-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OuWJdxjz8yuvBk1PU/KpwxVP2U5YW0EwyrdDWvb6GUjvfwuioPK3waeihkmzNxOC Yte7QmYXAY5yzrv3eN3GEA== 0000912057-97-017528.txt : 19970515 0000912057-97-017528.hdr.sgml : 19970515 ACCESSION NUMBER: 0000912057-97-017528 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HIGHWAYMASTER COMMUNICATIONS INC CENTRAL INDEX KEY: 0000944400 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 510352879 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26140 FILM NUMBER: 97604207 BUSINESS ADDRESS: STREET 1: 16479 DALLAS PARKWAY STREET 2: STE 710 CITY: DALLAS STATE: TX ZIP: 75248 BUSINESS PHONE: 2147322500 MAIL ADDRESS: STREET 1: 16479 DALLAS PARKWAY STREET 2: STE 710 CITY: DALLAS STATE: TX ZIP: 75248 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 -------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period from _______________ to _______________ Commission file number 0-26140 HIGHWAYMASTER COMMUNICATIONS, INC. ----------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 51-0352879 ------------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 16479 Dallas Parkway, Suite 710, Dallas, Texas 75248 ---------------------------------------------- --------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (214) 732-2500 -------------- Not Applicable - ------------------------------------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report.) 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 such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Number of Shares Outstanding as of Title of each class May 9, 1997 - ----------------------------- ---------------------------------- Common Stock, $.01 par value 24,853,808 HIGHWAYMASTER COMMUNICATIONS, INC. AND SUBSIDIARY Form 10-Q INDEX PAGE NUMBER PART I. FINANCIAL INFORMATION Item 1 Consolidated Financial Statements: Consolidated Balance Sheets at March 31, 1997 and December 31, 1996 1 Consolidated Statements of Operations for the three months ended March 31, 1997 and 1996 2 Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1996 3 Consolidated Statement of Changes in Stockholders' Equity for the three months ended March 31, 1997 4 Notes to Consolidated Financial Statements 5-6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 7-8 PART II. OTHER INFORMATION Item 1 Legal Proceedings 9 Item 2 Changes in Securities 9 Item 3 Defaults Upon Senior Securities 9 Item 4 Submission of Matters to a Vote of Security Holders 9 Item 5 Other Information 9 Item 6 Exhibits and Reports on Form 8-K 9 Signatures 10 PART I - FINANCIAL INFORMATION HIGHWAYMASTER COMMUNICATIONS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands) ASSETS March 31, December 31, 1997 1996 --------- ------------ Current assets: Cash and cash equivalents $ 14,065 $ 19,725 Accounts receivable, net 9,681 8,537 Other short-term receivables 580 919 Inventory 2,785 3,458 Prepaid expenses 212 231 --------- --------- Total current assets 27,323 32,870 Property, plant and equipment, net 7,875 7,756 Long-term receivables 387 1,045 Deposits 308 309 Other assets 1,129 949 --------- --------- Total assets $ 37,022 $ 42,929 --------- --------- --------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,604 $ 3,450 Telecommunications costs payable 2,883 2,805 Accrued warranty 265 273 Accrued loss on short-term contracts 367 570 Other current liabilities 1,492 1,167 --------- --------- Total current liabilities 9,611 8,265 --------- --------- Stockholders' equity: Preferred stock --- --- Common stock 252 251 Additional paid-in capital 144,949 144,829 Accumulated deficit (117,243) (109,869) Treasury stock (547) (547) --------- --------- Total stockholders' equity 27,411 34,664 --------- --------- Total liabilities and stockholders' equity $ 37,022 $ 42,929 --------- --------- --------- --------- See accompanying notes to consolidated financial statements. 1 HIGHWAYMASTER COMMUNICATIONS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share) Three months ended March 31, ------------------- 1997 1996 ------- ------- Revenues: Product $ 5,832 $ 2,771 Service 5,058 3,520 ------- ------- Total revenues 10,890 6,291 ------- ------- Cost of revenues: Product 4,998 2,730 Service 3,607 2,558 ------- ------- Total cost of revenues 8,605 5,288 ------- ------- Gross profit 2,285 1,003 General and administrative expenses 4,098 2,129 Sales and marketing expenses 2,092 2,284 Engineering expenses 1,117 841 Customer service expenses 2,515 1,885 ------- ------- Operating loss (7,537) (6,136) Interest income 163 306 Interest expense to related parties --- (538) ------- ------- Loss before income taxes (7,374) (6,368) Income tax provision --- --- ------- ------- Net loss $(7,374) $(6,368) ------- ------- ------- ------- Per share data: Net loss per share $ (0.30) $( 0.32) ------- ------- ------- ------- Weighted average number of shares outstanding 24,844 22,022 ------- ------- ------- ------- See accompanying notes to consolidated financial statements. 2 HIGHWAYMASTER COMMUNICATIONS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)
Three months ended March 31, --------------------- 1997 1996 ------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(7,374) $ (6,368) Adjustments to reconcile net loss to cash used in operating activities: Depreciation and amortization 527 318 Amortization of discount on notes payable --- 284 (Increase) decrease in accounts receivable (1,144) (362) (Increase) decrease in other receivables 997 (112) (Increase) decrease in inventory 673 (5,438) (Increase) decrease in prepaid expenses and deposits 20 (53) Increase (decrease) in accounts payable 1,154 1,828 Increase (decrease) in accrued expenses and other current liabilities 192 (1,134) Other (104) 136 ------- -------- Net cash used in operating activities (5,059) (10,901) ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (543) (1,648) Additions to capitalized software (179) (27) ------- -------- Net cash used in investing actitivies (722) (1,675) ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options 121 --- ------- -------- Net cash provided by financing activities 121 --- ------- -------- Net decrease in cash (5,660) (12,576) Cash and cash equivalents, beginning of period 19,725 23,969 ------- -------- Cash and cash equivalents, end of period $14,065 $ 11,393 ------- -------- ------- -------- Supplemental cash flow information: Interest paid $ --- $ 255 ------- -------- ------- --------
See accompanying notes to consolidated financial statements. 3 HIGHWAYMASTER COMMUNICATIONS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY Three months ended March 31, 1997 (UNAUDITED) (in thousands, except share information)
Preferred Stock Common Stock Additional Treasury Stock ----------------- ----------------- Paid-in ------------------ Accumulated Shares Amount Shares Amount Capital Shares Amount Deficit Total ------ ------ ------ ------ ---------- ------ ------ ------------ ------ Stockholders' equity at December 31, 1996 1,000 $ --- 25,150,527 $ 251 $144,829 311,997 $ (547) $(109,869) $34,664 Exercise of stock options 15,278 1 120 121 Net loss (7,374) (7,374) ----- ------ ---------- ------ -------- ------- ------- ---------- ------- Stockholders' equity at March 31, 1997 1,000 $ --- 25,165,805 $ 252 $144,949 311,997 $ (547) $(117,243) $27,411 ----- ------ ---------- ------ -------- ------- ------- ---------- ------- ----- ------ ---------- ------ -------- ------- ------- ---------- -------
See accompanying notes to consolidated financial statements. 4 HIGHWAYMASTER COMMUNICATIONS, INC. AND SUBSIDIARY Notes To Consolidated Financial Statements (Unaudited) 1. BUSINESS OVERVIEW The Company operates a wireless enhanced-services network with both voice and data capabilities in 99% of the available cellular coverage areas in the United States and 100% of the A-Side cellular coverage areas in Canada. The Company's private network covers approximately 95% of the United States interstate highway system. Through this private network, the Company provides integrated mobile voice, data, tracking, and fleet management information services to trucking companies and private truck operators in the long-haul segment of the transportation industry. The HighwayMaster system includes a Mobile Communication Unit (the "Mobile Communication Unit" or "Unit") installed in each truck and a proprietary dispatch software package developed by the Company for use by trucking companies. The Mobile Communication Unit transmits and receives voice and data communication to and from long-haul trucks through the Company's private network. In addition, the Unit contains a sophisticated navigational tracking device that enables dispatchers to obtain accurate position reports for trucks located anywhere in the United States and Canada. The Company's dispatch software package enables a trucking company to optimize the use of its fleet by processing data transmitted by Mobile Communication Units and performing a variety of fleet management functions. In the fourth quarter of 1996, the Company entered into a strategic business alliance with Prince ("Prince") to develop and provide AutoLink service for motorists in the United States and Canada. The basic AutoLink Product will provide an intelligent communications link from the car to an information services complex in order to provide emergency assistance, roadside assistance and information services to the occupants of the car, including remote tracking of stolen or missing vehicles. HighwayMaster will be responsible for managing the network, providing software for the intelligent mobile unit in the car, and assisting in managing various information services providers. The AutoLink business alliance is currently in its preliminary stages and no revenues will be realized by the Company from AutoLink in 1997. The Company's revenues are derived from sales and installation of Mobile Communication Units and charges for its services. 2. BASIS OF PRESENTATION The unaudited consolidated financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all footnote disclosures required by generally accepted accounting principles. These consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 1996. The accompanying consolidated financial statements reflect all adjustments (all of which are of a normal recurring nature) which are, in the opinion of management, necessary for a fair presentation of the Company's financial position, results of operations and cash flows for the interim periods. The results for any interim period are not necessarily indicative of the results for the entire year. 5 3. LEASING OPERATIONS The Company leases its products to certain customers with terms ranging from three to five years. The related contracts are accounted for as sales-type leases. At December 31, 1996, the total amounts receivable under sales-type leases was $1,468,000. In March 1997, a customer who represented $1,239,000 of this amount receivable notified the Company that it intended to terminate its long-term lease commitment. Although the lease agreement contains termination penalties, the amount due from this customer is in dispute. Accordingly, the Company recorded a $1,000,000 charge to reduce the carrying value of the receivable at March 31, 1997. 4. INVENTORIES March 31, December 31, 1997 1996 ----------- ----------- Complete systems $ 900,000 $ 1,265,000 Component parts 1,885,000 2,193,000 ----------- ----------- $ 2,785,000 $ 3,458,000 ----------- ----------- ----------- ----------- 5. EARNINGS PER SHARE Net loss per share for the three months ended March 31, 1997 was computed by dividing the net loss by the weighted average number of shares outstanding during the period. Net loss per share for the three months ended March 31, 1996 was computed by dividing the net loss, increased by the accretion of discount on Series B Preferred Stock ($610,000), by the weighted average number of shares outstanding during the period. For the three months ended March 31, 1997, stock options that are common stock equivalents have been excluded from the computation of earnings per share since their effect would be anti-dilutive. For the three months ended March 31, 1996, there were no common stock equivalents. In February 1997, the FASB issued FAS No. 128, "Earnings per Share" ("FAS 128"), which is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. Effective December 31, 1997, the Company will adopt FAS 128, which establishes standards for computing and presenting earnings per share (EPS). Adoption of FAS 128 would not have changed the earnings per share amounts reported in the accompanying consolidated financial statements. 6. LITIGATION As previously reported, the Company is party to a lawsuit filed in the U.S. District Court, Northern District of Texas, Dallas Division against AT&T Corp. ("AT&T") and Lucent Technologies, Inc. ("Lucent"). Since the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 1996, there have been no material changes in this matter except that the hearing on AT&T's Partial Motion to Dismiss and Lucent's Motion to Dismiss is currently scheduled for July 1997, rather than May 1997 as previously reported. 6 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996 Revenues for the three months ended March 31, 1997 were $10.9 million compared to $6.3 million for the three months ended March 31, 1996. Product revenues for the three months ended March 31, 1997 were $5.8 million compared to $2.8 million for the three months ended March 31, 1996. Service revenues for the three months ended March 31, 1997 were $5.1 million compared to $3.5 million for the three months ended March 31, 1996. The increase in product revenues from the 1996 period to the 1997 period is primarily attributable to a 109% increase in Units sold. Units sold in the 1996 period were abnormally low due to, among other things, inefficiencies in connection with a restructuring of the Company's sales force, and adverse economic conditions affecting the trucking industry. The increase in service revenues from the 1996 period to the 1997 period is primarily attributable to the increase in the number of Mobile Communication Units in service. Cost of revenues for the three months ended March 31, 1997 was $8.6 million compared to $5.3 million for the three months ended March 31, 1996. This increase is consistent with the number of Units sold and in service. Gross profit margin was 21.0% for the three months ended March 31, 1997 compared to 15.9% for the three months ended March 31, 1996. Product gross profit margin was 14.3% for the three months ended March 31, 1997 compared to 1.5% for the three months ended March 31, 1996. The improvement in product gross profit margin from the 1996 period to the 1997 period is primarily due to a lower average cost per Unit sold. The lower average cost per Unit is primarily attributable to manufacturing and procurement economies. Service gross profit margin was 28.7% for the three months ended March 31, 1997 compared to 27.3% for the three months ended March 31, 1996. At the present time the Company's service revenues are generated from Units served by the AT&T Complex and served by the Company's Network Services Center ("NSC"). In the case of customers served through the AT&T Complex, service charges are collected by AT&T. The Company receives payment from AT&T for the portion of these service charges recognized by the Company as revenue and the remainder is retained by AT&T as compensation for its cost of providing services. In the case of customers served by the NSC, the entire amount of the service charges to customers is recognized by the Company as revenue and all operating expenses are borne by the Company. The operating expenses associated with the NSC are included in the General and Administrative (primarily depreciation, allowance for bad debts and billing expenses) and Customer Service (other third party and internal operating expenses) captions in the accompanying Consolidated Statement of Operations for the three months ended March 31, 1997. Because of the difference in the contractual relationships described above, to the extent a greater proportion of customers are served by the NSC, service margins are expected to improve. The operating expenses associated with the NSC are not expected increase proportionately with the number of customers added. General and administrative expenses for the three months ended March 31, 1997 were $4.1 million compared to $2.1 million for the three months ended March 31, 1996. The most significant increases in general and administrative expenses from the 1996 period to the 1997 period were bad debt expense, NSC depreciation expense, and the costs associated with billing customers served by the NSC. Bad debt expense increased (i) because of the significant increase in revenues from the 1996 period to the 1997 period and (ii) because of a $1 million charge recorded to provide for loss on the sales-type lease receivable due from a customer as a result of the customer's early termination of the lease. See Note 3 of the footnotes to the accompanying consolidated financial statements. Sales and marketing expenses for the three months ended March 31, 1997 were $2.1 million compared to $2.3 million for the three months ended March 31, 1996. The decrease from the 1996 period to the 1997 period is primarily related to reduction in the number of employees. The 1996 period was 7 characterized by expansion of the sales force. Sales and marketing expenses for the 1997 period reflects the results of a realignment of the sales force to coincide with the Company's target markets. Engineering expenses for the three months ended March 31, 1997 were $1.1 million compared to $0.8 million for the three months ended March 31, 1996. This increase is primarily attributable to increases in payroll related costs as a result of headcount additions. Customer service expenses for the three months ended March 31, 1997 were $2.5 million compared to $1.9 million for the three months ended March 31, 1996. This increase is primarily attributable to (i) NSC operating expenses and (ii) costs incurred as a result of the increased number of Units in service. The reduction in interest expense to related parties from the 1996 period to the 1997 period is due to the retirement of all outstanding indebtedness to related parties. LIQUIDITY AND CAPITAL RESOURCES Net cash used in operating activities and for capital expenditures for the three months ended March 31, 1997 was $5.8 million. At March 31, 1997 the Company had cash on hand of $14.1 million and working capital of $17.7 million. Based on the Company's projected operating results, the Company believes that it will likely need to secure additional equity or debt financing during 1997 in order to fund its currently anticipated operating needs and capital expenditure requirements. The amount and timing of the additional financing that will be required depends upon, among other things, the Company's 1997 cash flow from operations, which may vary depending on a number of factors, including the rate of installation of Mobile Communication Units, the level of competition and general economic conditions and other factors beyond the Company's control. The Company is actively seeking additional financing, although, at the present time, the Company does not have any commitments in place. While the Company believes there are alternative sources of financing available, there can be no assurance that the Company will be able to consummate a financing arrangement on terms that would be satisfactory. INFLATION The Company believes that to date inflation has not had a material effect on its results of operations. Although inflation may in the future affect the cost of the Mobile Communication Units sold by the Company, the Company expects that economies of scale and engineering improvements are likely to offset any foreseeable cost increases. FORWARD LOOKING STATEMENTS This report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this report, including without limitation, certain statements in this Item 2 under the captions "---Results of Operations" and "---Liquidity and Capital Resources," may constitute forward looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Important factors that could cause actual results to differ materially from the Company's expectations ("cautionary statements") are disclosed in this report and the Company's Annual Report on Form 10-K for the year ended December 31, 1996 (under the caption "Business --- Risk Factors" and elsewhere). All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. 8 HIGHWAYMASTER COMMUNICATIONS, INC. AND SUBSIDIARY PART II - OTHER INFORMATION Item 1. Legal Proceedings -- AT&T Litigation. As previously reported, the Company is party to a lawsuit filed in the U.S. District Court, Northern District of Texas, Dallas Division against AT&T Corp. ("AT&T") and Lucent Technologies, Inc. ("Lucent"). Since the filing of the Company's Annual Report on Form 10-K for the fiscal year ended 1996, there have been no material changes in this matter except that the hearing on AT&T's Partial Motion to Dismiss and Lucent's Motion to Dismiss is currently scheduled for July 1997, rather than May 1997 as previously reported. Item 2. Changes in Securities -- None. Item 3. Defaults Upon Senior Securities -- None. Item 4. Submission of Matters to a Vote of Security Holders -- None. Item 5. Other Information -- None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits -- See the Index to Exhibits. (b) Reports on Form 8-K -- None 9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HIGHWAYMASTER COMMUNICATIONS, INC. Date: May 12, 1997 By: /s/ William C. Saunders -------------------------------------------- William C. Saunders President and Chief Executive Officer By: /s/ Stephen P. Tacke -------------------------------------------- Stephen P. Tacke Vice President, Controller and Acting Chief Financial Officer (Principal Financial and Accounting Officer) 10 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 10-Q QUARTERLY REPORT UNDER THE SECURITIES EXCHANGE ACT OF 1934 ---------------------- HIGHWAYMASTER COMMUNICATIONS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) EXHIBITS - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- INDEX TO EXHIBITS Exhibit Number Title - ------- ----- 3.1 Certificate of Incorporation of the Company, as amended. (9) 3.2 Form of Amended By-Laws of the Company. (7) 4.1 Specimen of certificate representing Common Stock, $.01 par value, of the Company. (1) 4.2 Warrant Certificate, dated September 27, 1996, issued to SBW. (7) 4.3 Recapitalization Agreement, dated September 27, 1996, by and among the Company, the Erin Mills Stockholders, the Carlyle Stockholders and the other persons named therein. (7) 4.4 Amended and Restated Stockholders' Agreement, dated September 27, 1996, by and among the Company, SBW, the Erin Mills Stockholders, the Carlyle Stockholders, the By-Word Stockholders and the other persons named therein. (7) 10.1 License Agreement, dated April 23, 1992, by and between Voice Control Systems and the Company (as successor to By-Word Technologies, Inc.) (1) 10.2 Agency Agreement, dated February 1, 1993, between the Company and Saunders, Lubinski & White, Inc. (1) 10.3 Employment Agreement, dated February 4, 1994, by and between HighwayMaster Corporation and William C. Kennedy, Jr., as amended. (1) (5) 10.4 Employment Agreement, dated February 4, 1994, by and between HighwayMaster Corporation and William C. Saunders, as amended. (1) (5) 10.5 Employment Agreement, dated November 23, 1994, by and between HighwayMaster Corporation and Gordon D. Quick. (1) (5) 10.6 Amended and Restated 1994 Stock Option Plan of the Company, dated February 4, 1994. (1) (5) (6) 10.7 Purchase Agreement, dated September 27, 1996, between the Company and SBW. (7) Exhibit Number Title - ------- ----- 10.8 Mobile Communications (Voice and Data) Services Agreement, dated as of July 15, 1993, between the Company and EDS Personal Communications Corporation, as amended. (1) (2) 10.9 Services Agreement, dated March 14, 1995, between the Company and GTE Telecommunications Services Incorporated. (1) (2) 10.10 Services Agreement, dated March 20, 1996, between the Company and GTE-Mobile Communications Service Corporation. (3) (4) 10.11 Agreement, dated June 8, 1994, between the Company and Truckstops of America, Inc. (1) 10.12 Amendment dated November 16, 1995 to that certain Mobile Communications (Voice and Data) Services Agreement, dated as of July 15, 1993, between the Company and EDS Personal Communications Corporation. (3) (4) 10.13 Letter Agreement, dated April 5, 1995, between the Company and IEX Corporation. (1) 10.14 Product Development Agreement dated December 21, 1995, between the Company and IEX Corporation. (3) (4) 10.15 Technical Services Agreement, dated September 27, 1996, between the HM Corporation and SBW. (7) 10.16 Letter Agreement, dated February 19, 1996, between the Company and IEX Corporation. (3) 10.17 Form of Adoption Agreement, Regional Prototype Cash or Deferred Profit-Sharing Plan and Trust Sponsored by McKay Hochman Co., Inc., relating to the HighwayMaster Corporation 401(k) Plan. (1) 10.18 Agreement, dated December 3, 1996 between the Company and Pickett Racing (8) 10.19 Software Transfer Agreement, dated April 25, 1997 between the Company and Burlington Motor Carriers, Inc. (9)(10) 11 Statement re Computation of Per Share Earnings. (9) 27 Financial Data Schedules. (9) -------------------------------------------------------- (1) Filed in connection with the Company's Registration Statement on Form S-1, as amended (No. 33-91486) effective June 22, 1995. (2) Certain confidential portions deleted pursuant to Order Granting Application for Confidential Treatment issued in connection with Registration Statement on Form S-1 (No. 33-91486) effective June 22, 1995. (3) Filed in connection with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. (4) Certain confidential portions deleted pursuant to Application for Confidential Treatment filed in connection with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. (5) Indicates management or compensatory plan or arrangement required to be identified pursuant to Item 14(a)(4). (6) Filed in connection with the Company's Form 10-Q Quarterly Report for the quarterly period ended June 30, 1996. (7) Filed in connection with the Company's Current Report on Form 8-K filed on October 7, 1996. (8) Filed in connection with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. (9) Filed herewith. (10) Certain confidential portions deleted pursuant to Application for Confidential Treatment filed in connection with this Quarterly Report on Form 10-Q. EX-3.1 2 EXHIBIT 3.1 Exhibit 3.1 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF HIGHWAYMASTER COMMUNICATIONS, INC. HighwayMaster Communications, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY FIRST: That at a meeting of the Board of Directors of HighwayMaster Communications, Inc. (the "corporation"), resolutions were duly adopted setting forth proposed amendments of the Certificate of Incorporation of the corporation, declaring such amendments to be advisable and directing that such amendments be presented to the stockholders of the corporation for consideration thereof. The resolutions setting forth the proposed amendments are as follows: RESOLVED, that the second sentence of Article XII of the corporation's Certificate of Incorporation be deleted and that Article IV of the corporation's Certificate of Incorporation be amended in its entirety to read as follows: The aggregate number of shares of capital stock which the corporation shall have authority to issue is 50,021,000, consisting of 50,000,000 shares of common stock, par value $0.01 per share (the "Common Stock"), 1,000 shares of Class B Common Stock, par value $0.01 per share (the "Class B Common Stock"), and 20,000 shares of preferred stock, par value $0.01 per share (the "Preferred Stock"). The Common Stock and the Class B Common Stock are hereinafter collectively referred to as the "Company Common Stock". A. COMPANY COMMON STOCK Except as otherwise expressly provided herein, all shares of Company Common Stock shall be identical and shall entitle the holders thereof to the same rights and privileges. 1. DIVIDENDS (a) Subject to the rights granted to the holders of any Preferred Stock that may be outstanding, the holders of Common Stock shall be entitled to receive dividends and distributions when and as declared by the Board of Directors of the corporation out of funds legally available therefor. (b) Subject to the rights of the holders of any Preferred Stock that may be outstanding, the holders of shares of Class B Common Stock shall be entitled to receive, when and as declared by the Board of Directors, but only out of funds legally available therefor, dividends and distributions, on each date that dividends or other distributions (other than dividends or distributions payable in Common Stock of the corporation) are payable on or in respect of Common Stock, in an amount per share of Class B Common Stock equal to the aggregate amount of dividends or other distributions (other than dividends or distributions payable in Common Stock of the corporation) that would be payable on such date to a holder of the Reference Package (as defined below). Each such dividend and distribution shall be paid to the holders of record of shares of Class B Common Stock on the date, not exceeding sixty days preceding such dividend or distribution payment date, fixed for that purpose by the Board of Directors in advance of payment of each particular dividend or distribution, which shall be the same record date as for the payment of dividends or distributions on the Common Stock. (c) The term "REFERENCE PACKAGE" shall initially mean 1,600 shares of Common Stock of the corporation. In the event the corporation shall at any time after the close of business on September 27, 1996 (A) declare or pay a dividend on or distribution in respect of any Common Stock payable in Common Stock, (B) subdivide any Common Stock, (C) combine any Common Stock into a smaller number of shares or (D) change or reclassify the Common Stock (whether pursuant to a merger or consolidation or otherwise), then and in each such case the Reference Package after such event shall be the Common Stock that a holder of the Reference Package immediately prior to such event would hold thereafter as a result thereof. The Board of Directors may make such adjustments in the Reference Package, in addition to those required hereby, as shall be determined by the Board, as evidenced by a Board resolution, to be necessary and advisable in order to avoid taxation so far as practicable of any dividend of stock or stock rights or any event treated 2 as such for Federal income tax purposes to the recipients. Whenever any adjustment is required in the Reference Package, the corporation shall forthwith (i) file at the principal office of the corporation a statement describing in reasonable detail the adjustment and the method of calculation used, and (ii) cause a copy of such statement to be mailed by first class mail postage prepaid to the holders of record of the Class B Common Stock as of the effective date of such adjustment. The corporation may obtain the certificate of any independent firm of public accountants of national recognition selected by the Board of Directors which, if obtained, shall be presumptive evidence of the correctness of any computation made under Section 1(c). 2. VOTING RIGHTS (a) GENERAL. The holders of Common Stock and Class B Common Stock shall have identical voting rights and vote together as a single class on all actions to be taken by such holders, except as specified below. Each share of Common Stock shall, when entitled to vote, have one vote and each share of Class B Common Stock shall, when entitled to vote, have the number of votes that a holder of the Reference Package would have. (b) ELECTION OF DIRECTORS. There shall be two classes of directors, those elected by the Common Stock ("Common Directors") and those elected by the Class B Common Stock ("Class B Directors"). The rights, duties and authority of the Common Directors and the Class B Directors shall be identical in all respects. The number of Common Directors shall be the number to be determined by the Nominating Committee of the Corporation. The number of Class B Directors shall be one, except that if Southwestern Bell Wireless Holdings, Inc. ("SBW") and its Affiliates Beneficially Own (as hereinafter defined) 20% or more of the outstanding Common Stock, including Common Stock issuable upon conversion of Class B Common Stock or other convertible securities or upon the exercise of any outstanding options, warrants, rights or obligations, other than shares issuable upon the exercise of (i) the 5,000,000 warrants issued on September 27, 1996 (the "Warrants"), and (ii) options, warrants, rights or obligations issued by any entity other than the corporation ("Excluded Options"), there shall be two Class B Directors. For the purposes of the foregoing calculations, the number of outstanding shares of Common Stock shall include all shares issuable upon conversion of outstanding convertible securities or upon exercise of outstanding options, warrants, rights or obligations other than the Warrants, Excluded Options and employee stock options. As used herein, an "Affiliate" of any specified person or entity means any person or entity directly or indirectly controlling or controlled by or under direct or indirect common control with such person. As used herein, the term "Beneficially Own" (and correlative terms) shall mean, with respect to any shares of Common Stock or other securities, to be entitled, directly or 3 indirectly through one or more intermediaries, to all material incidents of ownership with respect to such securities, including, but not limited to, (i) the right to vote such securities (in the case of voting securities), (ii) subject to any transfer restrictions, the right to dispose of such securities and to receive any proceeds realized from the disposition thereof and (iii) the right to receive any dividends and other distributions with respect to such securities. The Common Directors shall be elected by the holders of Common Stock by a plurality vote and the Class B Directors shall be elected by the holders of the Class B Common Stock by a plurality vote, in either case at an annual stockholders meeting, except as hereinafter provided, and each director shall hold office until his successor has been duly elected and qualified or his earlier death, resignation or removal. Vacancies in any class of directors and newly created directorships resulting from any increase in the authorized number of directors of any class of Company Common Stock may be filled by the majority of directors of such class then in office, though less than a quorum, or by a sole remaining director so elected and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, or until their earlier death, resignation or removal. If there are no directors in office, then an election of directors may be held in the manner provided by law. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent (10%) of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancy or newly-created directorships, or to replace the directors chosen by the directors then in office. Unless otherwise restricted by law, any director or the entire Board may be removed, with or without cause, by a majority vote of the class of Company Common Stock entitled to elect such director or directors. No decrease in the size of the Board shall serve to shorten the term of an incumbent director. (c) VOTING RIGHTS OF CLASS B COMMON STOCK. The following actions shall require the approval of a majority of the outstanding Class B Common Stock, voting as a single class: (i) the approval of any annual budget or business plan for the corporation or any subsidiary of the corporation or the deviation by the corporation or any such subsidiary from any annual budget for the corporation or such subsidiary approved by the Board of Directors by more than five percent (5%); 4 (ii) issuance by the corporation of any equity securities, including securities convertible into equity securities (other than (A) the grant of employee stock options (subject to the proviso set forth in (D) below), (B) the issuance of equity securities pursuant to the Purchase Agreement, dated as of September 27, 1996 between the corporation and SBW (the "Purchase Agreement") or pursuant to any of the other Transaction Documents (as defined in the Purchase Agreement), (C) the issuance of equity securities upon the exercise or conversion of securities or employee stock options that are outstanding as of September 27, 1996 or (D) the issuance of equity securities upon the conversion of Class B Common Stock or upon the exercise of employee stock options granted hereafter, PROVIDED, HOWEVER, that there shall not be outstanding at any time employee stock options for more than 1.5 million shares of Common Stock plus the options granted to William C. Kennedy, Jr. and William C. Saunders that are outstanding at September 27, 1996) or incurrence of any indebtedness, provided that the corporation can incur up to $5 million in indebtedness in any year without the approval of the Class B Common Stock; (iii) the hiring or termination by the corporation of its chief executive officer, chief operating officer or chief financial officer; (iv) the corporation's entering into any line of business other than its Existing Line of Business (as hereinafter defined) or into any joint ventures, partnerships or similar arrangements; (v) the corporation's exiting its Existing Line of Business or disposing of assets (other than telecommunications equipment and other assets sold in the ordinary course of business) in any year with a value in excess of $500,000 or which are otherwise material to the corporation's operations; (vi) the adoption, implementation or acceptance (including the failure to opt out) of any Anti-Takeover Provision (as hereinafter defined) not in effect as of September 27, 1996 that would be applicable to, and, in the reasonable determination of SBW, adversely affect, the holders of the Class B Common Stock and their Affiliates; or (vii) the taking of any corporate action that would reduce the number of shares in the Reference Package below 1,600. 5 "Anti-Takeover Provision" means (i) any provision of the certificate of incorporation or bylaws of the corporation or any contract, agreement or plan to which the corporation is a party or by which it is bound or any statutory provision enacted after September 27, 1996 which is applicable to the corporation which the corporation may opt out of if the effect of such provision would be to materially delay, hinder or prevent a change in control of the corporation or (ii) a stockholder rights plan or "poison pill," including the provisions of any preferred stock or common stock purchase rights issued pursuant thereto; provided, however, that such term shall not include any customary change of control provisions contained in employment agreements between the corporation and any of its directors, officers or other employees or in any plans or agreements relating to stock options or other awards of equity securities made by the corporation to any such persons. "Existing Line of Business" means a non-facilities based, enhanced service provider that offers fleet management and/or status or information about vehicles and/or location capabilities through mobile communications service. (d) BYLAWS. Any alteration, amendment, repeal or replacement of Article XI of the corporation's bylaws, or of any other Article of the bylaws that would have a similar effect, by the stockholders of the corporation shall require the approval of a majority of the outstanding Class B Common Stock, voting as a separate class. 3. CONVERSION (a) OPTIONAL CONVERSION. At the option of the holder thereof, each share of Class B Common Stock may be converted into the Reference Package; provided, however, that no shares of Class B Common Stock may be converted pursuant to this Section 3(a) unless the holders of all outstanding shares of Class B Common Stock elect to convert such shares into the Reference Package as of the same date in accordance with the procedures set forth below. (b) OPTIONAL CONVERSION PROCEDURES. Any holder of shares of Class B Common Stock desiring to convert such shares into Common Stock shall surrender the certificate or certificates evidencing such shares of Class B Common Stock, at the principal office of the corporation or such other office as the corporation may designate for such purpose, which certificate or certificates, if the corporation shall so require, shall be duly endorsed to the corporation or in blank, or accompanied by proper instruments of transfer to the corporation or in blank, accompanied by irrevocable written notice to the corporation that the holder elects so to convert such shares of Class B Common Stock and specifying the name or names (with address or addresses) in which a certificate or certificates evidencing shares of Common Stock are to be issued. The corporation shall, as soon as 6 practicable after such surrender of certificates evidencing shares of Class B Common Stock accompanied by the written notice and compliance with any other conditions herein contained, deliver by first class mail postage prepaid to the holder that surrendered such shares of Class B Common Stock or to such holder's nominee certificates evidencing the number of full shares of Common Stock to which such holder shall be entitled as aforesaid, together with a cash adjustment in respect of any fraction of a share of Common Stock as provided below. No interest will be payable with respect to any cash adjustment paid with respect to any fractional shares of Common Stock as provided below. On the date shares of Class B Common Stock are surrendered for conversion, dividends shall cease to accrue on all shares of Class B Common Stock, such shares shall no longer be deemed outstanding, all rights of the holders thereof as holders of Class B Common Stock shall cease (other than the right to receive dividends declared payable to holders of record of Class B Common Stock on a record date prior to the date of surrender) and thereupon the certificate or certificates theretofore representing such shares of Class B Common Stock shall represent only the right to receive the Common Stock deliverable upon conversion in respect thereof. (c) FRACTIONAL SHARES; TAXES. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of Class B Common Stock. If any such conversion would otherwise require the issuance of a fractional share, an amount equal to such fraction multiplied by the Closing Price of the Common Stock on the day of conversion shall be paid to the holder in cash by the Corporation. The term "Closing Price" on any day shall mean the reported last sale price per share of Common Stock regular way on such day or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices regular way, in each case on the New York Stock Exchange, or, if the shares of Common Stock are not listed or admitted to trading on such Exchange, the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted sale price or, if not so quoted, the average of the closing bid and asked prices quoted on the Nasdaq National Market, or, if not so quoted, the average of the closing bid and asked prices as furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by the corporation for that purpose. The corporation will pay any and all stamp taxes, stock issuance taxes or similar taxes that may be payable in respect of the issuance or delivery of Common Stock on conversion of shares of Class B Common Stock; provided, however, that the corporation shall not be required to pay any tax or other charge that may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the record holder of the shares of Class B Common Stock being converted and in such case the corporation shall not be obligated to issue or deliver any stock 7 certificate until such tax or charge has been paid in full or it has been established to the satisfaction of the corporation that no such tax or charge is due. (d) AVAILABLE COMMON STOCK. The corporation shall at all times reserve and keep available out of its authorized but unissued Common Stock, for the purpose of issuance upon conversion of Class B Common Stock, the full number of Common Stock then deliverable upon the conversion of all shares of Class B Common Stock then outstanding. 4. TRANSFER (a) PROHIBITED TRANSFERS. No holder of shares of Class B Common Stock shall Transfer any such shares or any interest therein to any Person (as hereinafter defined) other than SBW or an Affiliate of SBW. As used herein, the term "Transfer" means any sale, transfer, assignment, disposition or other means of conveying legal or beneficial ownership of such shares, whether direct or indirect and whether voluntary or involuntary, and the terms "Transferred," "Transferable," "Transferor" and "Transferee" have correlative meanings. As used herein, the term "Person" means any individual, corporation, partnership, joint stock company, joint venture, association, trust, unincorporated organization, government or any agency, department or political subdivision thereof, or any other entity. (b) EFFECT OF PURPORTED TRANSFERS. Any attempted or purported Transfer of shares of Class B Common Stock in violation of paragraph (a) above shall not be effective to Transfer ownership of such shares to the purported Transferee thereof, who shall not be entitled to any rights as a stockholder of the corporation with respect to the shares purported to be Transferred (including, but not limited to, the right to vote such shares or to receive dividends with respect thereto). All rights with respect to any shares attempted or purported to be Transferred in violation of the aforementioned provisions shall remain the property of the stockholder who initially attempted or purported to transfer such shares in violation thereof. Upon a determination by the Board of Directors that there has been or is threatened an attempted or purported Transfer of shares in violation of the aforementioned provisions, the Board of Directors may take such action as it deems advisable, including but not limited to refusing to give effect on the books of the corporation to such attempted or purported Transfer or instituting legal proceedings to enjoin or rescind the same. (c) LEGEND. All certificates evidencing shares of this Series shall bear a conspicuous legend referencing the restrictions set forth in this Section 4. 8 B. PREFERRED STOCK The Board of Directors of the corporation, by resolution or resolutions, may at any time and from time to time, divide and establish any or all of the unissued shares of Preferred Stock not then allocated to any series of Preferred Stock into one or more series and, without limiting the generality of the foregoing, fix and determine the designation of each such share, the number of shares which shall constitute such series and certain powers, preferences and relative, participating, optional or other special rights and qualifications, limitations and restrictions and voting rights of the shares of each series so establishing. SERIES D PARTICIPATING CONVERTIBLE PREFERRED STOCK 1. DESIGNATION AND AMOUNT. The distinctive serial designation of this series shall be "Series D Participating Convertible Preferred" (hereinafter sometimes referred to as "this Series"). The number of shares in this Series shall be 1,000, which number may be decreased (but not increased) by the Board of Directors of the corporation (the "Board of Directors") without a vote of stockholders; PROVIDED, HOWEVER, that such number may not be decreased below the number of then currently outstanding shares of this Series. 2. DIVIDENDS. (a) The holders of shares of this Series shall be entitled to receive, when and as declared by the Board of Directors, but only out of funds legally available therefor, dividends and distributions, on each date that dividends or other distributions (other than dividends or distributions payable in Common Stock (as defined below)) are payable on or in respect of Common Stock in an amount per share of this Series equal to the aggregate amount of dividends or other distributions (other than dividends or distributions payable in Common Stock of the corporation) that would be payable on such date to a holder of the Reference Package. Each such dividend and distribution shall be paid to the holders of record of shares of this Series on the date, not exceeding sixty days preceding such dividend or distribution payment date, fixed for the purpose by the Board of Directors in advance of payment of each particular dividend or distribution. (b) The term "Reference Package" shall initially mean 1,600 shares of Common Stock. In the event the corporation shall at any time after the close of business on September 27, 1996 (A) declare or pay a dividend on any Common Stock payable in Common Stock, (B) subdivide any Common Stock or (C) combine any Common Stock into a smaller number of shares or (D) change or reclassify the Common Stock (whether pursuant to a merger or consolidation or otherwise), then and in each such case the Reference Package after such event shall be the Common Stock, or new class of shares, that 9 a holder of the Reference Package immediately prior to such event would hold thereafter as a result thereof. 3. LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up of the affairs of the corporation, whether voluntary or involuntary, the holders of shares of this Series shall be entitled, before any distribution or payment is made on any date to the holders of the Common Stock or any other stock of the corporation ranking junior to this Series upon liquidation, to be paid in full an amount per share of this Series equal to the greater of (A) $20,000 or (B) the aggregate amount distributed or to be distributed prior to such date in connection with such liquidation, dissolution or winding up to a holder of the Reference Package (such greater amount being hereinafter referred to as the "Liquidation Preference"), together with accrued dividends to such distribution or payment date, whether or not earned or declared. If such payment shall have been made in full to all holders of shares of this Series, the holders of shares of this Series as such shall have no right or claim to any of the remaining assets of the corporation. (b) In the event the assets of the corporation available for distribution to the holders of shares of this Series upon any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (a) of this Section 3, no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such liquidation, dissolution or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such liquidation, dissolution or winding up. (c) For the purposes of this Section 3, the consolidation or merger of, or binding share exchange by, the corporation with any other corporation or the sale of all or substantially all the assets of the corporation shall not be deemed to constitute a liquidation, dissolution or winding up of the corporation. 4. CONVERSION PRIVILEGE. (a) Subject to and upon compliance with the provisions of this Section 4, at the option of the holder of shares of this Series, shares of this Series may be converted, in blocks of 250 shares or any larger integral multiple thereof. Such conversion right shall commence at the opening of business on September 30, 1996. (b) Subject to subsection (a) hereof, each share of this Series shall be convertible into the Reference Package. 10 (c) The Board of Directors may make such adjustments in the Reference Package, in addition to those required by Section 2(b), as shall be determined by the Board, as evidenced by a Board resolution, to be necessary and advisable in order to avoid taxation so far as practicable of any dividend of stock or stock rights or any event treated as such for Federal income tax purposes to the recipients. (d) Whenever any adjustment is required in the Reference Package, the corporation shall forthwith (i) file at the principal office of the corporation a statement describing in reasonable detail the adjustment and the method of calculation used, and (ii) cause a copy of such statement to be mailed by first class mail postage prepaid to the holders of record of this Series as of the effective date of such adjustment. (e) The corporation shall at all times reserve and keep available out of its authorized but unissued Common Stock, for the purpose of issuance upon conversion of this Series, the full number of Common Stock then deliverable upon the conversion of all shares of this Series then outstanding. (f) The corporation will pay any and all stamp taxes, stock issuance taxes or similar taxes that may be payable in respect of the issuance or delivery of Common Stock on conversion of shares of this Series; provided, however, that the corporation shall not be required to pay any tax or other charge that may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the record holder of the shares of this Series being converted and in such case the corporation shall not be obligated to issue or deliver any stock certificate until such tax or charge has been paid in full or it has been established to the satisfaction of the corporation that no such tax or charge is due. (g) No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Series. If any such conversion would otherwise require the issuance of a fractional share, an amount equal to such fraction multiplied by the Closing Price of the Common Stock on the day of conversion shall be paid to the holder in cash by the corporation. The term "Closing Price" on any day shall mean the reported last sale price per share of Common Stock regular way on such day or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices regular way, in each case on the New York Stock Exchange, or, if the shares of Common Stock are not listed or admitted to trading on such Exchange, the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted sale price or, if not so quoted, the average of the closing bid and asked prices quoted on the Nasdaq National Market, or, if not so quoted, the average of the closing bid 11 and asked prices as furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by the corporation for that purpose. (h) The corporation may obtain the certificate of any independent firm of public accountants of national recognition selected by the Board of Directors, which, if obtained, shall be presumptive evidence of the correctness of any computation made under Section 2(b). (i) All shares of this Series surrendered for conversion or otherwise acquired by the corporation shall be cancelled and thereupon restored to the status of authorized but unissued preferred stock undesignated as to series. 5. CONVERSION PROCEDURES. (a) Any holder of shares of this Series desiring to convert such shares into Common Stock shall surrender the certificate or certificates evidencing such shares of this Series together with instructions setting forth the number of shares to be converted, at the principal office of the corporation or such other office as the corporation may designate for such purpose, which certificate or certificates, if the corporation shall so require, shall be duly endorsed to the corporation or in blank, or accompanied by proper instruments of transfer to the corporation or in blank, accompanied by irrevocable written notice to the corporation that the holder elects so to convert such shares of this Series and specifying the name or names (with address or addresses) in which a certificate or certificates evidencing shares of Common Stock are to be issued. (b) The corporation shall, as soon as practicable after such surrender of certificates evidencing shares of this Series accompanied by the written notice and compliance with any other conditions herein contained, deliver by first class mail postage prepaid to the Person that surrendered such shares of this Series or to such Person's nominee certificates evidencing the number of full shares of Common Stock to which such Person shall be entitled as aforesaid, together with a cash adjustment in respect of any fraction of a share of Common Stock as provided above. No interest will be payable with respect to any cash adjustment paid with respect to any fractional shares of Common Stock as provided above. (c) In the event that fewer than all shares of Series D Participating Convertible Preferred represented by a surrendered certificate are to be converted hereunder, a new certificate shall be issued at the expense of the corporation representing the shares of Series D Participating Convertible Preferred not so converted. (d) On the date shares of Series D Participating Convertible Preferred are surrendered for conversion, dividends shall cease to accrue on any shares of this Series 12 surrendered for conversion, such shares shall no longer be deemed outstanding, all rights of the holders thereof as preferred stockholders of the corporation shall cease (other than the right to receive dividends declared payable to holders of record of this Series on a record date prior to the date of surrender) and thereupon the certificate or certificates theretofore representing such shares of Series D Participating Convertible Preferred shall represent only the right to receive the Common Stock deliverable upon conversion in respect thereof. 6. MANDATORY CONVERSION. (a) If the Regulatory Relief Date shall not have occurred on or before September 27, 2001, all of the then currently outstanding shares of Series D Participating Convertible Preferred shall, at the election of the corporation at any time after the opening of business on September 28, 2001 and after notice has been provided as set forth below, be converted into shares of Common Stock on the basis provided in Section 4. (b) If the corporation has elected to convert this Series into Common Stock pursuant to this Section 6, the corporation will provide notice of mandatory conversion of shares of Series D Participating Convertible Preferred pursuant to this Section 6 to holders of record of the Series D Participating Convertible Preferred to be converted not less than 15 nor more than 60 days prior to the date fixed for conversion. Such notice shall be provided by mailing notice of such conversion first class mail postage prepaid, to each holder of record of the Series D Participating Convertible Preferred to be converted, at such holder's address as it appears on the stock register of the corporation. (c) Effective on the conversion date fixed by the corporation and notified to the holders of Series D Participating Convertible Preferred pursuant to subparagraph (b) of this Section 6, each outstanding share of Series D Participating Convertible Preferred shall be converted into fully paid and nonassessable shares of Common Stock on the basis provided in Section 4, automatically and without any action on the part of any holder of shares of Series D Participating Convertible Preferred, and such shares of Common Stock shall be deemed outstanding from and after such conversion date. (d) As of the Regulatory Relief Date, each share of this Series shall automatically, without any action on the part of the holder thereof, convert into one share of Class B Common Stock, and as of such date, the holders thereof shall be treated in all respects as the holders of Class B Common Stock. (e) Each holder of shares of Series D Participating Convertible Preferred to be converted pursuant to Section 6(a) and 6(d) shall surrender the certificates evidencing such shares to the corporation at the principal office of the corporation, and shall thereupon 13 be entitled to receive certificates evidencing shares of Common Stock and to receive any dividends or other distributions payable on shares of Common Stock payable following such surrender to the holders of record after the date of such conversion and any cash payable in lieu of fractional shares. 7. PROVISIONS IN CASE OF CONSOLIDATION OR MERGER. In case of any consolidation of the corporation with, or merger of the corporation into, any other Person or any merger of another Person into the corporation (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the corporation), the Person formed by such consolidation or resulting from such merger, as the case may be, shall provide for the conversion of each share of this Series into the kind and amount of securities, cash and other property receivable upon such consolidation or merger by a holder of the number of shares of Common Stock of the corporation into which such share of this Series might have been converted immediately prior to such consolidation or merger, assuming such holder of Common Stock of the corporation (i) is not a Person with which the corporation consolidated or into which the corporation merged or which merged into the corporation, as the case may be ("Constituent Person"), or an Affiliate of a Constituent Person and (ii) failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such consolidation or merger (provided that if the kind or amount of securities, cash and other property receivable upon such consolidation or merger is not the same for each share of Common Stock of the corporation held immediately prior to such consolidation or merger by others than a Constituent Person or an Affiliate thereof and in respect of which such rights of election shall not have been exercised ("non-electing share"), then for the purpose of this Section 7 the kind and amount of securities, cash and other property receivable upon such consolidation or merger by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). If as a result of the provisions of this Section 7 the shares of this Series become convertible or exchangeable into securities or assets of a Constituent Person, such Constituent Person shall provide for adjustments which, for events subsequent to the effective date of such consolidation, merger or sale of assets, shall be as nearly equivalent as may be practicable to the adjustments provided for herein. The above provisions of this Section 7 shall similarly apply to successive consolidation or mergers. 8. REDEMPTION. The shares of this Series shall not be redeemable. 9. VOTING RIGHTS. (a) Except as required by law or as provided in Section 9(b) below, the holders of shares of this Series shall not be entitled to vote on any matter submitted to the stockholders of the corporation. 14 (b) In addition to any vote of this Series which may be required by law, the affirmative vote of a majority of the outstanding shares of the Series D Participating Convertible Preferred, voting as a class, shall be required to approve the following: (i) any merger or consolidation of the corporation with or into any other Person that requires a vote of the stockholders of the corporation in accordance with the applicable provisions of the General Corporation Law of the State of Delaware; (ii) any sale or transfer of all or substantially all of the assets of the corporation that requires a vote of the stockholders of the corporation in accordance with the applicable provisions of the General Corporation Law of the State of Delaware; (iii) any amendment, alteration or repeal of the corporation's Certificate of Incorporation, as amended; (iv) the dissolution of the corporation; (v) the adoption, implementation or acceptance (including the failure to opt out) of any Anti-Takeover Provision not in effect as of September 27, 1996 that would be applicable to, and, in the reasonable determination of the holders of this Series, adversely affect, the holders of this Series and their Affiliates; (vi) issuance by the corporation of any equity securities, including securities convertible into equity securities (other than (A) the grant of employee stock options (subject to the proviso set forth in (D) below), (B) the issuance of equity securities pursuant to the Purchase Agreement or any of the other Transaction Documents, (C) the issuance of equity securities upon the exercise or conversion of securities or employee stock options that are outstanding as of September 27, 1996, or upon the conversion of shares of this Series, or (D) the issuance of equity securities upon the exercise of employee stock options granted after September 27, 1996, PROVIDED, HOWEVER, that there shall not be outstanding at any time employee stock options for more than 1.5 million shares of Common Stock plus the options granted to William C. Kennedy, Jr. and William C. Saunders that are outstanding at September 27, 1996) or incurrence of any indebtedness for borrowed money or evidenced by bonds, notes or 15 debentures, provided that the corporation can incur up to $5 million in indebtedness in any one year without a vote of this Series; (vii) the corporation's entering into any line of business other than its Existing Line of Business or entering into joint ventures, partnerships or similar arrangements, which, in each such case, would require expenditures, individually or in the aggregate, of more than $3 million; (viii) any disposal or disposition in any 12-month period of any asset or assets of the corporation (other than telecommunications equipment and other assets sold in the ordinary course of business) of which the sale, or fair market value exceeds in the aggregate $3 million; (ix) any amendment, alteration or repeal of the terms of this Series including, without limitation, any increase in the number of authorized shares of such series; and (x) any corporate action that would reduce the number of shares in the Reference Package below 1,600. 10. TRANSFER. (a) PROHIBITED TRANSFERS. No holder of shares of this Series shall Transfer any such shares or any interest therein to any Person other than SBW or an Affiliate of SBW. (b) EFFECT OF PURPORTED TRANSFERS. Any attempted or purported Transfer of shares of this Series in violation of paragraph (a) above shall not be effective to Transfer ownership of such shares to the purported Transferee thereof, who shall not be entitled to any rights as a stockholder of the corporation with respect to the shares purported to be Transferred (including, but not limited to, the right to vote such shares or to receive dividends with respect thereto). All rights with respect to any shares attempted or purported to be Transferred in violation of the aforementioned provisions shall remain the property of the Person who initially attempted or purported to transfer such shares in violation thereof. Upon a determination by the Board of Directors that there has been or is threatened an attempted or purported Transfer of shares in violation of the aforementioned provisions, the Board of Directors may take such action as it deems advisable, including, but not limited to, refusing to give effect on the books of the 16 corporation to such attempted or purported Transfer or instituting legal proceedings to enjoin or rescind the same. (c) LEGEND. All certificates evidencing shares of this Series shall bear a conspicuous legend referencing the restrictions set forth in this Section 10. 11. DEFINITIONS. As used herein, the following terms shall have the following meanings unless the context otherwise requires. "Purchase Agreement" means the Purchase Agreement, dated as of September 27, 1996, between the corporation and SBW. "Regulatory Relief Date" shall mean that date on which SBC Communications, Inc. or its Affiliates have, in their sole judgment, obtained all necessary federal and state regulatory approvals to provide landline, interLATA long-distance service pursuant to the Communications Act of 1934, as amended by the Telecommunications Act of 1996. SECOND: That thereafter the necessary number of shares as required by statute were voted in favor of the amendments. THIRD: That said amendments were duly adopted in accordance with the provisions of Sections 228 and 242 of the General Corporation Law of the State of Delaware. 17 IN WITNESS WHEREOF, HighwayMaster Communications, Inc. has made under its corporate seal and the hands of its President and Secretary, respectively, of such corporation the foregoing certificate, and the said President and Secretary have hereunto set their hands and caused the corporate seal of such corporation to be hereunto affixed this 17 th day of January, 1997. HIGHWAYMASTER COMMUNICATIONS, INC. By: /s/ WILLIAM C. SAUNDERS ---------------------------------- William C. Saunders President ATTEST: /s/ WESLEY E. SCHLENKER - ---------------------------------------- Wesley E. Schlenker Secretary 18 EX-10.19 3 EXHIBIT 10.19 Exhibit 10.19 SOFTWARE TRANSFER AGREEMENT This Software Transfer Agreement (this "Agreement"), is entered into as of April 25, 1997 (the "Effective Date"), by and between HighwayMaster Corporation ("HighwayMaster"), a Delaware corporation, and Burlington Motor Carriers, Inc. ("Burlington"), a Delaware corporation. WHEREAS, Burlington owns the entire right, title, and interest in and to computer software and related materials for which it desires to transfer to HighwayMaster; and WHEREAS, HighwayMaster desires to receive all right, title, and interest in and to the computer software and related materials from Burlington; NOW THEREFORE, in consideration of the mutual promises contained herein, as well as the execution of the Information Management Services Agreement between HighwayMaster and Burlington, effective ______, 1997 and each of the Exhibits thereto ("Data Processing Agreement") it is hereby agreed as follows: 1. DEFINITIONS 1.1 "PROGRAM" shall mean the software customer refers to internally as the Spirit software, including any and all versions of source code, object code, job control language, or other listings that relate or refer to the operations and accounting software, training simulator, and related code used to operate the data center of Burlington, other than software properly licensed by Burlington from third parties. 1.2 "RELATED DELIVERABLES" shall mean technical specifications, functional specifications, programming manuals, operations manuals, and the like that relate to the design, function, or operation of the Program. 2. DELIVERY: PAYMENT 2.1 SPECIFICATIONS. Burlington shall prepare and deliver to HighwayMaster the Program and Related Deliverables. 2.2 COPIES. Burlington shall not retain any versions or copies of the Program and Related Deliverables, other than those versions and copies that HighwayMaster agrees in writing that Burlington can retain to perform its duties and obligations under this Agreement and the Information Management Services Agreement. -1- 2.3 PAYMENT. CONFIDENTIAL TREATMENT REQUESTED OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. 3. RIGHTS CONVEYED 3.1 GENERAL ASSIGNMENT. Burlington assigns to HighwayMaster and HighwayMaster accepts from Burlington all right, title, and interest in and to the Program and Related Deliverables. 3.2 COPYRIGHT. The rights conveyed under Section 3.1 shall include but not be limited to an irrevocable grant of the sole and exclusive rights to the Program and Related Deliverables with the rights to use, modify, market, and license the Program and Related Deliverables throughout the world, including all copyrights in the Program and Related Deliverables and in all derivative works, together with all exclusive rights granted to an author under the copyright laws of the United States, foreign countries, and international copyright conventions and the right to grant these rights or any part of them to third parties. 3.3 OTHER INTELLECTUAL PROPERTY. The rights conveyed under this Section 3.1 shall include but not be limited to all right, title, and interest in and to any inventions, discoveries, ideas, trade secrets, trade names, or other intellectual property embodied in the Program and Related Deliverables. 3.4 NO RIGHTS TO "SPIRIT" TRADEMARK. The trademark "Spirit" will remain the sole and exclusive property of Burlington. HighwayMaster will not utilize the trademark "Spirit" in marketing the Spirit Software to third parties, and will, prior to providing trademarked material to third parties, replace the "Spirit" name or logo on the software with a trade mark to be determined by and owned by HM. 4. WARRANTY 4.1 OWNERSHIP. Burlington represents and warrants to HighwayMaster that Burlington has the power and authority to enter into this Agreement as the sole and exclusive owner of all rights conveyed in SECTION 3, except for material in the public domain. 4.2 AUTHORSHIP. Burlington represents and warrants to HighwayMaster that the Program and Related Deliverables are original except for material in the public domain and such excerpts from other works as may be included with the written permission of the copyright owners; and that Burlington retains the entire right, title, and interest in and to the Program and Related Deliverables as either: (i) the author of the Program and Related Deliverables produced as a work -2- made for hire; or (ii) the assignee from the true and original authors of the Program and Related Deliverables. 4.3 INFRINGEMENT. Burlington represents and warrants to HighwayMaster that the Program and Related Deliverables do not contain any libelous material or injurious instructions; that the Program and Related Deliverables do not infringe any patent, trade name, trademark, trade secret, or copyright; and that the Program and Related Deliverables do not invade or violate any right of privacy, personal or proprietary right, or other common law or statutory right. 4.4 DISCLAIMER. BURLINGTON SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 5. INDEMNITY 5.1 INDEMNITY. Burlington agrees to indemnify and hold harmless HighwayMaster, or its assigns, harmless from any and all losses, damages, liabilities, costs, charges, and expenses, including reasonable attorneys' fees, arising out of any breach of any of the representations and warranties contained in Section 4. This shall include any and all expense whatsoever, as reasonably incurred (including the fees and expenses of counsel chosen by HighwayMaster) in investigating, preparing or defending against any litigation, threatened litigation, mediation or arbitration with any third party arising out of Burlington's breach (or Burlington's alleged breach as claimed by such third party) of any of the representations and warranties contained in Section 4. 6. INTELLECTUAL PROPERTY 6.1 OWNERSHIP. The Program and Related Deliverables constitute valuable and confidential trade secrets of HighwayMaster which hereafter are proprietary to HighwayMaster, and all right, title, and interest thereto belongs to HighwayMaster as of the Effective Date. All applicable copyrights, trade secrets, patent and other intellectual and proprietary rights in the Program and Related Deliverables are hereafter the sole and exclusive property of HighwayMaster. It is expressly understood that no title to or ownership of the Program and Related Deliverables, or any part thereof, remains with Burlington. 7. COUNTERPARTS 7.1 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument. 8. GOVERNING LAW 8.1 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. -3- 9. JURISDICTION 9.1 JURISDICTION. The parties hereto consent to the exclusive jurisdiction of the federal district court residing in Dallas, Texas (or if no federal jurisdiction exists, to the state district court in Dallas, Texas) for all litigation which may be brought with respect to or arising out of the terms of and the transactions and relationships contemplated by this Agreement. 10. FURTHER ASSURANCES 10.1 FURTHER ASSURANCES. Subsequent to the Effective Date, the parties shall execute and deliver such additional documents and certificates as may be necessary to give effect to this Agreement. Burlington specifically agrees to use its best efforst to cause execution by itself or its employees, ex- employees, contractors, or others of any and all documents to acquire, procure, or perfect the rights conveyed in Section 3 for the benefit of HighwayMaster, but in no event shall Customer be released or excused from its warranties set forth in Sections 4.1, 4.2 and 4.3 above. This Agreement shall survive the termination of the Information Management Services Agreement betweent the parties. 11. LIMITATION OF LIABLITY 11.1 LIMITATION OF LIABILITY. If either party shall breach any covenant, agreement or undertaking required of it by this Agreement, the liability of such party shall be limited to direct damages, actually incurred. Neither party shall be liable to the other for any special or consequential damages or for any claim or demand made by any third party. Provided, that this section 13.1 shall not limit the duty of Burlington to provide defense costs, license fees and other costs directly incurred as a result of claims by any third party arising from Burlington's alleged breach of ownership, authorship, or infringement warranties set forth in Sections 4.1, 4.2 and 4.3 above, and as set forth more completely in the indemnity provided in Section 5.1 above. IN WITNESS WHEREOF, this Agreement has been executed by the undersigned duly authorized officers of the parties: HIGHWAYMASTER CORPORATION BURLINGTON MOTOR CARRIERS, INC. By: /s/ GORDON QUICK By: /s/ THOMAS F. GROJEAN -------------------------- -------------------------- Name: Gordon Quick Name: Thomas F. Grojean ------------------------ ------------------------ Title: EVP - COO Title: Chairman - CEO ----------------------- ----------------------- Date: 4/25/97 Date: 4/25/97 ------------------------ ------------------------ -4- EX-11 4 EXHIBIT 11 Exhibit 11 HIGHWAYMASTER COMMUNICATIONS, INC. AND SUBSIDIARY STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Three months ended March 31, ---------------------------- 1997 1996 ------------ ------------ NET LOSS APPLICABLE TO COMMON STOCKHOLDERS Loss before accretion and extraordinary item $(7,374,000) $(6,368,000) Accretion of Series B preferred stock --- (610,000) ----------- ----------- Net loss applicable to common stockholders $(7,374,000) $(6,978,000) ----------- ----------- ----------- ----------- WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING Weighted average number of shares outstanding, net of treasury shares 24,843,551 22,021,664 Additional weighted average shares for assumed exercise of stock options, net of shares assumed to be repurchased with exercise proceeds --- --- ----------- ----------- Weighted average number of shares outstanding 24,843,551 22,021,664 ----------- ----------- ----------- ----------- NET LOSS PER COMMON SHARE APPLICABLE TO COMMON STOCKHOLDERS Loss before accretion $ (0.30) $ (0.29) Accretion of Series B preferred stock --- (0.03) ----------- ----------- Net loss per common share applicable to common stockholders $ (0.30) $ (0.32) ----------- ----------- ----------- -----------
EX-27 5 FDS
5 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 14,065 0 10,769 (1,088) 2,785 27,323 10,083 (2,208) 37,022 9,611 0 0 0 252 27,159 37,022 5,832 10,890 4,998 8,605 9,822 1,258 0 (7,374) 0 (7,374) 0 0 0 (7,374) (0.30) 0
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