SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
--------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
ARCH WIRELESS, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the Appropriate Box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
--------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
5) Total fee paid:
--------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
Amount Previously Paid:
1) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
2) Filing Party:
--------------------------------------------------------------------------------
3) Date Filed:
-------------------------------------------------------------------------
(ARCH LOGO)
May 9, 2003
Dear Stockholder:
You are cordially invited to attend our 2003 annual meeting of
stockholders, which will be held at the offices of Hale and Dorr LLP, 26th
floor, 60 State Street, Boston, Massachusetts 02109, on Thursday, June 12, 2003,
at 1:00 p.m. local time.
At this year's annual meeting, you are asked to elect eight directors, to
approve an increase in the number of shares available for issuance under our
2002 stock incentive plan, to approve an amendment to our certificate of
incorporation requiring stockholder approval for certain issuances of our stock
that equal 15% or more of our stock outstanding before the issuance and to
ratify the appointment of our independent auditors. The accompanying proxy
statement includes additional important information about these proposals.
You are also asked to approve our merger with a wholly-owned subsidiary
that will result in the imposition of new transfer restrictions on our common
stock. We believe that these new transfer restrictions will help protect the tax
benefits associated with our federal income tax attributes, including net
operating losses (NOLs) that may be used to offset future federal taxable
income. The transfer restrictions will prohibit certain transfers of our common
stock after there has been a cumulative change in ownership of our stock of more
than 40%, unless the transfers are approved by the board of directors, and will
prohibit any transfer of our common stock to the extent that it results in a
cumulative change in ownership of more than 42%.
Your board of directors encourages you to vote in favor of each proposal.
Please vote your shares promptly. You may exercise your proxy and mail it
in the prepaid envelope to ensure that your shares are represented at the
meeting. Alternatively, most of our stockholders will also be able to submit a
proxy by telephone or through the Internet. If you have any questions or need
assistance in voting your shares electronically, you may call MacKenzie
Partners, Inc. at (800) 322-2885 (toll-free) or at (212) 929-5500 (collect).
Thank you for your continued support.
Sincerely,
/s/ C. EDWARD BAKER, JR.
C. EDWARD BAKER, JR.
Chairman of the Board and
Chief Executive Officer
ARCH WIRELESS, INC.
NOTICE OF 2003 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 12, 2003
You are hereby notified that the 2003 annual meeting of stockholders of
Arch Wireless, Inc. will be held at the offices of Hale and Dorr LLP, 26th
floor, 60 State Street, Boston, Massachusetts 02109, on Thursday, June 12, 2003,
at 1:00 p.m., local time, for the purpose of considering and voting upon the
following matters:
1. To elect eight directors for terms of one year each.
2. To approve an amendment to our 2002 stock incentive plan increasing
the number of shares of common stock authorized for issuance under
the plan from 950,000 to 1,200,000, of which approximately 250,000
shares will be used to grant stock options with an exercise price of
$.001 per share to the non-employee directors who joined our board
of directors upon our emergence from bankruptcy and who are
reelected at the annual meeting.
3. To adopt an Agreement and Plan of Merger between our company and
Arch 382 Corporation, a wholly-owned subsidiary, that will result in
the imposition of transfer restrictions on our common stock to help
preserve to the extent possible the tax benefits described in this
proxy statement.
4. To approve an amendment to our certificate of incorporation that
will require stockholder approval for certain issuances of our stock
that equal 15% or more of our stock outstanding before the issuance.
5. To ratify the appointment by the board of directors of
PricewaterhouseCoopers LLP as our independent public accountants for
the year ending December 31, 2003.
6. To transact such other business as may properly come before the
meeting.
These items of business are more fully described in the proxy statement
accompanying this notice. The board of directors does not know of any other
business to be transacted at the annual meeting.
The board of directors has fixed the close of business on Wednesday, April
16, 2003 as the record date for the determination of stockholders entitled to
notice of and to vote at the annual meeting. A list of our stockholders entitled
to notice of and to vote at the meeting will be available for examination by any
stockholder, for any purpose germane to the meeting, during ordinary business
hours for ten days prior to the meeting at our principal executive offices, 1800
West Park Drive, Suite 250, Westborough, Massachusetts 01581, telephone (508)
870-6700, and at the time and place of the annual meeting.
A copy of our annual report to stockholders for the year ended December 31,
2002 accompanies this notice of meeting and the enclosed proxy statement. Our
annual report contains consolidated financial statements and other information
of interest to stockholders.
By order of the board of directors,
PATRICIA A. GRAY,
Secretary
May 9, 2003
Westborough, Massachusetts
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE. NO POSTAGE
NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
SUMMARY OF PROPOSALS
TO BE CONSIDERED AT OUR 2003 ANNUAL MEETING
The following is a summary of the proposals to be considered at our 2003
annual meeting. This summary does not contain all of the information you should
consider before voting on the proposals. You should read the entire proxy
statement, including the attached appendices, carefully because the information
in this summary is not complete.
PROPOSAL 1 -- ELECTION OF DIRECTORS (PAGE 5)
The board of directors has proposed the election of eight persons as our
directors, each to hold office until our 2004 annual meeting. The proxies
solicited by the board of directors will be voted FOR the election of each of
the following director nominees, unless the proxy is marked otherwise:
- C. Edward Baker, - Carroll D. McHenry - Richard A. Rubin
Jr.
- James V. Continenza - Matthew Oristano - Samme L. Thompson
- Eric Gold - William E. Redmond, Jr.
The board of directors recommends that you vote FOR the election of each of
the nominees for director named above.
PROPOSAL 2 -- APPROVAL OF AMENDMENT TO 2002 STOCK INCENTIVE PLAN (PAGE 20)
The board of directors has approved an amendment to our 2002 stock
incentive plan increasing the number of shares of common stock authorized for
issuance under the plan from 950,000 to 1,200,000, of which approximately
250,000 shares will be used to grant stock options with an exercise price of
$.001 per share to the non-employee directors who joined our board of directors
upon our emergence from bankruptcy and who are reelected at the annual meeting.
Stockholder approval is not required for the amendment to our 2002 stock
incentive plan. If the stockholders do not approve the amendment, the board of
directors will reconsider the matter. The board of directors recommends that you
vote FOR the approval of the amendment to the 2002 stock incentive plan.
PROPOSAL 3 -- ADOPTION OF AN AGREEMENT AND PLAN OF MERGER PROVIDING FOR THE
MERGER OF OUR COMPANY WITH A WHOLLY-OWNED SUBSIDIARY THAT WILL
RESULT IN THE IMPOSITION OF TRANSFER RESTRICTIONS ON OUR COMMON
STOCK (PAGE 24)
The board of directors has approved, subject to stockholder approval, the
merger of our company with Arch 382 Corporation, a wholly-owned subsidiary, that
will result in the imposition of transfer restrictions on our stock. The
following is a summary of the proposal:
- Reason for the Merger (pages 24-25). Our board of directors has approved
the merger agreement, subject to stockholder approval, to help protect
the tax benefits associated with our federal income tax attributes,
including tax attributes that may be used to offset future federal
taxable income. The merger will result in the imposition of restrictions
on the transfer of our common stock that our board believes may enable us
to avoid a change in ownership that would result in significant
limitations on the amount and timing of the use of our tax attributes.
Under applicable federal tax law, a change in ownership would occur if
there has been more than a 50% cumulative change in ownership of our
stock.
- Terms of the Merger and Class A Common Stock; New Transfer Restrictions
(pages 25-26). In the merger, Arch Wireless, Inc. will be merged with a
wholly-owned subsidiary that was formed for the specific purpose of the
merger. Arch Wireless, Inc. will be the surviving entity. Upon the
effectiveness of the merger, each of our issued and outstanding shares of
common stock will be converted into the right to receive one share of a
new class of security called Class A common stock. The new Class A common
stock will be identical in all respects to the common stock, except that
it will be subject to the following restrictions. After a cumulative
change in ownership of our stock of more than 40%, any transfer of Class
A common stock by or to a holder of 5% or more of our outstanding stock
will be prohibited unless the transferee or transferor provides notice of
the
transfer to us and our board of directors approves the transfer. Our
board of directors will approve a transfer of Class A common stock if it
determines in good faith that the transfer (1) would not result in a
cumulative change in ownership of our stock of more than 42% or (2) would
not increase the cumulative change in ownership of our stock. Prior to a
cumulative change in ownership of our stock of more than 40%, transfers
of Class A common stock will not be prohibited except to the extent that
they result in a cumulative change in ownership of more than 42%, but any
transfer by or to a holder of 5% or more of our outstanding stock would
require a notice to us. Similar restrictions will apply to the issuance
or transfer of an option to purchase Class A common stock if the exercise
of the option would result in a transfer that would be prohibited
pursuant to the restrictions described above. Transfers by or to us and
any transfer pursuant to a merger approved by the board of directors or
any tender offer to acquire all of our outstanding stock where a majority
of the shares have been tendered will be exempt from these restrictions.
Once the transfer restrictions are no longer necessary to protect the tax
benefits associated with our federal income tax attributes, the Class A
common stock will be subject to conversion back into common stock without
transfer restrictions on a share-for-share basis.
- Tax and Accounting Consequences of the Merger (page 27). The merger will
not be a taxable event for stockholders. The tax basis and holding period
for the shares of Class A common stock received by stockholders will be
the same as the tax basis and holding period of the shares of common
stock exchanged in the merger. The merger will not have any significant
accounting consequences to us and will not have any significant tax
consequences to us other than the intended tax benefits described above.
- Required Approvals (page 27). The merger agreement must be adopted by
the affirmative vote of holders of a majority of the issued and
outstanding shares of our common stock. The merger must also be approved
by the holders of a majority in principal amount of the outstanding 10%
notes and 12% notes issued by our wholly-owned subsidiary, Arch Wireless
Holdings, Inc, and will require certain approvals from the Federal
Communications Commission.
- Possible Loss of Liquidity for Shares (page 27). If the merger is
approved and the transfer restrictions become effective, stockholders may
encounter difficulty in selling their shares because the following
transfers by or to holders of 5% or more of our outstanding stock will be
prohibited after there has been a cumulative change in ownership of our
stock of more than 40%, unless approved by our board of directors, and
any transfer will be prohibited to the extent it would result in a
cumulative change in ownership of our stock of more than 42%. These
transfer restrictions could have the effect of decreasing the liquidity
of your shares.
- Possible Anti-Takeover Effects (pages 27-28). If the merger is approved,
the transfer restrictions on new shares of Class A common stock could
have the effect of preventing or delaying a change in control of our
company. However, the transfer restrictions are not being proposed in
response to any specific effort to acquire control of our company and
should not interfere with any merger or any other business combination
approved by the board of directors or any tender or exchange offer for
all of our stock.
- No Appraisal Rights (page 28). Stockholders do not have appraisal rights
in connection with the merger.
- Exchange of Stock Certificates (page 28). We will send instructions to
stockholders of record of how to exchange their stock certificates
representing shares of common stock for new certificates representing
Class A common stock after completion of the merger. Please do not submit
any stock certificates at this time.
- Completion of the Merger (page 27). If we obtain the required
stockholder approval, we plan to complete the merger promptly following
receipt of the other approvals required for the merger.
- Board Recommendation (page 24). The board unanimously recommends that
you vote FOR the adoption of the merger agreement.
PROPOSAL 4 -- APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION
REQUIRING STOCKHOLDER APPROVAL FOR CERTAIN ISSUANCES OF OUR STOCK
THAT EQUAL 15% OR MORE OF OUR STOCK OUTSTANDING BEFORE THE
ISSUANCE (PAGE 29)
The board of directors has approved, subject to stockholder approval, an
amendment to our certificate of incorporation that would require stockholder
approval for certain issuances of our stock that equal 15% or more of our stock
outstanding before the issuance. The stockholder approval requirement that will
be included in our certificate of incorporation, if the amendment is approved,
is similar to Nasdaq Marketplace Rules 4350(i)(1)(C) and (D), but would apply to
issuances of more than 15% of our outstanding common stock rather than the
higher threshold of more than 20% of our common stock that would be required if
we were subject to the current Nasdaq rules. We are not subject to the Nasdaq
Marketplace Rules because our common stock is not listed on the Nasdaq Stock
Market. The board has approved this amendment, including the 15% threshold,
because it believes stockholders should have the opportunity to approve certain
additional issuances of stock that would result in substantial dilution to
existing stockholders.
Holders of a majority of the issued and outstanding shares of our common
stock must vote in favor of the amendment to our certificate of incorporation
for the amendment to be approved. The board of directors recommends that you
vote FOR the approval of the amendment to our certificate of incorporation.
PROPOSAL 5 -- RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS (PAGE 30)
The board of directors has selected the firm of PricewaterhouseCoopers LLP
as our independent public accountants for the year ending December 31, 2003.
Stockholder approval of the selection of PricewaterhouseCoopers LLP is not
required by law, but the board believes that it is advisable to give
stockholders an opportunity to ratify the appointment. If stockholders do not
ratify the selection of PricewaterhouseCoopers LLP as our independent public
accountants, the board of directors will reconsider the matter. The board of
directors recommends that you vote FOR the ratification of the selection of
PricewaterhouseCoopers LLP as our independent public accountants.
ARCH WIRELESS, INC.
1800 WEST PARK DRIVE, SUITE 250
WESTBOROUGH, MASSACHUSETTS 01581
PROXY STATEMENT
2003 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 12, 2003
THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF
PROXIES BY THE BOARD OF DIRECTORS FOR USE AT THE 2003 ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON THURSDAY, JUNE 12, 2003, AT 1:00 P.M., LOCAL TIME, AT
THE OFFICES OF HALE AND DORR LLP, 26TH FLOOR, 60 STATE STREET, BOSTON,
MASSACHUSETTS 02109.
All proxies will be voted in accordance with the instructions of the
stockholder. If no choice is specified, the proxies will be voted in favor of
the matters set forth in the accompanying notice of meeting. A stockholder may
revoke any proxy at any time before its exercise by delivery of a written
revocation to our corporate secretary. Attendance at the meeting will not itself
be deemed to revoke a proxy unless the stockholder affirmatively revokes the
proxy or votes at the meeting.
A copy of our annual report on Form 10-K for the year ended December 31,
2002, as filed with the Securities and Exchange Commission, excluding exhibits,
is being furnished to all stockholders along with this proxy statement. Exhibits
to the Form 10-K will be provided upon written request and payment of an
appropriate processing fee. Please address requests to Arch Wireless, Inc., 1800
West Park Drive, Suite 250, Westborough, Massachusetts 01581, Attention:
Investor Relations.
VOTING SECURITIES AND VOTES REQUIRED
On April 16, 2003, the record date for determination of stockholders
entitled to notice of and to vote at the meeting, there were 18,731,031 shares
of common stock issued, outstanding and entitled to vote. Each share of common
stock entitles the record holder thereof to one vote on each of the matters to
be voted upon at the meeting.
The holders of a majority of the outstanding common stock will constitute a
quorum for the transaction of business at the annual meeting. Shares of common
stock present in person or represented by proxy, including shares that abstain
or do not vote with respect to any of the matters presented at the annual
meeting, will be counted for purposes of determining whether a quorum exists at
the meeting.
The affirmative vote of the holders of a plurality of the shares voting on
the matter is required for the election of directors (Proposal 1). The
affirmative vote of the holders of a majority of the shares voting on the matter
is required for the approval of the amendment to our 2002 stock incentive plan
(Proposal 2) and the ratification of PricewaterhouseCoopers LLP as our
independent public accountants for the year ending December 31, 2003 (Proposal
5). The affirmative vote of the holders of a majority of the outstanding shares
is required for the adoption of the merger agreement providing for our merger
with a wholly-owned subsidiary that will result in the imposition of transfer
restrictions on our common stock (Proposal 3) and for approval of the amendment
to our certificate of incorporation requiring stockholder approval for certain
issuances of our stock that equal 15% or more of our stock outstanding before
the issuance (Proposal 4).
Shares held by stockholders who abstain from voting as to a particular
matter, and shares held in "street name" by brokers or nominees who indicate on
their proxies that they do not have discretionary authority to vote such shares
as to a particular matter, will not be counted as shares voted in favor of such
matter and will not be counted as shares voting on such matter. Accordingly,
abstentions and "broker non-votes" will have no effect on the voting on matters
that require the affirmative vote of a plurality or majority of the shares
voting on a matter (Proposals 1, 2 and 5) but will have the same effect as a
vote against the matter that requires the affirmative vote of a majority of the
outstanding shares (Proposals 3 and 4).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information about the beneficial
ownership of our common stock as of April 16, 2003 by:
- each person known by us to own beneficially more than 5% of the voting
power of our outstanding common stock;
- each of our current directors;
- our chief executive officer and the other named executive officers; and
- all of our current directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission based upon voting or investment power over
the securities.
Unless otherwise indicated, each person or entity listed in the table has
sole voting power and investment power, or shares such power with his spouse,
with respect to all shares of capital stock listed as owned by such person or
entity. The inclusion of shares in the table does not constitute an admission
that the named stockholder is a direct or indirect beneficial owner of the
shares.
SHARES
OUTSTANDING
AT APRIL 16,
NAME 2003 PERCENTAGE(1)
---- ------------ -------------
C. Edward Baker, Jr. ....................................... 254,700 1.4%
Lyndon R. Daniels........................................... 147,400 *
J. Roy Pottle............................................... 120,600 *
Paul H. Kuzia............................................... 74,700 *
Patricia A. Gray............................................ 29,700 *
William C. Bousquette....................................... -- *
James V. Continenza......................................... -- *
Eric Gold................................................... -- *
Carroll D. McHenry.......................................... -- *
Matthew Oristano(2)......................................... 4,979 *
William E. Redmond, Jr. .................................... -- *
Richard A. Rubin(3)......................................... 1,004,999 5.4%
Samme L. Thompson........................................... -- *
Carroll R. Wetzel, Jr. ..................................... -- *
David C. Abrams(4).......................................... 1,345,969 7.2%
Contrarian Capital Management L.L.C.(5)..................... 1,665,263 8.9%
Franklin Resources, Inc.(6)................................. 1,988,443 10.6%
Hawkeye Capital Management LLC(3)........................... 1,004,999 5.4%
Putnam, LLC(7).............................................. 1,065,624 5.7%
All current directors and executive officers as a group (13
persons).................................................. 634,079 3.4%
---------------
* Less than 1%
(1) Our plan of reorganization provides that 20,000,000 shares of our common
stock will be issued to our former secured and unsecured creditors and
senior management. However, the number of shares of common stock to be
distributed to each former creditor, and the actual distribution of the
shares, is contingent upon the resolution of the individual claims of our
former creditors. The percentage listed in the table above is based on the
18,731,031 shares of our common stock that have been distributed to former
secured and unsecured creditors and senior management as of April 16, 2003.
2
(2) The shares listed are owned by the Oristano Foundation, a charitable trust
the trustees of which are members of the Oristano family, and by Alda
Limited Partnership, the general partner of which is a corporation
controlled by Mr. Oristano.
(3) Based on a Schedule 13D, dated March 21, 2003, filed with the Securities and
Exchange Commission. The Schedule 13D was filed on behalf of Richard A.
Rubin, Hawkeye Capital Management LLC and Hawkeye Capital LP. Mr. Rubin is
the managing member of Hawkeye Capital Management LLC, which is the general
partner of Hawkeye Capital LP, a pooled investment vehicle. The shares are
reported to be beneficially owned by all three of the reporting persons, but
it is reported that Mr. Rubin has sole voting power and sole disposition
power over the shares.
(4) Based on a Schedule 13D, dated April 4, 2003, filed with the Securities and
Exchange Commission. The Schedule 13D was filed on behalf of David C. Abrams
and Abrams Capital, LLC. Abrams Capital, LLC is reported to be the
beneficial owner of 1,273,484 of the shares, which includes shares
beneficially owned by private investment partnerships of which Abrams
Capital, LLC is the general partner. David C. Abrams is reported to be the
beneficial owner of 1,345,969 shares, which includes shares beneficially
owned by private investment partnerships and a private investment
corporation that may be deemed to be controlled by Mr. Abrams, who is the
managing member of the sole general partner of such partnerships and the
managing member of the investment adviser to the private investment
corporation.
(5) Based on a Schedule 13G/A, dated February 14, 2003, filed with the
Securities and Exchange Commission.
(6) Based on a Schedule 13G/A, dated March 17, 2003, filed with the Securities
and Exchange Commission. The Schedule 13G/A was filed on behalf of Franklin
Resources, Inc., the parent holding company, Charles B. Johnson, the
principal stockholder of the parent holding company; Rupert H. Johnson, the
principal stockholder of the parent holding company; and Franklin Advisors,
Inc., investment adviser, all of which disclaim beneficial ownership of the
shares. The shares are reported to be beneficially owned by one or more open
or close-ended investment companies or other managed accounts that are
advised by direct and indirect investment advisory subsidiaries of Franklin
Resources, Inc.
(7) Based on a Schedule 13G, dated February 14, 2003, filed with the Securities
and Exchange Commission. The Schedule 13G was filed on behalf of Putnam,
LLC, its parent holding company, Marsh & McLennan Companies, Inc., and its
investment advisors and subsidiaries, Putnam Investment Management, LLC,
which is the investment advisor to the Putnam family of mutual funds, and
The Putnam Advisory Company, LLC, which is the investment advisor to
Putnam's institutional clients, each of which disclaim beneficial ownership
of the shares. Both Putnam Investment Management, LLC and The Putnam
Advisory Company, LLC are reported to have disposition powers over the
shares as investment managers, but each of the trustees of the Putnam family
of mutual funds have voting power over the shares held by each fund, and The
Putnam Advisory Company, LLC has shared voting power over the shares held by
institutional clients.
The address of each person or entity listed in the table is: c/o Arch
Wireless, Inc., 1800 West Park Drive, Westborough, Massachusetts 01581, except
for David C. Abrams, which is 222 Berkeley Street, 22nd Floor, Boston,
Massachusetts 02116, Contrarian Capital Management, L.L.C., which is 411 West
Putnam Avenue, Suite 225, Greenwich, Connecticut 06830, Putnam, LLC, which is
One Post Office Square, Boston, Massachusetts 02109, Franklin Resources, Inc.,
which is One Franklin Parkway, San Mateo, California 94403 and Hawkeye Capital
Management LLC, which is 200 West 57th Street, New York, New York 10019.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and holders of more than 10% of our common stock
to file initial reports of ownership and reports of changes in ownership of our
common stock with the Securities and Exchange Commission. We believe that during
3
2002 our reporting persons complied with all section 16(a) filing requirements,
except that Messrs. Baker, Daniels, Pottle and Kuzia and Ms. Gray each filed a
late Form 4 to report their deemed acquisition of common stock on November 5,
2002. These shares were actually issued on April 8, 2003 but were deemed issued
on November 5, 2002 because all conditions to their issuance had been satisfied
on that date.
4
PROPOSAL 1 -- ELECTION OF DIRECTORS
Pursuant to our by-laws, the board of directors has fixed at eight the
number of directors to be elected at the annual meeting. Our directors are
elected annually by the stockholders and hold office until the next annual
meeting and until successors are elected and qualified or until death,
resignation or removal. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled until the next
annual meeting of stockholders by a majority of directors then in office.
The board of directors, based on the recommendation of its nominating and
governance committee, proposes the election of the persons listed below as our
directors. Seven of our nine current directors have been nominated for
reelection and one additional person has been nominated for election. Two of our
current directors, William C. Bousquette and Carroll R. Wetzel, Jr., have chosen
not to stand for reelection to the board. This year's nominees are to be elected
to serve for a term expiring at the 2004 annual meeting of stockholders.
The persons named in the enclosed proxy card will vote to elect each of the
director nominees listed below, unless the proxy is marked otherwise. Each of
the nominees has indicated his willingness to serve as a director if elected,
but if any of the nominees becomes unable, prior to the annual meeting, to serve
the proxies may be voted for substitute nominees selected by the board of
directors or for a reduction in the number of directors, as determined by the
board of directors. The board of directors believes each of the nominees will be
able to serve if elected.
Set forth below are the names of each nominee for director, their ages, the
year in which each first became one of our directors, their principal
occupations and employment during the past five years and the names of other
public companies of which they serve as a director.
POSITIONS WITH ARCH, PRINCIPAL OCCUPATIONS AND
NAME AND PERIOD OF SERVICE AS A DIRECTOR AGE EMPLOYMENT OVER PAST FIVE YEARS, AND DIRECTORSHIPS
---------------------------------------- --- --------------------------------------------------
C. Edward Baker, Jr.................... 52 Chief executive officer of Arch since 1988 and
chairman of the board of Arch since 1989.
Director since 1986
James V. Continenza(2)................. 40 President and chief executive officer since September
2002 of Teligent, Inc., a provider of fixed-wireless
Director since 2002 broadband services that filed for bankruptcy
protection in May 2001, chief operating officer of
Teligent, Inc. from May 2001 to September 2002 and its
senior vice president of strategic operations from
September 2000 to May 2001; president and chief
executive officer of Lucent Technologies Product
Finance, which was a division of The CIT Group, Inc.,
a financial services company, from April 1999 to
September 2000; senior vice president -- worldwide
sales and marketing of Lucent Technologies Product
Finance from September 1997 to April 1999; director of
Teligent, Inc.
Eric Gold(2)........................... 40 Senior vice president of CRT Capital Group LLC, a
securities research and brokerage firm, since March
Director since 2002 2003; telecommunications analyst at Dresdner Kleinwort
Wasserstein, the investment bank of Dresdner Bank AG,
from May 1997 to March 2003.
Carroll D. McHenry(1)(2)(3)............ 60 Chairman of the board, president, chief executive
officer of Heartland Wireless Communications, Inc., a
Director since 2002 wireless cable television company that filed for
bankruptcy protection in December 1998, and
Heartland's successor company, Nucentrix Broadband
Networks, Inc., since April 1997.
5
POSITIONS WITH ARCH, PRINCIPAL OCCUPATIONS AND
NAME AND PERIOD OF SERVICE AS A DIRECTOR AGE EMPLOYMENT OVER PAST FIVE YEARS, AND DIRECTORSHIPS
---------------------------------------- --- --------------------------------------------------
Matthew Oristano(1).................... 47 President and chief executive officer of Alda Inc., an
investment management company, since 1995; chairman of
Director since 2002 the board and chief executive officer of People's
Choice TV Corp., a wireless communications company,
from April 1993 to September 1999.
William E. Redmond, Jr.(2)............. 43 President and chief executive officer from December
1996 to February 2003 and chairman of the board since
Director since 2002 1999 of Gardenway, Inc., a manufacturer of outdoor
garden and power equipment that filed for bankruptcy
protection in July 2001 in order to facilitate a sale
of substantially all of its assets in August 2001;
director of Tokheim Corporation since November 2000
and chairman of the oversight committee of the board
of Tokheim since November 2002; director of WKI
Holding Company, Inc., which operates principally
through its subsidiary World Kitchen, Inc., since
January 2003.
Richard A. Rubin....................... 39 President of Hawkeye Capital Management LLC, a
provider of investment management services, since
Director nominee November 1999; engaged in organizing Hawkeye Capital
Management LLC between July 1998 and November 1999;
principal at MHR Advisors LLC from January 1997 to
July 1998.
Samme L. Thompson(1)(3)................ 57 President of Telit Associates, Inc., a financial and
strategic advisory firm, since April 2002; senior vice
Director since 2002 president of Motorola Corporation from July 1999 until
April 2002; chief financial officer of NetCom
Solutions International, Inc., a provider of network
and logistics integration services, from April 1998 to
June 1999; president of Telit Associates, Inc. from
1994 to 1999; director of Conseco, Inc.
---------------
(1) Member of our audit committee.
(2) Member of our compensation committee.
(3) Member of our nominating and governance committee.
All of our current directors, other than Mr. Baker, were appointed by our
secured lenders as part of our reorganization proceedings under chapter 11 of
the bankruptcy code.
The board of directors recommends a vote "FOR" the election of each of the
nominees for directors named above.
6
CORPORATE GOVERNANCE
GENERAL PHILOSOPHY
We believe that good corporate governance is important to ensure that our
company is managed for the long-term benefit of our stockholders. Since our
emergence from bankruptcy in May 2002, we have been reviewing our corporate
governance practices and comparing them to those suggested by various
authorities in corporate governance and the practices of other public companies.
We have also been reviewing the provisions of the Sarbanes-Oxley Act of 2002 and
the new and proposed rules of the Securities and Exchange Commission. In
addition, even though we are not subject to them, we have been reviewing the
proposed new listing standards of the Nasdaq Stock Market and the New York Stock
Exchange.
We have taken steps to enhance our corporate governance policies and
practices and to implement voluntarily many of the proposed new rules and
listing standards. In particular, we:
- reconstituted our nominating committee as the nominating and governance
committee and adopted a new charter for this committee;
- adopted a new charter for our audit committee,
- nominated for election as a director one person, Richard A. Rubin, who
requested that he be nominated pursuant to the procedures described below
under the caption "Stockholder Proposals for 2004 Annual Meeting";
- have proposed an amendment to our certificate of incorporation that would
require us to obtain stockholder approval for certain additional
issuances of our stock that equal 15% or more of our stock outstanding
before the issuance (Proposal 4 below);
- plan to adopt a code of business conduct and ethics applying to all
officers, directors and employees;
- are seeking stockholder approval of the proposed amendment to our 2002
stock incentive plan (Proposal 2 below) even though such approval is not
required by law; and
- are seeking stockholder ratification of the appointment of
PricewaterhouseCoopers LLP as our independent public accountants for the
year ending December 31, 2003 (Proposal 5 below) even though such
ratification is not required by law.
You can access our current committee charters and corporate governance
guidelines in the "Investor Relations" section of www.arch.com, or receive
copies without charge by writing to Arch Wireless, Inc., 1800 West Park Drive,
Suite 250, Westborough, Massachusetts 01581, Attention: Investors Relations.
BOARD AND COMMITTEE MEETINGS
The board of directors held 16 meetings during 2002, including regular,
special and telephonic meetings. During 2002, each director attended at least
75% of the total number of board meetings held during the period in which he was
a director and at least 75% of the total number of meetings held by each board
committee on which he served during the period in which he was a member of such
committee, except that Mr. Wetzel attended two of the three meetings of the
audit committee held while he was a member.
The board of directors has an audit committee, a compensation committee and
a nominating and governance committee.
AUDIT COMMITTEE
Messrs. Bousquette, Oristano, Thompson and Wetzel served on our audit
committee during the period from our emergence from bankruptcy in May 2002
through the filing of our annual report on Form 10-K with the Securities and
Exchange Commission on March 28, 2003. Messrs. Bousquette and Wetzel
7
subsequently resigned from the audit committee and have chosen not to stand for
reelection to the board. As a result, the board appointed Mr. McHenry to the
audit committee and Mr. Oristano was appointed chairman of the audit committee
on May 5, 2003.
The audit committee assists the board in fulfilling its oversight
responsibilities by reviewing the financial information that will be provided to
our stockholders, the systems of internal controls that management and the board
of directors have established, the independence of our auditors and all audit
processes. The audit committee:
- consults with our independent public accountants to review our annual
financial statements and related footnotes prior to their submission to
the board of directors;
- discusses with the independent public accountants our internal financial
controls, the audit scope and procedural plans, and recommendations by
the auditors;
- assesses and confirms the independence of the independent public
accountants selected as auditor; and
- coordinates our internal and external audits.
The audit committee has the sole authority and responsibility to select,
evaluate and, where appropriate, replace the independent public accountants. In
addition, the audit committee reviews all services provided by the independent
public accountants and all fees paid to them. The audit committee held six
meetings during 2002, including regular, special and telephonic meetings. The
audit committee has recommended that PricewaterhouseCoopers LLP be selected as
our independent public accountants for the year ending December 31, 2003.
COMPENSATION COMMITTEE
Messrs. Continenza, Gold, McHenry and Redmond currently serve on our
compensation committee. Since Mr. McHenry has been appointed to the audit
committee and the board will likely appoint an additional independent director
to the nominating and governance committee following the annual meeting, it is
likely that the membership of the compensation committee will also change
following the annual meeting.
The compensation committee is responsible for our compensation strategy and
structure on a company-wide basis and, in particular, for the compensation of
our executive officer and key managers. The compensation committee administers
our management bonus plan and our stock incentive plan, and recommends the
implementation of new plans or changes to existing plans, and recommends
compensation for our non-employee directors. The compensation committee is also
responsible for oversight of executive development initiatives and succession
planning for our key executive officers. The compensation committee held four
meetings during 2002.
NOMINATING AND GOVERNANCE COMMITTEE
Messrs. Bousquette, McHenry, Thompson and Wetzel served on our nominating
and governance committee during the period from our emergence from bankruptcy in
May 2002 through April 2003. Messrs. Bousquette and Wetzel subsequently resigned
from the nominating and governance committee and have chosen not to stand for
reelection to the board. As a result, the board will likely appoint an
additional independent director to the nominating and governance committee
following our annual meeting.
The nominating and governance committee recommends nominees for election as
directors, leads the annual review of the board's performance, recommends board
committee members, recommends governance guidelines and procedures and reviews
management recommendations for officers to be elected by the board. The
nominating and governance committee, which was formed on November 6, 2002, held
one meeting during 2002.
8
The nominating and governance committee will consider nominees recommended
by stockholders if such nominations are submitted in compliance with the
procedures described below under the caption "Stockholder Proposals for 2004
Annual Meeting." One of this year's nominees, Richard A. Rubin, was nominated by
the nominating and governance committee after he requested that he be nominated
pursuant to these procedures.
REPORT OF THE AUDIT COMMITTEE
From the date of our emergence from bankruptcy in May 2002 through the
filing of our annual report on Form 10-K with the Securities and Exchange
Commission on March 28, 2003, the audit committee of the board of directors was
composed of Messrs. Bousquette, Oristano, Thompson and Wetzel. Messrs.
Bousquette and Wetzel subsequently resigned from the audit committee and have
chosen not to stand for reelection to the board.
The audit committee acts under a written charter adopted by the audit
committee on November 5, 2002 and ratified by the board of directors on December
12, 2002. A copy of this charter is attached to this proxy statement as Appendix
A. Each member of the audit committee is an independent director, as defined by
its charter, the current and proposed rules of the Nasdaq Stock Market and the
proposed Securities and Exchange Commission rules.
The audit committee reviewed our audited financial statements for the year
ended December 31, 2002 and discussed these financial statements with our
management. Management is responsible for our internal controls and the
financial reporting process. Our independent accountants are responsible for
performing an independent audit of our financial statements, in accordance with
generally accepted accounting principles, and to issue a report on those
financial statements. The audit committee is responsible for monitoring and
overseeing these processes. As appropriate, the audit committee reviews and
evaluates, and discusses with our management, internal accounting, financial and
auditing personnel and the independent auditors, the following:
- the plan for, and the independent auditors' report on, each audit of our
financial statements;
- our financial disclosure documents, including all financial statements
and reports filed with the Securities and Exchange Commission or sent to
stockholders;
- changes in our accounting practices, principles, controls or
methodologies;
- significant developments or changes in accounting rules and laws
applicable to us; and
- the adequacy of our internal controls and accounting, financial and
auditing personnel.
The audit committee also reviewed and discussed the audited financial
statements and the matters required by Statement on Auditing Standards 61
(entitled "Communication with Audit Committees") with PricewaterhouseCoopers
LLP, our independent auditors. This statement requires our independent auditors
to discuss with our audit committee, among other things, the following:
- methods to account for significant unusual transactions;
- the effect of significant accounting policies in controversial or
emerging areas for which there is a lack of authoritative guidance or
consensus;
- the process used by management in formulating particularly sensitive
accounting estimates and the basis for the auditors' conclusions
regarding the reasonableness of those estimates; and
- disagreements with management over the application of accounting
principles, the basis for management's accounting estimates and the
disclosures in the financial statements.
Our independent auditors also provided the audit committee with the written
disclosures and the letter required by Independence Standards Board Standard No.
1 (entitled "Independence Discussions with Audit Committees"). Independence
Standards Board Standard No. 1 requires auditors annually to disclose in writing
all relationships that in the auditor's professional opinion may reasonably be
thought to bear on
9
independence, confirm their perceived independence and engage in a discussion of
independence. Accordingly, the audit committee discussed with the independent
auditors their independence from us. The audit committee also considered whether
the independent auditors' provision of other, non-audit related services to us
is compatible with maintaining such auditors' independence.
Based on its discussions with management and the independent auditors, and
its review of the representations and information provided by management and the
independent auditors, the audit committee recommended to the board of directors
that the audited financial statements be included in our Annual Report on Form
10-K for the year ended December 31, 2002.
Dated: March 28, 2003 By the audit committee,
William C. Bousquette, Chairman
Matthew Oristano
Samme L. Thompson
Carroll R. Wetzel, Jr.
DIRECTOR COMPENSATION
FEES AND EXPENSES
We pay our vice chairman of the board an annual fee of $90,000 and our
other non-employee directors an annual fee of $25,000. Mr. Wetzel, our current
vice chairman, has chosen not to stand for reelection to the board. Following
the annual meeting, the board is likely to appoint either a lead independent
outside director or a new vice chairman.
We pay the chairman of the audit committee an additional annual fee of
$15,000 and the chairman of the compensation committee an additional annual fee
of $7,500 in light of their additional duties. We pay each non-employee director
$2,000 for attendance and participation at each meeting of the board of
directors at which corporate action is considered or taken. Each board committee
chair is paid $2,000 and each board committee member is paid $1,000 for
attendance and participation at each board committee meeting.
We also reimburse all directors for customary and reasonable expenses
incurred in attending board and board committee meetings.
STOCK OPTIONS
Subject to stockholder approval (Proposal 2 below), we will grant stock
options to purchase an aggregate of approximately 250,000 shares of common
stock, with an exercise price of $.001 per share and vesting 50% on May 29, 2003
and 50% on May 29, 2004, to the non-employee directors who joined our board of
directors upon our emergence from bankruptcy and who are reelected to the board
at the annual meeting. TD Securities (USA), Inc., on behalf of the steering
committee of our prepetition secured creditors, indicated its support for the
grant of these stock options to our non-employee directors when these directors
were recruited to serve on our board following our emergence from bankruptcy.
10
INFORMATION ABOUT EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
Our current executive officers are as follows:
C. Edward Baker, Jr. ................ 52 Chief executive officer of Arch since 1988 and chairman
of the board of Arch since 1989.
Lyndon R. Daniels.................... 50 President and chief operating officer of Arch since
January 1998; president and chief executive officer of
Pacific Bell Mobile Services, a subsidiary of SBC
Communications Inc., from November 1993 to December 1997.
J. Roy Pottle........................ 44 Executive vice president and chief financial officer of
Arch since February 1998; vice president and treasurer of
Jones Intercable, Inc., a cable television operator, from
October 1994 to February 1998.
Paul H. Kuzia........................ 60 Executive vice president, technology and regulatory
affairs of Arch since September 1996; vice president,
engineering and regulatory affairs of Arch from 1988 to
September 1996.
Patricia A. Gray..................... 48 Senior vice president, general counsel and secretary of
Arch since May 2000; vice president, general counsel and
secretary of Arch from January 2000 to May 2000; vice
president and general counsel of Arch from June 1999 to
January 2000; prior to June 1999, vice president, general
counsel and secretary of MobileMedia Corporation, which
filed for bankruptcy protection in January 1997.
The foregoing individuals were our executive officers at the time that our
Chapter 11 bankruptcy proceedings commenced on December 6, 2001.
Our executive officers are elected by the board of directors and hold
office until their successors are elected or until their earlier death,
resignation or removal.
11
SUMMARY COMPENSATION
The annual and long-term compensation of our chief executive officer and
other executive officers named below was as follows for the years ended December
31, 2000, 2001 and 2002:
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------- -----------------------
OTHER OPTIONS TO
ANNUAL RESTRICTED PURCHASE ALL OTHER
COMPEN- STOCK COMMON COMPEN-
NAME AND PRINCIPAL POSITION SATION AWARDS STOCK SATION
DURING 2002 YEAR SALARY($) BONUS($)(1) ($)(2) (#)(3) (#)(4) ($)(5)
--------------------------- ---- ---------- ------------ ---------- ---------- ---------- ---------
C. Edward Baker, Jr. ... 2002 $607,200 $1,023,000 $4,584 249,663 -- $427,766
Chairman and chief 2001 601,431 230,000 3,400 -- -- --
executive officer 2000 532,200 371,250 4,990 -- 951,000 --
Lyndon R. Daniels....... 2002 379,000 527,400 3,666 146,445 -- --
President and chief 2001 383,277 160,000 3,400 -- -- --
operating officer 2000 348,200 224,130 3,500 -- 607,000 --
J. Roy Pottle........... 2002 312,200 452,500 2,200 118,215 -- --
Executive vice 2001 309,892 130,000 2,100 -- -- --
president and chief 2000 282,200 166,290 3,191 -- 452,000 --
financial officer
Paul H Kuzia............ 2002 236,000 215,000 3,666 73,223 -- --
Executive vice 2001 234,461 80,000 3,400 -- -- --
president, technology 2000 216,000 121,485 3,509 -- 322,300 --
and regulatory affairs
Patricia A. Gray........ 2002 229,000 189,200 4,125 29,113 -- --
Senior vice president, 2001 227,461 60,000 3,037 -- -- --
general counsel and 2000 206,773 100,620 1,516 -- 232,500 --
secretary
---------------
(1) Represents bonus paid in such fiscal year with respect to prior year.
Information for bonus compensation paid in 2002 includes retention bonuses
paid to Messrs. Baker, Daniels, Pottle and Kuzia and Ms. Gray pursuant to
our retention plan in the amounts of $363,000, $300,000, $300,000, $100,000
and $100,000, respectively. See "-- Retention Plan" below. Information for
bonus compensation paid in 2002 to Mr. Baker also includes $210,000
reimbursed during 2002 for the payment of taxes in connection with the
cancellation of $427,766 of indebtedness owed by Mr. Baker to us in
connection with our chapter 11 reorganization. See "-- Executive Employment
Agreements and Loans" below.
(2) Represents matching contributions paid under our 401(k) plan, except as
otherwise indicated.
(3) Represents shares of restricted stock issued upon the effective date of our
plan of reorganization. See "-- 2002 Stock Incentive Plan" below.
(4) No stock appreciation rights were granted to any of the named executive
officers during 2000, 2001 or 2002.
(5) Represents indebtedness owed to us by Mr. Baker that was cancelled in
connection with our chapter 11 reorganization. See "-- Executive Employment
Agreements and Loans" below.
EXECUTIVE EMPLOYMENT AGREEMENTS AND LOANS
We are a party to executive employment agreements with each of Messrs.
Baker, Daniels and Pottle. Each of the executive employment agreements has a
term of three years expiring on May 29, 2005 and will automatically renew from
year to year thereafter unless terminated by either party at least 90 days prior
to any renewal date. Under these agreements, Messrs. Baker, Daniels and Pottle
are entitled to
12
receive annual base salaries of $600,000, $379,000 and $305,000, respectively,
subject to review and adjustment after 2002 by the board of directors, and other
bonuses and benefits.
In the event that the employment of an executive is terminated by us prior
to a change in control other than for cause, disability or death, or by the
executive for good reason, the executive will be entitled to receive:
- a lump sum cash payment equal to the executive's annual base salary in
effect at the time of the termination;
- a lump sum cash payment of a pro rata portion of the annual bonus for
which the executive would have been eligible for the fiscal year in which
the executive's employment is terminated;
- for a period of nine months from the first anniversary of the date of
termination, continuation payments equal to the amount by which the
executive's monthly base salary immediately prior to his termination
exceeds the executive's new monthly base salary; and
- for the period during which cash benefits are available, continuation of
family medical benefits similar to those received prior to termination,
unless the executive becomes entitled to receive substantially equivalent
benefits from another employer.
In the event that the employment of an executive is terminated by us
following a change in control but prior to January 1, 2004 without cause or by
the executive for good reason, the executive will be entitled to receive:
- a lump sum cash payment equal to 21 months of the executive's monthly
base salary at the highest monthly rate paid during the term of the
agreement;
- a lump sum cash payment of a pro rata portion of the annual bonus for
which the executive would have been eligible for the fiscal year in which
the executive's employment is terminated; and
- for a period of 21 months from the date of termination, employee
benefits, including family benefits, similar to those received prior to
termination, unless the executive becomes entitled to receive
substantially equivalent benefits from another employer.
In the event an executive resigns without good reason, he will be entitled
to receive a lump sum cash payment equal to the amount of unpaid base salary,
deferred compensation and accrued vacation pay through the termination date.
Good reason is defined to include, among other things, a material reduction
in employment position or responsibilities, the inability of the executive to
perform his duties as a result of disability, the relocation of the executive
more than 50 miles from his regular place of business or, in the case of Mr.
Baker, ceasing to be our chief executive officer or a member of our board of
directors. Following termination of employment without good reason or for cause,
each executive has agreed not to compete with us or solicit our employees or
business for one year.
All restricted stock and options, if any, held by the executive will become
immediately exercisable or vested in full upon a change of control, as defined
in the agreement. Additionally, if the executive would receive benefits upon a
change of control that would be qualified as "excess parachute payments" under
the "golden parachute provision" of the Internal Revenue Code, payments that we
are required to pay to the executive will be reduced if such a reduction would
result in a larger after tax benefit to the executive.
Prior to our chapter 11 reorganization and before the enactment of the
Sarbanes-Oxley Act, we had made a loan to Mr. Baker bearing interest at 4.99%
annually. Upon the effective date of our plan of reorganization on May 29, 2002,
the unpaid amount of this indebtedness, approximately $428,000, was cancelled.
13
RETENTION PLAN
We adopted a retention plan to assist in retaining the services of key
employees and in focusing key employees on our chapter 11 reorganization
efforts. Retention bonuses are being paid to Messrs. Baker, Daniels, Pottle and
Kuzia and Ms. Gray in the amounts of $726,000, $600,000, $600,000, $200,000 and
$200,000, respectively.
Each retention bonus is payable in three installments if the eligible
employee is employed on the date each installment is due; provided that if any
eligible employee's employment is terminated by us other than for cause,
disability or death, each as defined in the retention plan, then all unpaid
installments of the retention bonus payments will be immediately due and payable
to the employee as of his or her termination of employment. Similarly, if a
change in control, as defined in the retention plan, occurs prior to the payment
of the final installment then all unpaid installments will be immediately due
and payable to all eligible employees. If we are liquidated or commence a plan
of liquidation prior to a change in control, then all installments not yet
payable shall be forfeited.
The first and second installments of 25% each of the retention bonus were
paid on May 29, 2002, the effective date of our plan of reorganization. The
third installment of 50% of each retention bonus will be paid on June 30, 2003.
SEVERANCE PLAN
We have a severance plan that provides severance benefits to our employees,
including the named executive officers other than Messrs. Baker, Daniels and
Pottle. Severance benefits will be paid if the executive officer is terminated
by us, without cause.
If eligible for benefits, the terminated executive officer will receive a
lump sum payment of his or her base salary for a period of six months plus an
additional two weeks for each year of service, as defined in the severance plan,
up to a maximum of 12 months total base salary plus any pro rata portion of any
targeted bonus that the executive officer was eligible to receive. Each
terminated executive officer eligible for severance payments shall also be
eligible for continued participation in our sponsored employee health programs
in effect, if any, during the period which is used to calculate severance
payments if the executive officer continues the same payments for such benefits
as made immediately prior to employment termination and as adjusted after that
time for our active employees. Participation in the health programs will cease,
except to the extent required by law, whenever other comparable benefits are
available to the terminated executive officer.
2002 STOCK INCENTIVE PLAN
Our only equity compensation plan is our 2002 stock incentive plan, which
was established in connection with our emergence from bankruptcy in May 2002.
Under the 2002 plan, restricted stock awards, stock options and other
stock-based awards may be granted to our employees, officers, directors,
consultants and advisors.
The 2002 plan is administered by the board of directors. The board is
authorized to adopt, amend and repeal the administrative rules, guidelines and
practices relating to the 2002 plan and to interpret the provisions of the 2002
plan. The board may amend, suspend or terminate the 2002 plan at any time. The
board has delegated to the compensation committee authority to administer
certain aspects of the 2002 plan.
The board of directors or the compensation committee selects the recipients
of awards under the 2002 plan and determines (1) the number of shares of common
stock covered by awards under the plan, (2) the dates upon which awards vest or
become exercisable, (3) the issue price of restricted stock awards, which may be
less than the fair market value of the common stock on the date of grant, (4)
the exercise price of stock options, which may not be less than the fair market
value of our common stock on the date of grant in the case of incentive stock
options, and (5) the duration of the options, which may not exceed 10 years.
14
The 2002 plan permits the following forms of payment of the exercise price
of stock options, some of which are in our discretion: (1) payment by cash,
check or in connection with a "cashless exercise" through a broker, (2)
surrender to us of shares of common stock, (3) delivery to us of a promissory
note, (4) any other lawful means or (5) any combination of these forms of
payment.
If any option granted under the 2002 plan expires or is terminated,
surrendered, canceled or forfeited, the unused shares of common stock covered by
such option will again be available for grant under the 2002 plan. No awards may
be granted under the 2002 plan after May 29, 2012, but awards previously granted
may extend beyond that date.
The 2002 plan provided that all 950,000 shares of common stock initially
available under the plan would be issued as restricted stock to certain members
of our senior management in connection with our emergence from bankruptcy. Upon
the effective date of our plan of reorganization, we issued a total of 882,200
shares of common stock for $.001 per share to ten members of our senior
management, including 249,663 shares to Mr. Baker, 146,445 shares to Mr.
Daniels, 118,215 shares to Mr. Pottle, 73,223 shares to Mr. Kuzia and 29,113
shares to Ms. Gray. Subject to continued employment on the applicable vesting
dates, these shares will vest 35.222% on the first anniversary of the effective
date (May 29, 2003), 35.222% on the second anniversary of the effective date
(May 29, 2004) and 29.556% on the third anniversary of the effective date (May
29, 2005). On April 8, 2003, an additional 17,800 shares were issued for $.001
per share to members of our senior management when it was determined that the
general unsecured claims, excluding secured creditor deficiency claims, of our
intermediate holding company, Arch Wireless Holdings, Inc., would not exceed
$120 million. These shares, of which 5,037 were issued to Mr. Baker, 2,955 were
issued to Mr. Daniels, 2,385 were issued to Mr. Pottle, 1,477 were issued to Mr.
Kuzia and 587 were issued to Ms. Gray, vest in the same manner as the initial
882,200 shares. In addition, if and as general unsecured claims of our
intermediate holding company are reduced below $120 million, we will issue up to
50,000 additional shares at a rate of approximately 10,000 shares for every $10
million of claims reduced below $120 million, vesting on the third anniversary
of the effective date (May 29, 2005). To the extent these additional 50,000
shares are issued, they will be issued for $.001 per share to our senior
management, including our executive officers named above.
All shares issued to Messrs. Baker, Daniels and Pottle will immediately
vest if:
- a change in control occurs while the executive is employed by us;
- the employment of the executive is terminated without cause following the
announcement of a change in control;
- the employment of the executive is terminated within 90 days prior to a
change in control or the announcement of a change in control; or
- the employment of the executive is terminated more than 90 days prior to
a change in control or the announcement of a change in control and the
executive can reasonably demonstrate that such termination was in
connection with or anticipation of the change in control.
As of December 31, 2002, no securities remained available for future
issuance under the 2002 plan except as described above. In May 2003, and subject
to stockholder approval at our 2003 annual meeting, our board of directors
increased the size of the 2002 plan from 950,000 shares to 1,200,000, of which
approximately 250,000 shares will be used to grant stock options with an
exercise price of $.001 per share to the non-employee directors who joined our
board of directors upon our emergence from bankruptcy and who are reelected to
the board at the annual meeting. Subject to continued service as a director,
these stock options will vest 50% on May 29, 2003 and 50% on May 29, 2004 and
will immediately vest upon a change in control of our company. TD Securities
(USA), Inc., on behalf of the steering committee of our prepetition secured
creditors, indicated its support for the grant of these stock options to our
non-employee directors when these directors were recruited to serve on our board
following our emergence from bankruptcy.
15
CANCELLED RESTRICTED STOCK GRANTS AND STOCK OPTIONS
In March 2001, 27 key executives, including the named executive officers,
were granted the right to receive a total of up to 12,400,000 shares of our old
common stock without payment of cash consideration based on the achievement of
company-wide performance criteria relating to advanced wireless messaging net
revenue, average revenue per advanced messaging unit and growth in the number of
advanced messaging units in service in 2001 and 2002. These stock rights were
cancelled on May 29, 2002 pursuant to our plan of reorganization.
During 2001 and 2002, no options to purchase shares of our common stock
were granted to, or exercised by, our named executive officers. All outstanding
stock options were cancelled on May 29, 2002 pursuant to our plan of
reorganization.
INDEMNIFICATION AGREEMENTS
In early 2003, we entered into indemnification agreements with 18 persons,
including each current director and executive officer, requiring us to indemnify
such persons to the fullest extent permitted by the Delaware corporation
statute.
REPORT OF THE COMPENSATION COMMITTEE
OVERVIEW
The compensation committee is responsible for our overall compensation
strategy and program structure, the compensation of executive officers
(including base salaries, merit increases and bonuses), the compensation of
directors and the administration of our stock plans. Our executive compensation
program is intended to promote the achievement of our business goals and,
thereby, to maximize corporate performance and stockholder returns. Compensation
consists of a combination of base salary, performance bonuses and long-term
incentives. The compensation committee believes it is important to have bonuses
constitute a portion of each executive's compensation package in order to tie
his or her compensation level to corporate performance, and believes it is
important to have long-term incentives constitute a portion of each executive's
compensation package in order to help align the interests of executives and
stockholders.
In determining levels of compensation, the compensation committee considers
factors such as:
- competitive positioning, including compensation of executives at
comparable companies;
- present compensation levels;
- individual performance, including expected future contributions;
- our need to attract, retain and reward key executives; and
- existing contractual obligations, including the 2002 performance bonus
plan and executive employment agreements referred to below.
The compensation committee, in determining Mr. Baker's compensation,
reviews compensation for chief executives of publicly-held companies of similar
size, including those in wireless messaging and similar businesses, Mr. Baker's
individual performance against quantitative and qualitative goals, and our
company's performance.
In addition, executive compensation for 2002 reflected certain agreements
and plans established in connection with our reorganization process. These
agreements and plans, as described below, were approved by our former creditors
and were assumed as part of our bankruptcy plan with the approval of the
bankruptcy court prior to the time the current members of the compensation
committee joined the board of directors or compensation committee.
16
BASE SALARIES
The base salary of each executive officer is reviewed annually. In setting
base salaries, the compensation committee considers the factors described above.
No executive officer received an increase in base salary in 2002 or 2003, except
that Mr. Pottle's base salary for 2003 was increased from $305,000 to $324,000.
Pursuant to his executive employment agreement, Mr. Baker's base salary for 2003
is $600,000.
PERFORMANCE BONUSES
In general, at the beginning of each year Mr. Baker proposes bonus
parameters for the year to the compensation committee. The proposal incorporates
corporate-wide goals as well as goals jointly established by Mr. Baker and each
of the bonus plan participants for their individual areas of responsibility. The
individual and corporate goals included in the bonus plan generally represent
objective measures of performance and quantifiable financial objectives.
Throughout the year, Mr. Baker meets with executive officers to review their
progress in achieving these goals. After the end of the year, Mr. Baker performs
a final performance review with the compensation committee and presents proposed
bonuses to the compensation committee for consideration and approval.
Prior to our chapter 11 filing, we entered into an agreement with certain
of our secured creditors outlining, among other things, the terms of the
retention and severance plans described above and incentive compensation plans
for 2002 and 2003 covering approximately 75 employees. For both 2002 and 2003,
incentive compensation was to be based on our actual levels of cash flow
available for debt service and earnings before interest, taxes, depreciation and
amortization compared to the projected levels contained in our plan of
reorganization. Based on the achievement of the company performance measures
contained in the 2002 incentive compensation, the compensation committee
approved the payment of the maximum available bonuses for 2002 to our executive
officers, including bonuses of $1,350,000, $682,200, $457,500, $345,000 and
$267,600 for Messrs. Baker, Daniels, Pottle and Kuzia and Ms. Gray,
respectively, and these bonuses were paid in March 2003.
LONG-TERM INCENTIVES
Long-term incentives, including stock-based awards, are intended to relate
executive compensation to corporate performance, to help retain the service of
our executive officers and directors and to help align the long-term interests
of our executive officers and directors with those of our stockholders.
In connection with our emergence from bankruptcy in May 2002, restricted
stock awards to purchase an aggregate of 950,000 shares of common stock for
$.001 per share, vesting over three years through May 29, 2005, are being
granted to our senior management, including 268,850 shares to Mr. Baker, 157,700
shares to Mr. Daniels, 127,300 shares to Mr. Pottle, 78,850 shares to Mr. Kuzia
and 31,350 shares to Ms. Gray. These grants were approved by our former
creditors and the bankruptcy court.
The compensation committee, in consultation with professional compensation
advisors and with the intention to provide management with market-competitive
compensation, has modified the 2003 incentive compensation plan referenced above
and implemented a new long-term incentive plan. The modified 2003 incentive
compensation plan adds as an additional factor our actual levels of customer
disconnects, or churn, in relation to planned levels, and measures target
bonuses against our 2003 operating plan as approved by the board rather than the
projected operating results contained in our plan of reorganization. The new
long-term incentive plan utilizes the same performance measures as the modified
2003 incentive compensation plan and provides for payouts based on "phantom
stock" units three years after the beginning of the period for which applicable
incentive compensation is earned. Together, the modified 2003 incentive
compensation plan and new long-term incentive plan will provide the potential
for greater incentive compensation than the original 2003 incentive compensation
plan but may result in a reduction in the cash compensation payable in 2004.
17
EXECUTIVE EMPLOYMENT AGREEMENTS
We are a party to the executive employment agreements with Messrs. Baker,
Daniels and Pottle summarized above on pages 12-13 under the caption
"-- Executive Employment Agreements and Loans." The executive employment
agreements were approved by our former creditors and the bankruptcy court.
RETENTION PLAN
Pursuant to the retention plan summarized above on page 14 under the
caption "-- Retention Plan," retention bonuses are being paid to approximately
60 executives, including $726,000, $600,000, $600,000, $200,000 and $200,000,
respectively, to Messrs. Baker, Daniels, Pottle and Kuzia and Ms. Gray. The
retention plan was established because of the critical need to retain key
executives during our chapter 11 reorganization process and was approved by our
former creditors and the bankruptcy court.
SEVERANCE PLAN
The severance plan summarized above on page 14 under the caption
"-- Severance Plan" provides severance benefits to our employees, including the
named executive officers other than Messrs. Baker, Daniels and Pottle. The
severance plan was approved by our former creditors and the bankruptcy court.
Messrs. Baker, Daniels and Pottle are entitled to severance benefits under their
executive employment agreements.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction for compensation over $1,000,000 paid by a public company to its chief
executive officer and its four other most highly compensated executive officers.
Qualifying "performance-based" compensation is not subject to the deduction
limit if specified requirements are met. The restricted stock issuances to
senior management as part of our chapter 11 reorganization proceedings did not
qualify as performance-based compensation under section 162(m) of the Internal
Revenue Code. The compensation committee generally intends to structure future
stock options, if any, granted to our executive officers in a manner to qualify
as performance-based compensation but does not currently intend to qualify cash
compensation, cash-based long-term incentives or stock-based awards other than
stock options as performance-based compensation. The compensation committee will
continue to monitor the impact of section 162(m) on our company.
Dated: March 28, 2003 By the compensation committee,
William C. Redmond, Jr., Chairman
James V. Continenza
Eric Gold
Carroll D. McHenry
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of our compensation committee are James V. Continenza,
Eric Gold, Carroll D. McHenry and William E. Redmond, Jr.
C. Edward Baker, Jr., our chairman and chief executive officer, makes
recommendations and participates in discussions regarding executive
compensation, but he does not participate directly in discussions regarding his
own compensation. None of our current executive officers has served as a
director or member of the compensation committee, or other committee serving an
equivalent function, of any other entity, any of whose executive officers has
served as one of our directors or as a member of our compensation committee.
18
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total stockholder return on our
common stock for the period from May 30, 2002 (the first trading day following
the effectiveness of our plan of reorganization) through December 31, 2002 with
the cumulative total return on the Nasdaq Stock Market (U.S.) Index and the
Nasdaq Telecommunications Index, consisting of 303 telecommunications companies
whose stock is traded on Nasdaq.
The comparison below assumes $100 was invested on May 30, 2002 in our
common stock and in each of the above indices and, in each case, assumes
reinvestment of all dividends. Measurement points are on May 30, 2002, June 30,
2002, September 30, 2002 and December 31, 2002.
COMPARISON OF CUMULATIVE TOTAL RETURN* SINCE MAY 30, 2002
AMONG ARCH WIRELESS, INC., THE NASDAQ STOCK
MARKET (U.S.) INDEX AND THE NASDAQ TELECOMMUNICATIONS INDEX
[PERFORMANCE GRAPH]
5/30/02 6/30/02 9/30/02 12/31/02
------- ------- ------- --------
Arch Wireless, Inc. ..................................... $100.00 $40.00 $22.00 $82.00
Nasdaq Stock Market (U.S.)............................... 100.00 $86.93 $69.75 $79.57
Nasdaq Telecommunications................................ 100.00 $75.83 $69.64 $81.31
* Assume $100 was invested on 5/30/02 in stock or index, including reinvestment
of dividends.
19
PROPOSAL 2 -- APPROVAL OF AMENDMENT TO 2002 STOCK INCENTIVE PLAN
The 2002 stock incentive plan was established in connection with our
emergence from bankruptcy in May 2002. The 2002 plan provided that all 950,000
shares of common stock initially available under the plan would be issued as
restricted stock to certain members of our senior management in connection with
our emergence from bankruptcy, as summarized above on pages 14-15 under the
caption "Information About Executive Compensation -- 2002 Stock Incentive Plan."
As of December 31, 2002, no shares remained available for future issuance under
the 2002 plan. In order to provide equity incentives for the retention of our
outside directors, in May 2003 the board of directors approved an amendment to
our 2002 plan increasing the number of shares of common stock authorized for
issuance under the plan from 950,000 to 1,200,000, of which approximately
250,000 shares will be used to grant nonstatutory stock options with an exercise
price of $.001 per share to the non-employee directors who joined our board of
directors upon our emergence from bankruptcy and who are reelected to our board
at the annual meeting, and permitting the grant of nonstatutory stock options
with exercise prices below the fair market value of the common stock on the date
of grant. Because the nonstatutory stock options issued to the non-employee
directors will have a nominal exercise price, they may be treated as restricted
stock awards for federal income tax purposes.
Stockholder approval is not required for the amendment to our 2002 plan. We
are seeking stockholder approval because we believe doing so is consistent with
good corporate governance practices. If the stockholders do not approve the
amendment, the board of directors will reconsider the matter.
The board of directors believes that this amendment is in the best
interests of our company and stockholders and recommends that stockholders vote
FOR this proposal.
SUMMARY OF THE 2002 STOCK INCENTIVE PLAN
The 2002 stock incentive plan provides for the grant of the following types
of awards:
- restricted stock awards;
- incentive stock options intended to qualify under section 422 of the
Internal Revenue Code;
- nonstatutory stock options; and
- other stock-based awards, including the grant of shares based upon
specified conditions, the grant of securities convertible into common
stock and the grant of stock appreciation rights.
DESCRIPTION OF AWARDS
Restricted Stock Awards. Restricted stock awards entitle recipients to
acquire shares of common stock, subject to our right to repurchase all or part
of such shares from the recipient in the event that the conditions specified in
the applicable award are not satisfied prior to the end of the applicable
restriction period established for such award. The purchase price for restricted
stock awards may be less than the fair market value of the common stock on the
date of grant.
Incentive Stock Options and Nonstatutory Stock Options. Optionees receive
the right to purchase a specified number of shares of common stock at a
specified option price and subject to the other terms and conditions specified
in connection with the option grant. Incentive stock options must be granted at
an exercise price not less than the fair market value of the common stock on the
date of grant but, assuming the amendment is approved by stockholders, the
exercise price of nonstatutory stock options may be less than the fair market
value of the common stock on the date of grant. Options may not be granted for a
term in excess of ten years. The 2002 plan permits the board of directors to
determine the manner of payment of the exercise price of options, including
through payment by cash, check or in connection with a "cashless exercise"
through a broker, by surrender to us of shares of common stock (which shares are
owned for at least six months), by delivery to us of a promissory note, or by
any other lawful means.
20
Other Stock-Based Awards. Under the 2002 plan, the board of directors has
the right to grant other awards based upon the common stock having such terms
and conditions as the board of directors may determine. This may include the
grant of shares based upon specified conditions, the grant of securities
convertible into common stock and the grant of stock appreciation rights.
ELIGIBILITY TO RECEIVE AWARDS
Our officers, employees, directors, consultants and advisors and those of
our subsidiaries are eligible to be granted awards under the 2002 plan. Under
present law, however, incentive stock options may only be granted to our
employees and employees of our subsidiaries. The maximum number of shares with
respect to which awards may be granted to any participant under the 2002 plan
may not exceed 400,000 shares during any calendar year.
As of April 16, 2003, approximately 3,300 persons were eligible to receive
awards under the 2002 plan, including our executive officers and non-employee
directors. If the amendment to the 2002 plan is approved by stockholders,
approximately 250,000 shares will be used to grant stock options to our non-
employee directors as described below and there will be essentially no remaining
shares available for issuance under the 2002 plan. Except as described below
with respect to our non-employee directors, the granting of awards under the
2002 plan is discretionary, and we cannot now determine the number or type of
awards to be granted in the future to any particular person or group if shares
become available under the 2002 plan.
On May 1, 2003, the last reported sale price of our common stock on the OTC
Bulletin Board was $3.30 per share.
STOCK OPTION GRANTS TO INCUMBENT NON-EMPLOYEE DIRECTORS UPON STOCKHOLDER
APPROVAL
If the amendment to the 2002 plan is approved by stockholders, an aggregate
of approximately 250,000 shares of common stock will be used to grant
nonstatutory stock options with an exercise price of $.001 per share to the
non-employee directors who joined our board of directors upon our emergence from
bankruptcy. Each non-employee director who joined our board of directors upon
our emergence from bankruptcy and who is reelected to the board at the annual
meeting will receive a stock option for 41,666 shares. Subject to continued
service as a director, these stock options will vest 50% on May 29, 2003 and 50%
on May 29, 2004 and will immediately vest upon a change in control of our
company. TD Securities (USA), Inc., on behalf of the steering committee of our
prepetition secured creditors, indicated its support for the grant of these
stock options to our non-employee directors when these directors were recruited
to serve on our board following our emergence from bankruptcy. If the amendment
is approved and each of Messrs. Continenza, Gold, McHenry, Oristano, Redmond and
Thompson is reelected at the annual meeting, each of them will receive an option
to purchase 41,666 shares with an exercise price of $.001 per share, vesting as
described above. Mr. Rubin, as a new nominee for director, will not be eligible
to receive a stock option under the amendment.
ADMINISTRATION
The board of directors administers the 2002 plan. The board of directors
has the authority to adopt, amend and repeal the administrative rules,
guidelines and practices relating to the 2002 plan and to interpret the
provisions of the 2002 plan. Pursuant to the terms of the 2002 stock incentive
plan, the board of directors has authorized the compensation committee to
administer certain aspects of the 2002 stock plan, including the granting of
awards to executive officers. Subject to any applicable limitations in the 2002
plan, the board of directors, the compensation committee or any other committee
or subcommittee to whom the board delegates authority selects the recipients of
awards and determines:
- the number of shares of common stock subject to restricted stock awards,
including conditions for repurchase, issue price and repurchase price;
21
- the number of shares of common stock subject to options and the related
exercise price, vesting provisions and duration; and
- the number of shares of common stock subject to other stock-based awards
and the terms and conditions of such awards, including conditions for
repurchase, issue price and repurchase price.
The board of directors is required to make appropriate adjustments in
outstanding awards to reflect stock dividends, stock splits and certain other
events. In the event of our acquisition or liquidation, the board of directors
is authorized to provide for awards to be assumed or substituted for, to
accelerate the awards to make them fully exercisable prior to consummation of
the event or to provide for a cash-out of their value. If any option award
expires or is terminated, surrendered or canceled without having been fully
exercised, the unused shares of common stock covered by such option award will
again be available for grant under the 2002 plan, subject in the case of
incentive stock options to any limitation required under the Internal Revenue
Code.
AMENDMENT OR TERMINATION
No award may be made under the 2002 plan after May 29, 2012, but awards
previously granted may extend beyond that date. The board of directors may at
any time amend, suspend or terminate the 2002 plan, except that to the extent
required by section 162(m) of the Internal Revenue Code, no award intended to
comply with section 162(m) by the board of directors after the date of such
amendment shall become exercisable, realizable or vested unless and until such
amendment shall have been approved by our stockholders.
FEDERAL INCOME TAX CONSEQUENCES
The following summarizes the United States federal income tax consequences
that generally will arise with respect to awards granted under the 2002 plan.
This summary is based on the tax laws in effect as of the date of this proxy
statement. Changes to these laws could alter the tax consequences described
below.
RESTRICTED STOCK AWARDS
A participant will not have income upon the grant of restricted stock
unless an election under section 83(b) of the Internal Revenue Code is made
within 30 days of the date of grant. If a timely 83(b) election is made, then a
participant will have compensation income equal to the value of the stock less
the purchase price. When the stock is sold, the participant will have capital
gain or loss equal to the difference between the sales proceeds and the value of
the stock on the date of grant. If the participant does not make an 83(b)
election, then when the stock vests the participant will have compensation
income equal to the value of the stock on the vesting date less the purchase
price. When the stock is sold, the participant will have capital gain or loss
equal to the sales proceeds less the value of the stock on the vesting date. Any
capital gain or loss will be long-term if the participant held the stock for
more than one year and otherwise will be short-term.
INCENTIVE STOCK OPTIONS
A participant will not have income upon the grant of an incentive stock
option. Also, except as described below, a participant will not have income upon
exercise of an incentive stock option if the participant has been employed by us
or one of our 50% or more-owned corporate subsidiaries at all times beginning
with the option grant date and ending three months before the date the
participant exercises the option. If the participant has not been so employed
during that time, then the participant will be taxed as described below under
the caption "Nonstatutory Stock Options." The exercise of an incentive stock
option may subject the participant to the alternative minimum tax.
A participant will have income upon the sale of the stock acquired under an
incentive stock option at a profit (if sales proceeds exceed the exercise
price). The type of income will depend on when the participant sells the stock.
If a participant sells the stock more than two years after the option was
granted
22
and more than one year after the option was exercised, then all of the profit
will be long-term capital gain. If a participant sells the stock prior to
satisfying these waiting periods, then the participant will have engaged in a
disqualifying disposition and a portion of the profit will be ordinary income
and a portion may be capital gain. This capital gain will be long-term if the
participant has held the stock for more than one year and otherwise will be
short-term. If a participant sells the stock at a loss (sales proceeds are less
than the exercise price), then the loss will be a capital loss. This capital
loss will be long-term if the participant held the stock for more than one year
and otherwise will be short-term.
NONSTATUTORY STOCK OPTIONS
A participant will not have income upon the grant of a nonstatutory stock
option. A participant will have compensation income upon the exercise of a
nonstatutory stock option equal to the value of the stock on the day the
participant exercised the option less the exercise price. Upon sale of the
stock, the participant will have capital gain or loss equal to the difference
between the sales proceeds and the value of the stock on the day the option was
exercised. This capital gain or loss will be long-term if the participant has
held the stock for more than one year and otherwise will be short-term.
OTHER STOCK-BASED AWARDS
The tax consequences associated with any other stock-based award granted
under the 2002 plan will vary depending on the specific terms of such award.
Among the relevant factors are whether or not the award has a readily
ascertainable fair market value, whether or not the award is subject to
forfeiture provisions or restrictions on transfer, the nature of the property to
be received by the participant under the award, and the participant's holding
period and tax basis for the award or underlying common stock.
TAX CONSEQUENCES TO US
There will be no tax consequences to us except that we will be entitled to
a deduction when a participant has compensation income. Any such deduction will
be subject to the limitations of section 162(m) of the Internal Revenue Code.
23
PROPOSAL 3 -- ADOPTION OF AN AGREEMENT AND PLAN OF MERGER PROVIDING FOR THE
MERGER OF OUR COMPANY WITH A WHOLLY-OWNED SUBSIDIARY THAT WILL RESULT IN THE
IMPOSITION OF TRANSFER RESTRICTIONS ON OUR COMMON STOCK
To help protect the tax benefits associated with our federal income tax
attributes, the board of directors has approved, subject to stockholder
approval, an Agreement and Plan of Merger between our company and Arch 382
Corporation, a wholly-owned subsidiary, that will result in the imposition of
the restrictions on transfer of our stock described below. The Agreement and
Plan of Merger is attached as Appendix B. The complete text of the transfer
restrictions will be contained in Article FOURTH of our certificate of
incorporation, which will be amended in the merger. The text of the amended
Article FOURTH is set forth in Appendix C.
The board of directors believes that the merger, and the resultant transfer
restrictions, are in the best interests of our company and stockholders and
recommends that stockholders vote FOR this proposal.
REASON FOR THE MERGER
We currently anticipate generating taxable losses for the next several
years. We estimate that at December 31, 2003 our tax net operating losses will
be between $175 million and $200 million. Under current tax law, these net
operating losses will not expire until December 31, 2023. We currently
anticipate that we will have sufficient tax deductions from our operations
following our emergence from chapter 11, including from the federal income tax
attributes that we retained after our emergence from chapter 11, to offset
future federal taxable income (before these deductions) for the next several
years. The extent to which these tax attributes will be available to offset
future federal taxable income depends on factual and legal matters that are
subject to varying interpretations. Therefore, despite our expectations, it is
possible that we may not have sufficient tax attributes to offset future federal
taxable income.
If we experience a change in ownership, as defined in sections 382 and 383
of the Internal Revenue Code, we could have significant limits on the amounts
and timing of the use of various tax attributes. Generally, a change in
ownership will occur if a cumulative change in ownership of more than 50%
occurs. The cumulative change in ownership is a measurement of the change in
ownership of our stock held by all of our 5% stockholders. In general terms, it
will equal the aggregate of any increase in the percentage of stock owned by
each 5% stockholder over the lowest percentage of stock owned by each of them
during the prior three years, but not prior to May 29, 2002, the day we emerged
from bankruptcy.
For example, if a stockholder owned 5.5% of our outstanding stock on May
29, 2002 and subsequently purchased additional shares so that it now owns 9.5%
of our outstanding stock, that stockholder's subsequent acquisitions of our
shares would contribute to a change in ownership of 9.5% minus 5.5%, or 4.0%. We
would combine the change in ownership calculations for all of our 5%
stockholders whose interests have increased to calculate the cumulative change
in ownership. If the aggregate increase in the ownership percentage of all of
these stockholders exceeds 50%, then a change in ownership will have occurred.
In making these calculations, all holders of less than 5% of our outstanding
stock generally will be combined and treated as one 5% stockholder. We believe
that since our emergence from chapter 11 we have undergone a cumulative change
in ownership of approximately 20%.
If the deductions associated with our tax attributes are insufficient to
offset future federal taxable income, or if a change in ownership occurs and our
deductions are limited, we would likely generate taxable income and would be
required to make current income tax payments. Any such payments would reduce our
cash available to repay our outstanding debt and could result in insufficient
cash being available to service our debt obligations. If we were to fail to make
required debt repayments, creditors could accelerate repayment of our
outstanding debt. In this circumstance, it is unlikely that we would have
sufficient liquidity to repay the debt, which could ultimately result in our
having to file for bankruptcy protection.
To help protect these tax benefits, the board of directors has approved,
subject to stockholder approval, the merger agreement providing for the merger
of our company with a wholly-owned subsidiary,
24
as described below. In the merger, outstanding shares of common stock will be
converted into the right to receive new shares of Class A common stock, which
will be subject to the transfer restrictions described below. The transfer
restrictions will prohibit certain transfers of our common stock after there has
been a cumulative change in ownership of our stock of more than 40%, unless
approved by the board of directors, and will prohibit any transfer of our common
stock to the extent that it would result in a cumulative change in ownership of
our stock of more than 42%. These levels were chosen so that inadvertent
transfers would not trigger a change in ownership and we would also have some
capacity to issue additional shares without triggering such a change.
However, we cannot assure you that the merger, even if it receives all
required approvals, will prevent a change in ownership or otherwise enable us to
avoid significant limitations on the amounts and timing of the use of our tax
attributes.
We now believe that we may generate federal taxable income sooner than the
time frame anticipated at the time the plan of reorganization for our chapter 11
bankruptcy was developed. In addition, we believe that our secured creditors
would have been opposed to any effort to impose transfer restrictions and would
not have supported the plan of reorganization if it had contained such
restrictions. As a result, we did not seek to impose similar transfer
restrictions as part of our chapter 11 bankruptcy.
TERMS OF THE MERGER AND CLASS A COMMON STOCK
In the merger, Arch Wireless, Inc. will merge with a wholly-owned
subsidiary. The subsidiary will be newly-formed for the specific purpose of the
merger and will have conducted no operations and have no assets or liabilities.
Arch Wireless, Inc. will be the surviving entity in the merger, and will
continue to engage in the business of providing one and two-way wireless
messaging and information services.
In the merger, each issued and outstanding share of common stock, $.001 par
value, will be converted into the right to receive one share of a new class of
security called Class A common stock, $.0001 par value. The rights of the Class
A common stock, $.0001 par value, will be identical in all respects to the
common stock, $.001 par value, except for the transfer restrictions described
below and the different par value. Immediately following the merger, no shares
of common stock, $.001 par value, will be outstanding. Once the transfer
restrictions are no longer necessary to protect the tax benefits associated with
our federal income tax attributes, the Class A common stock will be subject to
conversion back into common stock without transfer restrictions on a
share-for-share basis. We cannot predict if or when the transfer restrictions
will no longer be necessary to protect these tax benefits or, as a result, if or
when the Class A common stock will be subject to conversion back into common
stock, because this is dependent on, among other things, the timing and amount
of our future tax attributes and the future value of our stock.
TRANSFER RESTRICTIONS
If the merger is approved by stockholders and becomes effective, all
outstanding common stock will be converted into the right to receive Class A
common stock, which will be subject to the restrictions described below. After a
cumulative change in ownership of our stock of more than 40%, the following
transfers will be prohibited unless the transferor or transferee provides notice
of the transfer to us and the board of directors approves the transfer: (1)
transfers of Class A common stock by stockholders to a stockholder that holds 5%
or more of our outstanding stock, (2) transfers of Class A common stock by
stockholders who hold 5% or more of our outstanding stock to any person, entity
or group and (3) transfers of Class A common stock by stockholders to any
person, entity or group that, if consummated, would result in their ownership of
5% or more of our outstanding stock. In some circumstances, a stockholder may be
attributed the ownership of stock held by another person or entity for purposes
of determining whether the stockholder holds 5% or more of our outstanding
stock, and a holder of less than 5% of our outstanding stock may be considered a
holder of 5% or more of our outstanding stock for purposes of the restrictions
if that holder is treated as a 5% shareholder under section 382 of the Internal
Revenue Code.
25
The board of directors will approve a transfer of Class A common stock if
it determines in good faith that the transfer (1) would not result in a
cumulative change in ownership of our stock of more than 42% or (2) would not
increase the cumulative change in ownership of our stock. The board of directors
may require an opinion of counsel, at the expense of the transferor and/or
transferee, that the transfer would satisfy the conditions for approving the
transfer discussed in the preceding sentence. A transfer by a holder of 5% or
more of our outstanding stock who acquired such stock after our emergence from
chapter 11 generally will not increase the cumulative change in ownership of our
stock if that transfer occurs within three years of the holder's acquisition of
the stock.
Prior to a cumulative change in ownership of our stock of more than 40%, no
transfers of Class A common stock will be prohibited, but a transferor or
transferee must provide notice to us of any transfer by or to a holder of 5% or
more of our outstanding stock. However, notwithstanding the foregoing, any
transfer of Class A common stock will be prohibited to the extent that it would
result in a cumulative change in ownership of our stock of more than 42%. Any
transfer prohibited by the restrictions discussed above would not be given
effect and in general the shares would instead be transferred to an agent who
would be required to dispose of the shares to other purchasers that would not
own 5% or more of our outstanding stock following the transfer.
Similar restrictions will apply to the issuance or transfer of an option to
purchase Class A common stock, if the exercise of the option would result in a
transfer that would be prohibited pursuant to the restrictions described above.
Transfers by or to us and any transfer pursuant to (1) any merger,
consolidation or similar transaction approved in advance by the board of
directors or (2) any tender or exchange offer for any and all of our stock as to
which a majority of our outstanding stock is tendered, as long as the offeror
has committed to acquire any shares not tendered for the same type and amount of
consideration paid in the offer, will be exempt from these restrictions.
If Proposal 2 is approved and the stock options to purchase approximately
250,000 shares are granted to our non-employee directors, our cumulative change
in ownership will increase to approximately 21%. At the request of Franklin
Resources, Inc., which owned approximately 10.6% of our outstanding common stock
as of April 16, 2003, we are required to file a "shelf" registration statement
to permit Franklin to sell some or all of its common stock at any time and from
time to time. If the merger is approved, neither Franklin nor any of our other
stockholders would be exempt from the new transfer restrictions. If Franklin
sells all of its common stock, our cumulative change in ownership will increase
to approximately 31%. Franklin may sell common stock under the registration
statement we are required to file for up to two years after it is declared
effective. We cannot predict when, or if, sales by Franklin, or by any other
stockholder, will cause our cumulative change in ownership to equal 40%.
OTHER CONSEQUENCES OF THE MERGER
The merger will not change the proportionate equity interest of any
stockholder in our company. The Class A common stock will trade in the
over-the-counter market under the same symbol, AWIN, under which the common
stock traded prior to the merger. We have filed a listing application with, and
anticipate that the Class A common stock will trade on, the Boston Stock
Exchange under the same symbol, AWL, under which the common stock traded prior
to the merger. We will continue to file periodic and other reports with the
Securities and Exchange Commission. The merger will not result in any changes to
our certificate of incorporation, except as described in the following
paragraph, or any significant changes to our by-laws.
In the merger, Article FOURTH of our certificate of incorporation will be
amended to read in its entirety as set forth in Appendix C. As a result of the
merger, we will be authorized to issue a total of 50,000,000 shares of Class A
common stock, of which 20,250,000 shares will be outstanding or reserved for
future issuance, assuming the proposed increase in our 2002 stock incentive plan
(Proposal 2) is approved by stockholders. Following the merger, the authorized
shares of Class A common stock that are not outstanding or reserved for future
issuance, and the 50,000,000 authorized shares of common stock,
26
will be available for future issuance without further action by stockholders
except as required by applicable law and except for the new requirements for
stockholder approval for certain issuances of stock by us that will be
applicable if the amendment to our certificate of incorporation (Proposal 4)
described below on page 29 is approved. These shares could be issued for
possible future financing transactions, acquisitions, stock dividends and other
corporate purposes. We have no present intention to issue any additional shares
other than the approximately 250,000 shares that will become available under our
2002 stock incentive plan upon stockholder approval of the proposed amendment to
our 2002 stock incentive plan (Proposal 2 above) and, if the proposed amendment
is not approved by stockholders, the intention of the board of directors to
grant the non-employee directors who joined our board of directors upon our
emergence from bankruptcy an alternative, appropriate equity-based compensation
package. Stockholders do not have preemptive or other similar rights to acquire
the additional authorized shares.
The exchange of common stock for Class A common stock pursuant to the
merger will not be taxable to our stockholders. The tax basis and holding period
for the shares of Class A common stock received by stockholders will be the same
as the tax basis and holding period of the shares of common stock exchanged
pursuant to the merger.
The merger will not have any significant accounting consequences to us and
will not have any significant tax consequences to us other than the intended
benefits described above.
REQUIRED APPROVALS
The merger agreement must be adopted by the affirmative vote of the holders
of a majority of the issued and outstanding shares of common stock.
The merger must also be approved by the holders of a majority in principal
amount of the outstanding 10% notes and 12% notes issued by our wholly-owned
subsidiary, Arch Wireless Holdings, Inc. We anticipate receiving this consent
prior to the annual meeting.
The merger requires prior Federal Communications Commission approval of the
transfer of control of certain of our licenses. We filed all applications
requiring prior approval on March 21, 2003. The Federal Communications
Commission granted the applications on April 14, 2003. The Federal
Communications Commission requires that the approved merger be consummated by
June 13, 2003 and that it be notified by July 14, 2003. Both of these deadlines
can be extended by submitting a request to the Federal Communications
Commission. Although no prior Federal Communications Commission approval is
required for the pro forma transfer of control of the remainder of our licenses,
we must notify the Federal Communications Commission within 30 days of closing
on the merger that the merger has occurred.
No other federal or state regulatory approvals are required to complete the
merger, other than the filing of a certificate of merger in Delaware following
receipt of the approvals described above.
If we obtain the required stockholder approval, we plan to complete the
merger promptly following receipt of the other approvals required for the
merger.
POSSIBLE LOSS OF LIQUIDITY FOR SHARES
If the merger is approved and the transfer restrictions become effective,
stockholders may encounter difficulty in selling their shares because transfers
by or to holders of 5% or more of our outstanding stock will be prohibited after
there has been a cumulative change in ownership of our stock of more than 40%,
unless approved by the board of directors, and any transfer will be prohibited
to the extent that it would result in a cumulative change in ownership of our
stock of more than 42%. These transfer restrictions could have the effect of
decreasing the liquidity of your shares.
POSSIBLE ANTI-TAKEOVER EFFECTS
The transfer restrictions resulting from the merger, if approved by the
stockholders, could have the effect of preventing or delaying a change in
control of our company. However, the transfer restrictions are
27
not being proposed in response to any specific effort to acquire control of our
company and should not interfere with any merger or any other business
combination approved by the board of directors or any tender or exchange offer
for any and all of our stock, provided that such offer is accepted by the
holders of a majority of our outstanding stock and the offeror has committed to
undertake a second-step merger to acquire the remainder of our outstanding stock
for the same type and amount of consideration paid in the offer.
NO APPRAISAL RIGHTS
Stockholders do not have appraisal rights in connection with the merger.
EXCHANGE OF STOCK CERTIFICATES
If the merger is approved, stock certificates representing common stock
will be exchanged for new certificates representing Class A common stock.
Following the merger, instructions for exchanging stock certificates will be
mailed to all stockholders. Please do not submit any stock certificates at this
time.
28
PROPOSAL 4 -- APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF
INCORPORATION THAT WILL REQUIRE STOCKHOLDER APPROVAL FOR
CERTAIN ISSUANCES OF OUR COMMON STOCK
The board of directors believes that stockholders should have the
opportunity to approve certain additional issuances of stock that would result
in substantial dilution to existing stockholders. Accordingly, the board of
directors has approved, subject to stockholder approval, an amendment to our
certificate of incorporation that will require stockholder approval for certain
future issuances of our stock that equal 15% or more of our stock outstanding
before the issuance. If the amendment is approved, the complete text of the
proposed amendment to our certificate of incorporation will be contained in a
new Article THIRTEENTH of our certificate of incorporation. The text of the new
Article THIRTEENTH is set forth in Appendix D.
The stockholder approval requirement that will be included in our
certificate of incorporation if the amendment is approved is based on rules
applicable to companies that are listed on the Nasdaq National Market. The
stockholder approval requirement proposed for our certificate of incorporation
is similar to Nasdaq Marketplace Rules 4350(i)(1)(C) and (D), but would apply to
issuances of more than 15% of our outstanding common stock, rather than the
higher threshold of more than 20% that would be required if we were subject to
current the Nasdaq rules. We are not subject to the Nasdaq Marketplace Rules
because our common stock is not listed on the Nasdaq National Market. The board
has approved this amendment, including the 15% threshold, because it believes
stockholders should have the opportunity to approve certain additional issuances
of stock that would result in substantial dilution to existing stockholders.
If approved, the amendment will require stockholder approval in connection
with the acquisition of the stock or assets of another company if:
- the shares of our common stock or Class A common stock (or securities
convertible into or exercisable for our common stock or Class A common
stock) to be issued in connection with the acquisition have or will have
upon issuance voting power equal to or more than 15% of the voting power
of our shares of common stock and Class A common stock outstanding on the
date that a definitive agreement providing for the acquisition or
issuance is entered into by us; or
- the number of shares of our common stock or Class A common stock to be
issued in connection with the acquisition is or will be upon issuance
equal to or more than 15% of the number of shares of our common stock and
Class A common stock outstanding on the date that a definitive agreement
providing for the acquisition or issuance is entered into by us.
The amendment will also require stockholder approval in connection with a
transaction, other than a public offering, involving the sale, issuance or
potential issuance by us of our common stock or Class A common stock (or
securities convertible into or exercisable for our common stock or Class A
common stock) at a price less than the greater of book or market value which,
together with sales by our officers, directors or substantial shareholders as
part of or in connection with the same transaction, equals 15% or more of our
common stock and Class A common stock or 15% or more of the voting power of our
common stock and Class A common stock outstanding on the date that a definitive
agreement providing for the transaction is entered into by us.
The board of directors believes that this amendment to our certificate of
incorporation is in the best interests of our company and stockholders and
recommends that stockholders vote FOR this proposal.
29
PROPOSAL 5 -- RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors, on the recommendation of the audit committee, has
selected the firm of PricewaterhouseCoopers LLP as our independent public
accountants for the year ending December 31, 2003. Although stockholder approval
of the board of directors' selection of PricewaterhouseCoopers LLP is not
required by law, the board of directors believes that it is advisable to give
stockholders an opportunity to ratify this appointment. If the stockholders do
not ratify the selection of PricewaterhouseCoopers LLP as our independent public
accountants, the board of directors will reconsider the matter.
The board of directors recommends a vote "FOR" the ratification of the
selection of PricewaterhouseCoopers LLP as our independent public accountants.
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the annual meeting and will have the opportunity to make a statement, if
desired, and will be available to respond to appropriate questions from
stockholders.
CHANGE IN INDEPENDENT PUBLIC ACCOUNTANTS
On June 27, 2002, our board of directors and our audit committee dismissed
Arthur Andersen LLP as our independent auditors and engaged
PricewaterhouseCoopers LLP to serve as our independent auditors for the fiscal
year ending December 31, 2002, effective June 27, 2002. Arthur Andersen LLP's
audit report on our consolidated financial statements for each of the fiscal
years ended December 31, 2000 and 2001, respectively, contained an explanatory
paragraph regarding our ability to continue as a going concern. Except as stated
above, Arthur Andersen LLP's reports on our consolidated financial statements
for each of the fiscal years ended December 31, 2000 and 2001 did not contain
any adverse opinion or disclaimer of opinion, nor were they qualified or
modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended December 31, 2000 and 2001 and through June
2002, there were no disagreements with Arthur Andersen LLP on any matter of
accounting principle or practice, financial statement disclosure, or auditing
scope or procedure which, if not resolved to Arthur Andersen LLP's satisfaction,
would have caused them to make reference to the subject matter in conjunction
with their report on our consolidated financial statements for such years; and
there were no reportable events as defined in Item 304(a)(1)(v) of Regulation
S-K.
We requested Arthur Andersen LLP to furnish us with a letter addressed to
the Securities and Exchange Commission stating whether or not it agrees with the
above statements. A copy of that letter, dated June 28, 2002, was included with
our current report on Form 8-K, filed with the Securities and Exchange
Commission on June 27, 2002.
Prior to their engagement, neither we, nor anyone acting on our behalf,
consulted PricewaterhouseCoopers LLP with respect to the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on our consolidated
financial statements, or any other matters or reportable events as set forth in
Items 304(a)(2)(i) and (ii) of Regulation S-K.
INDEPENDENT AUDITORS FEES
Aggregate fees of PricewaterhouseCoopers LLP for professional services
rendered to us for the year ended December 31, 2002 were:
Audit................................. $541,061
Audit-related......................... 58,000
Tax................................... 52,500
All other............................. --
--------
Total................................. $651,561
========
30
The audit fees were for professional services rendered for the audits of
our consolidated financial statements and for reviews of our consolidated
financial statements included in our quarterly reports on Form 10-Q for the
quarters ended June 30, 2002 and September 30, 2002. The audit-related fees were
for assurance and related services related to the audit of our 401(k) plans. The
tax fees were for services related to tax compliance, including the review and
preparation of tax returns and consultations relating to tax planning and tax
advice.
The audit committee authorized our management to incur fees for non-audit
services, including audits of benefit plans, assistance with Securities and
Exchange Commission filings and tax preparation and planning consultations not
to exceed, in the aggregate, 50% of annual audit fees. The audit committee
further delegated authority to its chairman to approve fees in excess of the 50%
limitation and to approve fees for non-audit services not specifically listed
above.
31
STOCKHOLDER PROPOSALS FOR 2004 ANNUAL MEETING
Any proposal that a stockholder intends to present at the 2004 annual
meeting of stockholders must be submitted to our corporate secretary at our
offices, 1800 West Park Drive, Suite 250, Westborough, Massachusetts 01581, no
later than January 10, 2004 in order to be considered for inclusion in the proxy
statement relating to that meeting.
In addition, our by-laws require that we be given advance notice of
stockholder nominations for election to the board of directors and of other
matters which stockholders wish to present for action at an annual meeting of
stockholders, other than matters included in our proxy statement in accordance
with SEC Rule 14a-8. The required notice must be made in writing and received by
our corporate secretary at our principal executive offices not less than 60 days
nor more than 90 days prior to the first anniversary of the preceding year's
annual meeting of stockholders. However, in the event that the annual meeting of
stockholders in any year is advanced by more than 20 days, or delayed by more
than 60 days, from the first anniversary of the preceding year's annual meeting
of stockholders, a stockholder's notice must be received no earlier than 90 days
prior to such annual meeting and not later than the close of business on the
later of (A) the 60th day prior such annual meeting and (B) the 10th day
following the day on which notice of the date of such annual meeting was mailed
or public disclosure of the date of such annual meeting was made, whichever
occurs first. The date of our 2004 annual meeting of stockholders has not yet
been established, but assuming it is held on May 13, 2004, in order to comply
with the time periods set forth in our by-laws, appropriate notice for the 2004
annual meeting would need to be provided to our corporate secretary no earlier
than February 13, 2004 and no later than March 14, 2004.
OTHER MATTERS
The board of directors knows of no other business which will be presented
for consideration at the annual meeting other than that described above.
However, if any other business should come before the annual meeting, it is the
intention of the persons named in the enclosed proxy to vote, or otherwise act,
in accordance with their best judgment on such matters.
We will bear the costs of soliciting proxies. In addition to solicitation
by mail, our directors, officers and regular employees may, without additional
remuneration, solicit proxies by telephone, telegraph, facsimile and personal
interviews. We have retained MacKenzie Partners, Inc., a proxy solicitation
firm, for assistance in connection with the annual meeting for a fee of
approximately $8,000 plus expenses. We will also request brokerage houses,
custodians, nominees and fiduciaries to forward copies of the proxy material to
those persons for whom they hold shares and request instructions for voting the
proxies. We will reimburse such brokerage houses and other persons for their
reasonable expenses in connection with this distribution.
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE
WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK
PERSONALLY.
By order of the board of directors,
PATRICIA A. GRAY,
Secretary
May 9, 2003
Westborough, Massachusetts
32
APPENDIX A
ARCH WIRELESS, INC.
AND CONSOLIDATED SUBSIDIARIES (THE "COMPANY")
Audit Committee Charter
--------------------------------------------------------------------------------
AUDIT COMMITTEE MISSION
The primary mission of the audit committee is to assist the board in
fulfilling its oversight responsibilities by reviewing the financial information
that will be provided to shareholders and others, the systems of internal
controls that management and the board of directors have established and all
audit processes.
MEMBERSHIP
The audit committee shall be comprised of at least three (3) members. All
members shall be able to read and understand fundamental financial statements,
have knowledge of financial matters sufficient to discharge their
responsibilities and be diligent in the exercise of their responsibilities
hereunder. At least one member of the audit committee shall have accounting or
related financial management expertise, as the board of directors interprets
such qualification in its business judgment. Unless otherwise determined by the
board of directors (in which case disclosure of such determination shall be made
in the Company's filings with the Securities and Exchange Commission ("SEC")),
at least one member of the audit committee shall be a "financial expert" (as
defined by applicable SEC rules). Unless a chairperson is elected by the board
of directors, the committee shall choose a chairperson annually. Only
independent directors will serve on the audit committee, except as otherwise
permitted under the Sarbanes-Oxley Act of 2002 (the "2002 Act"), and rules
promulgated by the Securities and Exchange Commission ("SEC"), and the National
Association of Securities Dealers, Inc. and The Nasdaq Stock Market, Inc.
(collectively, "Nasdaq"). An independent director is free of relationships that
could adversely influence his or her independent judgment as a committee member.
An independent director may not be associated with a major vendor to, or
customer of, the Company, may not receive payments from the Company other than
for board or committee service or reimbursement of expenses in connection with
such service or otherwise be considered an "affiliated person" of the Company
under the 2002 Act and shall otherwise meet the definition of independent
director under the 2002 Act and applicable law, and rules, regulations and
standards promulgated by the SEC and Nasdaq.
GENERAL RESPONSIBILITIES
1. The audit committee shall assist the board of directors in fulfilling
their responsibilities to shareholders concerning the Company's accounting and
reporting practices, and shall facilitate open communication among the internal
auditors and other Company management, the independent accountant and the board
of directors.
2. The audit committee shall keep a record of its meetings and provide
reports of such meetings and its activities to the full board of directors and
may make appropriate recommendations.
3. The audit committee is authorized to engage independent counsel and
other advisers, as it determines necessary to carry out its duties, and
determine the appropriate funding therefor to be provided by the Company without
further action from the board of directors. The audit committee shall have
complete and unrestricted access to Company management and other employees, and
such of the Company's books and records, as it determines necessary to fulfill
its responsibilities hereunder and under applicable laws and listing standards.
4. The audit committee has the power to conduct or authorize
investigations into matters within the committee's scope of responsibilities.
The committee is authorized to retain independent counsel, accountants or other
advisers to assist in an investigation.
A-1
5. The audit committee shall meet at least four times each year, unless
otherwise determined by the committee, and more frequently if circumstances make
that preferable. The committee shall prepare a schedule of its meetings, and
agendas therefor, at least annually. The audit committee chairman is authorized
to convene a committee meeting whenever he or she deems it necessary. An audit
committee member should not vote on any matter in which he or she is not
independent. The committee may ask members of management or others to attend the
meeting and is authorized to receive all pertinent information from management.
The actions of the committee shall be governed by the Delaware General
Corporation Law and the Company's charter and bylaws.
6. The audit committee shall perform the functions indicated in the
charter and such other functions and carry out such other responsibilities as
may be required under the Company's charter or bylaws, applicable laws and
listing standards, or as requested by the Board of Directors not otherwise set
forth herein, including, without limitation, the following:
6.1 The audit committee shall establish procedures as appropriate or
required for: (A) the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting controls,
or auditing matters; and (B) the confidential, anonymous submission by
employees of the Company of concerns regarding questionable accounting or
auditing matters;
6.2 Prior to engaging the auditor for such services, the audit
committee shall be responsible for reviewing and approving any of the
following services proposed to be performed by the Company's auditors: (A)
all auditing services (including comfort letters in connection with any
underwriting), and (B) all non-audit services, including tax services,
permitted under the 2002 Act. The audit committee may delegate this
responsibility to one or more of its members. The audit committee will
cause the Company to disclose its approval of any such non-audit services
in the Company's periodic report filed with the SEC if and when determined
required or appropriate.
7. The audit committee shall discharge its responsibilities, and shall
assess information provided by the Company's management and the outside auditor
and advisers, in accordance with its business judgment. In exercising its
business judgment, the audit committee may rely on the information and advice
provided by the Company and the outside auditor and advisers.
8. The audit committee shall be responsible for reviewing and approving
any related party transactions as may be defined from time to time under
applicable listing standards, SEC rules or otherwise defined by the board of
directors, except to the extent delegated to another committee of the board.
9. Prior to the Company's issuance of any earnings release, the audit
committee shall review and approve such release.
10. The audit committee shall review all audits, examinations and comment
letters of all regulatory agencies and third parties delivered to the Company.
11. The audit committee shall be responsible for ensuring, or, upon
appointment of any other committee of the Board charged with such
responsibility, coordinating with such committee to ensure, that the Company has
an effective system for monitoring compliance with applicable laws, regulations
and listing standards pertaining to financial reporting and audit functions.
RESPONSIBILITIES FOR ENGAGING INDEPENDENT ACCOUNTANTS
1. The audit committee shall be directly responsible for the appointment,
compensation and oversight of the work of any public accounting firm employed by
the Company (including resolution of disagreements between management and the
auditor regarding financial reporting) for the purpose of preparing or issuing
an audit report or related work, and each such registered public accounting firm
shall report directly to the audit committee. The audit committee, in its sole
discretion, may determine to recommend to the board of directors that the
selection of the outside auditor be proposed for ratification by shareholders in
any proxy statement. The audit committee shall determine the appropriate funding
to
A-2
be provided by the Company without further action from the board of directors
for payment of compensation to the registered public accounting firm employed by
the Company for the purpose of rendering or issuing an audit report. The audit
committee shall take appropriate actions to oversee the independence of the
independent accountant selected as auditor, including a review of all services
provided by the independent accountant and the fees paid for them at least
annually. The committee shall also ensure that they receive from such outside
auditor the written disclosures and letter from the outside auditor required by
Independence Standards Board Standard No. 1. The audit committee shall actively
engage in a dialogue with the auditor with respect to any disclosed
relationships or services that may impact the objectivity and independence of
the auditor and take appropriate action to ensure the outside auditor is
independent. Without limiting the foregoing, the committee shall obtain and
review any reports on the auditor issued by the Public Company Accounting
Oversight Board pursuant to the 2002 Act annually, if and when such reports are
issued.
2. The audit committee shall consider, in consultation with the
independent accountant and such of the Company's management as the audit
committee requests, the audit scope and procedural plans for the audit made by
the internal auditors and the independent accountant.
3. The audit committee shall take appropriate actions to coordinate the
activities of the internal auditor and the independent accountant. The purpose
of coordinating these efforts is to maximize coverage, reduce redundancy and use
audit resources effectively.
RESPONSIBILITIES FOR REVIEWING INTERNAL AUDITS, THE ANNUAL EXTERNAL AUDIT,
QUARTERLY AND ANNUAL FINANCIAL STATEMENTS, AND OTHER PUBLIC DOCUMENTS
1. The audit committee shall ascertain that the independent accountant
views the audit committee as its client, that it shall be available to the audit
committee and the full board of directors at least annually and that it shall
provide the committee with a timely analysis of significant financial reporting
issues.
2. The audit committee shall periodically ask management, the internal
auditor and the independent accountant about significant risks and exposures and
shall assess management's steps to minimize them.
3. The audit committee shall take appropriate actions to oversee and shall
periodically evaluate, the independence of the internal auditor. Without
limiting the foregoing, the audit committee shall review and, prior to any such
action by the Company, approve, any proposed personnel related action to hire,
dismiss or perform any annual or other formal evaluation of the performance, of
the Director of Internal Audit.
4. The audit committee shall review the following with the independent
accountant and the internal auditor periodically and at least once a year:
4.1 The adequacy of the Company's internal controls, including
computerized information system controls and security, and any fraud
involving management or other employees having a significant role in the
Company's internal controls.
4.2 Any significant findings and recommendations made by the
independent accountant or internal auditor, together with management's
responses to them.
4.3 Any deficiencies in disclosure controls and procedures.
5. The audit committee shall consider and review with management and the
internal auditor periodically and at least once a year:
5.1 Any significant findings and recommendations made by the internal
auditor during the year and management's response to them. 5.2 Any
difficulties the internal auditor encountered while conducting audits,
including any restrictions on the scope of their work or access to required
information.
A-3
5.3 The planned scope of management's internal audit plan that the
audit committee thinks advisable.
5.4 The Internal Audit Department charter.
5.5 The Internal Audit budget and staffing.
6. Following each SAS 71/100 and quarterly financial statement review, the
audit committee shall review the Company's financial statements and related
footnotes with management and the independent accountant.
7. After the annual financial statement audit is completed, the audit
committee shall review the following with management and the independent
accountant.
7.1 The Company's annual financial statements and related footnotes.
The audit committee shall determine, based on its review and discussions
referred to in this section, whether it recommends to the board of
directors that the audited financial statements be included in the
Company's annual report on Form 10-K for the last fiscal year for filing
with the SEC.
7.2 The independent accountant's audit of and report on the financial
statements.
7.3 Any serious difficulties or disputes with management encountered
during the course of the audit.
7.4 Anything else about the audit procedures or findings that AICPA
SAS 61 or GAAS requires the auditors to discuss with the committee or that
the audit committee in its business judgment deems relevant.
8. After each SAS 71/100 and quarterly financial review and each annual
financial statement audit is completed, the audit committee shall review the
following with management and the independent accountant:
8.1 Critical accounting policies and practices used, alternative
treatments of financial information within GAAP that have been discussed
with management, ramifications of the use of such alternative disclosures
and treatments, and the treatments preferred by the auditor, and other
material written communications between the auditor and management, such as
any management letter or schedule of unadjusted differences.
8.2 The auditor's qualitative judgments about the appropriateness,
not just the acceptability, of accounting principles and financial
disclosures and how aggressive (or conservative) the accounting principles
and underlying estimates are, together with the auditor's explanation of
complex or judgmental accounting entries.
8.3 Prior to the deadline for filing the Company's periodic reports
with the SEC, the audit committee shall review with the Chief Executive
Officer and the Chief Financial Officer their evaluation of the
effectiveness of the Company's disclosure controls and procedures, and
internal controls and procedures for financial reporting as required or
appropriate.
9. The audit committee shall review annual filings with the SEC and other
published documents containing the Company's financial statements and shall
consider whether the information in the filings is consistent with the
information in the financial statements.
10. The audit committee shall review the interim financial reports with
management, the independent accountant before those interim reports are released
to the public or filed with the SEC or other regulators.
11. The audit committee shall prepare a report for inclusion in the proxy
statement relating to the annual meeting of stockholders at which directors are
to be elected that describes the committee's composition and other matters
required under item 306 of regulation S-K or any other rules and
A-4
regulations of the SEC or Nasdaq or other laws applicable to financial statement
reporting or the audit committee.
PERIODIC RESPONSIBILITIES
1. Review and update the audit committee's charter annually.
2. Perform an assessment of the audit committee's performance of its
responsibilities hereunder at least annually in coordination with any committee
appointed by the Board charged with the responsibility for conducting and/or
monitoring Board and Board committee evaluations.
3. Meet with the internal auditor, the independent accountant and
management in separate executive sessions to discuss any matters the audit
committee or these groups believe should be discussed privately with the audit
committee.
A-5
APPENDIX B
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated this 6th day of May, 2003, pursuant to
Section 251 of the General Corporation Law of the State of Delaware, between
Arch 382 Corporation, a Delaware corporation having its principal place of
business at 1800 West Park Drive, Suite 250, Westborough, Massachusetts 01581
(the "Subsidiary"), and Arch Wireless, Inc., a Delaware corporation having its
principal place of business at 1800 West Park Drive, Suite 250, Westborough,
Massachusetts 01581 (the "Surviving Corporation").
W I T N E S S E T H:
WHEREAS, the Subsidiary is a corporation duly organized and existing under
the laws of the State of Delaware and is authorized to issue 1,000 shares of
common stock, $.001 par value per share ("Subsidiary Shares"), of which 100
shares are issued and outstanding as of the date hereof;
WHEREAS, the Surviving Corporation is a corporation duly organized and
existing under the laws of the State of Delaware and is authorized to issue
50,000,000 shares of common stock, $.001 par value per share ("Common Shares"),
of which 18,731,031 shares are issued and outstanding and 1,268,969 shares are
reserved for issuance as of the date hereof;
WHEREAS, the Subsidiary desires to merge itself into the Surviving
Corporation;
WHEREAS, the Surviving Corporation desires that the Subsidiary be merged
into itself; and
WHEREAS, the Boards of Directors of the Subsidiary and the Surviving
Corporation have adopted resolutions approving and declaring the advisability of
this Agreement and Plan of Merger.
NOW THEREFORE, in consideration of the foregoing premises and the
undertakings herein contained and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Merger. The Subsidiary shall be merged with and into the Surviving
Corporation pursuant to Section 251 of the General Corporation Law of the
State of Delaware. The Surviving Corporation shall survive the merger
herein contemplated and shall continue to be governed by the laws of the
State of Delaware. The separate corporate existence of the Subsidiary shall
cease forthwith upon the Effective Date (as defined below). The merger of
the Subsidiary into the Surviving Corporation shall herein be referred to
as the "Merger."
2. Effective Date. The Merger shall be effective upon the filing of
this Agreement and Plan of Merger or a Certificate of Merger with the
Secretary of State of the State of Delaware, which filing shall be made as
soon as practicable after (i) the execution of this Agreement and Plan of
Merger, (ii) all required stockholder approvals have been obtained and
(iii) all required consents from holders of 10% Senior Subordinated Secured
Notes due 2007 and 12% Subordinated Secured Compounding Notes due 2009 of
Arch Wireless Holdings, Inc., a wholly owned subsidiary of the surviving
Corporation. The time of such effectiveness shall herein be referred to as
the "Effective Date."
3. Capital Stock of the Subsidiary. On the Effective Date, by virtue
of the Merger and without any action on the part of the holders thereof,
each Subsidiary Share issued and outstanding immediately prior thereto
shall be cancelled without payment of any consideration therefor.
4. Capital Stock of the Surviving Corporation. On the Effective Date,
by virtue of the Merger and without any action on the part of the holder
thereof, each Common Share issued and outstanding immediately prior thereto
shall be converted into and represent the right to receive one (1) fully
paid and non-assessable share of Class A Common Stock, par value $.0001 per
share, of the Surviving Corporation (each, a "Merger Share" and
collectively, the "Merger Shares"). All such Common
B-1
Shares, when so converted, shall no longer be outstanding and shall
automatically be cancelled; and from and after the Effective Date each
holder of a certificate representing any such Common Shares (a
"Certificate") shall cease to have any rights with respect thereto, except
the right to receive one (1) Merger Share for each Common Share formerly
represented thereby.
5. Exchange of Shares.
(a) Prior to the Effective Date, the Surviving Corporation shall
appoint an exchange agent (the "Exchange Agent") to effect the issuance of
Merger Shares in exchange for Certificates. Promptly following the
Effective Date, the Surviving Corporation shall deliver to the Exchange
Agent, in trust for the benefit of holders of Certificates, a stock
certificate (issued in the name of the Exchange Agent or its nominee)
representing the Merger Shares. As soon as practicable after the Effective
Date, the Surviving Corporation shall cause the Exchange Agent to send a
notice and a transmittal form to each holder of a Certificate advising such
holder of the effectiveness of the Merger and the procedure for
surrendering to the Exchange Agent such Certificate in exchange for the
Merger Shares issuable pursuant to Section 4. Each holder of a Certificate,
upon proper surrender thereof to the Exchange Agent in accordance with the
instructions in such notice, shall be entitled to receive in exchange
therefor the Merger Shares issuable pursuant to Section 4. Until properly
surrendered, each such Certificate shall be deemed for all purposes to
evidence only the right to receive the Merger Shares issuable pursuant to
Section 4. Holders of Certificates shall not be entitled to receive the
Merger Shares to which they would otherwise be entitled until such
Certificates are properly surrendered.
(b) If any Merger Shares are to be issued in the name of a person
other than the person in whose name the Certificate surrendered in exchange
therefor is registered, it shall be a condition to the issuance of such
Merger Shares that (i) the Certificate so surrendered shall be
transferable, and shall be properly assigned, endorsed or accompanied by
appropriate stock powers, (ii) such transfer shall be permitted under the
provisions of the Restated Certificate of Incorporation of the Surviving
Corporation, as amended on the Effective Date, (iii) such transfer shall
otherwise be proper, and (iv) the person requesting such transfer shall pay
to the Exchange Agent any transfer or other taxes payable by reason of the
foregoing or establish to the satisfaction of the Exchange Agent that such
taxes have been paid or are not required to be paid. Notwithstanding the
foregoing, neither the Exchange Agent nor any other party shall be liable
to a former holder of Common Shares for any Merger Shares issuable to such
former holder pursuant to Section 4 that are delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed, the Surviving
Corporation shall issue or cause to be issued in exchange for such lost,
stolen or destroyed Certificate certificates representing the Merger Shares
issuable in exchange therefor pursuant to Section 4. The Board of Directors
of the Surviving Corporation may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen
or destroyed Certificate to give the Surviving Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made
against the Surviving Corporation with respect to the Certificate alleged
to have been lost, stolen or destroyed.
(d) No dividends or other distributions that are payable to the
holders of record of Merger Shares as of a date on or after the Effective
Date shall be paid to former holders of Common Shares entitled by reason of
the Merger to receive Merger Shares until such holders surrender their
Certificates for the Merger Shares. Following surrender of any such
Certificate, there shall be paid to the holder of the certificate
representing the Merger Shares issued in connection therewith, without
interest, (i) at the time of such surrender, the proportionate amount of
any dividends or other distributions with a record date after the Effective
Date theretofore paid with respect to such Merger Shares, and (ii) at the
appropriate payment date, the proportionate amount of any dividends or
other
B-2
distributions with a record date after the Effective Date but prior to such
surrender and a payment date subsequent to such surrender payable with
respect to such Merger Shares.
6. No Further Rights. From and after the Effective Date, no Common
Shares shall be deemed to be outstanding, and holders of Certificates shall
cease to have any rights with respect thereto, except as provided herein or
by law.
7. Closing of Transfer Books. At the Effective Date, the stock
transfer books of the Surviving Corporation shall be closed and no transfer
of Common Shares shall thereafter be made. If, after the Effective Date,
Certificates are presented to the Surviving Corporation or the Exchange
Agent, they shall be cancelled and exchanged for Merger Shares in
accordance with Sections 4 and 5 hereof.
8. Succession. On the Effective Date, the Surviving Corporation shall
succeed to all of the rights, privileges, debts, liabilities, powers and
property of the Subsidiary in the manner of and as more fully set forth in
Section 259 of the General Corporation Law of the State of Delaware.
Without limiting the foregoing, upon the Effective Date, all property,
rights, privileges, franchises, patents, trademarks, licenses,
registrations, and other assets of every kind and description of the
Subsidiary shall be transferred to, vested in and devolved upon the
Surviving Corporation without further act or deed and all property, rights,
and every other interest of the Subsidiary and the Surviving Corporation
shall be as effectively the property of the Surviving Corporation as they
were of the Subsidiary and the Surviving Corporation, respectively. All
rights of creditors of the Subsidiary and all liens upon any property of
the Subsidiary shall be preserved unimpaired, and all debts, liabilities
and duties of the Subsidiary shall attach to the Surviving Corporation as
though it had been the party thereto in lieu of the Subsidiary and may be
enforced against the Surviving Corporation to the same extent as if said
debts, liabilities and duties had been incurred or contracted by it.
9. Certificate of Incorporation and By-Laws. The Restated Certificate
of Incorporation of the Surviving Corporation in effect on the Effective
Date shall be amended by deleting Article FOURTH thereof in its entirety
and inserting in lieu thereof the text set forth on Exhibit A attached
hereto and, as so amended, shall continue to be the Restated Certificate of
Incorporation of the Surviving Corporation until further amended in
accordance with the provisions thereof and applicable law. The By-Laws of
the Surviving Corporation in effect on the Effective Date shall be the
By-Laws of the Surviving Corporation until amended in accordance with the
provisions thereof and applicable law.
10. Directors and Officers. The members of the Board of Directors and
the officers of the Surviving Corporation on the Effective Date shall
continue in office until the expiration of their respective terms of office
and until their successors have been elected and qualified.
11. Further Assurances. From time to time, as and when required by
the Surviving Corporation or by its successors and assigns, there shall be
executed and delivered on behalf of the Subsidiary such deeds and other
instruments, and there shall be taken or caused to be taken by it such
further and other action, as shall be appropriate or necessary in order to
vest or perfect in or to confirm of record or otherwise in the Surviving
Corporation the title to and possession of all the property, interests,
assets, rights, privileges, immunities, powers, franchises and authority of
the Subsidiary, and otherwise to carry out the purposes of this Agreement
and Plan of Merger, and the officers and directors of the Subsidiary are
fully authorized in the name and on behalf of the Subsidiary or otherwise
to take any and all such action and to execute and deliver any and all such
deeds and other instruments.
12. Abandonment. At any time prior to the Effective Date, this
Agreement and Plan of Merger may be terminated and the Merger may be
abandoned by the Board of Directors of either the Subsidiary or the
Surviving Corporation or both, notwithstanding approval of this Agreement
and Plan of Merger by the stockholders of the Subsidiary or the Surviving
Corporation.
13. Amendment. This Agreement and Plan of Merger may be amended by
the Boards of Directors of the Subsidiary and the Surviving Corporation at
any time before or after approval of the matters presented in connection
with the Merger by the stockholders of either party, but, after any
B-3
such approval, no amendment shall be made which by law requires further
approval by such stockholders without such further approvals.
14. Governing Law. This Agreement and Plan of Merger and the legal
relations between the parties shall be governed by and construed in
accordance with the laws of the State of Delaware.
15. Counterparts. In order to facilitate the filing and recording of
this Agreement and Plan of Merger, the same may be executed in any number
of counterparts, each of which shall be deemed to be an original.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
B-4
IN WITNESS WHEREOF, each of the Subsidiary and the Surviving Corporation
has caused this Agreement and Plan of Merger to be executed and attested on its
behalf by its officers thereunto duly authorized, as of the date first above
written.
ARCH WIRELESS, INC.
By: /s/ GERALD J. CIMMINO
------------------------------------
Name: Gerald J. Cimmino
Title: Vice President and
Treasurer
ATTEST:
/s/ PATRICIA A. GRAY
--------------------------------------
Name: Patricia A. Gray
Title: Secretary
ARCH 382 CORPORATION
By: /s/ GERALD J. CIMMINO
------------------------------------
Name: Gerald J. Cimmino
Title: Vice President and
Treasurer
ATTEST:
/s/ PATRICIA A. GRAY
--------------------------------------
Name: Patricia A. Gray
Title: Secretary
B-5
EXHIBIT A
[SEE APPENDIX C]
B-6
APPENDIX C
AMENDED ARTICLE FOURTH OF CERTIFICATE OF INCORPORATION
FOURTH:
1. Capital Stock. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 100,000,000 shares, of
which 50,000,000 shares shall be shares of Common Stock, $.001 par value per
share ("Common Stock"), and 50,000,000 shares shall be shares of Class A Common
Stock, $.0001 par value per share ("Class A Common Stock").
Except as otherwise set forth below in Section 2 of this Article FOURTH,
the powers, rights, preferences, limitations and restrictions of the Common
Stock and the Class A Common Stock shall be identical in all respects. Except as
otherwise provided by law, the holders of outstanding shares of Common Stock and
the holders of outstanding shares of Class A Common Stock, voting together as a
single class, shall possess the voting power for the election of directors and
for all other purposes, each holder of record of shares of Common Stock and each
holder of record of shares of Class A Common Stock being entitled to one vote
for each share of Common Stock or Class A Common Stock, respectively, standing
in its name on the books of the Corporation.
2. Restrictions on Class A Common Stock. In order to preserve the Tax
Benefits to which the Corporation is entitled pursuant to the Internal Revenue
Code of 1986, as amended, or any successor statute (collectively, the "Code")
and the Treasury Regulations thereunder, the Class A Common Stock shall be
subject to the following restrictions:
A. Definitions.
As used in this Article FOURTH, the following capitalized terms have
the following meanings when used herein with initial capital letters and
not otherwise defined herein (and any references to any portions of
Treasury Regulations sec.1.382-2T and sec.1.382-4(d) shall include any
amendments thereto and any successor provisions):
(1) "40% Ownership Change" means an ownership change of the
Corporation, as defined in Section 382, determined by substituting "40
percentage points" for "50 percentage points" in Section 382(g)(1) and
Treasury Regulations sec.1.382-2T(a)(1).
(2) "42% Ownership Change" means an ownership change of the
Corporation, as defined in Section 382, determined by substituting "42
percentage points" for "50 percentage points" in Section 382(g)(1) and
Treasury Regulations sec.1.382-2T(a)(1).
(3) "Agent" means any agent designated by the Board of Directors of
the Corporation pursuant to Section 2.C(2) of this Article FOURTH.
(4) "Corporation Securities" means (i) shares of Common Stock, (ii)
shares of Class A Common Stock and (iii) any other interest that is
treated as "stock" of the Corporation pursuant to Treasury Regulations
sec.1.382-2T(f)(18).
(5) "Excess Securities" mean any Class A Common Stock which is the
subject of a Prohibited Transfer.
(6) "Fair Market Value" shall mean, with respect to Class A Common
Stock on any specified date, the value thereof (i) calculated on the
basis of the closing market price for the Class A Common Stock on the
date prior to making such calculation, or (ii) if the Class A Common
Stock is not listed or admitted to trading on any stock exchange but is
traded in the over-the-counter market, calculated based upon the average
of the highest bid and lowest asked prices, as such prices are reported
by the National Association of Securities Dealers, Inc. on the date
prior to making such calculation or, if none, on the last preceding day
prior to making such calculation for which such quotations exist, or
(iii) if the Class A Common Stock is neither listed nor admitted to
trading on any stock exchange nor traded in the over-the-counter market,
C-1
as determined in good faith by the Board of Directors based upon the
advice of an independent investment banking firm or independent
financial advisor.
(7) "Five-Percent Shareholder" means a Person or group of Persons
that is a "5-percent shareholder" of the Corporation pursuant to
Treasury Regulations sec.1.382-2T(g).
(8) "Mandatory Conversion Date" means the date on which the
transfer agent for the Class A Common Stock receives a written
determination by the Board of Directors of the Corporation that the
Restriction Release Date has occurred.
(9) "Percentage Stock Ownership" means a percentage stock ownership
interest as determined in accordance with Treasury Regulations
sec.1.382-2T(g), (h), (j) and (k).
(10) "Permitted Transfer" means a Transfer of Class A Common Stock
(i) after the Restriction Release Date or (ii) pursuant to any (I)
merger, consolidation or similar transaction approved in advance by the
Board of Directors of the Corporation or (II) tender or exchange offer
made pursuant to the applicable rules and regulations of the Securities
Exchange Act of 1934, as amended, for any and all outstanding Class A
Common Stock in which a majority of the outstanding Class A Common Stock
has been validly tendered and not withdrawn and in which offer the
offeror or an affiliate thereof has committed to consummate a merger
with the Corporation in which all of the Class A Common Stock not so
acquired in such offer is (subject to any applicable appraisal rights)
converted into the same type and amount of consideration paid for Class
A Common Stock accepted in such tender or exchange offer.
(11) "Person" means any individual, trust, estate, partnership,
association, company, firm, corporation or other legal entity, and
includes any successor (by merger or otherwise) of such entity.
(12) "Prohibited Distribution" means any dividends or other
distributions received by a Purported Transferee in respect of Excess
Securities.
(13) "Prohibited Transfer" means any purported Transfer of Class A
Common Stock to the extent that such Transfer is prohibited and/or void
under Section 2.B of this Article FOURTH.
(14) "Publicly Announced Issuance" means the issuance of
Corporation Securities (or options to purchase Corporation Securities)
by the Corporation in a transaction that has been approved by the Board
of Directors of the Corporation and that has been publicly announced in
a press release or any filing made with the Securities and Exchange
Commission.
(15) "Purported Transferee" means any purported transferee of a
Prohibited Transfer.
(16) "Restriction Date" means the date on which (i) the transfer
agent for the Class A Common Stock receives a written determination by
the Board of Directors of the Corporation that there has occurred, or
that there will occur as a result of a Publicly Announced Issuance, a
40% Ownership Change, (ii) the Board of Directors of the Corporation
makes a public announcement of such determination and (iii) the
Corporation files a Current Report on Form 8-K (or any successor form)
with the Securities and Exchange Commission including such public
announcement. In making such determination, the Corporation shall first
obtain an opinion from independent counsel that it is reasonably likely
that there has occurred, or that there will occur as a result of a
Publicly Announced Issuance, a 40% Ownership Change. In making such
determination, the Corporation's independent counsel may rely on (i) any
Transfer Notice provided pursuant to this Article FOURTH, (ii) the
existence and absence of filings of Schedules 13D and 13G (or any
similar filings with the Securities and Exchange Commission disclosing
ownership of Corporation Securities), (iii) any stock transfer records
provided by the Corporation's transfer agent, Depository Trust Company
or any similar depository or nominee, and (iv) any other certificates
delivered by the Corporation, its transfer agent or its shareholders
that independent counsel may reasonably require as a condition to
providing its opinion.
C-2
(17) "Restriction Release Date" means the earlier of (i) the
repeal, amendment or modification of Section 382 in such a way as to
render the restrictions imposed by Section 382 no longer applicable to
the Corporation or (ii) the date on which the limitation amount imposed
by Section 382 in the event of an ownership change of the Corporation,
as defined in Section 382, would not be less than the net operating loss
carryforward and net unrealized built-in loss of the Corporation and any
direct or indirect subsidiary thereof.
(18) "Section 382" means Section 382 of the Code and any comparable
successor provision.
(19) "Tax Benefits" means the net operating losses, net operating
loss carryovers, capital losses, capital loss carryovers, general
business credit carryovers, alternative minimum tax credit carryovers
and foreign tax credit carryovers, as well as, without duplication, any
loss or deduction attributable to a "net unrealized built-in loss"
within the meaning of Section 382, of the Corporation or any direct or
indirect subsidiary thereof.
(20) "Transfer" means, any sale, transfer, assignment, conveyance,
or other disposition, including without limitation by merger, operation
of law, bequest or pursuant to any domestic relations order, other than
a sale, transfer, assignment, conveyance, or other disposition by or to
the Corporation.
(21) "Transfer Notice" means the notice required by Section 2.B(6)
of this Article FOURTH.
B. 5% Ownership Limit.
(1) Except as provided in Section 2.B(2) of this Article FOURTH,
any Transfer of Class A Common Stock on or after the Restriction Date
but before the Restriction Release Date shall be prohibited and void ab
initio (A) if the transferor is a Five-Percent Shareholder or (B) to the
extent that, as a result of such Transfer (or any series of Transfers of
which such Transfer is a part), either (i) any Person or group of
Persons would become a Five-Percent Shareholder or (ii) the Percentage
Stock Ownership in the Corporation of any Five-Percent Shareholder would
be increased.
(2) A Transfer of Class A Common Stock described in Section 2.B(1)
of this Article FOURTH shall not be prohibited and void ab initio if (A)
such Transfer is a Permitted Transfer or (B) prior to such Transfer the
transferor or the purported transferee has provided the Transfer Notice
as required by Section 2.B(6) of this Article FOURTH and the Board of
Directors of the Corporation determines in good faith upon the request
of the transferor or purported transferee that (i) such Transfer would
not result in a 42% Ownership Change or (ii) for purposes of Section
382, (x) the number of percentage points by which, immediately after
such Transfer, the percentage of Corporation Securities owned by one or
more Five Percent Shareholders exceeds the lowest percentage of
Corporation Securities owned by such shareholders at any time during the
three years prior to such Transfer (but after May 29, 2002) would not
exceed (y) the number of percentage points by which, immediately prior
to such Transfer, the percentage of Corporation Securities owned by one
or more Five Percent Shareholders exceeded the lowest percentage of
Corporation Securities owned by such shareholders at any time during the
three years prior to such Transfer (but after May 29, 2002).
(3) As a condition to making its determination under clause (i) or
(ii) of Section 2.B(2)(B) of this Article FOURTH, the Board of Directors
of the Corporation may, in its discretion, require (at the expense of
the transferor and/or purported transferee) an opinion of reputable
counsel that such Transfer satisfies the conditions set forth in either
clause (i) or (ii) of Section 2.B(2)(B) of this Article FOURTH;
provided, however, that if the Board of Directors of the Corporation
requires such opinion such counsel may rely on (i) any Transfer Notice
provided pursuant to this Article FOURTH, (ii) the existence and absence
of filings of Schedules 13D and 13G (or any similar filings with the
Securities and Exchange Commission
C-3
disclosing ownership of Corporation Securities), (iii) any stock
transfer records provided by the Corporation's transfer agent,
Depository Trust Company or any similar depository or nominee, and (iv)
any other certificates delivered by the Corporation, its transfer agent
or its shareholders that such counsel may reasonably require as a
condition to providing its opinion and the Corporation will use
reasonable efforts to make or cause to make such items available to such
counsel. The transferor and purported transferee shall deliver to the
Corporation such certificates as the Board of Directors of the
Corporation may reasonably require as a condition to making such
determination.
(4) The issuance or Transfer, on or after the Restriction Date but
before the Restriction Release Date, of an option within the meaning of
Treasury Regulations sec.1.382-4(d)(9) (other than the issuance of an
option by or to the Corporation) to purchase Class A Common Stock shall
be prohibited and void ab initio if the exercise of such option on the
date of such issuance or Transfer would result in a Prohibited Transfer,
unless prior to such issuance or Transfer (A) the transferor or the
purported transferee has provided the Transfer Notice as required by
Section 2.B(6) of this Article FOURTH and (B) the Board of Directors of
the Corporation determines in good faith upon the request of the
transferor or purported transferee that the Transfer of Class A Common
Stock upon the exercise of such option would satisfy the conditions set
forth in either clause (i) or (ii) of Section 2.B(2)(B) of this Article
FOURTH.
(5) Notwithstanding any provision of this Article FOURTH to the
contrary, any Transfer of Class A Common Stock (other than a Permitted
Transfer) shall be prohibited and void ab initio to the extent such
Transfer would result in a 42% Ownership Change, and any issuance or
Transfer, before the Restriction Release Date, of an option within the
meaning of Treasury Regulations sec.1.382-4(d)(9) (other than the
issuance of an option by or to the Corporation) to purchase Class A
Common Stock shall be prohibited and void ab initio to the extent the
exercise of such option on the date of such issuance or Transfer would
result in a 42% Ownership Change.
(6) Written notice of any Transfer of Class A Common Stock (other
than a Permitted Transfer) shall be provided by the transferor or
purported transferee to the Secretary of the Corporation if (i) the
transferor is a Five-Percent Shareholder or (ii) as a result of such
Transfer (or any series of Transfers of which such Transfer is a part),
either (I) any Person or group of Persons would become a Five-Percent
Shareholder or (II) the Percentage Stock Ownership in the Corporation of
any Five-Percent Shareholder would be increased. Written notice of the
issuance or Transfer, before the Restriction Release Date, of an option
within the meaning of Treasury Regulations sec.1.382-4(d)(9) to purchase
Class A Common Stock also shall be provided by the transferor or
purported transferee to the Secretary of the Corporation if the exercise
of such option on the date of such issuance or Transfer would result in
a Transfer of Class A Common Stock for which notice is required pursuant
to the preceding sentence. In the case of an issuance or Transfer prior
to the Restriction Date, such notice shall be provided no later than the
second business day following the date of such issuance or Transfer, and
in the case of an issuance or Transfer on or after the Restriction Date,
such notice shall be provided at least three business days prior to such
issuance or Transfer. Such notice shall set forth the number of shares
of Class A Common Stock acquired or to be acquired, the identity of the
transferor and purported transferee and the date of the issuance or
Transfer. Such notice shall be sent by first class or registered mail
(postage prepaid), by overnight courier, or by facsimile transmission or
electronic mail meeting the definition of "electronic transmission" in
Section 232 of the General Corporation Law of the State of Delaware, to
any address specifically set forth in the "Investor Relations" section
of the Corporation's website as the address to send Transfer Notices or,
if no such address is so set forth, to the Corporation's principal
executive office. Any such notice meeting the requirements of Section
2.B(6) of this Article FOURTH shall be recognized in the order in which
it is received by the Secretary of the Corporation. In the case of a
Transfer of Class A Common Stock on or after the Restriction Date or the
issuance or Transfer of an option
C-4
on or after the Restriction Date, within three business days of
receiving such notification, the Board of Directors of the Corporation
(i) shall make a determination whether the Transfer of Class A Common
Stock satisfies, or the Transfer of Class A Common Stock upon the
exercise of the option would satisfy, the conditions set forth in either
clause (i) or (ii) of Section 2.B(2)(B) of this Article FOURTH and (ii)
shall provide written notice to the transferor and the purported
transferee of such determination. Such notice shall be sent to the
transferor and purported transferee by first class or registered mail,
postage prepaid, by overnight courier, or given by electronic
communication in compliance with the provisions of the General
Corporation Law of the State of Delaware. If the Board of Directors of
the Corporation does not provide such written notice to the transferor
and the purported transferee, an action may be brought in the Court of
Chancery in the State of Delaware to determine whether the Transfer
satisfies, or the Transfer upon exercise of the option would satisfy,
the conditions set forth in either clause (i) or (ii) of Section
2.B(2)(B) of this Article FOURTH. Any notices required by Section 2.B(6)
of this Article FOURTH shall be deemed received three days after being
sent by first class or registered mail (postage prepaid), the next
business day after being sent by overnight courier, or upon transmission
if sent by facsimile transmission, electronic mail or electronic
communication.
(7) The Board of Directors of the Corporation may exercise the
authority granted by Section 2.B of this Article FOURTH through duly
authorized committees of the Board of Directors of the Corporation.
C. Treatment of Excess Securities
(1) No employee or agent of the Corporation shall record any
Prohibited Transfer, and the Purported Transferee shall not be
recognized as a stockholder of the Corporation for any purpose
whatsoever in respect of the Excess Securities. The Purported Transferee
shall not be entitled with respect to such Excess Securities to any
rights of stockholders of the Corporation, including, without
limitation, the right to vote such Excess Securities and to receive
dividends or distributions, whether liquidating or otherwise, in respect
thereof, if any. Once the Excess Securities have been acquired in a
Transfer that is not a Prohibited Transfer, the Class A Common Stock
shall cease to be Excess Securities.
(2) If the Board of Directors of the Corporation determines that a
purported Transfer of Class A Common Stock constitutes a Prohibited
Transfer then, upon written demand by the Corporation, the Purported
Transferee shall transfer or cause to be transferred any certificate or
other evidence of purported ownership of the Excess Securities within
the Purported Transferee's possession or control, together with any
Prohibited Distributions, to an Agent. The Agent shall thereupon sell to
a buyer or buyers, which may include the Corporation, such Excess
Securities in one or more arms'-length transactions (over any stock
exchange on which the Class A Common Stock is listed or admitted to
trading or in the over-the-counter market or any other recognized public
market on which the Class A Common Stock may be traded, if possible, or
otherwise privately (but, if sold privately, sold at a purchase price
equal to the Fair Market Value of the Excess Securities)). If the
Purported Transferee has resold the Excess Securities before receiving
the Corporation's demand to surrender the Excess Securities to the
Agent, the Purported Transferee shall be deemed to have sold the Excess
Securities for the Agent, and shall be required to transfer to the Agent
any Prohibited Distributions and proceeds of such sale, except to the
extent that the Corporation grants written permission to the Purported
Transferee to retain a portion of such sales proceeds not exceeding the
amount that the Purported Transferee would have received from the Agent
pursuant to Section 2.C(3) of this Article FOURTH, if the Agent rather
than the Purported Transferee had resold the Excess Securities.
(3) The Agent shall apply any proceeds of a sale by it of Excess
Securities, together with any Prohibited Distributions, and, if the
Purported Transferee had previously resold the Excess Securities, any
amounts received by it from a Purported Transferee, as follows: (x)
first, such
C-5
amounts shall be paid to the Agent to the extent necessary to cover its
costs and expenses incurred in connection with its duties hereunder; and
(y) second, all other remaining amounts shall be paid to the Purported
Transferee, up to the amount paid by the Purported Transferee for the
Excess Securities (or, in the case of a gift, inheritance or similar
Transfer, the Fair Market Value thereof at the time of the Prohibited
Transfer to the Purported Transferee); and (z) third, any remaining
amounts shall be paid to one or more organizations qualifying under
Section 501(c)(3) of the Code selected by the Board of Directors of the
Corporation. The recourse of any Purported Transferee in respect of any
Prohibited Transfer shall be limited to the amount payable to the
Purported Transferee pursuant to clause (y) of the immediately preceding
sentence. In no event shall the proceeds of any sale of Excess
Securities pursuant to Section 2.C of this Article FOURTH inure to the
benefit of the Corporation.
(4) If the Purported Transferee fails to surrender the Excess
Securities or the proceeds of a sale thereof to the Agent within thirty
days from the date on which the Corporation makes a demand pursuant to
Section 2.C(2) of this Article FOURTH, then the Corporation shall have
the right to bring an action solely and exclusively in the Court of
Chancery in the State of Delaware to compel such surrender, except if
said Court of Chancery does not have jurisdiction over the Purported
Transferee the Corporation may bring such action in any court that has
jurisdiction over the Purported Transferee and the claim hereunder.
(5) The Corporation shall make the demand described in Section
2.C(2) of this Article FOURTH within forty-five days of the date on
which the Board of Directors of the Corporation determines that the
Transfer would result in Excess Securities.
D. Board Authority
(1) The Board of Directors of the Corporation shall have the power
to determine whether any issuance or Transfer of Class A Common Stock or
an option to purchase Class A Common Stock complies with the
requirements set forth in Section 2 of this Article FOURTH, including,
without limitation, (A) the identification of Five-Percent Shareholders,
(B) whether a Transfer of Class A Common Stock or the exercise of an
option to purchase Class A Common Stock is or would result in a
Prohibited Transfer, (C) the Percentage Stock Ownership in the
Corporation of any Five-Percent Shareholder, (D) whether an instrument
constitutes a Corporation Security, (E) whether an instrument
constitutes Class A Common Stock or an option within the meaning of
Treasury Regulations sec.1.382-4(d)(9) to purchase Class A Common Stock,
(F) whether the Restriction Date or the Restriction Release Date has
occurred, (G) whether a Transfer would occur pursuant to a Permitted
Transfer, (H) whether a Transfer of Class A Common Stock or the Transfer
of Class A Common Stock upon the exercise of an option satisfies or
would satisfy the conditions set forth in either clause (i) or (ii) of
Section 2.B(2)(B) of this Article FOURTH, (I) the amount or Fair Market
Value due to a Purported Transferee pursuant to clause (y) of Section
2.C(3) of this Article FOURTH, and (J) any other matters which the Board
of Directors of the Corporation determines to be relevant; provided,
however, that any dispute, claim, or controversy arising out of or
relating to any such determination made by the Board of Directors of the
Corporation pursuant to this Section 2.D(1) shall be resolved solely and
exclusively in an action brought in the Court of Chancery in the State
of Delaware, except if said Court of Chancery does not have jurisdiction
over the other party to such dispute, claim or controversy the
Corporation may bring such action in any Court that has jurisdiction
over such other party and the claim hereunder.
(2) Upon a determination by the Board of Directors of the
Corporation that there has been or is threatened a Prohibited Transfer
to a Purported Transferee or that there has been or is threatened an
issuance or Transfer of an option that is prohibited and/or void under
Section 2.B(4) of this Article FOURTH, the Board of Directors of the
Corporation may take such action in addition to any action required or
permitted by Sections 2.B and 2.C of this Article FOURTH as it deems
advisable to give effect to the provisions of this Section 2 of
C-6
Article FOURTH, including without limitation, refusing to give effect on
the books of the Corporation to such Prohibited Transfer or instituting
proceedings to enjoin such Prohibited Transfer.
E. Mandatory Conversion
(1) Upon the Mandatory Conversion Date, each outstanding share of
Class A Common Stock shall automatically be converted into one share of
Common Stock (subject to appropriate adjustment in the event of any
dividend, stock split, combination or similar recapitalization affecting
the Class A Common Stock in a manner differently than it affects the
Common Stock).
(2) All holders of record of shares of Class A Common Stock shall
be given written notice of the Mandatory Conversion Date and the place
designated for mandatory conversion of all such shares of Class A Common
Stock pursuant to Section 2.E of this Article FOURTH. Such notice need
not be given in advance of the occurrence of the Mandatory Conversion
Date. Such notice shall be sent by first class or registered mail,
postage prepaid, or given by electronic communication in compliance with
the provisions of the General Corporation Law of the State of Delaware,
to each record holder of Class A Common Stock. Upon receipt of such
notice, each holder of shares of Class A Common Stock shall surrender
his or its certificate or certificates for all such shares to the
Corporation at the place designated in such notice, and shall thereafter
receive certificates for the number of shares of Common Stock to which
such holder is entitled pursuant to Section 2.E of this Article FOURTH.
On the Mandatory Conversion Date, subject to Section 2.E(4) of this
Article FOURTH, all outstanding shares of Class A Common Stock shall be
deemed to have been converted into shares of Common Stock, which shall
be deemed to be outstanding of record, and all rights with respect to
the Class A Common Stock so converted, including the rights, if any, to
receive notices and vote (other than as a holder of Common Stock) will
terminate, except only the rights of the holders thereof, upon surrender
of their certificate or certificates therefor, to receive certificates
for the number of whole shares of Common Stock into which such Class A
Common Stock has been converted, and payment of any declared but unpaid
dividends thereon and payment of cash in lieu of any fractional shares
of Common Stock. If so required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by written
instrument or instruments of transfer, in form satisfactory to the
Corporation, duly executed by the registered holder or by his or its
attorney duly authorized in writing. As soon as practicable after the
Mandatory Conversion Date and the surrender of the certificate or
certificates for Class A Common Stock, the Corporation shall cause to be
issued and delivered to such holder, or on his or its written order, a
certificate or certificates for the number of whole shares of Common
Stock issuable on such conversion in accordance with the provisions
hereof.
(3) All certificates evidencing shares of Class A Common Stock
which are required to be surrendered for conversion in accordance with
the provisions hereof shall, from and after the Mandatory Conversion
Date, be deemed to have been retired and cancelled and the shares of
Class A Common Stock represented thereby converted into Common Stock
(and the right to receive a payment of cash in lieu of any fractional
shares of Common Stock) for all purposes, notwithstanding the failure of
the holder or holders thereof to surrender such certificates on or prior
to such date. Such converted Class A Common Stock may not be reissued,
and the Corporation may thereafter take such appropriate action (without
the need for stockholder action) as may be necessary to reduce the
authorized number of shares of Class A Common Stock accordingly.
(4) Notwithstanding any other provision in Section 2.E of this
Article FOURTH, each holder of shares of Class A Common Stock converted
into shares of Common Stock who would otherwise have been entitled to
receive a fraction of a share of Common Stock (after taking into account
all shares of Class A Common Stock owned by such holder and the
aggregate number of shares of Common Stock into which such shares have
been converted) shall receive, in lieu
C-7
thereof, cash (without interest) in an amount equal to such fractional
part of a share of Common Stock multiplied by the Fair Market Value of
the Class A Common Stock on the Mandatory Conversion Date.
F. Miscellaneous
(1) Any provision in this Section 2 of Article FOURTH which is
prohibited or unenforceable under Delaware law shall be ineffective to
the extent of such prohibition or unenforceability without invalidating
the remaining provisions of this Section 2 of Article FOURTH and of the
Corporation's Restated Certificate of Incorporation.
(2) The Corporation shall use its commercially reasonable efforts
to legend all share certificates representing outstanding shares of
Class A Common Stock in order to note conspicuously the restrictions on
transfers set forth in this Section 2 of Article FOURTH.
(3) The Corporation may require as a condition to the registration
of the transfer of any Class A Common Stock that the purported
transferee furnish to the Corporation all information reasonably
requested by the Corporation with respect to all of the purported
transferee's direct or indirect ownership interests in, or options to
acquire, Corporation Securities.
C-8
APPENDIX D
NEW ARTICLE THIRTEENTH OF CERTIFICATE OF INCORPORATION
THIRTEENTH:
Without the approval of a majority of the total voting power of all votes
cast on the proposal at a meeting duly held at which a quorum is present, or the
written consent of a majority of the outstanding shares of Class A Common Stock
and Common Stock (acting together as a single class), the Corporation shall not
issue any shares of Class A Common Stock or Common Stock (collectively,
"Corporation Stock"), or securities exchangeable or exercisable for or
convertible into Corporation Stock, in the circumstances set forth in Sections 1
and 2 of this Article THIRTEENTH.
1. In connection with the acquisition of the stock or assets of another
company if:
(A) the Corporation Stock (or securities exchangeable or exercisable
for or convertible into Corporation Stock) to be issued pursuant to such
acquisition have or will have upon issuance voting power equal to or in
excess of 15% of the voting power of the Corporation Stock outstanding on
the date that a definitive agreement providing for such acquisition or
issuance is entered into by the Corporation; or
(B) the number of shares of Corporation Stock to be issued pursuant to
such acquisition is or will be upon issuance equal to or in excess of 15%
of the number of shares of Corporation Stock outstanding on the date that a
definitive agreement providing for such acquisition or issuance is entered
into by the Corporation; or
2. In connection with a transaction, other than a public offering,
involving the sale, issuance or potential issuance by the Corporation of
Corporation Stock (or securities exchangeable or exercisable for or convertible
into Corporation Stock) at a price less than the greater of book value (as
determined at the most recently completed fiscal quarter in accordance with
generally accepted accounting principles) ("Book Value") or Fair Market Value
(as defined below) of such securities which, together with any sales by
officers, directors or Substantial Shareholders (as defined below) as part of or
in connection with the same transaction, equals 15% or more of the Corporation
Stock, or 15% or more of the voting power of the Corporation Stock, outstanding
on the date that a definitive agreement providing for such transaction is
entered into by the Corporation.
For purposes of this Article THIRTEENTH:
(1) Only shares actually issued and outstanding (excluding treasury
shares or shares held by a subsidiary) are to be used in making any
calculation provided for in this Article THIRTEENTH. Unissued shares
reserved for issuance upon conversion of Corporation Stock or upon exercise
of options or warrants will not be regarded as outstanding.
(2) "Fair Market Value" shall mean, with respect to any security on
any specified date, the value thereof (i) if such security is listed or
admitted to trading on any stock exchange, calculated on the basis of the
closing market price for such security on the date prior to making such
calculation, or (ii) if such security is not listed or admitted to trading
on any stock exchange but is traded in the over-the-counter market,
calculated based upon the average of the highest bid and lowest asked
prices, as such prices are reported by the National Association of
Securities Dealers, Inc. on the date prior to making such calculation or,
if none, on the last preceding day prior to making such calculation for
which such quotations exist, or (iii) if such security is neither listed
nor admitted to trading on any stock exchange nor traded in the
over-the-counter market, as determined in good faith by the Board of
Directors.
(3) "Substantial Shareholder" shall mean any beneficial owner of 5% or
more of the outstanding Corporation Stock that has made a filing with the
Securities and Exchange Commission disclosing such beneficial ownership and
that has not subsequently made another filing with the Securities and
D-1
Exchange Commission, or informed the Corporation in writing, to the effect
that its beneficial ownership level is less than 5% of the outstanding
Corporation Stock.
Notwithstanding any other provision hereof, no approval shall be required
under this Article THIRTEENTH for any mandatory conversion of Class A Common
Stock into Common Stock pursuant to Section 2.E of Article FOURTH.
D-2
APPENDIX
[This appendix to the proxy statement is not a part of the proxy statement
and will not be included in the proxy materials distributed to stockholders]
ARCH WIRELESS, INC.
2002 STOCK INCENTIVE PLAN
1. Purpose
The purpose of this 2002 Stock Incentive Plan (the "Plan") of Arch
Wireless, Inc., a Delaware corporation (the "Company"), is to advance the
interests of the Company's stockholders by enhancing the Company's ability to
attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's stockholders.
Except where the context otherwise requires, the term "Company" shall include
any of the Company's present or future parent or subsidiary corporations as
defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as
amended, and any regulations promulgated thereunder (the "Code") and any other
business venture (including, without limitation, joint venture or limited
liability company) in which the Company has a controlling interest, as
determined by the Board of Directors of the Company (the "Board").
2. Eligibility
All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options, restricted stock awards or other stock based
awards (each, an "Award") under the Plan. Each person who has been granted an
Award under the Plan shall be deemed a "Participant".
3. Administration and Delegation
(a) Administration by Board of Directors. The Plan will be administered
by the Board. The Board shall have authority to grant Awards and to adopt, amend
and repeal such administrative rules, guidelines and practices relating to the
Plan as it shall deem advisable. The Board may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. All decisions by the Board
shall be made in the Board's sole discretion and shall be final and binding on
all persons having or claiming any interest in the Plan or in any Award. No
director or person acting pursuant to the authority delegated by the Board shall
be liable for any action or determination relating to or under the Plan made in
good faith.
(b) Appointment of Committees. To the extent permitted by applicable
law, the Board may delegate any or all of its powers under the Plan to one or
more committees or subcommittees of the Board (a "Committee"). All references in
the Plan to the "Board" shall mean the Board or a Committee of the Board to the
extent that the Board's powers or authority under the Plan have been delegated
to such Committee.
1
4. Stock Available for Awards
(a) Number of Shares. Subject to adjustment under Section 8, Awards may
be made under the Plan for up to 950,000 shares of common stock, $.001 par value
per share, of the Company (the "Common Stock"). If any Option (as hereinafter
defined) expires or is terminated, surrendered or canceled without having been
fully exercised or is forfeited in whole or in part or results in any Common
Stock not being issued, the unused Common Stock covered by such Option shall
again be available for the grant of Awards under the Plan, subject, however, in
the case of Incentive Stock Options (as hereinafter defined), to any limitations
under the Code. Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
(b) Per-Participant Limit. Subject to adjustment under Section 8, the
maximum number of shares of Common Stock with respect to which Awards may be
granted to any Participant under the Plan shall be 400,000 per calendar year.
The per-Participant limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code ("Section 162(m)").
(c) Issuance of Shares. The 950,000 shares of Common Stock available
for issuance under the Plan will be issued in accordance with the Modified Joint
Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code for
the Company and all of its domestic subsidiaries as confirmed by order of the
United States Bankruptcy Court for the District of Massachusetts, Western
Division, in Case No. 01-47330-HJB (the "Plan of Reorganization"). On the
Effective Date (as defined in the Plan of Reorganization), the Company shall
issue to continuing members of its management (the "Management Recipients"), in
such amounts and to such persons as are specified on Exhibit A attached hereto,
an aggregate of 882,200 shares of Common Stock (the "Initial Shares"). From time
to time, if and to the extent any portion of the Swing Shares (as defined in the
Plan of Reorganization) do not constitute USAM Secured Creditor Swing Shares (as
defined in the Plan of Reorganization), and if and to the extent any of the
Management Allocated Amount (as defined in the Plan of Reorganization) is
credited to the Plan, such Swing Shares that do not constitute USAM Secured
Creditor Swing Shares (the "Additional Swing Shares") and such Management
Allocated Amount that is credited to the Plan (collectively, the "Additional
Management Shares") shall be issued to the Management Recipients on the same
terms, including price (subject to proportionate adjustment for any stock splits
or similar events), as the Initial Shares and in proportion to the allocation of
the Initial Shares among the Management Recipients as specified on Exhibit A
attached hereto, except that the vesting for any Additional Swing Shares shall
be the same as the vesting for the Initial Shares (commencing as of the
Effective Date) and the Management Allocated Amount that is credited to the Plan
shall vest on the third anniversary of the Effective Date. Additional Management
Shares shall be issued to a Management Recipient who is no longer employed by
the Company on the date of issuance of Additional Management Shares only in
proportion to the number of Initial Shares that were vested at the time of
termination of employment of such Management Recipient, and the remaining
Additional Management Shares otherwise issuable to such Management Recipient
shall be forfeited and not issued.
2
5. Stock Options
(a) General. The Board may grant options to purchase Common Stock
(each, an "Option") and determine the number of shares of Common Stock to be
covered by each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
(b) Incentive Stock Options. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) Exercise Price. The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement;
provided, however, that the exercise price shall be not less than 100% of the
fair market value of the Common Stock, as determined by the Board, at the time
the Option is granted.
(d) Duration of Options. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement; provided, however, that no Option will be granted
for a term in excess of 10 years.
(e) Exercise of Option. Options may be exercised by delivery to the
Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board
together with payment in full as specified in Section 5(f) for the number of
shares for which the Option is exercised.
(f) Payment Upon Exercise. Common Stock purchased upon the exercise of
an Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may, in its sole discretion, otherwise
provide in an option agreement, by (i) delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly to the
Company sufficient funds to pay the exercise price and any required tax
withholding or (ii) delivery by the Participant to the Company of a copy of
irrevocable and unconditional instructions to a creditworthy broker to deliver
promptly to the Company cash or a check sufficient to pay the exercise price and
any required tax withholding;
(3) when the Common Stock is registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), by delivery of shares of
Common Stock owned by the Participant valued at their fair market value as
determined by (or in a manner approved by) the Board in good faith ("Fair Market
Value"), provided (i) such method of payment is then
3
permitted under applicable law and (ii) such Common Stock, if acquired directly
from the Company, was owned by the Participant at least six months prior to such
delivery;
(4) to the extent permitted by the Board, in its sole
discretion by (i) delivery of a promissory note of the Participant to the
Company on terms determined by the Board, or (ii) payment of such other lawful
consideration as the Board may determine; or
(5) by any combination of the above permitted forms of
payment.
(g) Substitute Options. In connection with a merger or consolidation of
an entity with the Company or the acquisition by the Company of property or
stock of an entity, the Board may grant Options in substitution for any options
or other stock or stock-based awards granted by such entity or an affiliate
thereof. Substitute Options may be granted on such terms as the Board deems
appropriate in the circumstances, notwithstanding any limitations on Options
contained in the other sections of this Section 5 or in Section 2.
6. Restricted Stock.
(a) Grants. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, a "Restricted Stock Award").
(b) Terms and Conditions. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any.
(c) Stock Certificates. Any stock certificates issued in respect of a
Restricted Stock Award shall be registered in the name of the Participant and,
unless otherwise determined by the Board, deposited by the Participant, together
with a stock power endorsed in blank, with the Company (or its designee). At the
expiration of the applicable restriction periods, the Company (or such designee)
shall deliver the certificates no longer subject to such restrictions to the
Participant or if the Participant has died, to the beneficiary designated, in a
manner determined by the Board, by a Participant to receive amounts due or
exercise rights of the Participant in the event of the Participant's death (the
"Designated Beneficiary"). In the absence of an effective designation by a
Participant, Designated Beneficiary shall mean the Participant's estate.
7. Other Stock Based Awards. The Board shall have the right to grant other
Awards based upon the Common Stock having such terms and conditions as the Board
may determine, including the grant of shares based upon certain conditions, the
grant of securities convertible into Common Stock and the grant of stock
appreciation rights.
4
8. Adjustments for Changes in Common Stock and Certain Other Events
(a) Changes in Capitalization. In the event of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-Participant limit set forth in Section 4(b), (iii) the number and
class of securities and exercise price per share subject to each outstanding
Option, (iv) the repurchase price per share subject to each outstanding
Restricted Stock Award, and (v) the terms of each other outstanding Award shall
be appropriately adjusted by the Company (or substituted Awards may be made, if
applicable) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is necessary and appropriate. If this Section 8(a)
applies and Section 8(c) also applies to any event, Section 8(c) shall be
applicable to such event, and this Section 8(a) shall not be applicable.
(b) Liquidation or Dissolution. In the event of a proposed liquidation
or dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date. The Board may specify the effect of a liquidation or
dissolution on any Restricted Stock Award or other Award granted under the Plan
at the time of the grant of such Award.
(c) Reorganization Events
(1) Definition. A "Reorganization Event" shall mean: (a) any
merger or consolidation of the Company with or into another entity as a result
of which all of the Common Stock of the Company is converted into or exchanged
for the right to receive cash, securities or other property or (b) any exchange
of all of the Common Stock of the Company for cash, securities or other property
pursuant to a share exchange transaction.
(2) Consequences of a Reorganization Event on Options. Except
to the extent otherwise provided in individual Awards: Upon the occurrence of a
Reorganization Event, or the execution by the Company of any agreement with
respect to a Reorganization Event, the Board shall provide that all outstanding
Options shall be assumed, or equivalent options shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof). For purposes
hereof, an Option shall be considered to be assumed if, following consummation
of the Reorganization Event, the Option confers the right to purchase, for each
share of Common Stock subject to the Option immediately prior to the
consummation of the Reorganization Event, the consideration (whether cash,
securities or other property) received as a result of the Reorganization Event
by holders of Common Stock for each share of Common Stock held immediately prior
to the consummation of the Reorganization Event (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided, however, that if
the consideration received as a result of the Reorganization Event is not solely
common stock of the acquiring or succeeding corporation (or an affiliate
thereof), the Company may, with the consent of the acquiring or
5
succeeding corporation, provide for the consideration to be received upon the
exercise of Options to consist solely of common stock of the acquiring or
succeeding corporation (or an affiliate thereof) equivalent in fair market value
to the per share consideration received by holders of outstanding shares of
Common Stock as a result of the Reorganization Event.
Notwithstanding the foregoing, if the acquiring or succeeding
corporation (or an affiliate thereof) does not agree to assume, or substitute
for, such Options, then the Board shall, upon written notice to the
Participants, provide that all then unexercised Options will become exercisable
in full as of a specified time prior to the Reorganization Event and will
terminate immediately prior to the consummation of such Reorganization Event,
except to the extent exercised by the Participants before the consummation of
such Reorganization Event; provided, however, that in the event of a
Reorganization Event under the terms of which holders of Common Stock will
receive upon consummation thereof a cash payment for each share of Common Stock
surrendered pursuant to such Reorganization Event (the "Acquisition Price"),
then the Board may instead provide that all outstanding Options shall terminate
upon consummation of such Reorganization Event and that each Participant shall
receive, in exchange therefor, a cash payment equal to the amount (if any) by
which (A) the Acquisition Price multiplied by the number of shares of Common
Stock subject to such outstanding Options (whether or not then exercisable),
exceeds (B) the aggregate exercise price of such Options. To the extent all or
any portion of an Option becomes exercisable solely as a result of the first
sentence of this paragraph, upon exercise of such Option the Participant shall
receive shares subject to a right of repurchase by the Company or its successor
at the Option exercise price. Such repurchase right (1) shall lapse at the same
rate as the Option would have become exercisable under its terms and (2) shall
not apply to any shares subject to the Option that were exercisable under its
terms without regard to the first sentence of this paragraph.
(3) Consequences of a Reorganization Event on Restricted Stock
Awards. Except to the extent otherwise provided in individual Awards: Upon the
occurrence of a Reorganization Event, the repurchase and other rights of the
Company under each outstanding Restricted Stock Award shall inure to the benefit
of the Company's successor and shall apply to the cash, securities or other
property which the Common Stock was converted into or exchanged for pursuant to
such Reorganization Event in the same manner and to the same extent as they
applied to the Common Stock subject to such Restricted Stock Award.
(4) Consequences of a Reorganization Event on Other Awards.
The Board shall specify the effect of a Reorganization Event on any other Award
granted under the Plan at the time of the grant of such Award.
9. General Provisions Applicable to Awards
(a) Transferability of Awards. Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution, and, during the life of the Participant, shall be
exercisable only by the Participant. References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.
6
(b) Documentation. Each Award shall be evidenced in such form (written,
electronic or otherwise) as the Board shall determine. Each Award may contain
terms and conditions in addition to those set forth in the Plan.
(c) Board Discretion. Except as otherwise provided by the Plan, each
Award may be made alone or in addition or in relation to any other Award. The
terms of each Award need not be identical, and the Board need not treat
Participants uniformly.
(d) Termination of Status. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) Withholding. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. Except as the Board may otherwise
provide in an Award, when the Common Stock is registered under the Exchange Act,
Participants may satisfy such tax obligations in whole or in part by delivery of
shares of Common Stock, including shares retained from the Award creating the
tax obligation, valued at their Fair Market Value; provided, however, that the
total tax withholding where stock is being used to satisfy such tax obligations
cannot exceed the Company's minimum statutory withholding obligations (based on
minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes, that are applicable to such supplemental taxable
income). The Company may, to the extent permitted by law, deduct any such tax
obligations from any payment of any kind otherwise due to a Participant.
(f) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(g) Conditions on Delivery of Stock. The Company will not be obligated
to deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(h) Acceleration. The Board may at any time provide that any Options
shall become immediately exercisable in full or in part, that any Restricted
Stock Award shall be free of
7
restrictions in full or in part or that any other Awards may become exercisable
in full or in part or free of some or all restrictions or conditions, or
otherwise realizable in full or in part, as the case may be.
10. Miscellaneous
(a) No Right To Employment or Other Status. No person shall have any
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
with respect to an Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date and
the distribution date for such stock dividend shall be entitled to receive, on
the distribution date, the stock dividend with respect to the shares of Common
Stock acquired upon such Option exercise, notwithstanding the fact that such
shares were not outstanding as of the close of business on the record date for
such stock dividend.
(c) Effective Date and Term of Plan. The Plan shall become effective on
the date on which it is adopted by the Board, but no Award granted to a
Participant that is intended to comply with Section 162(m) shall become
exercisable, vested or realizable, as applicable to such Award, unless and until
the Plan has been approved by the Company's stockholders to the extent
stockholder approval is required by Section 162(m) in the manner required under
Section 162(m) (including the vote required under Section 162(m)). No Awards
shall be granted under the Plan after the completion of ten years from the
earlier of (i) the date on which the Plan was adopted by the Board or (ii) the
date the Plan was approved by the Company's stockholders, but Awards previously
granted may extend beyond that date.
(d) Amendment of Plan. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that to the extent required by
Section 162(m), no Award granted to a Participant that is intended to comply
with Section 162(m) after the date of such amendment shall become exercisable,
realizable or vested, as applicable to such Award, unless and until such
amendment shall have been approved by the Company's stockholders if required by
Section 162(m) (including the vote required under Section 162(m)).
(e) Governing Law. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
8
EXHIBIT A
Management Allocated Total Potential
Name Initial Shares Swing Shares* Amount* Shares
---- -------------- ------------- ------- ------
Ed Baker 249,663 5,037 14,150 268,850
Lyn Daniels 146,445 2,955 8,300 157,700
Roy Pottle 118,215 2,385 6,700 127,300
Paul Kuzia 73,223 1,477 4,150 78,850
Peter Barnett 59,107 1,193 3,350 63,650
Tony Battaglia 59,107 1,193 3,350 63,650
Chris Kollman 59,107 1,193 3,350 63,650
Dave Andersen 59,107 1,193 3,350 63,650
Pat Gray 29,113 587 1,650 31,350
Chris Madden 29,113 587 1,650 31,350
------- ------ ------ -------
882,200 17,800 50,000 950,000
*these shares will be issued only to the extent provided in Section 4(c) of the
Plan
A-1
PROXY
ARCH WIRELESS, INC.
1800 WEST PARK DRIVE, SUITE 250
WESTBOROUGH, MASSACHUSETTS 01581
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 12, 2003.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoint(s) Patricia
A. Gray, J. Roy Pottle and David A. Westenberg, and each of them, with full
power of substitution, as proxies to represent and vote all shares of Arch
Wireless, Inc. which the undersigned would be entitled to vote if personally
present at the annual meeting of stockholders to be held on Thursday, June 12,
2003, at 1:00 p.m. (local time) at Hale and Dorr LLP, 26th floor, 60 State
Street, Boston, Massachusetts 02109 and at any adjournments thereof.
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the annual meeting or any adjournments
thereof.
Attendance of the undersigned at the annual meeting or any adjournments
thereof will not be deemed to revoke this proxy unless the undersigned revokes
this proxy in writing.
Please return your cards in the enclosed envelope to the following
address:
Proxy Services
c/o EquiServe Trust Company N.A.
P.O. Box 8687
Edison, NJ 08818-9247
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SEE REVERSE
SIDE SIDE
UNLESS OTHERWISE INSTRUCTED, THIS PROXY WILL BE VOTED "FOR" EACH OF THE
PROPOSALS LISTED BELOW.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR PROPOSALS 1, 2, 3, 4 AND 5.
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
1. Election of Directors.
NOMINEES: (01) C. Edward Baker, Jr.
(02) James V. Continenza
(03) Eric Gold
(04) Carroll D. McHenry
(05) Matthew Oristano
(06) William E. Redmond, Jr.
(07) Richard A. Rubin
(08) Samme L. Thompson
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ]
--------------------------------------------
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE
FOR ANY INDIVIDUAL NOMINEE, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED ABOVE.)
2. Approve an amendment to our 2002 stock incentive plan increasing the number
of shares of common stock authorized for issuance under the plan from
950,000 to 1,200,000, of which approximately 250,000 shares will be used to
grant stock options with an exercise price of $.001 per share to the
non-employee directors who joined our board of directors upon our emergence
from bankruptcy and who are reelected at the annual meeting.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
MARK HERE [ ]
IF YOU PLAN
TO ATTEND
THE MEETING
MARK HERE [ ]
FOR ADDRESS
CHANGE AND
NOTE AT LEFT
3. Adopt an Agreement and Plan of Merger between our company and Arch 382
Corporation, a wholly-owned subsidiary, that will result in the imposition
of transfer restrictions on our common stock to maintain the tax benefits
described in the proxy statement.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Approve an amendment to our certificate of incorporation that will require
stockholder approval for certain issuances of our stock that equal 15% or
more of our stock outstanding before the issuance.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. Ratify the appointment of PricewaterhouseCoopers LLP as independent auditors
for year ending December 31, 2003.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PREPAID
ENVELOPE.
The signature on this Proxy should correspond exactly with stockholder's name as
printed to the left. In the case of joint tenants, co-executors or co-trustees,
both should sign. Persons signing as Attorney, Executor, Administrator, Trustee
or Guardian should give their full title.
VOTES MUST BE INDICATED (X) IN BLACK OR BLUE INK.
Signature Signature
---------------------------- -----------------------------
Date: Date:
------------------ ------------------