for awards under the plans consistent with the method of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), the Company's net loss and loss per share would have
been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- ---------
<S> <C> <C> <C> <C>
Net loss (in 000's).................... As reported $(43,887) $(59,316) $ (99,867)
Pro forma (46,568) (62,446) (104,722)
Basic and diluted loss per share....... As reported $ (1.10) $ (1.47) $ (2.47)
Pro forma (1.17) (1.55) (2.59)
</TABLE>
FIXED STOCK OPTION PLANS
The Company has two fixed stock option plans. Under the 1991 Plan, the
Company may grant options to its employees for up to 9,500,000 shares of Class A
Common Stock. Under the Directors Plan, the Company may grant options to its
non-employee directors for up to 100,000 shares of common stock. Under both
plans, the exercise price of each option equals the market price of the
Company's stock at the close of the market on the date of grant and an option's
maximum term is 10 years. Options are granted at various times during the year
and generally vest over five years under the 1991 Plan and over three years
under the Directors Plan. Both plans are administered by the Compensation
Committee of the Board of Directors.
Under the provisions of Third Amended and Restated 1991 Stock Issuance
Plan, the Company may also issue common stock to employees; however, any shares
issued reduce, on a share-for-share basis, the number of shares issuable under
the 1991 Plan. The stock vests over a period not to exceed forty-eight months.
Additional vesting occurs upon death or disability. Upon the termination of an
officer, the Company can repurchase the unvested stock at cost. Under the Plan,
the Company issued 300,000 shares to an officer during 1992 at $0.326 per share.
All awards under the Plan have been made at a price at or above the estimated
fair value of the Company's common stock at the date of grant.
F-15
<PAGE> 54
The pro forma net loss and loss per share amounts disclosed above reflect
the SFAS 123 adjustment for pro forma compensation cost for the fair value of
each option grant, which was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
1991 PLAN:
Dividend yield............................................ -- -- --
Expected volatility....................................... 47.3% 48.2% 73.0%
Average risk-free interest rate........................... 6.3% 5.1% 5.7%
Expected term in years.................................... 8.7 8.1 8.1
DIRECTORS PLAN:
Dividend yield............................................ -- -- --
Expected volatility....................................... 40.0% 48.2% 73.0%
Average risk-free interest rate........................... 6.7% 4.5% 5.3%
Expected term in years.................................... 8.2 10.0 10.0
</TABLE>
A summary of the status of the Company's 1991 Plan and Directors Plan as of
December 31, 1997, 1998 and 1999 and changes during those years is presented
below:
1991 PLAN
<TABLE>
<CAPTION>
1997 1998 1999
----------------- ----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE
(000) PRICE (000) PRICE (000) PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year.......................... 3,473 $7.09 4,276 $7.12 5,651 $7.30
Granted......................... 2,502 8.36 2,277 7.61 1,869 5.60
Exercised....................... (135) 4.19 (329) 4.86 (257) 4.62
Forfeited....................... (1,564) 9.28 (573) 8.57 (1,147) 7.40
------ ----- ------
Outstanding at end of year...... 4,276 $7.12 5,651 $7.30 6,116 $6.87
====== ===== ======
Options exercisable at
year-end...................... 1,502 $5.26 1,892 $6.19 2,303 $6.84
====== ===== ======
Weighted-average fair value of
options granted during the
year.......................... $4.74 $4.68 $4.28
===== ===== =====
</TABLE>
DIRECTORS PLAN
<TABLE>
<CAPTION>
1997 1998 1999
----------------- ----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE
(000) PRICE (000) PRICE (000) PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year........................... 25 $12.00 25 $12.00 50 $ 9.03
Granted.......................... -- -- 25 6.05 25 4.44
Exercised........................ -- -- -- -- -- --
Forfeited........................ -- -- -- -- -- --
-- -- --
Outstanding at end of year....... 25 $12.00 50 $ 9.03 75 $ 7.50
== == ==
Options exercisable at
year-end....................... 15 $12.00 23 $12.00 42 $ 9.38
== == ==
Weighted-average fair value of
options granted during the
year........................... $ -- $ 3.93 $ 3.60
====== ====== ======
</TABLE>
F-16
<PAGE> 55
The following table summarizes information about fixed stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ----------------------------
NUMBER WEIGHTED-AVG. NUMBER
RANGE OF OUTSTANDING REMAINING WEIGHTED-AVG. EXERCISABLE WEIGHTED-AVG.
EXERCISE PRICES AT 12/31/99 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/99 EXERCISE PRICE
- --------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
1991 PLAN
$ 0.00 to 2.00 61,100 2.4 $ 0.94 61,100 $ 0.94
2.01 to 4.00 289,500 3.4 3.26 289,500 3.26
4.01 to 6.00 1,285,200 9.5 5.16 46,940 5.59
6.01 to 8.00 2,851,556 7.3 6.63 1,377,635 6.82
8.01 to 10.00 1,618,842 8.1 9.50 521,304 9.65
10.01 to 12.00 9,650 6.4 10.81 6,788 10.82
DIRECTORS PLAN
$ 0.00 to 12.00 75,000 8.1 $ 7.50 41,665 $ 9.38
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN
Under the Employee Stock Purchase Plan, the Company is authorized to issue
up to 500,000 shares of common stock to its eligible employees. Under terms of
the Plan, employees can choose on January 1 and July 1 of each year to have a
portion of their earnings not to exceed $25,000 of market value per year
withheld to purchase the Company's common stock. The purchase price of the stock
is 90 percent of the lower of the market price on the grant date or the market
price on the June 30 or December 31 immediately following the grant date of an
option. Under the Plan, the Company sold 44,616 shares to employees in 1997,
35,052 shares in 1998 and 34,794 shares in 1999. The weighted-average fair value
of the purchased rights granted in 1997 was $1.65, $2.06 in 1998 and $1.97 in
1999. The pro forma net loss and loss per share amounts disclosed above reflect
the SFAS 123 adjustment for pro forma compensation cost for the fair value of
the employees' purchase rights, which was estimated using the Black-Scholes
model with the following assumptions:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
EMPLOYEE STOCK PURCHASE PLAN:
Dividend yield............................................ -- -- --
Expected volatility....................................... 47.3% 48.2% 73.0%
Average risk-free interest rate........................... 5.4% 5.4% 5.3%
Expected term in years.................................... 0.5 0.5 0.5
</TABLE>
13. FEDERAL INCOME TAXES
Effective January 1, 1993, the Company adopted the Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS
109 requires an asset and liability approach which requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events which have been recognized in the Company's financial statements. The
Company had approximately $256.0 million of net operating loss carryforwards for
federal income tax purposes at December 31, 1999. The net operating loss
carryforwards will expire in the years 2004 through 2019 if not previously
utilized. The utilization of these carryforwards is subject to certain
limitations. Of the net operating loss carryforwards at December 31, 1999,
management has estimated that approximately $38.9 million is subject to an
annual utilization limit of $4.8 million.
In connection with the adoption of SFAS 109, the Company has recorded a
valuation reserve equal to its net deferred tax asset at each reporting period
as management believes that it is more likely than not that such asset will not
be realized, due to historical and anticipated future operating losses.
Accordingly, the adoption of SFAS 109 did not have an effect on the Company's
financial position or results of operations. Management will evaluate the
appropriateness of the reserve in the future.
Deferred income taxes reflect the tax consequences on future years of
temporary differences between the tax basis of assets and liabilities and their
financial reporting basis and the potential benefits of certain tax
F-17
<PAGE> 56
carryforwards. The significant deferred tax assets and liabilities, as
determined under the provisions of SFAS 109, and the change in those assets and
liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 CHANGE 1999
------------ -------- ------------
<S> <C> <C> <C>
Gross deferred tax asset:
Net operating loss carryforwards................ $ 75,668 $ 11,356 $ 87,024
Bad debt reserve................................ 478 4,027 4,505
Inventory reserve............................... (61) 3,175 3,114
Accretion of Senior Discount Notes.............. 49,241 6,758 55,999
Other........................................... 1,259 865 2,124
--------- -------- ---------
126,585 26,181 152,766
Gross deferred tax liability:
Depreciation.................................... (4,094) 7,625 3,531
--------- -------- ---------
122,491 33,806 156,297
Valuation allowance.......................... (122,491) (33,806) (156,297)
--------- -------- ---------
Net deferred tax asset....................... $ -- $ -- $ --
========= ======== =========
</TABLE>
14. EXTRAORDINARY ITEMS
In connection with the Refinancing (as discussed in Note 8), the Company
incurred an extraordinary charge of approximately $13.8 million in the first
quarter of 1998 related to the early retirement of debt.
On May 19, 1998, the Company and many other paging companies experienced an
unprecedented interruption of service when the PanAmSat Galaxy IV communications
satellite, on which the Company leased capacity, ceased to communicate with
paging uplink stations throughout the United States. Management believes that
this is the first event of its kind to affect the paging industry in the 35-year
history of satellite telecommunications. This event occurred when the
satellite's onboard control system and a back-up control system failed and
PanAmSat technicians were unable to restore the satellite's proper orientation
toward Earth. The Company initiated its recovery plan by re-orienting its
satellite links to its back-up satellites. To do so, the Company realigned
satellite dish antennas on each of its approximately 2,000 transmission sites to
receive the back-up satellites' signals. Although the satellite failure was
beyond the Company's control, the Company provided its customers with a two-day
airtime credit to compensate them for the period when they were unable to
receive messages. The Company incurred $3.8 million of costs (including the
airtime credit) during the three months ended June 30, 1998, which it recorded
as an extraordinary charge.
15. START-UP COSTS
In April, 1998, the AICPA (AcSEC -- Accounting Standards Executive
Committee) issued Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5"). The intent of SOP 98-5 is to have all
companies account for start-up costs consistently. The SOP is effective for
financial statements for fiscal years beginning after December 15, 1998. The
initial application of SOP 98-5 is reported as the cumulative effect of change
in accounting principle as described in Accounting Principles Board Opinion No.
20, "Accounting Changes". The Company has not capitalized "start-up" costs as
defined by SOP 98-5. Therefore, the adoption of SOP 98-5 had no effect on the
Company's financial statements.
16. COMPREHENSIVE INCOME (LOSS)
In January 1998, the Company adopted the FASB Statement No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting comprehensive
income and its components within the financial statements. Comprehensive income
is defined as all changes in the equity of a business enterprise from
transactions and other events and circumstances, except those resulting from
investments by owners and distributions to owners. The Company's comprehensive
income components are immaterial for 1998 and 1999 and, therefore, the same as
net income for both periods.
F-18
<PAGE> 57
17. RELATED-PARTY TRANSACTIONS
In connection with the Unit Offering completed in 1995 (see Note 8), the
Company incurred $3.8 million in fees to an affiliate of a shareholder. In
addition, an affiliate of a shareholder acted as an underwriter of the Company's
initial public offering in June 1996 and received $2.0 million in compensation
in the form of an underwriter's discount. An affiliate of a shareholder also
acted as placement agent for the 11 1/4% Notes offering and received
compensation from the Company in the amount of $8.1 million for acting in such
capacity. An affiliate of the Company received $1.1 million in syndication fees
associated with the issuance of the Credit Facility in 1999.
As of December 31, 1999, the chairman and certain other officers of the
Company are indebted to the Company in the aggregate amount of $464,782 under
promissory notes issued in connection with the purchase of the Company's common
stock (the "Notes"). The Notes have terms ranging from three to four years and
are secured by common stock owned by the officers. The Notes bear interest at
the Applicable Federal Rate in effect on the date of issuance as published by
the Internal Revenue Service, ranging from 4.57% to 5.84%. Interest is due and
payable annually beginning on the first anniversary of the date of each Note.
All Notes are included in Stock Subscriptions Receivable in the Consolidated
Balance Sheets.
18. SEGMENT REPORTING
In June 1997, the FASB issued Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 131
establishes accounting standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company adopted SFAS 131 in 1998.
The Company's reportable segments are divisions that offer different
products and/or services. They are managed separately because each division
requires different technology and management strategies. The Company reports
segments based on these divisions as management makes operating decisions and
assesses individual performances based on the performance of these segments.
The Company has three reportable segments: Wireless Data, Traditional
Paging and International. Through its Wireless Data Division, the Company has
constructed and operates an advanced messaging network, which covers
approximately 90% of the U.S. population, as an overlay of its one-way network.
Through its Traditional Paging Division, the Company has constructed and
operates a wireless messaging and communications network and provides paging and
other one-way wireless messaging services to its subscribers. Through its
International Division, the Company provides messaging services in selected
countries on a seamless international network. The Company pursues international
opportunities through foreign related entities, interests in joint venture
arrangements, or network affiliation agreements between the Company and the
owners of foreign networks.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies except for the allocation of debt
by divisions.
The Company has allocated proceeds from equity and debt offerings to its
Wireless Data and Traditional Paging Divisions. The methodology the Company
follows results in the attribution of the proceeds of each offering based on the
specific capital and operating requirements of each division. Positive free cash
flow (defined as earnings before interest, taxes, depreciation and amortization
less capital expenditures) generated by a division is utilized to reduce its
respective debt allocation. As of December 31, 1999, $72.5 million and $157.3
million of equity and $439.1 million and $99.1 million of debt have been
allocated to the Wireless Data and Traditional Paging Divisions, respectively.
For 1999, interest expense of $48.5 million and $16.8 million was allocated to
Wireless Data and Traditional Paging Divisions, respectively.
F-19
<PAGE> 58
The following table sets forth segment financial information related to the
Company's various operations (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------------
WIRELESS TRADITIONAL
DATA PAGING INTERNATIONAL CONSOLIDATED
-------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues................................. $ -- $277,605 $ 173 $277,778
Operating income (loss).................. (207) (1,887) (497) (2,591)
Interest expense......................... 19,820 18,679 -- 38,499
Interest income.......................... 436 65 -- 501
Net loss................................. (19,591) (20,987) (3,309) (43,887)
EBITDA(1)................................ (16) 27,774 (497) 27,261
Total assets............................. 185,943 175,359 574 361,876
Capital expenditures..................... 35,337 32,169 -- 67,506
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------------
WIRELESS TRADITIONAL
DATA PAGING INTERNATIONAL CONSOLIDATED
-------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues................................ $ 96 $311,469 $ 87 $311,652
Operating income (loss)................. (14,506) 17,603 (647) 2,450
Interest expense........................ 25,162 18,636 -- 43,798
Interest income......................... 3,145 42 -- 3,187
Loss before extraordinary items......... (37,284) (893) (3,533) (41,710)
EBITDA(1)............................... (8,691) 55,208 (647) 45,870
Total assets............................ 325,118 166,766 2,171 494,055
Capital expenditures.................... 128,032 40,386 128 168,546
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1999
-----------------------------------------------------
WIRELESS TRADITIONAL
DATA PAGING INTERNATIONAL CONSOLIDATED
-------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues................................ $ 13,387 $311,181 $ 597 $325,165
Operating income (loss)................. (68,938) 36,647 (469) (32,760)
Interest expense........................ 48,498 16,812 -- 65,310
Interest income......................... 552 27 -- 579
Net income (loss)....................... (117,068) 19,544 (2,343) (99,867)
EBITDA(1)............................... (33,744) 79,600 (469) 45,387
Total assets............................ 324,615 124,449 2,866 451,930
Capital expenditures.................... 27,666 18,070 -- 45,736
</TABLE>
- ---------------
(1) EBITDA represents earnings (loss) before interest, taxes, depreciation,
amortization, other (income) expense and extraordinary items. EBITDA is a
financial measure commonly used in the wireless data industry. EBITDA is not
derived pursuant to generally accepted accounting principles ("GAAP"), and
therefore should not be construed as an alternative to operating income, as
an alternative to cash flows from operating activities (as determined in
accordance with GAAP) or as a measure of liquidity. The calculation of
EBITDA does not include the commitments of the Company for capital
expenditures and payment of debt and should not be deemed to represent funds
available to the Company.
19. SUBSEQUENT EVENTS
SALE OF INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
On February 1, 2000 the Company sold its investments in PageMart Canada to
Bell Mobility Paging Inc. ("Bell Mobility"), a wholly-owned subsidiary of Bell
Canada. The Company received cash consideration and Bell Mobility will repay
certain intercompany liabilities by providing Canadian roaming credits. Based
upon preliminary information, management estimates a nonrecurring gain of
approximately $3 million will be recognized on this transaction. Concurrently,
714,286 shares of Class A Common Stock of the Company were issued in exchange
for the 1,000,000 Class A common shares held by the third-party Canadian
investors in Canada Holding (see Note 5). The terms of the sale established an
exclusive 10-year network relationship with Bell Mobility as the Canadian member
of the Company's international network.
F-20
<PAGE> 59
ADOPTION OF FLEXIBLE INCENTIVE PLAN
Effective January 3, 2000, the Board of Directors adopted, subject to
stockholder approval, the WebLink Wireless, Inc. 2000 Flexible Incentive Plan
(the "Flexible Incentive Plan"). The Flexible Incentive Plan provides for the
grant of nonqualified and incentive stock options, stock appreciation rights,
restricted stock, performance awards, dividend equivalent rights, phantom stock,
and other awards of incentive compensation (collectively, "Awards") to
individuals, partnerships, corporations, joint ventures and any other form of
business organization (collectively, "Persons") who are responsible for the
management, growth and financial success of the Company including, without
limitation, officers, directors, employees and consultants. The purpose of the
Flexible Incentive Plan is to strengthen the Company by providing eligible
Persons with the opportunity to acquire a proprietary interest or increase their
proprietary interest in the Company, thereby providing a means of attracting
desirable employees, directors, vendors and consultants and encouraging them to
remain in the service of the Company.
Three million shares of common stock are currently reserved for issuance
under the Flexible Incentive Plan, subject to adjustment in the event of a
recapitalization, stock split, reverse stock split, dividend or other
distribution, reorganization, merger, consolidation, or other similar corporate
transaction.
On February 10, 2000, 1,075,000 shares of phantom stock were granted under
the Flexible Incentive Plan with a three year vesting period. Based on the
closing market price of $23.813 reported on the Nasdaq on February 10, 2000,
these grants have an aggregate market value of $25.6 million. The compensation
cost associated with the grants to be recorded as an expense over the vesting
period. Accordingly, a non-cash charge of $8.5 million will be incurred in 2000,
2001 and 2002.
RELATED PARTY TRANSACTIONS
The Company has entered into an agreement with the chairman and chief
executive officer providing that all obligations on his indebtedness to the
Company will be suspended until and forgiven on January 3, 2001 if his
employment has not previously been terminated by the Company for cause or by the
chairman for a reason other than good reason (as defined in such agreement).
F-21
<PAGE> 60
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of WebLink Wireless, Inc.:
We have audited, in accordance with auditing standards generally accepted
in the United States the consolidated financial statements of WebLink Wireless,
Inc. (formerly PageMart Wireless, Inc.) and subsidiaries (the "Company") as of
December 31, 1998 and 1999, and the related consolidated statements of
operations, stockholders' (deficit) equity, and cash flows for each of the three
years in the period ended December 31, 1999, included in this Form 10-K and have
issued our report thereon dated February 2, 2000 (except with respect to the
matters discussed in Note 19, as to which the date is February 24, 2000). These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedule based on our
audits.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. Schedule II -- Valuation and
Qualifying Accounts is not a required part of the basic consolidated financial
statements but is supplementary information required by the Securities and
Exchange Commission. This information has been subjected to the auditing
procedures applied in our audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
consolidated financial statements taken as a whole.
[Arthur Andersen LLP Signature]
Dallas, Texas,
February 24, 2000
S-1
<PAGE> 61
WEBLINK WIRELESS, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER BALANCE AT
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
----------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year Ended December 31, 1999......... $2,580 $ 7,565 $ -- $ 1,812(a) $8,333
Year Ended December 31, 1998......... $7,170 $11,130 $ -- $15,720(a) $2,580
Year Ended December 31, 1997......... $4,776 $10,910 $ -- $ 8,516(a) $7,170
</TABLE>
- ---------------
(a) Accounts written off as uncollectible, net of recoveries.
S-2
<PAGE> 62
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.1 -- Restated Certificate of Incorporation of PageMart
Wireless, Inc. (filed as an exhibit to the Registration
Statement on Form S-1 of the Company (Reg. No. 33-03012),
and incorporated herein by reference).
3.2 -- Certificate of Amendment to Restated Certificate of
Incorporation of PageMart Wireless, Inc. dated December
28, 1995 (filed as an exhibit to the Registration
Statement on Form S-1 of the Company (Reg. No. 33-03012),
and incorporated herein by reference).
3.3 -- By-laws of PageMart Wireless, Inc. (filed as an exhibit
to the Form 10-K of the Company for the fiscal year ended
December 31, 1997, and incorporated herein by reference.)
3.4 -- Certificate of Amendment to Restated Certificate of
Incorporation of PageMart Wireless, Inc. dated May 9,
1996 (filed as an exhibit to the Registration Statement
on Form S-1 of the Company (Reg. No. 33-03012), and
incorporated herein by reference).
3.5 -- Certificate of Ownership and Merger merging PageMart,
Inc. into PageMart Wireless, Inc. (filed as an exhibit to
the Form 10-K of the Company for the year ended December
31, 1998, and incorporated herein by reference).
3.6 -- Certificate of Ownership and Merger merging WebLink
Wireless, Inc. into PageMart Wireless, Inc. (filed as an
exhibit to the Form 8-K of the Company dated December 1,
1999, and incorporated herein by reference).
4.1 -- Indenture, dated as of January 28, 1998, between PageMart
Wireless, Inc. and United States Trust Company of New
York, as Trustee, relating to the 11 1/4% Senior
Subordinated Discount Notes due 2008. (filed as an
exhibit to the Form 10-K of the Company for the fiscal
year ended December 31, 1997, and incorporated herein by
reference).
4.2 -- Indenture, dated as of January 17, 1995, between PageMart
Wireless, Inc. and United States Trust Company of New
York, as Trustee, relating to the 15% Senior Discount
Notes due 2005. (filed as an exhibit to the Registration
Statement on Form S-1 of the Company (Reg. No. 33-91142),
and incorporated herein by reference).
4.3 -- First Supplemental Indenture, dated as of December 31,
1997, among PageMart Wireless, Inc. and United States
Trust Company of New York, as Trustee (filed as an
exhibit to the Form 8-K of the Company dated January 28,
1998, and incorporated herein by reference).
10.1 -- Warrant Agreement, dated as of October 19, 1993, between
PageMart, Inc. and United States Trust Company of New
York, as Warrant Agent, relating to the Warrants to
purchase Common Stock of the Company (filed as an exhibit
to the Form 10-K of the Company for the fiscal year ended
December 31, 1994, and incorporated herein by reference).
10.2 -- Second Amended and Restated Satellite Services
Supplemental Agreement, dated as of July 1, 1998, between
PageMart Wireless, Inc. and AvData Systems, Inc. (filed
as an exhibit to the Form 10-K of the Company for the
year ended December 31, 1998, and incorporated herein by
reference)(1)
10.3 -- Satellite Services and Space Segment Lease Agreement,
dated January 2, 1995, between PageMart, Inc. and
SpaceCom Systems, Inc. (filed as an exhibit to the
Registration Statement on Form S-1 of the Company (Reg.
No. 33-91142), and incorporated herein by reference).
</TABLE>
<PAGE> 63
<TABLE>
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10.4 -- Credit Agreement, dated as of March 23, 1999, by and
among PageMart Wireless, Inc., and the Lenders and Agents
named therein (filed as an exhibit to the Form 10-K of
the Company for the year ended December 31, 1998, and
incorporated herein by reference).
10.5 -- Security Agreement, dated as of March 23, 1999, among
PageMart Wireless, Inc., and the Lenders and Agent named
therein (filed as an exhibit to the Form 10-K of the
Company for the year ended December 31, 1998, and
incorporated herein by reference).
10.6 -- Pledge Agreement, dated as of March 23, 1999 among
PageMart Wireless, Inc. and the Lenders and Collateral
Agent named therein (filed as an exhibit to the Form 10-K
of the Company for the year ended December 31, 1998, and
incorporated herein by reference).
10.7 -- Promissory Note and Security Agreement, dated May 21,
1997, between PageMart, Inc. and Glenayre Electronics,
Inc. (filed as an exhibit to the Form 10-Q of the Company
for the quarter ended June 30, 1997, and incorporated
herein by reference).
10.8 -- Modification and Reaffirmation Agreement, dated March 12,
1998, between PageMart Wireless, Inc. and Glenayre
Electronics, Inc. (filed as an exhibit to the Form 10-Q
of the Company for the quarter ended March 31, 1998, and
incorporated herein by reference).
10.9 -- Amended and Restated Agreement Among Certain Stockholders
of PageMart Nationwide, Inc. dated as of September 19,
1995 (filed as an exhibit to the Form 8-K of the Company
dated October 6, 1995, and incorporated herein by
reference).
10.10 -- Amendment No. 1 to Amended and Restated Agreement Among
Certain Stockholders, dated as of October 1, 1997, among
PageMart Wireless, Inc. and certain of its stockholders
(filed as an exhibit to the Form 10-K of the Company for
the fiscal year ended December 31, 1997, and incorporated
herein by reference).
10.11 -- Letter, dated January 27, 2000, regarding the agreement
of certain stockholders to vote for the approval of the
2000 Flexible Incentive Plan.
10.12 -- Equipment Purchase Agreement, dated as of January 26,
1996, between Motorola, Inc. and PageMart Wireless, Inc.
(filed as an exhibit to the Form 10-K of the Company for
the fiscal year ended December 31, 1995, and incorporated
herein by reference)(1).
10.13 -- Amendment No. 1 to Equipment Purchase Agreement between
Motorola, Inc. and the Company dated June 15, 1998.
10.14 -- Amendment No. 2 to Equipment Purchase Agreement between
Motorola, Inc. and the Company dated August 5, 1998.
10.15 -- Amendment No. 3 to Equipment Purchase Agreement dated
September 20, 1999 between Motorola, Inc. and the
Company.
10.16 -- Technology Asset Agreement, dated as of December 1, 1995,
between Motorola, Inc. and PageMart Wireless, Inc. (filed
as an exhibit to the Form 10-K of the Company for the
fiscal year ended December 31, 1995, and incorporated
herein by reference)(1).
10.17 -- PageMart Wireless, Inc. Employee Stock Purchase Plan
(filed as an exhibit to the Registration Statement on
Form S-1 of the Company (Reg. No. 33-03012), and
incorporated herein by reference).
10.18 -- WebLink Wireless, Inc. Nonqualified Formula Stock Option
Plan for Non-Employee Directors, as amended.
</TABLE>
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10.19 -- Office Lease Agreement, dated as of November 26, 1996,
between Crescent Real Estate Equities Limited and
PageMart Wireless, Inc. (filed as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, and incorporated herein by
reference).
10.20 -- WebLink Wireless, Inc. Fifth Amended and Restated 1991
Stock Option Plan, as amended.
10.21 -- Severance and Reimbursement Agreement, dated September
12, 1997, between PageMart Wireless, Inc. and N. Ross
Buckenham (filed as an exhibit to the Form 10-Q of the
Company for the quarter ended September 30, 1997, and
incorporated herein by reference).
10.22 -- Resale Agreement, dated September 1, 1998, between
PageMart Wireless, Inc. and GTE Communications System
Corporation (filed as an exhibit to the Form 10-K of the
Company for the year ended December 31, 1998, and
incorporated herein by reference)(1)
10.23 -- Amended and Restated Strategic Alliance Agreement No. 1,
dated as of April 22, 1999, between GTE Communication
Systems Corporation and PageMart Wireless, Inc.
10.24 -- Amended and Restated Strategic Alliance Agreement No. 2,
dated as of April 22, 1999, between GTE Communication
Systems Corporation and PageMart Wireless, Inc.
10.25 -- Resale Agreement, dated as of December 12, 1997, between
PageMart Wireless, Inc. and GTE Communications
Corporation (filed as an exhibit to the Form 10-K of the
Company for the fiscal year ended December 31, 1997, and
incorporated herein by reference).(1)
10.26 -- Third Amended and Restated 1991 Stock Issuance Plan
(filed as an exhibit to the Registration Statement on
Form S-8 (Reg. No. 33-98116), and incorporated herein by
reference).
10.27 -- Retention Agreement, dated as of January 3, 2000, between
the Company and John D. Beletic.
10.28 -- WebLink Wireless, Inc. 2000 Flexible Incentive Plan.
11.1 -- Computation of per share earnings (loss) for the three
months ended December 31, 1999.
11.2 -- Computation of per share earnings (loss) for the three
months ended December 31, 1998.
11.3 -- Computation of per share earnings (loss) for the year
ended December 31, 1999.
11.4 -- Computation of per share earnings (loss) for the year
ended December 31, 1998.
12.1 -- Computation of Ratio of Earnings to Fixed Charges for
years ended December 31, 1994, 1995, 1996, 1997, 1998 and
1999 and the three months ended December 31, 1999.
21.1 -- WebLink Wireless, Inc. Subsidiaries.
23.1 -- Consent of Arthur Andersen LLP.
27.1 -- Financial Data Schedule for the year ended December 31,
1999.
</TABLE>
- ---------------
(1) The Company has requested confidential treatment for certain portions of
this agreement.
<PAGE> 1
EXHIBIT 10.11
MORGAN STANLEY DEAN WITTER
1221 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
(212) 761-4000
WebLink Wireless, Inc.
3333 Lee Parkway, Suite 100
Dallas, Texas 75219 January 27, 2000
Attention: John D. Beletic
Chairman and Chief Executive Officer
Dear John:
We understand that WebLink Wireless, Inc. (the "COMPANY") intends to propose,
for approval by its stockholders at its 2000 regular annual meeting, the
Company's 2000 Flexible Incentive Plan substantially in the form approved by the
Board of Directors of the Company at its meeting on January 13, 2000 (the
"EMPLOYEE PLAN"). The Morgan Stanley stockholders support the adoption and
implementation of the Employee Plan in order to facilitate the retention and
motivation of the Company's key employees.
Accordingly, each of the undersigned stockholders of the Company hereby agrees,
severally and not jointly, to vote all shares of common stock, par value $.0001
per share, of the Company that such stockholder is entitled to vote at the time
of the 2000 regular annual meeting of the stockholders of the Company in favor
of the approval and adoption of the Employee Plan and any actions related
thereto. Nothing herein shall be construed to limit in any way the ability of
the undersigned to sell, transfer or otherwise dispose of any such common stock
at any time and the agreement contained herein will be terminated with respect
to any such Shares that are sold, transferred or disposed of.
This letter agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware.
Very truly yours,
THE MORGAN STANLEY LEVERAGED EQUITY FUND II, L.P.
MORGAN STANLEY CAPITAL PARTNERS III, L.P.
MORGAN STANLEY CAPITAL INVESTORS, L.P.
MSCP III 892 INVESTORS, L.P.
By: /s/ Leigh J. Abramson
--------------------------
Leigh J. Abramson
MORGAN STANLEY VENTURE CAPITAL FUND II, L.P.
MORGAN STANLEY VENTURE CAPITAL FUND, L.P.
MORGAN STANLEY VENTURE CAPITAL FUND II, C.V.
MORGAN STANLEY VENTURE INVESTORS, L.P.
By: /s/ Guy de Chazal
-----------------------
Guy de Chazal
<PAGE> 1
EXHIBIT 10.13
AMENDMENT NO.1 TO
EQUIPMENT PURCHASE AGREEMENT
Reference is hereby made to that Equipment Purchase Agreement (the
"Agreement") effective as of December 1, 1995 between PageMart, Inc.
("PageMart") and Motorola, Inc. ("Motorola"). Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed thereto in the
Agreement.
WHEREAS, PageMart and Motorola have agreed to modify the Agreement;
NOW THEREFORE, the parties hereby agree as follows:
ARTICLE IV: Section 1.1. Buyer Purchase Commitment, is hereby amended to read
in its entirety, as follows:
1.1 Buyer Purchase Agreement. PageMart agrees to purchase from Motorola $40
million of conventional one-way and two-way infrastructure Equipment over the
forty-seven (47) month period beginning December 1, 1995 and ending October 31,
1999. In the event PageMart fails to order and take delivery from Motorola of
$40 million of infrastructure Equipment prior to September 1, 1999, provided any
failure to take delivery is not due to Force Majeure as described in Section
15.1 of Article I, or to Motorola's failure to meet reasonable scheduled
delivery dates, then on September 1, 1999, Motorola may prepare an invoice for,
and ship, infrastructure products chosen at Motorola's sole discretion, with a
total price (priced at the purchase prices of this Agreement) equivalent to the
difference between $40 million and the amount of infrastructure Equipment
previously ordered by PageMart and delivered under this Agreement. PageMart
agrees to accept such Products and to pay such invoice within thirty (30) days
of its receipt. The following orders shall apply towards PageMart's $40 million
commitment:
(A) PageMart shall issue to Motorola, a Purchase Order for Motorola's I-20 Nuc
IIs no later than June 19, 1998 for delivery to PageMart as per the attached
delivery schedule dated June 10, 1998.
(B) PageMart shall issue to Motorola, a Purchase Order for I-20 Kits no later
than June 19, 1998 for delivery to PageMart as per the attached delivery
schedule dated June 10, 1998. The total number of I-20 Kits to be ordered will
be based upon the number of Motorola transmitters in PageMart's network
requiring a kit.
(C) PageMart shall issue to Motorola, a Purchase Order for the RF-A! 1:5 (or a
same or similar product of equivalent functionality) no later than June 19, 1998
for delivery to PageMart as per the attached delivery schedule dated June 10,
1998. The obligation to place this order is subject to PageMart's
cost-effective, technical and organizational acceptance of this equipment
configuration.
(D) PageMart shall issue to Motorola, a Purchase Order for the RF-A! II no later
than October 31, 1998 for delivery to PageMart as per the attached delivery
schedule dated June 10, 1998. In the event Motorola, due to causes within its
control, unable to deliver the RF-A! II (with the capabilities specified in the
column entitled "RF-A! II" in the PageMart Receiver Requirements Document dated
June 10, 1998) by the delivery dates in the attached schedule, the October 31,
1999 date in this Section 1.1 shall be extended for the period of time that the
delivery is late, up to a maximum extension of one year, to October 31, 2000. If
the RF-A! II is not available, then at any time before April 1, 2000 if mutually
agreed by both parties or if after April 1, 2000, but before September 1, 2000,
PageMart may, in its sole discretion, cancel the Purchase Order for the RF-A! II
and issue a new Purchase Order for the remainder of the patent credit amount for
delivery on a schedule mutually agreed upon by PageMart and Motorola. The new
Purchase Order shall apply toward and fulfill PageMart's $40 million commitment,
even though the equipment may be delivered after September 1, 2000, but no later
than October 31, 2000.
This does not alter the credits provided for in the Catapult Agreement executed
12/30/97.
Date of Modification: June 15, 1998
PAGEMART WIRELESS, INC. MOTOROLA, INC.
By: /s/ N. ROSS BUCKENHAM By: /s/ TONY MARSHALL
----------------------------- ----------------------------
Name: N. Ross Buckenham Name: Tony Marshall
--------------------------- ---------------------------
Title: President Title: Vice President & General
Manager APSD
-------------------------- --------------------------
Date: 6/15/98 Date: June 15, 1998
--------------------------- ---------------------------
APPROVED AS TO
LEGALITY & FORM
15 JUNE 1998 TP
---------------
<PAGE> 1
EXHIBIT 10.14
AMENDMENT NO. 2
TO
EQUIPMENT PURCHASE AGREEMENT
Reference is hereby made to that Equipment Purchase Agreement
(the "Agreement") effective as of December 1, 1995 between PageMart Wireless,
Inc. ("PageMart") and Motorola, Inc. ("Motorola"). Capitalized terms used but
not otherwise defined herein shall have the meanings ascribed thereto in the
Agreement.
WHEREAS, PageMart and Motorola have agreed to modify the
Agreement;
NOW THEREFORE, the parties hereby agree as follows:
ARTICLE IV: SECTION 1.3 CREDIT FOR ADVANCED MESSAGING SUBSCRIBER UNITS, IS
HEREBY AMENDED TO READ IN ITS ENTIRETY, AS FOLLOWS:
1.3 Credit for Advanced Messaging Subscriber Units. As described here
and in Article III, Section 1, as additional consideration for the transfer of
the PageMart Patents to Motorola in accordance with the Technology Asset
Agreement between the parties, Motorola agrees to furnish at no cost to
PageMart, credit for an additional $1.5 million of two-way advanced messaging
subscriber equipment (priced at the purchase prices of this Agreement), applied
on a pro-rata basis to PageMart's purchase of its first $5 million of two-way
messaging subscriber Equipment from Motorola during the term of this Agreement.
PageMart will be entitled to credit each month for a proportionate amount of
subscriber Equipment in addition to the first $5 million, based upon the
subscriber Equipment purchased to date through that month.
PageMart has issued to Motorola an initial Purchase Order for 5,000 (five
thousand) ReFLEX25 advanced messaging subscriber units and will provide one or
more additional Purchase Orders for 20,000 (twenty thousand) ReFLEX25 advanced
messaging units, when they are commercially available. Since Motorola has been
unable to deliver and certify as commercial by June 15, 1998, the ReFLEX25
advanced messaging subscriber Equipment in the first Purchase Order, the October
31, 1999 date in Section 1.1 of Article IV of the Agreement shall be extended
for the period of time that commercial availability is delayed beyond June 15,
1998, up to a maximum extension of one year.
Date of Modification: August 5, 1998
PAGEMART WIRELESS, INC. MOTOROLA, INC.
By: /s/ N. ROSS BUCKERHAM By: /s/ JULIE A. SHIMER
------------------------------ ----------------------------------
Name: N. Ross Buckerham Name: Julie A. Shimer
---------------------------- --------------------------------
Title: President Title: VP & GM NAPSD
--------------------------- -------------------------------
Date: 8/15/98 Date: 8/5/98
---------------------------- --------------------------------
<PAGE> 1
EXHIBIT 10.15
AMENDMENT NO.3
TO
EQUIPMENT PURCHASE AGREEMENT
Reference is hereby made to that EQUIPMENT PURCHASE AGREEMENT (the
"Agreement"), effective as of December 1, 1995, between PageMart, Inc.
("PageMart") and Motorola, Inc. ("Motorola"), as amended by Amendment No. 1
dated June 15, 1998, and by Amendment No. 2 dated August 5, 1998. Capitalized
terms used but not otherwise defined herein shall have the meanings ascribed
thereto in the Agreement.
WHEREAS, PageMart and Motorola have agreed to modify the Agreement;
NOW THEREFORE, the parties hereby agree as follows:
ARTICLE IV: SECTION 1.1, BUYER PURCHASE COMMITMENT, IS HEREBY AMENDED TO READ IN
ITS ENTIRETY, AS FOLLOWS:
1.1 Buyer Purchase Agreement. PageMart agrees to purchase from Motorola $40
million of conventional one-way and two-way infrastructure Equipment (and/or
ReFLEX 25 advanced messaging units provided for by this Amendment No. 3) over
the sixty-seven (67) month period beginning December 1, 1995 and ending June 30,
2001. In the event PageMart fails to order and take delivery from Motorola of
$40 million of infrastructure Equipment (and/or ReFLEX 25 advanced messaging
units provided for by this Amendment No. 3) prior to June 30, 2001, provided any
failure to take delivery is not due to Force Majeure as described in Section
15.1 of Article I, or to Motorola's failure to meet reasonable scheduled
delivery dates for ReFLEX 25 advanced messaging units, then on or after July 1,
2001, Motorola may prepare an invoice for, and ship to PageMart, ReFLEX 25
advanced messaging units chosen at Motorola's sole discretion, with a total
price (priced at the purchase prices of this Agreement) equivalent to the
difference between $40 million and the amount of infrastructure Equipment (and
ReFLEX 25 advanced messaging units provided for by this Amendment No. 3)
previously ordered by PageMart and delivered under this Agreement. PageMart
agrees to accept such Products and to pay such invoice within thirty (30) days
of its receipt. After the Date of Modification of this Amendment No. 3, only the
following order shall apply towards PageMart's $40 million purchase commitment:
(A) On or before August 31, 1999, PageMart shall issue to Motorola, an initial
Purchase Order for additional ReFLEX 25 advanced messaging units, in an amount
of no less than $1.4 million, for delivery to PageMart prior to December 31,
1999, as per customer requirements. PageMart shall subsequently issue additional
purchase orders to Motorola for ReFLEX 25 advanced messaging units. Products
procured by Purchase Orders under this Amendment shall be for delivery to
PageMart prior to June 30, 2001. Notwithstanding the language of Section 1.2
Credit for Infrastructure Equipment and Section 1.4 Additional Infrastructure
Credit, for PageMart's purchases of ReFLEX 25 advanced messaging units from
Motorola by the Purchase Orders described in this Section 1.1(A), PageMart's
remaining credit for the transfer of PageMart Patents to Motorola in accordance
with the Technology Asset Agreement between the parties, shall be applied as a
total discount of 30% towards the sales price, resulting in a total remaining
credit balance of $5,265,000. Such credit application shall wholly satisfy all
credits provided to PageMart by the Agreement.
THIS AMENDMENT NO. 3 DOES NOT ALTER THE PURCHASE COMMITMENTS FOR REFLEX 25
ADVANCED MESSAGING UNITS SPECIFIED IN AMENDMENT NO. 2 DATED AUGUST 5, 1998, AND
THE CREDITS PROVIDED THEREIN ARE SEPARATE FROM AND SHALL NOT AFFECT THE CREDITS
PROVIDED ELSEWHERE IN THE AGREEMENT.
Date of Modification: September 20, 1999.
PAGEMART WIRELESS INC. MOTOROLA, INC.
By: /s/ G. CLAY MYERS By: /s/ MIGUEL PELLON
-------------------------------- -------------------------------
Name: G. Clay Myers Name: Miguel Pellon
------------------------------ -----------------------------
Title: CFO Title: VP & GM US Paging Ops.
----------------------------- ----------------------------
Date: 8/20/99 Date: 10/4/99
------------------------------ -----------------------------
<PAGE> 1
EXHIBIT 10.18
WEBLINK WIRELESS, INC.
NONQUALIFIED FORMULA STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
<PAGE> 2
WEBLINK WIRELESS, INC.
NONQUALIFIED FORMULA STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
Table of Contents
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE I - Purpose and Administration................................... 1
1.1 Purpose................................................ 1
1.2 Administration......................................... 1
1.3 Participation.......................................... 2
1.4 Stock Subject to the Plan.............................. 2
1.5 Restrictions on Exercise............................... 2
ARTICLE II - Stock Options............................................... 3
2.1 Grant and Option Price................................. 3
2.2 Stock Option Agreement................................. 4
2.3 Option Period.......................................... 4
2.4 Vesting and Exercise of Options........................ 4
2.5 Nontransferability of Options.......................... 5
2.6 Termination of Directorship............................ 5
2.7 Issuance of Stock Certificates........................ 7
ARTICLE III - Other Provisions.......................................... 7
3.1 Adjustments Upon Changes in Capitalization............ 7
3.2 Acceleration.......................................... 9
3.3 Continuation of Directorship.......................... 11
3.4 Amendment and Termination............................. 11
3.5 Time of Exercise...................................... 12
3.6 Privileges of Stock Ownership and
Non-Distributive Intent............................. 12
3.7 Effective Date of the Plan............................ 12
3.8 Expiration............................................ 12
3.9 Governing Law......................................... 12
3.10 Application of Funds.................................. 12
3.11 No Liability for Good Faith Determinations............ 13
3.12 Execution of Receipts and Releases.................... 13
3.13 No Guarantee of Interests............................. 13
3.14 Payment of Expenses................................... 13
3.15 Corporate Records..................................... 13
3.16 Information........................................... 13
3.17 No Liability of Corporation........................... 14
3.18 Corporate Action...................................... 14
</TABLE>
<PAGE> 3
<TABLE>
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3.19 Severability.......................................... 14
3.20 Notice................................................ 14
3.21 Waiver of Notices..................................... 15
3.22 Successors............................................ 15
3.23 Headings.............................................. 15
3.24 Word Usage............................................ 15
</TABLE>
<PAGE> 4
WEBLINK WIRELESS, INC.
NONQUALIFIED FORMULA STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
ARTICLE I
Purpose and Administration
Section 1.1 Purpose. The purpose of the WebLink Wireless, Inc. Nonqualified
Formula Stock Option Plan for Non-Employee Directors (the "Plan") is to
strengthen WebLink Wireless, Inc. (the "Corporation") by providing a means of
retaining and attracting competent non-employee personnel to serve on its board
of directors by extending to certain such individuals added long-term incentives
for high levels of performance and for unusual efforts designed to improve the
financial performance of the Corporation. In order to effectuate this intent,
the Corporation will, pursuant to this Plan, grant to each eligible non-employee
director the option to acquire shares of common stock of the Corporation
("Common Stock"), which options shall vest over a specified period of time.
Section 1.2 Administration. The Plan shall be administered by the compensation
committee (the "Committee") of the Board of Directors of the Corporation (the
"Board").
Subject to the express provisions of the Plan, the Committee shall have
powers and authorities which are exclusively ministerial in nature, including
the authority to construe and interpret the Plan, to define the terms used in
the Plan, to prescribe, amend and rescind rules and regulations relating to the
administration of the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. The determinations of the
Committee on all matters referred to in this Plan shall be
1
<PAGE> 5
conclusive. The Committee shall not be liable for any action, failure to act,
determination or interpretation made in good faith with respect to the Plan or
any transaction under the Plan.
Section 1.3 Participation. Each member of the Board who (i) is not employed by
the Corporation or any Affiliate and (ii) owns one percent (1%) or less of the
Corporation's Common Stock at the time of any grant hereunder (collectively, the
"Non-Employee Directors") shall be eligible and shall participate in the Plan.
For purposes of the Plan, the term "Affiliate" shall mean a "parent
corporation", as such term is defined in Section 424(e) of the Internal Revenue
Code, as amended (the "Code"), or a "subsidiary corporation", as such term is
defined in Section 424(f) of the Code.
Section 1.4 Stock Subject to the Plan. Subject to adjustment as provided in
Section 3.1 hereof, the stock to be offered under the Plan shall be treasury
shares or shares of the Corporation's authorized but unissued Common Stock
(hereinafter collectively called "Stock"). The aggregate number of shares of
Stock to be issued upon exercise of all options granted under the Plan shall not
exceed 300,000 shares, subject to adjustments as set forth in Sections 3.1 and
3.2 hereof. If any option granted hereunder shall lapse or terminate for any
reason without having been fully exercised, the shares subject thereto shall
again be available for purposes of the Plan.
Section 1.5 Restrictions on Exercise . No option granted hereunder may be
exercised unless and until the Committee determines that such exercise will be
made in compliance with all applicable laws, rules and regulations, including,
without limitation, applicable securities laws, rules and regulations. The
Corporation does not have any obligation to take any action to register or
qualify shares of Common Stock pursuant to applicable
2
<PAGE> 6
securities laws or to perfect an exemption from such registration/qualification
requirements.
ARTICLE II
Stock Options
Section 2.1 Grant and Option Price.
(a) On the effective date of this Plan, each existing Non-Employee
Director shall be granted an option to purchase 25,000 shares of Stock.
Thereafter, on the day a Non-Employee Director is first elected or
appointed to the Board, such Non-Employee Director shall be granted an
option to purchase 25,000 shares of Stock.
(b) On each subsequent third anniversary of the date of grant,
each Non-Employee Director who was previously elected to the Board and
who continues to serve in such capacity, shall be granted an option to
purchase an additional 25,000 shares of Stock.
(c) The purchase price of the Stock covered by each option granted
under the Plan shall be equal to the Fair Market Value of such Stock on
the date of grant. For purposes of the Plan, the term "Fair Market
Value" on any date shall mean: (i) if the Stock is listed or admitted
to trade on a national securities exchange, the closing price of the
Stock on the Composite Tape, as published in the Wall Street Journal,
of the principal national securities exchange on which the Stock is so
listed or admitted to trade, on such date or, if there is no trading of
the Stock on such date, then the closing price of the Stock as quoted
on such Composite Tape on the next preceding date on which there was
trading in such
3
<PAGE> 7
shares; (ii) if the Stock is not listed or admitted to trade on a
national securities exchange, then the closing price of the Stock as
quoted on the National Market System of the National Association of
Securities Dealers, Inc. ("NASD") on such date; (iii) if the Stock is
not listed to trade on the National Market System of the NASD, the mean
between the bid and asked price for the Stock on such date, as
furnished by the NASD through NASDAQ or a similar organization if
NASDAQ is no longer reporting such information; or (iv) if the Stock is
not listed or admitted to trade on a national securities exchange and
if bid and asked prices for the Stock are not so furnished by the NASD
or a similar organization, the values established by the Committee for
purposes of granting options under the Plan. In addition to the above
rules, Fair Market Value shall be determined without regard to any
restriction other than a restriction which, by its terms, will never
lapse.
Section 2.2 Stock Option Agreement. Each option granted pursuant to the Plan
shall be evidenced by a Stock Option Agreement ("Option Agreement"), in such
form as the Committee shall require, between the Corporation and the
Non-Employee Director to whom the option has been granted (the "Optionee").
Section 2.3 Option Period. Except as otherwise provided herein, each option
and all rights or obligations thereunder shall expire on the tenth anniversary
of the date of grant (the "Expiration Date"), and shall be subject to earlier
termination as hereinafter provided.
Section 2.4 Vesting and Exercise of Options.
(a) Subject to Section 3.2 hereof, an option granted hereunder
shall be exercisable only to the extent of shares that have vested.
Shares shall vest hereunder as to 1/12 of each grant as of the last day
of the first calendar quarter
4
<PAGE> 8
following the date of the grant, with an additional 1/12 of such grant
to vest as of the last day of each calendar quarter subsequent thereto.
(b) The purchase price of the Stock purchased upon exercise of an
option shall be paid in full in cash or by check at the time of each
exercise of an option or by such other consideration as may be provided
for by the Committee in the Option Agreement; provided, however, that
if the Option Agreement so provides and upon receipt of all regulatory
approvals, the person exercising the option may deliver in payment of a
portion or all of the purchase price certificates for Common Stock,
including a multiple series of exchanges of such Common Stock, which
shall be valued at the Fair Market Value of such Common Stock on the
date of exercise of the option. No options shall be exercisable except
in respect of whole shares of Stock.
Section 2.5 Nontransferability of Options. An option granted under the Plan
shall, by its terms, be nontransferable by the Optionee other than by will or by
the laws of descent and distribution. During the Optionee's lifetime, the option
shall be exercisable only by the Optionee or by the Optionee's duly appointed
guardian or personal representative.
Section 2.6 Termination of Directorship.
(a) If the directorship of the Optionee is terminated for any
reason other than (i) Disability (as hereinafter defined) of the
Optionee, (ii) death of the Optionee, or (iii) on account of any act of
fraud or intentional misrepresentation or embezzlement,
misappropriation or conversion of assets or opportunities of the
Corporation or any Affiliate, or other cause, as determined by the
Board, an option (to the extent otherwise exercisable on the date of
such termination) shall
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<PAGE> 9
be exercisable by the Optionee at any time prior to the Expiration Date
of the option or within 90 days after the date of such termination of
the directorship, whichever is the shorter period.
(b) If the Optionee's directorship is terminated by reason of
Disability, an option (to the extent otherwise exercisable on the date
of the Optionee's termination of directorship by reason of Disability)
shall be exercisable by the Optionee at any time prior to the
Expiration Date of the option or within twelve (12) months after the
date of such termination, whichever is the shorter period. As used
herein, the term "Disability" shall mean the inability to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death
or which has lasted or can be expected to last for a continuous period
of not less than twelve (12) months. The determination of whether or
not an Optionee's directorship is terminated by reason of Disability
shall be in the sole and absolute discretion of the Committee. An
individual shall not be considered Disabled unless he furnishes proof
of the existence thereof in such form and manner, and at such times, as
the Committee may require.
(c) If an Optionee dies while serving as a member of the Board,
the option shall be exercisable (to the extent otherwise exercisable on
the date of the death of such Optionee) by the person or persons
entitled to do so under the Optionee's will, or, if the Optionee shall
fail to make testamentary disposition of said option or shall die
intestate, by the Optionee's legal representative or representatives,
at any time prior to the Expiration Date of the option or within twelve
(12) months after the date of death, whichever is the shorter period.
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<PAGE> 10
(d) The option of a Non-Employee Director shall automatically
terminate as of the date his or her directorship is terminated, if the
directorship is terminated on account of any act of (i) fraud or
intentional misrepresentation; (ii) embezzlement, misappropriation or
conversion of assets or opportunities of the Corporation or any
Affiliate; or (iii) cause as otherwise determined by the Board.
Section 2.7 Issuance of Stock Certificates. Upon exercise of an option, but
subject to the provisions of Section 3.6 of the Plan, the person exercising the
option shall be entitled to one (1) stock certificate evidencing the shares
acquired upon such exercise; provided, however, that any person who tenders
Common Stock in payment of a portion or all of the purchase price of Stock
purchased upon exercise of the option shall be entitled to receive a separate
certificate representing the number of shares purchased in consideration of the
tender of such Common Stock.
ARTICLE III
Other Provisions
Section 3.1 Adjustments Upon Changes in Capitalization.
(a) In the event that a dividend payable in shares of Common Stock
or a stock split shall be hereinafter declared upon the Common Stock,
the number of shares of Common Stock then subject to any option granted
hereunder and the number of shares reserved for issuance pursuant to
the Plan but not yet covered by an option shall be adjusted by adding
to each such share the number of shares which would be distributable
thereon if such share had been outstanding on the date
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<PAGE> 11
fixed for determining the shareholders entitled to receive such stock
dividend or stock split.
(b) In the event that the outstanding shares of the Common Stock
shall be changed into or exchanged for a different number or kind of
shares of stock or other securities of the Corporation or of another
corporation, whether through reorganization, recapitalization, stock
split, combination of shares, merger or consolidation, then there shall
be substituted for each share of Common Stock subject to any such
option and for each share of Common Stock reserved for issuance
pursuant to the Plan but not yet covered by an option, the number and
kind of shares of stock or other securities into which each outstanding
share of Common Stock shall be so changed or for which each such share
shall be exchanged.
(c) In the event that there shall be any change, other than as
specified above in this Section 3.1, in the number or kind of
outstanding shares of Common Stock or of any stock or other securities
into which Common Stock shall have been changed or for which it shall
have been exchanged, then if the Committee shall in its sole discretion
determine that such change equitably requires an adjustment in the
number or kind of shares theretofore reserved for issuance pursuant to
the Plan but not yet covered by an option and of the shares then
subject to an option or options, such adjustment shall be made by the
Committee and shall be effective and binding for all purposes of the
Plan and of each Option Agreement.
(d) In the case of any such substitution or adjustment as provided
for in this Section, the option price in each Option Agreement for each
share covered
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<PAGE> 12
thereby prior to such substitution or adjustment will be the option
price for all shares of stock or other securities which shall have been
substituted for such share or to which such adjustment provided for in
this Section 3.1 shall be made. No adjustment or substitution provided
for in this Section 3.1 shall require the Corporation pursuant to any
Option Agreement to sell a fractional share, and the total substitution
or adjustment with respect to each Option Agreement shall be limited
accordingly.
Section 3.2 Acceleration. In the event of a Change in Control, the provisions
of subsections (a) and (b) of this Section 3.2 shall apply to determine the
exercisability of options granted hereunder. A "Change in Control" for purposes
of this Plan shall mean the acquisition of fifty percent (50%) or more of the
Common Stock, issued and outstanding immediately prior thereto, pursuant to a
tender or exchange offer made by a person or group of related persons (other
than the Corporation or a person that directly or indirectly controls, is
controlled by or is under common control with the Corporation) which the Board
does not recommend to the shareholders, or one or more of the following
shareholder-approved transactions: (i) a merger or consolidation in which the
Corporation is not the surviving entity, provided securities possessing fifty
percent (50%) or more of the total combined voting power of the Corporation's
outstanding voting securities are transferred to a person or persons different
from those who held such securities immediately prior to such transaction; (ii)
the sale, transfer or other disposition of all or substantially all of the
assets of the Corporation other than in the ordinary course of business; or
(iii) any reverse merger in which the Corporation is the surviving entity but in
which securities possessing fifty percent (50%) or more of the total combined
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<PAGE> 13
voting power of the Corporation's outstanding voting securities are transferred
to a person or persons different from those who held such securities immediately
prior to such merger. In no event shall any merger, consolidation or other
reorganization involving the Corporation be deemed to constitute a "Change in
Control" if the primary purpose of such transaction is either to change the
state in which the Corporation is incorporated or to create a holding company
structure whereby the Corporation's shareholders of record become the
shareholders of the holding company.
(a) Change in Control with Provision Being Made Therefor. If
provision be made in writing in connection with a Change in Control for
the assumption and continuance of any option granted under the Plan, or
the substitution for such option of a new option covering the shares of
the successor corporation, with appropriate adjustment as to number and
kind of shares and prices, the option granted under the Plan, or the
new option substituted therefor, as the case may be, shall continue in
the manner and under the terms provided.
(b) Change in Control Without Provision Being Made Therefor. If
provision is not made in connection with a Change in Control for the
continuance and assumption of the option granted under the Plan or for
the substitution of any option covering the shares of the successor
corporation, then the holder of any such option shall be entitled,
prior to the effective date of any such Change in Control, to purchase
the full number of shares not previously exercised under such option,
without regard to the period of exercisability set forth in Section 2.4
if (and only if) such option has not at that time expired or been
cancelled, failing which purchase, any unexercised portion shall be
deemed cancelled as of the effective date of such Change in Control.
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All adjustments under this Section 3.2 shall be made by the Committee,
whose determination as to what adjustments shall be made and the extent thereof,
shall be final, binding and conclusive for all purposes of the Plan and of each
Option Agreement.
Section 3.3 Continuation of Directorship. Nothing contained in this Plan (nor
in any option granted pursuant to this Plan) shall confer upon any Non-Employee
Director any right to continue as a member of the Board or constitute any
contract or agreement or interfere in any way with the right of the Corporation
to remove such Non-Employee Director from the Board. Nothing contained herein or
in any Option Agreement shall affect any other contractual rights of a
Non-Employee Director.
Section 3.4 Amendment and Termination. The Board may at any time suspend or
terminate the Plan and may, with the consent of the Optionee, make such
modifications of the terms and conditions of such Optionee's option as it shall
deem advisable. No option may be granted during any suspension of the Plan or
after such termination. The amendment, suspension or termination of the Plan
shall not, without the consent of the Optionee, alter or impair any rights or
obligations under any option theretofore granted under the Plan.
The Board may at any time amend the Plan as it shall deem advisable
without further action on the part of the shareholders of the Corporation;
provided, that any amendment to the Plan must be approved by the shareholders of
the Corporation, if the amendment would (i) increase the aggregate number of
shares of Stock which may be issued pursuant to options granted under the Plan;
(ii) change the minimum option price; (iii) increase the maximum terms of
options provided for herein; (iv) materially modify the requirements as to
eligibility for participation in the Plan; (v) remove the administration
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<PAGE> 15
of the Plan from the Committee; or (vi) materially increase the benefits
accruing to holders of options under the Plan.
Section 3.5 Time of Exercise. An option shall be deemed to be exercised when
the Secretary of the Corporation receives written notice of such exercise from
the person entitled to exercise the option together with payment of the purchase
price made in accordance with Section 2.4 of this Plan.
Section 3.6 Privileges of Stock Ownership and Non-Distributive Intent. The
holder of an option shall not be entitled to the privileges of stock ownership
as to any shares of Stock not actually issued and delivered to the holder.
Section 3.7 Effective Date of the Plan. The Plan shall be effective upon
approval by the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock present and entitled to vote at a meeting duly held or by
the written consent of the holders of a majority of the outstanding shares of
Common Stock entitled to vote.
Section 3.8 Expiration. Unless previously terminated by the Board, the Plan
shall expire at the close of business on the date which is the last day of the
ten (10) year period beginning on the earlier of the date on which the Plan is
adopted by the Board or the date on which the shareholders approve the Plan, and
no option shall be granted under it thereafter, but such expiration shall not
affect any option theretofore granted.
Section 3.9 Governing Law. The Plan and the options issued hereunder shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Texas applicable to contracts made and performed within that State.
Section 3.10 Application of Funds. The proceeds received by the Corporation
from the sale of shares pursuant to options shall be used for general corporate
purposes.
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Section 3.11 No Liability for Good Faith Determinations. Neither the members of
the Board nor the Committee shall be liable for any act, omission or
determination taken or made in good faith with respect to the Plan or any option
granted under it.
Section 3.12 Execution of Receipts and Releases. Any payment or any issuance
or transfer of shares of Stock to the Optionee, or to his legal representative,
heir, legatee or distributee, in accordance with the provisions hereof, shall,
to the extent thereof, be in full satisfaction of all claims of such persons
hereunder. The Board may require any Optionee, legal representative, heir,
legatee or distributee, as a condition precedent to such payment, to execute a
release and receipt therefor in such form as it shall determine.
Section 3.13 No Guarantee of Interests. Neither the Board nor the Corporation
guarantees the Stock from loss or depreciation.
Section 3.14 Payment of Expenses. All expenses incident to the administration,
termination or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Corporation.
Section 3.15 Corporate Records. Records of the Corporation and any Affiliate
regarding the Optionee's period of service, termination of service and the
reason therefor, leaves of absence, and other matters shall be conclusive for
all purposes hereunder, unless determined by the Committee to be incorrect.
Section 3.16 Information. The Corporation and any Affiliate shall, upon request
or as may be specifically required hereunder, furnish or cause to be furnished
all of the information or documentation which is necessary or required by the
Committee to perform its duties and functions under the Plan.
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Section 3.17 No Liability of Corporation. The Corporation assumes no obligation
or responsibility to the Optionee or his or her personal representatives, heirs,
legatees or distributees for any act of, or failure to act on the part of, the
Board or the Committee.
Section 3.18 Corporate Action. Any action required of the Corporation shall be
by resolution of the Board or by a person authorized to act by Board resolution.
Section 3.19 Severability. If any provision of this Plan shall be held to be
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining provisions hereof, but shall be fully severable and the Plan shall
be construed and enforced as if the illegal or invalid provision had never been
included herein.
Section 3.20 Notice. Whenever any notice is required or permitted hereunder,
such notice must be in writing and personally delivered or sent by mail. Except
as otherwise provided in Section 3.5 of this Plan, any notice required or
permitted to be delivered hereunder shall be deemed to be delivered on the date
on which it is personally delivered or, whether actually received or not, on the
third (3rd) business day after it is deposited in the United States mail,
certified or registered, postage pre-paid, addressed to the person who is to
receive it at the address which such person has theretofore specified by written
notice delivered in accordance herewith. The Corporation or an Optionee may
change, at any time and from time to time, by written notice to the other, the
address which it or he had theretofore specified for receiving notices. Until it
is changed in accordance herewith, the Corporation and each Optionee shall
specify as its and his address for receiving notices the address set forth in
the Option Agreement pertaining to the shares to which such notice relates.
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Section 3.21 Waiver of Notices. Any person entitled to notice hereunder may
waive such notice.
Section 3.22 Successors. The Plan shall be binding upon the Optionee, his or
her heirs, legatees and legal representatives, and upon the Corporation and its
successors and assigns.
Section 3.23 Headings. The titles and headings of sections and paragraphs are
included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
Section 3.24 Word Usage. Words used in the masculine shall apply to the
feminine where applicable and, wherever the context of this Plan dictates, the
plural shall be read as the singular and the singular as the plural.
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EXHIBIT 10.20
WEBLINK WIRELESS, INC.
FIFTH AMENDED AND RESTATED 1991 STOCK OPTION PLAN
ARTICLE I
GENERAL PROVISIONS
1. PURPOSE
The purpose of the WebLink Wireless, Inc. Fifth Amended and Restated
1991 Stock Option Plan (the "Plan") is to strengthen WebLink Wireless, Inc., a
Delaware corporation (the "Corporation"), by providing eligible individuals who
are responsible for the management, growth and financial success of the
Corporation or who otherwise render valuable services to the Corporation with
the opportunity to acquire a proprietary interest, or increase their proprietary
interest, in the Corporation and thereby providing a means of attracting
competent personnel and encouraging them to remain in the service of the
Corporation.
2. ADMINISTRATION OF THIS PLAN
This Plan shall be administered by the Stock Option Committee of the
Board (the "Committee") which shall be comprised of two (2) or more directors,
each of whom shall be a "non-employee director," as defined in Rule 16b-3,
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Committee shall have full power and authority (subject to the
provisions of this Plan) to establish such rules and regulations as it may deem
appropriate for the proper Plan administration and to construe the terms of and
make such determinations under, and issue such interpretations of, this Plan and
any outstanding option grants as it may deem necessary or advisable. Decisions
of the Committee shall be final and binding on all parties who have an interest
in this Plan or any outstanding option.
3. PERSONS ELIGIBLE TO RECEIVE OPTION GRANTS
(a) The persons eligible to receive option grants pursuant to
this Plan ("Optionees") are limited to key employees (including
officers and directors) of the Corporation (or its Parent or Subsidiary
(as such terms are hereinafter defined) corporations) who render
services which contribute to the success and growth of the Corporation
(or its Parent or Subsidiary corporations) or which may reasonably be
anticipated to contribute to the future success and growth of the
Corporation (or its Parent or Subsidiary corporations).
(b) The Committee shall have full authority to determine, with
respect to the option grants made under this Plan, which eligible
individuals are to receive option grants, the number of shares to be
covered by each such grant, the status of the granted option as either
an Incentive Option or a Non-Statutory Option (as such terms are
hereinafter defined), the time or times at which each granted option is
to become exercisable and the maximum term for which the option may
remain outstanding.
<PAGE> 2
4. STOCK SUBJECT TO THIS PLAN
(a) The stock issuable under this Plan shall be shares of the
Corporation's authorized but unissued or reacquired Class A convertible
common stock, par value $.0001 per share ("Common Stock"). The maximum
number of shares which may be issued over the term of this Plan shall
not exceed 9,500,000 shares. However, any shares of Common Stock issued
under the Corporation's Third Amended and Restated 1991 Stock Issuance
Plan will reduce, on a share-for-share basis, the number of shares
issuable under this Plan. The total number of shares issuable in the
aggregate under this Plan and the Third Amended and Restated 1991 Stock
Issuance Plan shall be subject to adjustment from time to time in
accordance with the provisions of Section 4(c) of this Article I.
(b) Shares subject to (i) the portion of one or more
outstanding options which are not exercised prior to expiration or
termination and (ii) outstanding options cancelled in accordance with
the cancellation-regrant provisions of Section 5 of Article II will be
available for subsequent option grants under this Plan. The shares
which shall not be available for subsequent option grants under this
Plan include (A) shares subject to an option surrendered under this
Plan in connection with a Change in Control (as such term is
hereinafter defined) and (B) shares issued pursuant to the exercise of
an option (whether as vested or unvested shares) which are repurchased
by the Corporation.
(c) In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of shares of Common
Stock or other securities), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of securities of the Corporation,
or other similar corporate transaction or event affects the benefits or
potential benefits intended to be made available under this Plan such
that an adjustment is determined by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential
bene fits intended to be made available under this Plan, then the
Committee may, in such manner as it may deem equitable, adjust any or
all of (i) the number of shares of Common Stock subject to this Plan
and which thereafter may be made the subject of options under this
Plan, (ii) the number of shares of Common Stock subject to outstanding
options, (iii) the nature of the consideration (including, without
limitation, other securities of the Corporation, securities of another
entity and/or other property) to be received upon exercise of an option
and/or (iv) the grant, purchase or exercise price with respect to any
option, or, if deemed appropriate, make provisions for a cash payment
to the holder of an outstanding option; provided, however, in each
case, that with respect to Incentive Options no such adjustment shall
be authorized to the extent that such adjustment would cause this Plan
to violate Section 422(b)(1) or 424(a) of the Code (as such term is
hereinafter defined) or any successor provisions thereto; and provided
further, however, that the number of shares of Common Stock subject to
any option payable or denominated in shares of Common Stock shall
always be a whole number. Notwithstanding the foregoing, Non-Statutory
Options shall be subject to only such adjustment as shall be necessary
to maintain the proportionate interest of the Optionee and preserve,
without exceeding, the value of such option.
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(d) Common Stock issuable under this Plan may be subject to
such restrictions as may be determined by the Committee, including,
without limitation, restrictions on transfer, repurchase rights and
other restrictions.
5. DEFINITIONS
The following definitional provisions shall be in effect for
all purposes under this Plan:
(a) Board means the board of directors of WebLink Wireless,
Inc.
(b) Change in Control means the acquisition of fifty percent
(50%) or more of the Corporation's outstanding voting stock pursuant to
a tender or exchange offer made by a person or group of related persons
(other than the Corporation or a person that directly or indirectly
controls, is controlled by or is under common control with the
Corporation) which the Board does not recommend to the stockholders.
(c) Code means the Internal Revenue Code of 1986, as amended.
(d) Corporation means WebLink Wireless, Inc., a Delaware
corporation.
(e) Corporate Transaction means one or more of the following
stockholder-approved transactions:
(i) a merger or consolidation in which the
Corporation is not the surviving entity, provided securities
possessing fifty percent (50%) or more of the total combined
voting power of the Corporation's outstanding voting
securities are transferred to a person or persons different
from those who held such securities immediately prior to such
transaction,
(ii) the sale, transfer or other disposition of all
or substantially all of the assets of the Corporation other
than in the ordinary course of business, or
(iii) any reverse merger in which the Corporation is
the surviving entity but in which securities possessing fifty
percent (50%) or more of the total combined voting power of
the Corporation's outstanding voting securities are
transferred to person or persons different from those who held
such securities immediately prior to such merger.
In no event shall any merger, consolidation or other reorganization
involving the Corporation be deemed to constitute a Corporate
Transaction if the primary purpose of such transaction is either to
change the State in which the Corporation is incorporated or to create
a holding-company structure whereby the Corporation's stockholders of
record become the stockholders of the holding company.
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(f) Employee means an individual who is in the employ of the
Corporation or one or more Parent or Subsidiary corporations. An
Optionee shall be considered to be an Employee for so long as such
individual remains in the employ of the Corporation or one or more
Parent or Subsidiary corporations, subject to the control and direction
of the employer entity as to both the work to be performed and the
manner and method of performance.
(g) Exercise Date shall be the date on which both (i) written
notice of the exercise of an outstanding option under this Plan and
(ii) payment of the option price are delivered to the Corporation.
(h) Fair Market Value of a share of Common Stock on any
relevant date shall be determined in accordance with the following
provisions:
(i) If the Common Stock is not at the time listed or
admitted to trading on any national securities exchange but is
traded in the over-the-counter market, the Fair Market Value
shall be the mean between the highest bid and the lowest asked
prices (or, if such information is available, the closing
sales price) per share of Common Stock on the date in question
in the over-the-counter market, as such prices are reported by
the National Association of Securities Dealers through its
Nasdaq National Market System or any successor system. If
there are no reported bid and asked prices (or closing sales
price) for the Common Stock on the date in question, then the
mean between the highest bid and lowest asked prices (or
closing sales price) on the last preceding date for which such
quotations exist shall be determinative of Fair Market Value.
(ii) If the Common Stock is at the time listed or
admitted to trading on any national securities exchange, then
the Fair Market Value shall be the closing sales price per
share of Common Stock on the date in question on the national
securities exchange determined by the Committee to be the
primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on
such exchange. If there is no reported sale of Common Stock on
such exchange on the date in question, then the fair market
value shall be the closing sales price on the exchange on the
last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither
listed nor admitted to trading on any national securities
exchange nor traded in the over-the-counter market, or if the
Committee determines that the valuation provisions of
subparagraphs (i) and (ii) above will not result in a true and
accurate valuation of the Common Stock, then the Fair Market
Value shall be determined by the Committee after taking into
account such factors as the Committee shall deem appropriate
under the circumstances.
(i) Incentive Option means an incentive stock option which
satisfies the requirements of Section 422 of the Code.
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(j) Non-Statutory Option means an option that does not meet
(whether at the time of the grant of such option or subsequently) the
statutory requirements prescribed for an Incentive Option.
(k) Notice of Grant means written notification (in
substantially the form attached hereto as EXHIBIT B) of the grant of an
option pursuant to this Plan.
(l) Parent corporation means any corporation which, directly
or indirectly, owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all
classes of stock of the Corporation.
(m) Permanent Disability shall have the meaning set forth in
Section 22(e)(3) of the Code, or any successor provision thereto.
(n) Plan means this Fifth Amended and Restated 1991 Stock
Option Plan of the Corporation.
(o) Service means the performance of services for the
Corporation or one or more Parent or Subsidiary corporations by an
individual in the capacity of an Employee or a non- employee member of
the Board or the board of directors of such Parent or Subsidiary
corporations, unless a different meaning is specified in the Stock
Option Agreement. An Optionee shall be deemed to remain in Service for
so long as such individual renders services to the Corporation or any
Parent or Subsidiary corporation on a periodic basis in the capacity of
an Employee or a non-employee member of the Board or the board of
directors of such Parent or Subsidiary corporation.
(p) Stock Option Agreement means a stock option agreement, in
substantially the form attached hereto as EXHIBIT A and incorporated
herein by reference (the "Stock Option Agreement"), incorporating any
repurchase rights or first refusal rights retained by the Corporation
with respect to the Common Stock purchased under an option.
(q) Subsidiary corporation means any corporation of which the
Corporation, directly or indirectly, owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock of the corporation
in question.
(r) 10% Stockholder means the owner of stock (as determined
under Section 424(d) of the Code) possessing 10% or more of the total
combined voting power and value of all classes of stock of the
Corporation or any Parent or Subsidiary corporation.
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ARTICLE II
OPTION GRANTS
1. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to this Plan shall be authorized by action of
the Committee and may, at the discretion of the Committee, be either Incentive
Options or Non-Statutory Options. Each granted option shall be evidenced by a
Stock Option Agreement and a Notice of Grant; provided, however, that each Stock
Option Agreement shall comply with and incorporate the terms and conditions
specified below. Each Stock Option Agreement evidencing an Incentive Option
shall, in addition, be subject to the applicable provisions of Section 2 of this
Article II.
(a) Option Price.
(i) The option price per share shall be fixed by the
Committee; provided, however, that in no event shall the
option price per share be less than eighty-five percent (85%)
for Non-Statutory Options or less than one hundred percent
(100%) for Incentive Options of the Fair Market Value of a
share of Common Stock on the date of the option grant.
(ii) If the individual to whom the option is granted
is at the time a 10% Stockholder and the option granted is an
Incentive Option, then the option price per share shall not be
less than one hundred ten percent (110%) of the Fair Market
Value of the Common Stock on the grant date.
(iii) The option price shall be payable in such form
and by such method as shall be determined by the Committee,
including, without limitation, cash (subject to the provisions
of Article III, Section 1), shares of Common Stock, other
securities or other property or any combination thereof,
having a fair market value (as determined in accordance with
the terms of this Plan in the case of Common Stock and in all
other cases by such methods or procedures as shall be
authorized by the Committee) on the Exercise Date equal to the
relevant exercise price (including payment in accordance with
a cashless exercise program under which, if so instructed by
the person exercising the option, shares of Common Stock may
be issued directly to such person's broker or dealer upon
receipt of the purchase price in cash from the broker or
dealer).
(b) Term and Exercise of Options. Each option granted under
this Plan shall be exercisable at such time or times, during such
period, and for such number of shares of Common Stock as shall be
determined by the Committee and set forth in the Stock Option Agreement
evidencing such option. However, no option granted under this Plan
shall have
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<PAGE> 7
a term in excess of ten (10) years from the grant date, and no
Incentive Option granted to a 10% Stockholder shall have a term in
excess of five (5) years from the grant date.
(c) Nontransferability of Options. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee or by
the Optionee's duly appointed guardian or personal representative and
shall not be assignable or transferable by the Optionee otherwise than
by will or by the laws of descent and distribution following the
Optionee's death.
(d) Termination of Service.
(i) Should an Optionee cease to remain in Service for
any reason other than (i) Permanent Disability, (ii) death or
(iii) for Cause (as such term is hereinafter defined), an
option (to the extent otherwise exercisable on the date of
such termination) shall be exercisable by the Optionee at any
time prior to the expiration date of the option (except as
otherwise provided pursuant to Section 6 of this Article II)
or within three (3) months after the date of such termination,
whichever is the shorter period.
(ii) If an Optionee's Service ceases by reason of the
Optionee's Permanent Disability, an option (to the extent
otherwise exercisable on the date of such termination by
reason of Permanent Disability) shall remain exercisable by
the Optionee at any time prior to the expiration date of the
option (except as otherwise provided pursuant to Section 6 of
this Article II) or within twelve (12) months after the date
of such termination, whichever is the shorter period.
(iii) If an Optionee's Service ceases as a result of
death, an option (to the extent otherwise exercisable on the
date of the death of such Optionee) shall remain exercisable
by the person or persons entitled to do so under the
Optionee's will, or, if the Optionee shall fail to make
testamentary disposition of said option or shall die
intestate, by the Optionee's legal representative or
representatives, at any time prior to the expiration date of
the option (except as otherwise provided pursuant to Section 6
of this Article II) or within twelve (12) months after the
date of such death, whichever is the shorter period.
(iv) If the Optionee's Service ceases as a result of
termination for Cause (as hereinafter defined), any then
outstanding options of such Optionee shall automatically
terminate as of the termination date. As used herein,
termination for "Cause" shall mean termination upon the
occurrence of one or more of the following events:
(A) The Optionee's failure to substantially
perform his duties with the Corporation or any Parent
or Subsidiary corporation as determined by the
Committee in its sole discretion following receipt by
the Optionee of written notice of such failure and
the Optionee's failure to remedy such failure within
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<PAGE> 8
thirty (30) days after receipt of such notice (other
than failure from his incapacity during physical or
mental illness);
(B) The Optionee's willful failure or
refusal to perform specific directives of the Board,
which directives are consistent with the scope and
nature of the Optionee's duties and responsibilities,
and which are not remedied by the Optionee within
thirty (30) days after being notified in writing of
his failure by the Board;
(C) The Optionee's conviction of a felony;
or
(D) A breach of the Optionee's fiduciary
duty to the Corporation or any Parent or Subsidiary
corporation or willful violation in the course of
performing his duties for the Corporation or any
Parent or Subsidiary corporation of any law, rule or
regulation (other than traffic violations or other
minor offenses). No act or failure to act on the
Optionee's part shall be considered willful unless
done or omitted to be done in bad faith and without
reasonable belief that the action or omission was in
the best interest of the Corporation or any Parent or
Subsidiary corporation.
(e) Stockholder Rights. No shares of Common Stock shall be
issued until payment, as provided herein, therefor has been made. An
Optionee shall have none of the rights of a stockholder with respect to
the Common Stock covered by an option until such Optionee shall have
exercised the option and paid the option price.
2. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Plan. Incentive Options may only be granted
to individuals who are Employees. Options which are specifically designated as
Non-Statutory Options when issued under this Plan shall not be subject to such
terms and conditions.
(a) Option Price. The option price per share of the Common
Stock subject to an Incentive Option shall in no event be less than one
hundred percent (100%) of the Fair Market Value of a share of Common
Stock on the grant date.
(b) Dollar Limitation. The aggregate Fair Market Value
(determined as of the respective date or dates of grant) of the Common
Stock for which one or more options granted to any Employee under this
Plan (or any other plan of the Corporation or any Parent or Subsidiary
corporation) may for the first time become exercisable as incentive
stock options under the Federal tax laws during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To
the extent the Employee holds two or more such options which become
exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability thereof as Incentive Options under the
Federal tax
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<PAGE> 9
laws shall be applied on the basis of the order in which such options
are granted. In the event the limits of this Section 2(b) would
otherwise be exceeded, the Optionee may still exercise the options, but
such option, to the extent of such excess, shall be deemed to be a
Non-Statutory Option. Except as modified by the preceding provisions of
this Section 2, all the provisions of this Plan shall be applicable to
the Incentive Options granted hereunder.
3. LIMITED SURRENDER RIGHTS
(a) Should a Change in Control occur at a time when the
Corporation's outstanding capital stock is registered under Section 12
of the Exchange Act, then each Optionee who is at the time an officer
or director of the Corporation subject to the short-swing profit
restrictions of the Federal securities laws shall have the right to
surrender any or all options held by such individual under this Plan,
to the extent such options have been outstanding for at least six (6)
months and are at the time exercisable for vested shares. In return for
each surrendered option, the officer or director shall receive an
appreciation distribution from the Corporation in an amount equal to
the excess of (i) the aggregate Acquisition Price (as such term is
hereinafter defined) of the number of shares in which such individual
is at the time vested under the surrendered option over (ii) the
aggregate option price payable for such vested shares. Such limited
surrender right shall be exercisable for a period not to exceed thirty
(30) days following the completion of the Change in Control. Neither
the approval of the Committee nor the consent of the Board shall be
required for such surrender, and the distribution to which such
Optionee shall become entitled upon the option surrender shall be made
entirely in cash.
(b) The "Acquisition Price" per share of the vested Common
Stock subject to the surrendered option shall be deemed to be equal to
the greater of (i) the Fair Market Value per share on the date of
surrender or (ii) the highest reported price per share paid in
effecting the Change in Control of the Corporation's outstanding voting
stock. However, if the surrendered option is an Incentive Option, then
the Acquisition Price of the vested shares subject to the surrendered
option shall not exceed the clause (i) value per share.
4. CORPORATE TRANSACTIONS
(a) In the event of any Corporate Transaction, except as
otherwise provided in the agreement evidencing the grant of an option
hereunder, each option outstanding under this Plan shall automatically
accelerate so that each such option shall, immediately prior to the
specified effective date for such Corporate Transaction, become fully
exercisable with respect to the total number of shares of Common Stock
at the time subject to such option and may be exercised for all or any
portion of such shares.
(b) Upon the consummation of the Corporate Transaction, except
as otherwise provided in the agreement evidencing the grant of an
option hereunder, each option outstanding under this Plan shall
terminate and cease to be exercisable.
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<PAGE> 10
(c) The exercisability as incentive stock options under the
Federal tax laws of any options accelerated in connection with the
Corporate Transaction shall remain subject to the applicable dollar
limitation of subsection 2(b) of this Article II.
(d) The grant of options under this Plan shall in no way
affect the legal right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to
merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
5. CANCELLATION AND NEW GRANT OF OPTIONS
The Committee shall have the authority to effect, at any time and from
time to time, with the consent of the affected Optionees, the cancellation of
any or all outstanding options under this Plan and to grant in substitution
therefor new options under this Plan covering the same or different numbers of
shares of Common Stock but having an option price per share not less than
eighty-five percent (85%) of the Fair Market Value per share of Common Stock on
the new grant date (or one hundred percent (100%) of such Fair Market Value in
the case of an Incentive Option or, in the case of an Incentive Option held by a
10% Stockholder, not less than one hundred and ten percent (110%) of such Fair
Market Value).
6. EXTENSION OF EXERCISE PERIOD
The Committee shall have full power and authority to extend (either at
the time while the option is granted or at any time while the option remains
outstanding) the period of time for which the option is to remain exercisable
following an Optionee's cessation of Service, from the limited period set forth
in the Stock Option Agreement to such greater period of time as the Committee
may deem appropriate under the circumstances. In no event, however, shall such
option be exercisable after the specified expiration date of the option term.
ARTICLE III
MISCELLANEOUS
1. LOANS
(a) The Committee may assist any Optionee (including an
Optionee who is an officer or director of the Corporation) in the
exercise of one or more options granted to such Optionee under this
Plan, including the satisfaction of any Federal, State and local income
and employment tax obligations arising therefrom, by
(i) authorizing the extension of a loan from the
Corporation to such Optionee, or
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<PAGE> 11
(ii) permitting the Optionee to pay the option price
for the purchased Common Stock in installments over a period
of years.
(b) The terms of any loan or installment method of payment
(including the interest rate and terms of repayment) shall be
established by the Committee in its sole discretion. Loans or
installment payments may be granted with or without security or
collateral. In all events the maximum credit available to each Optionee
may not exceed the sum of (i) the aggregate option price or purchase
price payable for the purchased shares (less the par value payable for
the purchased shares) plus (ii) any Federal, State or local income and
employment tax liability incurred by the Optionee in connection with
such exercise.
(c) The Committee may, in its absolute discretion, determine
that one or more loans extended under the financial assistance program
shall be subject to forgiveness by the Corporation in whole or in part
upon such terms and conditions as the Committee in its discretion deems
appropriate.
2. AMENDMENT OF THIS PLAN AND AWARDS
(a) The Board shall have complete and exclusive power and
authority to amend, modify, suspend, discontinue or terminate this Plan
in any or all respects whatsoever. However, no such amendment,
modification, suspension, discontinuance or termination shall adversely
affect the rights and obligations of an Optionee with respect to
options at the time outstanding under this Plan, unless the Optionee
consents thereto. No option may be granted during any suspension of
this Plan or after its termination. In addition, the Board shall not,
without the approval of the Corporation's stockholders, amend this Plan
to (i) materially increase the maximum number of shares issuable under
this Plan (except for permissible adjustments under Article I, Section
4(c)), (ii) change the minimum option price, (iii) increase the maximum
terms for options granted hereunder, (iv) remove the administration of
this Plan from the Committee, (v) materially increase the benefits
accruing to individuals who participate in this Plan or (vi) materially
modify the eligibility requirements for participation in this Plan.
(b) Options to purchase shares of Common Stock may be granted
under this Plan which are in excess of the number of shares then
available for issuance under this Plan, provided there is obtained
Board approval of an amendment sufficiently increasing the number of
shares of Common Stock available for issuance under this Plan prior to
the actual option grant and stockholder approval of such amendment
prior to the exercise of the option. If such stockholder approval is
not obtained within twelve (12) months after the date the amendment to
this Plan is approved by the Board, then all options representing such
excess shall terminate and cease to be exercisable.
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<PAGE> 12
3. EFFECTIVE DATE AND TERM OF PLAN
(a) This Plan shall become effective when adopted by the
Board. All options previously granted under this Plan shall remain in
full force and effect, subject to the terms of the Stock Option
Agreements under which they were issued and this Plan.
(b) This Plan shall terminate upon the earlier of (i) August
19, 2001 or (ii) the date on which all shares available for issuance
under this Plan have been issued or cancelled pursuant to the exercise
or surrender of options granted hereunder. If the date of termination
is determined under clause (i) above, then no options outstanding on
such date shall be affected by the termination of this Plan, and such
securities shall thereafter continue to have force and effect in
accordance with the provisions of the Stock Option Agreements
evidencing such options.
4. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the issuance of
shares of Common Stock under this Plan shall be used for general corporate
purposes.
5. CONTINUATION OF EMPLOYMENT
Nothing contained in this Plan (or in any option granted pursuant to
this Plan) shall confer upon any Optionee any right to continue in the employ of
the Corporation or any Parent or Subsidiary corporation or constitute any
contract or agreement of employment or interfere in any way with the right of
the Corporation or any Parent or Subsidiary corporation to reduce any Optionee's
compensation from the rate in existence at the time of the granting of an option
or to terminate such Optionee's employment. Nothing contained herein or in any
Stock Option Agreement shall affect any other contractual rights of an Optionee.
6. WITHHOLDING
The Corporation's obligation to deliver shares upon the exercise or
surrender of any options granted under this Plan shall be subject to the
satisfaction of all applicable Federal, State and local income and employment
tax withholding requirements. The Corporation or any Parent or Subsidiary
corporation that employs any Optionee shall have the right to deduct any sums
that the Committee reasonably determines that Federal, State or local tax law
requires to be withheld with respect to the exercise of any option or as
otherwise may be required by those laws. Neither the Corporation nor any Parent
or Subsidiary corporation shall be obligated to advise any Optionee of the
existence of the tax or the amount which the employer corporation will be so
required to withhold. Upon the exercise of a Non-Statutory Option, if tax
withholding is required, an Optionee may, with the consent of the Committee,
have shares of Common Stock withheld ("Share Withholding") by the Corporation
from the shares otherwise to be received; provided, however, that if the
Optionee is subject to the provisions of Section 16 under the Exchange Act, no
Share Withholding shall be permitted unless such transaction complies with the
requirements of Rule 16b-3 promulgated under
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<PAGE> 13
the Exchange Act. The number of shares so withheld should have an aggregate Fair
Market Value on the date of exercise sufficient to satisfy the applicable
withholding taxes.
7. REGULATORY APPROVALS
The implementation of this Plan, the granting of any options hereunder
and the issuance of Common Stock upon the exercise or surrender of the option
grants made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over this Plan, the options granted under it and the Common Stock issued
pursuant to it. Without limiting the generality of the foregoing, no options
granted hereunder may be exercised and no shares of Common Stock issuable upon
exercise of such options may be transferred unless and until the Committee
determines that such exercise/transfer will be made in compliance with all
applicable laws, rules and regulations, including, without limitation,
applicable securities laws, rules and regulations. The Corporation does not have
any obligation to take any action to (i) register or qualify options or shares
of Common Stock pursuant to applicable laws or to perfect an exemption from such
registration/qualification requirements or (ii) list the shares of Common Stock
for trading on any stock exchange or automated transaction reporting system.
8. GOVERNING LAW
This Plan and the options issued hereunder shall be governed by, and
construed and enforced in accordance with, the laws of the State of Texas
applicable to contracts made and performed within that State.
9. COMPLIANCE WITH RULE 16B-3
At such time and so long as the Corporation shall have a class of
equity securities registered under Section 12 of the Exchange Act, it is
intended that this Plan be applied and administered in compliance with Rule
16b-3. If any provision of this Plan would be in violation of Rule 16b-3 if
applied as written, such provision shall not have effect as written and shall be
given effect so as to comply with Rule 16b-3, as determined by the Committee.
The Board is authorized to amend this Plan and to make any such modifications to
the Stock Option Agreements to comply with Rule 16b-3, as it may be amended from
time to time, and to make any other such amendments or modifications deemed
necessary or appropriate to better accomplish the purposes of this Plan in light
of any amendments made to Rule 16b-3.
10. NO LIABILITY FOR GOOD FAITH DETERMINATIONS
Neither the members of the Board nor any member of the Committee shall
be liable for any action, failure to act, omission or determination taken or
made in good faith with respect to this Plan or any option granted under it.
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<PAGE> 14
11. OTHER BENEFITS
Participation in this Plan shall not preclude the Optionee from
eligibility in any other stock option plan of the Company or any Parent or
Subsidiary corporation or any old age, benefit, insurance, pension, profit
sharing, retirement, bonus or other extra compensation plans which the
Corporation or any Parent or Subsidiary corporation has adopted, or may, at any
time, adopt for the benefit of its employees.
12. EXECUTION OF RECEIPTS AND RELEASES
Any payment or any issuance or transfer of shares of Common Stock to an
Optionee, or to his legal representative, heir, legatee or distributee, in
accordance with the provisions hereof, shall, to the extent thereof, be in full
satisfaction of all claims of such persons hereunder. The Committee may require
any Optionee, legal representative, heir, legatee or distributee, as a condition
precedent to such payment, to execute a release and receipt therefor in such
form as it shall determine.
13. PAYMENT OF EXPENSES
All expenses incident to the administration, termination or performance
of this Plan, including, without limitation, legal and accounting fees, shall be
paid by the Corporation. All expenses incurred by an Optionee shall be paid by
such Optionee.
14. CORPORATE RECORDS
Records of the Corporation or any Parent or Subsidiary corporation
regarding the Optionee's period of employment, termination of employment and the
reason therefor, leaves of absence, re-employment and other matters shall be
conclusive for all purposes hereunder, unless determined by the Board to be
incorrect.
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<PAGE> 15
EXHIBIT A
STOCK OPTION AGREEMENT
<PAGE> 16
EXHIBIT A
STOCK OPTION AGREEMENT
WITNESSETH:
RECITALS
Section A. The Board of Directors of WebLink Wireless, Inc., a Delaware
corporation (the "Company"), has adopted the WebLink Wireless, Inc. Fifth
Amended and Restated 1991 Stock Option Plan (the "Plan") for the purpose of
attracting and retaining the services of selected key employees (including
officers and directors) and non-employee members of the Board who contribute to
the financial success of the Company.
Section B. Optionee is an individual who is to render valuable services to the
Company, and this Agreement is executed pursuant to, and is intended to carry
out the purposes of, the Plan in connection with the Company's grant of a stock
option to Optionee.
Section C. Capitalized terms used in this Agreement shall, unless the context
clearly indicates otherwise, have the meaning assigned to such terms in
Paragraph 24 of this Agreement.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. Subject to and upon the terms and conditions set forth in
this Agreement, the Company hereby grants to Optionee, as of the Grant Date, a
stock option to purchase up to that number of Option Shares as is specified in
the Grant Notice. The Option Shares shall be purchasable from time to time
during the option term at the Option Price per share specified in the Grant
Notice.
2. Option Term. This option shall have a maximum term of ten (10) years measured
from the Grant Date and shall accordingly expire at the close of business on the
expiration date specified in the Grant Notice, unless sooner terminated in
accordance with Paragraphs 5 or 6 of this Agreement.
3. Option Nontransferable; Exception. This option shall be neither transferable
nor assignable by Optionee other than by will or by the laws of descent and
distribution following the Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. Dates of Exercise. This option is exercisable for the Option Shares in one or
more installments as is specified in the Grant Notice. As this option becomes
exercisable in one or more installments, the installments shall accumulate and
this option shall remain exercisable for such installments until the expiration
date or the sooner termination of the option term under Paragraphs 5 or 6 of
this Agreement.
<PAGE> 17
5. Termination of Service.
(i) Should Optionee cease to remain in Service for any reason
other than (a) Permanent Disability, (b) death or (c) for Cause, this
option (to the extent otherwise exercisable on the date of such
termination) shall be exercisable by Optionee at any time prior to the
expiration date of the option (except as otherwise extended by the
Committee) or within three (3) months after the date of such
termination, whichever is the shorter period.
(ii) If Optionee's Service ceases by reason of Optionee's
Permanent Disability, this option (to the extent otherwise exercisable
on the date of such termination by reason of Permanent Disability)
shall remain exercisable by Optionee at any time prior to the
expiration date of this option (except as otherwise extended by the
Committee) or within twelve (12) months after the date of such
termination, whichever is the shorter period.
(iii) If Optionee's Service ceases as a result of death, this
option (to the extent otherwise exercisable on the date of the death of
Optionee) shall remain exercisable by the person or persons entitled to
do so under Optionee's will or, if Optionee shall fail to make
testamentary disposition of this option or shall die intestate, by
Optionee's legal representative or representatives, at any time prior
to the expiration date of this option (except as otherwise extended by
the Committee) or within twelve (12) months after the date of such
death, whichever is the shorter period.
(iv) If Optionee's Service ceases as a result of termination
for Cause, then this option shall automatically terminate as of the
termination date. As used herein, termination for "Cause" shall mean
termination upon the occurrence of one or more of the following events:
(a) Optionee's failure to substantially perform his
duties with the Company or any Parent or Subsidiary
corporation as determined by the Committee in its sole
discretion following receipt by Optionee of written notice of
such failure and Optionee's failure to remedy such failure
within thirty (30) days after receipt of such notice (other
than failure from his incapacity during physical or mental
illness);
(b) Optionee's willful failure or refusal to perform
specific directives of the Board, which directives are
consistent with the scope and nature of Optionee's duties and
responsibilities, and which are not remedied by Optionee
within thirty (30) days after being notified in writing of his
failure by the Board;
(c) Optionee's conviction of a felony; or
(d) A breach of Optionee's fiduciary duty to the
Company or any Parent or Subsidiary corporation or willful
violation in the course of performing his duties for the
Company or any Parent or Subsidiary corporation of any law,
rule or
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<PAGE> 18
regulation (other than traffic violations or other minor
offenses). No act or failure to act on Optionee's part shall
be considered willful unless done or omitted to be done in bad
faith and without reasonable belief that the action or
omission was in the best interest of Company or any Parent or
Subsidiary corporation.
6. Corporate Transaction.
A. In connection with a Corporate Transaction, the exercisability of
this option shall automatically accelerate so that this option shall,
immediately prior to the specified effective date for such Corporate
Transaction, become fully exercisable with respect to the Option Shares and may
be exercised for all or any portion of such Option Shares.
B. Upon the consummation of the Corporate Transaction, this option
shall terminate and cease to be exercisable.
C. The exercisability of this option as an Incentive Option under the
Federal tax laws (if designated as such in the Grant Notice) shall, in
connection with any such Corporate Transaction, be subject to the applicable
dollar limitation of Paragraph 21 of this Agreement.
D. This Agreement shall not in any way affect the legal right of the
Company to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
7. Adjustment in Option Shares. In the event that the Committee shall determine
that any dividend or other distribution (whether in the form of shares of Common
Stock or other securities), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of securities of the Company, or other similar corporate
transaction or event affects the benefits or potential benefits intended to be
made available under this Plan such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under this option,
then the Committee may, in such manner as it may deem equitable, adjust any or
all of (i) the number of Option Shares subject to this option, (ii) the Option
Price payable hereunder and/or (iii) the nature of the consideration (including,
without limitation, other securities of the Company, securities of another
entity and/or other property); provided, however, in each case, that with
respect to Incentive Options no such adjustment shall be authorized to the
extent that such adjustment would cause the Plan or this option to violate
Section 422(b)(1) or 424(a) of the Code or any successor provisions thereto; and
provided further, however, that the number of Option Shares subject to this
option shall always be a whole number. Notwithstanding the foregoing,
Non-Statutory Options shall be subject to only such adjustment as shall be
necessary to maintain the proportionate interest of Optionee and preserve,
without exceeding, the value of this option.
8. Privilege of Stock Ownership. No shares of Common Stock shall be issued until
payment, as provided herein, therefor has been made. The Optionee shall not have
any of the rights of a
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<PAGE> 19
stockholder with respect to the Option Shares until such Optionee shall have
exercised this option and paid the Option Price.
9. Manner of Exercising Option.
A. In order to exercise this option with respect to all or any part of
the Option Shares for which this option is at the time exercisable, the holder
of this option must take the following actions:
(i) Provide to the Company, in the written, telephonic, or
electronic form designated by the Company, such information as is
requested by the Company to determine the number of Option Shares with
respect to which this option is exercised;
(ii) Pay the aggregate Option Price for the purchased Option
Shares in cash (subject to the provisions of Paragraph 15 of this
Agreement) or shares of Common Stock, other securities or other
property, or any combination thereof, having a fair market value (as
determined in accordance with the terms of this Agreement in the case
of Common Stock and in all other cases by such methods or procedures as
shall be authorized by the Committee) on the Exercise Date equal to the
Option Price.
(iii) Furnish to the Company appropriate documentation that
the person or persons exercising this option (if other than Optionee)
have the right to exercise this option.
B. As soon as practical following satisfaction of the foregoing
provisions of this Paragraph 9, the Company shall mail or deliver to Optionee
(or to the other person or persons exercising this option) a certificate or
certificates representing the Option Shares so purchased and paid for, with the
appropriate legends affixed thereto.
C. In no event may this option be exercised for any fractional shares
of Common Stock.
10. Market Stand-Off Provisions.
A. In connection with any underwritten public offering by the Company
of its equity securities pursuant to an effective registration statement filed
under the Securities Act of 1933, as amended (the "1933 Act"), Owner shall not
sell, make any short sale of, loan, hypothecate, pledge, grant any option for
the purchase of, or otherwise dispose or transfer for value or otherwise agree
to engage in any of the foregoing transactions with respect to any purchased
Option Shares without the prior written consent of the Company or its
underwriters. Such limitations shall be in effect for such period of time from
and after the effective date of such registration statement as may be requested
by the Company or such underwriters; provided, however, that in no event shall
such period exceed one hundred-eighty (180) days.
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<PAGE> 20
B. Owner shall be subject to the market stand-off provisions of this
Paragraph 10 provided and only if the officers and directors of the Company are
also subject to similar arrangements.
C. In the event of any stock dividend, stock split, recapitalization or
other change affecting the Company's outstanding Common Stock effected as a
class without receipt of consideration, then any new, substituted or additional
securities distributed with respect to purchased Option Shares shall be
immediately subject to the provisions of this Paragraph 10, to the same extent
purchased Option Shares are at such time covered by such provisions.
D. In order to enforce the limitations of this Paragraph 10, the
Company may impose stop-transfer instructions with respect to purchased Option
Shares until the end of the applicable stand-off period.
11. Compliance with Laws and Regulations.
A. The exercise of this option and the issuance of Option Shares upon
such exercise shall be subject to compliance by the Company and the Optionee
with all applicable requirements of law relating thereto and with all applicable
regulations of any stock exchange on which shares of the Common Stock may be
listed at the time of such exercise and issuance. Without limiting the
generality of the foregoing, this option may not be exercised and no Option
Shares may be transferred unless and until the Committee determines that such
exercise/transfer will be made in compliance with all applicable laws, rules and
regulations, including, without limitation, applicable securities laws, rules
and regulations. The Company does not have any obligation to take any action to
(i) register or qualify this option or any Option Shares pursuant to applicable
laws or to perfect an exemption from such registration/qualification
requirements or (ii) list the Option Shares for trading on any stock exchange or
automated transaction reporting system.
B. In connection with the exercise of this option, Optionee shall
execute and deliver to the Company such representations in writing as may be
requested by the Company in order for it to comply with the applicable
requirements of Federal and state securities laws.
C. Unless the issuance of purchased Option Shares to the Optionee has
been registered under the 1933 Act and all other applicable securities/blue sky
statutes, Optionee hereby confirms that Optionee has been informed that
purchased Option Shares are restricted securities under the 1933 Act and such
other securities/blue sky statutes and may not be resold or transferred unless
such shares are first registered under such act and such securities/blue sky
statutes or unless an exemption from such registration is available.
Accordingly, Optionee hereby acknowledges that Optionee is prepared to hold
purchased Option Shares for an indefinite period.
D. In order to reflect the restrictions on disposition of purchased
Option Shares imposed by this Agreement, the stock certificates representing the
purchased Option Shares will be endorsed as applicable with one or more of the
following restrictive legends:
-5-
<PAGE> 21
(i) "The shares represented by this certificate have not been
registered under the Securities Act of 1933 or any other applicable
securities laws. The shares may not be sold or offered for sale in the
absence of (a) an effective registration statement for the shares under
such Act and all other applicable securities laws, (b) a 'no action'
letter of the Securities and Exchange Commission with respect to such
sale or offer, or (c) satisfactory assurances to the Company that
registration under such Act and all other applicable securities laws is
not required with respect to such sale or offer."
(ii) "This certificate and the shares represented hereby may
not be sold, assigned, transferred, encumbered, or in any manner
disposed of except in conformity with the terms of a written agreement
dated _________________, ______ between the Company and the registered
holder of the shares (or the predecessor in interest to the shares).
The Company will upon written request furnish a copy of such agreement
to the holder hereof without charge."
12. Successors and Assigns. Except to the extent otherwise provided in Paragraph
3, the provisions of this Agreement shall inure to the benefit of, and be
binding upon, the successors, administrators, heirs, legal representatives and
assigns of Optionee and the successors and assigns of the Company, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms and conditions hereof.
13. Liability of Company.
A. If the Option Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without stockholder
approval be issued under the Plan, then this option shall be void with respect
to such excess shares, unless stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained. If such stockholder approval is not obtained within twelve (12) months
after the date the amendment to the Plan is approved by the Board, then the
right to acquire any such excess shares evidenced by this Agreement shall
terminate.
B. The inability of the Company to obtain approval from any regulatory
body having authority deemed by the Company to be necessary to the lawful
issuance and sale of any Common Stock pursuant to this option shall relieve the
Company of any liability with respect to the non-issuance or sale of the Common
Stock as to which such approval shall not have been obtained.
14. Notices. Any notice required to be given or delivered to the Company under
the terms of this Agreement shall be in writing and addressed to the Company in
care of the Corporate Secretary at the Company's principal corporate offices.
Any notice required to be given or delivered to Optionee shall be in writing and
addressed to Optionee at the address indicated below Optionee's signature line
on the Grant Notice. All notices shall be deemed to have been given or delivered
upon personal delivery or upon deposit in the U.S. mail, postage prepaid and
properly addressed to the party to be notified.
-6-
<PAGE> 22
15. Loans. The Committee may, in its absolute discretion and without any
obligation to do so, assist the Optionee in the exercise of this option by (i)
authorizing the extension of a loan to the Optionee from the Company or (ii)
permitting the Optionee to pay the option price for the purchased Common Stock
in installments over a period of years. The terms of any such loan or
installment method of payment (including the interest rate, the requirements for
collateral and the terms of repayment) shall be established by the Committee in
its sole discretion.
16. Construction. This Agreement and the option evidenced hereby are made and
granted pursuant to the Plan and are in all respects limited by and subject to
the express terms and provisions of the Plan. Optionee hereby acknowledges
receipt of a copy of the Plan. All decisions of the Committee with respect to
any question or issue arising under the Plan or this Agreement shall be
conclusive and binding on all persons having an interest in this option.
17. Governing Law. The interpretation, performance, and enforcement of this
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Texas, as such laws are applied to contracts entered into and
performed in such State without giving effect to the principles of conflict of
laws thereof. To the maximum extent practicable, this Agreement will be deemed
to call for performance in Dallas County, Texas.
18. No Waiver. No waiver of any breach or condition of this Agreement shall be
deemed to be a waiver of any other or subsequent breach or condition, whether of
like or different nature.
19. Optionee Undertaking. Optionee hereby agrees to take whatever additional
action and execute whatever additional documents the Company may in its judgment
deem necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either Optionee or purchased Option
Shares pursuant to the express provisions of this Agreement.
20. Agreement is Entire Contract. This Agreement, together with the Plan and the
Grant Notice, constitutes the entire contract between the parties hereto with
regard to the subject matter hereof. This Agreement may not be amended except by
written agreement of the parties hereto.
21. Additional Terms Applicable to an Incentive Option. In the event this
option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
A. This option shall cease to qualify for favorable tax treatment as an
Incentive Option under the Federal tax laws if (and to the extent) this option
is exercised for one or more Option Shares: (i) more than three (3) months after
the date the Optionee ceases to be an Employee for any reason other than death
or Permanent Disability or (ii) more than one (1) year after the date the
Optionee ceases to be an Employee by reason of Permanent Disability.
B. The aggregate Fair Market Value (determined as of the Grant Date) of
the Option Shares for which this option first becomes exercisable together with
any option granted Optionee
-7-
<PAGE> 23
under any other plan of the Company or any Parent or Subsidiary corporation as
incentive stock options under the Federal tax laws during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent Optionee holds two or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability thereof as Incentive Options under the Federal tax laws shall be
applied on the basis of the order in which such options are granted. In the
event the limits of this Paragraph 21B would otherwise be exceeded, Optionee may
still exercise the options, but such options, to the extent of such excess,
shall be deemed to be a Non-Statutory Option.
C. In the event this option is designated as an installment option in
the Grant Notice, no installment under this option (whether annual or monthly)
shall qualify for favorable tax treatment as an Incentive Option under the
Federal tax laws if (and to the extent) the aggregate Fair Market Value
(determined at the Grant Date) of the Common Stock for which such installment
first becomes exercisable hereunder will, when added to the aggregate Fair
Market Value (determined as of the respective date or dates of grant) of the
Common Stock for which this option or one or more other Incentive Options
granted to the Optionee prior to the Grant Date (whether under the Plan or any
other option plan of the Company or any Parent or Subsidiary corporations) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate.
D. Should the exercisability of this option be accelerated upon a
Corporate Transaction, then this option shall qualify for favorable tax
treatment as an Incentive Option under the Federal tax laws only to the extent
the aggregate Fair Market Value (determined at the Grant Date) of the Common
Stock for which this option first becomes exercisable in the calendar year in
which the Corporate Transaction occurs does not, when added to the aggregate
Fair Market Value (determined as of the respective date or dates of grant) of
the Common Stock for which this option or one or more other Incentive Options
granted to the Optionee prior to the Grant Date (whether under the Plan or any
other option plan of the Company or any Parent or Subsidiary corporations) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate.
E. To the extent this option should fail to qualify as an Incentive
Option under the Federal tax laws, Optionee will recognize compensation income
in connection with the acquisition of one or more Option Shares hereunder, and
Optionee must make appropriate arrangements for the satisfaction of all Federal,
state or local income tax withholding requirements and Federal social security
employee tax requirements applicable to such compensation income.
22. Additional Terms Applicable to a Non-Statutory Option. In the event this
option is designated a Non-Statutory Option in the Grant Notice or as otherwise
provided in Paragraph 21 of this Agreement, Optionee hereby agrees to make
appropriate arrangements with the Company for the satisfaction of all Federal,
state or local income tax withholding requirements, Federal social security
employee tax requirements, Federal Medicare requirements and other similar
requirements applicable to the exercise of this option. The Company's obligation
to deliver Option Shares upon the exercise of this option shall be subject to
the satisfaction of all applicable Federal, State and local
-8-
<PAGE> 24
income and employment tax withholding requirements. The Company or any Parent or
Subsidiary corporation that employs Optionee shall have the right to deduct any
sums that the Committee reasonably determines that Federal, State or local tax
law requires to be withheld with respect to the exercise of this option or as
otherwise may be required by those laws. Neither the Company nor any Parent or
Subsidiary corporation shall be obligated to advise Optionee of the existence of
the tax or the amount which the employer corporation will be so required to
withhold. Upon the exercise of a Non-Statutory Option, if tax withholding is
required, Optionee may, with the consent of the Committee, have Option Shares
withheld ("Share Withholding") by the Company from the Option Shares otherwise
to be received; provided, however, that if Optionee is subject to the provisions
of Section 16 under the Securities Exchange Act of 1934 (as amended) (the
"Exchange Act"), no Share Withholding shall be permitted unless such transaction
complies with the requirements of Rule 16b-3 promulgated under the Exchange Act.
The number of Option Shares so withheld should have an aggregate Fair Market
Value on the date of exercise sufficient to satisfy the applicable withholding
taxes.
23. Limited Stock Appreciation Right. Optionee is hereby granted a limited stock
appreciation right, exercisable upon the terms and conditions set forth below:
A. The stock appreciation right shall become exercisable in connection
with a Change in Control. However, such right shall under no circumstances
become exercisable until it has been outstanding for a period of at least six
(6) months measured from the Grant Date of this option.
B. Provided (i) the Optionee is at the time an officer or director of
the Company subject to the short-swing profit restrictions of the Federal
securities laws and (ii) one or more classes of the Company's equity securities
are at such time registered under Section 12 of the Exchange Act, then Optionee
shall have the right, exercisable for a thirty (30)-day period following the
completion of the Change in Control, to surrender this option (or any portion
thereof), to the extent such surrendered option (or portion thereof) is at the
time exercisable for vested Option Shares, for a cash distribution from the
Company equal in amount to the excess of (a) the aggregate Acquisition Price of
the number of Option Shares in which Optionee is at the time vested under the
surrendered option or portion thereof over (b) the aggregate Option Price
payable for such vested Option Shares.
C. Should one or more of the Option Shares be unvested at the time of
the option surrender, then such Option Shares shall not be included within the
appreciation distribution payable by the Company, and this option shall continue
in effect for such unvested Option Shares. Accordingly, the Company shall issue
a new stock option agreement (substantially in the form of this Agreement) for
such unvested Option Shares as soon as practicable following the option
surrender.
D. To effect the surrender of this option, the Optionee must provide
written notice to the Company, accompanied by the return of this Agreement and
all other instruments evidencing the surrendered option, prior to the expiration
of the applicable thirty (30)-day period.
-9-
<PAGE> 25
E. In no event may this limited stock appreciation right be exercised
when there is not a positive spread between the Fair Market Value of the Option
Shares and the aggregate Option Price payable for such Option Shares. This
limited stock appreciation right shall in all events terminate upon the
expiration or sooner termination of the option term and may not be assigned or
transferred by the Optionee.
24. Definitions. The following definitional provisions shall be in effect for
all purposes under this Agreement:
Acquisition Price shall be the greater of (i) the Fair Market Value per
share on the date this option is surrendered pursuant to Paragraph 23 of this
Agreement or (ii) the highest reported price per share paid in effecting the
Change in Control of the Company's outstanding voting stock. However, if the
surrendered option is designated as an Incentive Option in the Grant Notice,
then the Acquisition Price of the vested Option Shares subject to the
surrendered option shall not exceed the Fair Market Value per share.
Board means the Board of Directors of the Company.
Change in Control means the acquisition of fifty percent (50%) or more
of the Company's outstanding voting stock pursuant to a tender or exchange offer
made by a person or group of related persons (other than the Company or a person
that directly or indirectly controls, is controlled by or is under common
control with the Company) which the Board does not recommend to the Company's
stockholders.
Code means the Internal Revenue Code of 1986, as amended.
Committee means the Stock Option Committee of the Board which shall be
comprised of two (2) or more directors, each of whom shall be a "non-employee
director," as defined in Rule 16b-3, promulgated under the Exchange Act.
Common Stock means the Class A Convertible Common Stock, par value
$.0001 per share, of the Company.
Company means PageMart Wireless, Inc., a Delaware corporation.
Corporate Transaction means one or more of the following
stockholder-approved transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity, provided securities possessing fifty percent (50%) or
more of the total combined voting power of the Company's outstanding
voting securities are transferred to holders different from those who
held such securities immediately prior to such transaction,
-10-
<PAGE> 26
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, or
(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing fifty percent (50%) or more
of the total combined voting power of the Company's outstanding voting
securities are transferred to holders different from those who held
such securities immediately prior to such merger.
In no event shall any merger, consolidation or other reorganization involving
the Company be deemed to constitute a Corporate Transaction if the primary
purpose of such transaction is either to change the state in which the Company
is incorporated or to create a holding-company structure whereby the Company's
stockholders of record become the stockholders of record of the holding company.
Employee means an individual who is in the employ of the Company or any
Parent or Subsidiary corporation. An Optionee shall be considered to be an
Employee for so long as such individual remains in the employ of the Company or
any Parent or Subsidiary corporation, subject to the control and direction of
the employer entity as to both the work to be performed and the manner and
method of performance.
Exercise Date shall be date on which the option is exercised for one or
more Option Shares and payment for the Option Price is delivered to the Company
in accordance with Paragraph 9 of this Agreement.
Fair Market Value of a share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is not at the time listed or admitted
to trading on any national securities exchange but is traded in the
over-the-counter market, the Fair Market Value shall be the mean
between the highest bid and the lowest asked prices (or if such
information is available the closing sales price) per share of Common
Stock on the date in question in the over-the-counter market, as such
prices are reported by the National Association of Securities Dealers
through its Nasdaq National Market System or any successor system. If
there are no reported bid and asked prices (or closing sales price) for
the Common Stock on the date in question, then the mean between the
highest bid and lowest asked prices (or closing sales price) on the
last preceding date for which such quotations exist shall be
determinative of Fair Market Value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any national securities exchange, then the Fair Market Value
shall be the closing sales price per share of Common Stock on the date
in question on the national securities exchange determined by the
Committee to be the primary market for the Common Stock, as such price
is officially quoted in the composite tape of transactions on such
exchange. If there is no
-11-
<PAGE> 27
reported sale of Common Stock on such exchange on the date in question,
then the Fair Market Value shall be the closing sales price on the
exchange on the last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed nor
admitted to trading on any national securities exchange nor traded in
the over-the-counter market, or if the Committee otherwise determines
that the valuation provisions of subparagraphs (i) and (ii) above will
not result in a true and accurate valuation of the Common Stock, then
the Fair Market Value shall be determined by the Committee after taking
into account such factors as the Committee shall deem appropriate under
the circumstances.
Grant Date means the date specified in the Grant Notice as the date on
which the option was granted to the Optionee under the Plan.
Grant Notice means the Notice of Grant of Stock Option which
accompanies this Agreement.
Incentive Option means an incentive stock option which satisfies the
requirements of Section 422 of the Code.
Non-Statutory Option means an option that does not meet (whether at the
time of grant of such option or subsequently) the statutory requirements
prescribed for an Incentive Option.
Option Shares means the total number of shares of Common Stock
indicated in the Grant Notice as purchasable under this option.
Optionee means the individual identified in the Grant Notice as the
person to whom this option has been granted under the Plan.
Option Price means the exercise price per share to be paid by the
Optionee for the exercise of this option. The Option Price is indicated in the
Grant Notice.
Owner means, for purposes of Paragraph 10 of this Agreement, Optionee
and all subsequent holders of purchased Option Shares who derive their chain of
ownership through a transfer from Optionee.
Parent corporation means any corporation which, directly or indirectly,
owns, at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock of the Company.
Permanent Disability shall have the meaning set forth in Section
22(e)(3) of the Code, or any successor provision thereto.
Plan means the Fifth Amended and Restated 1991 Stock Option Plan of the
Company.
-12-
<PAGE> 28
Service means the performance of services for the Company or any Parent
or Subsidiary corporation by an individual in the capacity of an Employee or a
non-employee member of the Board or the board of directors of such Parent or
Subsidiary corporation. Accordingly, the Optionee shall be deemed to remain in
Service for so long as such individual renders services to the Company or any
Parent or Subsidiary corporation on a periodic basis in the capacity of an
Employee or a non-employee member of the Board or the board of directors of such
Parent or Subsidiary corporation.
Subsidiary corporation means any corporation of which the Company,
directly or indirectly, owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock of the corporation in question.
-13-
<PAGE> 29
EXHIBIT B
NOTICE OF GRANT OF STOCK OPTION
<PAGE> 30
NOTICE OF GRANT OF STOCK OPTION
SPECIAL VESTING SCHEDULE
WEBLINK WIRELESS, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following stock option grant (the
"Option") to purchase shares of the Common Stock of WebLink Wireless, Inc. (the
"Company"):
Optionee: ((OPTIONEE))
Grant Date: ((grant))
Option Price: ((price))per share
Number of Option Shares: ((shares)) shares
Expiration Date: ((expiration))
Type of Option: Incentive Option
-----
Non-Statutory Option
-----
Vesting Schedule: The Option shall vest and become exercisable on the
date(s) and with respect to the number of shares of Common Stock set
forth in EXHIBIT C provided the Optionee remains in continuous Service
from the Grant Date to the applicable vesting date. In no event will
the Option become vested and exercisable with respect to additional
shares of Common Stock after the Optionee's termination of Service. If
the Option becomes exercisable over more than one installment, the
number of shares set forth in EXHIBIT C for each additional installment
designates the number of additional shares of Common Stock for which
the Option becomes exercisable on the applicable vesting date.
Option Subject to Plan and Option Agreement. Optionee understands and
agrees that the Option is granted subject to and in accordance with the
express terms and conditions of the Company's Fifth Amended and
Restated 1991 Stock Option Plan (the "Plan"). All capitalized terms not
otherwise defined herein shall have the meaning set forth in the Plan.
Optionee further agrees to be bound by the terms and conditions of the
Plan and the terms and conditions of the Option as set forth in the
Stock Option Agreement attached hereto as EXHIBIT A. Optionee hereby
acknowledges receipt of a copy of the Plan in the form attached hereto
as EXHIBIT B.
No Employment or Service Contract. Nothing in this Notice or in the
Plan or the Stock Option Agreement shall confer upon the Optionee any
right to continue in the Service of the Company for any period of
specific duration or interfere with or otherwise restrict in any way
the rights of the Company or the Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Service at any time
for any reason whatsoever, with or without cause.
<PAGE> 31
NOTICE OF GRANT OF STOCK OPTION
SPECIAL VESTING SCHEDULE
Dated as of :((grant))
WEBLINK WIRELESS, INC.
By:
-----------------------------------
Title:
--------------------------------
OPTIONEE
--------------------------------------
Address:
--------------------------------------
--------------------------------------
2
<PAGE> 32
NOTICE OF GRANT OF STOCK OPTION
SPECIAL VESTING SCHEDULE
PAGEMART WIRELESS, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following stock option grant (the
"Option") to purchase shares of the Common Stock of PageMart Wireless, Inc. (the
"Company"):
Optionee: ((OPTIONEE))
Grant Date: ((grant))
Option Price: ((price))per share
Number of Option Shares: ((shares)) shares
Expiration Date: ((expiration))
Type of Option: Incentive Option
-----
Non-Statutory Option
-----
Vesting Schedule: The Option shall vest and become exercisable in its
entirety on ________________, provided the Optionee remains in
continuous Service from the Grant Date to such date. If Optionee's
Service is terminated before ________________due to Optionee's death or
disability or by the Company for a reason other than cause (as defined
below), then immediately prior to such termination of Service the
Option shall vest and become exercisable with respect to the total
number of shares shown on EXHIBIT C as vesting on or before the date of
termination of Service. In no event will the Option become vested and
exercisable with respect to additional shares of Common Stock after the
Optionee's termination of Service. If before ____________________
Optionee terminates his Service voluntarily or the Company terminates
his Service for cause, the Option will terminate without vesting.
"Cause" means the occurrence of one or more of the events set forth in
Sections 1(d)(iv)(B), (C) or (D) of the Plan (as defined below), but
not the events set forth in Section 1(d)(iv)(A).
Option Subject to Plan and Option Agreement. Optionee understands and
agrees that the Option is granted subject to and in accordance with the
express terms and conditions of the Company's Fifth Amended and
Restated 1991 Stock Option Plan (the "Plan"). All capitalized terms not
otherwise defined herein shall have the meaning set forth in the Plan.
Optionee further agrees to be bound by the terms and conditions of the
Plan and the terms and conditions of the Option as set forth in the
Stock Option Agreement attached hereto as EXHIBIT A. Optionee hereby
acknowledges receipt of a copy of the Plan in the form attached hereto
as EXHIBIT B. This Notice of Grant of Stock Option supersedes any
previous Notice of Grant of Stock Option with respect to the Option.
No Employment or Service Contract. Nothing in this Notice or in the
Plan or the Stock Option Agreement shall confer upon the Optionee any
right to continue in the Service of the Company for any period of
specific duration or interfere with or otherwise restrict in any
3
<PAGE> 33
NOTICE OF GRANT OF STOCK OPTION
SPECIAL VESTING SCHEDULE
way the rights of the Company or the Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Service at any time
for any reason whatsoever, with or without cause.
Dated as of :((grant))
PAGEMART WIRELESS, INC.
By:
-----------------------------------
Title:
--------------------------------
OPTIONEE
--------------------------------------
Address:
--------------------------------------
--------------------------------------
<PAGE> 34
NOTICE OF GRANT OF STOCK OPTION
SPECIAL VESTING SCHEDULE
WEBLINK WIRELESS, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following stock option grant (the
"Option") to purchase shares of the Common Stock of WebLink Wireless, Inc. (the
"Company"):
Optionee: ((OPTIONEE))
Grant Date: ((grant))
Vesting Commencement Date: ((vesting))
Option Price: ((price)) per share
Number of Option Shares: ((shares)) shares
Expiration Date: ((expiration))
Type of Option: Incentive Option
-----
Non-Statutory Option
-----
Vesting Schedule: Provided the Optionee remains in continuous Service
from the Grant Date to the applicable vesting date, the Option shall
become exercisable (i) with respect to 20% of the number of Option
Shares designated above, on the first anniversary of the Vesting
Commencement Date (the "Initial Vesting Date"); and (ii) with respect
to the remaining balance of the number of Option Shares designated
above, in equal, successive monthly installments over forty-eight (48)
calendar months, beginning with the first calendar month following the
Initial Vesting Date. The vesting date for each such calendar month
("Vesting Month") shall be the same day of the month as the Initial
Vesting Date (or the last day of the Vesting Month if the Initial
Vesting Date occurred on a day of the month that is greater than the
last day of the Vesting Month). In no event will the Option become
vested and exercisable with respect to additional shares of Common
Stock after the Optionee's termination of Service.
Option Subject to Plan and Option Agreement. Optionee understands and
agrees that the Option is granted subject to and in accordance with the
express terms and conditions of the Company's Fifth Amended and
Restated 1991 Stock Option Plan (the "Plan"). All capitalized terms not
otherwise defined herein shall have the meaning set forth in the Plan.
Optionee further agrees to be bound by the terms and conditions of the
Plan and the terms and conditions of the Option as set forth in the
Stock Option Agreement attached hereto as EXHIBIT A. Optionee hereby
acknowledges receipt of a copy of the Plan in the form attached hereto
as EXHIBIT B.
5
<PAGE> 35
NOTICE OF GRANT OF STOCK OPTION
SPECIAL VESTING SCHEDULE
No Employment or Service Contract. Nothing in this Notice or in the
Plan or the Stock Option Agreement shall confer upon the Optionee any
right to continue in the Service of the Company for any period of
specific duration or interfere with or otherwise restrict in any way
the rights of the Company or the Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Service at any time
for any reason whatsoever, with or without cause.
Dated as of :((grant))
WEBLINK WIRELESS, INC.
By:
-----------------------------------
Title:
--------------------------------
OPTIONEE
--------------------------------------
Signature of Optionee
Address:
--------------------------------------
--------------------------------------
6
<PAGE> 1
CONTRACT NUMBER: C949017S0001
AMENDED AND RESTATED
STRATEGIC ALLIANCE AGREEMENT NO. 1
BETWEEN
GTE COMMUNICATION SYSTEMS CORPORATION
AND
PAGEMART WIRELESS, INC.
CONTRACT MANAGER: GALE L. MARVIN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. RECITALS...............................................1
2. DEFINITIONS............................................1
3. DESCRIPTION AND SCOPE..................................2
4. TERM...................................................2
5. TERMINATION............................................3
6. GTE RESPONSIBILITIES...................................4
7. PMWI RESPONSIBILITIES..................................5
8. OWNERSHIP OF ONE-WAY FACILITIES AND FREQUENCIES........6
9. GTE SITES..............................................7
10. CONFIDENTIAL INFORMATION...............................7
11. DISPUTE RESOLUTION.....................................8
12. GENERAL PROVISIONS.....................................9
13. MAINTENANCE AND REPAIRS AT GTE OWNED SITES............14
14. SIGNATURES............................................15
</TABLE>
-CONFIDENTIAL-
<PAGE> 3
AMENDED AND RESTATED
STRATEGIC ALLIANCE AGREEMENT NO. 1
THIS AMENDED AND RESTATED STRATEGIC ALLIANCE AGREEMENT NO. 1 ("Agreement")
is made by and between PageMart Wireless, Inc., a Delaware corporation, with
offices for the purpose of this Agreement located at 3333 Lee Parkway, Suite
100, Dallas, Texas 75219 ("PMWI") and GTE Communication Systems Corporation, a
Delaware corporation, acting for the benefit of itself and its affiliates listed
in Exhibit A, with offices located at 700 Hidden Ridge, Irving, Texas 75038
("GTE") (collectively referred to as the "Parties" and individually as a
"Party").
1. RECITALS
The Parties recognize the mutual benefits to be gained if they cooperate in
the deployment of paging network facilities in the continental United
States ("CONUS") for the provision of wireless messaging and data
transmissions.
This Agreement is intended to create a framework and to define the terms
and conditions under which the Parties shall implement their strategic
alliance in a manner that maximally complements the wireless needs of the
Parties.
IN CONSIDERATION of the above Recitals, the terms and provisions set forth
herein, the mutual benefits to be gained by the performance thereof, and
for the good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereto agree as follows:
2. DEFINITIONS
Facilities - Both One-Way Facilities and NPCS Facilities
CONUS - The 48 continental United States
NPCS - (Narrowband PCS) - NPCS services operating in the 901-902 MHz,
930-931, and 940-941 MHZ bands.
NPCS FACILITIES - Equipment to be integrated into PMWI's network
infrastructure for transmission and receipt of NPCS messages which shall
include but not be limited to NPCS paging transmitters and receivers,
satellite downlinks and cable deployed for the transmitting and receiving
of two way paging messaging services.
One-Way Facilities - The GTE-supplied wireless network infrastructure which
shall include but not be limited to paging transmitters, satellite
downlinks, antennas, and cable being deployed to PMWI for the transmission
of one-way paging/messaging services
Project - The site specific installation function of NPCS or One-Way
Facilities
PCS - (Personal Communications Service) - Radio communications that
encompass mobile and ancillary fixed communication that provide services to
individuals and businesses and can be integrated with a variety of
competing networks.
<PAGE> 4
RSA - Resale Agreement No. C989107SC001 previously entered into between the
Parties.
Termination Date - That date which is twenty-four (24) months from either
the date of notification of termination or the expiration date because of
non-renewal.
THIRD PARTY SITES - Telecommunications transmission sites owned by or
beneficially belonging to a party other than GTE, notwithstanding Section
3.e., on which One-Way Facilities have been constructed.
3. DESCRIPTION AND SCOPE
a. This Agreement will govern the cooperation of the Parties in
connection with any Project in CONUS involving, without limitation,
the location, design, construction, and management of all One-Way
Facilities, and where specified, all NPCS Facilities. The Parties
agree that the deployment scope of the One-Way Facilities shall be no
less than one hundred fifty (150) and no more than two hundred fifty
(250) transmitters deployed within the first twenty-four (24) months
of this Agreement.
b. All telecommunications and wireless services that are the subject of
this Agreement shall be provided in accordance with the rules,
regulations and orders of the applicable state regulatory agency, the
Federal Communications Commission ("FCC") and the courts of the United
States.
c. The obligations of the Parties to cooperate and work together in
connection with any Project shall be as expressly set forth in this
Agreement. Neither Party undertakes by this Agreement or otherwise to
perform or discharge any liability or obligation for the other Party
not specifically contained herein, whether regulatory or contractual,
or to assume any responsibility whatsoever for the conduct of the
business or operations of the other Party. Nothing contained herein is
intended to give rise to a partnership or joint venture between the
Parties or to impose upon the Parties any of the duties or
responsibilities of partners or joint venturers. Neither Party shall
have any right or authority to act for, or to assume, create or incur
any obligation, liability or responsibility of any kind, whether
express or implied, against, in the name of, or on behalf of, the
other Party, except as expressly provided in this Agreement.
d. Unless otherwise specified herein, each Party shall assume and bear
all expenses, costs and fees incurred or assumed by such Party whether
or not the transactions provided for by this Agreement shall be
effectuated.
e. Any sites that are owned by GTE Wireless, Incorporated on which
One-Way Facilities are located shall be considered Third Party Sites
for the purposes of this Agreement.
4. TERM
The term of this Agreement commenced on September 15, 1994 and shall end on
December 31, 2004, unless earlier terminated in accordance with Section 5.
The term of this Agreement may be extended for successive one-year periods
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<PAGE> 5
following the expiration of the initial term by mutual written consent of
the Parties at least ninety (90) days prior to the end of the then current
term.
5. TERMINATION
a. Termination for Cause. This Agreement may be abandoned or terminated
at any time after the effective date of this Agreement by either
Party's furnishing written notice should the other Party:
i. breach, refuse or fail in any material respect properly to
perform any of its duties, obligations or commitments under this
Agreement, any one of which shall constitute a default, which
default is not substantially cured within thirty (30) days after
receiving written notice specifying the nature of the default;
ii. commence or have commenced against such Party any proceeding,
whether under court supervision or otherwise, for the liquidation
of such Party, determination of insolvency of such Party,
appointment of a receiver for such Party, assignment for the
benefit of all or substantially all of such Party's creditors, or
the bankruptcy of such Party; or
iii. indefinitely suspend its normal business operations.
If this Agreement is terminated by GTE as a result of PMWI's conduct
described in this Section 5 (a), then Section 5.b.i.(1) and (2) below
shall be enforced between the Parties. If this Agreement is terminated
by PMWI as a result of GTE's conduct described in this Section 5 (a),
then Section 5.b.ii.(1) and (2) below shall be enforced between the
Parties.
b. Termination for Convenience. This Agreement may be abandoned or
terminated at any time after the effective date of this Agreement, by
either party, subject to the following:
i. If this Agreement is terminated for convenience by PMWI:
(1) PMWI shall make a payment to GTE based upon the following
formula, per piece of equipment, using a life span of five
(5) years. P=C x (1-t/60) where P represents PMWI's payment
to GTE, C represents GTE's investment in the equipment, and
t represents the time period in months (1-60) that the piece
of equipment has been in service as of the Termination Date.
No equipment will be transferred from GTE to PMWI because of
this payment; and
(2) PMWI will be given the option to purchase the One-Way
Facilities at fair market value as of the Termination Date.
ii. If this Agreement is terminated for convenience by GTE:
(1) GTE shall make a payment to PMWI based upon the following
formula, per piece of equipment, using a life span of five
(5) years. P=R x (1-t/60) where P represents GTE's payment
to PMWI, R
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<PAGE> 6
represents the cost of relocating the pieces of equipment
residing on GTE property, and it represents the time period
in months (1-60) that the piece of equipment has been in
service as of the Termination Date; and
(2) PMWI shall be given the right to purchase the equipment
based upon the greater of ten percent (10%) of the
equipment's original cost or a calculated value utilizing
the formula P=C x (1-t/60) where P represents the purchase
price, C represents GTE's investment in the piece of
equipment, and it represents the time period in months
(1-60) that the piece of equipment has been in service as of
the Termination Date.
c. Termination of the RSA. If the RSA is terminated by:
i. PMWI in accordance with Section 28(a) of said RSA, this
Agreement shall also terminate, and Section 5.b.i.(1) above shall
be enforced between the Parties.
ii. GTE as a result of PMWI's conduct under Section 28(b) or (c) of
said RSA, this Agreement shall also terminate, and Section
5.b.i.(1) and (2) above shall be enforced between the Parties.
iii. PMWI as a result of GTE's conduct under Section 28(b) or (c) of
said RSA, this Agreement shall also terminate, and Section 5.b.ii
(1) and (2) above shall be enforced between the Parties.
d. If this Agreement is either terminated in accordance with this Section
or not renewed, PMWI agrees to keep the One-Way Facilities operating
in a normal capacity until the Termination Date and GTE agrees to
permit PMWI to leave any equipment located on GTE property through the
Termination Date.
e. The termination of this Agreement shall not affect any obligation of a
Party which is unfulfilled as of such termination provided that such
obligation by its terms or nature survives such termination.
6. GTE RESPONSIBILITIES
a. For any Project, GTE shall have the final responsibility, subject to
the consent of PMWI which shall not be unreasonably withheld, of
determining when and where the One-Way Facilities shall be
constructed.
b. For any One-Way Project, GTE shall, at its sole cost and expense,
finance the construction of One-Way Facilities on which PMWI would
utilize PMWI's frequencies to provide wireless services to PMWI's
customers and to GTE as a reseller of PMWI's wireless services.
c. In conjunction with the construction of any One-Way Facilities, GTE
shall be financially responsible for purchasing any transmitters,
antennae, satellite downlink, cable, and third party labor necessary
to install the One-Way Facilities.
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<PAGE> 7
d. For any One-Way Project, GTE shall be responsible for payment of all
property taxes, whether real or personal, on all One-Way Facilities
that may be imposed or assessed by any appropriate taxing authority.
e. GTE shall be responsible for payment of monthly site lease or license
fees to a maximum amount of $400 per month per site for fifty percent
(50%) of the total One-Way Project sites. GTE shall be given credit
for any sites located on property owned or leased by GTE. GTE's
monthly total site lease obligations shall be calculated using the
following formula: 0=$400 x (.5T-N), where 0 is equal to GTE's
obligation, T is equal to the total number of sites and N is equal to
the number of sites owned by GTE (GTE Network Services or its
successor). GTE will remit payment directly to PMWI for such site
lease obligation within thirty (30) days of receipt of an invoice for
same. This per month per site charge shall be increased on the
anniversary of this Agreement each year of this Agreement by five
percent (5%).
7. PMWI RESPONSIBILITIES
a. For any Project, PMWI shall be solely responsible for conducting any
propagation studies at PMWI's expense.
b. For any Project, PMWI, shall license the One-Way Facilities at
locations selected by GTE as described in Section 6.a. herein, to
utilize PMWI's nationwide frequencies to provide wireless services to
PMWI's customers and to GTE as a reseller of PMWI's wireless
services.
c. To the extent that any One-Way Facilities may be located on Third
Party Sites, PMWI shall be solely responsible for negotiating the
terms and conditions of any lease or license, any expenses associated
with lease site preparation which shall include but not be limited to
shelter construction and provisioning of electrical power and for the
remittance of any operating expenses associated with that lease or
license. The terms and conditions of any such lease or license should
contain authorization that GTE, subject to prior notification, shall
have reasonable access during normal working hours to visit and
inspect the One-Way Facilities.
d. Although GTE and PMWI shall jointly agree on the selection of
contractors to construct and maintain all One-Way Facilities of any
Project, PMWI shall be responsible, at its sole cost and expense, for
managing, coordinating and overseeing the construction and maintenance
of all Facilities.
e. At PMWI's sole cost and expense, PMWI shall operate all Facilities,
including, without limitation, the payment for any access connections
including but not limited to business single party lines and for any
long distance service necessary for polling all Facilities to ensure
all Facilities are operational, in a good state of repair, and
operating according to manufacturers specifications.
f. At PMWI's sole cost and expense, PMWI shall utilize PMWI's national
control center to provide monitoring, ongoing quality assurance and
maintenance, and local repair dispatch services for all Facilities
covered by this Agreement. PMWI shall additionally be responsible for
furnishing any upgrades, whether software or
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<PAGE> 8
otherwise, reasonably necessary for the operation of all Facilities.
g. PMWI shall, at its sole cost and expense, link by satellite all
Facilities to PMWI's network infrastructure for network control.
h. PMWI shall provide a reduction in GTE's monthly billing as a reseller
of PMWI Services, as authorized by and defined in the RSA, based upon
the following schedule:
i. Two hundred fifty dollars ($250) per month per installed
transmitter financed by GTE for months number one (1) through
sixty (60) of this Agreement.
ii. One hundred dollars ($100) per month per installed transmitter
financed by GTE for months number sixty-one (61) through one
hundred twenty (120) of this Agreement.
Notwithstanding the foregoing, the Parties agree that at no time shall
the amount of reduction as calculated above exceed twenty-five percent
(25%) of the monthly billing GTE receives as a reseller of PMWI
Services. Should the Parties agree to extend this Agreement beyond its
initial one hundred twenty (120) month term, the above per month
billing reduction from PMWI to GTE will be renegotiated at that time.
i. For any One-Way or NPCS Project, PMWI will be responsible for payment
of all monthly site lease or license fees. GTE shall reimburse PMWI
for fifty percent (50%) of any such One-Way site lease fees as set
forth in Section 6.e. above.
j. For any NPCS Project, PMWI shall be responsible for all capital
expenses involved in the purchase of, installation of, and
construction of any NPCS Facilities.
k. For any NPCS Project, PMWI shall be responsible for all property
taxes, whether real or personal, on all NPCS Facilities that may be
imposed or assessed by any appropriate taxing authority.
l. PMWI agrees to reimburse GTE the amount of four hundred dollars ($400)
per month for each GTE site on which PMWI has installed NPCS
Facilities. This monthly site charge shall be increased on the
anniversary of this Agreement each year of this Agreement by five
percent (5%).
8. OWNERSHIP OF ONE-WAY FACILITIES AND FREQUENCIES
a. GTE shall have legal title to and shall be the exclusive owner of all
One-Way Facilities whether the property constituting the One-Way
Facilities shall be characterized as real or personal. PMWI, at its
expense, will defend GTE's rights to the One-Way Facilities and will
keep the One-Way Facilities free from all liens, encumbrances, and
legal processes, other than those arising out of actions of GTE. GTE
shall be permitted to display notice of its ownership of the One-Way
Facilities by affixing to the items of the One-Way Facilities indicia
of ownership and PMWI agrees not to remove, alter, or obscure said
identification. PMWI grants to GTE a security interest in PMWI's
interest in the One-Way Facilities subject to this
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<PAGE> 9
Agreement and agrees to execute all documents necessary to perfect
said security interest.
b. Notwithstanding the foregoing, PMWI and GTE understand and agree that
the nationwide frequencies upon which PMWI furnishes the wireless
services provided for herein are licensed exclusively to PMWI. Nothing
contained herein shall permit GTE to disconnect the transmitters,
antennae or other equipment or remove any of such assets from any
Facility sites during the term of this Agreement without prior written
permission from PMWI, such permission not to be unreasonably withheld.
c. PMWI shall have legal title to or the equitable right to control NPCS
Facilities whether the property constituting the NPCS Facilities shall
be characterized as real or personal. PMWI shall be permitted to
display notice of its ownership of the NPCS Facilities by affixing to
the items of the NPCS Facilities indicia of ownership and GTE agrees
not to remove, alter, or obscure said identification.
9. GTE SITES
GTE shall furnish certain sites owned or leased by GTE to PMWI for the
installation of the Facilities and provision of wireless services to PMWI's
customers and to GTE as a reseller of PMWI's wireless services at no cost
to PMWI until the Termination Date. In performing its obligations under
this Agreement, PMWI shall comply with all reasonable rules and
regulations, which shall be mutually agreed to and established by the
Parties, with respect to access to and use of the GTE sites. GTE's
obligation to pay site lease or license fees shall be reduced by the number
of sites owned or leased by GTE or as set forth in Section 6.e above.
10. CONFIDENTIAL INFORMATION
a. To effectuate this Agreement, it may be necessary for either Party to
disclose to the other proprietary or confidential customer, technical
and business information in written, graphic, oral or other tangible
or intangible forms ("Confidential Information"). In order to protect
such Confidential Information from improper disclosure, each party
agrees: (1) that all such Confidential Information shall be and shall
remain the exclusive property of the source; (2) to limit access to
such Confidential Information to authorized employees who have a need
to know the Confidential Information in order to perform the services
set out in this Agreement; (3) to keep such Confidential Information
confidential and to use the same level of care to prevent disclosure
or unauthorized use of the received Confidential Information as it
exercises in protecting its own Confidential Information of a similar
nature; (4) for a period of three years following any disclosure, not
to copy or publish or disclose such Confidential Information to others
or authorize anyone else to copy or publish or disclose such
Confidential Information to others without the prior written approval
of the source; (5) to return promptly any copies of such Confidential
Information to the source at its request; and (6) to use such
Confidential Information only for purposes of fulfilling work or
services performed hereunder and for other purposes only upon such
terms as may be agreed upon between the parties in writing.
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<PAGE> 10
b. These obligations shall not apply to any Confidential Information
which was legally in the recipient's possession prior to receipt from
the source, was received in good faith from a third party not subject
to a confidential obligation to the source, now is or later becomes
publicly known through no breach of confidential obligation by the
recipient, was developed by the recipient without the developing
person(s) having access to any of the Confidential Information
received in confidence from the source, or which is required to be
disclosed pursuant to subpoena or other process issued by a court or
administrative agency having appropriate jurisdiction. If a receiving
party receives a request to disclose any Confidential Information
(whether pursuant to a valid and effective subpoena, an order issued
by a court or other governmental authority of competent jurisdiction
or otherwise) on advice of legal counsel that disclosure is required
under applicable law, such party agrees that, prior to disclosing any
Confidential Information, it shall (i) notify the disclosing party of
the existence and terms of such request or advice, (ii) cooperate with
the disclosing party in taking legally available steps to resist or
narrow any such request or to otherwise eliminate the need for such
disclosure, if requested to do so by the disclosing party, and (iii)
if disclosure is required, use its best efforts to obtain a protective
order or other reliable assurance that confidential treatment will be
afforded to such portion of the Confidential Information as is
required to be disclosed. The disclosing party shall reimburse the
other party for its reasonable expenses, including attorney fees, in
exerting best efforts in complying with b (ii) and b (iii).
c. The obligation of confidentiality and use with respect to Confidential
Information disclosed by one party to the other shall survive any
termination of this Agreement for a period of three years from the
date of the initial disclosure of the Confidential Information.
11. DISPUTE RESOLUTION
a. The Parties desire to resolve disputes arising out of this Agreement
without litigation. Accordingly, except for action seeking a temporary
restraining order or injunction related to the purposes of this
Agreement, or suit to compel compliance with this dispute resolution
process, the Parties agree to use the following alternative dispute
resolution procedure as their sole remedy with respect to any
controversy or claim arising out of or relating to this Agreement or
its breach.
b. At the written request of a Party, each Party will appoint a
knowledgeable, responsible representative to meet and negotiate in
good faith to resolve any dispute arising under this Agreement. The
Parties intend that these negotiations be conducted by nonlawyer,
business representatives. The location, format, frequency, duration
and conclusion of these discussions shall be left to the discretion of
the representatives. Upon agreement, the representatives may utilize
other alternative dispute resolution procedures such as mediation to
assist in the negotiations. Discussions and correspondence among the
representatives for purposes of these negotiations shall be treated as
confidential information developed for purposes of settlement, exempt
from discovery and production, which shall not be admissible in the
arbitration described below or in any lawsuit without the concurrence
of all Parties. Documents identified in or provided with such
communications, which are not prepared for purposes of the
negotiations, are not
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so exempted and may, if otherwise admissible, be admitted in evidence
in the arbitration or lawsuit.
c. If the negotiations do not resolve the dispute within sixty (60) days
of the initial written request, the dispute shall be submitted to
binding arbitration by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. A Party may
demand such arbitration in accordance with the procedures set out in
those rules. Discovery shall be controlled by the arbitrator and shall
be permitted to the extent set out in this Section. Each Party may
submit in writing to a Party, and that Party shall so respond, to a
maximum of any combination of thirty-five (35) (none of which may have
subparts) of the following: interrogatories, demands to produce
documents, and requests for admission. Each Party is also entitled to
take the oral deposition of one individual of another Party.
Additional discovery may be permitted upon mutual agreement of the
parties. The arbitration hearing shall be commenced within sixty (60)
days of the demand for arbitration. The arbitration shall be held in
the city where this Agreement was executed by GTE. The arbitrator
shall control the scheduling so as to process the matter
expeditiously. The Parties may submit written briefs. The arbitrator
shall rule on the dispute by issuing a written opinion within thirty
(30) days after the close of hearings. The times specified in this
Section may be extended upon mutual agreement of the Parties or by the
arbitrator upon a showing of good cause. Judgment upon the award
rendered by the arbitrator may be entered in any court having
jurisdiction.
d. Each Party shall bear its own costs of these procedures. A Party
seeking discovery shall reimburse the responding Party the costs of
production of documents (to include search time and reproduction
costs). The Parties shall equally split the fees of the arbitration
and the arbitrator.
12. GENERAL PROVISIONS
a. Further Assurances. From and after the effective date of this
Agreement, the Parties each agree to execute and deliver such further
documents and instruments and to do such further acts and things as
the other may reasonably request in order to effectuate the
transactions contemplated by this Agreement. The Parties shall
cooperate and assist one another in the performance of the provisions
of this Agreement, and shall take such steps as are reasonably
necessary to allow the other Party to discharge the obligations
imposed by this Agreement.
b. Excusable Delays. Neither Party shall be liable for any delay or
failure in its performance of any of the acts required by this
Agreement when such delay or failure arises beyond the reasonable
control of such Party. Such causes may include, without limitation,
acts of God or public enemies, labor disputes, material or component
shortages, supplier failures, embargoes, rationing, acts of local,
state or national governments or public agencies (not solicited,
encouraged or invited by any Party), utility or communication failures
or delays, fires, floods, epidemics, riots and strikes. The time for
performance of any act delayed by such cause shall be postponed for a
period equal to the delay; provided, however, that the Party so
affected shall give prompt notice to the other Party of such delay.
The Party so affected, however, shall use its best efforts to avoid or
remove such causes of nonperformance to complete performance of the
act delayed, whenever such causes are removed.
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c. Assignment. Neither this Agreement nor any of the rights hereunder may
be assigned or otherwise transferred by any Party, by operation of law
or otherwise, without the prior written consent of the other Party,
except that the Parties may, without obtaining such consent, assign
their respective obligations and rights hereunder to their parent, or
any other subsidiary of a parent, eighty percent (80%) or more of the
voting stock of which is owned by the parent. In any case of
assignment, however, the assignee shall assume all obligations of the
assigning Party hereunder and the other Party shall have received
documents satisfactory in form and substance to it evidencing such
assumption. Any such assignment shall not relieve any Party to this
Agreement of its obligations hereunder, and any such assignee may,
upon the terms and conditions, reassign its rights hereunder to such
original Party or to any assignee of such original Party permitted
hereunder.
d. Successors in Interest. All provisions of this Agreement shall be
binding upon, inure to the benefit of, and be enforceable by and
against the respective successors and assigns of the Parties or
purchasers of substantially all of the assets of a Party.
e. Independent Contractor Relationship. The persons provided by each
Party shall be solely that Party's employees or agents and shall be
under the sole and exclusive direction and control of that Party. They
shall not be considered employees of the other Party for any purpose.
Each Party shall remain an independent contractor with respect to the
other and shall be responsible for compliance with all laws, rules and
regulations involving, but not limited to, employment of labor, hours
of labor, health and safety, working conditions and payment of wages.
Each Party shall also be responsible for payment of taxes, including
federal, state and municipal taxes, chargeable or assessed with
respect to its employees, such as, Social Security, unemployment,
Workers' Compensation, disability insurance, and federal and state
withholding. Each Party shall indemnify the other for any loss,
damage, liability, claim, demand or penalty that may be sustained by
reason of its failure to comply with this provision.
f. Publicity. Any news release, public announcement, advertising or any
form of publicity pertaining to this Agreement, provision of services
pursuant to it, or association of the Parties with respect to the
subject of this Agreement shall be subject to prior written approval
of both parties.
g. Trademarks and Trade Names. Except as specifically set out in this
Agreement, nothing in this Agreement shall grant, suggest or imply any
authority for one Party to use the name, trademarks, service marks or
trade names of the other for any purpose whatsoever.
h. Records. Each Party shall keep true and accurate records directly
relating to this Agreement in accordance with generally accepted
accounting practices. Such records shall be retained for a period of
three (3) years from the Termination Date.
i. Attorney's Fees. Except as set forth in Section 11, in the event any
Party to this Agreement shall be required to initiate legal
proceedings (i) to interpret or to enforce performance of any term or
condition of this Agreement; (ii) to enjoin any action
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prohibited hereunder; or (iii) to gain any other form of relief
whatsoever, the prevailing Party shall be entitled to get such sums
from the other Party, in addition to any other damages or compensation
received, as well as reimbursement from the other Party for reasonable
attorneys' fees and court costs incurred on account thereof
notwithstanding the nature of the claim or cause of action asserted by
the prevailing Party.
j. Indemnification. Notwithstanding anything to the contrary herein, each
Party shall indemnify and save harmless the other from any loss or
damages (including reasonable attorney's fees) incurred by the other
because of claims, suits, or demands based on personal injury or death
or damage to property, including, without limitation, all Facilities,
or third party claims, suits or demands of any kind, to the extent
such loss or damage is caused by or results from the negligent or
willful acts or omissions of the other or its employees or agents. The
indemnifying Party shall receive the full opportunity and authority to
assume the sole defense of and settlement of such suits. The
indemnified Party agrees to furnish to the indemnifying Party upon
request all information and reasonable assistance available to the
indemnified party for defense against any such suit, claim, or demand.
k. Insurance. GTE and PMWI each agree to maintain during the term hereof
all insurance and/or bonds required by law or this Agreement,
including, but not limited to (1) Workers' Compensation and related
insurance as prescribed by applicable law; (2) employer's liability
insurance with limits of at least $500,000 for each occurrence; and
(3) comprehensive general liability insurance including products
liability, and, if the use of motor vehicles is required,
comprehensive motor vehicle liability insurance, each with limits of
at least $2,000,000 for combined single limit for bodily injury,
including death, and/or property damage. GTE and PMWI each shall cause
the other to be included as an Additional Insured under their
respective policies and GTE's and PMWI's appropriate coverage under
such policies shall be primary. GTE and PMWI each shall furnish
certificates or evidence of the foregoing insurance indicating the
amount and nature of such coverage, the expiration date of each
policy, and stating that no material change or cancellation of any
such policy shall be effective unless thirty (30) days advance written
notice is given to the Party named as an Additional Insured.
Notwithstanding the above, GTE and PMWI shall each have the option,
where permitted by law, to self-insure any or all of the foregoing
risks.
l. Assuring Performance of Responsibilities. Notwithstanding anything
stated or implied to the contrary elsewhere in this Agreement, GTE
may, as permissible under FCC rules and regulations, at its option and
without prejudice to other rights, take over and complete all or part
of PMWI's responsibilities with respect to the One-Way Facilities if
PMWI has defaulted, which default is not substantially cured within
thirty (30) days of receiving written notice of the default, or PMWI
has not furnished GTE with adequate assurance that PMWI is prepared to
perform its obligations in a timely fashion and/or as required by this
Agreement. PMWI shall be liable to GTE for any costs incurred by GTE
in discharging PMWI's responsibilities. If, in GTE's reasonable
opinion, a hazardous condition exists at any Facility, GTE may without
notice to PMWI take such immediate action as is necessary to protect
persons, the Facilities or the property of third parties from damage
or interference caused by the hazard.
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m. Rights and Remedies. The rights and remedies provided each of the
Parties herein shall be cumulative and in addition to any other rights
and remedies provided by law or otherwise. Any failure in the exercise
by any Party of its rights to enforce any provision of this Agreement
for any default or violation by another Party shall not prejudice such
Party's right of enforcement for any further or other default or
violation.
n. Limitation of Liability. It is expressly understood that neither Party
makes any warranty to the other with respect to the performance or
fitness for any purpose of the products or services contemplated by
this Agreement. Each Party's liability to the other for any loss,
cost, claim, injury, liability or expense, including reasonable
attorney's fees, relating to or arising out of any negligent act or
omission in its performance of obligations arising out of this
Agreement, shall be limited to the amount of direct damage actually
incurred. Absent gross negligence or knowing and willful misconduct
which causes a loss, neither Party shall be liable to the other for
any indirect, special or consequential damage of any kind whatsoever.
For purposes of this clause, payments and related expenses for third
party claims, suits or demands for which indemnity is owed shall be
considered direct damages.
o. Limitation of Actions. No action, regardless of form, arising out of
the subject matter of this Agreement may be brought by either Party
more than two (2) years after the cause of action has accrued. The
Parties waive the right to invoke any different limitation on the
bringing of actions provided under state law.
p. Notices. All notices and other communications required or permitted to
be given under this Agreement shall be in writing and shall be
effective when delivered personally, or if by telex or TWX, when
confirmed (which confirmation may be by reply telex or signal
indicating that the message has been clearly received) or if mailed,
five (5) days after mailing, postage prepaid and addressed to the
Parties at their respective addresses set forth below, unless by such
notice a different person, address or number shall have been
designated for giving notice hereunder:
If to GTE: GTE Communication Systems Corporation
700 Hidden Ridge
Irving, Texas 75038
Attn: Manager-Contract Management
Mail Code: HQWO3N56
If to PMWI: PageMart Wireless, Inc.
3333 Lee Parkway
Suite 100
Dallas, Texas 75219
Attn: Vice President Carrier Services Division
q. Waiver. The waiver by a Party of the performance of any covenant,
condition, obligation, representation, warranty or promise in this
Agreement shall not invalidate this Agreement or be deemed a waiver by
such Party of any other covenant, condition, obligation,
representation, warranty or promise. The waiver of a Party of the time
for performing any act or condition hereunder does not constitute a
waiver
12
<PAGE> 15
of the act or condition itself.
r. Construction. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any third Party. No third Party,
including any creditor of either Party, shall have any rights against
the Parties or any of their subsidiaries, successors or assigns by
reason of or under this Agreement.
s. Severability. In the event that any one or more provision(s) contained
in this Agreement should for any reason be held to be unenforceable in
any respect, such unenforceability shall not affect any other
provision of this Agreement, and this Agreement shall be construed as
if such unenforceable provision(s) had not been contained herein.
t. Survival of Obligations. The respective obligations of the Parties
under this Agreement which by their nature would continue beyond the
termination, cancellation or expiration hereof, shall survive
termination, cancellation or expiration hereof.
u. Headings. The captions of Articles and Sections of this Agreement are
inserted only as a matter of convenience and in no way define, limit,
extend or describe the scope of this Agreement or the intent of any
provision hereof.
v. Compliance with Laws and Regulations. The Parties shall comply with
all foreign, federal, state and local laws and regulations applicable
to their performance as described in this Agreement.
w. Applicable Law. This Agreement is made and executed in the state of
Texas and the laws and decisions of Texas, without reference to
provisions covering conflicts of laws, shall control the construction,
interpretation, validity and enforcement of this Agreement.
x. Amendments, Modifications and Supplements. Amendments, modifications
and supplements to this Agreement are allowed and will be binding on
the Parties after the effective date, provided such amendments,
modifications and supplements (1) are in writing, signed by an
authorized representative of both parties, and (2) by reference
incorporate this Agreement and identify the specific Sections or
clauses contained herein which are amended, modified or supplemented
or indicate that the material is new. The term, "this Agreement" shall
be deemed to include any future amendments, modifications and
supplements.
y. Entire Agreement. This Agreement, including all Exhibits attached
hereto, supersede all prior and contemporaneous agreements not
required or contemplated hereby. This Agreement may not be modified
except by a writing signed by authorized representatives of the
Parties.
z. Counterparts. This Agreement may be executed in one or more
counterparts, simultaneously or separately, and each counterpart shall
be deemed to be an original for all purposes. If the counterparts are
separately executed, this Agreement shall be deemed executed when each
Party has signed a copy. Thereafter, the Parties shall exchange signed
copies of this Agreement for their respective files.
13
<PAGE> 16
13. MAINTENANCE AND REPAIRS AT GTE OWNED SITES
a. PMWI will reimburse GTE for all actual costs incurred (including
reasonable travel expenses) when escorting PMWI employees to any
One-Way or NPCS Facilities located at unmanned GTE owned sites. Such
amount shall not exceed a rate cap of eighty-five dollars ($85) per
hour, unless overtime or premium time is required, in which case such
rate cap is not applicable. PMWI agrees to give GTE twenty-four (24)
hour notice prior to scheduling any such request.
b. In the event PMWI requests GTE to perform maintenance or repairs on
any Facilities, PMWI agrees to provide all parts necessary to complete
the maintenance or repairs and will compensate GTE one hundred dollars
($100) per hour, plus all actual costs incurred (including reasonable
travel expenses).
14
<PAGE> 17
14. SIGNATURES
IN WITNESS WHEREOF, the Parties have executed this Agreement on the date or
dates indicated below to be effective when executed by both.
PAGEMART WIRELESS, INC. GTE COMMUNICATION SYSTEMS
CORPORATION
By: /s/ TODD A. BERGWALL By: /s/ GALE L. MARVIN
------------------------------ --------------------------------
Name: Todd A. Bergwall Name: Gale L. Marvin
---------------------------- ------------------------------
Title: V.P. Law and Regulation Title: Senior Contract Manager
---------------------------- ------------------------------
Date: April 21, 1999 Date: April 22, 1999
---------------------------- ------------------------------
[STAMP]
15
<PAGE> 18
EXHIBIT A
GTE AFFILIATED ENTITIES
GENERAL ADMINISTRATION
GTE Corporation
GTE Finance Corporation
GTE Investment Management Corporation
GTE Realty Corporation
GTE Realty Corporation of Connecticut
GTER Incorporated
GTE-TCCA, Inc.
GTE REinsurance Company Limited (Vermont)
GTE Life Insurance Company Limited (Bermuda)
GTE REinsurance Management Limited (Bermuda)
GTE Service Corporation
GTE Shareholder Services Incorporated
GTE VisNet Incorporated
GOVERNMENT SYSTEMS
Contel Federal Systems, Inc.
GTE Government Systems Corporation
GTE CyberTrust Solutions Incorporated
GTE Federal Services Corporation
GTE Government Systems Overseas Corporation
GTE Overseas Systems and Services Corporation
Telecom Systems Incorporated
Contel Page International Holdings, Inc.
Contel Page International, Inc.
Page Europa, S.p.A.
MTX Italia
GTE Telecom Incorporated
GTE Telecom International Incorporated
GTE Telecom International Systems Corporation
GTE Telecom Saudi Arabia LTD
INFORMATION SERVICES
GTE Information Services Incorporated
General Telephone Directory Company C. por A.
GTE Communications Corporation
GTE Data Services GmbH
GTE Directories (Belgium) Limited
GTE Directories (B) SDN.BHD (Brunei)
GTE Directories Corporation
Associated Directory Services-WC, Company
GTE Directories Distribution Corporation
GTE Directories Sales Corporation
GTEX Corporation
GTE Directories (HK) Limited (Hong Kong)
GTE Directorios - Republica Dominicana, C. por A.
GTE Government Information Services Incorporated
GTE Information Services (UK) Limited (England)
U S West Polska Sp. Z o.o
GTE New Media Services Incorporated
GTE Telecommunications Services Incorporated
GTE Yellow Pages Publishing Hungary Kft
INTERNETWORKING OPERATIONS
GTE Internetworking Incorporated
GTE Intelligent Network Services Incorporated
BBN Corporation
BBN International Corporation
BBN International Sales Corporation
BBN Securities Corporation
BBN U.K. Limited
Bolt Beranek and Newman Corporation
Realtech Corporation
TELEPHONE OPERATING COMPANIES
GTE Alaska Incorporated
GTE Arkansas Incorporated
GTE California Incorporated
Contel Advanced Systems, Inc.
GTE Florida Incorporated
GTE Florida Business Connections Corporation
GTE Funding Incorporated
GTE Hawaiian Telephone Company Incorporated
GTE Hawaiian Tel Insurance Company Incorporated
GTE Hawaiian Tel International Incorporated
The Micronesian Telecommunications Corporation
GTE Pacifica Incorporated
GTE Midwest Incorporated
GTE North Incorporated
GTE Northwest Incorporated
GTE West Coast Incorporated
GTE South Incorporated
GTE Southwest Incorporated
Contel of Minnesota, Inc. d/b/a GTE Minnesota
Contel of the South, Inc. d/b/a GTE Systems of the South
Contel Service Corporation
GTE Anglo Holding Company Incorporated
La Compagnie de Telephone Anglo-Canadienne/Anglo-
Canadian Telephone Company
BC TELECOM Inc.
Aerotech Specialities Ltd.
BC TEL
Canadian Telephones and Supplies Ltd.
ISM Information Systems Management
(B.C.) Corporation
BC TEL Mobility Cellular Inc.
BC TEL Mobile Ltd.
BC TEL Properties Inc.
BC TEL Risk Management Inc.
BC TEL Systems Support Inc.
Microtel International Inc.
SRI Strategic Resources Inc.
Telecom Leasing Canada (TLC) Limited
Quebec-Telephone
QuebecTel Communications Inc.
QuebecTel Mobilite Inc.
Quebec Tel International Inc.
GTE Customer Networks, Inc.
GTE Data Services Incorporated
GTE Data Services International Incorporated
A-1
<PAGE> 19
EXHIBIT A
GTE AFFILIATED ENTITIES
GTE Holdings (Canada) Limited
Compania Dominicana de Telefonos, C. por A.
(Codetel)
Quality Telecommunications, C. por A.
GTE International Telephone Incorporated
Informatica y Telecommunicaciones, C. por A.
(Dominican Republic)
GTE International Telecommunications Incorporated
GTE do Brasil Limitada
GTE Mexico, L.L.C.
GTE PCS International Incorporated
GTE Venezuela Incorporated
VenWorld Telecom, C.A. (Venezuela)
Compania Anonima Nacional Telefonos de Venezuela (CANTV)
Prontocel S.A. (Brazil)
GTE Investments Incorporated
GTE London Limited (England)
GTE Main Street Incorporated
GTE Media Ventures Incorporated
ContelVision, Inc.
GTE Enterprise Initiatives Incorporated
GTE Vantage Incorporated
WIRELESS PRODUCTS AND SERVICES
GTE Airfone Incorporated
GTE Airfone of Canada Incorporated
GTE Railfone Incorporated
Mexfone, S.A. de C.V.
GTE Wireless Incorporated
GTE Mobile Communications Service Corporation
GTE Mobile Communications International
Incorporated
GTE Mobilnet of Asheville Incorporated
GTE Mobilnet of Danville Incorporated
GTE Mobilnet of Eastern North Carolina Incorporated
GTE Mobilnet of Jacksonville Incorporated
GTE Mobilnet of Jacksonville II Incorporated
GTE Mobilnet of Wilmington Incorporated
GTE Mobilnet of Wilmington II Incorporated
GTE Mobilnet of Fayetteville Incorporated
GTE Mobilnet of Florence, South Carolina Incorporated
GTE Mobilnet of North Carolina Incorporated
GTE Mobilnet of Raleigh Incorporated
GTE Mobilnet of South Carolina Incorporated
GTE Mobilnet of the Southeast Incorporated
GTE Cellular Communications Corporation
GTE Mobilnet of Cleveland Incorporated
GTE Mobilnet Sales Corp.
GTE Mobilnet Service Corp.
GTE Mobilnet of Austin Incorporated
GTE Wireless of Houston Incorporated
GTE Wireless of the Midwest Incorporated
GTE Wireless of the Pacific Incorporated
GTE Mobilnet of Clatsop Incorporated
Contel Cellular International, Inc.
GTE Mobilnet Holding Incorporated
GTE Mobilnet of Alabama Incorporated
GTE Mobilnet of Florence, Alabama Incorporated
GTE Mobilnet of Chattanooga Incorporated
GTE Mobilnet of Chattanooga II Incorporated
GTE Mobilnet of Clarksville Incorporated
GTE Mobilnet of Gadsden Incorporated
GTE Mobilnet of Knoxville Incorporated
GTE Mobilnet of Memphis Incorporated
GTE Mobilnet of Memphis II Incorporated
GTE Mobilnet of Nashville Incorporated
GTE Mobilnet of Tennessee Incorporated
GTE Mobilnet of Central California Incorporated
Pinnacles Cellular, Inc.
GTE Mobilnet of Huntsville Incorporated
GTE Mobilnet of Illinois Funding Incorporated
GTE Mobilnet of San Diego Incorporated
GTE Mobilnet of the Southwest Incorporated
GTE Wireless of the South Incorporated
OTHER OPERATIONS
GTE China Incorporated
GTE International Telecommunications Services LLC
GITS Branch LLC
GTE Holdings Mexico, S. de R.L. de C.V.
GTE Data Services-Mexico, S.A. de C.V.
GTEDS Services-Mexico, S.A. de C.V.
GTE Supply-Mexico, S.A. de C.V.
GTE Communications Services Incorporated
GTE Leasing Corporation
GTE Leasing Acceptance Corporation
Kalama Grain Terminal, Inc.
GTE Products of Connecticut Corporation
GTE Communication Systems Corporation (GTE Supply)
GTE International Incorporated
GTE Far East (Services) Limited
GTE Overseas Corporation
GTE Laboratories Incorporated
GTE Operations Support Incorporated
GTE Operations do Brasil Comercial Ltda.
West Indies Telephone Company
A-2
<PAGE> 20
EXHIBIT A
GTE AFFILIATED ENTITIES
Televac, Inc.
GTE Transfer Corporation
A-3
<PAGE> 1
CONTRACT NUMBER: C949017S0002
AMENDED AND RESTATED
STRATEGIC ALLIANCE AGREEMENT NO. 2
BETWEEN
GTE COMMUNICATION SYSTEMS CORPORATION
AND
PAGEMART WIRELESS, INC.
CONTRACT MANAGER: GALE L. MARVIN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. RECITALS .......................................... 1
2. DEFINITIONS ....................................... 1
3. DESCRIPTION AND SCOPE ............................. 2
4. TERM .............................................. 2
5. TERMINATION ....................................... 2
6. RETENTION OF CUSTOMERS ............................ 3
7. GTE RESPONSIBILITIES ONE-WAY ...................... 4
8. PMWI RESPONSIBILITIES ............................. 4
9. CONSTRUCTION SCHEDULE ............................. 5
10. PAYMENT ........................................... 5
11. OWNERSHIP OF FACILITIES AND FREQUENCIES ........... 6
12. CONFIDENTIAL INFORMATION .......................... 6
13. DISPUTE RESOLUTION ................................ 7
14. GENERAL PROVISIONS ................................ 8
15. MAINTENANCE AND REPAIRS AT GTE OWNED SITES ........ 13
16. SIGNATURES ........................................ 14
EXHIBIT A - GTE AFFILIATES
</TABLE>
<PAGE> 3
AMENDED AND RESTATED
STRATEGIC ALLIANCE AGREEMENT NO. 2
THIS AMENDED AND RESTATED STRATEGIC ALLIANCE AGREEMENT NO. 2 ("Agreement")
is made by and between PageMart Wireless, Inc., a Delaware corporation, with
offices for the purpose of this Agreement located at 3333 Lee Parkway, Suite
100, Dallas, Texas 75219 ("PMWI") and GTE Communication Systems Corporation, a
Delaware corporation, acting through its GTE Supply division for the benefit of
itself and its affiliates listed in Exhibit A, with offices located at 700
Hidden Ridge, Irving, Texas 75038 ("GTE") (collectively referred to as the
"Parties" and individually as a "Party").
1. RECITALS
The Parties recognize the mutual benefits to be gained if they cooperate in
the deployment of paging network facilities in the state of Hawaii
("HAWAII") for the provision of wireless messaging and data transmissions.
This Agreement is intended to create a framework and to define the terms
and conditions under which the Parties shall implement their strategic
alliance in a manner that maximally complements the wireless needs of the
Parties.
IN CONSIDERATION of the above Recitals, the terms and provisions set forth
herein, the mutual benefits to be gained by the performance thereof, and
for the good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereto agree as follows:
2. DEFINITIONS
Facilities - Both One-Way Facilities and NPCS Facilities.
NPCS - (Narrowband PCS) - NPCS services operating in the 901-902 MHz,
930-931, and 940-941 MHz bands.
NPCS FACILITIES - Equipment to be integrated into PMWI's NPCS network
infrastructure for transmission and receipt of NPCS messages which shall
include but not be limited to NPCS paging transmitters and receivers,
satellite downlinks and cable deployed for the transmitting and receiving
of two way paging messaging services.
One-Way Facilities - The GTE-supplied wireless network infrastructure in
the state of Hawaii, which shall include but not be limited to paging
transmitters, satellite downlinks, antennas, and cable being deployed to
PMWI for the transmission of one-way paging/messaging services on PMWI's
One-Way paging frequencies 929.6625 MHz and 929.7125 MHz.
Project - The site specific installation function of NPCS or One-Way
Facilities.
RSA - Resale Agreement No. C989107SC001 previously entered into between
the Parties.
TURN UP DATE - That date when the One-Way Facilities on the island of Oahu
are
<PAGE> 4
functioning properly and the first local subscriber has been activated.
3. DESCRIPTION AND SCOPE
a. This Agreement will govern the cooperation of the Parties in
connection with any Project in HAWAII involving, without limitation,
the location, design, construction, and management of the Facilities.
b. All telecommunications and wireless services that are the subject of
this Agreement shall be provided in accordance with the rules,
regulations and orders of the applicable state regulatory agency, the
Federal Communications Commission ("FCC") and the courts of the United
States.
c. The obligations of the Parties to cooperate and work together in
connection with any Project shall be as expressly set forth in this
Agreement. Neither Party undertakes by this Agreement or otherwise to
perform or discharge any liability or obligation for the other Party
not specifically contained herein, whether regulatory or contractual,
or to assume any responsibility whatsoever for the conduct of the
business or operations of the other Party. Nothing contained herein is
intended to give rise to a partnership or joint venture between the
Parties or to impose upon the Parties any of the duties or
responsibilities of partners or joint venturers. Neither Party shall
have any right or authority to act for, or to assume, create or incur
any obligation, liability or responsibility of any kind, whether
express or implied, against, in the name of, or on behalf of, the
other Party, except as expressly provided in this Agreement.
d. Unless otherwise specified herein, each Party shall assume and bear
all expenses, costs and fees incurred or assumed by such Party whether
or not the transactions provided for by this Agreement shall be
effectuated.
4. TERM
The term of this Agreement shall commence upon the execution of this
Agreement by both Parties and shall end on December 31, 2004, unless
earlier terminated in accordance with Section 5. The term of this Agreement
may be extended for successive one-year periods following the expiration of
the initial term by mutual written consent of the Parties at least ninety
(90) days prior to the end of the then current term.
5. TERMINATION
a. Termination for Cause. This Agreement may be abandoned or terminated
at any time after the effective date of this Agreement by either
Party's furnishing written notice should the other Party:
i. breach, refuse or fail in any material respect properly to
perform any of its duties, obligations or commitments under this
Agreement, any one of which shall constitute a default, which
default is not substantially cured within thirty (30) days after
receiving written notice specifying the nature of the default;
ii. commence or have commenced against such Party any proceeding,
2
<PAGE> 5
whether under court supervision or otherwise, for the liquidation
of such Party, determination of insolvency of such Party,
appointment of a receiver for such Party, assignment for the
benefit of all or substantially all of such Party's creditors, or
the bankruptcy of such Party; or
iii. indefinitely suspend its normal business operations.
If this Agreement is terminated by GTE as a result of PMWI's conduct
described in this Section 5(a), then Section 5(b)(i) below shall be
enforced between the Parties. If this Agreement is terminated by PMWI
as a result of GTE's conduct described in this Section 5(a), then
Section 5(b)(ii) below shall be enforced between the Parties.
b. Termination for Convenience. This Agreement may be abandoned or
terminated at any time after January 1, 2001, by either party, subject
to the following:
i. If this Agreement is terminated for convenience by PMWI, PMWI
agrees, provided that GTE continues to timely make payments to
PMWI under the RSA, to continue utilizing its licensed radio
frequencies on the Facilities until the Termination Date, or
until such time that GTE has gained its own spectrum rights, plus
an additional ninety (90) days, or until such time that GTE no
longer has customers receiving paging or messaging services from
PMWI over the Facilities, whichever occurs first. In such event,
PMWI shall only be required to pay the usage fees set forth in
Section 10 relating to One-Way Facilities and NPCS Facilities for
so long as PMWI has customers utilizing the One-Way Facilities or
NPCS Facilities, as applicable.
ii. If this Agreement is terminated for convenience by GTE, GTE
agrees to keep the Facilities, operating in a normal capacity and
permit PMWI to keep the NPCS Facilities on the GTE sites for a
period of one (1) year after notice provided PMWI continues to
make the required payments under Section 10.a.iii.
c. If this Agreement is not renewed, the Parties agree to keep the
Facilities operating in a normal capacity until the Termination Date.
d. The termination of this Agreement shall not affect any obligation of a
Party which is unfulfilled as of such termination provided that such
obligation by its terms or nature survives such termination.
6. RETENTION OF CUSTOMERS
If this Agreement is terminated, each Party shall:
a. Have the right to retain those customers acquired by that Party.
b. Agree to commercially reasonable cooperation to support the other in
its endeavors to continue providing wireless messaging and data
transmissions to its customers.
3
<PAGE> 6
7. GTE RESPONSIBILITIES ONE-WAY
a. For the Project, GTE shall have the final responsibility, subject to
the consent of PMWI which shall not be unreasonably withheld, of
determining when and where the One-Way Facilities shall be
constructed.
b. For the Project, GTE shall, at its sole cost and expense, finance the
construction of One-Way Facilities on which PMWI would utilize PMWI's
one-way paging frequencies to provide wireless services to PMWI's
customers and to GTE as a reseller of PMWI's wireless services.
c. In conjunction with the construction of the One-Way Facilities, GTE
shall be financially responsible for purchasing any transmitters,
antennae, satellite downlink, cable, and third party labor necessary
to install the One-Way Facilities. GTE shall additionally be
responsible for One-Way Facility maintenance and furnishing any
upgrades, whether software or otherwise, reasonably necessary for the
operation of the One-Way Facilities.
d. To the extent that the One-Way Facilities may be located on property
owned by or beneficially belonging to a third party, GTE shall be
solely responsible for negotiating the terms and conditions of any
lease or permit, any expenses associated with lease site preparation
which shall include but not be limited to shelter construction and
provisioning of electrical power and for the remittance of any
operating expenses associated with that lease or permit.
e. For the Project, GTE shall be responsible for payment of all property
taxes, whether real or personal, on all One-Way Facilities that may be
imposed or assessed by any appropriate taxing authority.
8. PMWI RESPONSIBILITIES
a. For the Project, PMWI shall be solely responsible for conducting any
propagation studies at PMWI's expense.
b. For the Project, PMWI at no cost or expense to GTE, shall license the
Facilities with the FCC at locations selected by GTE as described in
Section 7(a) herein, to utilize PMWI's nationwide frequencies to
provide wireless services to PMWI's customers and to GTE as a reseller
of PMWI's wireless services.
c. Although GTE and PMWI shall jointly agree on the selection of
contractors to construct the One-Way Facilities of the Project, PMWI
shall be responsible, at its sole cost and expense, for managing,
coordinating and overseeing the construction of the One-Way
Facilities.
d. At PMWI's sole cost and expense, PMWI shall operate the Facilities,
including, without limitation, the payment for any access connections
including but not limited to business single party lines and for any
long distance service necessary for polling the Facilities to ensure
the Facilities are operational, in a good state of repair, and
operating according to manufacturers specifications.
4
<PAGE> 7
e. At PMWI's sole cost and expense, PMWI shall utilize PMWI's national
control center to provide monitoring and ongoing quality assurance for
the NPCS Facilities and shall provide timely notification to GTE of
any NPCS Facility outages.
f. PMWI shall, at its sole cost and expense, link by satellite the
Facilities to PMWI's network infrastructure for network control.
g. For the Project, PMWI shall, at its sole cost and expense, finance the
construction of NPCS Facilities on which PMWI would utilize PMWI's
frequencies to provide NPCS services to PMWI's customers and to GTE as
a reseller of PMWI's wireless services.
h. In conjunction with the construction of any NPCS Facilities, PMWI
shall be financially responsible for purchasing any transmitters,
antennae, satellite downlink, cable, and third party labor necessary
to install the NPCS Facilities. PMWI shall additionally be responsible
for NPCS Facility maintenance and furnishing any upgrades, whether
software or otherwise, reasonably necessary for the operation of the
NPCS Facilities.
9. CONSTRUCTION SCHEDULE
The One-Way Facilities shall be constructed on an island by island basis in
the following order: Oahu, Maui, Kauai, and Hawaii.
10. PAYMENT
a. PMWI shall pay GTE the following amounts for use of the One-Way
Facilities:
i. Twenty-seven thousand dollars ($27,000) commencing on the Turn Up
Date and continuing for 90 days or until completion of One-Way
Facilities construction, whichever occurs first.
ii. Thirty-six thousand dollars ($36,000) per month commencing on
completion of One-Way Facilities construction or 90 days after
Turn Up Date, whichever occurs first, and continuing through
month number one hundred twenty (120) of this Agreement.
iii. Four hundred dollars ($400) per month for each NPCS site (the
"NPCS Fee").
b. The amounts in paragraphs (i) and (ii) above are valid only if the
One-Way Facilities contain between thirty-seven (37) and forty-three
(43) transmitters. If the number of transmitters in the One-Way
Facilities consist of either more or less than these quantities, the
Parties agree to renegotiate the payment amounts.
c. Beginning on the date described below, PMWI shall pay GTE the NPCS Fee
for each NPCS site constructed on property owned or leased by GTE.
PMWI shall be responsible for payment of the NPCS Fee only from and
after the first day of the month that is midway between January 1,
1999 and the date GTE begins billing PMWI for the NPCS Fee. GTE will
begin billing PMWI the NPCS Fee each month
5
<PAGE> 8
in arrears when the PMWI NPCS network in Hawaii has been completed, or
on July 1, 1999, whichever occurs first.
d. Payment terms shall be net thirty (30) days from receipt of invoice.
11. OWNERSHIP OF FACILITIES AND FREQUENCIES
a. GTE shall have legal title to and shall be the exclusive owner of all
One-Way Facilities whether the property constituting the One-Way
Facilities shall be characterized as real or personal. PMWI shall have
legal title to or the equitable right to control NPCS Facilities
whether the property constituting the NPCS Facilities shall be
characterized as real or personal.
b. Notwithstanding the foregoing;
i. PMWI and GTE understand and agree that the nationwide frequencies
upon which PMWI furnishes the wireless services provided for
herein are licensed exclusively to PMWI.
ii. Nothing contained herein shall permit GTE to disconnect the
transmitters, antennae or other equipment or remove any of such
assets from any Facility sites during the term of this Agreement
without prior written permission from PMWI, such permission not
to be unreasonably withheld.
12. CONFIDENTIAL INFORMATION
a. To effectuate this Agreement, it may be necessary for either Party to
disclose to the other proprietary or confidential customer, technical
and business information in written, graphic, oral or other tangible
or intangible forms ("Confidential Information"). In order to protect
such Confidential Information from improper disclosure, each party
agrees: (1) that all such Confidential Information shall be and shall
remain the exclusive property of the source; (2) to limit access to
such Confidential Information to authorized employees who have a need
to know the Confidential Information in order to perform the services
set out in this Agreement; (3) to keep such Confidential Information
confidential and to use the same level of care to prevent disclosure
or unauthorized use of the received Confidential Information as it
exercises in protecting its own Confidential Information of a similar
nature; (4) for a period of three years following any disclosure, not
to copy or publish or disclose such Confidential Information to others
or authorize anyone else to copy or publish or disclose such
Confidential Information to others without the prior written approval
of the source; (5) to return promptly any copies of such Confidential
Information to the source at its request; and (6) to use such
Confidential Information only for purposes of fulfilling work or
services performed hereunder and for other purposes only upon such
terms as may be agreed upon between the parties in writing.
b. These obligations shall not apply to any Confidential Information
which was legally in the recipient's possession prior to receipt from
the source, was received in good faith from a third party not subject
to a confidential obligation to the source, now is or later becomes
publicly known through no breach of confidential obligation by the
6
<PAGE> 9
recipient, was developed by the recipient without the developing
person(s) having access to any of the Confidential Information
received in confidence from the source, or which is required to be
disclosed pursuant to subpoena or other process issued by a court or
administrative agency having appropriate jurisdiction. If a receiving
party receives a request to disclose any Confidential Information
(whether pursuant to a valid and effective subpoena, an order issued
by a court or other governmental authority of competent jurisdiction
or otherwise) on advice of legal counsel that disclosure is required
under applicable law, such party agrees that, prior to disclosing any
Confidential Information, it shall (i) notify the disclosing party of
the existence and terms of such request or advice, (ii) cooperate with
the disclosing party in taking legally available steps to resist or
narrow any such request or to otherwise eliminate the need for such
disclosure, if requested to do so by the disclosing party, and (iii)
if disclosure is required, use its best efforts to obtain a protective
order or other reliable assurance that confidential treatment will be
afforded to such portion of the Confidential Information as is
required to be disclosed. The disclosing party shall reimburse the
other party for its reasonable expenses, including attorney fees, in
exerting best efforts in complying with b (ii) and b (iii).
c. The obligation of confidentiality and use with respect to Confidential
Information disclosed by one party to the other shall survive any
termination of this Agreement for a period of three years from the
date of the initial disclosure of the Confidential Information.
13. DISPUTE RESOLUTION
a. The Parties desire to resolve disputes arising out of this Agreement
without litigation. Accordingly, except for action seeking a temporary
restraining order or injunction related to the purposes of this
Agreement, or suit to compel compliance with this dispute resolution
process, the Parties agree to use the following alternative dispute
resolution procedure as their sole remedy with respect to any
controversy or claim arising out of or relating to this Agreement or
its breach.
b. At the written request of a Party, each Party will appoint a
knowledgeable, responsible representative to meet and negotiate in
good faith to resolve any dispute arising under this Agreement. The
Parties intend that these negotiations be conducted by nonlawyer,
business representatives. The location, format, frequency, duration
and conclusion of these discussions shall be left to the discretion of
the representatives. Upon agreement, the representatives may utilize
other alternative dispute resolution procedures such as mediation to
assist in the negotiations. Discussions and correspondence among the
representatives for purposes of these negotiations shall be treated as
confidential information developed for purposes of settlement, exempt
from discovery and production, which shall not be admissible in the
arbitration described below or in any lawsuit without the concurrence
of all Parties. Documents identified in or provided with such
communications, which are not prepared for purposes of the
negotiations, are not so exempted and may, if otherwise admissible, be
admitted in evidence in the arbitration or lawsuit.
7
<PAGE> 10
c. If the negotiations do not resolve the dispute within sixty (60) days
of the initial written request, the dispute shall be submitted to
binding arbitration by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. A Party may
demand such arbitration in accordance with the procedures set out in
those rules. Discovery shall be controlled by the arbitrator and shall
be permitted to the extent set out in this Section. Each Party may
submit in writing to a Party, and that Party shall so respond, to a
maximum of any combination of thirty-five (35) (none of which may have
subparts) of the following: interrogatories, demands to produce
documents, and requests for admission. Each Party is also entitled to
take the oral deposition of one individual of another Party.
Additional discovery may be permitted upon mutual agreement of the
parties. The arbitration hearing shall be commenced within sixty (60)
days of the demand for arbitration. The arbitration shall be held in
the city where this Agreement was executed by GTE. The arbitrator
shall control the scheduling so as to process the matter
expeditiously. The Parties may submit written briefs. The arbitrator
shall rule on the dispute by issuing a written opinion within thirty
(30) days after the close of hearings. The times specified in this
Section may be extended upon mutual agreement of the Parties or by the
arbitrator upon a showing of good cause. Judgment upon the award
rendered by the arbitrator may be entered in any court having
jurisdiction.
d. Each Party shall bear its own costs of these procedures. A Party
seeking discovery shall reimburse the responding Party the costs of
production of documents (to include search time and reproduction
costs). The Parties shall equally split the fees of the arbitration
and the arbitrator.
14. GENERAL PROVISIONS
a. Further Assurances. From and after the effective date of this
Agreement, the Parties each agree to execute and deliver such further
documents and instruments and to do such further acts and things as
the other may reasonably request in order to effectuate the
transactions contemplated by this Agreement. The Parties shall
cooperate and assist one another in the performance of the provisions
of this Agreement, and shall take such steps as are reasonably
necessary to allow the other Party to discharge the obligations
imposed by this Agreement.
b. Excusable Delays. Neither Party shall be liable for any delay or
failure in its performance of any of the acts required by this
Agreement when such delay or failure arises beyond the reasonable
control of such Party. Such causes may include, without limitation,
acts of God or public enemies, labor disputes, material or component
shortages, supplier failures, embargoes, rationing, acts of local,
state or national governments or public agencies (not solicited,
encouraged or invited by any Party), utility or communication failures
or delays, fires, floods, epidemics, riots and strikes. The time for
performance of any act delayed by such cause shall be postponed for a
period equal to the delay; provided, however, that the Party so
affected shall give prompt notice to the other Party of such delay.
The Party so affected, however, shall use its best efforts to avoid or
remove such causes of nonperformance to complete performance of the
act delayed, whenever such causes are removed.
8
<PAGE> 11
c. Assignment. Neither this Agreement nor any of the rights hereunder may
be assigned or otherwise transferred by any Party, by operation of law
or otherwise, without the prior written consent of the other Party,
except that the Parties may, without obtaining such consent, assign
their respective obligations and rights hereunder to their parent, or
any other subsidiary of a parent, eighty percent (80%) or more of the
voting stock of which is owned by the parent. In any case of
assignment, however, the assignee shall assume all obligations of the
assigning Party hereunder and the other Party shall have received
documents satisfactory in form and substance to it evidencing such
assumption. Any such assignment shall not relieve any Party to this
Agreement of its obligations hereunder, and any such assignee may,
upon the terms and conditions, reassign its rights hereunder to such
original Party or to any assignee of such original Party permitted
hereunder.
d. Successors in Interest. All provisions of this Agreement shall be
binding upon, inure to the benefit of, and be enforceable by and
against the respective successors and assigns of the Parties or
purchasers of substantially all of the assets of a Party.
e. Independent Contractor Relationship. The persons provided by each
Party shall be solely that Party's employees or agents and shall be
under the sole and exclusive direction and control of that Party. They
shall not be considered employees of the other Party for any purpose.
Each Party shall remain an independent contractor with respect to the
other and shall be responsible for compliance with all laws, rules and
regulations involving, but not limited to, employment of labor, hours
of labor, health and safety, working conditions and payment of wages.
Each Party shall also be responsible for payment of taxes, including
federal, state and municipal taxes, chargeable or assessed with
respect to its employees, such as, Social Security, unemployment,
Workers' Compensation, disability insurance, and federal and state
withholding. Each Party shall indemnify the other for any loss,
damage, liability, claim, demand or penalty that may be sustained by
reason of its failure to comply with this provision.
f. Publicity. Any news release, public announcement, advertising or any
form of publicity pertaining to this Agreement, provision of services
pursuant to it, or association of the Parties with respect to the
subject of this Agreement shall be subject to prior written approval
of both parties.
g. Trademarks and Trade Names. Except as specifically set out in this
Agreement, nothing in this Agreement shall grant, suggest or imply any
authority for one Party to use the name, trademarks, service marks or
trade names of the other for any purpose whatsoever.
h. Records. Each Party shall keep true and accurate records directly
relating to this Agreement in accordance with generally accepted
accounting practices. Such records shall be retained for a period of
three (3) years from the Termination Date.
i. Attorney's Fees. Except as set forth in Section 13, in the event any
Party to this Agreement shall be required to initiate legal
proceedings (i) to interpret or to enforce performance of any term or
condition of this Agreement; (ii) to enjoin any action prohibited
hereunder; or (iii) to gain any other form of relief whatsoever, the
prevailing Party shall be entitled to get such sums from the other
Party, in addition
9
<PAGE> 12
to any other damages or compensation received, as well as
reimbursement from the other Party for reasonable attorneys' fees and
court costs incurred on account thereof notwithstanding the nature of
the claim or cause of action asserted by the prevailing Party.
j. Indemnification. Notwithstanding anything to the contrary herein, each
Party shall indemnify and save harmless the other from any loss or
damages (including reasonable attorney's fees) incurred by the other
because of claims, suits, or demands based on personal injury or death
or damage to property, including, without limitation, all Facilities,
or third party claims, suits or demands of any kind, to the extent
such loss or damage is caused by or results from the negligent or
willful acts or omissions of the other or its employees or agents. The
indemnifying Party shall receive the full opportunity and authority to
assume the sole defense of and settlement of such suits. The
indemnified Party agrees to furnish to the indemnifying Party upon
request all information and reasonable assistance available to the
indemnified party for defense against any such suit, claim, or demand.
k. Insurance. GTE and PMWI each agree to maintain during the term hereof
all insurance and/or bonds required by law or this Agreement,
including, but not limited to (1) Workers' Compensation and related
insurance as prescribed by applicable law; (2) employer's liability
insurance with limits of at least $500,000 for each occurrence; and
(3) comprehensive general liability insurance including products
liability, and, if the use of motor vehicles is required,
comprehensive motor vehicle liability insurance, each with limits of
at least $2,000,000 for combined single limit for bodily injury,
including death, and/or property damage. GTE and PMWI each shall cause
the other to be included as an Additional Insured under their
respective policies and GTE's and PMWI's appropriate coverage under
such policies shall be primary. GTE and PMWI each shall furnish
certificates or evidence of the foregoing insurance indicating the
amount and nature of such coverage, the expiration date of each
policy, and stating that no material change or cancellation of any
such policy shall be effective unless thirty (30) days advance
written notice is given to the Party named as an Additional Insured.
Notwithstanding the above, GTE and PMWI shall each have the option,
where permitted by law, to self-insure any or all of the foregoing
risks.
l. Assuring Performance of Responsibilities. Notwithstanding anything
stated or implied to the contrary elsewhere in this Agreement, GTE
may, as permissible under FCC rules and regulations, at its option and
without prejudice to other rights, take over and complete all or part
of PMWI's responsibilities with respect to the One-Way Facilities if
PMWI has defaulted, which default is not substantially cured within
thirty (30) days of receiving written notice of the default, or PMWI
has not furnished GTE with adequate assurance that PMWI is prepared to
perform its obligations in a timely fashion and/or as required by this
Agreement. PMWI shall be liable to GTE for any costs incurred by GTE
in discharging PMWI's responsibilities. If, in GTE's reasonable
opinion, a hazardous condition exists at any Facility, GTE may without
notice to PMWI take such immediate action as is necessary to protect
persons, the Facilities or the property of third parties from damage
or interference caused by the hazard.
10
<PAGE> 13
m. Rights and Remedies. The rights and remedies provided each of the
Parties herein shall be cumulative and in addition to any other rights
and remedies provided by law or otherwise. Any failure in the exercise
by any Party of its rights to enforce any provision of this Agreement
for any default or violation by another Party shall not prejudice such
Party's right of enforcement for any further or other default or
violation.
n. Limitation of Liability. It is expressly understood that neither Party
makes any warranty to the other with respect to the performance or
fitness for any purpose of the products or services contemplated by
this Agreement. Each Party's liability to the other for any loss,
cost, claim, injury, liability or expense, including reasonable
attorney's fees, relating to or arising out of any negligent act or
omission in its performance of obligations arising out of this
Agreement, shall be limited to the amount of direct damage actually
incurred. Absent gross negligence or knowing and willful misconduct
which causes a loss, neither Party shall be liable to the other for
any indirect, special or consequential damage of any kind whatsoever.
For purposes of this clause, payments and related expenses for third
party claims, suits or demands for which indemnity is owed shall be
considered direct damages.
o. Limitation of Actions. No action, regardless of form, arising out of
the subject matter of this Agreement may be brought by either Party
more than two (2) years after the cause of action has accrued. The
Parties waive the right to invoke any different limitation on the
bringing of actions provided under state law.
p. Notices. All notices and other communications required or permitted to
be given under this Agreement shall be in writing and shall be
effective when delivered personally, or if by telex or TWX, when
confirmed (which confirmation may be by reply telex or signal
indicating that the message has been clearly received) or if mailed,
five (5) days after mailing, postage prepaid and addressed to the
Parties at their respective addresses set forth below, unless by such
notice a different person, address or number shall have been
designated for giving notice hereunder:
If to GTE: GTE Communication Systems Corporation
700 Hidden Ridge
Irving, Texas 75038
Attn: Manager-Contract Management
Mail Code: HQW03N56
If to PMWI: PageMart Wireless, Inc.
3333 Lee Parkway
Suite 100
Dallas, Texas 75219
Attn: Vice President Carrier Services Division
q. Waiver. The waiver by a Party of the performance of any covenant,
condition, obligation, representation, warranty or promise in this
Agreement shall not invalidate this Agreement or be deemed a waiver by
such Party of any other covenant, condition, obligation,
representation, warranty or promise. The waiver of a Party of the time
for performing any act or condition hereunder does not constitute a
waiver of the act or condition itself.
11
<PAGE> 14
r. Construction. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any third party. No third party,
including any creditor of either Party, shall have any rights against
the Parties or any of their subsidiaries, successors or assigns by
reason of or under this Agreement.
s. Severability. In the event that any one or more provision(s) contained
in this Agreement should for any reason be held to be unenforceable in
any respect, such unenforceability shall not affect any other
provision of this Agreement, and this Agreement shall be construed as
if such unenforceable provision(s) had not been contained herein.
t. Survival of Obligations. The respective obligations of the Parties
under this Agreement which by their nature would continue beyond the
termination, cancellation or expiration hereof, shall survive
termination, cancellation or expiration hereof.
u. Headings. The captions of Articles and Sections of this Agreement are
inserted only as a matter of convenience and in no way define, limit,
extend or describe the scope of this Agreement or the intent of any
provision hereof.
v. Compliance with Laws and Regulations. The Parties shall comply with
all foreign, federal, state and local laws and regulations applicable
to their performance as described in this Agreement.
w. Applicable Law. This Agreement is made and executed in the state of
Texas and the laws and decisions of Texas, without reference to
provisions covering conflicts of laws, shall control the construction,
interpretation, validity and enforcement of this Agreement.
x. Amendments, Modifications and Supplements. Amendments, modifications
and supplements to this Agreement are allowed and will be binding on
the Parties after the effective date, provided such amendments,
modifications and supplements (1) are in writing, signed by an
authorized representative of both parties, and (2) by reference
incorporate this Agreement and identify the specific Sections or
clauses contained herein which are amended, modified or supplemented
or indicate that the material is new. The term, "this Agreement" shall
be deemed to include any future amendments, modifications and
supplements.
y. Entire Agreement. This Agreement, including all Exhibits attached
hereto, supersede all prior and contemporaneous agreements not
required or contemplated hereby. This Agreement may not be modified
except by a writing signed by authorized representatives of the
Parties.
z. Counterparts. This Agreement may be executed in one or more
counterparts, simultaneously or separately, and each counterpart shall
be deemed to be an original for all purposes. If the counterparts are
separately executed, this Agreement shall be deemed executed when each
Party has signed a copy. Thereafter, the Parties shall exchange signed
copies of this Agreement for their respective files.
12
<PAGE> 15
15. MAINTENANCE AND REPAIRS AT GTE OWNED SITES
All maintenance and repairs are covered in a separate Agreement between the
parties.
13
<PAGE> 16
16. SIGNATURES
IN WITNESS WHEREOF, the Parties have executed this Agreement on the date or
dates indicated below to be effective when executed by both.
PAGEMART WIRELESS, INC. GTE COMMUNICATION SYSTEMS
CORPORATION
By: /s/ W. WAYNE STARGARDT By: /s/ GALE L. MARVIN
------------------------------------ --------------------------------
Name: W. Wayne Stargardt Name: Gale L. Marvin
---------------------------------- ------------------------------
Title: Vice President, Carrier Services Title: Senior Contract Manager
---------------------------------- ------------------------------
Date: April 5, 1999 Date: April 22, 1999
---------------------------------- ------------------------------
[STAMP]
14
<PAGE> 17
EXHIBIT A
GTE AFFILIATED ENTITIES
GENERAL ADMINISTRATION
GTE Corporation
GTE Finance Corporation
GTE Investment Management Corporation
GTE Realty Corporation
GTE Realty Corporation of Connecticut
GTER Incorporated
GTE-TCCA, Inc.
GTE REinsurance Company Limited (Vermont)
GTE Life Insurance Company Limited (Bermuda)
GTE REinsurance Management Limited (Bermuda)
GTE Service Corporation
GTE Shareholder Services Incorporated
GTE VisNet Incorporated
GOVERNMENT SYSTEMS
Contel Federal Systems, Inc.
GTE Government Systems Corporation
GTE CyberTrust Solutions Incorporated
GTE Federal Services Corporation
GTE Government Systems Overseas Corporation
GTE Overseas Systems and Services Corporation
Telecom Systems Incorporated
Contel Page International Holdings, Inc.
Contel Page International, Inc.
Page Europa, S.p.A.
MTX Italia
GTE Telecom Incorporated
GTE Telecom International Incorporated
GTE Telecom International Systems Corporation
GTE Telecom Saudi Arabia LTD
INFORMATION SERVICES
GTE Information Services Incorporated
General Telephone Directory Company C. por A.
GTE Communications Corporation
GTE Data Services GmbH
GTE Directories (Belgium) Limited
GTE Directories (B) SDN.BHD (Brunei)
GTE Directories Corporation
Associated Directory Services-WC, Company
GTE Directories Distribution Corporation
GTE Directories Sales Corporation
GTEX Corporation
GTE Directories (HK) Limited (Hong Kong)
GTE Directorios - Republica Dominicana, C. por A.
GTE Government Information Services Incorporated
GTE Information Services (UK) Limited (England)
U S West Polska Sp. Z o.o.
GTE New Media Services Incorporated
GTE Telecommunications Services Incorporated
GTE Yellow Pages Publishing Hungary Kft
INTERNETWORKING OPERATIONS
GTE Internetworking Incorporated
GTE Intelligent Network Services Incorporated
BBN Corporation
BBN International Corporation
BBN International Sales Corporation
BBN Securities Corporation
BBN U.K. Limited
Bolt Beranek and Newman Corporation
Realtech Corporation
TELEPHONE OPERATING COMPANIES
GTE Alaska Incorporated
GTE Arkansas Incorporated
GTE California Incorporated
Contel Advanced Systems, Inc.
GTE Florida Incorporated
GTE Florida Business Connections Corporation
GTE Funding Incorporated
GTE Hawaiian Telephone Company Incorporated
GTE Hawaiian Tel Insurance Company Incorporated
GTE Hawaiian Tel International Incorporated
The Micronesian Telecommunications Corporation
GTE Pacifica Incorporated
GTE Midwest Incorporated
GTE North Incorporated
GTE Northwest Incorporated
GTE West Coast Incorporated
GTE South Incorporated
GTE Southwest Incorporated
Contel of Minnesota, Inc. d/b/a GTE Minnesota
Contel of the South, Inc. d/b/a GTE Systems of the South
Contel Service Corporation
GTE Anglo Holding Company Incorporated
La Compagnie de Telephone Anglo-Canadienne/Anglo-
Canadian Telephone Company
BC TELECOM Inc.
Aerotech Specialities Ltd.
BC TEL
Canadian Telephones and Supplies Ltd.
ISM Information Systems Management
(B.C.) Corporation
BC TEL Mobility Cellular Inc.
BC TEL Mobile Ltd.
BC TEL Properties Inc.
BC TEL Risk Management Inc.
BC TEL Systems Support Inc.
Microtel International Inc.
SRI Strategic Resources Inc.
Telecom Leasing Canada (TLC) Limited
Quebec-Telephone
QuebecTel Communications Inc.
QuebecTel Mobilite Inc.
Quebec Tel International Inc.
GTE Customer Networks, Inc.
GTE Data Services Incorporated
GTE Data Services International Incorporated
A-1
<PAGE> 18
EXHIBIT A
GTE AFFILIATED ENTITIES
GTE Holdings (Canada) Limited
Compania Dominicana de Telefonos, C. por A.
(Codetel)
Quality Telecommunications, C. por A.
GTE International Telephone Incorporated
Informatica y Telecommunicaciones, C. por A.
(Dominican Republic)
GTE International Telecommunications Incorporated
GTE do Brasil Limitada
GTE Mexico, L.L.C.
GTE PCS International Incorporated
GTE Venezuela Incorporated
VenWorld Telecom, C.A. (Venezuela)
Compania Anonima Nacional Telefonos de Venezuela (CANTV)
Prontocel S.A. (Brazil)
GTE Investments Incorporated
GTE London Limited (England)
GTE Main Street Incorporated
GTE Media Ventures Incorporated
ContelVision, Inc.
GTE Enterprise Initiatives Incorporated
GTE Vantage Incorporated
WIRELESS PRODUCTS AND SERVICES
GTE Airfone Incorporated
GTE Airfone of Canada Incorporated
GTE Railfone Incorporated
Mexfone, S.A. de C.V.
GTE Wireless Incorporated
GTE Mobile Communications Service Corporation
GTE Mobile Communications International
Incorporated
GTE Mobilnet of Asheville Incorporated
GTE Mobilnet of Danville Incorporated
GTE Mobilnet of Eastern North Carolina Incorporated
GTE Mobilnet of Jacksonville Incorporated
GTE Mobilnet of Jacksonville II Incorporated
GTE Mobilnet of Wilmington Incorporated
GTE Mobilnet of Wilmington II Incorporated
GTE Mobilnet of Fayetteville Incorporated
GTE Mobilnet of Florence, South Carolina Incorporated
GTE Mobilnet of North Carolina Incorporated
GTE Mobilnet of Raleigh Incorporated
GTE Mobilnet of South Carolina Incorporated
GTE Mobilnet of the Southeast Incorporated
GTE Cellular Communications Corporation
GTE Mobilnet of Cleveland Incorporated
GTE Mobilnet Sales Corp.
GTE Mobilnet Service Corp.
GTE Mobilnet of Austin Incorporated
GTE Wireless of Houston Incorporated
GTE Wireless of the Midwest Incorporated
GTE Wireless of the Pacific Incorporated
GTE Mobilnet of Clatsop Incorporated
Contel Cellular International, Inc.
GTE Mobilnet Holding Incorporated
GTE Mobilnet of Alabama Incorporated
GTE Mobilnet of Florence, Alabama Incorporated
GTE Mobilnet of Chattanooga Incorporated
GTE Mobilnet of Chattanooga II Incorporated
GTE Mobilnet of Clarksville Incorporated
GTE Mobilnet of Gadsden Incorporated
GTE Mobilnet of Knoxville Incorporated
GTE Mobilnet of Memphis Incorporated
GTE Mobilnet of Memphis II Incorporated
GTE Mobilnet of Nashville Incorporated
GTE Mobilnet of Tennessee Incorporated
GTE Mobilnet of Central California Incorporated
Pinnacles Cellular Inc.
GTE Mobilnet of Huntsville Incorporated
GTE Mobilnet of Illinois Funding Incorporated
GTE Mobilnet of San Diego Incorporated
GTE Mobilnet of the Southwest Incorporated
GTE Wireless of the South Incorporated
OTHER OPERATIONS
GTE China Incorporated
GTE International Telecommunications Services LLC
GITS Branch LLC
GTE Holdings Mexico, S. de R.L. de C.V.
GTE Data Services-Mexico, S.A. de C.V.
GTEDS Services-Mexico, S.A. de C.V.
GTE Supply-Mexico, S.A. de C.V.
GTE Communications Services Incorporated
GTE Leasing Corporation
GTE Leasing Acceptance Corporation
Kalama Grain Terminal, Inc.
GTE Products of Connecticut Corporation
GTE Communication Systems Corporation (GTE Supply)
GTE International Incorporated
GTE Far East (Services) Limited
GTE Overseas Corporation
GTE Laboratories Incorporated
GTE Operations Support Incorporated
GTE Operations do Brasil Comercial Ltda.
West Indies Telephone Company
A-2
<PAGE> 19
EXHIBIT A
GTE AFFILIATED ENTITIES
Televac, Inc.
GTE Transfer Corporation
A-3
<PAGE> 1
EXHIBIT 10.27
RETENTION AGREEMENT
This RETENTION AGREEMENT ("Agreement"), effective as of January 3,
2000, by and between WebLink Wireless, Inc., a Delaware corporation (the
"Company"), and John D. Beletic (the "Executive"), evidences that;
WHEREAS, the Executive is the Chairman and Chief Executive Officer of
the Company and has made and/or is expected to make or continue to make
significant contributions to the profitability, growth and financial strength of
the Company;
WHEREAS, the Company considers it essential to the best interests of
its stockholders to foster the continuous employment of key management personnel
of the Company;
WHEREAS, in order to induce Executive to remain in the employ of the
Company, the Company will make certain payments to Executive in the event
Executive's employment with the Company is terminated under certain
circumstances described below;
WHEREAS, the Company and the Executive desire to establish certain
employment and compensation rights and obligations with respect to the
Executive; and
WHEREAS, the Executive is willing to continue to render services to the
Company in consideration of the terms and subject to the conditions set forth in
this Agreement;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Operation of Agreement.
(a) For purposes of this Agreement, a "Change in Control"
will be deemed to have occurred if at any time during
the Term (as hereinafter defined) any of the
following events shall occur:
(i) The Company is merged, consolidated,
converted or reorganized into or with
another corporation or other legal entity,
and as a result of such merger,
consolidation, conversion or reorganization
less than a majority of the combined voting
power of the then outstanding securities of
the Company or such corporation or other
legal entity are
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<PAGE> 2
held, immediately after such transaction, in
the aggregate, by the holders of Voting
Stock (as hereinafter defined) of the
Company immediately prior to such
transaction and/or such voting power is not
held by substantially all of such holders in
substantially the same proportions relative
to each other;
(ii) The Company sells (directly or indirectly)
all or substantially all of its assets
(including, without limitation, by means of
the sale of the capital stock or assets of
one or more direct or indirect subsidiaries
of the Company) to any other corporation or
other legal entity (other than a directly or
indirectly majority-owned subsidiary of the
Company), of which less than a majority of
the combined voting power of the then
outstanding voting securities (entitled to
vote generally in the election of directors
or persons performing similar functions on
behalf of such other corporation or legal
entity) of such other corporation or legal
entity is held in the aggregate by the
holders of Voting Stock of the Company
immediately prior to such sale and/or such
voting power is not held by substantially
all of such holders in substantially the
same proportions relative to each other;
(iii) Any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended
(the "Exchange Act")) becomes (subsequent to
the date hereof) the beneficial owner (as
the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange
Act) of securities representing fifty
percent (50%) or more of the combined voting
power of the outstanding securities entitled
to vote generally in the election of
directors of the Company ("Voting Stock");
provided, however, purposes of this Section
1(a)(iii), the term "person" will not be
deemed to include any "person" who, as of
the date hereof, owns forty-five percent
(45%) or more of the Voting Stock of the
Company; or
(iv) The stockholders of the Company approve a
plan contemplating the liquidation or
dissolution of the Company.
(b) The period during which this Agreement shall be in
effect (the "Term") shall commence as of the date
hereof and shall expire as of the close
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<PAGE> 3
of business on January 3, 2001, provided, however,
unless either the Executive or the Company gives
written notice of intent to terminate this Agreement
upon the expiration of the first year of this
Agreement or any subsequent renewal period, this
Agreement will automatically be renewed, upon each
anniversary of the date hereof, for successive one
year periods ("renewal periods"). Any such notice of
termination must be given not less than thirty (30)
days prior to the end of the first year of this
Agreement or any subsequent renewal period.
Notwithstanding the foregoing, the Executive may
elect not to renew this Agreement at any time within
the fifteen (15) day period immediately following
receipt by the Executive of a Compensation Resolution
(as hereinafter defined), regardless of whether such
Compensation Resolution is delivered before or after
any anniversary date of this Agreement. An election
not to renew this Agreement will not affect any
rights which have vested or otherwise accrued prior
to the expiration of this Agreement. The expiration
of the Term of this Agreement will not be deemed to
be a "termination" of this Agreement for the purposes
of Sections 4 and 5.
2. Employment. Subject to the terms and conditions of this
Agreement, the Company shall continue the Executive in its employ and the
Executive shall remain in the employ of the Company for the Term, in the
position and with substantially the same duties and responsibilities that the
Executive has as of the date hereof or in the position and with the duties and
responsibilities that the Company and the Executive may hereafter mutually agree
in writing. Throughout the Term, the Executive shall devote substantially all of
the Executive's time during normal business hours (subject to vacations, sick
leave and other absences in accordance with the policies of the Company as in
effect for senior executives as of the date hereof or as otherwise approved by
the Board of Directors of the Company (the "Board")) to the business and affairs
of the Company and shall attempt to maximize stockholder value, but nothing in
this Agreement shall preclude the Executive from devoting reasonable periods of
time during normal business hours to (i) serving as a director, trustee or
member of or participant in any organization or business so long as such
activity does not materially interfere with the performance of the Executive's
obligations pursuant to this Agreement, (ii) engaging in charitable and
community activities, or (iii) managing the Executive's personal investments.
3. Compensation During Term. During the Term, the Executive shall
receive an annual base salary (which base salary is herein referred to as "Base
Pay") and shall have the opportunity to earn an annual bonus (the "Annual
Bonus") and may have the opportunity to earn a special bonus (the "Special
Bonus") in each case, in such amounts,
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<PAGE> 4
at such rates, at such times and subject to such conditions as may be determined
annually by the Board pursuant to a formal resolution adopted by the Board
(hereinafter referred to as the "Compensation Resolution"). After delivery of a
copy of the Compensation Resolution (certified by the Secretary of the Company)
to the Executive, the amount, terms and conditions of the Base Pay, Annual Bonus
and Special Bonus (if any) to be earned by and paid to the Executive for the
fiscal year to which the Compensation Resolution relates, may not be amended in
a manner adverse to the Executive without the written consent of the Executive.
The Executive acknowledges the receipt of the Compensation Resolution relating
to the 2000 fiscal year of the Company. The Company will deliver to the
Executive subsequent Compensation Resolutions relating to subsequent fiscal
years of the Company, in a manner consistent with the Company's past
compensation practices. Unless otherwise provided in the applicable Compensation
Resolution, the Executive's Base Pay shall be payable in accordance with the
Company's generally applicable payroll policies and this Agreement. Unless
otherwise provided in the applicable Compensation Resolution, the Executive's
Annual Bonus shall be paid in accordance with the Company's past compensation
practices and this Agreement. Any Special Bonus payable to the Executive shall
be paid in accordance with the terms of the applicable Compensation Resolution
and this Agreement. The Annual Bonus and the Special Bonus are hereinafter
collectively referred to as "Incentive Pay." If this Agreement is "renewed" for
one or more renewal periods (pursuant to Section 2) the Executive's Base Pay for
such renewal period will not be less than the Base Pay payable to the Executive
pursuant to the Compensation Resolution applicable to the immediately preceding
annual period and the target bonus amount with respect to any such renewal
period will be not less than one hundred percent (100%) of the Base Pay payable
with respect to such renewal period.
4. Termination.
(a) This Agreement may be terminated by the Company
during the Term upon the occurrence of one or more of
the following events:
(i) If the Executive is unable to perform the
essential functions of the Executive's
position(s) (with or without reasonable
accommodation) because the Executive has
become Disabled (as hereinafter defined),
and actually begins to receive disability
benefits pursuant to, a long-term disability
plan maintained by or on behalf of the
Company for its employees generally; or
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<PAGE> 5
(ii) For "Cause," which for purposes of this
Agreement shall mean:
(A) the Executive shall have committed
an intentional act of fraud,
embezzlement or a material theft in
connection with the Executive's
duties or in the course of the
Executive's employment with the
Company;
(B) the Executive shall have been
convicted of felony and the
continuation of the employment of
the Executive with the Company
following such conviction will have
a materially adverse affect upon
the reputation and/or prospects of
the Company;
(C) the Executive shall have breached
any material duty of loyalty to the
Company; provided the actions of
the Executive were not approved by
the Board following full disclosure
of the Executive's interest;
(D) the Executive shall have materially
breached the obligations of the
Executive pursuant to the second
sentence of Section 2;
(E) the Executive shall have committed
intentional wrongful damage to
property of the Company (which is
materially harmful to the Company);
or
(F) the Executive shall have committed
intentional wrongful disclosure of
secret processes or confidential
information of the Company (which
is materially harmful to the
Company).
Notwithstanding the foregoing, the Company's right to terminate this Agreement
with respect to any action of the Executive described in Section 4(a)(ii) will
be deemed to have been irrevocably waived by the Company, if the Company does
not terminate this Agreement within sixty (60) days following the Board first
being made aware of such action of the Executive. For purposes of this
Agreement, no act, or failure to act, on the part of the Executive shall be
deemed "intentional" if it was due primarily to an error in judgment or
negligence, but shall be deemed "intentional" only if done, or omitted to be
done, by the Executive not in good faith and without reasonable belief that the
Executive's action or omission was in the best interest of the Company.
Notwithstanding the foregoing, this Agreement shall not be deemed to have been
terminated for "Cause" hereunder unless and until there shall have been
delivered to the Executive a copy of a resolution duly
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<PAGE> 6
adopted by the affirmative vote of not less than a majority of the Board then in
office at a meeting of the Board called and held for such purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, the Executive has committed an act
set forth above in this Section 4(a)(ii) and specifying the particulars thereof
in detail. Nothing herein shall limit the right of the Executive or the
Executive's beneficiaries to contest the validity or propriety of any such
determination. In addition, to the extent that any action of the Executive
relied upon by the Company to terminate this Agreement pursuant to Section
4(a)(ii) is susceptible of being cured, the Company must provide the Executive
with written notice of its intent to terminate this Agreement (such notice to
identify with specificity the action upon which the Company intends to rely to
terminate this Agreement) and the right of the Company to terminate this
Agreement based upon such action shall be suspended for a period of thirty (30)
days to allow the Executive to cure such action. If the Executive is successful
in curing such action within such thirty (30) day period, such action may not
thereafter be relied upon by the Company as a basis for terminating this
Agreement. As used herein, the term "Disabled" will be deemed to mean the
inability of the Executive, as determined reasonably by the Board, by reason of
any medically determinable physical or mental impairment to engage in the
performance of the material duties of the Executive referenced in Section 2 for
a period which has lasted or can reasonably be expected to last without material
interruption for not less than twelve (12) months.
(b) The Executive shall be entitled to severance benefits
as follows:
(i) The Executive will be entitled to benefits
as provided in Section 5 hereof upon any
termination by the Company of this Agreement
for any reason other than (x) for Cause, (y)
as a result of the death of the Executive or
(z) by reason of the Executive becoming
Disabled and the actual receipt by the
Executive of disability benefits in
accordance with Section 4(a)(i) hereof;
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<PAGE> 7
(ii) The Executive will be entitled to benefits
as provided in Section 5 hereof upon
termination by the Executive of this
Agreement during the Term upon the
occurrence of any of the following events:
(A) Failure to elect or reelect the
Executive to the office(s) of the
Company which the Executive holds
as of the date hereof, or failure
to elect or reelect the Executive
as a director of the Company or the
removal of the Executive as a
director of the Company (or any
successor thereto);
(B) A significant adverse change
imposed by the Board in the nature
or scope of the authorities,
powers, functions, responsibilities
or duties attached to the
position(s) with the Company which
the Executive held immediately
prior to the date hereof,
(C) The Company shall require that the
principal place of work of the
Executive be changed to any
location which is in excess of 25
miles from the location thereof
immediately prior to the date
hereof or to travel away from the
Executive's office in the course of
discharging the Executive's
responsibilities or duties
hereunder significantly more (in
terms of either consecutive days or
aggregate days in any calendar
year) than was required of the
Executive prior to the date hereof
without, in either case, the
Executive's prior consent;
(D) Any material breach of this
Agreement by the Company or any
successor thereto, including,
without limitation, any failure by
the Company to pay to the Executive
the compensation payable to the
Executive by the Company pursuant
to this Agreement; and
(iii) Upon any termination of this Agreement based
upon the Executive being Disabled, the
Executive will promptly be paid the Special
Bonus, if any, set forth in the applicable
Compensation Resolution.
(c) For the Executive's service pursuant to Subsection
2(a) hereof, during the Term the Executive shall be a
full participant in, and shall be entitled to the
perquisites, benefits and service credit for benefits
as provided under any and all employee retirement
income and welfare benefit policies, plans, programs
or arrangements in which senior
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<PAGE> 8
executives of the Company participate generally,
including without limitation any stock option, stock
purchase, stock appreciation, phantom stock, savings,
pension, supplemental executive retirement or other
retirement income or welfare benefit, deferred
compensation, incentive compensation, group and/or
executive life, accident, health, dental,
medical/hospital or other insurance (whether funded
by actual insurance or self-insured by the Company),
disability, salary continuation, expense
reimbursement and other employee benefit policies,
plans, programs or arrangements that may exist as of
the date hereof or any equivalent successor policies,
plans, programs or arrangements that may be adopted
hereafter by the Company (collectively, "Employee
Benefits"). A termination by the Company pursuant to
Section 4(a) hereof or by the Executive pursuant to
Section 4(b) hereof shall not affect any rights which
the Executive may have pursuant to any agreement,
policy, plan, program or arrangement of the Company
providing Employee Benefits, which rights shall be
governed by the terms thereof.
(d) Notwithstanding the foregoing, this Agreement may be
terminated by the Company or the Executive at any
time upon thirty (30) days prior written notice.
5. Severance Compensation.
(a) Without affecting any additional obligations of the
Company set forth in an applicable Compensation
Resolution, if this Agreement is terminated in the
manner described in Sections 4(b)(i) or 4(b)(ii)
hereof, the Company shall pay to the Executive the
amount specified in Section 5(a)(i) hereof within
five business days after the date (the "Termination
Date") that this Agreement is terminated (the
effective date of which shall be the date of
termination, or such other date that may be specified
by the Executive if the termination is pursuant to
Section 4(b) hereof):
(i) In lieu of any further payments to the
Executive for periods subsequent to the
Termination Date, but without affecting the
rights of the Executive referred to in
Section 5(c) hereof or pursuant to any stock
option, phantom stock, stock appreciation
right, restricted stock grant or similar
award, (x) if the termination of the
Executive's employment occurs prior to
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<PAGE> 9
the occurrence of a Change in Control, a
lump sum payment (the "Pre-Change in Control
Severance Payment") in an amount equal to
the sum of (A) the aggregate Base Pay plus
(B) the aggregate Incentive Pay, which, in
each case, the Executive would have received
pursuant to this Agreement during the
remainder of the Term had the Executive's
employment continued for the remainder of
the Term and (y) if the termination of the
Executive's employment occurs subsequent to
the occurrence of a Change in Control, a
lump sum payment (the "Post-Change in
Control Severance Payment") in an amount
equal to the sum of (A) the aggregate Base
Pay plus (B) the aggregate Annual Bonus
which the Executive would have received
pursuant to this Agreement during the
remainder of the Term had the Executive's
employment continued for the remainder of
the Term. The Pre-Change in Control
Severance Payment and the Post-Change in
Control Severance Payment are hereinafter
collectively referred to as the "Severance
Payment."
(ii) For the remainder of the Term the Company
shall arrange to provide the Executive with
Employee Benefits substantially similar to
those which other senior executive officers
of the Company are entitled to receive (and
if and to the extent that such benefits
shall not or cannot be paid or provided
under any policy, plan, program or
arrangement of the Company solely due to the
fact that the Executive is no longer an
officer or employee of the Company, then the
Company shall itself pay to the Executive
and/or the Executive's dependents and
beneficiaries, such Employee Benefits) and
(B) without limiting the generality of the
foregoing, the remainder of the Term shall
be considered service with the Company for
the purpose of service credits under the
Company's retirement income, supplemental
executive retirement and other benefit plans
applicable to the Executive and/or the
Executive's dependents and beneficiaries
immediately prior to the Termination Date.
(b) If this Agreement is terminated during the Term by
the Company pursuant to Section 4(a)(ii) hereof or if
this Agreement is terminated during the Term by the
Executive for any reason other than pursuant to
Section 4(b) hereof, the Executive will forfeit any
right to receive
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<PAGE> 10
any unpaid Incentive Pay. If this Agreement is
terminated during the Term (i) by the Company as a
result of the death of the Executive or (ii) by the
Executive for any reason other than pursuant to
Section 4(b) hereof, the Executive will forfeit any
right to receive any unpaid Annual Bonus.
(c) Upon written notice given by the Executive to the
Company prior to the receipt of any payment pursuant
to Section 5(a) hereof, the Executive, at the
Executive's sole option, without adjustment to
reflect the present value of such amounts as
aforesaid, may elect to have all or any of the
Severance Payment payable pursuant to Section 5(a)(i)
hereof paid to the Executive on a quarterly or
monthly basis during the remainder of the Term.
(d) There shall be no right of set-off or counterclaim in
respect of any claim, debt or obligation against any
payment to or benefit (including Employee Benefits)
of the Executive provided for in this Agreement.
(e) Without limiting the rights of the Executive at law
or in equity, if the Company fails to make any
payment required to be made hereunder on a timely
basis, the Company shall pay interest on the amount
thereof at an annualized rate of interest equal to
the then-applicable Discount Rate (as hereinafter
defined) or, if lesser, the highest rate allowed by
applicable usury laws. As used herein, the term
"Discount Rate" will be deemed to mean the discount
rate required to be utilized for purposes of
computations under Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), or any
successor provision thereto, or if no such rate is so
required to be used, a rate equal to the
then-applicable interest rate prescribed by the Code
for benefit valuations in connection with
non-multiemployer pension plan terminations assuming
the immediate commencement of benefit payments.
6. No Mitigation Obligation. The parties hereto expressly agree
that the payment of the severance compensation by the Company to the Executive
in accordance with the terms of this Agreement will be liquidated damages, and
that the Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall any profits, income, earnings or other benefits from any source whatsoever
create any mitigation, offset, reduction or any other obligation on the part of
the Executive hereunder or otherwise.
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<PAGE> 11
7. Legal Fees and Expenses. It is the intent of the Company that
subsequent to the occurrence of a Change in Control, the Executive not be
required to incur the expenses associated with the enforcement of the
Executive's rights under this Agreement by litigation or other legal action
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Executive hereunder. Accordingly, if it
should appear to the Executive that the Company has, subsequent to the
occurrence of a Change in Control, failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other person takes
any action, subsequent to the occurrence of a Change in Control, to declare this
Agreement void or unenforceable, or institutes any litigation designed to deny,
or to recover from, the Executive the benefits intended to be provided to the
Executive hereunder, the Company irrevocably authorizes the Executive from time
to time to retain counsel of the Executive's choice, at the expense of the
Company as hereafter provided, to represent the Executive in connection with the
litigation or defense of any litigation or other legal action, whether by or
against the Company or any director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction. Notwithstanding any existing
or prior attorney-client relationship between the Company and such counsel, the
Company irrevocably consents to the Executive's entering into an attorney-client
relationship with such counsel, and in that connection the Company and the
Executive agree that a confidential relationship shall exist between the
Executive and such counsel. The Company shall pay or cause to be paid and shall
be solely responsible for any and all reasonable attorneys' and related fees and
expenses incurred by the Executive as a result of the Company's failure to
perform this Agreement or any provision thereof or as a result of the Company or
any person contesting the validity or enforceability of this Agreement or any
provision thereof as aforesaid.
8. Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes as
shall be required pursuant to any law or government regulation or ruling.
9. Successors and Binding Agreement.
(a) The Company shall require any successor (whether
direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or
substantially all of the business and/or assets of
the Company, to expressly assume and agree to perform
this Agreement in the same manner and to the same
extent the Company would be required to perform if no
such succession had taken place. This Agreement shall
be binding upon and inure to the benefit of the
Company and any successor to the Company, including
without limitation any
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<PAGE> 12
persons acquiring directly or indirectly all or
substantially all of the business and/or assets of
the Company whether by purchase, merger,
consolidation, reorganization or otherwise (and such
successor shall thereafter be deemed the "Company"
for the purposes of this Agreement). This Agreement
shall not otherwise be assignable, transferable or
delegable by the Company.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal
representatives, executors, administrators,
successors, heirs, distributees and/or legatees.
(c) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the
other, assign, transfer or delegate this Agreement or
any rights or obligations hereunder except as
expressly provided in Section 9(a) hereof. Without
limiting the generality of the foregoing, the
Executive's right to receive payments hereunder shall
not be assignable, transferable or delegable, whether
by pledge, creation of a security interest or
otherwise, other than by a transfer by the
Executive's will or by the laws of descent and
distribution and, in the event of any attempted
assignment or transfer contrary to this Section 9(c),
the Company shall have no liability to pay any amount
so attempted to be assigned, transferred or
delegated.
(d) The Company and the Executive recognize that each
Party will have no adequate remedy at law for breach
by the other of any of the agreements contained
herein and, in the event of any such breach, the
Company and the Executive hereby agree and consent
that the other shall be entitled to a decree of
specific performance, mandamus or other appropriate
remedy to enforce performance of this Agreement.
10. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (EXCLUSIVE OF
CONFLICTS OF LAW PRINCIPLES) AND THE LAWS OF THE UNITED STATES OF AMERICA AND
WILL, TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR PERFORMANCE IN
DALLAS COUNTY, TEXAS. COURTS WITHIN THE STATE OF TEXAS WILL HAVE JURISDICTION
OVER ANY AND ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER IN LAW OR EQUITY,
ARISING OUT OF OR RELATING TO THIS AGREEMENT. THE PARTIES CONSENT
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<PAGE> 13
TO AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. VENUE IN ANY SUCH
DISPUTE, WHETHER IN FEDERAL OR STATE COURT, WILL BE LAID IN DALLAS COUNTY,
TEXAS. EACH OF THE PARTIES HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH
DISPUTE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (i)
SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (ii)
SUCH PARTY AND SUCH PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY
SUCH COURTS OR (iii) ANY LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN
INCONVENIENT FORUM.
11. Notices. All notices, demands, requests or other
communications that may be or are required to be given, served or sent by either
party to the other party pursuant to this Agreement will be in writing and will
be mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by hand delivery, telegram or
facsimile transmission addressed as follows:
<TABLE>
<S> <C>
(a) If to the Executive: 3219 Drexel
Dallas, Texas 75205
Facsimile Transmission No.: (214) 526-1992
Attn: John D. Beletic
with a copy (which will
not constitute notice) to: Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Facsimile Transmission No.: (214) 745-5390
Attn: Robert E. Crawford, Jr., Esq.
(b) If to the Company: WebLink Wireless, Inc.
3333 Lee Parkway
Dallas, Texas 75219
Facsimile Transmission No.: (214) 765-4962
</TABLE>
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<PAGE> 14
<TABLE>
<S> <C>
Attn: General Counsel
with a copy (which will
not constitute notice) to: Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Facsimile Transmission No.: (212) 450-5745
Attn: Ulrika Ekman
</TABLE>
Either party may designate by written notice a new address to which any notice,
demand, request or communication may thereafter be given, served or sent. Each
notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above will be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a facsimile transmission) the answer back being
deemed conclusive evidence of such delivery or at such time as delivery is
refused by the addressee upon presentation.
12. Gender. Words of any gender used in this Agreement will be
held and construed to include any other gender, and words in the singular number
will be held to include the plural, unless the context otherwise requires.
13. Amendment. This Agreement may not be amended or supplemented
except pursuant to a written instrument signed by the party against whom such
amendment or supplement is to be enforced. Nothing contained in this Agreement
will be deemed to create any agency, joint venture, partnership or similar
relationship between the parties to this Agreement. Nothing contained in this
Agreement will be deemed to authorize either party to this Agreement to bind or
obligate the other party.
14. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be deemed to be an original and all of which
will be deemed to be a single agreement. This Agreement will be considered fully
executed when all parties have executed an identical counterpart,
notwithstanding that all signatures may not appear on the same counterpart.
15. Severability. If any of the provisions of this Agreement are
determined to be invalid or unenforceable, such invalidity or unenforceability
will not invalidate or render unenforceable the remainder of this Agreement, but
rather the entire Agreement will be construed as if not containing the
particular invalid or unenforceable provision or provisions, and the rights and
obligations of the parties will be construed and enforced accordingly. The
parties acknowledge that if any provision of this Agreement is determined
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<PAGE> 15
to be invalid or unenforceable, it is their desire and intention that such
provision be reformed and construed in such manner that it will, to the maximum
extent practicable, be deemed to be valid and enforceable.
16. Third Parties. Except as expressly set forth or referred to in
this Agreement, nothing in this Agreement is intended or will be construed to
confer upon or give to any party other than the parties to this Agreement and
their successors and permitted assigns, if any, any rights or remedies under or
by reason of this Agreement.
17. Waiver. No failure or delay in exercising any right hereunder
will operate as a waiver thereof, nor will any single or partial exercise
thereof preclude any other or further exercise or the exercise of any other
right.
18. Prior Agreements. This Agreement and the agreements,
instruments and documents contemplated by this Agreement, including, without
limitation, that certain Confidentiality and Noncompetition Agreement, dated
June 6, 1997, by and between the Executive and the Company, represent the
parties' entire agreement with respect to the subject matter of this Agreement
and such other agreements, instruments and documents and supersede and replace
any prior agreement or understanding with respect to that subject matter. This
Agreement may not be amended or supplemented except pursuant to a written
instrument signed by the party against whom such amendment or supplement is to
be enforced. Except as expressly set forth in this Agreement (e.g., Section
19(a), etc.), awards under benefit plans (e.g., stock option awards, restricted
stock grants, phantom stock awards, etc.) are not within the scope of this
Agreement and will not be governed by or affected by this Agreement.
19. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined
that any payment or distribution by the Company (or
any affiliate, stockholder, or subsidiary thereof or
any plan or program of the Company or any affiliate,
stockholder, or subsidiary thereof) to the Executive
(whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any
additional payments required under this Section 19)
(a "Payment") is subject or will cause the Executive
to be subject to the excise tax imposed by Section
4999 of the Code (or any successor provision) (i.e.,
while the Executive is considered a "disqualified
individual" as such term is defined in Section 280G
of the Code and the regulations promulgated
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<PAGE> 16
thereunder), or any interest or penalties are
incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred
to as the "Excise Tax"), then the Company shall pay
to the Executive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or
penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and
any interest and penalties imposed with respect
thereto) and Excise Taxes imposed upon the Gross-Up
Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) Subject to the provisions of Section 19(c), all
determinations required to be made under this Section
19, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such
determination, shall be made by the Company's public
accounting firm (the "Accounting Firm") which shall
provide detailed supporting calculations both to the
Company and the Executive as soon as possible
following a request made by the Executive or the
Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, the
Company shall appoint another nationally recognized
public accounting firm to make the determinations
required hereunder (which accounting firm shall then
be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 19, shall be paid
by the Company to the Executive within five (5) days
of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that
no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written opinion that
failure to report the Excise Tax on the Executive's
applicable federal income tax return would not result
in the imposition of a negligence or similar penalty.
Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a
result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have
been made by the Company should have been made
("Underpayment"), consistent with the calculations
required to
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<PAGE> 17
be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 19(c) and
the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company
of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten
(10) business days after the Executive is informed in
writing of such claim and shall apprise the Company
of the nature of such claim and the date on which
such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of
the 30-day period following the date on which the
Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to
the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such
claim,
(ii) take such action in connection with
contesting such claim as the Company shall
reasonably request in writing from time to
time, including, without limitation,
accepting legal representation with respect
to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith to
effectively contest such claim,
(iv) and permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and
pay directly all costs and expenses (including
additional interest and penalties) incurred in
connection with such contest and shall indemnify and
hold the Executive harmless, on a "grossed up,"
after-tax basis, for any
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<PAGE> 18
Excise Tax or any income or other tax (including
interest and penalties with respect thereto) imposed
as a result of such representation and payment of
costs and expenses. Without limitation on the
foregoing provisions of this Section 19(c), the
Company shall control all proceedings taken in
connection with such contest and, at its sole option,
may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive
to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine;
provided further, that if the Company directs the
Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to
the Executive on an interest-free basis and shall
indemnify and hold the Executive harmless, on a
"grossed up," after-tax basis, from any Excise Tax or
any income or other tax (including interest or
penalties with respect thereto) imposed with respect
to such advance or with respect to any imputed income
with respect to such advance; and provided further,
that any extension of the statute of limitations
relating to payment of taxes for the taxable year of
the Executive with respect to which such contested
amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control
of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any
other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 19(c),
the Executive becomes entitled to receive, and
receives, any refund with respect to such claim, the
Executive shall (subject to the Company's complying
with the requirements of Section 19(c)) promptly pay
to the Company the amount of such refund (together
with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by
the Executive of any amount advanced by the Company
pursuant to Section 19(c), a determination is made
that the Executive shall not be entitled to any
refund with respect to such claim and the Company
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<PAGE> 19
does not notify the Executive in writing of its
intent to contest such denial of refund prior to the
expiration of thirty (30) days after such
determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
20. Forgiveness of Indebtedness; Interest Moratorium. The Company
agrees that the obligations of the Executive to pay principal and/or interest
with respect to that certain Fixed Rate Promissory Note, dated January 28, 1994,
made payable by the Executive to the Company in the original principal amount of
Ninety-Seven Thousand Eight Hundred and 00/100 Dollars ($97,800.00), that
certain Fixed Rate Promissory Note, dated September 22, 1997, made payable by
the Executive to the Company in the original principal amount of Sixteen
Thousand Three Hundred and 00/100 Dollars ($16,300.00) and that certain Fixed
Rate Promissory Note, dated January 14, 1998, made payable by the Executive to
the Company in the original principal amount of Forty-Eight Thousand Nine
Hundred and 00/100 Dollars ($48,900.00) as such notes have been previously or
may be hereafter renewed, extended or modified (hereinafter collectively
referred to as the "Notes") are suspended (although interest will continue to
accrue) until the close of business on January 3, 2001 and; provided the
Executive has not terminated this Agreement during the Term other than pursuant
to Section 4(b) and the Company has not terminated this Agreement pursuant to
Section 4(a)(ii), the such obligations will terminate on the close of business
on January 3, 2001. At such time, if the Company has not previously terminated
this Agreement pursuant to Section 4(a)(ii), the Company will mark such Notes
"paid in full" and will deliver such Notes to the Executive.
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<PAGE> 20
21. No Retroactive Recovery of Compensation. The Company hereby
waives any right to seek recovery of any payment or other benefit paid or
provided to the Executive pursuant to this Agreement subsequent to the payment
or delivery thereof.
22. Assistance with Transition. In the event the Executive elects
not to renew this Agreement, the Executive agrees to use reasonable efforts to
assist the Company in retaining a successor for the Executive and in exchange
for such assistance, the Board may, in its sole discretion, elect to accelerate
the vesting of any option, restricted stock, phantom stock, stock appreciation
or similar award made to the Executive. The Company acknowledges and agrees that
the failure of the Executive to comply with the provisions of this Section 22
will not give rise to any remedy on behalf of the Company (including, without
limitation, any right to terminate this Agreement or any other agreement between
the Company and the Executive or any right to equitable relief) or subject the
Executive to any liability (including, without limitation, damages, whether
sought in an action at law or in equity and whether or not sought in an action
in contract, in tort or otherwise).
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
COMPANY
WEBLINK WIRELESS, INC.
By: /s/ Frederick G. Anderson
---------------------------------------
Name:
-------------------------------
Title: VP
-------------------------------
EXECUTIVE:
/s/ John D. Beletic
-------------------------------------------
John D. Beletic
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<PAGE> 1
EXHIBIT 10.28
WEBLINK WIRELESS, INC.
2000 FLEXIBLE INCENTIVE PLAN
SECTION 1. PURPOSE OF THIS PLAN
The purpose of the WebLink Wireless, Inc. 2000 Flexible Incentive Plan
is to strengthen WebLink Wireless, Inc., a Delaware corporation (the
"Corporation"), by providing eligible individuals who are responsible for the
management, growth and financial success of the Corporation or who otherwise
render valuable services to the Corporation with the opportunity to acquire a
proprietary interest, or increase their proprietary interest, in the Corporation
and thereby providing a means of attracting competent personnel and encouraging
them to remain in the service of the Corporation. To achieve this purpose,
eligible Persons may receive Stock Options, Stock Appreciation Rights,
Restricted Stock, Performance Awards, Dividend Equivalent Rights, Phantom Stock
and any other Awards (as such terms are hereinafter defined), or any combination
thereof.
SECTION 2. DEFINITIONS
As used in this Plan, the following terms shall have the meanings set
forth below unless the context otherwise requires:
2.1 "Award" shall mean the grant of a Stock Option, a Stock
Appreciation Right, Restricted Stock, a Performance Award, a Dividend
Equivalent Right, Phantom Stock or any other grant of incentive
compensation pursuant to this Plan.
2.2 "Board" shall mean the Board of Directors of the
Corporation, as the same may be constituted from time to time.
2.3 "Cause" shall mean either
(a) termination of a Participant's Service with the
Corporation or a Subsidiary upon the occurrence of one or more
of the following events as determined in the sole discretion
of the Committee:
(i) The Participant's failure to substantially perform
such Participant's duties with the Corporation or any
Parent or Subsidiary Corporation as determined by the
Committee in its sole discretion following receipt by the
Participant of written notice of such failure and the
Participant's failure to remedy such failure within thirty
(30) days after receipt of such notice (other than a
failure resulting from the Participant's incapacity due to
physical or mental illness or injury);
(ii) The Participant's willful failure or refusal to
perform specific directives of the Board, which directives
are consistent with the scope and nature of the
Participant's duties and responsibilities, and which are
not
<PAGE> 2
remedied by the Participant within thirty (30) days after
being notified in writing of such Participant's failure by
the Board;
(iii) The Participant's conviction of a felony; or
(iv) A breach of the Participant's fiduciary duty to
the Corporation or any Parent or Subsidiary Corporation or
willful violation in the course of performing the
Participant's duties for the Corporation or any Parent or
Subsidiary Corporation of any law, rule or regulation
(other than traffic violations or other minor offenses).
No act or failure to act on the Participant's part shall
be considered willful unless done or omitted to be done in
bad faith and without reasonable belief that the action or
omission was in the best interest of the Corporation or
any Parent or Subsidiary Corporation; or
(b) such other definition of Cause as may be approved by
the Committee in connection with a specific Award (such
alternative definition to be included in the agreement
evidencing such Award).
2.4 "Change in Control" means either
(a) the acquisition of fifty percent (50%) or more of
the Corporation's outstanding voting stock pursuant to a
tender or exchange offer made by a person or group of related
persons (other than the Corporation or a person that directly
or indirectly controls, is controlled by or is under common
control with the Corporation) which the Board does not
recommend to the stockholders; or
(b) such other definition of Change in Control as may
be approved by the Committee in connection with a specific
Award (such alternative definition to be included in the
agreement evidencing such Award).
2.5 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time (or any successor to such legislation).
2.6 "Committee" shall mean the committee established by the
Board to administer the Plan, as such Committee may be constituted from
time to time; provided, however, membership on the Committee shall be
limited to "non-employee directors" (as such term is defined in Rule
16b-3 (or any successor to such rule) promulgated under the Exchange
Act) who are also "outside directors", as required pursuant to Section
162(m) of the Code and such Treasury regulations as may be promulgated
thereunder; and provided further, the Committee will consist of not
less than two (2) directors. All members of the Committee will serve at
the pleasure of the Board. If no committee is established by the Board,
the Board will be deemed to be the "Committee" for purposes of this
Plan.
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<PAGE> 3
2.7 "Common Stock" shall mean the shares of the Corporation's
authorized but unissued or reacquired Class A convertible common stock,
par value $.0001 per share.
2.8 "Corporation" shall have the meaning set forth in Section
1 of this Plan.
2.9 "Corporate Transaction" shall mean one or more of the
following stockholder-approved transactions:
(a) a merger or consolidation in which the
Corporation is not the surviving entity, provided securities
possessing fifty percent (50%) or more of the total combined
voting power of the Corporation's outstanding voting
securities are transferred to a person or persons different
from those who held such securities immediately prior to such
transaction;
(b) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation other than
in the ordinary course of business; or
(c) any reverse merger in which the Corporation is
the surviving entity but in which securities possessing fifty
percent (50%) or more of the total combined voting power of
the Corporation's outstanding voting securities are
transferred to a person or persons different from those who
held such securities immediately prior to such merger.
In no event shall any merger, consolidation or other
reorganization involving the Corporation be deemed to constitute a
Corporate Transaction if the primary purpose of such transaction is
either to change the State in which the Corporation is incorporated or
to create a holding-company structure whereby the Corporation's
stockholders of record become the stockholders of the holding company.
2.10 "Designated Beneficiary" shall mean the beneficiary
designated by a Participant, in a manner authorized by the Committee,
to exercise the rights of such Participant in the event of such
Participant's death. In the absence of an effective designation by a
Participant, the Designated Beneficiary shall be such Participant's
estate.
2.11 "Director" shall mean any member of the Board.
2.12 "Disability" shall mean, with respect to any Incentive
Stock Option, permanent and total inability to engage in any
substantial gainful activity, even with reasonable accommodation, by
reason of any medically determinable physical or mental impairment
which has lasted or can reasonably be expected to last without material
interruption for a period of not less than twelve (12) months, as
determined in the sole discretion of the Committee, and except as
otherwise agreed upon by a Participant and the Committee. With respect
to any Award other than an Incentive Stock Option, "Disability" shall
mean, except as otherwise agreed upon by a Participant and the
Committee, the
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<PAGE> 4
inability of a Participant, as determined in the sole and absolute
discretion of the Committee, by reason of any medically determinable
physical or mental impairment, to engage in the performance of the
material duties of the position in which such Participant was last
engaged by the Corporation or a Parent or Subsidiary Corporation, for a
period which has lasted or can reasonably be expected to last without
material interruption for not less than twelve (12) months.
2.13 "Dividend Equivalent Right" shall mean the right of the
holder thereof to receive payments based on the dividends that would
have been paid on the number of Shares specified in an Award granting
Dividend Equivalent Rights if the number of Shares subject to such
Award were held by such holder on the record date for determining
stockholders to whom dividends are payable.
2.14 "Effective Date" shall mean January 3, 2000.
2.15 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time (or any successor to such
legislation).
2.16 "Fair Market Value" shall mean with respect to the
Shares, as of any date:
(a) If the Common Stock is not at the time listed or
admitted to trading on any national securities exchange but is
traded in the over-the-counter market, the Fair Market Value
shall be the mean between the highest bid and the lowest asked
prices (or, if such information is available, the closing
sales price) per share of Common Stock on the date in question
in the over-the-counter market, as such prices are reported by
the National Association of Securities Dealers through its
Nasdaq National Market System or any successor system. If
there are no reported bid and asked prices (or closing sales
price) for the Common Stock on the date in question, then the
mean between the highest bid and lowest asked prices (or
closing sales price) on the last preceding date for which such
quotations exist shall be determinative of Fair Market Value.
(b) If the Common Stock is at the time listed or
admitted to trading on any national securities exchange, then
the Fair Market Value shall be the closing sales price per
share of Common Stock on the date in question on the national
securities exchange determined by the Committee to be the
primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on
such exchange. If there is no reported sale of Common Stock on
such exchange on the date in question, then the fair market
value shall be the closing sales price on the exchange on the
last preceding date for which such quotation exists.
(c) If the Common Stock is at the time neither listed
nor admitted to trading on any national securities exchange
nor traded in the over-the-counter market, or if the Committee
determines that the valuation provisions of subparagraphs (i)
and
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<PAGE> 5
(ii) above will not result in a true and accurate valuation of
the Common Stock, then the Fair Market Value shall be
determined by the Committee after taking into account such
factors as the Committee shall deem appropriate under the
circumstances.
2.17 "Incentive Stock Option" shall mean any option to
purchase Shares awarded pursuant to this Plan which qualifies as an
"Incentive Stock Option" pursuant to Section 422 of the Code.
2.18 "Limited Stock Appreciation Rights" shall have the
meaning set forth in Subsection 7.4 of this Plan.
2.19 "Nonqualified Stock Option" shall mean any option to
purchase Shares awarded pursuant to this Plan that does not qualify as
an Incentive Stock Option (including, without limitation, any option to
purchase Shares originally designated as or intended to qualify as an
Incentive Stock Option to the extent such option does not (for whatever
reason) qualify as an Incentive Stock Option).
2.20 "Non-Share Method" shall have the meaning set forth in
Subsection 17.13 of this Plan.
2.21 "Non-Tandem Stock Appreciation Right" shall mean any
Stock Appreciation Right granted alone and not in connection with an
Award which is a Stock Option.
2.22 "Optionee" shall mean any Participant who has been
granted and holds a Stock Option awarded pursuant to this Plan.
2.23 "Parent Corporation" shall mean any corporation which,
directly or indirectly, owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock of the Corporation with respect to the
election of directors generally.
2.24 "Participant" shall mean any Person who has been granted
and holds an Award granted pursuant to this Plan.
2.25 "Performance Award" shall mean any Award granted pursuant
to this Plan of Shares, rights based upon, payable in or otherwise
related to Shares (including Restricted Stock) or cash, as the
Committee or Board of Directors may determine, at the end of a
specified performance period established by the Committee or Board of
Directors and may include, without limitation, Performance Shares or
Performance Units.
2.26 "Performance Shares" shall have the meaning set forth in
Subsection 9.1 of this Plan.
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<PAGE> 6
2.27 "Performance Units" shall have the meaning set forth in
Subsection 9.1 of this Plan.
2.28 "Person" shall mean an individual, partnership, limited
liability corporation, corporation, joint stock corporation, trust,
estate, joint venture association or unincorporated organization or any
other form of business organization.
2.29 "Phantom Stock" shall mean one unit granted to a
Participant pursuant to Section 11 of this Plan which entitles the
Participant to receive a payment in cash, Common Stock, or both, as
specified in the Phantom Stock Agreement (as such term is defined in
Section 11 of this Plan) on the date of conversion.
2.30 "Plan" shall mean this WebLink Wireless, Inc. 2000
Flexible Incentive Plan as it may be amended from time to time.
2.31 "Reload Option" shall mean a Stock Option as defined in
Subsection 6.6(b) of this Plan.
2.32 "Restricted Stock" shall mean any Shares granted pursuant
to this Plan that are subject to restrictions or substantial risk of
forfeiture, as described in Section 8 of this Plan.
2.33 "Securities Act" shall mean the Securities Act of 1933,
as amended from time to time (or any successor to such legislation).
2.34 "Service" shall mean the performance of services for the
Corporation or one or more Parent or Subsidiary Corporations by an
individual in the capacity of an employee, a member of the Board or the
board of directors of such Parent or Subsidiary Corporation, or a
consultant, unless a different meaning is specified in the agreement
evidencing the grant of an Award hereunder. A Participant shall be
deemed to remain in Service for so long as such individual renders
services to the Corporation or any Parent or Subsidiary Corporation on
a periodic basis in the capacity of an employee, a member of the Board
or the board of directors of such Parent or Subsidiary Corporation, or
a consultant.
2.35 "Share Retention Method" shall have the meaning set forth
in Subsection 17.13 of this Plan.
2.36 "Shares" shall mean shares of the Common Stock and any
shares of capital stock or other securities hereafter issued or
issuable upon, in respect of or in substitution or exchange for shares
of Common Stock.
2.37 "Stock Appreciation Right" shall mean the right of the
holder thereof to receive property or Shares with a Fair Market Value
equal to or cash in an amount equal to the excess of the Fair Market
Value of the aggregate number of Shares subject to such Stock
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<PAGE> 7
Appreciation Right on the date of exercise over the Fair Market Value
of the aggregate number of Shares subject to such Stock Appreciation
Right on the date of the grant of such Stock Appreciation Right (or
such other value as may be specified in the agreement granting such
Stock Appreciation Right). A Stock Appreciation Right may be a Tandem
Stock Appreciation Right, Non-Tandem Stock Appreciation Right or
Limited Stock Appreciation Right.
2.38 "Stock Option" shall mean any Incentive Stock Option or
Nonqualified Stock Option.
2.39 "Subsidiary or Subsidiary Corporation" shall mean a
subsidiary corporation of the Corporation, as defined in Section 424(f)
of the Code.
2.40 "Tandem Stock Appreciation Right" shall mean a Stock
Appreciation Right granted in connection with an Award which is a Stock
Option.
SECTION 3. ADMINISTRATION OF THIS PLAN
3.1 Administration. This Plan shall be administered and
interpreted by the Committee.
3.2 Awards.
(a) Subject to the provisions of this Plan, and directions
from the Board, the Committee is authorized and has the full
power and discretion to:
(i) determine the Persons to whom Awards are
to be granted;
(ii) determine the types and combinations of
Awards to be granted; the number of Shares to be
covered by an Award; the exercise price of an Award;
the time or times when an Award shall be granted and
may be exercised; the terms, performance criteria or
other conditions, vesting periods or any restrictions
for an Award; any restrictions on Shares acquired
pursuant to the exercise of an Award; and any other
terms and conditions of an Award;
(iii) interpret the provisions of this Plan;
(iv) prescribe, amend and rescind rules and
regulations relating to this Plan;
(v) determine whether, to what extent and
under what circumstances to provide loans from the
Corporation to Participants to exercise Awards
granted pursuant to this Plan, and the terms and
conditions of such loans;
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<PAGE> 8
(vi) rely upon employees of the Corporation
for such clerical and recordkeeping duties as may be
necessary in connection with the administration of
this Plan;
(vii) accelerate or defer (with the consent
of the Participant) the vesting of any rights
pursuant to an Award; and
(viii) make all other determinations and
take all other actions necessary or advisable for the
administration of this Plan.
(b) Without limiting the Board's right to amend this
Plan pursuant to Section 15 or the Committee's authority under
Subsection 3.2(a) of this Plan, the Board may take all actions
authorized by Subsection 3.2(a) of this Plan, including,
without limitation, granting such Awards pursuant to this Plan
as the Board may deem necessary or appropriate. In such a
case, the Board shall have the authority to perform all acts
performable by the Committee pursuant to the terms of this
Plan.
3.3 Procedures.
(a) Proceedings by the Board or Committee with
respect to this Plan will be conducted in accordance with the
certificate of incorporation and bylaws of the Corporation.
(b) All questions of interpretation and application
of this Plan or pertaining to any question of fact or Award
granted hereunder will be decided by the Committee in its
discretion, whose decision will be final, conclusive and
binding upon the Corporation and each other affected party.
SECTION 4. SHARES SUBJECT TO PLAN
4.1 Limitations. The maximum number of Shares that may be
issued with respect to all Awards, including Incentive Stock Options,
granted pursuant to this Plan shall not exceed 3,000,000 Shares.
(a) Shares subject to (i) the portion of one or more
outstanding Stock Options which are not exercised prior to
expiration or termination and (ii) outstanding Stock Options
cancelled in accordance with the cancellation-regrant
provisions of Section 6.6 will be available for subsequent
Awards granted under this Plan. The Shares which shall not be
available for subsequent Stock Option grants under this Plan
include (1) Shares subject to an Award surrendered under this
Plan in connection with a Change in Control and (2) Shares
issued pursuant to this Plan (whether as vested or unvested
Shares) which are repurchased by the Corporation.
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<PAGE> 9
(b) In the event that the Committee shall determine that
any dividend or other distribution (whether in the form of
shares of Common Stock or other securities), recapitalization,
stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or
exchange of securities of the Corporation, or other similar
corporate transaction or event affects the benefits or
potential benefits intended to be made available under this
Plan such that an adjustment is determined by the Committee to
be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made
available under this Plan, then the Committee may, in such
manner as it may deem equitable, adjust any or all of (i) the
number of Shares subject to this Plan and which thereafter may
be made the subject of Awards under this Plan, (ii) the number
of Shares subject to outstanding Awards, (iii) the nature of
the consideration (including, without limitation, other
securities of the Corporation, securities of another entity
and/or other property) to be received upon exercise of an
Award and/or (iv) the grant, purchase or exercise price with
respect to any Award, or, if deemed appropriate, make
provisions for a cash payment to the holder of an outstanding
Award; provided, however, in each case, that with respect to
Incentive Stock Options no such adjustment shall be authorized
to the extent that such adjustment would cause this Plan to
violate Section 422(b)(1) or 424(a) of the Code or any
successor provisions thereto; and provided further, however,
that the number of Shares subject to any Stock Option payable
or denominated in Shares shall always be a whole number.
Notwithstanding the foregoing, Nonqualified Stock Options
shall be subject to only such adjustment as shall be necessary
to maintain the proportionate interest of the Optionee and
preserve, without exceeding, the value of such Stock Option,
unless increased or decreased by reason of changes in the
capitalization of the Corporation as hereinafter provided or
by amendment of this Plan. The Shares issued pursuant to this
Plan may be authorized but unissued Shares, or (except as
noted in Subsection 4.1(a)) they may be issued Shares which
have been reacquired by the Corporation.
SECTION 5. ELIGIBILITY
Eligibility for participation in this Plan shall be confined to those
individuals who are key employees (including officers and Directors) of the
Corporation (or its Parent or Subsidiary Corporations), Directors or consultants
who render services which contribute to the success and growth of the
Corporation or its Parent or Subsidiary Corporations or which may reasonably be
anticipated to contribute to the future success and growth of the Corporation
(or its Parent or Subsidiary Corporations). In making any determination as to
Persons to whom Awards shall be granted, the type of Award and/or the number of
Shares to be covered by the Award, the Committee shall consider the position and
responsibilities of the Person; the importance of the Person to the Corporation;
the duties of the Person; the past, present and potential contributions of the
Person to the growth and success of the Corporation; and such other factors as
the Committee may deem relevant in connection with accomplishing the purposes of
this Plan.
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SECTION 6. STOCK OPTIONS
6.1 Grants. The Committee may grant Stock Options alone or in
addition to other Awards granted pursuant to this Plan to any eligible
Person. Each Person so selected shall be offered a Stock Option to
purchase the number of Shares determined by the Committee. The
Committee shall specify whether such Stock Option is an Incentive Stock
Option or Nonqualified Stock Option and any other terms or conditions
relating to such Award. To the extent that any Stock Option designated
as an Incentive Stock Option does not qualify as an Incentive Stock
Option (whether because of its provisions, the failure of the
stockholders of the Corporation to authorize the issuance of Incentive
Stock Options, the time or manner of its exercise or otherwise), such
Stock Option or the portion thereof which does not qualify shall be
deemed to constitute a Nonqualified Stock Option. Each Person to be
granted a Stock Option shall enter into a written agreement with the
Corporation, in such form as the Committee may prescribe, setting forth
the terms and conditions (including, without limitation, the exercise
price and vesting schedule) of the Stock Option. At any time and from
time to time, the Optionee and the Committee may agree to modify a
Stock Option agreement in such respects as they may deem appropriate,
including, without limitation, the conversion of an Incentive Stock
Option into a Nonqualified Stock Option. The Committee may require that
an Optionee meet certain conditions before the Stock Option or a
portion thereof may vest or be exercised, as, for example, that the
Optionee remain in the Service of the Corporation or a Subsidiary for a
stated period or periods of time.
6.2 Incentive Stock Options Limitations.
(a) Incentive Stock Options shall only be granted to
individuals who are employees of the Corporation or a Parent
or Subsidiary Corporation. In no event shall any individual be
granted Incentive Stock Options to the extent that the Shares
covered by any Incentive Stock Options (and any incentive
stock options granted pursuant to any other plans of the
Corporation or its Subsidiaries) that may be exercised for the
first time by such individual in any calendar year have an
aggregate Fair Market Value in excess of $100,000. For this
purpose, the Fair Market Value of the Shares shall be
determined as of the date(s) on which the Incentive Stock
Options are granted. To the extent a Participant holds two or
more such Stock Options which become exercisable for the first
time in the same calendar year, the foregoing limitation on
the exercisability thereof as Incentive Stock Options shall be
applied on the basis of the order in which such Stock Options
are granted. It is intended that the limitation on Incentive
Stock Options provided in this Subsection 6.2(a) be the
maximum limitation on Stock Options which may be considered
Incentive Stock Options pursuant to the Code.
(b) The Stock Option exercise price of an Incentive
Stock Option shall not be less than one hundred percent (100%)
of the Fair Market Value of the Shares subject to such
Incentive Stock Option on the date of the grant of such
Incentive Stock Option.
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(c) Notwithstanding anything herein to the contrary,
in no event shall any employee owning more than ten percent
(10%) of the total combined voting power of the Corporation or
any Parent or Subsidiary Corporation be granted an Incentive
Stock Option unless the option exercise price of such
Incentive Stock Option shall be at least one hundred ten
percent (110%) of the Fair Market Value of the Shares subject
to such Incentive Stock Option on the date of the grant of
such Incentive Stock Option.
(d) In no event shall any individual be granted an
Incentive Stock Option after the expiration of ten (10) years
from the date this Plan is adopted or is approved by the
stockholders of the Corporation (if stockholder approval is
required by Section 422 of the Code).
(e) To the extent stockholder approval of this Plan
is required by Section 422 of the Code, no individual shall be
granted an Incentive Stock Option unless this Plan is approved
by the stockholders of the Corporation within twelve (12)
months before or after the date this Plan is initially
adopted. In the event this Plan is amended to increase the
number of Shares subject to issuance upon the exercise of
Incentive Stock Options or to change the class of employees
eligible to receive Incentive Stock Options, no individual
shall be granted an Incentive Stock Option unless such
amendment is approved by the stockholders of the Corporation
within twelve (12) months before or after such amendment (if
such stockholder approval is required by Section 422 of the
Code).
(f) No Incentive Stock Option shall be granted to any
employee owning more than ten percent (10%) of the total
combined voting power of the Corporation or any Parent of
Subsidiary Corporation unless the term of such Incentive Stock
Option is equal to or less than five (5) years measured from
the date on which such Incentive Stock Option is granted.
6.3 Option Term and Price. The term of a Stock Option shall be
for such period of time from the date of its grant as may be determined
by the Committee; provided, however, that no Incentive Stock Option
shall be exercisable later than ten (10) years from the date of its
grant. The Stock Option price shall be fixed by the Committee;
provided, however, that in no event shall the Stock Option price per
Share be less than one hundred percent (100%) of the Fair Market Value
of a Share.
6.4 Time of Exercise. No Stock Option may be exercised unless
it is exercised prior to the expiration of its stated term.
Furthermore, at the time of exercise, the Optionee must be, and
continually have been since the date of grant of such Stock Option, in
the Service of the Corporation or a Parent or Subsidiary Corporation,
except that:
(a) A Stock Option may, to the extent vested as of
the date the Optionee's Service with the Corporation or a
Parent or Subsidiary Corporation ceases, be
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exercised during the three-month period immediately following
the date the Optionee's Service ceases (for any reason other
than death, Disability or termination for Cause) with the
Corporation or a Parent or Subsidiary Corporation (or within
such other period as may be specified in the applicable Stock
Option agreement); provided that, if the Stock Option has been
designated as an Incentive Stock Option and the Stock Option
agreement provides for a longer exercise period, the exercise
of such Stock Option after such three-month period shall be
treated as the exercise of a Nonqualified Stock Option;
(b) If the Optionee dies while in the Service of the
Corporation or a Subsidiary, or within three months after the
Optionee's Service ceases (for any reason other than
termination for Cause) (or within such other period as may be
specified in the applicable Stock Option agreement), a Stock
Option may, to the extent vested as of the date of the
Optionee's death, be exercised by the Optionee's Designated
Beneficiary during the twelve-month period immediately
following the date of the Optionee's death (or within such
other period as may be specified in the applicable Stock
Option agreement);
(c) If the Optionee's Service with the Corporation or
a Subsidiary ceases by reason of the Optionee's Disability, a
Stock Option, to the extent vested as of the date the
Optionee's Service with the Corporation or a Subsidiary
ceases, may be exercised during the twelve-month period
immediately following the date on which the Optionee's Service
with the Corporation or a Subsidiary ceases (or within such
other period as may be specified in the applicable Stock
Option agreement); provided that, if the Stock Option has been
designated as an Incentive Stock Option and the Stock Option
agreement provides for a longer exercise period, the exercise
of such Stock Option after such twelve-month period shall be
treated as the exercise of a Nonqualified Stock Option; and
(d) If the Optionee's Service is terminated for
Cause, all Stock Options held by such Optionee shall
simultaneously terminate and will no longer be exercisable.
Nothing contained in this Subsection 6.4 will be deemed to extend the
term of a Stock Option or to revive any Stock Option which has
previously lapsed or been canceled, terminated or surrendered.
Notwithstanding the foregoing, however, the Committee shall have full
power and authority to extend (either at the time the Stock Option is
granted or at any time while the Stock Option remains outstanding) the
period of time for which the Stock Option is to remain exercisable
following an Optionee's cessation of Service, from the period set forth
in the agreement evidencing the grant of the Stock Option to such
greater period of time as the Committee may deem appropriate under the
circumstances. In no event, however, shall a Stock Option be
exercisable after the specified expiration date of the Stock Option.
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6.5 Vesting of Stock Options.
(a) Each Stock Option granted pursuant to this Plan
may only be exercised to the extent that the Optionee vested
in such Stock Option. Each Stock Option shall vest separately
in accordance with the Stock Option vesting schedule
determined by the Committee, which will be incorporated in the
Stock Option agreement entered into between the Corporation
and such Optionee. The Stock Option vesting schedule may be
accelerated if, in the sole discretion of the Committee, the
acceleration of the Stock Option vesting schedule would be in
the best interests of the Corporation. Notwithstanding the
foregoing, except as provided or permitted pursuant to
Subsection 6.5(c) or Section 14 of this Plan, no Stock Option
may vest prior to the first anniversary of the date on which
it is granted.
(b) In the event of the dissolution or liquidation of
the Corporation, each Stock Option granted pursuant to this
Plan shall terminate as of a date to be fixed by the
Committee; provided, however, that not less than thirty (30)
days written notice of the date so fixed shall be given to
each Optionee. Upon the date fixed by the Committee, any
unexercised Stock Options shall terminate and be of no further
effect.
(c) The Committee may provide in the Stock Option
agreement that some or all of a Stock Option shall vest upon
the occurrence of a Change in Control.
6.6 Manner of Exercise of Stock Options.
(a) Except as otherwise provided in this Plan, Stock
Options may be exercised as to Shares only in amounts and at
intervals of time specified in the written Stock Option
agreement between the Corporation and the Optionee. Each
exercise of a Stock Option, or any part thereof, shall be
evidenced by a written notice delivered by the Optionee to the
Corporation. The purchase price of the Shares as to which a
Stock Option shall be exercised shall be paid in full at the
time of exercise, and may be paid to the Corporation either:
(i) in cash (including check acceptable to
the Corporation, bank draft or money order); or
(ii) by other consideration deemed
acceptable by the Committee in its sole discretion.
(b) If an Optionee delivers Shares (including Shares
of Restricted Stock) already owned by the Optionee full or
partial payment of the exercise price for any Stock Option, or
if the Optionee elects to have the Corporation retain that
number of Shares out of the Shares being acquired through the
exercise of the Stock Option having a Fair Market Value equal
to the exercise price of the Stock Option being
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exercised, the Committee may, in its sole discretion,
authorize the grant of a new Stock Option (a "Reload Option")
for that number of Shares equal to the number of already owned
Shares surrendered (including Shares of Restricted Stock) or
newly acquired Shares being retained by the Corporation in
payment of the Stock Option exercise price of the underlying
Stock Option being exercised. The grant of a Reload Option
will become effective upon the exercise of the underlying
Stock Option. The Stock Option exercise price of the Reload
Option shall be the Fair Market Value of a Share on the
effective date of the grant of the Reload Option. Each Reload
Option shall be exercisable no later than the time when the
underlying stock option being exercised could be last
exercised. The Committee may also specify additional terms,
conditions and restrictions for the Reload Option and the
Shares to be acquired upon the exercise thereof.
(c) An Optionee shall not have any of the rights of a
stockholder of the Corporation with respect to the Shares
subject to a Stock Option except to the extent that such Stock
Option is exercised and one or more certificates representing
such Shares shall have been delivered to the Optionee.
6.7 Limited Surrender Rights.
(a) Should a Change in Control occur at a time when the
Corporation's outstanding capital stock is registered under
Section 12 of the Exchange Act, then each Participant who is
at the time an officer or director of the Corporation subject
to the short-swing profit restrictions of the Federal
securities laws shall have the right to surrender any or all
Stock Options held by such individual under this Plan, to the
extent such Stock Options are at the time exercisable for
vested shares. In return for each surrendered Stock Option,
the officer or director shall receive an appreciation
distribution from the Corporation in an amount equal to the
excess of (i) the aggregate Acquisition Price (as such term is
hereinafter defined) of the number of shares in which such
individual is at the time vested under the surrendered Stock
Option over (ii) the aggregate Stock Option price payable for
such vested shares. Such limited surrender right shall be
exercisable for a period not to exceed thirty (30) days
following the completion of the Change in Control. The
distribution to which such Optionee shall become entitled upon
the Stock Option surrender shall be made entirely in cash. The
surrender of Stock Options to the Corporation pursuant to this
Subsection 6.7 is specifically approved by the Board and, if
necessary to exempt such surrender from Section 16(b) of the
Exchange Act, the Board shall take any additional action
necessary for such approval to comply with the requirements of
Rule 16b-3(e) promulgated under the Exchange Act.
(b) The "Acquisition Price" per share of the vested Common
Stock subject to the surrendered Stock Option shall be deemed
to be equal to the greater of (i) the Fair Market Value per
share on the date of surrender or (ii) the highest reported
price per share paid in effecting the Change in Control of the
Corporation's
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outstanding voting stock. However, if the surrendered Stock
Option is an Incentive Option, then the Acquisition Price of
the vested shares subject to the surrendered Stock Option
shall not exceed the Fair Market Value per share on the date
of surrender.
SECTION 7. STOCK APPRECIATION RIGHTS
7.1 Grants. The Committee may grant to any eligible Person
either Non-Tandem Stock Appreciation Rights or Tandem Stock
Appreciation Rights. Stock Appreciation Rights shall be subject to such
terms and conditions as the Committee shall impose. The grant of the
Stock Appreciation Right may provide that the holder will be paid for
the value of the Stock Appreciation Right either in cash or in Shares,
or a combination thereof, at the sole discretion of the Committee. In
the event of the exercise of a Stock Appreciation Right payable in
Shares, the holder of the Stock Appreciation Right shall receive that
number of whole Shares having an aggregate Fair Market Value on the
date of exercise equal to the value obtained by multiplying (a) either
(i) in the case of a Tandem Stock Appreciation Right, the difference
between the Fair Market Value of a Share on the date of exercise over
the per share exercise price of the related Stock Option, or (ii) in
the case of a Non-Tandem Stock Appreciation Right, the difference
between the Fair Market Value of a Share on the date of exercise over
the Fair Market Value on the date of the grant by (b) the number of
Shares as to which the Stock Appreciation Right is exercised. However,
notwithstanding the foregoing, the Committee, in its sole discretion,
may place a ceiling on the amount payable upon exercise of a Stock
Appreciation Right, but any such limitation shall be specified at the
time that the Stock Appreciation Right is granted.
7.2 Exercisability. A Tandem Stock Appreciation Right granted
in connection with an Incentive Stock Option (a) may be exercised at,
and only at, the times and to the extent the related Incentive Stock
Option is exercisable, (b) will expire upon the termination of the
related Incentive Stock Option, (c) may not exceed 100% of the
difference between the exercise price of the related Incentive Stock
Option and the Fair Market Value of the Shares subject to the related
Incentive Stock Option at the time the Tandem Stock Appreciation Right
is exercised and (d) may be exercised at, and only at, such times as
the Fair Market Value of the Shares subject to the related Incentive
Stock Option exceeds the exercise price of the related Incentive Stock
Option. A Tandem Stock Appreciation Right may be transferred at, and
only at, the times and to the extent the related Stock Option is
transferable. If a Tandem Stock Appreciation Right is granted, there
shall be surrendered and canceled from the related Stock Option at the
time of exercise of the Tandem Stock Appreciation Right, in lieu of
exercise pursuant to the related Stock Option, that number of Shares as
shall equal the number of Shares as to which the Tandem Stock
Appreciation Right shall have been exercised.
7.3 Certain Limitations on Non-Tandem Stock Appreciation
Rights. A Non-Tandem Stock Appreciation Right will be exercisable as
provided by the Committee and will have such other terms and conditions
as the Committee may determine. A
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Non-Tandem Stock Appreciation Right is subject to acceleration of
vesting or immediate termination in certain circumstances and to
conditions on exercisability and the timing thereof in the same manner
as Stock Options pursuant to Subsections 6.4 and 6.5 of this Plan and,
to the extent payable in Shares, shall be entitled to the same limited
surrender rights as Stock Options pursuant to Subsection 6.7 of this
Plan.
7.4 Limited Stock Appreciation Rights. The Committee may grant
"Limited Stock Appreciation Rights," either as Tandem Stock
Appreciation Rights or Non-Tandem Stock Appreciation Rights. Limited
Stock Appreciation Rights will become exercisable only upon the
occurrence of such event as the Committee may designate at the time of
grant or thereafter.
SECTION 8. RESTRICTED STOCK
8.1 Grants. The Committee may grant Awards of Restricted Stock
to any eligible Person for such minimum consideration, if any, as may
be required by applicable law or such greater consideration as may be
determined by the Committee, in its sole discretion. The terms and
conditions of the Restricted Stock shall be specified by the grant
agreement. The Committee, in its sole discretion, may specify any
particular rights which the Participant to whom a grant of Restricted
Stock is made shall have in the Restricted Stock during the restriction
period and the restrictions applicable to the particular Award, the
vesting schedule (which may be based on service, performance or other
factors) and rights to acceleration of vesting (including, without
limitation, whether non-vested Shares are forfeited or vested upon
termination of Service). Further, the Committee may grant
performance-based Awards consisting of Restricted Stock by conditioning
the grant, or vesting or such other factors, such as the release,
expiration or lapse of restrictions upon any such Award (including the
acceleration of any such conditions or terms) of such Restricted Stock
upon the attainment of specified performance goals or such other
factors as the Committee may determine. The Committee shall also
determine when the restrictions shall lapse or expire and the
conditions, if any, pursuant to which the Restricted Stock will be
forfeited or sold back to the Corporation. Each Award of Restricted
Stock may have different restrictions and conditions. Unless otherwise
set forth in the grant agreement, Restricted Stock may not be sold,
pledged, encumbered or otherwise disposed of by the recipient until the
restrictions specified in the Award expire. Awards of Restricted Stock
are subject to acceleration of vesting, termination of restrictions and
termination in the same manner as Stock Options pursuant to Subsections
6.4 and 6.5 of this Plan, and shall be entitled to the same limited
surrender rights as Stock Options pursuant to Subsection 6.7 of this
Plan.
8.2 Awards and Certificates. Any Restricted Stock issued
hereunder may be evidenced in such manner as the Committee, in its sole
discretion, shall deem appropriate including, without limitation,
book-entry registration or issuance of a stock certificate or
certificates. In the event any stock certificate is issued in respect
of Shares of Restricted Stock, such certificate shall bear an
appropriate legend with respect to the restrictions
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applicable to such Award. The Corporation may retain, at its option,
the physical custody of any stock certificate representing any awards
of Restricted Stock during the restriction period or require that the
certificates evidencing Restricted Stock be placed in escrow or trust,
along with a stock power endorsed in blank, until all restrictions are
removed or expire.
SECTION 9. PERFORMANCE AWARDS
9.1 Grants. A Performance Award may consist of either or both,
as the Committee may determine, of (a) the right to receive Shares or
Restricted Stock, or any combination thereof as the Committee may
determine ("Performance Shares"), or (b) the right to receive a fixed
dollar amount payable in Shares, Restricted Stock, cash or any
combination thereof, as the Committee may determine ("Performance
Units"). The Committee may grant Performance Awards to any eligible
Person, for such minimum consideration, if any, as may be required by
applicable law or such greater consideration as may be determined by
the Committee, in its sole discretion. The terms and conditions of
Performance Awards shall be specified at the time of the grant and may
include provisions establishing the performance period, the performance
criteria to be achieved during a performance period, the criteria used
to determine vesting (including the acceleration thereof), whether
Performance Awards are forfeited or vest upon termination of Service
during a performance period and the maximum or minimum settlement
values. Each Performance Award shall have its own terms and conditions,
which shall be determined in the sole discretion of the Committee. If
the Committee determines, in its sole discretion, that the established
performance measures or objectives are no longer suitable because of a
change in the Corporation's business, operations, corporate structure
or for other reasons that the Committee deems satisfactory, the
Committee may modify the performance measures or objectives and/or the
performance period. Awards of Performance Shares and/or Performance
Units are subject to acceleration of vesting, termination of
restrictions and termination in the same manner as Stock Options
pursuant to Subsections 6.4 and 6.5 of this Plan and, to the extent
payable in Shares, shall be entitled to the same limited surrender
rights as Stock Options pursuant to Subsection 6.7 of this Plan.
9.2 Terms and Conditions. Performance Awards may be valued by
reference to the Fair Market Value of a Share or according to any other
formula or method deemed appropriate by the Committee, in its sole
discretion, including, but not limited to, achievement of specific
financial, production, sales, cost or earnings performance objectives
that the Committee believes to be relevant or the Corporation's
performance or the performance of the Common Stock measured against the
performance of the market, the Corporation's industry segment or its
direct competitors. Performance Awards may also be conditioned upon the
applicable Participant remaining in the Service of the Corporation or
one of its Subsidiaries for a specified period. Performance Awards may
be paid in cash, Shares (including Restricted Stock) or other
consideration, or any combination thereof. Performance Awards may be
payable in a single payment or in installments and may be payable at a
specified date or dates or upon attaining the performance objective or
objectives, all at the sole discretion of the Committee. The extent to
which any applicable performance
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objective has been achieved shall be conclusively determined by the Committee in
its sole discretion.
SECTION 10. DIVIDEND EQUIVALENT RIGHTS
The Committee may grant a Dividend Equivalent Right to any eligible
Person, either as a component of another Award or as a separate Award, and, in
general, each such Participant awarded a Dividend Equivalent Right that is
outstanding on a dividend record date for the Common Stock shall be credited
with an amount equal to the cash or stock dividends or other distributions that
would have been received had the Shares subject to the Award been issued and
outstanding on the dividend record date. The terms and conditions of the
Dividend Equivalent Right shall be specified in a dividend equivalent right
agreement which evidences such Award. Dividend Equivalent Rights may be settled
in cash or Shares, or a combination thereof, in a single payment or in
installments. A Dividend Equivalent Right granted as a component of another
Award may provide that such Dividend Equivalent Right shall be settled upon
exercise, settlement or payment for or lapse of restrictions on such other
Award, and that such Dividend Equivalent Right shall expire or be forfeited or
annulled pursuant to the same conditions as such other Award. A Dividend
Equivalent Right granted as a component of another Award may also contain terms
and conditions different from such other Award.
SECTION 11. PHANTOM STOCK
The Committee may grant to any eligible Person shares of Phantom Stock.
Such grant shall be evidenced by an agreement (the "Phantom Stock Agreement"),
in such form as is approved by the Committee, between the Corporation and the
Participant. Each Phantom Stock Agreement shall set forth the date of grant of
the shares of Phantom Stock, the number of shares of Phantom Stock awarded, the
period during which the shares of Phantom Stock shall vest, and the period
during which the shares of Phantom Stock shall be convertible, in whole or in
part, and redeemed for payment (the "Conversion Period").
Vested shares of Phantom Stock that are convertible in accordance with
the applicable Phantom Stock Agreement, or in accordance with the terms of this
Plan, may be converted by a Participant into cash, Common Stock, or both, only
in accordance with this Section 11 and the terms and conditions of the
applicable Phantom Stock Agreement. To convert vested, convertible shares of
Phantom Stock, a Participant must deliver or mail to the Committee a written
notice of conversion stating the number of shares of Phantom Stock to be
converted. Such conversion shall be effective on the date of receipt by the
Committee (the "Conversion Date"). Upon receipt by the Committee of a proper
written notice of conversion of a Participant, the Participant shall be entitled
to receive, at the time and in the manner set forth in the applicable Phantom
Stock Agreement (a) an amount in cash equal to the aggregate Fair Market Value
on the Conversion Date of the shares converted or (b) shares of Common Stock
equal in number to the number of shares of Phantom Stock converted. The
Corporation shall satisfy its obligation upon conversion of shares of Phantom
Stock by either making a distribution in cash or by distributing the requisite
number of shares of Common Stock. The method of settlement and the time of
payment shall be set forth in the applicable
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Phantom Stock Agreement. Awards of shares of Phantom Stock are subject to
acceleration of vesting or immediate termination in certain circumstances and to
conditions on exercisability and the timing thereof in the same manner as Stock
Options pursuant to Subsections 6.4 and 6.5 of this Plan and, to the extent
payable in Shares, shall be entitled to the same limited surrender rights as
Stock Options pursuant to Subsection 6.7 of this Plan.
SECTION 12. OTHER AWARDS
The Committee may grant to any eligible Person other forms of Awards
based upon, payable in or otherwise related to, in whole or in part, Shares, if
the Committee, in its sole discretion, determines that such other form of Award
is consistent with the purposes of this Plan. The terms and conditions of such
other form of Award shall be specified in a written agreement which sets forth
the terms and conditions of such Award, including, but not limited to, the
price, if any, and the vesting schedule, if any, of such Award. Such Awards may
be granted for such minimum consideration, if any, as may be required by
applicable law or for such other greater consideration as may be determined by
the Committee, in its sole discretion.
SECTION 13. COMPLIANCE WITH SECURITIES AND OTHER LAWS
As a condition to the issuance or transfer of any Award or any security
issuable in connection with such Award, the Corporation may require an opinion
of counsel, satisfactory to the Corporation, to the effect that (a) such
issuance and/or transfer will not be in violation of the Securities Act or any
other applicable securities laws and (b) such issuance and/or transfer will not
be in violation of the rules and regulations of any securities exchange or
automated quotation system on which the Common Stock is listed or admitted to
trading. Further, the Corporation may refrain from issuing, delivering or
transferring any Award or any security issuable in connection with such Award
until the Committee has determined that such issuance, delivery or transfer will
not violate such securities laws or rules and regulations and that the recipient
has tendered to the Corporation any federal, state or local tax owed as a result
of such issuance, delivery or transfer, when the Corporation has a legal
liability to satisfy such tax. The Corporation shall not be liable for damages
due to delay in the issuance, delivery or transfer of any Award or any security
issuable in connection with such Award or any agreement, instrument or
certificate evidencing such Award or security for any reason whatsoever,
including, but not limited to, a delay caused by the listing requirements of any
securities exchange or automated quotation system or any registration
requirements under the Securities Act, the Exchange Act, or under any other
state or federal law, rule or regulation. Except as may be set forth in an
agreement evidencing the grant of an Award, the Corporation is under no
obligation to take any action or incur any expense to register or qualify the
issuance, delivery or transfer of any Award or any security issuable in
connection with such Award under applicable securities laws or to perfect any
exemption from such registration or qualification or to list any security on any
securities exchange or automated quotation system. Furthermore, the Corporation
will have no liability to any person for refusing to issue, deliver or transfer
any Award or any security issuable in connection with such Award if such refusal
is based upon the foregoing provisions of this Section 13. As a condition to any
issuance, delivery or transfer of any Award or any security issuable in
connection with such Award, the Corporation may place legends on any agreement,
instrument or
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certificate evidencing such Award or security; issue stop transfer orders with
respect thereto; require such market stand-off, lockup, or similar agreements or
undertakings as the Corporation deems necessary or desirable; and require such
agreements or undertakings as the Corporation may deem necessary or advisable to
assure compliance with applicable laws or regulations, including, if the
Corporation or its counsel deems it appropriate, representations from the
recipient of such Award or security to the effect that such recipient is
acquiring such Award or security solely for investment and not with a view to
distribution and that no distribution of the Award or the security will be made
unless registered pursuant to applicable federal and state securities laws, or
in the opinion of counsel to the Corporation, such registration is unnecessary.
SECTION 14. ADJUSTMENTS UPON THE OCCURRENCE OF A CORPORATE
TRANSACTION
(a) In the event of any Corporate Transaction, except as
otherwise provided in the agreement evidencing the grant of an Award
hereunder, each Award outstanding under this Plan shall automatically
accelerate so that each such Award shall, immediately prior to the
specified effective date for such Corporate Transaction, become fully
exercisable, convertible or payable and may be exercised or converted,
as the case may be, to the extent of all or any portion of such Award.
(b) Upon the consummation of the Corporate Transaction, except
as otherwise provided in the agreement evidencing the grant of an Award
hereunder, each Award outstanding under this Plan shall terminate and
cease to be exercisable.
(c) The exercisability as incentive stock options under the
Federal tax laws of any Incentive Stock Options accelerated in
connection with the Corporate Transaction shall remain subject to the
applicable dollar limitation of Subsection 6.2(a) of this Plan.
(d) The grant of Awards under this Plan shall in no way affect
the legal right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of
its business or assets.
SECTION 15. AMENDMENT OR TERMINATION OF THIS PLAN
15.1 Amendment of This Plan. Notwithstanding anything contained
in this Plan to the contrary, all provisions of this Plan (including,
without limitation, the maximum number of Shares that may be issued
with respect to Awards to be granted pursuant to this Plan) may at any
time or from time to time be modified or amended by the Board;
provided, however, that no Award at any time outstanding pursuant to
this Plan may be modified, impaired or canceled adversely to the holder
of the Award without the consent of such holder. Without limiting the
generality of the foregoing, the Board is authorized to amend this Plan
to the extent it deems necessary to comply with Rule 16b-3 (or any
successor to such rule) promulgated under the Exchange Act, and to make
any other amendments deemed
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necessary or appropriate to better accomplish the purposes of this Plan
in light of any amendments made to Rule 16b-3 (or any successor to such
rule).
15.2 Termination of This Plan. The Board may suspend or
terminate this Plan at any time, and such suspension or termination may
be retroactive or prospective. Termination of this Plan shall not
impair or affect any Award previously granted hereunder and the rights
of the holder of the Award shall remain in effect until the Award has
been exercised in its entirety or has expired or otherwise has been
terminated by the terms of such Award.
SECTION 16. AMENDMENTS AND ADJUSTMENTS TO AWARDS
The Committee may amend, modify or terminate any outstanding Award with
the Participant's consent at any time prior to payment or exercise in any manner
not inconsistent with the terms of this Plan, including, without limitation, to
change the date or dates as of which and/or the terms and conditions pursuant to
which (i) a Stock Option becomes exercisable or (ii) a Performance Award is
deemed earned. The Committee may also make adjustments in the terms and
conditions of, and the criteria included in agreements evidencing Awards in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 14 hereof) affecting the Corporation, or the
financial statements of the Corporation or any Parent Corporation or Subsidiary
Corporation, or of changes in applicable laws, regulations or accounting
principles, whenever the Committee determines that such adjustments are
appropriate to prevent reduction or enlargement of the benefits or potential
benefits intended to be made available pursuant to this Plan. Without limiting
the generality of the foregoing, the Committee is authorized to modify any Award
to the extent it deems necessary to comply with Rule 16b-3 (or any successor to
such rule) promulgated under the Exchange Act, and to make any other
modifications deemed necessary or appropriate to better accomplish the purposes
of this Plan in light of any amendments made to Rule 16b-3 (or any successor to
such rule).
SECTION 17. GENERAL PROVISIONS
17.1 No Limit on Other Compensation Arrangements. Nothing
contained in this Plan shall prevent the Corporation from adopting or
continuing in effect other compensation arrangements, and such
arrangements may be either generally applicable or applicable only in
specific cases.
17.2 No Right to Employment or Continuation of Relationship.
Nothing in this Plan or in any Award, nor the grant of any Award, shall
confer upon or be construed as giving any Participant any right to
remain in the employ of the Corporation or a Parent or Subsidiary
Corporation or to continue as a consultant or Director. Further, the
Corporation or a Parent or Subsidiary Corporation may at any time
dismiss a Participant from employment or terminate the relationship of
any consultant or Director with the Corporation or any Parent or
Subsidiary Corporation, free from any liability or any claim pursuant
to this
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Plan, unless otherwise expressly provided in this Plan or in any
agreement evidencing an Award made under this Plan. No consultant,
Director or employee of the Corporation or any Parent or Subsidiary
Corporation shall have any claim to be granted any Award, and there is
no obligation for uniformity of treatment of any consultant, Director
or employee of the Corporation or any Parent or Subsidiary Corporation
or of any Participants.
17.3 GOVERNING LAW. EXCEPT AS TO MATTERS RELATING TO THE
INTERNAL AFFAIRS OF THE CORPORATION WHICH SHALL BE GOVERNED BY THE
DELAWARE GENERAL CORPORATION LAW, THE VALIDITY, CONSTRUCTION AND EFFECT
OF THIS PLAN AND ANY RULES AND REGULATIONS RELATING TO THIS PLAN SHALL
BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF AND
WILL, TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR
PERFORMANCE IN DALLAS COUNTY, TEXAS.
17.4 Severability. If any provision of this Plan or any Award
is or becomes or is deemed to be invalid, illegal or unenforceable in
any jurisdiction or as to any individual or Award, or would disqualify
this Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to
conform to applicable law, or if it cannot be construed or deemed
amended without, in the sole determination of the Committee, materially
altering the intent of this Plan or the Award, such provision shall be
stricken as to such jurisdiction, individual or Award and the remainder
of this Plan and any such Award shall remain in full force and effect.
17.5 No Fractional Shares. No fractional Shares shall be
issued or delivered pursuant to this Plan or any Award, and the
Committee shall determine, in its discretion, whether cash, other
securities or other property shall be paid or transferred in lieu of
any fractional Shares or whether such fractional Shares or any rights
thereto shall be canceled, terminated or otherwise eliminated.
17.6 Headings. Headings are given to the Sections and
Subsections of this Plan solely as a convenience to facilitate
reference. Such headings shall not be deemed in any way material or
relevant to the construction or interpretation of this Plan or any
provision thereof.
17.7 Effective Date. The provisions of this Plan that relate
to the grant of Incentive Stock Options shall be effective as of the
date of the approval of this Plan by the stockholders of the
Corporation.
17.8 Transferability of Awards. Awards shall not be
transferable otherwise than by will or the laws of descent and
distribution without the written consent of the Committee (which may be
granted or withheld at the sole discretion of the Committee). Awards
may be exercised, during the lifetime of the holder, only by the
holder. Any attempted
-22-
<PAGE> 23
assignment, transfer, pledge, hypothecation or other disposition of an
Award contrary to the provisions hereof, or the levy of any execution,
attachment or similar process upon an Award shall be null and void and
without effect.
17.9 Rights of Participants. Except as hereinbefore expressly
provided in this Plan, any Person to whom an Award is granted shall
have no rights by reason of any subdivision or consolidation of stock
of any class or the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class or by reason
of any dissolution, liquidation, reorganization, merger or
consolidation or spinoff of assets or stock of another corporation, and
any issue by the Corporation of shares of stock of any class or
securities convertible into shares of stock of any class shall not
affect, and no adjustment by reason thereof shall be made with respect
to, the number or exercise price of Shares subject to an Award.
17.10 No Limitation Upon the Rights of the Corporation. The
grant of an Award pursuant to this Plan shall not affect in any way the
right or power of the Corporation to make adjustments,
reclassifications, or changes of its capital or business structure; to
merge, convert or consolidate; to dissolve or liquidate; or sell or
transfer all or any part of its business or assets.
17.11 No Liability for Good Faith Determinations. Neither the
members of the Board nor any member of the Committee shall be liable
for any action, failure to act, omission or determination taken or made
in good faith with respect to this Plan or any Award granted hereunder.
17.12 Execution of Receipts and Releases. Any payment or any
issuance or transfer of shares of Common Stock to a Participant, or to
the legal representative, heir, legatee or distributee of a
Participant, in accordance with the provisions hereof, shall, to the
extent thereof, be in full satisfaction of all claims of such persons
hereunder. The Committee may require any Participant, or legal
representative, heir, legatee or distributee of a Participant, as a
condition precedent to such payment, to execute a release and receipt
therefor in such form as it shall determine.
17.13 Withholding Obligation. The amount, as determined by the
Committee, of any federal, state or local tax required to be withheld
by the Corporation upon the grant, exercise, settlement, conversion,
redemption, or otherwise with respect to any Award granted hereunder,
shall, subject to the authorization of the Committee, be satisfied, at
the election of the Participant, either (i) by payment by the
Participant to the Corporation of the amount of such withholding
obligation in cash or other consideration acceptable to the Committee
in its sole discretion (the "Non-Share Method") or (ii) through either
the retention by the Corporation of a number of Shares out of the
Shares being acquired through the grant, exercise, settlement,
conversion, redemption, or otherwise with respect to any Award or the
delivery of already owned Shares having a Fair Market Value equal to
the amount of the withholding obligation (the "Share Retention
Method"). If a Participant elects to use the
-23-
<PAGE> 24
Share Retention Method in full or partial satisfaction of any tax
liability resulting from the exercise of a Stock Option, the Committee
may authorize the grant of a Reload Option for that number of Shares as
shall equal the number of Shares used to satisfy the tax liabilities of
the Participant arising out of the exercise of such Stock Option. Such
Reload Option will be granted at the price and on the terms set forth
in Subsection 6.6 (b). The cash payment or an amount equal to the Fair
Market Value of the Shares so withheld, as the case may be, shall be
remitted by the Corporation to the appropriate taxing authorities.
17.14 Date of Grant of an Award. No Participant shall have any
enforceable rights under this Plan prior to such execution and delivery
of a written agreement hereunder. Solely for purposes of determining
the Fair Market Value of the Shares subject to an Award, such Award
will be deemed to have been granted as of the date specified by the
Committee notwithstanding any delay which may elapse in executing and
delivering the applicable agreement.
-24-
<PAGE> 25
FORM OF
PHANTOM STOCK AGREEMENT
WEBLINK WIRELESS, INC.
2000 FLEXIBLE INCENTIVE PLAN
THIS PHANTOM STOCK AGREEMENT (the "AGREEMENT") is dated as of this____
day of ____________, 20___, between WEBLINK WIRELESS, INC., a Delaware
corporation (the "COMPANY") and _________________, an Executive of the Company
or one or more of its Subsidiaries (the "EXECUTIVE"). All capitalized terms not
otherwise defined herein or in exhibits to this Agreement shall have the meaning
set forth in the WebLink Wireless, Inc. 2000 Flexible Incentive Plan, as amended
(the "PLAN").
W I T N E S S E T H:
WHEREAS, the Company desires to carry out the purposes of the Plan by
granting the Executive the opportunity to receive shares of Common Stock;
NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto agree as
follows:
1. Grant of Shares of Phantom Stock. The Company hereby grants to
Executive_____________ shares of phantom stock (the "PHANTOM STOCK"). Each share
of Phantom Stock represents one share of Common Stock. The shares of Phantom
Stock will be granted to Executive on the following date (the "Date of Grant")
[SELECT APPLICABLE ONE]:
[ ] the date of this Agreement
[ ] _____________, 20___, unless, prior to the Date of Grant, the
Executive has voluntarily resigned his employment [without Good
Reason (as defined in Exhibit C to this Agreement)] with the
Company] or the Company has terminated the employment of the
Executive with the Company [for Cause (as defined in Exhibit A to
this Agreement)].
2. Vesting of Shares of Phantom Stock. Except as otherwise provided
herein, unless terminated hereunder, shares of Phantom Stock will vest in
accordance with the vesting schedule set forth below. The vesting of the shares
of Phantom Stock accrues only in accordance with the following vesting schedule
1
<PAGE> 26
and, except as otherwise provided herein, only to the extent that the Executive
remains in the continuous employ or service of the Company or a subsidiary of
the Company.
[INSERT VESTING SCHEDULE.]
The events resulting in the vesting of the Phantom Stock are
hereinafter referred to as "Vesting Events".
3. Payment Events. [INCLUDE TO EXTENT APPLICABLE]
(a) To the extent not previously converted, all shares of
Phantom Stock will be automatically converted into Common Stock,
payable on ____________, 20___.
(b) A share of Phantom Stock shall be converted into a share
of Common Stock in accordance with the terms of Sections 3 and 4 of
this Agreement. Shares of Phantom Stock will not be converted until at
least one Payment Event occurs. A Payment Event occurs upon [SELECT ALL
THAT APPLY]:
[ ] consummation of a Change in Control;
[ ] consummation of a Change in Control in which stockholders of the
Company receive stock of a company that has such stock listed on
the New York Stock Exchange, NASDAQ, the American Stock Exchange or
such other stock exchange as may be approved by the Board of
Directors of the Company (the "BOARD") and has an equity market
capitalization not less than $__ billion;
[ ] the Company achieving an equity market capitalization of $___
billion, in the absence of a Change in Control;
[ ] [Events (which must be specifically defined) providing liquidity to
current stockholders];
[ ] Other: ____________________________________
(c) Once shares of Phantom Stock have vested, such shares may
be forfeited by the Executive and recovered by the Company only if the
Executive has engaged in Materially Adverse Conduct. As used herein,
the term "Materially Adverse Conduct" will be deemed to mean that the
Executive has committed an egregious act of intentional fraud which has
a material adverse effect upon the Company or its successor, in each
case, taken as a whole. In no event will the Company have the right
2
<PAGE> 27
to recover/forfeit either shares of Common Stock issued upon conversion
of shares of Phantom Stock or proceeds from the sale of shares of
Common Stock issued upon conversion of shares of Phantom Stock.
4. Manner of Conversion.
(a) A share of Phantom Stock will be converted into a share of
Common Stock when [SELECT APPLICABLE ONE]:
[ ] a Vesting Event has occurred
[ ] both a Payment Event and a Vesting Event have occurred
with respect to such share of Phantom Stock.
(b) The conversion of shares of Phantom Stock into shares of
Common Stock shall be automatic and without notice by the Executive to
the Company. Any provision of the Plan which would otherwise require a
written notice of conversion from the Executive to the Company shall be
without force or effect, and the Company hereby waives its right to
receive any such notice of conversion prior to conversion.
5. Withholding Taxes. Unless it is unable to satisfy its withholding
obligations as provided below because of "Economic Constraint", the Company will
satisfy any federal, state or local tax required to be withheld due to the
payment of shares of Phantom Stock in accordance with the following procedures:
(a) the Company will compute the taxable value of the
compensation which would be deemed to have been paid to the Executive
if all of the shares of Phantom Stock which would otherwise be
convertible into shares of Common Stock (but for the provisions of this
Section 5) were converted into shares of Common Stock and were issued
to the Executive;
(b) the Company will divide the aggregate taxable value
computed pursuant to the immediately preceding clause (a) by the number
of shares of Phantom Stock which would otherwise be convertible into
shares of Common Stock (but for the provisions of this Section 5);
(c) based upon the calculation made in the immediately
preceding clause (a), the Company will remit payment to the Internal
Revenue Service (as a withholding tax payment) an amount equal to the
lesser of (i) the result of applying the minimum statutory withholding
rate to the value calculated pursuant to the immediately preceding
clause (a) or
3
<PAGE> 28
(ii) the maximum amount that can be paid without causing Economic
Constraint;
(d) the Company will divide the payment made in the
immediately preceding clause (c) by the result of the calculation made
in clause (b);
(e) the Company will subtract the result of the calculation
made in the immediately preceding clause (d) from the number of shares
of Common Stock which (but for the provisions of this Section 5) would
be issuable to the Executive upon the conversion of shares of Phantom
Stock into shares of Common Stock; and
(f) the Company will issue to the Executive the number of
shares of Common Stock calculated pursuant to the immediately preceding
clause (e).
In the event the Company is not able to satisfy its minimum statutory
withholding obligations with respect to the conversion of shares of Phantom
Stock into shares of Common Stock due to Economic Constraint, it will remit to
the Internal Revenue Service (as a withholding tax payment) the maximum amount
which it is able to withhold and pay without Economic Constraint and the
Executive will remit to the Company, within 14 days following the later of (i)
notification by the Company to the Executive that a Payment Event has occurred
and (ii) delivery to the Executive of the shares of Common Stock into which
shares of Phantom Stock have been converted as a result of such Payment Event,
sufficient cash or other consideration acceptable to the Board to satisfy (when
aggregated with any payments made by the Company) the Company's minimum
statutory withholding obligation with respect to such conversion (such payment
being hereinafter referred to as the "EXECUTIVE WITHHOLDING TAX PAYMENT"). In
the event that the Executive is obligated to make the Executive Withholding Tax
Payment, the Company may, in its discretion, retain as security from the shares
otherwise issuable to the Executive upon conversion of shares of Phantom Stock
into Common Stock shares of Common Stock with a Fair Market Value (as
hereinafter defined) equal to the Executive Withholding Tax Payment. Any such
shares of Common Stock retained by the Company will be promptly delivered to the
Executive upon payment of the Executive Withholding Tax Payment. As used herein
the term "Fair Market Value" will be deemed to mean the closing price as of the
Trading Day immediately preceding the day on which the Payment Event occurs (or
if there is no closing price on such Trading Day, the average between the
closing bid and asked prices for the Common Stock on such Trading Day) on the
principal stock exchange or automated transaction reporting system on which the
Common Stock is then listed for trading. If the Common Stock is not then listed
for trading, the term "Fair Market Value" will be deemed to be such value as
4
<PAGE> 29
may be reasonably determined by the Board. For purposes of this Agreement,
"Economic Constraint" is defined as an economic or fiscal condition of the
Company such that any such retention of such shares and/or payment of such
required withholding amount could reasonably result in the violation of any of
the Company's covenants under any credit or loan agreement to which the Company
is then a party or, in the good faith determination of the Board, could
reasonably have a material adverse effect on the Company and, in each case, the
Company is not reasonably able to promptly resell such withheld shares in the
open market.
6. Acceleration of Vesting Dates. Notwithstanding the provisions of
Section 2 hereof but subject to delayed vesting pursuant to Section 3:
(a) If Executive [SELECT ALL THAT APPLY]
[ ] dies,
[ ] is terminated without Cause,
[ ] is terminated for disability,
[ ] terminates this Agreement for Good Reason,
the shares of Phantom Stock that would have vested will be vested upon
such death or termination (such amount, the "ACCELERATED AMOUNT");
provided, however that if Executive is terminated without Cause
following one or more Payment Events, Executive shall be vested in the
greater of (x) the Accelerated Amount or (y) the number of shares of
unvested Phantom Stock that would have been convertible had they been
vested immediately prior to such termination.
(b) In the event of a Change in Control which does not result
in the occurrence of a Payment Event and which would result in the
Common Stock not being publicly traded and the stockholders of the
Company receiving consideration other than solely cash, the Company may
cancel unvested and unconverted shares of Phantom Stock in exchange (i)
in the circumstance in which securities are issued to the stockholders
of the Company in connection with the Change in Control, for the
securities received by the stockholders of the Company or (ii) in all
other circumstances, for such other consideration as the Board may
equitably determine to have a value equal to the value of the canceled
shares of Phantom Stock; provided, however, any such securities
received shall not be transferable except in such circumstances as
shares of Common Stock would otherwise be transferable to Executive
under this Agreement or under the Stockholders Agreement.
5
<PAGE> 30
7. No Contract. This Agreement does not constitute a contract for
employment or service and shall not affect the right of the Company to terminate
Executive's employment or service for any reason or no reason whatsoever.
8. Rights as Stockholder. This grant of shares of Phantom Stock shall
not entitle Executive to any rights of a stockholder of the Company or to any
notice of proceedings of the Company with respect to any shares of Common Stock
payable upon these shares of Phantom Stock unless and until the shares of
Phantom Stock have been converted into such shares of Common Stock and such
shares have been registered in the Executive's name upon the stock records of
the Company.
9. Restriction on Issuance of Shares. The Company shall not be required
to issue or deliver any certificates for shares payable upon the conversion of a
share of Phantom Stock prior to: (a) the obtaining of any approval from any
governmental agency which the Company shall, in its reasonable discretion,
determine to be necessary or advisable; and (b) the completion of any
registration or other qualification of such shares under any state or federal
law or ruling or regulation of any governmental body which the Company shall, in
its sole discretion, determine to be necessary or advisable. In addition, if the
Common Stock reserved for issuance upon the conversion of shares of Phantom
Stock shall not then be registered under the Securities Act of 1933, the Company
may upon payment of shares, require Executive or his permitted transferee to
represent in writing that the shares being acquired are for investment and not
with a view to distribution, and may mark the certificate for the shares with a
legend restricting transfer and may issue stop transfer orders relating to such
certificate to the Company's transfer agent (if applicable).
10. Restriction on Sale of Shares. Executive agrees not to sell any of
the shares of Common Stock when applicable laws or Company policies prohibit a
sale. Such restriction will apply so long as Executive is an employee,
consultant or director of the Company or a subsidiary of the Company.
11. Certain Forfeiture Events. If the employment of the Executive with
the Company is terminated for Cause, all unvested shares of Phantom Stock which
have not yet been converted into shares of Common Stock and paid to Executive
shall be forfeited and cancelled.
12. Lapse of Shares of Phantom Stock. This Agreement shall be null and
void in the event Executive shall fail to sign and return a counterpart hereof
to the Company within thirty (30) days of its delivery to Executive.
13. Binding Effect. This Agreement shall be binding upon the heirs,
executors, administrators, and successors of the parties hereto.
6
<PAGE> 31
14. Governing Instrument and Entire Agreement. This grant of shares of
Phantom Stock and any shares issued hereunder shall in all respects be governed
by the terms and provisions of the Plan. In the event of a conflict between the
terms of this Agreement and the terms of the Plan (a copy of which is attached),
the terms of the Plan shall control. There are no oral agreements between the
parties relating to the subject matter hereof, and this Agreement and the terms
of the Plan constitute the entire agreement of the parties with respect to the
subject matter hereof. This Agreement may not be amended except by written
agreement executed by the Company and Executive.
COMPANY
WEBLINK WIRELESS, INC.
By:
---------------------------------
Name:
-------------------------
------------------------------
Title:
------------------------
------------------------------
Accepted and Agreed:
EXECUTIVE:
Name:
------------------------------
Date:
------------------------------
7
<PAGE> 32
[To be used if definitions in Plan is to be replaced.]
Exhibit A
"Cause" shall mean: [SELECT ALL THAT APPLY]
[ ] the Executive shall have committed an intentional act of fraud,
embezzlement or a material theft in connection with the Executive's duties or in
the course of the Executive's employment with the Company.
[ ] the Executive shall have been convicted of felony and the
continuation of the employment of the Executive with the Company following such
conviction will have a materially adverse affect upon the reputation and/or
prospects of the Company.
[ ] the Executive shall have breached any material duty of loyalty to the
Company; provided the actions of the Executive were not approved by the Board
following full disclosure of the Executive's interest.
[ ] the Executive shall have materially breached his obligation to devote
substantially all of his time during normal business hours (subject to
vacations, sick leaves and other absences in accordance with the policies of the
Company as of in effect of the date hereof) to the business and affairs of the
Company and to attempt to maximize shareholder value.
[ ] the Executive shall have committed intentional wrongful damage to
property of the Company (which is materially harmful to the Company).
[ ] the Executive shall have committed intentional wrongful disclosure of
secret processes or confidential information of the Company (which is materially
harmful to the Company).
[ ] the Executive shall have failed to comply with specific directions of
the Board of Directors or the Chief Executive Officer of the Company.
[ ] Other ______________________________
[ ] For purpose of this definition of Cause, no act, or failure to
act, on the part of the Executive shall be deemed "intentional" if it was due
primarily to an error in judgment or negligence, but shall be deemed
"intentional" only if done, or omitted to be done, by the Executive not in good
faith and without reasonable
8
<PAGE> 33
belief that the Executive's action or omission was in the best interest of the
Company.
To the extent that any action of the Executive relied upon by the
Company to terminate Executive's employment for Cause is susceptible of being
cured, the Company must provide the Executive with written notice of its intent
to terminate (such to identify with specificity the action upon which the
Company intends to rely to terminate) and the right of the Company to terminate
any such employment based upon such action shall be suspended for a period of
thirty (30) days to allow the Executive to cure such action.
9
<PAGE> 34
[To be used if definitions in Plan is to be replaced.]
Exhibit B
"Change in Control" shall mean [SELECT ALL THAT APPLY]:
[ ] The Company is merged, consolidated, converted or reorganized into
or with another corporation or other legal entity, and as a result
of such merger, consolidation, conversion or reorganization less
than a majority of the combined voting power of the then
outstanding securities of the Company or such corporation or other
legal entity are held, immediately after such transaction, in the
aggregate, by the holders of Voting Stock (as hereinafter defined)
of the Company immediately prior to such transaction and/or such
voting power is not held by substantially all of such holders in
substantially the same proportions relative to each other;
[ ] The Company sells (directly or indirectly) all or substantially all
of its assets (including, without limitation), by means of the sale
of the capital stock or assets of one or more direct or indirect
subsidiaries of the Company) to any other corporation or other
legal entity (other than a directly or indirectly majority-owned
subsidiary of the Company), of which less than a majority of the
combined voting power of the then outstanding voting securities
(entitled to vote generally in the election of directors or persons
performing similar functions on behalf of such other corporation or
legal entity) of such other corporation or legal entity is held in
the aggregate by the holders of Voting Stock of the Company
immediately prior to such sale and/or such voting power is not held
by substantially all of such holders in substantially the same
proportions relative to each other;
[ ] Any person (as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) becomes (subsequent to the date hereof) the
beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) of securities representing fifty percent (50%) or
more of the combined voting power of the outstanding securities
entitled to vote generally in the election of directors of the
Company ("Voting Stock"); provided, however, for purposes of this
section, the term "person" will not be deemed to
10
<PAGE> 35
include any "person" who, as of the date hereof, owns forty-five
percent (45%) or more of the Voting Stock of the Company; or
[ ] The stockholders of the Company approve a plan contemplating the
liquidation or dissolution of the Company.
11
<PAGE> 36
Exhibit C
"Good Reason" shall mean [SELECT ALL THAT APPLY]:
[ ] Failure to elect or reelect the Executive to the office(s) of the
Company which the Executive holds as of the date hereof.
[ ] A significant adverse change imposed by the Board in the nature or
scope of the authorities, powers, functions, responsibilities or
duties attached to the position(s) with the Company which the
Executive held immediately prior to the date hereof.
[ ] The Company shall require that the principal place of work of the
Executive be changed to any location which is in excess of 25 miles
from the location thereof immediately prior to the date hereof
[ ] The Company shall require the Executive to travel away from the
Executive's office in the course of discharging the Executive's
responsibilities or duties hereunder significantly more (in terms
of either consecutive days or aggregate days in any calendar year)
than was required of the Executive prior to the date hereof
without, in either case, the Executive's prior consent.
[ ] Any material breach of this Agreement by the Company or any
successor thereto; including, without limitation, any failure to
pay to the Executive the compensation payable to the Executive by
the Company pursuant to this Agreement.
[ ] Other _____________________________
12
<PAGE> 1
EXHIBIT 11.1
WEBLINK WIRELESS, INC.
COMPUTATION OF PER SHARE EARNINGS (LOSS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1999
---------------------------------------
NUMBER PERCENT EQUIVALENT
OF SHARES OUTSTANDING SHARES
----------- ----------- -----------
<S> <C> <C> <C>
COMMON STOCK
From Founders' Stock 2,300,000 100.00% 2,300,000
Stock Options Exercised 1,316,931 92.82% 1,222,319
Preferred Stock Converted to Common Stock 15,310,943 100.00% 15,310,943
1994 Common Stock Offerings 11,242,857 100.00% 11,242,857
1995 Common Stock Offerings 4,323,874 100.00% 4,323,874
1996 Common Stock Offering 6,000,000 100.00% 6,000,000
1999 Treasury Stock Transaction (6,588) 43.47% (2,864)
Employee Stock Purchase Plan Shares Issued 145,737 87.55% 127,598
Warrants Exercised 130,513 100.00% 130,513
----------- -----------
40,764,267 40,655,240
WEIGHTED AVERAGE SHARES OUTSTANDING 40,655,240
NET LOSS (25,072,717)
NET LOSS PER SHARE $ (0.62)
===========
</TABLE>
<PAGE> 1
EXHIBIT 11.2
WEBLINK WIRELESS, INC.
COMPUTATION OF PER SHARE EARNINGS (LOSS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1998
-------------------------------------------
NUMBER PERCENT EQUIVALENT
OF SHARES OUTSTANDING SHARES
------------ ----------- ------------
<S> <C> <C> <C>
COMMON STOCK
From Founders' Stock 2,300,000 100.00% 2,300,000
Stock Options Exercised 1,060,225 99.77% 1,057,752
Preferred Stock Converted to Common Stock 15,310,943 100.00% 15,310,943
1994 Common Stock Offerings 11,242,857 100.00% 11,242,857
1995 Common Stock Offerings 4,323,874 100.00% 4,323,874
1996 Common Stock Offering 6,000,000 100.00% 6,000,000
Employee Stock Purchase Plan Shares Issued 110,943 81.90% 90,862
Warrants Exercised 49,450 100.00% 49,450
------------ ------------
40,398,292 40,375,738
WEIGHTED AVERAGE SHARES OUTSTANDING 40,375,738
NET LOSS $(14,831,244)
NET LOSS PER SHARE $ (0.37)
============
</TABLE>
<PAGE> 1
EXHIBIT 11.3
WEBLINK WIRELESS, INC.
COMPUTATION OF PER SHARE EARNINGS (LOSS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31, 1999
-------------------------------------------
NUMBER PERCENT EQUIVALENT
OF SHARES OUTSTANDING SHARES
------------ ----------- ------------
<S> <C> <C> <C>
COMMON STOCK
From Founders' Stock 2,300,000 100.00% 2,300,000
Stock Options Exercised 1,316,931 85.05% 1,120,066
Preferred Stock Converted to Common Stock 15,310,943 100.00% 15,310,943
1994 Common Stock Offerings 11,242,857 100.00% 11,242,857
1995 Common Stock Offerings 4,323,874 100.00% 4,323,874
1996 Common Stock Offering 6,000,000 100.00% 6,000,000
1999 Treasury Stock Transaction (6,588) 10.96% (722)
Employee Stock Purchase Plan Shares Issued 145,737 81.88% 119,333
Warrants Exercised 130,513 63.75% 83,208
------------ ------------
40,764,267 40,499,559
WEIGHTED AVERAGE SHARES OUTSTANDING 40,499,559
NET LOSS $(99,866,909)
NET LOSS PER SHARE $ (2.47)
============
</TABLE>
<PAGE> 1
EXHIBIT 11.4
WEBLINK WIRELESS, INC.
COMPUTATION OF PER SHARE EARNINGS (LOSS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
------------------------------------------
NUMBER PERCENT EQUIVALENT
OF SHARES OUTSTANDING SHARES
------------ ----------- ------------
<S> <C> <C> <C>
COMMON STOCK
From Founders' Stock 2,300,000 100.00% 2,300,000
Stock Options Exercised 1,060,225 88.35% 936,674
Preferred Stock Converted to Common Stock 15,310,943 100.00% 15,310,943
1994 Common Stock Offerings 11,242,857 100.00% 11,242,857
1995 Common Stock Offerings 4,323,874 100.00% 4,323,874
1996 Common Stock Offering 6,000,000 100.00% 6,000,000
Employee Stock Purchase Plan Shares Issued 110,943 75.19% 83,423
1997 Warrants Exercised 49,450 98.26% 48,590
------------ ------------
40,398,292 40,246,361
WEIGHTED AVERAGE SHARES OUTSTANDING 40,246,361
LOSS BEFORE EXTRAORDINARY ITEMS $(41,710,000)
EXTRAORDINARY ITEMS $(17,606,000)
------------
NET LOSS $(59,316,000)
LOSS BEFORE EXTRAORDINARY ITEMS (1.03)
EXTRAORDINARY ITEMS (0.44)
------------
NET LOSS PER SHARE $ (1.47)
============
</TABLE>
<PAGE> 1
EXHIBIT 12.1
WEBLINK WIRELESS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1996 1997 1998 (1) 1999 1999
------------ ------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Net loss ...................... $(45,813) $(53,113) $(48,598) $(43,887) $(59,316) $(25,073) $(99,867)
Add: Amount of
previously capitalized
interest amortized ......... -- -- -- -- 252 572 2,288
Add: Fixed charges ............ 12,933 30,720 35,041 38,499 43,798 17,133 65,310
-------- -------- -------- -------- -------- -------- --------
Adjusted earnings ............. (32,880) (22,393) (13,557) (5,388) (15,266) (7,368) (32,269)
Fixed charges:
Interest in
indebtedness ............... 11,209 28,383 32,368 36,672 52,645 16,607 63,452
Amortization of debt
issuance costs ............. 800 1,052 2,143 844 1,172 331 1,291
Interest portion
of rental and
lease expense .............. 924 1,285 530 983 1,428 195 567
-------- -------- -------- -------- -------- -------- --------
Fixed charges ................. 12,933 30,720 35,041 38,499 55,245 17,133 65,310
Deficiency of
earnings available to
cover fixed charges ........... $(45,813) $(53,113) $(48,598) $(43,887) $(70,511) $(24,501) $(97,579)
======== ======== ======== ======== ======== ======== ========
Earnings to fixed charges ratio -- -- -- -- -- -- --
</TABLE>
(1) The fixed charge adjustment to earnings excludes $11.4 million of
capitalized interest for the year ended December 31, 1998.
<PAGE> 1
EXHIBIT 21.1
PAGEMART WIRELESS, INC.
<TABLE>
<CAPTION>
Subsidiaries: Jurisdiction of Incorporation:
<S> <C>
PageMart PCS, Inc.
PageMart II, Inc. Delaware
PageMart Operations, Inc. Delaware
WebLink International, Inc. Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-8 File Nos. 333-30114, 33-98116, 333-09083,
and 333-09087, on Form S-3 File Nos. 33-91142 and 333-48971.
/s/ ARTHUR ANDERSEN LLP
Dallas, Texas,
February 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S DECEMBER 31, 1999 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 10,440
<SECURITIES> 0
<RECEIVABLES> 48,190
<ALLOWANCES> 8,333
<INVENTORY> 5,941
<CURRENT-ASSETS> 63,895
<PP&E> 434,530
<DEPRECIATION> 188,934
<TOTAL-ASSETS> 451,930
<CURRENT-LIABILITIES> 101,526
<BONDS> 538,185
0
0
<COMMON> 4
<OTHER-SE> (188,444)
<TOTAL-LIABILITY-AND-EQUITY> 451,930
<SALES> 64,563
<TOTAL-REVENUES> 325,165
<CGS> 72,035
<TOTAL-COSTS> 148,650
<OTHER-EXPENSES> 78,147
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65,310
<INCOME-PRETAX> (99,867)
<INCOME-TAX> 0
<INCOME-CONTINUING> (99,867)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (99,867)
<EPS-BASIC> (2.47)
<EPS-DILUTED> (2.47)
</TABLE>
