- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): SEPTEMBER 27, 1996
HIGHWAYMASTER COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-26140 51-0352879
(State of other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
16479 DALLAS PARKWAY, SUITE 710, DALLAS, TEXAS 75248
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (972) 732-2500
NOT APPLICABLE
(Former name or former address if changed from last report)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
ITEM 5. OTHER EVENTS.
INTRODUCTION
This Current Report on Form 8-K (the "Current Report") relates to (i)
certain transactions (the "SBW Transactions") consummated on September 27,
1996 by HighwayMaster Communications, Inc. (the "Company") and Southwestern
Bell Wireless Holdings, Inc. ("SBW"), a wholly owned subsidiary of SBC
Communications Inc. ("SBC"), including, but not limited to, the issuance to
SBW of 1,000 shares of a new series of preferred stock, par value $.01 per
share, of the Company designated as Series D Participating Convertible
Preferred Stock ("Series D Preferred Stock") in consideration of a cash
payment in the amount of $20.0 million (the "Purchase Price"), and (ii)
certain transactions (the "Recapitalization Transactions") consummated on the
same date by the Company, the Erin Mills Stockholders (as defined below), the
Carlyle Stockholders (as defined below) and certain other holders of its
outstanding securities, including, but not limited to, the issuance by the
Company to such security holders of an aggregate of 2,682,018 shares of
common stock, par value $.01 per share ("Common Stock"), of the Company in
consideration of (a) a cash payment in the amount of $10.0 million, (b) the
cancellation of promissory notes in the aggregate principal amount of
approximately $12.7 million issued by the Company and (c) the cancellation of
all outstanding shares of Series B Preferred Stock, par value $.01 per share
("Series B Preferred Stock"), of the Company.
SBW TRANSACTIONS
On September 27, 1996, the Company and SBW consummated the SBW
Transactions. The description of the SBW Transactions set forth below does
not purport to be complete, and such description is qualified in its entirety
by reference to the exhibits to this Current Report which relate to the SBW
Transactions.
SALE OF SERIES D PREFERRED STOCK
In accordance with the terms and conditions set forth in a Purchase
Agreement, dated September 27, 1996 (the "Purchase Agreement"), between the
Company and SBW, the Company sold 1,000 shares of Series D Preferred Stock to
SBW in exchange for the Purchase Price. Immediately upon receipt of the
Purchase Price from SBW, the Company delivered the Purchase Price to Texas
Commerce Bank, N.A., as escrow agent (the "Escrow Agent"), to be held
pursuant to an Escrow Agreement, dated as of September 27, 1996 ("Escrow
Agreement"), among the Company, SBW and the Escrow Agent.
-2-
The Purchase Agreement provides that, if the Antitrust Authorization
Condition (as defined below) is satisfied prior to or on December 31, 1996
and a Governmental Condition (as defined below) does not exist at the time
the Antitrust Authorization Condition is satisfied, the Purchase Price will
promptly be released by the Escrow Agent to the Company. On the other hand,
if the Antitrust Authorization Condition is not satisfied as of December 31,
1996 or a Governmental Condition exists at such time, SBW will be entitled to
determine whether the Purchase Price will be released to the Company or
returned to SBW. If the Purchase Price is returned to SBW, SBW will return
to the Company the certificate evidencing the shares of Series D Preferred
Stock, and the Purchase Agreement and the other agreements and instruments
entered into in connection with the SBW Transactions will be terminated and
will be of no further force or effect. As used herein, (i) the term
"Antitrust Authorization Condition" means a condition to the effect that the
waiting period applicable under the Hart-Scott-Rodino Antitrust Improvements
Act of 1974, as amended, to the issuance to SBW of shares of Class B Common
Stock (as defined below) upon conversion of the shares of Series D Preferred
Stock has expired or early termination has been granted with respect thereto
and (ii) the term "Governmental Condition" means that any governmental or
regulatory authority or body has enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the transactions
contemplated by the Purchase Agreement or that any proceeding seeking any of
the foregoing is pending.
The shares of Series D Preferred Stock issued to SBW pursuant to the
Purchase Agreement are initially convertible into an aggregate of 1,600,000
shares of Common Stock at the option of SBW. In addition, at such time as
Regulatory Relief (as defined below) is obtained, all of the outstanding
shares of Series D Preferred Stock will automatically convert into an equal
number of shares of a new class of the Company's common stock to be
designated as Class B Common Stock, par value $.01 per share ("Class B Common
Stock"). If Regulatory Relief is not obtained on or before September 27,
2001, all of the outstanding shares of Series D Preferred Stock will be
converted into shares of Common Stock at the election of the Company on the
same basis as if they had been voluntarily converted by SBW. If the shares
of Series D Preferred Stock issued to SBW were converted into Common Stock as
of the date of this Current Report, SBW would hold approximately 6.1% of the
outstanding shares of Common Stock. As used herein, the term "Regulatory
Relief" means that SBC or its affiliates have obtained all necessary federal
and state regulatory approvals to provide landline, interLATA long-distance
service pursuant to the Communications Act of 1934, as amended by the
Telecommunications Act of 1996.
The holders of shares of Series D Preferred Stock will be entitled to
receive dividends and distributions equal to the aggregate amount of
dividends and distributions payable on or in respect of the number of shares
of Common Stock into which such shares of Series D Preferred Stock are then
convertible. In the event of a liquidation of the Company, the holders of
shares of Series D Preferred Stock will be entitled to an aggregate
liquidation preference in an amount equal to the greater of (i) $20.0 million
or (ii) the amount of distributions payable in connection with such
liquidation on or in respect of the number of shares of Common Stock into
which such shares of Series D Preferred Stock are then convertible.
Except as required by law or as described below, the holders of Series
D Preferred Stock will not be entitled to vote on any matters submitted to
the stockholders of the Company. However, the holders of Series D Preferred
Stock will be entitled to approve certain transactions that may be proposed
by the Company from time to time, including (i) mergers or consolidations
involving the
-3-
Company that require stockholder approval under the General Corporation Law
of the State of Delaware (the "DGCL"), (ii) sales of all or substantially all
of the assets of the Company that require stockholder approval under the
DGCL, (iii) amendments to the Company's Certificate of Incorporation, (iv)
the dissolution of the Company, (v) the adoption, implementation or
acceptance by the Company of certain anti-takeover provisions, (vi) the
issuance by the Company of equity securities, including securities
convertible into equity securities (subject to specified exceptions), and the
incurrence by the Company of debt obligations in an amount exceeding
$5,000,000 in any year, (vii) the Company entering into certain new lines of
business or entering into certain joint ventures, partnerships or similar
arrangements, (viii) the disposition by the Company of certain assets outside
the ordinary course of business, (ix) any amendment, alteration or repeal of
the terms of the Series D Preferred Stock and (x) any corporate action that
would reduce the number of shares of Common Stock into which a share of
Series D Preferred Stock is convertible to less than 1,600.
Copies of the Purchase Agreement, the Escrow Agreement and the
Certificate of Designation establishing the terms of Series D Preferred Stock
are attached as Exhibits 10a, 10b and 4a hereto, respectively, and are
incorporated by reference herein.
AUTHORIZATION OF CLASS B COMMON STOCK
At a meeting held on September 27, 1996, the Board of Directors of the
Company adopted a resolution declaring the advisability of adopting a
Certificate of Amendment (the "Certificate of Amendment") which would amend
the Certificate of Incorporation of the Company, as amended, in order, among
other things, to create a new series of common stock of the Company to be
designated as Class B Common Stock, par value $.01 per share ("Class B Common
Stock"), into which shares of Series D Preferred Stock will automatically be
converted upon receipt of Regulatory Relief. SBW has solicited consents from
ten of the largest stockholders of the Company (the "Designated Holders"),
including certain Erin Mills Stockholders, Carlyle Stockholders and By-Word
Stockholders (who in the aggregate hold approximately 68.4% of the outstanding
shares of Common Stock) with respect to the approval and adoption of the
Certificate of Amendment, and each Designated Holder has executed and
delivered to SBW a written consent approving the same. The Purchase
Agreement provides that the Company will take all required action under the
DGCL and applicable federal securities laws to effect the corporate action to
which such consents relate. In order to comply with this requirement, the
Company will file an information statement (the "Information Statement") with
the Securities and Exchange Commission pursuant to Regulation 14C under the
Securities Exchange Act of 1934, as amended, and will distribute the
Information Statement to its stockholders in order to notify them of the
adoption and approval of the Certificate of Amendment. As required pursuant
to Regulation 14C, the Company will not file the
-4-
Certificate of Amendment with the Secretary of State of the State of Delaware
until 20 calendar days after the Information Statement has been sent or given
to its stockholders.
Under the terms of the Certificate of Amendment, the outstanding shares
of Class B Common Stock will be convertible into an aggregate of 1,600,000
shares of Common Stock at the option of SBW, provided that no such shares may
be converted into Common Stock unless the holders of all outstanding shares of
Class B Common Stock elect so to convert their shares.
The holders of Class B Common Stock will be entitled to receive
dividends and distributions equal to the dividends and distributions payable
on or in respect of the number of shares of Common Stock into which such
shares of Class B Common Stock are then convertible. In the event of a
liquidation of the Company, the holders of Class B Common Stock will be
entitled to receive the amount of distributions payable in connection with
such liquidation on or in respect of the number of shares of Common Stock
into which such shares of Class B Common Stock are then convertible.
The holders of Common Stock and Class B Common Stock will generally have
identical voting rights and will vote together as a single class, with the
holders of Class B Common Stock being entitled to a number of votes equal to
the number of shares of Common Stock into which the shares of Class B Common
Stock held by them are then convertible. In addition, the holders of Class B
Common Stock will be entitled to elect one director of the Company (or two
directors if SBW and its affiliates beneficially own at least 20% of the
outstanding shares of Common Stock on a fully diluted basis, including shares
issuable upon conversion or exercise of outstanding options, warrants or
rights, but excluding shares issuable upon the conversion or exercise of the
Warrants (as defined below) or of options, warrants or rights issued by any
person other than the Company). The holders of Class B Common Stock will also
be entitled to approve certain transactions that may be proposed by the
Company from time to time, including (i) the approval of any annual budget or
business plan for the Company or any deviation from any annual budget by more
than 5%, (ii) the issuance by the Company of equity securities, including
securities convertible into equity securities (subject to specified
exceptions), and the incurrence by the Company of debt obligations in an
amount exceeding $5,000,000 in any year, (iii) the hiring or termination by
the Company of its chief executive officer, chief operating officer or chief
financial officer, (iv) the Company entering into certain new lines of
business or entering into certain joint venture, partnerships or similar
arrangements, (v) the Company exiting its existing line of business or
disposing of certain assets outside the ordinary course of business, (vi) the
adoption, implementation or acceptance by the Company of certain
anti-takeover provisions and (vii) any corporate action that would reduce the
number of shares of Common Stock into which a share of Class B Common Stock
is convertible to less than 1,600.
A copy of the Certificate of Amendment is attached as Exhibit 3b hereto,
and is incorporated by reference herein.
ISSUANCE OF WARRANTS
In connection with the transactions contemplated by the Purchase
Agreement and the other agreements and instruments relating to the SBW
Transactions, the Company issued to SBW certain warrants (the "Warrants")
evidenced by a Warrant Certificate, dated September 27, 1996 (the "Warrant
Certificate"). The Warrants entitle SBW to purchase from the Company, upon
the terms and subject to the conditions set forth in the Warrant Certificate,
(i) 3,000,000 shares of Common Stock at an exercise price of $14.00 per share
and (ii) 2,000,000 shares of Common Stock at an exercise price of $18.00 per
share, in each case subject to adjustment to prevent dilution. The Warrants
may be exercised by SBW for the cash exercise prices specified above or, at
the option of SBW, may be exercised by SBW without any cash payment for a
number of shares of Common Stock with a current market value equal to the
excess of (i) the current market value of the shares of Common Stock to be
purchased upon exercise over (ii) the exercise price of such shares of Common
Stock. Prior to receipt of Regulatory Relief, the Warrants may be exercised
only to the extent that doing so is consistent with the Communications Act of
1934, as amended by the Telecommunications Act of 1996. If all of the
Warrants were exercised by SBW as of the date of the Current Report, SBW
would hold approximately 16.8% of the outstanding shares of Common Stock.
The Warrants will expire on September 27, 2001.
A copy of the Warrant Certificate is attached as Exhibit 4b hereto, and
is incorporated by reference herein.
-5-
AMENDED STOCKHOLDERS' AGREEMENT
The Company, SBW, the Erin Mills Stockholders, the Carlyle Stockholders,
the By-Word Stockholders and certain other parties entered into an Amended
and Restated Stockholders' Agreement, dated September 27, 1996 (the "Amended
Stockholders' Agreement"), in order to amend and restate in its entirety the
existing Stockholders' Agreement, dated February 4, 1994, among such parties.
The Amended Stockholders' Agreement contains provisions relating to, among
other things, (i) the transfer of shares of Common Stock by certain of the
stockholders who are parties thereto, (ii) the grant of registration rights
by the Company to the stockholders who are parties thereto and (iii) the
election of members of the Company's Board of Directors. As used herein, (i)
the term "Erin Mills Stockholders" means Erin Mills International Investment
Corporation, The Erin Mills Development Corporation and The Erin Mills
Investment Corporation, (ii) the term "Carlyle Stockholders" means Clipper
Capital Associates, L.P., Clipper/Merban, L.P., Clipper/Merchant Partners, L.P.,
Carlyle-HighwayMaster Investors, L.P., Carlyle-HighwayMaster Investors II, L.P.,
Chase Manhattan Investment Holdings, Inc., H.M. Rana Investments Limited and
Archery Partners and (iii) the term "By-Word Stockholders" means William C.
Kennedy, Jr., Donald M. Kennedy, William C. Saunders, Robert S. Folsom and
Robert T. Hayes.
The Amended Stockholders' Agreement provides that, at all times after
October 12, 1996, the parties will take all action (including the voting of
shares of Common Stock owned by them) necessary to ensure that the Board of
Directors of the Company consists of (i) two directors designated by the Erin
Mills Stockholders, (ii) one director designated by the Carlyle Stockholders,
(iii) two directors designated by the By-Word Stockholders and (iv) two
independent directors (except that the addition of a second independent
director to the Board of Directors need not occur until the date of the next
annual meeting of the stockholders of the Company). Prior to the receipt of
Regulatory Relief, SBW will not be entitled to designate a director, but will
have the right to designate a non-voting delegate who will attend all
meetings of the Board of Directors and receive all materials distributed to
directors of the Company. Upon the conversion of Series D Preferred Stock
into Class B Common Stock (which will occur upon receipt of Regulatory
Relief), SBW will be entitled to designate one member of the Board of
Directors of the Company. In addition, if at any time after the conversion
of Series D Preferred Stock into Class B Common Stock SBW and its affiliates
beneficially own 20% or more of the outstanding Common Stock on a fully
diluted basis (including shares issuable upon conversion or exercise of
outstanding options, warrants or rights, but excluding shares issuable upon
the conversion or exercise of the Warrants or of options, warrants or rights
issued by any person other than the Company), SBW will be entitled to
designate a second member of the Board of Directors. No stockholder or group
of stockholders will be entitled to designate any director if the percentage
of the outstanding Common Stock beneficially owned by such stockholder or
group of stockholders falls below 5% (or with respect to the Erin Mills
Stockholders and By-Word Stockholders, 20% for the right to designate two
directors and 5% for the right to designate one director) on a fully diluted
basis (calculated in the manner described above).
Under the terms of the Amended Stockholders' Agreement, the Carlyle
Stockholders, the Erin Mills Stockholders, William C. Kennedy, Jr. and
William C.
-6-
Saunders (the "First Refusal Stockholders") granted a right of first refusal
to SBW with respect to all shares of Common Stock owned by them. Subject to
certain exceptions, such right of first refusal requires that, prior to
selling any shares of Common Stock, a First Refusal Stockholder must offer
such shares for sale to SBW at a price determined in accordance with the
terms of the Amended Stockholders' Agreement.
The Amended Stockholders' Agreement also provides for the grant of
certain demand, piggyback and other registration rights to the stockholders
who are parties thereto. Among other things, such agreement provides that,
with respect to an aggregate of 1,818,018 shares of Common Stock issued to
the Erin Mills Stockholders and the Carlyle Stockholders in connection with
the Recapitalization Transactions, the Company will register one-half of such
shares under the Securities Act of 1933, as amended (the "Securities Act"),
by March 31, 1997 and will register the remainder of such shares under the
Securities Act by September 27, 1997.
A copy of the Amended Stockholders' Agreement is attached as Exhibit 10e
hereto, and is incorporated by reference herein.
OTHER AGREEMENTS
HighwayMaster Corporation, a wholly owned subsidiary of the Company ("HM
Corporation"), entered into a Technical Services Agreement, dated September
27, 1996 (the "Technical Services Agreement"), with SBW pursuant to which SBW
or one or more of its affiliates will provide HM Corporation with certain
technical and advisory services in connection with, among other things, the
operation and improvement of its communications transmission system.
In addition, under the terms of the Purchase Agreement, promptly after
Regulatory Relief is obtained, the Company will cause HM Corporation to enter
into a Voice and Data Services Agreement (the "Voice and Data Services
Agreement") with an affiliate of SBW. The Voice and Data Services Agreement,
if entered into by the parties, will provide that the Company will purchase
long distance and other voice and data services from such affiliate of SBW.
A copy of the Technical Services Agreement is attached hereto as Exhibit
10c hereto, and is incorporated by reference herein.
BYLAW AMENDMENTS
At a meeting held on September 27, 1996, the Board of Directors of the
Company approved certain amendments to the Company's Bylaws (the "Bylaw
Amendments") in connection with the SBW Transactions, including certain
amendments relating to the authorization by the Company of Class B Common
Stock.
A copy of the Bylaw Amendments is attached as Exhibit 3a hereto, and is
incorporated by reference herein.
-7-
RECAPITALIZATION TRANSACTIONS
On September 27, 1996, the Company, the Erin Mills Stockholders, the
Carlyle Stockholders and certain other holders of outstanding securities of
the Company entered into a Recapitalization Agreement, dated as of September
27, 1996 (the "Recapitalization Agreement"), and consummated the
Recapitalization Transactions contemplated thereby. In particular, upon the
terms and conditions set forth in the Recapitalization Agreement, (i) the
Company repaid in full the principal amount of and interest accrued on
certain promissory notes in the aggregate principal amount of $5.0 million
executed in favor of an Erin Mills Stockholder in order to evidence the
Company's obligation to repay certain advances made by such Erin Mills
Stockholder in August and September 1996 to enable the Company to meet its
short-term working capital and other requirements, (ii) the Company issued an
aggregate of 800,000 shares of Common Stock to two Erin Mills Stockholders in
exchange for aggregate cash payments in the amount of $10.0 million, (iii)
the Company issued an aggregate of 864,000 shares of Common Stock to three
Erin Mills Stockholders and two other persons in exchange for the surrender
to the Company for cancellation of all outstanding shares of Series B
Preferred Stock, (iv) the Company paid to the Carlyle Stockholders a portion
of the accrued and unpaid interest on certain promissory notes in the
aggregate principal amount of approximately $12.7 million (the "Carlyle
Notes") executed in favor of the Carlyle Stockholders, and (v) the Company
issued an aggregate of 1,018,018 shares of Common Stock in exchange for the
surrender of the Carlyle Notes for cancellation.
A copy of the Recapitalization Agreement is attached as Exhibit 10d
hereto, and is incorporated by reference herein.
ADDITIONAL INFORMATION
For additional information regarding the SBW Transactions and the
Recapitalization Transactions, reference is made to the Company's press
release dated September 30, 1996, a copy of which is attached as Exhibit 99
hereto.
-8-
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
3a. Amendments to the Bylaws of the Company, adopted
September 27, 1996
3b. Proposed Certificate of Amendment to Certificate of
Incorporation of the Company
4a. Certificate of Designation Establishing Series D
Convertible Participating Preferred Stock
4b. Warrant Certificate, dated September 27, 1996, issued
to SBW
10a. Purchase Agreement, dated September 27, 1996, between
the Company and SBW
10b. Escrow Agreement, dated September 27, 1996, by and
among the Company, SBW and the Escrow Agent.
10c. Technical Services Agreement, dated September 27, 1996,
between HM Corporation and SBW
10d. Recapitalization Agreement, dated September 27, 1996, by
and among the Company, the Erin Mills Stockholders, the
Carlyle Stockholders and the other persons named therein.
10e. Amended and Restated Stockholders' Agreement, dated
September 27, 1996, by and among the Company, SBW, the
Erin Mills Stockholders, the Carlyle Stockholders, the By-
Word Stockholders and the other persons named therein.
99. Press Release dated September 30, 1996
-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, hereunto duly authorized.
HIGHWAYMASTER COMMUNICATIONS, INC.
(Registrant)
By: /s/ WILLIAM C. SAUNDERS
-------------------------------
William C. Saunders
President
Date: October 4, 1996
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3a. Amendments to the Bylaws of the Company,
adopted September 27, 1996
3b. Proposed Certificate of Amendment to
Certificate of Incorporation of the Company
4a. Certificate of Designation Establishing
Series D Convertible Participating
Preferred Stock
4b. Warrant Certificate, dated September 27,
1996, issued to SBW
10a. Purchase Agreement, dated September 27,
1996, between the Company and SBW
10b. Escrow Agreement, dated September 27, 1996,
by and among the Company, SBW and the Escrow
Agent
10c. Technical Services Agreement, dated September
27, 1996, between the HM Corporation and SBW
10d. Recapitalization Agreement, dated September
27, 1996, by and among the Company, the Erin
Mills Stockholders, the Carlyle Stockholders
and the other persons named therein
10e. Amended and Restated Stockholders' Agreement,
dated September 27, 1996, by and among the
Company, SBW, the Erin Mills Stockholders, the
Carlyle Stockholders, the By-Word Stockholders
and the other persons named therein.
99. Press Release dated September 30, 1996